Background
In November 2025, RH Capital Finance served statutory demands on two related Australian companies (Innovative 3D Systems Pty Ltd and Innovative 3D Technology Pty Ltd), both then in receivership. The demands totalled approximately $13.5 million and $9.5 million respectively. Each demand comprised two components: an initial advance made in May 2021 to purchase 3D printers, and an additional advance made in June 2021 under a variation agreement to fund customs duties and GST payable to import the printers into Australia.
At the time the statutory demands were served, the Innovative parties were engaged in a separate Federal Court proceeding (VID125/2023) brought by their receivers and managers against the companies’ director, Mr Allan. That proceeding involved disputes about whether GST refunds received by the companies should have been paid to RH Capital under the terms of the variation agreements, and allegations that RH Capital engaged in unconscionable conduct. In October 2024, Mr Allan and the Innovative parties filed a cross-claim seeking to set aside the variation agreements based on unconscionable conduct by RH Capital, asserting that RH Capital had required oppressive terms including establishment fees and a requirement to immediately remit all GST refunds.
The Court’s Holding
Justice Beach held that the statutory demands should be set aside under section 459J(1)(b) of the Corporations Act 2001 (Cth) because there was “some other reason” warranting their removal. The judgment clarifies the application of multiple statutory grounds. First, the court found there was a genuine dispute about the existence or amount of the debts arising from the variation agreements—RH Capital itself accepted this. However, the court rejected the Innovative parties’ argument that they possessed an offsetting claim sufficient to reduce the substantiated amount below the statutory minimum. The court held that offsetting claims must be supported by cogent evidence establishing their quantum, and that bare assertions without proper quantification are insufficient. Mr Allan’s affidavit had merely referenced the cross-claim without providing any realistic estimate of damages or loss.
Although the court would ordinarily have made an order under section 459H(4) varying the demands to remove the disputed additional advances, it declined to do so and instead invoked section 459J(1)(b) to set aside the demands entirely. The court’s reasons suggest that the concurrent proceedings, the tactical timing of the demands, and the potential for abuse of process were material to this discretionary decision. The respondent was ordered to pay the applicants’ costs of the proceeding.
Key Takeaways
- Section 459J(1)(b) confers a broad discretion to set aside statutory demands where there is “some other reason”—this includes considerations such as abuse of process and the existence of concurrent, related proceedings.
- A genuine dispute within section 459H requires a bona fide and real dispute concerning a reasonably arguable issue of fact or law, supported by some objective reality and substance; vague or inconsistent assertions will not suffice.
- Offsetting claims must be supported by cogent evidence permitting a prima facie calculation of quantum; merely referencing a cross-claim in another proceeding without quantification or realistic estimate of damages is insufficient.
- Variation of statutory demands under section 459H(4) is discretionary and will not occur if concurrent proceedings or abuse of process considerations warrant setting aside the demands entirely under section 459J(1)(b).
Why It Matters
This decision provides important guidance on the interplay between sections 459H and 459J of the Corporations Act. Courts will invoke the broader discretion in section 459J(1)(b) to prevent abuse of process, particularly where a creditor serves statutory demands on a company already in receivership or engaged in disputed proceedings with the same creditor. The decision also reinforces that offsetting claims cannot be left vague or aspirational; they must rest on identified loss, a stated basis for calculation, and—even if not to the last dollar—a realistic estimate capable of judicial assessment.
For practitioners, the case signals that tactical timing of statutory demands in the context of ongoing litigation will invite scrutiny, and that section 459J(1)(b) remains an important shield against procedural misuse despite the high bar for establishing genuine disputes and offsetting claims under section 459H.