In the primary proceedings, before Black J, Creata unsuccessfully applied to set aside a statutory demand from Faull under section 459G of the Corporations Legislation.

The appeal concerned the question of whether statutory demand should have been set aside.

Essentially, Mr Faull contended that Creata owed him a debt, under a deed dated 25 July 2014. By that deed Creata agreed to make certain payments (about US$400,000) and Mr Faull agreed to keep confidential certain information as defined.

Creata’s argument was that the statutory demand should be set aside because the deed was not adhered to so that Mr Faull was not entitled to receive the amount claimed. In support of this argument Creata relied upon hearsay evidence from a Mr Henderson about what a Mr Saunders told him Mr Faull had said in 2015 (i.e. secondhand yesterday).

The question before the primary judge was whether or not there was a genuine dispute as to the existence of a debt. The question needed to be determined by reference to the construction of the deed, the hearsay evidence and whether that amounted to a genuine dispute.

The court of appeal found that the deed could be constructed in more than one way (contrary to what the primary judge found), and that the hearsay evidence could be admitted and then used not to prove the asserted facts but to prove the fact of the dispute.

As such the appeal was granted and the statutory demand was set aside.

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