On 14 March 2025, the Victoria Court of Appeal delivered its decision in BRC Group v Watagan Park [2025] VSCA 36 – an important judgment emphasising the significance of carefully drafting supporting affidavits when applying to set aside a statutory demand under s 459G(3)(a) of the Corporations Act 2001 (Cth) (‘the Corporations Act’).
Factual Background
On 12 March 2024, Watagan Park Pty Ltd (‘the respondent’), served a statutory demand on BRC Group Pty Ltd (‘the applicant’) alleging that the applicant owed it a debt pursuant to a loan agreement. The applicant subsequently filed an application to set the statutory demand aside within the prescribed 21-day period. This application was supported by an affidavit.
The applicant’s supporting affidavit asserted that a genuine dispute existed about the existence and size of the debt. Notably, the affidavit purported to raise two grounds of dispute: (1) that there was no concluded loan agreement giving rise to the alleged debt; and (2) that the loan repayment date had not yet passed because the repayment was contingent upon the respondent exercising an equity option under a separate equity agreement (‘the additional dispute’).
On 11 Sep 2024, an associate judge dismissed the application to set aside the statutory demand on the basis that the affidavit was not a supporting affidavit within the meaning of s 459G(3)(a) of the Corporations Act by reason of failing to raise the additional dispute or a genuine dispute as to whether the debt existed. The applicant appealed.
The Victorian Court of Appeal was concerned with one key question: did the applicant’s affidavit qualify as an affidavit ‘supporting the application’ in relation to the additional dispute pursuant to s 459G(3)(a) of the Corporations Act?
The Victorian Court of Appeal’s findings
The Court summarised the following principles set out in Sceam Construction Pty Ltd v Clyne: [1]
- The affidavit must ‘support’ the application by establishing that there is a genuine dispute about the existence or amount of the debt.
- Typically, this is done by describing the dispute in the affidavit and outlining the scope of the dispute.
- The ground for resisting the demand must be raised expressly, by necessary inference, or reasonably available inference.
- If the dispute about the existence or amount of the debt is based purely on a particular interpretation of a document, that document should be exhibited to the affidavit.
- Merely asserting that the debt is disputed is insufficient.
- Even if the affidavit is filed on time (within the 21-day period), if it does not identify the dispute, it will not be considered a ‘supporting affidavit’ insofar as that dispute is concerned.
- The Court will consider whether the affidavit has properly identified the dispute having regard to the context and the degree of specificity with which the initial dispute is defined.
Applying these principles, the Court of Appeal concluded that the only reference to the equity agreement, so as to substantiate the additional dispute, was a passing reference in the body of the affidavit. A passing reference however, was not enough to properly raise the additional dispute without exhibiting the agreement to the affidavit. The Court found that the affidavit did not identify the terms of the equity agreement or even describe the agreement ‘in a summary way’. The documents that were exhibited to the affidavit merely showed that the parties were in the process of negotiating an agreement, but they did not provide any support for the claim that the parties reached a separate agreement. Therefore, the additional dispute could neither be expressly found or reasonably inferred from the affidavit and consequently, the affidavit could not be considered an affidavit ‘supporting the application’ under s 459G(3)(a) of the Corporations Act.
Key Takeaway
Persons seeking to file a supporting affidavit under s 459G(3)(a) of the Corporations Act are reminded to clearly articulate the nature and scope of their dispute and be sure to annex relevant documents to substantiate that dispute so as to reduce the risk that the application will be dismissed.
[1] [2021] VSCA 270
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