IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS List
S ECI 2020 01728

IN THE MATTER of VORTEX COMMUNICATIONS AUSTRALIA PTY LTD 
(ACN 123 281 158)

VORTEX COMMUNICATIONS AUSTRALIA PTY LTD (ACN 123 281 158) 	Plaintiff	
		
v  		
		
UC132, LLC	Defendant	

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JUDGE:	Efthim AsJ	
WHERE HELD:	Melbourne	
DATE OF HEARING:	19 October 2020	
DATE OF JUDGMENT:	6 November 2020	
CASE MAY BE CITED AS:	Re Vortex Communications Australia Pty Ltd 	
MEDIUM NEUTRAL CITATION:	[2020] VSC 796	

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CORPORATIONS – Application to set aside a statutory demand pursuant to s 459G of the Corporations Act 2001 (Cth) – Whether the representations/agreements made by the defendant’s agent led to a genuine dispute pursuant to s 459H of the Corporations Act 2001 (Cth) - Whether the statutory demand should be set aside on some other ground pursuant to s 459J of the Corporations Act 2001 (Cth) – Whether it is an abuse of process for the defendant to issue a statutory demand when another proceeding was on foot. 

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APPEARANCES:
	Counsel	Solicitors	
For the Plaintiff	Mr P Fary SC	Eastern Bridge Pty Ltd	
			
For the Defendant	Mr S Rubenstein 	Wisewould Mahony	

HIS HONOUR:
1	The plaintiff, Vortex Communications Australia Pty Ltd, applies pursuant to ss 459G and 459J of the Corporations Act 2001 (Cth) (‘the Act’) to set aside a statutory demand served on it by the defendant, UC132 LLC.
2	The statutory demand claims that the plaintiff owes the defendant US$271,493.00.  The description of the debt is as follows:
Description of the Debt	Amount of the Debts	
Moneys due and payable pursuant to an Aircraft Lease dated on or about 1 October 2018 and the associated documents entered into pursuant to that Aircraft Lease (including the Lease supplement) between the creditor and the company (Aircraft Lease), as set out below (noting all sums are expressed in United States Dollars (“USD”) per the terms of the Aircraft Lease.		
Debts Due
Fixed Monthly Rent (payable at USD26,500 per month)		
‘Fixed Monthly Rent’ for the month of November 2019 	USD26,500	
‘Fixed Monthly Rent’ for the month of December 2019 	USD26,500	
‘Fixed Monthly Rent’ for the month of January 2020 	USD26,500	
‘Fixed Monthly Rent’ for the month of February 2020 	USD26,500	
‘Fixed Monthly Rent’ for the month of March 2020	USD26,500	
Sub-total of ‘Fixed Monthly Rent’	USD132,500	

Hourly Rent (payable at USD300 per hour in connection with use of aircraft)		
‘Hourly Rent’ for 27.32 hours in March 2019	USD8,196	
‘Hourly Rent’ for 27.93 hours in April 2019	USD8,379	
‘Hourly Rent’ for 40.63 hours in May 2019	USD12,189	
‘Hourly Rent’ for 56.03 hours in June 2019	USD6,809	
‘Hourly Rent’ for 44.18 hours in July 2019	USD13,254	
‘Hourly Rent’ for 44.18 hours in August 2019	USD13,254	
‘Hourly Rent’ for 44.18 hours in September 2019	USD13,254	
‘Hourly Rent’ for 27.32 hours in October 2019	USD29,043	
‘Hourly Rent’ for 27.32 hours in November 2019	USD24,615	
Sub-total of ‘Hourly Rent’	USD189,993	

Total of Fixed Monthly Rent and Hourly Rent and debts due	
USD271,493	

Background
3	The plaintiff is with a group of companies which operates charter flight services within Australia.  The defendant is a company incorporated in the United States of America and is a special purpose vehicle which purchased, refurbished and leased a Beechcraft 1900C aircraft to the plaintiff. 
4	In 2017, Luke Monroe Overstreet, president and co-owner with his wife of Skysource International LLC (‘Skysource’), contacted Phillip Grace, the Chief Executive Officer of the defendant, regarding Mr Grace’s potential purchase of a Beechcraft 1900C aircraft that was eventually leased to the plaintiff with the intention that the aircraft would be refurbished by Skysource and later resold or leased (‘the Aircraft’).  The Aircraft was eventually leased to the plaintiff. 
5	In March 2018, Skysource advertised the Aircraft for lease or sale.   On 27 March 2018, Mr Overstreet received an email from Dave Woodland, the director of maintenance of the plaintiff, expressing an interest in purchasing the Aircraft.  Around 26 to 27 May 2018, the Aircraft was inspected by two representatives of the plaintiff.  On  24 August 2018, the Aircraft was again inspected and tested by the plaintiff.  Various upgrades were discussed between Mr Overstreet and Colin James Tucker, the director of the plaintiff.  These modifications included various avionics upgrades.  
6	Mr Tucker deposes that he agreed with the defendant that the defendant would carry out an avionics upgrade on the Aircraft prior to it being delivered to the plaintiff.  The overall cost of the upgrade would be US$92,500.00 and it would be shared equally by the plaintiff and the defendant.  The plaintiff’s 50% share of the costs would be factored into the rent payable under the lease.  The avionics upgrade would take around seven to ten days and the Aircraft would be delivered to the plaintiff by 1 October 2018.  
7	Mr Overstreet deposes that on or about 21 September 2018, he and Mr Tucker reached an in principle agreement that the cost of the avionics upgrades and other modifications would be US$92,500.00 and agreed that the monthly rent payable under the lease would be increased to US$26,500.00 to partially offset the costs of the avionics upgrades over the term of the lease.  On that day, he sent an email to Mr Grace advising him that the total cost of the avionics upgrades and other modifications would be US$92,762.00 and that Mr Tucker had agreed to increase the monthly rent payable by the plaintiff to US$26,500.00.
8	Mr Tucker deposes that the lease was executed by the plaintiff in September 2018.  Mr Overstreet, on the other hand, deposes that as at 15 October 2018, he had not provided Mr Tucker with a final lease and lease supplement which he previously advised Mr Tucker needed to be signed and returned prior to the avionics upgrades being undertaken.  As at 1 November 2018, the plaintiff and the defendant had not yet signed the final lease agreement nor had the plaintiff paid the deposit provided in the lease.  On 29 October 2018, Mr Tucker provided Mr Overstreet with the final signed lease.
9	On or after 4 November 2018, Mr Overstreet forwarded to Mr Tucker a copy of the Lease and Lease Supplement signed by the Defendant (‘the Lease’).  Mr Overstreet deposes that this was the earliest time that the fully signed Lease and Lease Supplement had been exchanged between the parties. 
10	Mr Tucker deposes that the Aircraft would be ready by the commencement date of the Lease.  He anticipated that the Aircraft would be in service by November 2018 and had taken on significant work in readiness.  The Aircraft was not ready for delivery as the defective avionics upgrade had not been rectified by Skysource by early November 2018.  As a result, Mr Tucker says the plaintiff incurred US$20,000.00 in costs associated with the ferry pilot and Dave Woodland being on stand-by in the United States for ten days.  
11	The relevant terms for the Lease include the following:  
•	the term of hire was 36 months and the commencement date was 15 October 2018;
•	the deposit was payable the day the Lease was entered into;
•	non-payment of the deposit, and non-payment of rent, were events of default;
•	the plaintiff accepted the Lease of the Aircraft on an ‘as is’ and ‘with all faults’ basis.  This is contained in the definition section of the Lease and provides:
AS-IS, WHERE-IS shall mean “AS-IS WHERE-IS”, AND “WITH ALL FAULTS”, WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND WHATSOEVER, BY, OR ANY RECOURSE OF ANY KIND WHATSOEVER TO, LESSOR.
•	at the time of entering into the Lease, the plaintiff warranted that it had inspected the Aircraft, found it to be in good working order, and that it was unconditionally and irrevocably accepted;
•	the plaintiff would, during the terms of the lease, maintain, inspect, service and repair the Aircraft;
•	that all rent and other fees would be paid by the plaintiff to the defendant absent deduction or set-off; 
•	the plaintiff would not sell, assign or sublease the Aircraft; and 
•	in the event the Lease was terminated, the plaintiff would deliver up the Aircraft to the defendant and would continue paying rent until that occurred.
12	The Aircraft first arrived in Australia on 20 November 2018.  The plaintiff engaged its maintenance company, Vortex Aircraft Maintenance Pty Ltd (‘Vortex Aircraft Maintenance’), to rectify what it alleges was the Aircraft’s defective avionics installation throughout late November 2018 and December 2018.  The cost of rectification was A$44,969.69.
13	The plaintiff had licenced the Aircraft to another company in the group, Vortex Air Pty Ltd (‘Vortex Air’).  Vortex Air was to pay the plaintiff a licence fee upon use of the Aircraft.  The licence fee was the equivalent of the rent under the Lease.  The plaintiff alleges that by the date of the first test fight on 31 December 2018, Vortex Air had cancelled three months of work from 1 October 2018 onwards and the loss suffered for recovering this work was A$210,000.00.  
14	On 3 January 2019, Mr Overstreet sent an email to the plaintiff regarding the payment of rent as no rent had been paid.  He received a reply from Mr Tucker that there were defects with the Aircraft.  On 4 January 2019, Mr Tucker alleges that he had a conversation with Mr Overstreet who told Mr Tucker to invoice Skysource for the avionics rectification costs.  On 11 January 2019, Vortex Aircraft Maintenance sent an invoice to Skysource for A$44,969.69.  That invoice has not been paid by Skysource.  
15	The plaintiff alleges that further repairs to the Aircraft were carried out and invoices for A$13,545.97 and $7,738.23 were sent to Skysource.  Neither of these invoices have been paid by Skysource.
16	The plaintiff alleges that between the delivery of the Aircraft in November 2018 and August 2019,  it requested that the defendant provide documents showing the engine component times.  These documents were requested as they had not been provided on delivery with the Aircraft.  Mr Overstreet deposes that this allegation is not true and the documents and records were provided.  The maintenance report was provided to the plaintiff in November 2018 and delivered to Dave Woodland during his acceptance inspection of the Aircraft. 
17	The plaintiff alleges that prior to a scheduled maintenance check in September 2019, the defendant produced documents showing that many of the engine components were overflown at the time of delivering.  These were replaced at a cost of A$49,721.09.  On 5 November 2019, Vortex Aircraft Maintenance invoiced Skysource for the cost of the repairs of replacing the overflown engine parts.  That sum has not been paid by the defendant.  
18	In September 2019, the plaintiff alleges that corrosion was also identified in the wing spar of the Aircraft.  This grounded the Aircraft immediately.  Corrosion in a wing spar is a serious safety concern.  Vortex Aircraft Maintenance rectified the corrosion in the wing spar at a cost of A$38,423.73 and invoiced Skysource for the costs of rectifying the corrosion.  The sum of A$38,423.73 has not been paid by the defendant.  
19	The plaintiff alleges that the defendant had not taken steps to overhaul the engine by October 2019.  Accordingly, the plaintiff sought and was granted a 70 day extension from the engine manufacturer.  This allowed the Aircraft to fly for a further 70 days beyond the overhaul due date.  No further extension was granted.  
20	Around late November to early December 2019, the plaintiff alleges that the Aircraft’s engine had to be overhauled and that the defendant refused to cooperate in that process.  Around the same time, the plaintiff alleges that it incurred A$12,000.00 in freight costs in transporting a new engine from Brisbane to Perth, A$23,000.00 in direct contractor maintenance costs for a rental engine and a further A$7,000.00 in non-direct maintenance costs for the rental engine.  
21	On 13 December 2019, the defendant terminated the Lease due to the failure of the plaintiff to pay rent and other fees.  On 18 December 2019, the plaintiff requested the defendant to withdraw the notice of termination on the basis that the defendant had breached the terms of the Lease and was unable to terminate the Lease.
22	Around this time, the plaintiff abandoned the Aircraft at Jandakot Airport in Perth where it remains to this day.  The defendant alleges that parts and components have been removed and the Aircraft is presently inoperable.  
23	On 3 March 2020, the plaintiff accepted the defendant’s alleged repudiation of the Lease and terminated the Lease.
The Law
24	Section 459G of the Act provides that: 
459G	Company may apply
(1)	A company may apply to the Court for an order setting aside a statutory demand served on the company.
(2)	An application may only be made within 21 days after the demand is so served.
(3)	An application is made in accordance with this section only if, within those 21 days:
(a)	an affidavit supporting the application is filed with the Court; and
(b)	a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.
25	When an application alleges a genuine dispute or offsetting claim, the Court is guided by s 459H of the Act.  Section 459H states: 
459H	Determination of application where there is a dispute or offsetting claim
(1)	This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a)	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;
(b)	that the company has an offsetting claim.
(2)	The Court must calculate the substantiated amount of the demand in accordance with the formula:
where:
admitted total means:
(a)	the admitted amount of the debt; or
(b)	the total of the respective admitted amounts of the debts;
as the case requires, to which the demand relates.
offsetting total means:
(a)	if the Court is satisfied that the company has only one offsetting claim—the amount of that claim; or
(b)	 if the Court is satisfied that the company has 2 or more offsetting claims—the total of the amounts of those claims; or
(c)	otherwise—a nil amount.
(3)	If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.
(4)	If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:
(a)	varying the demand as specified in the order; and
(b)	declaring the demand to have had effect, as so varied, as from when the demand was served on the company.
(5)	In this section
admitted amount, in relation to a debt, means:
(a)	if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt—a nil amount; or
(b)	 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
(c)	 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.
(6)	This section has effect subject to section 459J.
26	The meaning of a genuine dispute in the context of the challenge of a statutory demand was formulated by McLelland CJ in Eyota Pty Ltd v Hanave Pty Ltd.  His Honour said:
It is, however, necessary to consider the meaning of the expression ‘genuine dispute’… 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 ‘however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be’ not having `sufficient prima facie plausibility to merit further investigation as to [its] truth’ (cf Eng Mee Yong v Letchumanan [1980] AC 331 at 341), or ‘a patently feeble legal argument or an assertion of facts unsupported by evidence’: cf South Australia v Wall (1980) 24 SASR 189 at 194. 
27	In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd, Dodds-Streeton JA, with whom Neave and Kellam JJA agreed, referred to the principles that are to be taken into account in determining a genuine dispute and off-setting claim.  Her Honour said:
As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off‑setting claim.  It is required to evidence the assertions relevant to the alleged dispute or off‑setting claim only to the extent necessary for that primary task.  The dispute or off‑setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile.  As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something “between mere assertion and the proof that would be necessary in a court of law” may suffice…
28	It is not for the Court to determine the merits of a dispute when an application is made to set aside a statutory demand.  In Mibor Investments Pty Ltd v Commonwealth Bank of Australia, Hayne J said:
…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 the dispute.  All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.
Genuine Dispute
29	The first ground of a genuine dispute/offsetting claim arises from two agreements/representations that were made by the defendant, through its agent Skysource, to the plaintiff.  The plaintiff alleges that these agreements/representations were breached by the defendant. 
30	The plaintiff alleges that prior to entering into the Lease, the defendant represented or agreed that it would carry out an avionics upgrade at a cost of US$92,500.00 on the Aircraft prior to it being delivered to the plaintiff.  The cost of the avionics upgrade would be shared equally by the plaintiff and the defendant, and the plaintiff’s share of the costs would be factored into the rent payable into the Lease.  The avionics upgrade would take around seven to ten days and the Aircraft would be delivered to the plaintiff by 1 October 2018 (‘the First Agreement/Representation’).  
31	The plaintiff also alleges that prior to the plaintiff taking delivery of the Aircraft, the defendant represented or agreed that it would pay the costs of the avionics upgrade rather than doing those works itself if the plaintiff took delivery of the Aircraft (‘the Second Agreement/Representation’).  
32	The plaintiff submits that these agreements/representations were made by SkySource acting as the agent for the defendant in relation to the transaction.  It says there is a prima facie case that all of Skysource’s dealings were done with the actual or ostensible authority of the defendant because:
•	at all the times, the plaintiff dealt with Skysource on behalf of the defendant;
•	in or around March 2018, Mr Grace deposes that he instructed Mr Overstreet to market the Aircraft to find potential buyers;
•	Mr Grace spoke with Mr Overstreet shortly and authorised him to negotiate the potential sale of the Aircraft to the potential buyers; and
•	SkySource was to be paid a commission if it secured an agreement to sell or lease the Aircraft.
33	Counsel for the defendant conceded that it was arguable that Skysource may be characterised as an agent of the defendant but submitted that it was not relevant as to whether there was a genuine dispute.  On the evidence before me it is clearly arguable.
34	The plaintiff submits that both representations were misleading and deceptive because the defendant was not capable of carrying out the avionics upgrade within the time agreed or at all.  The defendant did not, in fact, pay for the costs of the avionics upgrade after delivery. The plaintiff submits that but for the agreements/representations, the plaintiff would not have entered into the Lease and incurred the liability for the rent and hourly rates and made payments under it, including payment of the deposit.  It would not have taken delivery of the Aircraft and expose itself to claims of rent from the defendant.
35	In his second affidavit, Mr Tucker deposed that the plaintiff would not have entered into the Lease but for the First Agreement/Representation, and would not have taken the delivery of the Aircraft but for the Second Agreement/Representation.  This was not raised in Mr Tucker’s first affidavit.  
36	The plaintiff further or in the alternative submits that the defendant’s conduct in serving the statutory demand seeking payment of the rent in circumstances where it has not complied with the First Agreement/Representation is unconscionable.  It says the defendant seeks to call in aid the insolvency provisions of the Act in circumstances where it has not substantially performed its part of the bargain under which the debt is alleged to have arisen.
37	The defendant submits that the no transaction case which is asserted by the plaintiff is not borne out on Mr Tucker’s own evidence and that at every stage Mr Tucker evinced an intention to proceed with the Lease and take delivery of the Aircraft.  In support of this submission, it relies on the following matters:
•	the plaintiff paid the deposit of the Lease on 4 November 2018, over a month after 1 October 2018 (being the date that Mr Tucker says the Aircraft should have been delivered by and, had it not, the plaintiff would not have entered into the Lease);
•	the Lease itself is dated 1 October 2018 and Mr Tucker knew that the Aircraft was not being handed over on that date;
•	the defendant did not execute the Lease until 4 November 2018.  Mr Grace deposes that he did not receive the Lease signed by Mr Tucker until 29 October 2018; and
•	under the terms of the Lease, the lease of the Aircraft did not commence until the acceptance date which was 1 November 2018.
38	The defendant relies on Mr Tucker’s evidence.  When taking delivery of the Aircraft, Mr Tucker deposed that in mid-November 2018, Skysource’s manager, Jim Slack, met with Mr Woodland where the Aircraft was being held in Billings, USA.  Mr Slack said to Mr Woodland words to the effect ‘do you just want to take it to Australia and sort out the costs later?.’  Mr Woodland told Mr Tucker about this conversation and asked whether he should take the Aircraft home and have the defective avionics fixed once in Australia.  Mr Tucker told Mr Woodland to take the Aircraft to Australia so he could fix the avionics. 
39	The defendant submits that the clear evidence is that the plaintiff sought to proceed with the Lease and to take delivery of the Aircraft.  It never sought to avoid the Lease or return the Aircraft.  It continued to take steps under the Lease and use the Aircraft even after becoming aware of the circumstances that on its case, made the alleged representations false and misleading. The defendants submits that therefore the no transaction case raised by the plaintiff has no basis in fact and is a recent invention.
40	The submissions of the defendant deal primarily with the First Agreement/Representation but do not deal with the Second Agreement/Representation, being that the defendant represented or agreed that it would pay the cost of the avionics upgrade.  The Aircraft was flown back to Australia but before it was flown back, Mr Slack told Mr Woodland that they would sort the costs out later.  That was in the context of there having already been an agreement or representation made concerning payment for the avionics upgrade.   Mr Tucker alleges that he had agreed previously that the costs of the upgrade would be shared equally by the plaintiff and the defendant.  
41	The defendant submits that the uncontested evidence is that the defendant incurred the upfront costs of Skysource in carrying out the avionics upgrade (subject to the agreement that monthly rent payable would be increased to US$26,500.00).  Therefore, at best, the plaintiff has an offsetting claim for no more than $44,969.69, being the amount purportedly invoiced by a different entity, Vortex Aircraft Maintenance, to Skysource. 
42	In my view, it is plausible that Mr Tucker may not have entered into the Lease and incurred the liability for the fixed monthly rent and hourly rates if these representations were not made.  It is a matter which is arguable and should be determined by a court of competent jurisdiction.  The plaintiff therefore has a genuine dispute.
43	The second ground of genuine dispute/offsetting claim arises from the failure of the defendant to perform an engine overhaul in accordance with the engine overhaul term of the Lease.  Section 9(c) of the Lease provides:
… For avoidance of doubt, Lessor and Lessee acknowledge and agree the Hourly Rent shall include reserve payments for the overhaul of the Engines, Propellers and applicable components, and Lessor shall coordinate with Lessee during the Term to complete such an overhaul on any Engine and/or Propeller should the need arise.
44	The engine overhaul was due in October 2019 but the plaintiff had an extension of 70 days to continue to fly the Aircraft with the permission of the Civil Aviation Authority.  That permission then expired and the Aircraft was grounded on December 2019.  The plaintiff contends that the defendant has not carried out its obligation under the Lease and the failure to carry out its obligations has rendered the Aircraft unusable.  
45	This alleged dispute relates to rental payments of US$26,500.00 per month for the months of November 2019, December 2019, January 2020, February 2020 and March 2020.  The plaintiff submits that the defendant is not entitled to fixed monthly rent for that period because it failed to perform its obligation under the Lease.  
46	The defendant asserts that at the time the overhaul was to be formed, the plaintiff was already in default under the Lease.  Notwithstanding that, the defendant agreed to the installation of a rental engine to the Aircraft so that the left engine could be overhauled and the Aircraft could continue to fly.  This was contingent on the plaintiff agreeing to remedy the default by steps set out in a forbearance agreement which the plaintiff refused or failed to sign and return to the defendant.   As a consequence, the defendant asserts that it validly terminated the Lease for non-payment of rent on 13 December 2019.  The obligation to undertake the engine overhaul ceased on the termination of the Lease.  The defendant submits that there was no breach of the Lease by the defendant and no entitlement by the plaintiff to claim any amounts in respect of the engine overhaul.
47	Mr Tucker has exhibited to his affidavit correspondence relating to the overhaul of the engine.  The correspondence is as follows:
On 3 December 2019 at 10:33pm, Luke Overstreet emailed Malcolm Venturi of Standard Aero, stating:
“Hello Malcolm, 
We are leaning towards having the work done at the Standard Aero Brisbane location for a couple reasons, one being the Parts Cap Cost program with a fixed quote and the other being the location to eliminate the shipping time and expense. 
I just have a couple of quick questions:
The Aircraft is owned by UC132, LLC and they will be the invoiced party and the engine lessee. The address is as follows:
UC132, LLC
1909 Woodall Rogers 
Suite 575 
Dallas, TX 75201
I look forward to your reply.
With regards,
Luke Overstreet
Skysource International. LLC”
The deposit payable to Standard Aero for the rental engine was $75,000.00USD. On 10 December 2019 at 3:43pm I emailed Luke Overstreet, stating:
“Hey Luke,
Are you able to pay deposit amount for engine today?
Variable lease will be paid Friday.
If you can send remittance, we can perhaps get the engine on the move.
I have a team that we can send over that specialise in PT6’s
They can install Friday-Sunday to keep PenJet going on Monday.
Paul doesn’t really have a back up.
Thanks
Kind Regards,
Colin Tucker”
On 11 December 2019 at 10:22am Luke Overstreet replied to my email, stating:
“It’s to late for today, it would have to be tomorrow. And if we are paying the deposit, there needs to be some reference to that in the lease to make sure the deposit comes back to UC132, LLC. 
Or if we can log it as a deposit on the GG overhaul, and invoice it as such, that would make it easy and accountable.
- Luke”
On 11 December 2019 at 12:34pm Luke Overstreet sent me a further email, copying in Malcolm Venturi at Standard Aero. The email states: 
“Perfect.
Malcolm, can you send me an invoice for the $75,000 deposit for the GG overhaul? Please include the wire instructions and we will get this sent first thing in the morning. 
With regards,
Luke Overstreet
Skysource International, LLC”
48	Based on this correspondence, the dispute raised by the plaintiff is plausible and requires further investigation.  It is arguable that the plaintiff should not have to pay the costs of the monthly rental from November 2019 up to March 2020.  It appears from the correspondence exhibited to Mr Tucker’s affidavit that the defendant had coordinated with the plaintiff to overhaul the engine but then chose not to pay for the engine overhaul and for a rental engine.  Instead, it chose to simply terminate the Lease.  It will be for a court of competent jurisdiction to determine whether the defendant will be entitled to the monthly payments in these circumstances.  The test to demonstrate whether there is a genuine dispute is not onerous.  On the evidence the plaintiff has demonstrated that there is a genuine dispute.  
49	The third genuine dispute/offsetting claim raised by the plaintiff relates to the delivery by the defendant to the plaintiff of an Aircraft with latent defects including wing spar corrosion issues and overflown parts.  The plaintiff submits that it would have not taken delivery of the Aircraft which had latent defects but for the agreements/representations.  It replaced the overflown engine parts at a cost of A$49,721.09 and rectified the corrosion in the wing spar at a cost of A$38,423.73.  The plaintiff’s maintenance company invoiced Skysource for the cost of rectification works and these invoices have not been paid.  It says that the defendant has received the benefit of the rectification works which were essential works to ensure that the Aircraft was safe.  
50	The defendant submits that the first alleged agreement/representation claim only relates to the avionics and there is no reference to any representation or agreement as to any other condition of the Aircraft.  Under the terms of the Lease, the plaintiff accepted a lease of the Aircraft on an ‘as is’ and ‘with all faults’ basis.  At the time of entering the Lease, the plaintiff warranted that it had inspected the Aircraft and found it to be in good working order and that it was unconditionally and irrevocably accepted.  It submits that the plaintiff was satisfied that the Aircraft was in good order before taking delivery of it,  and any repairs after delivery were its responsibility.  
51	The plaintiff submits that the ‘as-is, where-is’ term and the ‘no warranty’ term do not assist the defendant because agreements/representations were made prior to the entering to the Lease and are separately actionable; the agreements/representations are inconsistent with the ‘as-is, where-is’ and ‘no warranty’ term; and the obligation to pay for the engine overhaul under the engine overhaul term is separate to and not effected by the ‘as-is, where-is’ term and ‘no warranty’ term.
52	I agree with the plaintiff that the ‘as-is, where-is’ term and ‘no warranty’ term do not assist the defendant in relation to the prior agreements/representations, but in my view this term does relate to the corrosion and the overflown defects claim.  The terms of the Lease are clear and there can be no genuine dispute here, nor an offsetting claim.
Offsetting Claims
53	The plaintiff alleges that it has suffered the following losses as a result of the genuine  disputes that it has raised:
(a)	all amounts claimed as owing to the defendant under the Lease, including the amounts claimed in the statutory demand;
(b)	all amounts paid by it under the Lease, including;
(i)	the deposit of US$139,000 (A$185,426.46);
(ii)	fixed monthly rent totalling US$304,750.00;
(iii)	hourly rent totalling US$56,280.00;
(c)	the costs of the avionics upgrade of A$44,969.69;
(d)	the cost of carrying out the engine blend repair of A$13,545.97;
(e)	the cost of replacing the overflown engine parts of A$49,721.09;
(f)	the cost of rectification of the wing spar corrosion issues of A$38,423.73;
(g)	the costs of the ferry pilot and Dave Woodland being on standby awaiting the avionics upgrade of US$20,000.00;
(h)	lost licence fees of US$132,500.00, which would have been paid by Vortex Air to it had the Aircraft been used in the months that it was grounded; and 
(i)	freight and maintenance costs of A$42,000.00 in arranging a replacement rental engine (being A$12,000.00 in freight costs from Brisbane to Perth, A$23,000.00 in direct contractor maintenance costs and A$7,000.00 in non-direct maintenance costs);
54	The plaintiff licensed the Aircraft to Vortex Air which is not permissible under the Lease.  A term of the Lease is that the plaintiff was not to sell, assign or sublease the Aircraft without  permission.  The defendant submits that the licensing of the Aircraft  is null and void as against the defendant.  It say that this is a complete answer to the offsetting claims. 
55	The defendant does not say when it found out that the Aircraft was licensed out to another company.  It raised no objections.  The Lease was terminated for the reason that the plaintiff was not making payments under the Lease. It may have acquiesced to the licence. This is a matter that needs to be investigated.
56	The plaintiff has arguable offsetting claims to all of the loss that it has identified save and except for the cost of carrying out the engine blend repair of A$13,545.97 and the cost of the wing spar corrosion issues of A$38,423.73.  Those two losses are not able to be claimed due to the terms of the Lease.
Some Other Reason
57	The defendant has commenced proceedings against the plaintiff in the United States District Court for the Northern District of Texas – Dallas Division.  That proceeding includes the claims contained in the statutory demand.  On 17 May 2020, the plaintiff’s solicitor received an email letter dated 13 May 2020 from the defendant’s attorney in the United States enclosing various documents including the complaint in the United States Proceeding.  That letter stated:
Attached is a file-marked copy of a lawsuit in the United States District Court for the Northern District of Texas, Dallas Division (the “Lawsuit”). In that regard, attached is a Notice of Lawsuit and Request for Waiver of Service for Summons for each of Vortex and Mr. Tucker for your review, consideration and their respective execution, if acceptable. If not, let me know and we will effect service in accordance with the U.S. Federal Rules of Civil Procedure.
58	The plaintiff submits that the continued reliance on the statutory demand by the defendant after the commencement of the United States proceeding constitutes some other reason for setting aside the statutory demand pursuant to s 459J(1) of the Act.  
59	The process for the United States proceeding has not been served on the plaintiff and the defendant’s director has confirmed that the proceeding will not be served on the plaintiff until after this application has been heard and determined unless the process is amended to exclude the claims for hourly rent and monthly rent that are the subject of the statutory demand.
60	Barrett J in Re Zarzar Pty Ltd held that it was an abuse of the statutory demand process to continue to press and rely on a statutory demand while at the same time suing for the relevant debts.  His Honour explained why there is an abuse of process.  Barrett J said:
While there is no explicit rule precluding parallel resort by a creditor to both the statutory demand procedure and debt recovery proceedings, the reality is that it is an abuse of the statutory demand process to continue to press and rely on a demand while at the same time suing for the relevant debt or debts.  This is because the two procedures have different objectives.  The aim in serving a statutory demand is not to recover the debt (although eliciting payment may become a welcome by-product) but to obtain the benefit of a presumption of insolvency through non-compliance with the demand.  The aim of recovery proceedings, by contrast, is to compel payment and obtain monetary satisfaction.  The same reasoning holds good, in my view, when the alleged indebtedness is asserted by the putative creditor by way of set-off defence in proceedings commenced by the alleged debtor.  Again, the putative creditor abandons its stance of waiting for the expiration of a statutory period in order to obtain a presumption of insolvency (or, as an alternative, to obtain voluntary payment by the debtor in the meantime) in favour of positive assertion of the right to be paid as a means of obtaining recovery by way of reduction of a liability.
61	His Honour also made the following observations:
On this basis, it was, in my opinion, unreasonable of Evton to seek to maintain the statutory demand after 16 August 2016.  It should, at that point, have notified Zarzar that the demand was no longer pressed and was withdrawn.  It should also have consented to an order setting aside the statutory demand.  The date 16 August 2016 (being the point at which Evton should have ceased to press the statutory demand) is, to my mind, more significant for present purposes than 30 September 2016 (the point at which the parties apparently agreed that the statutory demand should be set aside).
62	The defendant submits that the claim in the United States proceeding is not being pressed until such time as the issue of the statutory demand has been resolved.  Based on the observations of Barrett J, it submits that there can be no abuse of process.  I note that Barrett J stated that the demand should no longer have been pressed and should have been withdrawn.  Here, the application has not been withdrawn, but is not being pressed until the statutory demand is heard. 
63	Black J in Re Modern Wholesale Jewellery Pty Ltd referred to Zarzar and made the following comments:
It seems to me that there is substantial force in his Honour’s observations in that respect.  It also seems to me that there is also a further reason why the contemporaneous, or near contemporaneous, commencement of contested proceedings in respect of a debt and the service of a creditor’s statutory demand in respect of that same debt may amount to an abuse of the creditor’s statutory demand procedure such that the demand should be set aside under s 459J of the Corporations Act.  That course has the potential, as this case amply demonstrated, to multiply the costs incurred by the parties, since a recipient who contests the debt will then be required, potentially within similarly short periods, both to file a Defence in the substantive proceedings, or otherwise face the risk of default judgment, and to bring an application to set aside the creditor’s statutory demand in this Court or the Federal Court of Australia.  Issues may then arise, as they have here, as to whether two proceedings should proceed in parallel or one should be deferred until the other has been heard.  That course will inevitably increase the costs incurred by the parties, but also involves the risk that scarce hearing time in the Courts, which is funded by the community and largely not by the parties, will be devoted to resolving the procedural difficulties which that course has created.
In this particular case, the extent of duplication and the wasted costs arising from the contemporaneous service of the First Modern Demand and the commencement of the District Court proceedings against Modern are highlighted by the fact that the first day of the hearing in this matter was to be followed, on the next day, by a listing of the District Court proceedings, and the second day of the hearing in this matter was also to be followed by an adjourned listing of the District Court proceedings.  It seems to me that some other reason to set aside a creditor’s statutory demand is established where, as here, the course adopted by a creditor that issues a creditor’s statutory demand is likely to force the party that receives it to the cost and inconvenience of overlapping proceedings, one brought on the basis that there is no genuine dispute as to the debt, and the other directed to determining such a dispute.  It seems to me that these matters, together with the other matters to which I will refer below, require that the First Modern Demand be set aside for some other reason under s 459J of the Corporations Act.
64	The defendant submits that there is no extended duplication and wasted costs here, as there was in Re Modern Wholesale Jewellery, because the United States proceeding has not been served on the plaintiff and the plaintiff is not faced with the position where it has to deal with competing costs.  It submits that all of the underlying reasons as to why it might be an abuse of process don’t arise when there is effectively a determination not to proceed with one of those proceedings.
65	The plaintiff agreed they are not being vexed because they have not been served with the United States proceeding but that does not undermine the force of the original reason why there is an abuse of process.  It says it doesn’t follow from what was said by Barrett J that if one simply does not serve the civil proceeding, as opposed to proceed with the statutory demand, that cures the problem. 
66	Even though the defendant has confirmed that the United States proceedings will not be served on the plaintiff until after this application has been heard, the fact remains that there are two proceedings on foot with different objectives and it is an abuse of process according to Barrett J.  One proceeding is on foot in order to obtain an event of insolvency, whereas the other is designed to elicit payment.  Barrett J states that the inconsistency of those two proceedings leads to the abuse.  The statutory demand should have been withdrawn.  The statutory demand will also be set aside for some other reason.