Chataway Enterprises Pty Limited v Chadmar Enterprises Pty Limited [2004] ACTSC 87 (17 September 2004)

Last Updated: 29 October 2004

CHATAWAY ENTERPRISES PTY LIMITED v CHADMAR ENTERPRISES PTY LIMITED

[2004] ACTSC 87 (17 September 2004)

CORPORATIONS - statutory demand - application to set aside - test to be applied - whether genuine dispute - affidavit in support - whether affidavit satisfies minimum requirements - extent to which affidavit may be supplemented by further affidavit material outside 21-day period

Corporations Act 2001, s 459G, 459H

David Grant and Co Pty Limited v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265

Graywinter Properties Pty Limited v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452

Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACSR 785

Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362

Hire Works Pty Limited v Elexpo Pty Limited (1995) 19 ACSR 114

Greenway Hotel Pty Ltd v Parton [2004] ACTCA 13 (Gray, Connolly and Lander JJ, 14 July 2004, unreported)

D & S Group of Companies Pty Ltd v O'Connor Investments Pty Ltd (1997) 15 ACLC 1794 Energy Equity Corporation Ltd v Sinedie Pty Limited [2001] WASCA 419; (2001) 166 FLR 179.

Commercial Bank of Australia Limited v Amadio [1983] HCA 14; (1983) 151 CLR 447

Garcia v National Australia Bank Limited [1998] HCA 48; (1998) 194 CLR 395

No. SC 478 of 2004

Judge: Master Harper

Supreme Court of the ACT

Date: 17 September 2004

IN THE SUPREME COURT OF THE )

) No. SC 478 of 2004

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: CHATAWAY ENTERPRISES PTY LIMITED

Plaintiff

AND: CHADMAR ENTERPRISES PTY LIMITED

Defendant

ORDER

Judge: Master Harper

Date: 17 September 2004

Place: Canberra

THE COURT ORDERS THAT:

1. The application be dismissed

2. The plaintiff pay the defendant's costs of the application.

1. This is an application under s 459G of the Corporations Act 2001 seeking an order setting aside a statutory demand. The demand was served by the defendant on the plaintiff on 23 June 2004. The debt was described in the demand in the following terms:

The debt arises by virtue of a transaction on 11 May 2004 whereby the creditor paid out the sum of $344,954.21 to Perpetual Trustee Company Limited to discharge the creditor's obligations under a deed of guarantee dated 3 April 2000 being payment out of the whole sum required to discharge the obligation of the principal debtor, Kayso Pty Limited, under the guarantee. The creditor and the company together with five other parties were jointly and severally co-guarantors under the guarantee and in the circumstances by virtue of the payment by the creditor of the full amount owing under the guarantee the company becomes obliged to pay to the creditor the sum of $49,279.17 by virtue of its obligation as a co-surety for one-seventh of the amount so paid.

The demand was supported by an affidavit sworn by Mr P C Bunn, a director of the defendant.

2. The present application was filed on 13 July 2004, returnable for 16 July. The defendant entered an appearance on 16 July. On that date, directions were made by consent as to the filing and service of additional affidavits. The timetable was extended on 6 August, and the application was heard on 3 September.

3. The application was supported by an affidavit of Mr J M Chataway, a director of the plaintiff, sworn and filed on 13 July. That affidavit was supplemented by a lengthy affidavit sworn by Mr Chataway on 23 July, and the defendant responded with affidavits by Mr Bunn sworn on 24 August and Mr R R P Badgery, a solicitor and partner in the firm of Dibbs Barker Gosling, sworn on 26 August 2004. All affidavits were read on the hearing of the application. Certain objections were taken on both sides, but none of the deponents were required for cross-examination.

4. Pursuant to s 459G, a company may apply to the court for an order setting aside a statutory demand. The application may not be made more than 21 days after service of the demand. An affidavit supporting the application must be filed and served within the 21-day period.

5. The plaintiff asserts that there is a genuine dispute about the debt. By virtue of s 459H, if the court is satisfied that there is a genuine dispute between the plaintiff and the defendant about the existence of the debt, the demand must be set aside. As Gummow J explained in David Grant and Co Pty Limited v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 at 270:

The provisions of the new Part 5.4 constitute a legislative scheme for quick resolution of the issue of solvency and the determination of whether the company should be wound up without the interposition of disputes about debts, unless they are raised promptly.

6. It is not enough to establish a genuine dispute that the deponent of the affidavit asserts that the debt is disputed. As against this, the court is not required to determine the dispute. There is no obligation on the plaintiff to establish a strong case or to bring forward all of its evidence. Provided that the plaintiff has established that there is a genuine dispute, it will usually be inappropriate for the court to express a view as to the strength or otherwise of the case.

7. In Graywinter Properties Pty Limited v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452, Sundberg J upheld the adequacy of a supporting affidavit, and allowed the applicant time to file supplementary material before the application to set aside the statutory demand was finally determined. His Honour said at 459:

In order to be a "supporting affidavit", an affidavit must say something that promotes the company's case. An affidavit which merely says "I am a director of the company but am too busy at present to make a full affidavit, and I will do so later" would not support the application. It would in no way advance, further or assist the company's cause, which is to have the notice set aside. At the other extreme, the affidavit need not detail, in admissible form, all the evidence that supports the contention of a genuine dispute. . . That evidence must be available at the hearing of the application to set aside, because the application is for final and not interlocutory relief. . .

In a s 459H(1)(a) case the affidavit must in my view disclose facts showing there is a genuine dispute between the parties. A mere assertion that there is a genuine dispute is not enough. Nor is a bare claim that the debt is disputed sufficient. It follows from the fact that the affidavit need not go into evidence, which is the customary function of an affidavit, that it may read like a pleading.

An affidavit which exhibits an exchange of correspondence between the parties or between their solicitors from which it appears that a claim is made and rejected for reasons given can qualify as a supporting affidavit. And an affidavit verifying the pleadings in an action may qualify.

. . . The affidavit must, as a minimum, contain a statement of the material facts on which the applicant intends to rely to show a genuine dispute - it might read more like a pleading than a story. That accords with what I consider to be the minimum requirement.

8. In the same case, his Honour went on to endorse the proposition, which had been held to apply in earlier cases, that an applicant whose initial affidavit satisfies the threshold test may supplement the material with additional affidavit evidence, and that the latter may be filed and served outside the 21-day period.

9. The meaning of the expression "genuine dispute" in s 450H was considered by McLelland CJ in Eq in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACSR 785, where his Honour said the following:

In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the "serious question to be tried" criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit. . .

But it does mean that except in. . . an extreme case, a court required to determine whether there is a genuine dispute 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. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute.

His Honour quoted Hayne J in Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362 at 366:

. . . at least in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.

10. In the affidavit supporting the application, Mr Chataway annexed a copy of the deed of guarantee mentioned in the schedule to the statutory demand. The deed, dated 3 April 2000, recited a request by five companies and two individuals to Perpetual Trustee Company Limited to advance funds to Kayso Pty Limited; an agreement by those seven entities to guarantee and indemnify Perpetual as set out in the deed; and the fact that the guaranteeing entities had before execution of the deed inspected, understood and approved security documents whereby Kayso as borrower was to give Perpetual a first registered mortgage over the land occupied by the Scullin supermarket. The guarantors included the plaintiff and defendant companies and Mr Bunn and Mr Chataway in their personal capacities. The deed bears Mr Chataway's signature on his own behalf, witnessed by Mr Badgery, and also his signature as sole director and secretary of the plaintiff company, attesting the fixing of its common seal.

11. The deed contained a clause (clause 3) empowering Perpetual as lender to do a number of things without the consent or knowledge of the guarantors and without discharging or affecting their liability, including releasing any existing or future security and making further advances to Kayso. It was submitted on behalf of the plaintiff that the terms of the deed were unusually wide and onerous, but there was no evidence to support the submission. Mr Badgery did not suggest in his affidavit that there was anything unusual about the deed, and as I have previously mentioned, he was not required for cross-examination.

12. Mr Chataway, in his supporting affidavit, deposed as follows:

3. The plaintiff asserts that the deed is not enforceable as against the plaintiff by reason of unconscionable conduct on the part of the lender at the time the deed was created upon the grounds that the plaintiff was not provided the opportunity of independent legal advice in respect of the deed. As such the plaintiff and its director did not have the ability to make an informed decision as to the risks involved, as a direct result of the obligations placed upon the plaintiff by virtue of the provisions of the deed.

4. I seek an order from the court that the statutory demand served upon the plaintiff be set aside upon the grounds that any alleged indebtedness arising on the part of the plaintiff as co-surety pursuant to the provisions of the deed, is unenforceable as a direct consequence of the unconscionable conduct exhibited by the lender at the time of the creation of the deed.

5. Further and in the alternative, I seek an order from the court that the deed be set aside by reason of the unconscionable conduct hereinbefore mentioned.

13. For the sake of completeness, I record that the originating application did not seek any order in the terms foreshadowed in paragraph five of the affidavit.

14. It is clear from the authorities that the plaintiff is limited, in seeking to establish a genuine dispute about the debt, to the material facts deposed to in the supporting affidavit, or, perhaps less stringently, to the material facts "pleaded" in that affidavit, as explained by Sundberg J in Graywinter Properties. His Honour was able to identify only one decision in which an applicant had succeeded in circumstances where the material facts had been set out in a supplementary affidavit outside the 21-day period, the original supporting affidavit having being limited to a bare denial of the debt: Hire Works Pty Limited v Elexpo Pty Limited (1995) 19 ACSR 114, a decision of Senior Master Mahony of the Supreme Court of Victoria. His Honour found himself unable to agree that a court could entertain, as an application under s 459G, a case in which an affidavit containing the minimum requirements had not been served within time, and I respectfully accept his Honour's analysis. I propose to follow Graywinter Properties rather than Hire Works.

15. Mr Chataway's second affidavit, sworn on 23 July 2004, extended to 113 paragraphs over 18 pages, with a further 15 annexures occupying some 50 pages. Much of this affidavit explained the history of his relationship with Mr Bunn, and the relationship between the various companies. Objection was taken by counsel for the defendant to much of the affidavit as irrelevant to the only ground upon which the plaintiff had chosen to rely in his first affidavit.

16. Mr Chataway deposed that he had been a career Air Force officer until 1974 when he retired with the rank of Group Captain, and that he is now 74 years of age. He moved to Canberra in November 1974 and went into partnership with other retired Air Force officers in the operation of a sand and gravel contracting business. In 1978, he purchased a service station at Macquarie, where he employed Mr Bunn, then a schoolboy, in the afternoons. He sold the service station in 1984 and moved to Cooma, New South Wales, where he still lives. In 1986 or 1987, Mr Bunn, who had been working with the National Australia Bank and had gained some experience in the management of supermarkets, approached him with a proposal to purchase the Scullin supermarket. In April 1987, Kayso Pty Limited was incorporated with Mr Chataway and Mr Bunn equal shareholders and directors. Kayso borrowed $180,000.00 from Esanda Finance Corporation towards the purchase of the supermarket business. In November 1989, Kayso purchased the supermarket land and building for $750,000.00. The purchase was financed by Esanda. From 1987, Mr Bunn managed the supermarket and Mr Chataway, although he had some involvement in record keeping, was largely a silent partner.

17. In late 1999, Esanda demanded repayment of the funds then owing by Kayso, an amount of some $877,000.00. Mr Bunn found alternative finance through Perpetual. The value of the land and building by this time had dropped sharply, and Mr Chataway contributed an amount of $380,000.00 towards paying out Esanda. Mr Bunn, on behalf of Kayso, retained Mr Badgery professionally, in relation to a dispute with Esanda as to the amount owing. Mr Chataway says that he was not a party to any of the negotiations with Perpetual, these being conducted by Mr Bunn.

18. He says that on 3 April 2000, he attended Mr Badgery's office at Mr Bunn's request. He says that during that meeting, Mr Badgery put documents in front of him and told him to sign them on behalf of the plaintiff company and on his own behalf. He says that he was of the belief that he needed to sign the documents for the refinancing. He had not seen any of the documentation prior to his attendance at Mr Badgery's office. His recollection was that he was at the office for a short period and that the execution was conducted in a somewhat rushed manner. He says that he was not given the opportunity to read the documents prior to signing them, nor did Mr Badgery advise him that it would be desirable to do so. In particular, he says that he was not given the opportunity to obtain independent legal or financial advice on his own behalf or on behalf of the plaintiff company prior to execution, nor did Mr Badgery suggest that this would be desirable.

19. Mr Chataway then deposed to the course of a dispute between himself and Mr Bunn. It does not seem to me that events subsequent to the execution of the deed of guarantee can be relevant to the genuineness of the dispute about the debt claimed in the statutory demand, and it is unnecessary for me to summarise the portion of Mr Chataway's affidavit which outlines events subsequent to 3 April 2000.

20. Mr Chataway also devoted part of his second affidavit to an argument that even if the deed of guarantee was found to be enforceable, the plaintiff could successfully defend a claim by the defendant for the claimed debt on the basis that it would be unfair, inequitable and unconscionable for the defendant to be permitted to do so. This attack on the debt was not mounted in the original affidavit and by the date of the second affidavit it was too late for the plaintiff to raise it.

21. Mr Chataway further used the affidavit to argue that in any proceedings commenced by the defendant against the plaintiff in respect of the debt, he would intend to join Barker Gosling, presumably as a third party. It is sufficient to say that any rights the plaintiff might have against Barker Gosling in third party proceedings of that kind would not constitute a defence to the principal claim by the defendant, and that the plaintiff is not precluded from enforcing any such rights in separate proceedings against Barker Gosling or Dibbs Barker Gosling.

22. In the remaining portion of the affidavit, Mr Chataway sought to expand upon the issue of the validity and enforceability of the deed of guarantee, and the question of unconscionable conduct on the part of Perpetual. This issue having been "pleaded" in the first affidavit may be expanded upon in a subsequent affidavit. Mr Chataway deposes that Perpetual is a large commercial organisation with superior knowledge of the pitfalls of small business, and that Perpetual was aware that Kayso's only real property was the supermarket land and building which was valued at very much less than its purchase price eleven years earlier. He says that Perpetual was aware that Esanda was exerting pressure on Kayso, Mr Bunn and the plaintiff company to pay out the previous loan. He asserts that Perpetual was aware of the potentially disastrous consequences for the plaintiff should Perpetual call upon the guarantee, and that in all the circumstances Perpetual should have advised the plaintiff to obtain independent legal and financial advice, and provided a copy of the deed in sufficient time to enable that to be done prior to execution. He further asserted that the plaintiff company had minimal experience in financial, commercial and security transactions, and that he was unable to judge whether the transaction was provident and whether it was in the best interest of the plaintiff company. He said that if he had been aware of the terms of the deed prior to execution, he would never have executed it on behalf of the company.

23. Mr Chataway also deposes that in July 2004, the defendant company commenced action against him personally in the Magistrates Court, claiming some $50,000.00 as his share of the guarantee. He has instructed his solicitors to file a defence and counter-claim.

24. Much of Mr Bunn's affidavit in reply was the subject of objection on the ground of relevance. Mr Bunn swears that he and Mr Chataway and the plaintiff company were each guarantors of the previous Esanda loan to Kayso, and this is not challenged. Deeds were executed in September 1991 and May 1995 by the plaintiff company and Mr Chataway, among others, as guarantors, to acknowledge increases in the amounts advanced. Mr Bunn also deposed to the service on Kayso of a notice of demand by Esanda in December 1999. I allowed these documents into evidence over the objection of counsel for the plaintiff, as relevant to Mr Chataway's knowledge and experience of financial dealings including corporate and personal guarantees and corporate borrowing. Mr Bunn also deposed that at all relevant times up to May 2001, Mr Chataway was a director of Kayso, except for a couple of weeks in February 1999. This is corroborated by a company search annexed to his affidavit.

25. Mr Bunn said that the attendance on Mr Badgery prior to the execution of the Perpetual guarantee documents was of at least an hour's duration, and that Mr Badgery explained the effect of the guarantee to him and to Mr Chataway. He recalled Mr Badgery telling them that if Kayso was unable to pay the debt, any of the guarantors could be called upon to pay the whole amount at Perpetual's option, the liability of the guarantors being joint and several. He recalled Mr Badgery asking him and Mr Chataway whether they understood the documents they were about to sign, and the consequences for Kayso and for the guarantors in the event of default. He answered in the affirmative, and recalled Mr Chataway doing the same.

26. Mr Badgery's affidavit evidence was to the effect that he had been practising as a solicitor since 1974, mostly in property and commercial law, and had been a partner with Dibbs Barker Gosling since 1985. He had given advice to borrowers and guarantors in commercial transactions on numerous occasions. He was retained in February 2000 by Mr Bunn to act on behalf of Kayso as borrower and on behalf of the plaintiff and defendant companies and Messrs Bunn and Chataway as guarantors, with respect to notices of demand served by Esanda. He was subsequently instructed to advise in relation to the refinancing of the Esanda debt by Perpetual. He was sent security documents including the deed of guarantee by Perpetual's solicitors, and on 28 March 2000 Mr Bunn and Mr Chataway attended his office to execute the documents. The conference lasted about an hour. He questioned Mr Chataway as to his understanding of the nature and effect of the documents, and the possible consequences for the guarantors of a default. He satisfied himself that Mr Chataway had an adequate understanding of these matters, and that he executed the documents freely and voluntarily. Mr Badgery witnessed Mr Chataway's signature to the deed, as a guarantor in his personal capacity.

27. Mr Badgery signed an independent certificate of explanation prepared by the solicitors for Perpetual, in which he certified that he had conducted an interview with Mr Chataway in his own right and as sole director of the plaintiff company, in which he had explained the nature and effects of the documents, and the legal consequences of a breach by any party. Mr Chataway signed an acknowledgement in his own right and as director of the plaintiff that he had read and understood the documents, and he also signed as a director, with Mr Bunn, by way of attesting the fixing of the common seal of Kayso, a form of acknowledgement which was among the papers prepared by the solicitors for Perpetual. Mr Badgery explained that the settlements of the transaction took place on 3 April, and that the previously executed guarantee was dated at settlement, having being executed by the borrower and guarantors at his office on 28 March. He went on to say that he had read Mr Chataway's affidavit and disagreed with it to the extent that it was inconsistent with his own affidavit.

28. It is not my task to resolve evidentiary conflicts, but simply to determine whether the plaintiff has raised, on the ground "pleaded" in his first affidavit, and factually expanded upon in his second affidavit, a plausible contention requiring investigation or a serious question to be tried, as explained by McLelland CJ in Eq in Eyota. It seems to me that the appropriate way to test this is to assume that the plaintiff's evidence will be accepted, and that evidence called by the defendant, where it is inconsistent with the plaintiff's evidence, will not. On this assumption, has the plaintiff demonstrated an arguable defence to a claim for the debt?

29. It should be noted that Mr Badgery was a solicitor instructed independently of the lender, Perpetual, but he was not instructed to advise the guarantors independently of the borrower, Kayso. To require that the guarantors be advised by a solicitor independent of the borrower would at that time have been artificial in the extreme. Mr Bunn and Mr Chataway were the shareholders and directors of Kayso. The guarantors were Mr Bunn and Mr Chataway personally, and five companies, four of which were controlled by Mr Bunn and one by Mr Chataway. There was in March-April 2000 no falling out or dispute between Mr Bunn and Mr Chataway, certainly none known to Perpetual.

30. The plaintiff does not deny that, if the deed of guarantee is found to be valid and enforceable, the defendant is entitled to a one-seventh contribution from the plaintiff to the amount paid by the defendant to Perpetual. Equally, the defendant concedes that if the deed is found to be invalid or unenforceable as against the plaintiff by reason of unconscionable conduct on the part of Perpetual, this will provide the plaintiff with a defence to the present demand, as a claim by a co-guarantor.

31. The proposition that the applicant is confined to the grounds set out in the original supporting affidavit, and is not permitted to rely on additional grounds raised for the first time in subsequent affidavit material filed outside the 21-day period, has recently been affirmed by the Court of Appeal of this Territory: Greenway Hotel Pty Ltd v Parton [2004] ACTCA 13 (Gray, Connolly and Lander JJ, 14 July 2004, unreported), citing with approval D & S Group of Companies Pty Ltd v O'Connor Investments Pty Ltd (1997) 15 ACLC 1794 and Energy Equity Corporation Ltd v Sinedie Pty Limited [2001] WASCA 419; (2001) 166 FLR 179.

32. Counsel for the defendant submits that Mr Chataway's first affidavit is inadequate for the purpose of establishing a genuine dispute. It is said to rely on the proposition that a lender is obliged to provide to a guarantor an opportunity for independent legal advice. The defendant submits that that is not the law. The law on the subject is as stated by the High Court in Commercial Bank of Australia Limited v Amadio [1983] HCA 14; (1983) 151 CLR 447, where the Court dismissed an appeal from the Supreme Court of South Australia setting aside a guarantee by an elderly Italian migrant couple of the bank overdraft of a building company controlled by their son. The son had misinformed his parents as to the amount of their potential liability under the guarantee and the bank was aware that they had been misinformed.

33. Mason J referred at 461 to the circumstances in which a court will set aside a contract for unconscionable conduct. His Honour said that this was usually taken to refer to the class of case in which a party makes unconscientious use of a superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage, so that the will of the innocent party, even if independent and voluntary, was the result of the disadvantageous position in which he was placed and of the other party unconscientiously taking advantage of that position. It was necessary (at 413) for there to be a disabling condition or circumstance which seriously affected the ability of the innocent party to make a judgment as to his own best interests, when the other party knew or ought to have known of the existence of that condition or circumstance and of its effect on the innocent party. His Honour referred to examples such as illness, ignorance, inexperience, impaired faculties, poverty, age, sex, drunkenness, illiteracy or lack of education and to lack of assistance or explanation where assistance or explanation was necessary.

34. Deane J outlined at 476 the circumstances in which the parents signed the guarantee documents. They were advanced in years. Their grasp of written English was limited. They were approached in their kitchen by a bank officer at a time when the father was reading the newspaper after lunch and the mother was washing dishes. They were presented with a complicated and lengthy document for their immediate signature. They had received no independent advice in relation to the transaction, and their son had misled them about it.

35. In Garcia v National Australia Bank Limited [1998] HCA 48; (1998) 194 CLR 395, the High Court allowed an appeal from the Supreme Court of New South Wales and set aside a secondary guarantee by a woman of primary guarantees in respect of her husband's business on the same ground, where the wife did not understand the effect and purport of the transaction, obtained no gain as a result of it, and the bank took no steps to ensure that the transaction was explained to her.

36. It seems to me that the plaintiff's evidence in the present application falls well short of establishing that the plaintiff company was subject to some special disability or was placed in some special situation of disadvantage in its dealings with Perpetual. I am not satisfied that there was anything unusually onerous about the deed of guarantee. Unlike Mr and Mrs Amadio and Mrs Garcia, Mr Chataway was a man of considerable experience in the world and in matters of commerce. He had been a senior officer in the Royal Australian Air Force, achieving the rank of Group Captain by the age of 44. From 1974 onwards, he engaged in business in partnership, and he subsequently owned and operated a service station. He had been a director of Kayso for three years before the execution of the guarantee, and in that time, had been involved in transactions where he and his company had guaranteed borrowings by Kayso from Esanda. By the time of execution of the Perpetual guarantee, he was 69 or 70 but there is no evidence that the aging process had affected his health or intellect adversely. Perpetual insisted that he sign an acknowledgement in his own right and as sole director of the plaintiff company that he had read and understood the guarantee documents, and insisted on a certificate of explanation being signed by a solicitor independent of Perpetual, before settling the transaction.

37. There is no doubt that there was pressure on Kayso to find a source of funds so as to pay out the Esanda loan. By the time the plaintiff and Mr Chataway executed the documents, no doubt there was significant pressure on Mr Bunn and Mr Chataway and all of their companies to execute the documents so that the transaction could proceed. I cannot accept the statement made by Mr Chataway in his affidavit that if he had been aware of the terms of the deed of guarantee prior to execution, he would never have signed it on behalf of the plaintiff company, although he may well have believed the statement to have been true when he swore his affidavit. The fact of the matter is that if he and the plaintiff company had refused to sign the guarantee, the transaction would not have proceeded. Kayso would have been left with its indebtedness to Esanda, which would have been in a position to enforce its guarantees against the plaintiff and against Mr Chataway personally.

38. It follows that I am not satisfied that the plaintiff has any prospect of establishing that Perpetual acted unconscionably so as to render the deed of guarantee invalid or unenforceable. The plaintiff has accordingly failed to establish, on the ground relied upon in Mr Chataway's affidavit of 13 July 2004, that there is a genuine dispute between the plaintiff and the defendant about the existence or amount of the debt to which the demand relates.

39. The plaintiff's application for an order that the statutory demand be set aside will be dismissed with costs.

I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.

Associate:

Date: 17 September 2004

Counsel for the plaintiff: Ms E K Glover

Solicitor for the plaintiff: Rod J Barnett & Associates

Counsel for the defendant: Mr G P Walker

Solicitor for the defendant: Meyer Clapham

Date of hearing: 3 September 2004

Date of judgment: 17 September 2004