In the matter of Tang & Cheung Investments Pty Ltd

[2025] NSWSC 817

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Tang & Cheung Investments Pty Ltd [2025] NSWSC 817

Hearing dates:

4 July 2025

Date of orders:

24 July 2025

Decision date:

24 July 2025

Jurisdiction:

Equity - Corporations List

Before:

Brereton J

Decision:

1) The statutory demand dated 13 March 2025 is set aside.

2) If either party wishes to make submissions on costs, they should advise my Associate of that wish before 4pm on 29 July 2025 and directions will be made.

Catchwords:

CORPORATIONS – application to set aside creditor’s statutory demand under Corporations Act 2001 (Cth) s 459G – whether there is a genuine dispute about the existence of the debt – whether there is some other reason for statutory demand to be set aside – statutory demand set aside

Legislation Cited:

Corporations Act 2001 (Cth)

Cases Cited:

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

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

Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452; [1996] FCA 822

Huynh v Attorney General (NSW) (2021) 107 NSWLR 75; [2021] NSWCA 297

In the matter of UGL Process Solutions Pty Ltd [2012] NSWSC 1256

Kranz v National Australia Bank Ltd (2003) 8 VR 310; [2003] VSCA 92

Ligon 158 Pty Ltd v Huber (2016) 117 ACSR 495; [2016] NSWCA 330

McLean v Discount & Finance Ltd (1939) 64 CLR 312

Re JDH Capital Pty Ltd [2024] NSWSC 164

Re Wollongong Coal Ltd (2015) 110 ACSR 134; [2015] NSWSC 1680

Sceam Construction Pty Ltd v Clyne (2021) 64 VR 404; [2021] VSCA 270

Texts Cited:

Courtney, W, J O’Donovan and J Phillips, The Modern Contract of Guarantee: English Edition (4th ed, 2020, Sweet & Maxwell)

Heydon, JD, MJ Leeming and PG Turner, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (5th ed, 2014, LexisNexis)

Category:

Principal judgment

Parties:

Tang & Cheung Investments Pty Ltd (plaintiff)
Lisa Elizabeth Joy Figueiras (defendant)

Representation:

Counsel:
R Ma (plaintiff – solicitor)
QM Noakhtar (defendant)

Solicitors:
Ma & Company Solicitors (plaintiff)
Bartier Perry Lawyers (defendant)

File Number(s):

2025/132860

Publication restriction:

Nil

Judgment

1. On about 5 May 2021, the defendant, Ms Lisa Figueiras, made a loan in the amount of $400,000 to a company called Charles Warners Bay Pty Ltd. The loan agreement was amended on several occasions. By one of those amendments, made on 14 June 2022, the plaintiff, Tang & Cheung Investments Pty Ltd, was introduced as a guarantor of the loan. The loan agreement was amended on 26 June 2023. The plaintiff remained a party to the agreement, as a guarantor, and executed the amending instrument. Ms Katy Chow is the sole director of the plaintiff. Prior to 13 March 2025, her husband, Mr Kelvin Tang, was also a director.

2. The plaintiff company contends that it came to be a guarantor following a request made by Ms Anita Cheung. Ms Cheung was a director of the borrowing company and was herself a guarantor. She was a close relative of Mr Tang. She died in November 2023.

3. The loan has fallen into arrears. In March 2024, some property that was held as security was sold and that resulted in repayment of principal in the amount of $200,000, together with payment of some interest and costs. Although there is some controversy about it, to which I will come, by letter and emails dated 13 February 2025, the defendant, through her solicitors, made a demand pursuant to the guarantee given by the plaintiff, requiring payment of $325,293.79 (comprising principal, interest and costs). Ms Chow and Mr Tang deny receiving the letter or emails. The demand went unanswered.

4. On about 17 March 2025, the defendant served a statutory demand dated 13 March 2025 on the plaintiff, demanding payment of $329,994.51.

5. On 7 April 2025, the plaintiff commenced these proceedings, seeking an order that the statutory demand be set aside pursuant to s 459G of the Corporations Act 2001 (Cth). The application was supported by an affidavit made by Ms Chow on 6 April 2025. The affidavit asserted a belief that there is a genuine dispute about the existence of the debt. Ms Chow advances the following matters in support of her belief:

1. she is uncertain if and when the loan was drawn down;

2. the guarantee was signed under the undue influence of Ms Cheung (who may have taken the loan for her personal use);

3. the directors were not informed of the financial or legal implications of signing such a guarantee;

4. she has been advised that the debt was fully settled on 18 March 2024;

5. she is uncertain whether the defendant has pursued the borrower or other guarantors; and

6. in the absence of an explanation of how the principal and interest were determined, there are doubts regarding the validity of the statutory demand.

Similar assertions were made in a letter dated 2 April 2025 from the plaintiff’s solicitors to the defendant’s solicitors (a copy of which was annexed to Ms Chow’s supporting affidavit).

6. For the reasons set out below, the statutory demand will be set aside.

Principles

7. The Court must set aside the demand if there is a genuine dispute about the existence of the whole of the debt: see s 459H of the Corporations Act.

8. The relevant principles to be applied in determining whether there is a genuine dispute are well-known and were not in dispute. The plaintiff referred to the observation by McLelland CJ in Eq in Eyota Pty Ltd v HanavePty Ltd (1994) 12 ACSR 785 at 787. The defendant referred to the convenient summary of the principles found in Re JDH Capital Pty Ltd [2024] NSWSC 164 at [13]-[16] per Black J. Those paragraphs quote the following concise statement from the decision of Barrett AJA in Ligon 158 Pty Ltd v Huber (2016) 117 ACSR 495; [2016] NSWCA 330 at [8] (drawn from the decision of Black J in Re Wollongong Coal Ltd (2015) 110 ACSR 134; [2015] NSWSC 1680 at [9]-[22]) (footnotes omitted):

(1)    A dispute is “genuine” if it is not “plainly vexatious or frivolous” or “may have some substance” or “involves a plausible contention requiring investigation”. A genuine dispute requires that it be bona fide and, to that effect, be premised on sufficiently particularised grounds that are “real and not spurious, hypothetical, illusory or misconceived” and which demonstrate the dispute’s “objective existence” and “prima facie plausibility”.

(2)    The test is governed by principles analogous to those which underpin an application for an interlocutory injunction or summary judgment. The court must, however, guard against setting the threshold too low for that is liable to defeat the legislative purpose of the section.

(3)    The task faced by a company challenging a statutory demand on the genuine dispute ground is by no means at all a difficult or demanding one. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow and the demand will be set aside. A finding to the contrary could only be arrived at if the contentions advanced are so devoid of substance that no further investigation is warranted.

(4)    The function of the court is merely to determine the existence of a genuine dispute. While this neither requires nor invites it to weigh or assess the merits of the dispute, the court will not exceed its legitimate function by having regard to evidence which bears upon whether the asserted dispute is genuine.

9. In written submissions filed before the hearing and oral submissions at the hearing, the plaintiff made some contentions that were not explicit in the affidavit in support of the application to set aside the statutory demand. Most notably, it was contended that:

1. the guarantee is liable to be set aside because it would be unconscionable for the defendant to enforce it; and

2. the service of the statutory demand was an abuse of process because the plaintiff is apparently solvent and also because there is no explanation as to why the defendant has not pursued the borrower (who is also apparently solvent).

10. The defendant submitted that the first of these contentions made on behalf of the plaintiff impermissibly travelled beyond the matters that had been identified in Ms Chow’s supporting affidavit, and so could not be advanced, relying on Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452; [1996] FCA 822. I will address this below.

Further submissions

11. At the conclusion of the oral hearing, I invited the parties to provide to my Associate any references to authorities (with pinpoint references) they wished to rely on concerning the question of whether a statutory demand should be set aside as an abuse of process if a demand for payment had not been made before the statutory demand was served.

12. Without leave, the plaintiff filed further written submissions, comprising some 4 pages of text. Those submissions were not immediately served on the defendant. Both of these things were inappropriate. Nevertheless, I indicated to the defendant I was minded to receive the further submissions on the basis that the defendant could provide responsive submissions (limited to 3 pages and with a deadline) and asked if the parties objected to that course. The solicitors for the defendant advised that this course was “acceptable to the defendant”. The defendant proceeded to provide responsive submissions. However, the defendant’s first contention in those responsive submissions was that I should disregard the plaintiff’s further submissions because they were served without leave and the defendant is prejudiced by having to respond to them expeditiously and with truncated written submissions.

13. On reflection, I have decided that the further submissions that were filed by the plaintiff without leave, should be ignored. I have not taken them into account in formulating these reasons. Nor have I taken into account the substantive submissions made by the defendant in response. As Leeming JA recently observed in Huynh v Attorney General (NSW) (2021) 107 NSWLR 75; [2021] NSWCA 297 at [249], providing supplementary material after the conclusion of oral argument, without leave, has been deprecated repeatedly. It should not have occurred.

Undue influence/unconscionable conduct

14. Ms Chow and Mr Tang allege that Ms Cheung was a trusted family member and the only one with a university education. She was an accountant and an experienced property developer. She managed the financial affairs of the plaintiff and Mr Tang. Ms Chow and Mr Tang contend that Ms Cheung asked them to procure the plaintiff company to help her bridge a short-term finance gap by providing a guarantee. They say she assured them that it would be temporary and that there would be no risk. They felt emotional and relational pressure to oblige her and say that they signed the documents without reviewing them properly or obtaining independent advice.

15. The plaintiff contends that the guarantee “was signed under undue influence from Anita Cheung, the sole director of the Borrower company at the time” and that she misled them. If true, there may be some kind of action against Ms Cheung’s estate or the borrower. However, what the plaintiff must show on this application is that there is a genuine dispute about the existence of the debt that is said to be owed by the plaintiff to Ms Figueiras (the defendant). There was no allegation that the defendant exerted any undue influence. Nor was there any allegation that there was any misrepresentation on the part of the defendant.

16. In written and oral submissions, Mr Ma, who appeared for the plaintiff, relied on the decision in Garcia v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48 (although he did not direct me to any particular passage from that decision, apart from the headnote). The plurality in that case observed as follows (at [33]):

It will be seen that the analysis of the second kind of case identified in Yerkey v Jones is not one which depends upon any presumption of undue influence by the husband over the wife. As we have said, undue influence is dealt with separately and differently. Nor does the analysis depend upon identifying the husband as acting as agent for the creditor in procuring the wife's agreement to the transaction. Rather, it depends upon the surety being a volunteer and mistaken about the purport and effect of the transaction, and the creditor being taken to have appreciated that because of the trust and confidence between surety and debtor the surety may well receive from the debtor no sufficient explanation of the transaction's purport and effect. To enforce the transaction against a mistaken volunteer when the creditor, the party that seeks to take the benefit of the transaction, has not itself explained the transaction, and does not know that a third party has done so, would be unconscionable.

This passage draws a distinction between a case based on undue influence and one where, in circumstances concerning a claim by a creditor against a surety, it would be unconscionable for the creditor to enforce a transaction against a surety. In the latter case, there is no need to prove that there was any undue influence.

17. Ms Chow’s affidavit in support of the application to set aside the statutory demand speaks of the guarantee being signed under the undue influence of Ms Cheung. While the affidavit is far from being clear about the basis upon which the plaintiff contends that the guarantee cannot be enforced by the defendant, I accept that there is a reasonably available inference that the plaintiff would contend that it would be unconscionable for the defendant to enforce the guarantee, relying on principles enunciated in cases such as Garcia v National Australia Bank, which would be a sufficient basis to permit the plaintiff to advance this contention on this application: see In the matter of UGL Process Solutions Pty Ltd [2012] NSWSC 1256 at [30]; Sceam Construction Pty Ltd v Clyne (2021) 64 VR 404; [2021] VSCA 270 at [17]. That is because Ms Chow’s affidavit conveys at least the suggestion that neither she nor her husband (and hence the plaintiff itself) understood the purport and effect of the guarantee because it was not explained to them and that the guarantee did not confer any gain on the plaintiff. This points to some of the elements that might engage a claim based on principles considered by the High Court in Garcia v National Australia Bank. While the affidavit focusses on an allegation that Ms Cheung was guilty of undue influence, relief against the defendant, as the creditor, would presumably have to be based on some allegation that it was unconscionable for the defendant to enforce a guarantee against the plaintiff (guarantor), having regard to the lack of understanding on the part of the plaintiff, who was a volunteer. An allegation of undue influence by Ms Cheung would obviously not, by itself, provide a basis to defeat a claim by the creditor. The prospect of an assertion that it was unconscionable for the creditor to enforce the guarantee was reasonably obvious and there was (just) enough in the affidavit to give fair notice that such a case was to be made.

18. It is necessary to consider whether a claim framed in terms of unconscionability may have any substance or is sufficiently plausible to warrant investigation. On the evidence before me, a claim by the plaintiff that it is unconscionable for the defendant to enforce the guarantee appears to be difficult, but I cannot conclude that it is unarguable. It would be an unusual application of the principles considered in Garcia v National Australia Bank to protect a company who gave a guarantee in favour of a natural person. However, the principles stated in that decision are not confined to a relationship between husband and wife. In Meagher, Gummow and Lehane’s Equity Doctrines and Remedies 5^th ed, 2014, in the chapter entitled “Undue Influence”, the current authors state (at [15-155]):

In Australia, it will be unconscionable for the financier to enforce the security if it has not itself explained the situation to the third party, and does not know that an independent person has done so if the financier knows that there was a relationship of trust and confidence between debtor and third party.  Certainly, this is the law where the debtor and third party are married, and there seems to be no reason why it would be less unconscionable to treat other non-commercial relationships of which the financier is aware differently.

The same passage in the 4th edition of the work was cited in Kranz v National Australia Bank Ltd (2003) 8 VR 310; [2003] VSCA 92 at [31] per Charles JA; Winneke P and Eames JA agreeing.

19. There is evidence that the relationship in the present case between the plaintiff and the borrower had a non-commercial element. On evidence advanced by Ms Chow and Mr Tang, Ms Cheung (who controlled the borrower) used her familial power to prevail upon the directors of the plaintiff to execute the guarantee. There was some evidence tendered by the defendant of text messages between Ms Chow and Ms Cheung that may suggest that her naivety was not as great as she suggests in her evidence. Nor is there any explanation of how Mr Tang and Ms Chow could have understood that the loan was for a short period (6 months) when they executed instruments more than 12 months apart. However, there was certainly not enough for me to be able to conclude that Ms Chow and Mr Tang’s evidence (which was that they did not properly understand what they were signing on behalf of the company) was false.

20. There is little in the evidence about any acts undertaken by the defendant creditor. There is no evidence that she took steps to explain the transaction to the plaintiff or found out that an independent person had done so. The two transaction documents executed by the plaintiff include a term to the effect that it was advised to obtain independent legal advice and has either obtained that advice or “has expressly deemed not to seek such advice”. Clauses such as this may serve an important evidentiary function but will not be conclusive. Thus, a surety who proves that they did not understand the purport or effect of a guarantee will not fail in an action merely because the agreement they executed states (incorrectly) that they did understand the purport and effect of the agreement.

21. As to the creditor’s knowledge (actual or constructive), not much is known. It would be surprising if the defendant did not make some inquiries as to the identity and financial wherewithal of the plaintiff. It would also be surprising if the creditor did not know about the identity and something of the financial position of Ms Cheung. The face of the loan documentation revealed that the plaintiff had the same postal address as the borrower (and the other guarantors). The name of the plaintiff arguably put the defendant on some notice of a family connection between Ms Cheung and the company.

22. Mr Noakhtar, who appeared for the defendant, submitted that there was no evidence that the plaintiff did not receive a benefit from the transaction and that the defendant rightfully assumed that the directors of the plaintiff complied with their duties as company directors, which is to act in the best interests of the company. However, the defendant did not give evidence to that effect. She made an affidavit in the proceedings but said very little about the circumstances by which the guarantee given by the plaintiff came about. It is also at least implicit in the evidence of Ms Chow and Mr Tang that the plaintiff did not receive any benefit and was a volunteer. If the borrower or Ms Cheung had made some payment or given consideration to the plaintiff (or to Ms Chow or Mr Tang) in exchange for the guarantee, the failure to make that disclosure in their affidavits would have rendered them highly misleading.

23. Cases concerning alleged unconscionable conduct are often highly fact dependent. Based on the facts now before me, which provide really only a glimpse of the full factual underpinnings, I conclude that the plaintiff’s contentions are not so devoid of substance that no further investigation is warranted. The plaintiff has shown that there is an issue that has a sufficient degree of cogency to be arguable, with the consequence that a finding of genuine dispute about the whole of the debt must follow and that the statutory demand must be set aside.

19. This does not by any means deprive the defendant of whatever rights she enjoys under the guarantee. The consequence is that she must take steps to enforce the guarantee by suing on it in the conventional way. By such proceedings, the plaintiff’s contention that enforcement of the guarantee is unconscionable can be properly tested by reference to all of the relevant facts. That is the proper way for this matter to be determined. In short, the plaintiff should not be summarily shut out from contesting the efficacy of the guarantee.

Other grounds

25. It follows that I do not have to address the plaintiff’s other grounds. But I will do so briefly.

The amount of any debt

26. The plaintiff submitted that the defendant had not proved that the loan has not been fully repaid (or that the loan was drawn down to start with). Ms Chow’s affidavit in support of the application states that she had been informed by Ms Ada Cheung, who was a director of one of the other guarantors, that the debt was fully settled on 18 March 2024 following the sale of one of its properties, which was security, at Rouse Hill, which resulted in a payment of $541,026.33 to the defendant’s solicitor.

27. The evidence before me, primarily from the defendant but supported by documents, explains the distribution of the proceeds of sale of the Rouse Hill property. In short, the proceeds were used to repay principal and other costs and fees in relation to two developments. An amount of $300,000 was paid to settle a different development loan and $200,000 was paid to reduce the Charles Warner Bay development loan.

28. I do not consider that there is a credible basis for the plaintiff to contend that the borrower did not draw down the loan or to deny that there is an amount outstanding from the borrower that is reflected in the amount claimed by the statutory demand.

Abuse of process

29. The plaintiff also submitted that it was an abuse of process (and may be unconscionable) for the defendant to pursue the plaintiff before proceeding against the borrower, an apparently solvent entity, and in failing also to claim against the other guarantors, which would give the plaintiff an opportunity to pursue a cross-claim. It claimed that the statutory demand should be set aside “for some other reason”, within the meaning of s 459J of the Corporations Act.

30. The loan agreement, by which the plaintiff became bound when it executed a further amendment to it on 14 June 2022 (and also by another amendment on 26 June 2023), provided that the lender may proceed against any of the guarantors without first having to proceed against the borrower or any other guarantor. The plaintiff’s obligations under the guarantee were triggered upon the failure of the borrower to repay the loan. The plaintiff’s claims for contribution or other remedies against the borrower or other guarantors are not lost merely because the lender chooses to pursue the plaintiff. The position as between the plaintiff and the borrower and other guarantors under the loan documents reflects the common law position: see McLean v Discount & Finance Ltd (1939) 64 CLR 312 at 328 per Latham CJ and also W Courtney, J O’Donovan and J Phillips, The Modern Contract of Guarantee: English Edition, 4^th edition at [10-113]. It is plainly neither unconscionable nor an abuse of process for the defendant to pursue the plaintiff for the debt without first, or simultaneously, enforcing its rights against the borrower and other guarantors.

31. The plaintiff also made a written submission, under the heading “Abuse of Process”, that the statutory demand was served “without any prior correspondence or warning”. I gave leave at the hearing for the defendant to adduce evidence that she had made a demand for payment prior to the service of the statutory demand. The agreements executed by the plaintiff included a postal address for service as well as 2 email addresses, one belonging to Mr Tang and the other to Ms Chow. A letter dated 13 February 2025, making a detailed demand, was sent by prepaid express post to the postal address for service. A copy of the letter was also sent by email to the two email addresses.

32. Mr Tang and Ms Chow both gave evidence that they did not see the letter that was posted and that they did not see the email that was addressed to them. Both said they do not often check their emails. Ms Chow’s evidence was that the postal address was Ms Cheung’s business address, not the registered office of the plaintiff. None of this evidence was challenged. On that basis, I conclude, for the purposes of this hearing, that they did not see the letter of demand. But I would also conclude that a detailed letter of demand was served in accordance with the notice provisions of the agreement. The demand was properly served, but did not come to the attention of the plaintiff’s directors.

33. I do not consider that there could be any sustainable argument of an abuse of process because the defendant failed to ensure that a demand for payment had come to the actual knowledge of the plaintiff’s directors. Having made a demand at the addresses for service nominated in the agreement, it was not an abuse of process to serve a statutory demand when the letter of demand went unanswered. I do not consider that the defendant can be reasonably criticised for failing to chase up the letter of demand before issuing the statutory demand.

34. It follows that I would not have set aside the statutory demand as an abuse of process.

Costs

35. The plaintiff has succeeded in its application. Ordinarily costs should follow the event: UCPR r 42.1. But costs are in the discretion of the Court. I have not heard any argument about costs. My preliminary view is that there should be no order as to costs given: (a) the plaintiff failed on several arguments; (b) the basis upon which the plaintiff has succeeded (a genuine dispute based on unconscionability) could and should have been made more explicitly; and (c) time was taken in making and addressing submissions filed after the hearing that should not have been filed.

Orders

36. I make the following orders:

1. The statutory demand dated 13 March 2025 is set aside.

2. If either party wishes to make submissions on costs, they should advise my Associate of that wish before 4pm on 29 July 2025 and directions will be made.

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Decision last updated: 24 July 2025