PARTIES:	RANFORD GOLD MINES PTY LTD

v

P&H EARTHMOVING PTY LTD

TITLE OF COURT:	SUPREME COURT OF THE NORTHERN TERRITORY OF AUSTRALIA

JURISDICTION:	Territory jurisdiction

FILE NOS:	No. 35 of 1994

DELIVERED:	24 May 1994

HEARING DATES:	Darwin 22 April 1994

JUDGMENT OF:	Kearney J

CATCHWORDS:

Corporations - winding up - application to set aside a statutory demand - supporting affidavit - applicability of Supreme Court Rules to the Corporation Law - non- compliance with r43.03(2) of the Supreme Court Rules - failure to state grounds of belief - whether Court has discretionary power to dispense with that requirement

Supreme Court Rules (NT), r43.03, r2.04
Supreme Court (Companies) Rules (NT), r7, r12(3) Supreme Court (Corporations Law) Interim Rules (NT), r4 Corporations Law (Cth), s459G

Tchia v Rogerson, (unreported, Angel J, 9 October 1992), referred to
Re Marloss One Pty Ltd (1992) 10 ACLC 30, followed
J-Corp Pty Limited v Ingram (1988) NTJ 329, followed

Corporations - winding up - application to set aside a statutory demand - general principles - Court must first ascertain if there is a "genuine dispute and/or offsetting claim" - if so satisfied, the Court is required to calculate the "substantiated amount of the demand"

Corporations Law (Cth), s459H
Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601, followed

Corporations - winding up - application to set aside a statutory demand - very limited role of Court in ascertaining if there is a "genuine dispute and/or offsetting claim" - circumstances in which factual basis may be investigated - circumstances in which deponent of supporting affidavit may be cross-examined

Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1992) 11 ACSR 362, followed
Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601, followed
Moyall Investments Services Pty Ltd v White (1993) 12 ACSR 320, followed
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, followed
CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd
(1993) 11 ACSR 773, followed
Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993)
120 ALR 173, referred to

Corporations - winding up - application to set aside a statutory demand - court must ascertain if there is a serious question to be tried as to whether there is a "genuine dispute and/or an offsetting claim" - applicant bears the onus of proof - need to adduce primary evidence

Moyall Investments Services Pty Ltd v White (1993) 12 ACSR 320, followed
Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993)
120 ALR 173, followed
CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd
(1993) 11 ACSR 773, followed
Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601, followed
American Cyanamid Co. v Ethicon Ltd [1975] AC 396, considered
The Australian Coarse Grain Pool Pty Ltd v The Barley Marketing Board of Queensland (1982) 57 ALJR 425, considered
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, followed

REPRESENTATION:

Counsel:

Plaintiff:	A. Wyvill
Defendant:	N. Henwood

Solicitors:

Plaintiff:	Halfpennys
Defendant:	Cridlands JUDGMENT CATEGORY CLASSIFICATION:	CAT A JUDGMENT ID NUMBER:		kea94016.J
NUMBER OF PAGES:	28

kea94016.J

IN THE SUPREME COURT
OF THE NORTHERN TERRITORY OF AUSTRALIA
AT DARWIN

No. 35 of 1994

IN THE MATTER OF the
Corporations Law

AND IN THE MATTER OF an
application to set aside a Creditor's Statutory Demand

BETWEEN:

RANFORD GOLD MINES PTY LTD (ACN 009 658 917)

Applicant

AND:

P & H EARTHMOVING PTY LTD (ACN 009 607 578)
Respondent

CORAM:	KEARNEY J

REASONS FOR JUDGMENT

(Delivered 24 May 1994)

On 9 February 1994 the respondent (herein "P&H") served a Statutory Demand on the applicant (herein "Ranford"), pursuant to s459E(2)(e) of the Corporations Law.	P&H claimed that Ranford owed it $180,869.04, as the balance of monies due and payable for the haulage of ore and (waste) overburden between 2 November 1993 and 21 December.	On 2 March 1994 Ranford applied pursuant to s459G for an order to set aside

the Notice of Demand.	I rule this afternoon on this application.
Background facts

Ranford has been an alluvial gold producer since 1989.	Since December 1992 it has operated an alluvial gold mine on a tribute basis, at Bridge Creek.	Its operation there consists of 3 working areas from which overburden and ore are removed, a small camp, and an alluvial processing plant.
In 1993 Ranford considered it would be unable by its own efforts to maintain a supply of ore at a level sufficient for it to continue to process ore efficiently during the Wet season.	For that purpose it needed to build up a stockpile of ore near its processing plant.	Consequently, on two separate occasions, in July 1993, and October - December 1993, Ranford contracted with P&H for that company to remove overburden, cart the underlying ore to a stockpile adjacent to Ranford's processing plant, and dispose of the overburden. P&H's demand arises out of the second contract.
The second contract was verbally entered into "on or about 3 November 1993", according to par4 of the affidavit of Mr Hutchinson, a director of P&H, of 8 March.	It is not in dispute that its terms were subsequently reduced to writing.
I note in passing that while the written contract is dated

8 November 1993, Mr Hutchinson deposed that it was "signed by [Ranford] on 20 January 1994". The written contract, clearly prepared by P&H, is as follows:-
"In response to our meeting on site at Bridge Creek on 3rd November, 1993, and the verbal agreement for

our company [P&H] to strip overburden and mine alluvial ore at the above site, we now wish to confirm our agreement and clarify the following points:

Strip O/B $1.00 per m³ loose.
Mine ore $1.62 per m³ loose.
Invoice to be signed each day.
Loads, quantities agreed each day.
Loads to be taken from load counters on 631 or 621.
Each load represents 25m³ 631 or 18.5m³ 621 loose.
All fuel to be supplied by Ranford Mine.
Payment 30 days from date of Statement.
This document constitutes a binding Contract between: P&H Earthmoving Pty Ltd and Ranford Gold Mine.
Please acknowledge your acceptance of this Contract by signing the duplicate of this letter and returning it to us."
P&H had commenced work, apparently on that basis, on

18 October 1993, initially using "621" scrapers and a caterpillar D7H bulldozer.	Later, when available, it used "631" scrapers. Mr McHugh said that he was in charge of the job for P&H, and worked "in accordance with directions from Mr Ken Padgett"; see par5 of his affidavit of 8 March.
P&H stopped work at Ranford's site some 9 weeks later, on or about 22 December 1993, at the direction of Mr Padgett, a director of Ranford; Mr Hutchinson said
Mr Padgett told him he was then satisfied with the stockpile, and had enough ore for the Wet season - see par11 of his affidavit of 8 March.	By that time Ranford was indebted to P&H in the amount of $230,869.04, according to P&H's November and December statements.	These statements were derived from
60 invoices detailing numbers of loads and quantities, "each of which bear Mr Padgett's signature"; see par6 of

Mr Hutchinson's affidavit of 8 March, and Annexure "C".	The work done by P&H in October 1993 was paid for, in full.
By 3 instalments paid on 14 and 21 January 1994, and

4 February, Ranford paid P&H on account a total of $50,000; hence the balance of $180,869.04 allegedly owing as set out in the Statutory Demand of 9 February.
On 7 February Messrs Padgett and Wilson, both directors of Ranford, attended at Mr Hutchinson's office and informed him that Ranford disputed the amount of monies due and payable to P&H; see par12 of Mr Hutchinson's affidavit of
8 March, and Annexure "E".		In essence, they now claimed that P&H had not delivered an estimated 31,440 cubic metres of ore out of the 99,449 cubic metres it claimed to have delivered and which it had charged Ranford for; as a result, according to their calculations, as at 5 February 1994 Ranford owed P&H a balance of $96,658.37, not $180,869.04 as claimed, a difference of $84,210.67.	They proposed that Ranford pay some
$50,000 of this amount ($96,658.37) in 3 instalments in February, but Ranford in fact made no payments.
On 9 February 1994, pursuant to s459E(2)(e), P&H served on Ranford a Statutory Demand and a supporting affidavit by Mr Hutchinson of that date.
The Statutory Demand and the application to set it aside
In his affidavit of 8 March in support of the Statutory Demand Mr Hutchinson deposes, inter alia, that Ranford is indebted to P&H in the sum of $180,869.04 and

denies the allegations made by Ranford's directors on

7 February 1994; see pars13(e) and (c).

On 2 March Ranford filed an application to set aside the Statutory Demand; this was supported by the affidavit of its lawyer Mr Ewens, of that date.
Par3 of Mr Ewens' affidavit sets out the basis upon which Ranford sought to set aside the statutory demand:-
"- - - there is a genuine dispute between the plaintiff and the defendant as to the existence or amount of the alleged debt and on the basis of an offsetting claim."
The remainder of the affidavit (pars4-24) sets out the facts upon which Ranford relies to establish the existence of this "genuine dispute" and "offsetting claim".
In essence, Ranford contends that it received from P&H substantially less ore than the 99,449 cubic metres it was invoiced for; the shortfall was some 28,000 cubic metres, for which it claimed a set-off.	It would also incur expense in obtaining 28,000 cubic metres of ore, which would entail the removal of some 40,000 cubic metres of overburden; it counterclaimed damages for that work, and also for income it had lost of some $180,000 when its plant was out of operation for some 2¼ months because its stockpile was exhausted due to the under-supply by P&H.	Taken together, Ranford's claims against P&H were for some $277,000 as opposed to P&H's Statutory Demand for $180,869.04; see pp22-23.
At this point, it may be noted that the affidavit evidence of 20 April of Mr Padgett established that during the 5-week period 16 February - 22 March he was in New Zealand and therefore unable to swear the affidavit required by s459G to

support the application of 2 March to set aside the Statutory Demand.	The supporting affidavit of Mr Ewens of 2 March did not comply with r12(3) of the Supreme Court (Companies) Rules and r43.03(2) of the Supreme Court Rules, in that it did not set out the grounds upon which his information and belief as to the facts alleged therein were based.	On 21 April a further supporting affidavit by Mr Ewens, was filed; it purported in pars4-6 to remedy this noncompliance, stating that the sources of his information were Messrs Padgett and Wilson, directors of Ranford.
The issues on the application of 2 March

The application was argued on 22 April.	It appeared that there were 4 matters in issues, viz:-
whether Ranford's application of 2 March should be dismissed as incompetent, due to the noncompliance with r12.03 of the Supreme Court (Companies) Rules and r43.03(2) of the Supreme Court Rules;
whether there was a "genuine dispute" and/or an "offsetting claim", pursuant to s459H(1) (see p9);
whether Mr Padgett could be cross-examined on his affidavit of 20 April, in and for the purpose of deciding issue (2); and
whether the substantiated amount is less than the statutory minimum, under s459H(3).
I now deal with these issues, seriatim.

Is the application of 2 March competent? Mr Henwood of counsel for P&H submitted inter alia,
that the contents of Mr Ewens' affidavit of 2 March were inadmissible, except for pars1 to 3, and 26, as the affidavit did not comply with r43.03(2) of the Supreme Court Rules.	As noted earlier, the statements of fact therein, were based on hearsay in the form of Mr Ewens' information and belief, but did not set out the grounds for his belief.	Rule 43.03 provides:-
"CONTENT OF AFFIDAVIT

Except where otherwise provided by or under this Chapter, an affidavit shall be confined to facts which the deponent is able to state of his own knowledge.

On an interlocutory application an affidavit may contain a statement of fact based on information and belief if the grounds are set out." (emphasis mine)
Mr Henwood submitted that this defect could not be cured by Mr Ewens' later affidavit of 21 April, as the strict
21 day time-limit for the making of the application supported by an affidavit, imposed by s459G(3), cannot be extended; and therefore the later (out-of-time) affidavit cannot "revive" the earlier (in-time) deficient affidavit.	He relied on Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1992) 11 ACSR 362 at 366; Texel Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 535 at 537; De Pellegrin Pty Ltd v Reinforced Earth Pty Ltd, (1994) 120 ALR 459; though cf Topfelt Pty Ltd v State Bank of NSW Ltd (1993) 120 ALR 155 at 171.

Mr Wyvill of counsel for Ranford submitted that the defect in Mr Ewens' affidavit of 2 March went only to the weight to be given to its contents, not to the admissibility of that evidence of those facts.	I do not accept that submission.	Alternatively, he submitted, if the defect went to the admissibility of the evidence,	it was a technical defect only and P&H would suffer no prejudice, particularly when compared with the "serious disadvantage" which Ranford would suffer if the affidavit evidence was not admitted.	He submitted that the facts alleged in the affidavit could be established by other evidence available.	In support, he relied on Hardie Rubber Company Pty Ltd v The General Tyre and Rubber Company (1973) 47 ALJR 462 at 466; Asherton v Jacksons
Corio Meat Packing (1965) Pty Ltd [1967] VR 850 at 858-854;

and Re Marloss One Pty Ltd (1992) 10 ACLC 30 at 32-33.

I consider that the effect of r12(3) and r7 of the Supreme Court (Companies) Rules and r4 of the Supreme Court (Corporations Law) Interim Rules is that r43.03(2) and r2.04 of the Supreme Court Rules apply to applications under s459G(1).	The Supreme Court Rules clearly give this Court discretionary power to dispense with compliance with the "grounds" requirement of r43.03(2), either before or after the occasion for compliance arises: see r2.04.
I respectfully adopt observations in Tchia v Rogerson, (unreported, Angel J, 9 October 1992) at pp10-11:-
" - - - procedure is not an end in itself, but a means to an end, which is the attainment of justice, and - - - the rules of practice to the work of justice is intended to be that of handmaid rather than mistress - - -".

I also respectfully agree with the views of Beach J in Re Marloss One Pty Ltd (supra) at 33, that:-
"- - -	it is encumbent upon the Court to ensure that the costs of litigation are kept to a minimum so long as in seeking to achieve that end injustice is not caused to a litigant".
I consider, having regard to the nature of the objection to  Mr Ewens' affidavit of 2 March, the circumstances as disclosed, and the respective prejudice which each party would suffer if the application of 2 March were struck out as incompetent on what I consider to be a technical defect, that this Court should exercise its discretionary power under r2.04 to dispense with the requirement of r43.03(2) that Mr Ewens'
original affidavit of 2 March set out his grounds of belief in the facts set out therein.	See also J-Corp Pty Limited v Ingram (1988) NTJ 329 at 335.	Adopting that approach, I order that the requirement be dispensed with; the application of
2 March is competent.

(2)	Is there a "genuine dispute" and/or an "offsetting claim"?
Section 459H provides, as far as material, as

follows:-

"459H.(1) This section applies where - - - the Court is satisfied of either or both of the following:

that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
that the company has an offsetting claim.

The Court must calculate the substantiated amount of the demand in accordance with the formula:

Admitted total - Offsetting total

where:

'Admitted total' means:
the admitted amount of the debt;
- - -
to which the demand relates;
'Offsetting total' means:
if the Court is satisfied that the company has only one offsetting claim - the amount of that claim; or
if the Court is satisfied that the company has 2 or more offsetting claims - the total of the amounts of those claims; or
otherwise - a nil amount.

If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.

If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:
varying the demand as specified in the order; and
declaring the demand to have had effect, as so varied, as from when the demand was served on the company.

In this section:
'admitted amount', in relation to a debt, means:
- - -
if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt - so much of that amount as the Court is satisfied is not the subject of such a dispute; or
otherwise - the amount of the debt; 'offsetting claim' means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates);
'respondent' means the person who served the demand on the company.

This section has effect subject to section 459J."
(emphasis mine)

The "statutory minimum" is $2000; see s9.

On the facts, s459H requires this Court first to ascertain if there is a "genuine dispute" about the existence

or amount of the debt claimed in the statutory demand, and/or a genuine "offsetting claim".	If it is so satisfied, the Court is required by s459H(2) to calculate the "substantiated amount of the demand" in accordance with the statutory formula; see Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 604-605.	I turn to these tasks.
Mr Wyvill and Mr Henwood agreed that the Court has a very limited role, when ascertaining whether there is a "genuine dispute" or "offsetting claim" in relation to the debt claimed by P&H in its statutory demand.	This is well established by Mibor Investments Pty Ltd v Commonwealth Bank of Australia (supra) at 366-367 - the Court should not make an "extended inquiry" or "attempt to weigh the merits of the dispute"; Re Morris Catering (Australia) Pty Ltd (supra) at 605 - "beyond a perception of genuineness (or the lack of it) the court has no function"; Moyall Investments Services Pty Ltd v White (1993) 12 ACSR 320 at 324; and Eyota Pty Ltd v Hanave Pty Ltd	(1994) 12 ACSR 785 at 787 - the Court "should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute", except in an "extreme case", that is, where the evidence lacks "sufficient prima facie plausibility to merit further investigation as to [its] truth."
Mr Wyvill submitted (transcript p41) that this Court is "bound to treat this [proceeding] as if it is a summary judgment application by [P&H] - - - [P&H] has the burden of proving - - - that [its] claims are clear, that [Ranford] has no arguable defence."	On the other hand, Mr Henwood submitted

that it is Ranford which bears the onus of establishing that there is a genuine dispute and/or an offsetting claim.	He relied on Moyall (supra) at p324, in support.
I accept Mr Henwood's submission.	However, Moyall (supra) does not refer to the standard of proof which Ranford must meet in that regard.	Mr Wyvill submitted that the "arguable case" standard applies; that is, it is the same standard as on an application for an interlocutory injunction.
See in this regard American Cyanamid Co. v Ethicon Ltd [1975] AC 396 at 407-408 and The Australian Coarse Grain Pool Pty Ltd v The Barley Marketing Board of Queensland (1982) 57 ALJR 425.
In my opinion, the standard to be applied for the purposes of s459G is whether Ranford has satisfied the Court that there is a serious question to be tried: see Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 120 ALR 173 at 189, CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd (1993) 11 ACSR 773 at 775, and Re Morris Catering (Australia) Pty Ltd (supra) at 603-604.	This standard means that a "genuine dispute" connotes a plausible contention requiring investigation; see Eyota Pty Ltd (supra).
Ranford's case

Mr Wyvill, relying on the affidavits of Mr Ewens of

2 March and 21 April and Mr Padgett's affidavit of 20 April, submitted that there is a serious question to be tried that P&H is liable in damages to Ranford, on a two-fold basis as follows.

Breach of contract

He submitted that the first basis of the liability of P&H is breach of contract.	First, the contract (see pp2-3) contained an express warranty by P&H that the loads of the 631 and 621 scrapers respectively would contain 25 cubic metres and 18.5 metres.	Alternatively, he submitted, in order to give business efficacy to the contract there is an implied warranty by P&H that it would use its best endeavours to ensure that those loads were full loads.	He submitted that it was reasonably arguable that P&H was in breach of its express or implied warranty, in that if the loads had been full, Ranford's stockpile would not have been exhausted when in fact it was exhausted, on 7 March 1994.
I note that for the purposes only of this application Ranford conceded that there was no dispute as to the actual number of loads delivered by P&H; see
Mr Hutchinson's affidavit of 8 March 1994, par6, annexure "C". Ranford's case is based solely on the volumes shifted by the 631 and 621 scrapers; it alleges they were "wrong to a substantial degree", as compared to the invoices.	Mr Padgett deposed that:-
"I believe the stockpile to have been approximately 28,000 cubic metres short on the volumes advised to Ranford by P&H."
The total volume advised by P&H was 99,449 cubic metres of ore; see Mr Padgett's affidavit of 20 April, annexures "B" and "C".
To substantiate Ranford's claim of this shortfall of about 28,000 cubic metres in the amount of ore P&H had shifted

to the stockpile, Mr Padgett deposed to the following calculations:-
"15. The manufacturers of the 631 and 621 scrapers, Caterpillar, advise in their technical brochures that the 631 is capable of being loaded to a maximum of 23.7 cubic metres, and the 621 to a capacity of 15.3 cubic metres.

- - -

My calculations are based on a number of factors.		First, the ore is transferred from the stockpile [for the purpose of processing] to a hopper by Ranford's loader, a 966E caterpillar loader equipped with a standard general purpose bucket rated at 3.1 cubic metres loaded flat and 3.3 cubic metres loaded heaped.	The average load is 3.0 cubic metres and the driver maintains a tally counter to record the number of loads and hence the volume of ore removed from the stockpile.	Secondly, ore is fed to the [processing] plant from the hopper.	Records indicate the volume fed by the loader to the hopper as being equivalent to the volume of ore processed by the plant at the speed at which it was set.	Records indicate the volume of ore processed when set at certain speeds.	The plant can be set at various speeds so as to process particular volumes of ore.

Figures derived from the loader records correspond with the figure derived from the plant records.

Thirdly, Ranford is able to determine the quantity of gold that it can expect to extract from any given quantity of ore taken from this particular location.	The amount of gold concentrate being obtained by Ranford at the present time correlates with the yield expected from the quantity and grade of ore being processed."

I note that in cross-examination, par18-20 were attacked; see pp26-29 of the transcript.	Par15 was not sought to be controverted; this may raise an issue of mutual or unilateral mistake - see Clause 6 of the contract, at p3.	However, this issue was not sought to be raised before me.

Misleading and deceptive  conduct Second, Mr Wyvill submitted that it was reasonably
arguable that P&H is liable in damages to Ranford, for misleading and deceptive conduct, pursuant to s52 of the Trade Practices Act.	He submitted that the daily invoices (see Clauses 3-4, p3) given by P&H to Ranford, which Mr Padgett had signed, represented that P&H had, in total, shifted 99,449 cubic metres of ore to Ranford's stockpile.	Ranford had relied on that representation.	Consequently, pursuant to s82 of the Trade Practices Act, there was a serious question that Ranford could recover damages from P&H.
P&H's case

Mr Henwood submitted that Ranford's case was "spurious", and amounted to "bluster" and mere "assertion"; cf Re Morris Catering (Australia) Pty Ltd (supra) at p605.	He submitted that Ranford had failed to discharge its onus of showing that there was a serious question to be tried, in relation to the genuineness of the offsetting claim.	He submitted that this Court, in effect, was being asked to believe that there was a genuine dispute, on the basis of "an allegation, in effect, - - - that the scrapers used by P&H Earthmoving were effectively two-thirds full for the whole contract".	And this, notwithstanding the following 5 matters, viz:
Mr Padgett signed the contract on

20 January 1994, some 4-5 weeks after P&H had completed its work under the contract, notwithstanding his alleged concerns as to the "volume of ore in the stockpile" which he said he

had raised in December 1993 and January 1994 with

Mr Hutchinson; see pars 30-31 of Mr Padgett's affidavit of

20 April 1994;

Ranford had not adduced any primary evidence to support the "assertions" that its records showed that less ore was processed than was supposed to have been in the stockpile: see Scanhill (supra) at p186.
Ranford's records were unreliable: see transcript pp26-29.
The evidence supports the conclusion that Ranford cannot pay the amount set out in the statutory demand; and
Mr Padgett had been present on site for most of the time that P&H was carrying out its work under the contract, allegedly making observations about the under- filling of the scrapers; yet he still signed the invoices presented to him - see the affidavit of Mr McHugh of 8 March 1994, par5 and 6.
Mr Henwood conceded that to examine these matters would require this Court to go beyond the established approach: see transcript p51, and, in particular, Mibor (supra) at 365-366.	However, he submitted that the legislature could not have intended to allow -
"mere assertions without any real basis in fact preventing winding up proceedings in circumstances where - - - it's a fiction masquerading as genuine disputes."
Mr Henwood also conceded that the authorities establish that Mibor (supra) at pp366-7 showed that -

"the Court will not embark upon any extended inquiry in order to determine whether there is a genuine dispute - - - and certainly will not attempt to weigh the merits of that dispute."
However, he submitted that the authorities show that the Court does in fact look into the merits to some degree; see, for example, Re Morris Catering (Australia) Pty Ltd (supra) and CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd (supra).
I agree with Mr Henwood's latter submission, particularly in light of the views of Hayne J in Mibor (supra) at 365:
"I do not consider that Div 3 of Pt54 of the Corporations Law requires the Court to conduct a trial of the kind described in order to determine whether a dispute is a genuine dispute. It may be that in some, perhaps limited, circumstances the Court may have to make some investigation of the factual basis of the claim that a debt is disputed before it could be satisfied that that dispute is a genuine dispute.	Each case will fall for decision upon its own facts". (emphasis mine)

I consider that the factual matrix of this case is such that this Court should investigate, to some degree, the factual basis of Ranford's claim to ensure there is a "genuine dispute and/or counterclaim"; or, as Mr Henwood put it, to ensure "fiction is not masquerading as a genuine dispute".	However, I remind myself that this Court's role in any such investigation is limited; as is said in Mibor (supra) at p307
- "all that the legislation requires is that the Court conclude that there is a [genuine dispute]".	Further, in that regard, Ranford has only to establish that there is a serious question to be tried. I permitted the deponents of affidavits to be cross-examined.

Conclusions

Taking into account Mr Henwood's submissions, and in particular the effect of Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (supra) at p186 and Eyota Pty Ltd v Hanave Pty Ltd (supra) in relation to Ranford's failure to adduce primary evidence, I consider that notwithstanding that suspicions of a "masquerade" by Ranford are not wholly dispelled, in the circumstances Ranford has discharged its onus.	I consider that it has shown that there is a serious question to be tried on the issues it has raised; there is a "genuine dispute" and an "offsetting claim" in this case.
The cross-examination of Mr Padgett Before turning to issue (4) on p6 I should refer to
the ruling I made during the hearing on 22 April 1994.
During the course of the hearing, Mr Henwood applied to cross-examine Mr Padgett in relation to his affidavit.	In support, he submitted that if leave was given to cross- examine, P&H would be able to demonstrate that
"many of the allegations made in Mr Padgett's affidavit, insofar as it can be relied upon, are without foundation and therefore not a genuine dispute - - - [which addresses] the question your Honour is required to determine."

Mr Henwood rightly conceded that the Court's role is limited, in applications under s459G (see p11).	However, he submitted that authorities such as Mibor (supra) at 364-365 and Scanhill Pty Ltd (supra) at 189-190 establish that in some, perhaps limited, circumstances the Court may have to make some investigation of the factual basis of the claim, and therefore cross-examination should be allowed, to test the

genuineness of the dispute.	He submitted that this Court must explore the defences referred to in Mr Padgett's affidavit of
20 April because they were "a recent invention", a matter which goes to the genuineness of the dispute.	He submitted that the Court should make "some inquiry into the merits"; otherwise it would "allow mere works of fiction to masquerade as genuine disputes".	If the assertions and allegations made in Mr Padgett's affidavit could not be tested at least to some extent it appeared that when anything is asserted in an affidavit in support of an application under s459G the process envisaged by the Statutory Demand procedure would be stultified.
Mr Wyvill submitted that the authorities so far have not permitted cross-examination on supporting affidavits: see, for example, Re Morris Catering (Australia) Pty Ltd (supra) at 605 and Eyota Pty Ltd v Hanave Pty Ltd (supra).	He submitted that there is only one authority - Mibor (supra) - where a respondent had sought to cross-examine a deponent on his supporting affidavit; and there Hayne J had not allowed it.
He submitted that Scanhill (supra) did not support P&H's application.	In that case Beazley J did not allow cross-examination, even though the affidavit, which asserted bare facts (it resembled a pleading) was bereft of particulars; he submitted that here Ranford's supporting affidavit set out detailed particulars of its claim and consequently the case for cross-examination was weaker than in Scanhill.

Mr Wyvill conceded that if this case involved a simple issue of fact, such as the delivery or non-delivery of goods, cross-examination would be permissible.	However, it involved a complex factual matrix and was not suitable for cross-examination.	Ranford would then have to cross-examine the deponents of affidavits in support of P&H, to ascertain if the dispute is genuine.	Effectively, then, the Court would be departing from its limited role in that it would be conducting an investigation into the merits and the likely result of the dispute.	He submitted that:-
"- - - the authorities are unanimous in saying that it is a very high hurdle they need to cross.	It's only in the clearest of cases that you look at the genuineness and expose the lack of genuineness very quickly".

He submitted that in the complex factual matrix of this case, cross-examination would not resolve that question.
In reply, Mr Henwood conceded that the facts were complex and that he might not succeed in cross-examination in destroying the whole of Ranford's assertions.	However, he submitted that P&H could thereby clearly show that the dispute was not genuine, and that the substantiated amount was greater than the statutory minimum.
I ruled that:-

"- - - this Court has a very limited role in [ascertaining] the genuineness of the dispute.	And it is clear also that that determination is not to take place as a result of some protracted inquiry. All of that would tend to support the proposition put forward by Mr Wyvill.	However	- - - I think it right in this case and on the facts, as I presently understand them to be, to grant Mr Henwood's application, and I will give you leave to cross- examine - - -." (emphasis mine)

My reasons for that ruling were that I concur with what Hayne J said in Mibor (supra) at 365:-
"It may be that in some, perhaps limited circumstances the court may have to make some investigation of the factual basis of the claim that a debt is disputed before it could be satisfied that that dispute is a genuine dispute.	Each case will fall for decision upon its own facts."

I considered that this case involves allegations of several factual disputes; and notwithstanding that this Court has a limited role and must not embark on an inquiry into the merits of the dispute or the credit of a deponent, to establish if the dispute is "genuine", it was a case where the Court should "make some investigation of the factual basis of the claim before it could be satisfied that that dispute is a genuine dispute"; see Mibor (supra) at p365.
In my opinion, what amounts to an "extreme case" (Eyota Pty Ltd v Hanave Pty Ltd (supra)) or "some, perhaps limited, circumstances" or "rare" cases	(Mibor, at pp364-365)
is always a question of fact bearing in mind the nature of the proceedings and the limited role of the Court therein.
Whether the substantiated amount is less than the statutory minimum, under s459H(3)
I have indicated I am satisfied that there is a serious question to be tried in regard to the genuineness of the dispute as to the amount of the debt and the offsetting claim.	This Court is now required to calculate the substantiated amount of the demand (s459H(2)).	The calculation is in accordance with the formula, "admitted total" minus "offsetting total" in s459H; see pp9-10.

As noted earlier, the "statutory minimum" is currently $2,000.
As to the approach to the calculation, Thomas J said in Re Morris Catering (Australia) Pty Ltd (supra) at 605:-
"Broadly speaking, the Court is required to examine the claim, assess the undisputed parts of the debt that has been demanded, and deduct from it any offsetting claims of the debtor company.	If the result is $2,000 or more, the Court has a discretion to vary the demand and to declare the varied demand to have had effect from the time when the original demand was served."

However if the result is less than $2,000 then the statutory demand must be set aside: see s459H(3) and CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd (supra) at 776.
As noted earlier, this case involves complex factual issues; this points to a serious difficulty in calculating "the substantiated amount" since many and varied factors, some presently speculative in light of the limited examination, impinge on the calculations.	However, in accordance with the directive in s459H(2), I turn to this task, noting its inherent difficulties.
Mr Wyvill did not dispute that Ranford had become indebted to P&H, as a result of the contract, but submitted that the amount of the debt as claimed ($180,869.94) was not due and payable to P&H, and that Ranford had an offsetting claim far in excess of P&H's claim.
Initially, on the affidavit material, Ranford's case, as deposed to by Mr Padgett on 20 April, was that:-
"23.	Average cost of carting ore and overburden amounts to $3.07 per cubic metre.	On a shortfall of 28,319 cubic metres, the amount that I estimate the stockpile was short on figures supplied by P&H,

Ranford has been called upon to pay an amount of
$86,939.33 for cartage which has not taken place.

- - -

Ranford supplied fuel to P&H for its earthmoving equipment.	P&H moved both ore and overburden.		If P&H have moved a volume of approximately 28,000 cubic metres less than has been charged, then to now move that extra volume would mean also moving approximately 42,000 cubic metres of overburden, a total of approximately 70,000 cubic metres of extra material, to make good the shortfall.	This will incur additional fuel costs of approximately $10,500.00.

P&H were requested to stockpile sufficient ore for Ranford to operate double shift throughout the wet season.	When it became apparent that the stockpile was insufficient, Ranford reduced to one shift.	It has not processed any	ore of significance since 7 March 1994, when the stockpile ran out.

Ranford has ben virtually at a standstill for approximately one month.	It is unlikely that Ranford will be able to cart its own ore again until the end of April 1994, by which time Ranford is likely to have been unproductive for approximately two months.

Ranford has been denied income from gold production for a period of approximately two months as a result of P&H failing to stockpile the quantity of ore requested and as invoiced.

The expected income from such gold production for a period of two and a quarter months amounts to approximately $180,000.00.	This is on the basis of processing 13,000 cubic metres per month with a grade comparable to that which Ranford has been experiencing over the past 12 months or so.	Gold has been selling at approximately $17.00 per gram, amounting to a monthly income of approximately
$80,000.00.	This amounts to $180,000.00 lost because of undersupply over a period of two and a quarter months, the amount of time which I believe Ranford will be out of production as a result of P&H's failure to stockpile as requested and as invoiced."

In essence, Ranford here claims that the amount of its undisputed debt to P&H is $93,929.71, based on the amount of ore it contends was delivered by P&H; that figure is derived

from $180,869.04 (P&H's claim) - $86,939.33 (par23) to make good the alleged shortfall.	It also claims to have an "offsetting claim" of $190,500 (being $180,000 plus $10,500 for fuel).	If Ranford's version of the facts is accepted as reasonably arguable, and the statutory formula in s459H is applied to these figures, clearly the "substantiated amount" is negative and this Court, applying s459H(3), would have to set the statutory demand aside.
However, later in the proceedings, relying on evidence adduced from Mr Padgett in cross-examination and re- examination, Mr Wyvill prepared "a statement of the assessment of loss" which sets out a 'best case' and 'worst case' assessment of the loss Ranford claims to have sustained.
That assessment of loss is as follows:-

"RANFORD GOLD MINES ASSESSMENT OF LOSS

Best case		
ore	28,000	by	$3.07	per	cubic	meter	85,960.00	
o/burden	42,000	by	$3.07	per	cubic	meter	128,940.00	
extra fuel							10,500.00	
	Total						$225,400.00	

ore	
28,000	
by	
$1.62	
per	
cubic	
meter	
45,360.00	
o/burden	42,000	by	$1.00	per	cubic	meter	42,000.00	
extra fuel							10,500.00	
	Total						$97,860.00	

Cost of rectifying Respondent's breach

Worst case

Consequential loss

Worst case - loss on income
March - 3 weeks at $20,00 per week	60,000.00
April - 4.5 weeks loss of 60% capacity	53,000.00
May -	4.5 weeks loss of 50% capacity		45,000.00 Total	$158,000.00
Best case - additional expenses

17 weeks (4 months) at $15,000.00 per week additional overheads -	$255,00.00

SUMMARY		
Worst case	158,000 +	97,860	=	$255,860.00	
Best case	225,000 +	255,000	=	$480,400.00 "	
If the facts upon which Ranford made these calculations are accepted as reasonably arguable, on Ranford's 'best case' assessment the undisputed debt to P&H for its work under the contract would be $94,909.04	(P&H claim for 180,869.04 - cost to Ranford of replacing 28,000 cubic metres shortfall, 85,960).	Ranford's offsetting claim would amount to (128,940
+ 10,500 + 255,000)= $394,440; see the submissions at transcript pp45-46.	The substantiated amount would therefore be negative.
On the 'worst case' scenario for Ranford on its figures, its undisputed debt to P&H would be $135,509.04 (180,869.04 - 45,360).	Ranford's offsetting claim would amount to (42,000 + 10,500 + 158,000) = $210,500.	Again the substantiated amount would be negative.
Mr Wyvill submitted that since whichever of these two bases the Court adopted, the "substantiated amount" would be lower than the statutory minimum, the statutory demand must be set aside, pursuant to s459H(3).

Mr Henwood submitted that Ranford's assertion that its undisputed debt, on the initial calculation, is
$94,909.04, cannot be sustained.	He submitted that there is no basis to support Mr Padgett's claim that the "average cost of carting ore and overburden amounts to $3.07"; see par23 of Mr Padgett's affidavit.	He submitted that at best the contract price of $1.62 (see p3) could be used to calculate the amount involved in genuine dispute.
Mr Padgett, clearly an experienced person in alluvial gold mining operations (see par5, 6, 7, 8 and 9 of his affidavit), was not cross-examined on this aspect of his evidence.	On those bases, I find that that amount is in genuine dispute, and reject Mr Henwood's submission.
For the purposes of calculating the "admitted total" and the "offsetting total", I consider that the contract figure of $1.62 (p2) should be used in assessing the undisputed debt, and the remainder of the $3.07 ($1.45) should be used in calculating the offsetting total.
On that basis Ranford's undisputed debt to P&H, according to Ranford, amounts to $45,876.78 (1.62 x 28,319); while the remainder, of $41,062.55 (1.45 x 28,319), forms part of the offsetting total.	I also take into account Ranford's offsetting claim for $10,500 in respect of the fuel (par25 of Mr Padgett's affidavit, p20).	Mr Henwood did not cross- examine Mr Padgett on this aspect; taking into account
Mr Padgett's experience in alluvial mining operations (see p23), I consider that that amount may be treated as part of a genuine offsetting claim for present purposes.

In respect of Ranford's substantive "offsetting claim", Mr Henwood submitted (transcript pp28, 29) that the figure of $180,000 for loss of production (see par29 of
Mr Padgett's affidavit, p23) has not been made out by Ranford as
"the gold remains in the ground.	It can be dug up at a later time".
(transcript pp29 and 59).

He submitted that in re-examination Mr Padgett was asked how long his "tribute basis" was in force (see transcript p35) and there was no suggestion that Ranford would not have time within that period to mine the remaining alluvial gold.
At first blush, this submission is attractive.

However on reflection, and for the purposes of this application, I consider it to be of no consequence.
Notwithstanding that I consider that it was not a term of the contract that P&H would deliver a fixed amount of ore to the stockpile, the evidence before this Court shows a reasonably arguable case that Ranford relied on the daily invoices presented by P&H, as accurately stating the quantity of ore stockpiled (in total 99,449 cubic metres).
The consequence of this approach, which I am constrained to adopt, is that Ranford arguably suffered a "loss of income".
For the purposes only of this application, bearing in mind the facts and the presently-speculative nature of matters relevant to calculating the "admitted total" and "offsetting total", having regard to the submissions of
Mr Wyvill (at transcript p46) and par29 of Mr Padgett's

affidavit, and the fact that Mr Padgett was not cross-examined on the "monthly income" of Ranford, I accept the figure of
$158,000 as being a genuine offsetting amount in relation to the consequential loss of Ranford.
As a result, it is unnecessary for this Court to attempt to assess if there is a genuine offsetting claim in respect of "additional expenses" (p25) (see transcript p46) since, applying the formula, the substantiated amount is already negative.	That is to say, the "admitted total" (180,869.04 - 45,876.78) is	134,992.26
The "offsetting total" (41,062.55 + 10,500 +

158,000)	is	209,562.55

(The substantiated amount, being "admitted
total" less the "offsetting" total	= -$74,570.29
==========
The "substantiated amount" being a negative figure on these calculations, Ranford is entitled to an order pursuant to s459H(3) setting aside the Statutory Demand.
Accordingly, I order that the Statutory Demand of

9 February 1994 be set aside.