Re Just Foods International Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2024 01153

IN THE MATTER of JUST FOODS INTERNATIONAL PTY LTD (ACN 658 497 584)

BETWEEN:

JUST FOODS INTERNATIONAL PTY LTD (ACN 658 497 584)	Plaintiff
v
DIAMOND ARMADA PTY LTD (ACN 104 376 758) as Trustee for the JIMENEZ FAMILY TRUST (ABN 62 165 076 311)	Defendant

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JUDGE:	Gobbo AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	8 July 2024
DATE OF JUDGMENT:	19 July 2024
CASE MAY BE CITED AS:	Re Just Foods International Pty Ltd
MEDIUM NEUTRAL CITATION:	[2024] VSC 493

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CORPORATIONS – Corporations Act 2001 (Cth) – Application to set aside a statutory demand pursuant to s 459G – Whether there is a genuine dispute as to existence of the debt – Plaintiff and defendant entered into contract for sale of shares – Plaintiff defaulted under contract – Defendant claimed that amount in statutory demand – Whether genuine dispute – Whether reply affidavits can be relied upon – Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 – Sceam Construction Pty Ltd v Clyne (2021) 64 VR 404 – Offsetting claim not raised in affidavit in support – Failure to properly raise alleged offsetting claim – Karimbla Construction Services Pty Ltd v Alliance Group Building Services Pty Ltd [2003] NSWSC 617 – Application dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms P J York, solicitor	Pradeepa Jayawardena York Law Practice
For the Defendant	Mr A Purton of counsel	K&L Gates

HER HONOUR:

The application

By originating process filed 14 March 2024, Just Foods International Pty Ltd (ACN 658 497 584) (‘Just Foods’) applies for orders under s 459G of the Corporations Act 2001 (Cth) (‘Act’) to set aside the defendant’s statutory demand dated 20 February 2024 (‘Demand’).
The Demand claims that Just Foods owes the defendant, Diamond Armada Pty Ltd (ACN 104 376 758) as trustee for the Jimenez Family Trust (‘Diamond Armada’), the sum of $897,043.85. The description of the debt is as follows:
Total of amounts owed by the Company to the Creditor pursuant to a Sale of Shares Agreement and Call Option dated 3 May 2022, as varied by a deed of variation dated 30 June 2022 entered into by Green Earth Industries Pty Ltd ACN 104 410 497, the Company, the Creditor, Marsh Dairy Products Pty Ltd ACN 005 086 288, Extramile Trading Pty Ltd ACN 619 970 552, Jesus Javier Jimenez and Vasilios Fergadiotis.
Just Foods relies on the affidavits of:
(a)Vasilios (Bill) Fergadiotis sworn 14 March 2024 (‘Supporting Affidavit’);
(b)Vasilios (Bill) Fergadiotis sworn 2 July 2024 (‘Reply Affidavit’), purportedly in reply; and
(c)Pradeepa Jayawardena York sworn 5 July 2024 (‘York Affidavit’), again purportedly in reply.
Diamond Armada opposes Just Foods’ application and relies on the affidavit of Jesus Javier (Harvey) Jimenez affirmed 16 April 2024 (‘Jimenez Affidavit’).
Both parties also rely on their written outline of submissions and the oral submissions made at the hearing before me.

Background

The alleged dispute is said to arise from a Sale of Shares Agreement and Call Option dated 3 May 2022, as varied by a deed of variation dated 30 June 2022 (‘Agreement’).[1]
[1]Affidavit of Jesus Javier (Harvey) Jimenez affirmed 16 April 2024, Exhibit HJ-1 page 10 (‘Jimenez Affidavit’).
Under the Agreement, Diamond Armada agreed to sell and Just Foods agreed to purchase all of the shares in Green Earth Industries Pty Ltd (ACN 104 410 497) (‘Green Earth’) for $1.5million on the terms set out in the Agreement.
The terms of the Agreement are not complex. The completion date was 1 August 2022 (‘Completion Date’).[2] The purchase price was to be paid in the following manner:[3]
(a)the deposit, which was split into two payments of $150,000.00 and $100,000.00, was to be paid within one Business Day of 30 June 2022 and by 1 July 2022 respectively;
(b)$450,000.00, which was to be paid on the Completion Date;
(c)$800,000.00, adjusted in accordance with clause 4.2 (‘Outstanding Amount’) was to be paid in the following tranches: $125,000.00 on the date which was three months after the Completion Date; $125,000.00 on the date which was six months after the Completion Date; $125,000.00 on the date which was nine months after the Completion Date; and the balance of the Outstanding Amount on the date which was 12 months after the Completion Date, unless the Call Option had been exercised by Diamond Armada in accordance with clause 6.2;
(d)the Outstanding Amount was to be adjusted by increasing or decreasing it in accordance with the increase or decrease in the net assets and liabilities of Just Foods, as calculated under clause 4.3; and
(e)if Just Foods defaulted under the Agreement, then it was required to pay to Diamond Armada on demand: (i) all reasonable expenses incurred by Diamond Armada as a result of the breach; and (ii) all interest on any money overdue during the period of the default at a rate being the aggregate of two percent per annum and the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 (Vic) as at the date upon which the default occurs (clause 12.1).
[2]See clause 1.1 and Item 3, Schedule 1, as varied by the deed of variation.
[3]See clause 1.1 and clause 4.1(b), as varied by the deed of variation.
On 1 August 2022, completion occurred at which time Just Foods paid $450,000.00 to Diamond Armada.
There was no dispute before me that in the period from October 2023 to 5 January 2024, Just Foods made the following payments to Diamond Armada in respect of interest under clause 12 of the Agreement: 8 September 2023 $4,986.30; 27 October 2023 $10,000.00; 9 November 2023 $7,909.36; 5 December 2023 $9,259.40; 22 December 2023 $8,915.34; and 5 January 2024 $9,188.45.

Key correspondence

The payments referred to in paragraphs 9 and 10 above are better understood in the context of correspondence that was passing between the parties during the relevant period.
On 3 August 2023, K&L Gates, solicitors for Diamond Armada, sent a letter to Legalite, the former solicitors for Just Foods, requiring that Just Foods pay the sum of $891,012.85 on 1 August 2023, being the Outstanding Amount due under the Agreement.[4]
[4]Jimenez Affidavit, Exhibit HJ-1 page 49.
The correspondence from K&L Gates followed receipt of an email from Mr Fergadiotis to Mr Jimenez on 1 August 2023 at 11:20am, where Mr Fergadiotis advised:[5]
Thank you for the opportunity to work with you over the past 12 months. I think you would agree that the integration has been a success and hopefully with a little more patience we can grow a great group.
We have had a number of conversations over the past few months regarding the final tranche of payment to you for the Green Earth business.
I have been working on this for a number of months to ensure that we met our commitments to you, and you are now due to receive a payment of $591,000.
[5]Ibid, Exhibit HJ-1 page 50.
On 19 August 2023, Mr Fergadiotis sent an email to Mr Jimenez stating:[6]
To be clear, we are committed to paying the remaining settlement sum to you as soon as possible. I feel very bad about this delay. This is the last thing in the world I would have wanted to happen. This is why I am selling personal assets to assist in the payment.
[6]Ibid, Exhibit HJ-1 page 51.
On 12 September 2023, Mr Fergadiotis sent a further email to Mr Jimenez in which he stated:[7]
I understand that the situation with the outstanding debt has been less than ideal, and I want you to know that we are taking every step to resolve it. As I have previously mentioned, we are in the process of selling some of my assets to ensure that we can meet our financial obligations. These sales are expected to be completed within the next 3 months …
…[W]e want to pay you the amount due under the contract to you with interest at a rate that you would not be able to obtain from a bank. This will also give me much needed time to pay the contracted amount to you in full, and we will compensate you for the delay with interest. I understand that we are late in making these payments, and we will compensate you with a 15% interest rate until the full amount is repaid.
[7]Ibid, Exhibit HJ-1 page 53.
On 10 January 2024 at 5:05am, Mr Fergadiotis sent an SMS text message to Mr Jimenez stating:[8]
…I wanted to extend my deepest gratitude for your unwavering patience regarding the delay in settling your account for the purchase of your business. I assure you that every effort is being made, working closely with top-quality trusted brokers, to expedite this process. The impending property sale will also significantly contribute to this settlement.
As previously advised please understand that the delay is in no way intentional, and we are genuinely eager to promptly finalize [sic] the payment, including offering respectful interest for the outstanding amount.
[8]Ibid, Exhibit HJ-1 page 55.

On 8 February 2024 at 12:25pm, Mr Fergadiotis sent an email to Mr Jimenez stating:[9]
I note that the various proposals that we have discussed with you recently, you have not found the proposals to be suitable to you.
Therefore in regards to making payments to you to pay the outstanding balance, we will pay $20k per month and in June/July we can meet together to review this payment with the purpose of increasing the amount. As you are aware we are working on options and are as keen as you to pay off the remaining amount to you and will pay you as much as we can right now and review the payments with the purpose of increasing it so that we pay you out asap.
[9]Ibid, Exhibit HJ-1 page 58.
The same day Mr Jimenez responded, sending an email to Mr Fergadiotis stating:[10]
In relation to the below, again I don't understand as Peter has not paid the interest payment to date, and now your [sic] saying that you can pay 20K per month. How can you offer 20K per month but cannot pay the 9K re interest owing.
[10]Ibid, Exhibit HJ-1 page 61.
On 13 February 2024, Mr Fergadiotis sent an email to Mr Jimenez advising:[11]
As discussed on Sunday, we will pay you $9,000 for this month, this week.
Then from March we will pay $20,000 per month and in June/July we can meet together to review this payment.
[11]Ibid, Exhibit HJ-1 pages 60-61.
On 13 February 2024, K&L Gates were instructed to issue a letter of demand to Just Foods requiring payment of the Outstanding Amount owing under the Agreement within seven days.[12]
[12]Ibid, Exhibit HJ-1 pages 67-68.
On 18 February 2024, Mr Fergadiotis sent an SMS text message to Mr Jimenez in which he advised:[13]
Hi Harvey, Thanks for the chat on Friday. I spoke with Peter. Just confirming we have paid $9,000 as agreed and that starting next month we will pay the $20,000 per month towards what we owe.
Rgds [sic] Bill
[13]Affidavit of Vasilios (Bill) Fergadiotis sworn 14 March 2024, [26] (‘Supporting Affidavit’).
On 20 February 2024 at 1:10pm, Kayla Davison of Legalite sent an email to Bryannen Gurr of K&L Gates recording:[14]
We are instructed that our clients were in contact last week and agreed that our client will:
1. pay $9,000 interest this month; and
2. starting next month, pay your client $20,000 per month.
We understand our client has paid the $9,000 interest to your client on 18 February 2024.
Please seek instructions on the above and confirm that no further action will be taken by your client in relation to the letter of demand dated 13 February 2024.
[14]Jimenez Affidavit, Exhibit HJ-1 pages 69-70.
On 20 February 2024 at 4:19pm, Stephen Hume of K&L Gates responded to Ms Davison’s email advising that:[15]
1.In correspondence last week, your client offered to pay our client $20,000 per month, plus an outstanding interest instalment in the order of $9,000;
2.our client did not accept the offer of $20,000 per month. Interest on the debt continues to accrue and fall due for payment under the terms of the share sale agreement;
3.an interest payment of ~$9,000 was made to Diamond Armada in the last few days; and
4.our client has not otherwise agreed to accept payment of the outstanding debt in instalments; and
5.the balance of the debt in the sum of $897,043.85 remains due and payable by Just Foods International P/L to Diamond Armada P/L.
Our client is now taking recovery action in relation to the outstanding debt. All rights are reserved.
[15]Ibid, Exhibit HJ-1 page 69.
On 22 February 2024, the Demand was served.
In response to the Demand, Just Foods commenced this proceeding and has sought to set the Demand aside on the basis of an alleged genuine dispute. That dispute is described in the Supporting Affidavit in the following terms:[16]
[16]Supporting Affidavit, [6]-[7].
The statutory demand should be set aside
6.There is a genuine dispute about the existence of the debt and the amount of the debt to which the statutory demand relates. Accordingly, the plaintiff seeks an order that the statutory demand be set aside under section 459H and/or section 459J of the Act.
There is a dispute as to the existence of the debt and the amount of the debt
7.There is a dispute as to the existence of the debt and the amount of the debt including because the defendant has not complied with, and has breached, it’s contractual obligations in respect of the contract under which the debt allegedly arises.

Preliminary matters

Admissibility of plaintiff’s affidavit material

At the commencement of the hearing, Counsel for Diamond Armada objected to the admissibility of the following parts of Just Foods’ affidavit evidence:
(a)paragraphs 11 to 12, and 15 to 16 of the Reply Affidavit on the basis that those matters were hearsay and expressed conclusions respectively;
(b)paragraphs 20 to 25 of the Reply Affidavit on that basis that those matters were beyond the scope of the matters raised in the Supporting Affidavit; and
(c)paragraphs 9 to 18, 19 to 28 and 29 to 32 of the York Affidavit on the basis that each of those tranches of paragraphs sought to raise a new ground of dispute not raised in the Supporting Affidavit.
At the hearing, I accepted Counsel for Diamond Armada’s submissions in respect to the objections raised and pronounced short oral reasons which are recorded in the transcript of the hearing to the effect that:
(a)paragraphs 11 to 12, and 15 to 16 of the Reply Affidavit were hearsay and conclusions and would both be given the appropriate weight; and
(b)Just Foods would not be entitled to rely on paragraphs 20 to 25 of the Reply Affidavit and paragraphs 9 to 18, 19 to 28 and 29 to 32 of the York Affidavit.
I otherwise informed the parties that when I delivered my reasons in respect of the application itself, I would provide further details of my reasons for disallowing certain parts of Just Foods’ evidence identified in paragraph 27(b) above. Those reasons follow.
Section 459G of the Act provides:
(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 the statutory period after the demand is so served.
(3) An application is made in accordance with this section only if, within that period:
(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.
In the oft cited case of Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (‘Graywinter’),[17] Sundberg J held that a genuine despite on which the party relies must be identified in the supporting affidavit, observing that where the supporting affidavit did not meet the minimum requirements, the absence of jurisdiction could not be overcome by the filing of a supplementary affidavit after the expiration of the statutory period. Sundberg J described the minimum requirements of an affidavit filed in support of s 459G(3) of the Act in the following terms:
(a)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’;
(b)the affidavit ‘may read like a pleading’ and need not detail, in admissible form, all the evidence that supports the contention of a genuine dispute; and
(c)neither a mere assertion that there is a genuine dispute nor a bare claim that the debt is disputed is sufficient.[18]
[17](1996) 70 FCR 452.
[18]Ibid, 459.
In Sceam Construction Pty Ltd v Clyne (‘Sceam’),[19] the Court of Appeal, in considering the application of what was well understood to be the Graywinter principle, stated (citations omitted):[20]
[38]Standing back from all that has been written in the authorities, it is important to bear firmly in mind that what is critical is the language in the legislation. It requires an affidavit supporting the application to be filed with the Court within the statutory period. In the context of a claim to set aside the statutory demand on the basis that there is a genuine dispute as to the existence or amount of the demand, pursuant to s459H(1)(a), the affidavit must support the application by providing the basis for establishing that there is a genuine dispute. Establishing the genuineness of the dispute requires material showing, or from which it can be inferred, that there is a real dispute. Most commonly this will be done by the deponent describing the dispute. That description will delineate the scope of the dispute which may be relied upon to set the demand aside. Where the dispute is based purely on the construction of a written agreement between the parties, the support requirement may be satisfied by exhibiting the agreement without more. But, for example and without being prescriptive, if something beyond the written terms is to be relied upon, then it is highly likely that this will need to be raised in the affidavit and more than mere assertion will be necessary. Ultimately, what is required to satisfy the support requirement must be assessed in the context of the particular application that is made.
[39]In our opinion, while various forms of language are used in the authorities, their effect is the same. Whether the terms ‘fair notice’ or ‘fairly alert’ are used or whether it is said that the ground must be raised ‘expressly, by necessary inference or by a reasonably available inference’, the outcome turns on whether the affidavit supports the application. In their context, we do not understand the Victorian authorities referred to above to have used the terms ‘fair notice’ and ‘fairly alert’ in a procedural fairness sense. Rather, in substance and properly understood, those phrases have been used as a shorthand for the lengthier phrase ‘expressly, by necessary inference or reasonably available inference’. That phrase requires that the grounds for resisting the statutory demand appear in the affidavit. The phrases ‘fair notice’ and fairly alert’ convey the same requirement. And in several of the cases using that terminology, the Court has used both phrases, in a context indicating that it considered that they conveyed the same requirement. The language of ‘fair notice’ or ‘fairly alerts’ has been directed towards the need for the affidavit to show that there is a real dispute, so as to properly be regarded as an affidavit that supports the application to set aside the statutory demand.
…
[43]Finally, we note that Graywinter itself concerned an affidavit that did not state any material facts to show that there was a genuine dispute; it contained mere assertions, and thus was not an affidavit ‘in support’ of the application. However, in other cases a supporting affidavit has been filed that does identify a genuine dispute on a particular basis, but the party seeking to set aside the statutory demand later seeks to rely on a different genuine dispute, identified in an affidavit filed outside the statutory time period. It is clear from the authorities that an affidavit filed within time that does not identify the dispute later sought to be relied upon is not a ‘supporting affidavit’ in so far as the different genuine dispute is concerned, and that the party concerned is not permitted to rely on that different genuine dispute if it was not identified in the supporting affidavit filed within the statutory time period. That is, the particular ‘genuine dispute’ on which an applicant seeks to rely must be identified in the supporting affidavit filed within time; it is not sufficient to identify one genuine dispute in the supporting affidavit, and then to identify a different genuine dispute in later affidavits filed out of time and at the hearing of the application.
[19](2021) 64 VR 404.
[20]Ibid, 415-417 [38]-[43] (emphasis added).

The issue before me is whether, on an objective analysis, what is sought to be agitated in the Reply Affidavit and the York Affidavit departs from what was raised in the Supporting Affidavit, such that any fresh grounds raised in these affidavits should not be permitted to be raised by Just Foods.
The material facts on which Just Foods intends to rely to support the genuine dispute and which are discernible from the Supporting Affidavit and/or the annexures and exhibits to it appear to be as follows:
(a)an alleged failure by Diamond Armada to provide to Just Foods the documents, books and records of Green Earth as required under clause 8.3 of the Agreement. Pursuant to the terms of the Agreement, the books and records were due to be provided at completion. Completion took place on 1 August 2022. Notably, there was no evidence in the Supporting Affidavit as to when the alleged failure to provide the books and records was said to have occurred or when it became known to Just Foods. The relevant parts of the Supporting Affidavit are extracted below:[21]
[21]Supporting Affidavit, [8], [10].
[8]Under the relevant Sale of Shares and Call Option Agreement for the purchase of Green Earth Industries Pty Ltd, the defendant was required to provide to the plaintiff the documents, books and records of Green Earth Industries Pty Ltd including the contracts between Green Earth Industries Pty Ltd and its suppliers and customers. However, the defendants has failed to do so. This failure is a material breach of contract under which the debt allegedly arises.
…
[10]I am informed by Peter Mannen (Chief Executive Officer) and Jo Lovalvo (Sales Director) from the plaintiff and believe that copies of contracts with suppliers and customers, and supplier and customer information were requested by Peter Mannen and Jo Lovalvo from Harvey Jimenez. Harvey Jimenez said he would provide the requested information but he did not provide the information.
(b)an allegation that Mr Jimenez had undermined the value of Green Earth allegedly in ‘breach of contract’. The only contract in evidence before me was the Agreement. That document was only extracted, in part, in the Supporting Affidavit.[22] A copy of the Agreement was not put into evidence by Just Foods. A full copy of the Agreement was exhibited to the Jimenez Affidavit. Beyond a reference to December 2023, there is no evidence in the Supporting Affidavit as to when the alleged breach of contract occurred, what contract was said to be breached (i.e. the Agreement or some other contract), the term or terms of the Agreement (or some other contract) that were allegedly beached or when these matters became known to Just Foods. The relevant parts of the Supporting Affidavit are extracted below:[23]
[11]Further, the conduct of Harvey Jimenez has thwarted the effect of the Sale of Shares and Call Option Agreement, in that Harvey Jimenez undermined the value of Green Earth Industries Pty Ltd, in breach of contract.
[12]In respect of Green Earth Industries Pty Ltd, sales in December 2022 were recorded as $549,000 but in December 2023, after the sale to the plaintiff, sales dropped to $241,000. Part of the reason for the drop in sales was due to Simplot’s closure of its Bathurst site. However, the ensuing drop in sales were known to Harvey Jimenez before the site closed and Harvey Jimenez made no attempt to arrest this drop in sales. We tried to motivate him to increase sales by increasing his consultancy fee to manage sales and procurement from $181,500 (inclusive of GST) to about $231,660 (inclusive of GST) to prevent this kind of situation from arising, which had put the group into more cashflow difficulty…
[13]Harvey Jimenez commenced working for the plaintiff on 1 August 2022. During this period of employment, he kept information in respect of Green Earth Industries Pty Ltd to himself and failed to meet the requirement to transition the suppliers and customers to Just Foods International Pty Ltd and associated entities Extramile Trading Pty Ltd and Marsh Diary Pty Ltd.
(c)an allegation that Mr Jimenez failed, from 1 August 2023, to obtain new sales as he was allegedly required to do.[24] Noting that 1 August 2022 was the Completion Date, and 1 August 2023 was the date by which the Outstanding Amount was due to be paid, the legal basis for the alleged requirement that Mr Jimenez was obliged to obtain new sales is entirely unclear. The requirement does not arise under clause 8.3 of the Agreement, being the only clause that the solicitor for Just Foods placed reliance upon. If such an obligation existed, no foundation for it was advanced at the hearing before me by Ms York;
(d)an allegation that a number of customers and suppliers advised Just Foods that they had been unaware of the change in ownership and refused to deal with Just Foods. Only one example of a customer was cited in the Supporting Affidavit, being Simplot Australia Pty Ltd (‘Simplot’), whom it was said had advised Just Foods on 15 February 2024 that they were not comfortable with the new arrangements.[25] Careful scrutiny of the communication between Simplot and Just Foods reveals that they were in fact notified of the change in ownership. In so far as the alleged refusal to deal with Just Foods is concerned, the Supporting Affidavit makes reference to one supplier only, being IL-Primo. However, again careful scrutiny of the communication between IL-Primo and Just Foods demonstrates that the alleged ‘refusal’ is nothing of the sort. Rather the communication refers to IL-Primo, as a creditor, seeking new trading account information following the change of ownership.[26] There is nothing in the Supporting Affidavit to explain whether this information was supplied by Just Foods. There is simply a conclusionary assertion that IL-Primo stopped supply causing Green Earth to lose a customer which in turn was said to be attributable to Mr Jimenez’ alleged failure to carry out his responsibilities, with those responsibilities not defined or identified; and
(e)an allegation that there had been an agreement reached between Mr Fergadiotis and Mr Jimenez to enter into a payment plan for the repayment of the debt which is the subject of the Demand.[27] That agreement is alleged to have been documented by the emails and other communications occurring between 8 February 2024 and 18 February 2024 referred to and extracted in paragraphs 17 to 21 above.
[22]Ibid, [9].
[23]Ibid, [11]-[13].
[24]Ibid, [14].
[25]Ibid, [16].
[26]Ibid, [17].
[27]Ibid, [19].
Conversely, paragraphs 20 to 25 of the Reply Affidavit raise the following matters:
(a)the terms and conditions of Mr Jimenez’ employment with Just Foods;[28]
(b)Just Foods allegedly becoming aware, on a date after August 2023, that Mr Jimenez had been disparaging Just Foods, causing it reputational damage, and passing on confidential information to competitors including Real Dairy Australia Pty Ltd. The Reply Affidavit is silent as to exactly when Mr Fergadiotis became aware of these matters;[29] and
(c)Mr Jimenez allegedly:
(i)damaging the business operations and thwarting the bargain entered into by Just Foods to purchase Green Earth; and
(ii)engaging in misleading and deceptive conduct in relation to the ‘Simplot contract’ and impeding Just Foods’ ability to make money from the Green Earth business.
The Reply Affidavit is also silent as to exactly when Mr Fergadiotis became aware of these matters.[30]
[28]Affidavit of Vasilios (Bill) Fergadiotis sworn 2 July 2024, [20]-[21].
[29]Ibid, [22].
[30]Ibid.
In addition, paragraphs 19 to 32 of the York Affidavit raise the following matters:
(a)the existence of a County Court proceeding commenced against Mr Fergadiotis on 19 April 2024 pursuant to a guarantee given by him under the Agreement, and in respect of which a default judgment had been obtained on 28 May 2024 and was yet to be the subject of an application to set aside; and
(b)the alleged existence of an offsetting claim. In this regard Ms York deposes that:[31]
[29] As stated in the affidavit of Mr Fergadiotis dated 14 March 2024 and in his affidavit in reply dated 2 July 2024, he intends to commence proceedings in relation to the conduct of defendant [sic] and its director, Mr Jimenez in relation to the defendant’s sale of Green Earth to the plaintiff.
[31]Affidavit of Pradeepa Jayawardena York sworn 5 July 2024, [29].
A careful examination of the Supporting Affidavit and/or the Reply Affidavit reveals that there is no such evidence by Mr Fergadiotis of his intention to commence proceedings against Diamond Armada, as distinct to Mr Jimenez.
Ms York otherwise references an intention by Just Foods to bring a counterclaim in the County Court proceeding (where a default judgment remains against Mr Fergadiotis and Just Foods is not a party) against both Mr Jimenez and Diamond Armada for breaches of fiduciary duty, misleading and deceptive conduct, interference with contractual relations and providing confidential information to competitors to the detriment of Just Foods.
When questioned as to how, in light of the authority in Greywinter and Sceam, I could consider paragraphs 20 to 25 of the Reply Affidavit and paragraphs 19 to 32 of the York Affidavit, the solicitor for Just Foods submitted that:[32]
[32]Transcript of Proceedings (8 July 2024) 17.6-17.21.
MS YORK: And, Your Honour, the contents of the affidavit in reply is I submit indispensable to the assessment of this case.
HER HONOUR: Which affidavit are you referring to, yours

or - - -
MS YORK: That’s the second affidavit.
HER HONOUR: Yes.
MS YORK: Which is the affidavit in reply. And I submit that it is indispensable to the assessment of the case and the justice to be done in this case. There’s really no way around it in that the information covered in that affidavit in reply, which is I’ll call it the second affidavit, was information that was not available at the time that the first affidavit was filed. Nevertheless, the fact that enliven the genuine dispute are also the fact that enliven the offsetting claims.
The solicitor for Just Foods further submitted that:[33]
HER HONOUR: An objection has been taken to paragraphs 20 to 25 on the basis that those matters are not raised in the primary affidavit. And the authorities are clear about whether or not I can consider fresh material that's not raised in the primary affidavit in any subsequent affidavit that’s been filed. Looking at the matters that are deposed to at paragraphs 20 to 25 how is it that you say that those matters were not known at the time the first affidavit was filed?
MS YORK: Those matters that are covered in paragraphs 20 to 25 were matters in which information came to my client’s attention in the latter part of March and April after that first affidavit.
[33]Ibid, 17.27-18.8.
And:[34]
MS YORK: I submit, Your Honour, that the affidavit in reply was – the statutory affidavit was referring to misleading and deceptive conduct and these matters are being referred to in the affidavit in reply whilst the facts are different they also go to misleading and deceptive conduct. And so these are matters that will be brought in the County Court counterclaim.
[34]Ibid, 21.30-22.5.
The essence of the submission by Ms York appeared to be that the existence of the County Court proceeding, and the alleged intention of Mr Fergadiotis to defend that action (despite the existence of a default judgment) and bring, apparently with Just Foods, a broader counterclaim for, amongst other claims, misleading and deceptive conduct, were not matters that had come to Mr Fergadiotis’ attention until after the Supporting Affidavit was filed. Ms York contended before me that the Court should have regard to these matters as they are ‘indispensable to the assessment of the case and the justice to be done in this case.’[35] Ms York did not take me to any authority in support of her submission. Further, Ms York did not identify whether the alleged causes of action intended to be raised in response to the County Court Proceeding and which she sought to agitate before me on the basis that they demonstrated a genuine dispute were causes of action available to Just Foods or to Mr Fergadiotis or to both. The submissions were replete with vague generalities and lacked any precision.
[35]Ibid, 17.14-17.15.
In Re Geitonia Pty Ltd,[36] Black J considered where a ground of dispute on which a company relied only arose after the expiry of the statutory time in which to make an application under s 459G of the Act remarking:[37]
It seems to me that to set aside a creditor’s statutory demand, on a ground which was not raised within the 21 day period specified in s459G of the Corporations Act, even in circumstances that it could not have been raised, would be outside the statutory jurisdiction conferred on the Court under that section and would involve a significant departure from the appellate authorities that have endorsed the Greywinter principle. Although that result is plainly disadvantageous to [the plaintiff company] in some respects, that disadvantage is to some extent mitigated by the fact that [the plaintiff company] will be entitled to raise this ground, without leave, in opposition to a winding up application based on a failure to comply with the Demand.
[36](2016) 11 BFRA 600.
[37]Ibid, 610 [30]. See also Galaxy Coins and Bullion Pty Ltd v Deputy Commissioner of Taxation (2018) 340 FLR 319, 332 [65].
Respectfully, I adopt Black J’s reasoning. In so far as Just Foods seeks to rely on the existence of the County Court Proceeding, which was not raised in the Supporting Affidavit, as a basis for advancing an argument of genuine dispute, I reject Ms York’s submission which I regard as contrary to law. Just Foods will not be entitled to rely on paragraphs 19 to 32 of the York Affidavit.
Turning then to the alleged offsetting claim, when questioned as to how I could consider this when it was not raised in the Supporting Affidavit, it appeared that the solicitor for Just Foods invited me to embark on inferential reasoning to the effect that because there was an alleged genuine dispute, it follows that there is an offsetting claim which, although not specifically addressed in the Supporting Affidavit, was a matter that I should consider:[38]
HER HONOUR: But there's no material, Ms York, that squarely raises an alleged offsetting claim. So how do say I can consider that at this point?
MS YORK: On the basis of there being a genuine dispute.
HER HONOUR: So the offsetting claim is a part of the genuine dispute, is it, as opposed to a standalone offsetting claim.
MS YORK: Well, there being genuine dispute naturally leads to claims and those claims are now matters that will be agitated in the County Court.
[38]Transcript of Proceedings (8 July 2024) 24.1-24.10.
I regard Ms York’s submission as devoid of substance, contrary to law, and I reject it. The first time any suggestion of an offsetting claim is raised is in the York Affidavit which was filed outside the statutory period. The Court of Appeal in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq)[39] specifically addressed this very circumstance observing that ‘[a]lthough Graywinter related to a supporting affidavit filed in a ‘genuine dispute’ case, Sundberg J’s observations are equally applicable to an ‘offsetting claim’ case’.[40]
[39][2015] VSCA 330 (‘Malec’).
[40]Ibid, [55].
For completeness I note that even if the alleged offsetting claim had been properly raised in the Supporting Affidavit in the same terms as it was raised in the York Affidavit, I would have ascribed it nominal value only such that it would not have been of any material assistance to Just Foods in prosecuting its application.
Section 459H(5) of the Act defines an offsetting claim as:
…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).
Any offsetting claim by Just Foods would have been for unliquidated damages. In applications under s 459H of the Act, a pragmatic approach is taken as to what is required in order to particularise the offsetting claim. A company is not required to particularise the claim to the last dollar and cent.[41] However, failing to adduce sufficient evidence to convince the Court that the claim is genuine will mean that the Court will ascribe a nominal value to it.[42]
[41]Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560, [19].
[42]Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (1994) 13 ACSR 455, 463.
In Karimbla Construction Services Pty Ltd v Alliance Group Building Services Pty Ltd,[43] Barrett J explained this broad brush approach in the following terms:[44]
Despite this clear need, according to the terms of the legislation, to quantify an offsetting claim in money terms, it is not necessary that the party seeking to have the statutory demand set aside should particularise the amount of the claim to the last dollar and cent. Particularly where the claim is of an unliquidated kind, there may be various ways of approaching the issue of assessment of damages and there may be elements of the assessment that are, of necessity, based on broad estimate. It is sufficient that there be, on the evidence, a plausible and coherent basis for asserting a claim to a sum which, despite elements of uncertainty as to details of calculation, can be seen to be, in any event, greater than the amount of the debt the subject of the statutory demand.
[43][2003] NSWSC 617.
[44]Ibid, [28].
When asked what the value of the offsetting claim was, the solicitor for Just Foods was unable to satisfactorily inform the Court.[45]
[45]Transcript of Proceedings (8 July 2024) 42.20-43.16.

Conclusion – objections to evidence

In respect of the impugned paragraphs, a careful examination of the Reply Affidavit and York Affidavit make it clear that the paragraphs over which an objection has been taken are fresh matters which were not the subject of the Supporting Affidavit. Adopting the language in Sceam, these impugned paragraphs concern a different alleged genuine dispute and Just Foods will not be permitted to rely on that different alleged genuine dispute as it was not raised in the Supporting Affidavit filed within the statutory time period. Just Foods will not be permitted to rely on paragraphs 20 to 25 of the Reply Affidavit and paragraphs 9 to 32 of the York Affidavit.

Substantive application

Legal principles

The legal principles applicable to applications under s 459G of the Act are well-established and uncontroversial. A company seeking to set aside a statutory demand on the basis that there is a genuine dispute bears the onus of establishing, on the balance of probabilities, that such a dispute exists.[46] The Court of Appeal in Malec summarised the principles applicable in applications to set aside statutory demands as follows (citations omitted):[47]
[47]The terms of s 459H of the Corporations Act and the authorities make clear that, on an application to set aside a statutory demand, the applicant is required only to establish a genuine dispute or offsetting claim. The applicant is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. It is not necessary for the applicant to advance a fully evidenced claim. Therefore, the task faced by an applicant is by no means at all a difficult or demanding one.
[48]In determining such an application, it is not necessary or appropriate for a court to engage in an in-depth examination or determination of the merits of the alleged dispute. This is because an application alleging a genuine dispute or offsetting claim is akin to one for an interlocutory injunction and requires the applicant to establish that there is a ‘plausible contention requiring investigation’ of the existence of either a dispute as to the debt or an offsetting claim. It is therefore not helpful to perceive that one party is more likely than the other to succeed or that the eventual state of the account between the parties is more likely to be one result than another. Further, the determination of the ‘ultimate question’ of the existence of the debt at a substantive hearing should not be compromised.
[49]The court is required to determine whether the dispute or offsetting claim is ‘genuine’. It has been said that the criterion of a ‘genuine’ dispute requires that the dispute be bona fide and truly exist in fact and that the grounds for alleging the existence of a dispute be real and not spurious, hypothetical, illusory or misconceived. It has also been observed that the dispute or offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion. It must also have sufficient factual particularity to exclude the merely fanciful or futile. A rigorous curial approach is essential to the effective operation of the statutory scheme.
[50]The court is not required to accept uncritically 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, as it may not have sufficient prima facie plausibility to merit further investigation as to its truth. The court is also not required to accept uncritically a patently feeble legal argument or an assertion of facts unsupported by evidence, although this should not be read as suggesting that the applicant must formally or comprehensively evidence the basis of its dispute or off-setting claim. Except in such extreme cases, the court should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on by the applicant to set aside a statutory demand.
[51]Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd involved a demand for payment of a debt alleged to be due under a contract for the supply of goods. The applicant relied on four matters, each of which had the potential to affect the respondent’s entitlement to be paid the entire amount of the debt. Barrett J held that all four matters were sufficiently plausible to raise a genuine dispute. He relevantly stated:
The [applicant] will fail in [the] task [of establishing a genuine dispute] only if … the contentions upon which it seeks to rely … are so devoid of substance that no further investigation is warranted. Once the [applicant] shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the [applicant], it must find that a genuine dispute exists, even where any case apparently available to be advanced against the [applicant] seems stronger.
[46]Re Speedy Loans Pty Ltd [2014] VSC 273, [17].
[47]Malec (n 39), [47]-[51].

In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd,[48] Dodds-Streeton JA (as her Honour then was), 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:[49]
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…
[48](2008) 66 ACSR 67.
[49]Ibid, 79 [71] (Dodds-Streeton JA).
Numerous authorities have observed that the threshold for establishing a genuine dispute is a low and by no means difficult or demanding one. However, that does not mean that the Court will not look critically at whether the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived.[50]
[50]Spacorp Australia Pty Ltd v Myer Stores Ltd (2001) 19 ACLC 1,270, 1,270 [3]; Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787; Powerhouse Australasia Pty Ltd v Viarc Pty Ltd [2006] VSC 508, [48]–[49] (‘Powerhouse’).
In Powerhouse Australasia Pty Ltd v Viarc Pty Ltd,[51] Dodds-Streeton J considered the approach and standard to be applied when dealing with applications to set aside statutory demands:[52]
While it is not a very exacting standard, on the other hand mere assertion of a dispute or off-setting claim, mere bluster or advancing grounds which are illusory or spurious or insufficiently particularised will not suffice. The Court must not enter into the merits of the dispute, but it is not crossing the line in relation to its legitimate role in these applications to consider evidence which ‘bears on whether or not the asserted dispute or off-setting claim is genuine’. Indeed, that is its necessary function.
[51]Powerhouse (n 50).
[52]Ibid, [48].
Further, in Creata (Aust) Pty Ltd v Faull[53] the Court held that if the dispute appears to be something ‘merely created or constructed in response to the pressure represented by the service of the statutory demand’ then it is not advanced in good faith and will not be regarded as genuine.
[53](2018) 125 ACSR 212, 224.
It is clear, therefore, that for a statutory demand to be set aside by reason of a dispute over the existence or amount of the debt or by reason of an offsetting claim, that the dispute or offsetting claim (as the case may be) must be genuine.[54] The qualifier of ‘genuine’ applies to both the dispute and an offsetting claim.[55]
[54]See Malec (n 39), [49].
[55]In2Ply Pty Ltd v Amerind Pty Ltd (in liq) (recs and mgrs apptd) (2014) 32 ACLC 14-075, 939-940 [30], referring to Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91.

Analysis and consideration

The principal contentions of Just Foods, raised in the Supporting Affidavit, appear to be that:
(a)Diamond Armada has materially breached the terms of the Agreement by failing to provide books and records and through the conduct of Mr Jimenez; and
(b)Diamond Armada entered into an agreed “payment plan” in respect of the debt, such that they should not be permitted to now demand the full amount of the debt in the Demand.
As against that position, Diamond Armada contends that the application should be dismissed as it fails to raise any genuine dispute. A critical assessment of the correspondence and evidence, as the authorities direct me to conduct, reveals the following uncontested facts.
First, Diamond Armada first demanded payment of the debt that is the subject of the Demand on 3 August 2023.
There is no evidence before me of Just Foods disputing the debt or querying the manner in which it had been calculated at any time between the initial letter of demand and service of the Demand.
Second, Just Foods made interest payments towards the debt and otherwise acknowledged the existence of the debt and offered excuses as to why it had been unable to pay it.
Third, and critically, there is a multitude of correspondence before me, and admissions in the Supporting Affidavit and the Reply Affidavit, that the debt is owing. In particular, I refer to paragraphs 4 and 5 of the Reply Affidavit, which are not only factually inconsistent but contain, at paragraph 5 a clear admission that the debt is due and owing. Entry into a payment plan to pay off a debt which is then the subject of a statutory demand is, in my view, entirely inconsistent with a later suggestion that the debt is the subject of a genuine dispute. I need not go beyond Just Foods’ own affidavit material and the admissions it contains, to be satisfied that there is no genuine dispute.
However, even if I were to consider the first ground upon which Just Foods relies, namely the alleged non-compliance by Diamond Armada with the Agreement, the assertions concerning genuine dispute are, in my view, lacking in substance and appear to have only been raised in response to the service of the Demand.
Clause 8.3 of the Agreement required Diamond Armada to deliver the books and records at completion. Completion took place on 1 August 2022, approximately 18 months before the Demand was served. The evidence relied on by Just Foods rises no higher than an assertion of facts unsupported by evidence. So much is clear looking at the vague generalised assertions contained at paragraphs 11 to 18 of the Supporting Affidavit. Whilst accepting that the Supporting Affidavit need not detail in admissible form all of the evidence that supports a contention of genuine dispute, what is required in my view, extends beyond vague assertions. The Supporting Affidavit is beset by a critical lack of precision as to key matters such as relevant dates and when carefully examined, the emails which are exhibited in support of the purported genuine dispute,[56] do no more than confirm vague communications in the absence of any causal link between those communications and the alleged breach of the Agreement. I refer to and repeat my observations at paragraphs 33(b) to 33(e) above.
[56]See for example those at paragraphs 16 and 17 of the Supporting Affidavit.
Similarly, the evidence about the conduct of Mr Jimenez is no more than an assertion. Those allegations are inconsistent with the uncontradicted evidence of Mr Jimenez and the contemporaneous statements made by Mr Fergadiotis, which are effusive in describing the performance of Mr Jimenez. Again, the evidence relied on by Just Foods is no higher than an assertion unsupported by evidence.
In my view, and having regard to the paucity of evidence before me, complaints about Diamond Armada’s compliance with the Agreement appear to be something merely created or constructed in response to the pressure represented by the service of the Demand. Those arguments are not advanced in good faith and, accordingly, ought not be regarded as genuine.
Further, and turning to the second limb upon which Just Foods relies, being a contention that there is an agreed payment plan, there was no evidence before me of such. Rather the evidence was no more than an offer by Just Foods to enter into a payment plan to pay the debt which is the subject of the Demand, which offer was not accepted by Diamond Armada. When the correspondence before me is considered objectively, I accept Counsel for Diamond Armada’s submission that there is nothing in those communications which indicates that Diamond Armada accepted Just Foods’ offer or that Diamond Armada had agreed to forbear from exercising its rights in respect of the debt which is the subject of the Demand.
In Bucknell v Commercial Banking Co of Sydney Ltd (‘Bucknell’),[57] the High Court considered the operation of a limitations defence to the bank’s ability to recovery its debt. In that context, the High Court considered what impact, if any, an acknowledgement to repay a debt would have on the whether a limitations defence could be taken. Of relevance to the position advanced by Just Foods in this matter are the observations of Dixon J in Bucknell who held that the law implies from an acknowledgment of the existence of the liability a promise to discharge it stating:[58]
Thus, if the context includes a flat refusal to pay, the admission of liability cannot be made the foundation of an implied promise to discharge the debt. If the admission is accompanied by an express promise to which the writer has attached conditions or limitations in point of time or otherwise, an absolute promise cannot be implied from the acknowledgment of liability, because to imply it would involve an inconsistency, and the creditor obtains no more than a conditional or limited revival of the debt. In the same way if the document in which the admission of liability is found contains an expression of some qualification which is inconsistent with an unconditional or unrestricted promise to pay, the promise implied from the acknowledgment of the debt will be qualified by the condition or limitation expressed.
[57](1937) 58 CLR 155.
[58]Ibid, 164 (Dixon J).
In my view, the evidence of Just Foods makes it clear that in offering to enter into a payment plan it acknowledged the debt which is the subject of the Demand. Adopting the language of Dixon J in Bucknell, the only qualification to the acknowledgement of the debt was the time which Just Foods required to discharge its liability to Diamond Armada. This qualification is not inconsistent with the acknowledgement of the liability. There were no qualifications as to the sum or existence of the debt, or any action required to be performed by Diamond Armada prior to payment which could make the offer of the payment plan a conditional or limited acknowledgment of the debt.
I accept the submission of Counsel for Diamond Armada that the fact that Just Foods offered to enter into a payment plan demonstrates the true position that it found itself in by February 2024. Just Foods did not dispute the debt owing under the Agreement but it had no capacity to pay it. Just Foods sought additional time to pay, on the promise of monthly payments. The position of Just Foods by 18 February 2024 was not materially different to its financial position in August 2023 when it was first in default under the Agreement. There was no genuine dispute in August 2023 when Mr Fergadiotis offered to sell personal assets to pay the debt. There was no genuine dispute on 18 February 2024 when the payment plan was offered by Mr Fergadiotis.
Further, I reject the submission of Ms York which was to the effect that it was only after the payment plan had been agreed (on her client’s evidence) that Just Foods became aware of the alleged material breach of the Agreement. There are two fundamental shortcomings with this submission.
First, before me, Just Foods still pressed its argument that there was a binding agreement to resolve the debt which was the subject of the Demand, being the payment plant. If, as was suggested in oral submissions, Just Foods became aware of material breaches of the Agreement since agreeing to the payment plan, it is difficult to understand why at the hearing before me they sought to maintain that that the payment plan they offered Diamond Armada was binding. That position was entirely unexplained by the solicitor for Just Foods.
Second, and more fundamentally, the evidence does not support Ms York’s submission. Mr Fergadiotis’ own evidence was that on 18 February 2024 he agreed to the payment plan and made a partial payment thereunder. His evidence is also that on 15 February 2024 he became aware of an alleged material breach of the Agreement by reason of the email received by Just Foods from Simplot. Clearly that email was received prior to the part payment being made on 18 February 2024. In the circumstances I must reject the submissions by Ms York. They are not supported by her client’s evidence.
In the circumstances, I am not satisfied that there is any genuine dispute. The plaintiff’s originating process filed 14 March 2024 is dismissed.
Finally, Just Foods also sought to challenge the quantum of the debt which was the subject of the Demand. At the hearing, I indicated to Ms York that I would hear her submission on whether the amount sought in the Demand ought to be varied. No oral submissions were advanced by Ms York. There is no material before me from which I could conclude that the amount sought in the Demand was incorrectly stated or should be varied pursuant to s 459H(4) of the Act.
I direct the parties to confer as to an appropriate form of order to give effect to these reasons. In the event the parties are unable to reach agreement, the matter will be listed for a brief further hearing and the parties will be required to set out their respective positions in short written submissions, including in respect of costs.

[2024] VSC 493

19 July 2024