Re Tarrawarra Yarra Valley Holding Pty Ltd
[2025] VSC 293
•20 May 2025 (ex tempore; revised 26 May 2025)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2025 00584
IN THE MATTER OF TARRAWARRA YARRA VALLEY HOLDING PTY LTD
(ACN 663 012 512)
BETWEEN:
| TARRAWARRA YARRA VALLEY HOLDING PTY LTD (ACN 663 012 512) | Plaintiff |
| v | |
| YYW FINANCIAL PTY LTD (ACN 665 147 044) | Defendant |
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JUDGE: | Delany J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 May 2025 |
DATE OF JUDGMENT: | 20 May 2025 (ex tempore; revised 26 May 2025) |
CASE MAY BE CITED AS: | Re Tarrawarra Yarra Valley Holding Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2025] VSC 293 |
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CORPORATIONS — Winding up — Creditor’s statutory demand — Application to set aside — Whether the company has an offsetting claim — Corporations Act 2001 (Cth), s 459H(1)(b) — Britten‑Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] NSWCA 344; (2013) 85 NSWLR 601, applied — No offsetting claim.
CORPORATIONS — Winding up — Creditor’s statutory demand — Application to set aside — Whether there is some other reason — Corporations Act 2001 (Cth), s 459J — Arcade Bridge Embroidery Co‑Pty Ltd v The Deputy Commissioner of Taxation [2005] ACTCA 3; (2005) 157 ACTR 22; Re MHC Pathology Pty Ltd [2020] VSC 789, applied — Some other reason not found.
PRACTICE AND PROCEDURE — Application to rely on evidence out of time — Refused.
PRACTICE AND PROCEDURE — Application for adjournment of hearing — Refused.
PRACTICE AND PROCEDURE — Civil Procedure Act 2010 (Vic) obligations upon the Court, parties and practitioners in context of applications to set aside — Civil Procedure Act 2010 (Vic), ss 7, 8, 23, 24, 25, 28 — Inordinate delay and non-compliance — Indemnity costs awarded.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W Liu | Nova Lawyers |
| For the Defendant | Mr D Kim | Northan Legal |
HIS HONOUR:
By originating process dated 7 February 2025 the plaintiff (‘Tarrawarra’) applies pursuant to s 459G of the Corporations Act 2001 (Cth) (‘Act’) to set aside a statutory demand dated 14 January 2025 served on it by the defendant (‘YYW Financial’). In support of its application the plaintiff relies on the affidavit of Nhut Quang Dai Huynh (‘Mr Huynh’), authorised representative of Tarrawarra, dated 7 February 2025 (‘initial affidavit’).
The statutory demand is for the sum of $3,855,420.47 (‘statutory demand’). The statutory demand was accompanied by a copy of and is based on a judgment in default of defence obtained by YYW Financial against Tarrawarra on 17 December 2024 in County Court proceeding number CI‑24‑02875 (‘County Court proceeding’).
Tarrawarra accepts that in circumstances where default judgment has been made against it that it cannot raise a genuine dispute about the existence of the judgment debt within the meaning of s 459H(1)(a) of the Act.
Tarrawarra submits that the statutory demand should be set aside because:
(a) it has an offsetting claim within the meaning of s 459H(1)(b) of the Act which necessitates the setting aside of the demand; and/or
(b) there is ‘some other reason’ why the demand should be set aside within the meaning of s 459J(1)(b) of the Act.
Timetabling orders
On 7 March 2025 Associate Justice Hetyey made timetabling orders for the filing of evidence and submissions (amongst other things) (‘7 March 2025 Order’).
The parties have filed evidence and submissions. The plaintiff has not done so in accordance with the 7 March 2025 Order.
The materials
Tarrawarra relies on the initial affidavit of Mr Huynh.
YYW Financial relies on the affidavit of Natalie En Xin Lim (‘Ms Lim’) dated 14 March 2025, filed in accordance with the 7 March 2025 Order.
It was at this point that compliance by Tarrawarra with the 7 March 2025 Order ceased.
On 30 April 2025, the Court emailed the parties seeking an update because of non-compliance with the 7 March 2025 Order. Following that email, on 2 May 2025 the solicitors for Tarrawarra sent an email seeking an adjournment of the 20 May 2025 substantive hearing fixed by the 7 March 2025 Order. YYW Financial informed the Court that it wished the hearing to proceed on the assigned date.
On 5 May 2025 I made an Order on the Court’s own motion that:
1. Any application by the plaintiff to adjourn the final hearing, or to rely upon evidence or submissions not filed in accordance with the March Order, is to be made via summons returnable on 20 May 2025.
2. By no later 4:00pm on 12 May 2025, the plaintiff is to file and serve any summons and affidavit in support of an application under paragraph 1 of this Order.
3. By no later than 4:00pm on 19 May 2025 the defendant is to file and serve any submissions and affidavit in reply.
(‘5 May 2025 Order’)
The 5 May 2025 Order noted in ‘Other Matters’ that the plaintiff had not complied with orders for the filing of any evidence in reply and for the filing of any submissions. It noted that unless there was an application on summons by the plaintiff and leave were granted to rely on further materials, the 20 May 2025 hearing would proceed on the basis of evidence previously filed by the parties and YYW Financial’s submissions due to be filed in accordance with the 7 March 2025 Order by 6 May 2025 and no other evidence or submissions.
On 5 May 2025 my Chambers informed the parties by email that the hearing of the application would be restricted to two hours.
YYW Financial filed an outline of submissions dated 6 May 2025 in accordance with the deadline in the 7 March 2025 Order and in addition, filed a short but helpful chronology.
On 12 May 2025 Tarrawarra filed a summons seeking orders:
1.That the final hearing of the application to set aside the statutory demand, listed on 20 May 2025, be adjourned until the County Court determines the plaintiff’s proposed application to set aside the default judgment against the plaintiff in proceeding CI-24-02875.
2. That in support of its application to set aside the statutory demand, the plaintiff have leave to rely on:
a.the affidavit of Nhut Quang Dai Huynh, affirmed 12 May 2025 and annexed to this summons; and
b.the outline of submissions dated 12 May 2025 and annexed to this summons.
Pursuant to the summons, at the hearing Tarrawarra sought leave to rely on a second affidavit of Mr Huynh dated 12 May 2025 and on its outline of submissions also dated 12 May 2025.
The filing of evidence and submissions by Tarrawarra on 12 May 2025 led to YYW Financial filing a further outline of submissions dated 19 May 2025 as anticipated by the 5 May 2025 Order.
YYW Financial relied at the hearing on further affidavits of Ms Lim dated 5 May 2025 and 19 May 2025.
Ms Lim’s 5 May 2025 affidavit deals with non-compliance by Tarrawarra with the 7 March 2025 Order. It provides an update concerning steps taken in the County Court proceeding since Ms Lim’s first affidavit, including informing this Court about the entry by YYW Financial of default judgment against the remaining defendants in the County Court proceeding on 28 April 2025.
In addition, the 5 May 2025 affidavit of Ms Lim provided evidence of the failure of Tarrawarra to pay its share of the costs of and to participate in the mediation of this proceeding provided for in the 7 March 2025 Order made by consent.
The 19 May 2025 affidavit of Ms Lim updated this Court about the failure of Tarrawarra to file an application in the County Court to set aside the default judgment underpinning the statutory demand despite earlier assertions by Tarrawarra of its intention to do so, including in the initial affidavit made more than four months earlier on 7 February 2025.
The leave sought by Tarrawarra in its 12 May 2025 summons to rely at the hearing on evidence and submissions filed in accordance with the relief sought in that summons was not opposed by YYW Financial. In those circumstances the hearing proceeded by reference to the initial and second affidavit of Mr Huynh and by reference to Tarrawarra’s submissions dated 12 May 2025.
At the hearing Tarrawarra sought leave to rely on a further late affidavit of Mr Huynh dated 19 May 2025, comprising 455 pages including exhibits. The application by Tarrawarra to rely on that affidavit, which was provided to the Court at approximately 6:30pm on the evening before the hearing, and I assume was provided to YYW Financial at around the same time, was opposed by YYW Financial.
The application by Tarrawarra to rely on the 19 May 2025 affidavit
Tarrawarra submitted that Mr Huynh’s affidavit of 19 May 2025 exhibited documents relating to Tarrawarra’s application filed yesterday afternoon in the County Court to set aside the default judgment to be heard in that Court on 17 July 2025 and was material to an assessment by this Court of the strength of any offsetting claim and the reliance by Tarrawarra in the alternative upon s 459J of the Act. It was submitted that if the default judgment was set aside because Tarrawarra had an arguable claim, there may be parallel proceedings to wind up the company where insolvency will be an issue.
Accepting the validity of those submissions, that does not explain why the Court should permit Tarrawarra to rely on Mr Huynh’s 19 May 2025 affidavit. It does not explain why the subject matter of the affidavit, the initiation of an application to set aside the default judgment in the County Court proceeding, could not have been attended to much earlier. The affidavit was served far too late. The events the subject matter of the affidavit took place far too late.
Mr Huynh’s 19 May 2025 affidavit was served by Tarrawarra in circumstances where it had earlier failed to comply with the 7 March 2025 Order. Having been given an opportunity to issue a summons so as to rely upon further material Tarrawarra had availed itself of that opportunity. There was no explanation for the failure by Tarrawarra to attend to the matters the subject of Mr Huynh’s 19 May 2025 affidavit prior to 12 May 2025, the extended date provided for in the 5 May 2025 Order.
It is unacceptable to the Court and to the other party, YYW Financial, to serve an affidavit which together with the exhibits comprises 455 pages at the last minute on the evening before the substantive hearing. The late service of such evidence is inconsistent with the overarching obligation in s 25 of the Civil Procedure Act 2010 (Vic) (‘CPA’) owed by Tarrawarra and by the legal practitioners acting on its behalf to act promptly and to minimise delay.
For those reasons I refused leave to Tarrawarra to rely on Mr Huynh’s 19 May 2025 affidavit.
The adjournment application
Tarrawarra applied by summons filed 12 May 2025 to adjourn the substantive hearing until after the hearing and determination of its application to set aside the default judgment in the County Court proceeding.
Although I refused leave to rely on Mr Huynh’s 19 May 2025 affidavit, for the purposes of determining both the adjournment application and the substantive application, I proceeded on the basis of advice from counsel that on 19 May 2025 an application was filed to set aside the default judgment in the County Court proceeding and that the application is listed for hearing in the County Court on 17 July 2025.
In support of the adjournment Tarrawarra relied on two substantive matters. First, on the fact there is a hearing date for its application to set aside the default judgment in the County Court. Second, it relied upon negotiations which took place between September 2024 and April 2025 referred to in the 12 May 2025 affidavit of Mr Huynh.
Concerning the first matter, Tarrawarra delayed inordinately in bringing its application to set aside the default judgment.
Judgment in default of defence was entered against Tarrawarra in the County Court proceeding on 17 December 2024. The statutory demand was served on 13 January 2025. On 7 February 2025 Tarrawarra commenced this proceeding. Tarrawarra did not at that time issue an application to set aside the default judgment. Instead, it waited for more than four months and until the afternoon before the hearing and then, it seems only after the service of the affidavit of Ms Lim dated 19 May 2025 confirmed there had been no application to set aside the judgment, was any action taken to initiate an application to set aside in the County Court.
Given the extensive delays that have occurred on the part of Tarrawarra and its failure to comply with the timetable set for the advancement of its own application in this proceeding, which pursuant to the 7 March 2025 Order was fixed for hearing on 20 May 2025, the fact that the day before the hearing an application has been filed and is to be heard in two months’ time does not provide a proper basis to adjourn the substantive hearing of Tarrawarra’s own application.
No satisfactory explanation for the delay has been provided. The evidence of Ms Lim is that negotiations in which YYW Financial was involved with a view to settling the County Court proceeding ended around 9 December 2024.
Mr Huynh has given evidence that on 15 January 2025 he received a text message from Mr Nguyen, who had assumed the conduct of negotiations on behalf of the defendants, to the effect that Tarrawarra was close to reaching a deal with YYW Financial. In early April 2025 he was told that an agreement in principle had been reached for a payout to refinance the loan. It was after default judgment was entered in the County Court on 28 April 2025 that Mr Nguyen called to say the parties had been unable to reach a settlement.
Taking the most generous view of this evidence, there is no evidence of the precise date after 28 April 2025 on which Mr Huynh was told the case had not settled. At no time did he or any representative of Tarrawarra communicate to YYW Financial that the reason it had not applied earlier to set aside the judgment was because of the settlement negotiations. There is no evidence of any communications between Tarrawarra and YYW Financial about the existence of any settlement negotiations after 9 December 2024.
Mr Huynh gave evidence in his second affidavit that Tarrawarra intended to file and serve an application to set aside the default judgment entered against it in the County Court proceeding by 16 May 2025. That did not happen.
Ms Lim, the solicitor for YYW Financial, gives evidence in her third affidavit that just prior to the affirmation of that affidavit (at approximately 8:45am on 19 May 2025), she could not see on the Court Connect portal of the County Court any record of Tarrawarra having applied to that Court to set aside the default judgment.
From at least shortly after 28 April 2025 Tarrawarra sat on its hands, including in circumstances where it must have been clear to Tarrawarra and to its director, Mr Hoa Kim Dai, that its primary ground in support of setting aside the statutory demand was its proposed set off in the County Court proceeding and that to have any chance of succeeding on that ground, it was essential that Tarrawarra move quickly to set aside the judgment. As early as the initial affidavit on 7 February 2025 Mr Huynh had started instructing a lawyer on behalf of Tarrawarra to commence preparation for an application to set aside the default judgment. Despite that evidence, Tarrawarra did nothing until the afternoon before the hearing.
This is a case of too little and far too late on the part of Tarrawarra.
The application by Tarrawarra to adjourn the hearing of the application which it filed on 7 February 2025 until after the hearing of its application to set aside the County Court judgment is refused.
Civil Procedure Act 2010 (Vic) obligations
Before moving to the substantive issues I wish to make some observations about the manner in which Tarrawarra has conducted this litigation.
In making those observations I am in no way critical of counsel for either party. I do not blame them for the delays that have occurred, particularly the delays caused by Tarrawarra.
The filing and service of late evidence, particularly voluminous evidence as occurred in this case on the evening before the hearing is unacceptable. Unless exceptional circumstances exist it is inappropriate for a judicial officer to permit reliance upon such material filed blatantly outside the time fixed by previous orders. To permit reliance on such evidence is disruptive, oppressive to the Court and to the other parties and is inconsistent with the overarching obligations in the CPA.
The late filing of evidence and submissions is not consistent with the overarching obligation upon parties and legal practitioners to use reasonable endeavours to act promptly and to minimise delay imposed by s 25 of the CPA. It is disruptive to other parties to litigation when orders for the filing and service of evidence and submissions are not complied with and yet the non-complying party serves evidence and submissions out of time upon which it seeks to rely at the hearing. In the absence of an order prohibiting reliance on those materials, the responding party is placed in a very difficult position and may have no real alternative but to respond to the materials filed out of time. That process often leads to a series of ‘rounds’ of evidence and submissions. It increases the volume of materials. It increases the costs. It does not serve to narrow the issues in dispute as parties and practitioners are obliged to do by s 24 of the CPA. Because of the resulting increased volume and the disjointed nature of the materials when ’rounds’ of evidence and submissions are filed, an undue burden is imposed on judicial officers charged with hearing and determining such applications.
Pursuant to s 8 of the CPA the Court is required to seek to give effect to the overarching purpose, stated in s 7, namely to facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute.
Orders of the Court are not guidelines. That is particularly the case in time sensitive applications such as an application to set aside a statutory demand.
In future cases involving applications to set aside statutory demands timetabling orders will include a warning in ‘Other Matters’ that without an application by summons supported by an affidavit explaining the delay no party will be permitted to rely upon evidence or submissions filed outside the time specified in those orders.
I now turn to a consideration of the substantive issues.
Background
On 28 June 2019 Tarrawarra and a company called Huu Loi Yarra Valley Pty Ltd (‘Huu Loi Pty Ltd’) became the registered proprietors as tenants in common of a property at 1–3 Tarrawarra Road Coldstream, Victoria, being the land contained at Certificate of Title Volume 10499 Folio 418 (‘Coldstream property’). The Coldstream property is currently owned by Huu Loi Pty Ltd as the holder of one of five equal undivided shares and by Tarrawarra as the holder of four of five equal undivided shares.
On 14 July 2023 YYW Financial entered into a loan agreement for a $2,759,000 loan supported by a general security and mortgage deed and guarantee with Tarrawarra and Huu Loi Pty Ltd as co-borrowers and mortgagors and with other parties as guarantors.
On 18 July 2023 the mortgage AX056823S was registered on the Coldstream property and YYW Financial advanced the loan amount to Tarrawarra and Huu Loi Pty Ltd.
On 22 May 2024, YYW Financial commenced the County Court proceeding against:
a.The Plaintiff (as trustee of Tarrawarra Yarra Valley Holding Unit Trust and in its own capacity), who was named as the first defendant.
b.HLYV (as trustee of Huu Loi Yarra Valley Unit Trust and in its own capacity), who was named as the second defendant.
c.Hoa Kim Dai, who is the director and secretary of the Plaintiff and one of the obligors (guarantor), who was named as the third defendant.
d.Loi Huu Nguyen, who is one of the obligors (guarantor), who was named as the fourth defendant.
e. Quang Le Huynh, who is one of the obligors (guarantor) and husband of Hoa Kim Dai, who was named as the fifth defendant.
On 20 June 2024, Tarrawarra filed a notice of appearance in the County Court proceeding. On 13 August 2020 the County Court ordered the filing of defences and any counterclaims by 23 August 2024. Tarrawarra did not file a defence in the County Court proceeding.
Ms Lim gives evidence in her first affidavit that between the end of October 2024 and early December 2024 the legal representatives of YYW Financial and the second and fourth defendants in that proceeding being Huu Loi Pty Ltd and Mr Loi Huu Nguyen engaged in without prejudice communications in an endeavour to resolve their differences.
Tarrawarra did not engage in those communications because on around 20 October 2024 Tarrawarra entered into a deed of agreement with other defendants pursuant to which they conducted negotiations with YYW Financial including on behalf of Tarrawarra.
The evidence of Ms Lim to which I have already referred is that by 9 December 2024 the communications that took place did not result in a resolution.
On 17 December 2024, YYW Financial obtained default judgment in the County Court proceeding against Tarrawarra and against Mr Huynh for failure to file a defence. Judgment was for the total sum of $3,855,420.47 and an order for possession of the Coldstream property. A copy of the judgment was served on Tarrawarra that day.
On 13 January 2025, YYW Financial served the statutory demand on Tarrawarra.
On 7 February 2025, Tarrawarra commenced this proceeding.
On 25 February 2025, YYW Financial obtained default judgment in the County Court proceeding against Hoa Kim Dai (the third defendant to the County Court proceeding and the sole director of Tarrawarra).
On 11 April 2025, Judge Wise of the County Court made an order striking out the defence of Huu Loi Pty Ltd, the second defendant to the County Court proceeding and Mr Nguyen, the fourth defendant.
On 19 July 2024, Huu Loi Pty Ltd and Mr Nguyen filed and served a defence in the County Court proceedings. On 26 August 2024, YYW Financial served a request for further and better particulars on Huu Loi Pty Ltd and Mr Nguyen. It was after YYW Financial filed an application to have Huu Loi Pty Ltd and Mr Nguyen’s defence struck out for failure to provide those further and better particulars, that on 28 April 2025, YYW Financial obtained default judgment against each of Huu Loi Pty Ltd and Mr Nguyen.
Statutory provisions
Section 459E(1) of the Act relevantly provides that a creditor may serve on a company a statutory demand relating to a debt or debts owed by the company, which are ‘due and payable’.
Section 459G(1) of the Act provides that a company may apply to the Court for an order setting aside a statutory demand served on the company.
Section 459H(1)(a) of the Act provides that the Court may set aside a statutory demand where it is satisfied that a company has an offsetting claim.
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, setoff or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).
Section 459J of the Act provides that the Court may set aside a statutory demand where it is satisfied that there is ‘some other reason’ why the demand should be set aside.
Tarrawarra relies on the same three grounds in support of its application to set aside the statutory demand pursuant to s 459H(1)(b) or s 459J(1)(b) of the Act. Those grounds are:
a. TYVH entered into the loan and mortgage as a result of unconscionable dealing, such that they should be set aside;
b. the interest payable by TYVH on the loan amounted to a penalty; and
c. YYW conducted recovery action in contravention of the Farm Debt Mediation Act 2011 (Vic).
Offsetting claim
Tarrawarra submits it has an offsetting claim being its right to apply to the County Court to set aside the default judgment against it, which judgment is the basis for the statutory demand.
It submits that the offsetting claim, if successful, will result in an order reversing the default judgment, the effect of which was to order:
(a) Tarrawarra to pay YYW Financial $4,179,599.99; and
(b) that YYW Financial be permitted to recover possession of the Coldstream property.
Tarrawarra submits that the statutory demand being in the amount of $3,855,420.47, the net result is that the ‘admitted total’ subtract the ‘offsetting total’ is less than zero, with the effect that the statutory demand should be set aside.
Principles
In Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd,[1] the New South Wales Court of Appeal outlined some of the principles applicable to an application to set aside a statutory demand on the basis of an offsetting claim:
[1][2013] NSWCA 344; (2013) 85 NSWLR 601 (Beazley P, Meagher and Gleeson JJA) (‘Britten‑Norman’).
[30] It is settled law that s 459H requires the court to be satisfied that there is a “serious question to be tried”: see Scanhill v Century 21 Australasia at 467, or “an issue deserving of a hearing” as to whether the company has such a claim against the creditor: see Chase Manhattan Bank Australia Ltd v Oscty Pty Ltd [1995] FCA 1208 ; 17 ACSR 128 at [42] per Lindgren J; Eumina Investments Pty Ltd v Westpac Banking Corp [1998] FCA 824 ; 84 FCR 454 per Emmett J (as his Honour then was). The claim must be made in good faith: Macleay Nominees v Belle Property East Pty Ltd. In that case, Palmer J observed, at [18], that good faith, in this context, meant that the offsetting claim was arguable on the basis of facts that were asserted “with sufficient particularity to enable the court to determine that the claim is not fanciful”.
…
Sufficiency of evidence to satisfy the Court there is an offsetting claim
…
[33] An examination of the case law reveals that there have been various attempts to formulate what evidence is required for the court to have the requisite degree of satisfaction. Before considering the case law, it is appropriate first to refer to the terms of s 459G, as well as to the requirements of the Supreme Court (Corporations) Rules 1999 (the Corporations Rules).
…
[35] An affidavit constitutes written evidence and thus, subject to certain exceptions, must comply with the rules of evidence as to form and relevance. Relevance for the purposes of an application under s 459H is governed by the terms of the section and the particular matters raised by the application: see the Evidence Act 1995, s 55.
[36] Accordingly, there must be evidence that satisfies the court that there is “a serious question to be tried”, or “an issue deserving of a hearing”, or a “plausible contention requiring investigation” of the existence of either a dispute as to the debt or an offsetting claim. It is apparent, therefore, that evidence sufficient to satisfy this test, given the time period in which the affidavit must be filed, cannot and need not conclusively prove the claim or otherwise be incontrovertible or substantially non‑contestable.
[37] Having regard to the test that applies in determining whether the evidence is sufficient for the purposes of setting aside the demand, which is discussed below, the hearsay rule will not apply with the same strictness as is required in a fully contested hearing of a principal dispute. Rather, as in the case of an interlocutory proceedings, hearsay evidence may be admissible provided evidence of the source of the hearsay is adduced: see the Evidence Act, s 75.
…
[46] In determining whether there is evidence of a genuine dispute as to the debt, or that there is an offsetting claim, except in extreme cases, the court is not concerned to engage in an enquiry as to the credit of the deponent of the affidavit filed in support of the application. However, as McLelland CJ in Eq observed in Eyota, at 787:
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.
[47] What underlay those remarks, of course, was that the court’s concern was to determine whether there was plausible evidence to establish the existence of a genuine dispute, not whether the evidence was disputed or even likely to be accepted on a final hearing of any such claim. Thus, in Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 Hayne J stated, at 295:
… in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.
[48] The same approach has been taken to the evidence required in the case of an alleged offsetting claim: see s 459H(1)(b). In Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 Thomas J stated, at 605:
There is little doubt that Div 3 … prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court’s examination are the ascertainment of whether there is a ‘genuine dispute’ and whether there is a ‘genuine claim’.
It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the court has no function. It is 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.
The essential task is relatively simple — to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it). (emphases added)
Consideration
It is necessary to give separate consideration to each of the three grounds relied on by Tarrawarra pursuant to s 459H(1)(b) of the Act.
Concerning the first ground, unconscionable dealing, the evidence filed on behalf of Tarrawarra is not sufficient to establish there is a serious question to be tried in relation to alleged unconscionable dealing. I am not satisfied that the evidence, which at best consists of general assertions and no direct evidence in support of the asserted claim, satisfies the criteria discussed in Britten-Norman.
Regarding the second ground, assuming an argument regarding whether the interest on the loan amounted to a penalty based on the construction of clause 3.1 of the loan agreement, even if that argument were to succeed in the County Court, the result would be an offsetting claim for only that portion of the statutory demand amount that relates to the charging of interest. Even if there were no interest found to be recoverable there would not be an offsetting claim for an amount that exceeds the amount of the statutory demand. In those circumstances the ‘penalty’ argument does not form a proper basis to set aside pursuant to s 459H(1)(b).
Turning to the third ground, while it may theoretically be possible for Tarrawarra to rely on an alleged contravention of the Farm Debt Mediation Act 2011 (Vic) (‘FDM Act’) to seek to set aside the default judgment, to do so Tarrawarra would need to demonstrate, amongst other things, that Tarrawarra is itself a ‘farmer’ within the meaning of the FDM Act. Mr Huynh has given no evidence that is the case.
In the initial affidavit, Mr Huynh states that ‘this is a farm mortgage’ in asserting that the FDM Act applies. Later in the affidavit, Mr Huynh asserts that the defendant admits the property is a farm in historical exchanges and exhibits correspondence to that effect. Mr Huynh also exhibits correspondence from the State Revenue Office that merely states that the Coldstream property has been accepted as land used for primary production for the purposes of a tax exemption.
The exemption status of the Coldstream property for tax purposes does not mean that the Coldstream property is covered by the FDM Act.
The evidence relied on by Tarrawarra in relation to the FDM Act falls well short of evidence needed to establish that there is a serious question to be tried.
For the reasons discussed, the evidence in support of an application to set aside relying on s 459H(1)(b) falls well short of satisfying the criteria referred to in Britten-Norman. There is no proper basis to set aside the statutory demand pursuant to s 459H(1)(b).
Some other reason
Principles
The principles relating to ‘some other reason’ to set aside were set out by the Supreme Court of the ACT in Arcade Bridge Embroidery Co-Pty Ltd v The Deputy Commissioner of Taxation:[2]
[25] As a Full Court of the Federal Court said in Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 459; 147 ALR 444 at 450–1; [1997] FCA 681, the “other reason” referred to in s 459J(1)(b) must be a reason other than a defect in the demand.
[26] Accordingly, what the appellant must put in evidence is conduct on the part of the respondent, or circumstances, which enliven the court’s discretionary power but which do not relate to a defect in the demand itself. That the conduct of the respondent is productive of substantial injustice may be a powerful ground for exercising the discretion: Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 80 FCR 295 at 300. However, it is not a necessary element for granting relief under s 459J(1)(b).
[27] What is contemplated by s 459J(1)(b) is a discretion of broad compass which extends to conduct that may be described as unconscionable, an abuse of process, or which gives rise to substantial injustice: Hoare Bros Pty Ltd v Cmr of Taxation (1996) 62 FCR 302 at 317–18; 135 ALR 677 at 691–2.
[2][2005] ACTCA 3; (2005) 157 ACTR 22 [25]–[27].
To those observations should be added to the further remarks by Hetyey AsJ in Re MHC Pathology Pty Ltd[3] that:
Whilst the discretion conferred by the provision is broad, a judge should not set aside a statutory demand under s 459J(1)(b) simply because she or he subjectively considers it fair to do so. The Court’s power under the sub‑section exists to maintain the integrity of the statutory demand procedure in Part 5.4 of the Corporations Act and to counter its subversion.
[3][2020] VSC 789 [75].
Consideration
Tarrawarra relies on the fact it has now made an application to set aside the statutory demand and upon the same three matters in support of setting aside pursuant to s 459J(1)(b) that it relies upon pursuant to s 459H(1)(b).
The first and third matters, the alleged engaging in unconscionable conduct by YYW Financial and the allegation of breach of the FDM Act are matters which, if they were otherwise to succeed in giving rise to an arguable case for setting aside the statutory demand pursuant s 459J(1)(b) fail to do so because of the lack of evidence to support either ground.
The second argument raised on behalf of Tarrawarra, the allegation that the interest provision in the loan agreement constitutes a penalty, was advanced by reference to the loan agreement rather than by reference to evidence from a witness. The submission was developed orally at the hearing but was not the subject of detailed written or oral submissions by Tarrawarra that included reference to earlier decided cases.
Clause 3.1 of the loan agreement to which attention was directed is in the following terms.
Interest
Simple interest will accrue on the Outstanding Principal during the Interest Term at the Higher Rate. Notwithstanding the aforesaid, for so long as the Borrower strictly complies with all of its obligations under this agreement, in particular, repays all monies payable under this agreement at the time they fall due, then the Lower Rate shall apply throughout the Interest Term and the interest on the Lower Rate will accrue monthly and be calculated on the basis of a 365‑day year. For the avoidance of doubt and notwithstanding any provisions to the contrary in this agreement, in the event that the Borrower fails to comply with clauses 3.2 and/or 4.1, then the Higher Rate will apply to all Outstanding Principal from the Interest Commencement Date until the date of which both the Outstanding Principal and Outstanding Interest are repaid in full and such interest on the Higher Rate is to be calculated and compounded monthly instead. In all other circumstances which the Higher Rate applies, the Higher Rate shall apply from the date of breach (regardless of whether a notice of default has been served), until the date of which the breach has been remedied to the reasonable satisfaction of the Lender and the shortfall between the Higher Rate and Lower Rate shall fall due on the Repayment Date.
The higher rate specified in the Schedule is 24%, the lower rate is 9.5%. The discrepancy between the two interest rates was the foundation of the submission that the clause imposes a penalty.
The argument having been raised on behalf of Tarrawarra, YYW Financial submitted that clauses specifying a higher and lower rate of interest are not uncommon in commercial transactions. It was submitted that to establish a penalty in circumstances such as the present based on the level of the higher rate of interest, expert evidence would be needed. It is not just a matter of impression. Reference was made by YYW Financial to the decision of the WA Supreme Court, Quantum Asset Management Pty Ltd v Love Properties (WA) Pty Ltd,[4] where a higher rate of 53% was found not to constitute a penalty.
[4][2017] WASC 167 [2], [32]–[33], [63]–[65] (‘Quantum Asset Management’).
It is not my role on this application to determine whether clause 3.1 constitutes a penalty. That is particularly the case when whether or not a particular clause constitutes a penalty requires a close analysis of the clause, a consideration of the contract as a whole and the application of authorities including the decision of the High Court in Paciocco v Australia and New Zealand Banking Group Ltd.[5] In this case, the construction argument raised by Tarrawarra was unsupported by expert evidence that evaluates the rate specified against the level of risk assumed by the tender having regard to the circumstances as was the case in Quantum Asset Management. It was an argument advanced without reference to authority. It is not appropriate to try and evaluate or determine the merits of such an argument ‘on the run’. If such an argument was regarded by Tarrawarra as an argument of substance, the onus was on Tarrawarra to articulate that argument clearly and by reference to authority in the written submissions filed by it on 12 May 2025.
[5][2016] HCA 28, (2016) 258 CLR 525.
Leaving aside the absence of references to authority and the absence of expert evidence, it remains the case that any defence based on clause 3.1 constituting a penalty cannot go to the heart of the debt that underpins the default judgment. Just as the penalty argument based on clause 3.1 fails to satisfy s 459H(1)(b) I am not persuaded the argument satisfies the criteria in s 459J(1)(a).
While s 459J(1)(b) of the Act contains a separate source of power to set aside a statutory demand than s 459H(1)(b), it seems to me that the proper exercise of that power is appropriately confined to cases where the matters relied on, if not acted upon to set aside the demand, would give rise to substantial injustice, would result in an outcome that is unconscionable or would amount to an abuse of process. I do not consider any injustice, whether substantial or otherwise, is occasioned to Tarrawarra in refusing to set aside the statutory demand pursuant to s 459J(1)(b) when regard is had to all the circumstances including the inordinate delay by Tarrawarra in bringing this application and its failure to articulate a clear and cogent argument as to why clause 3.1 constitutes a penalty by reference to authority.
For those reasons, the application by Tarrawarra to set aside the statutory demand is refused.
Costs
Following argument in relation to costs, I have determined that Tarrawarra is to pay YYW Financial’s costs of and incidental to this application on a solicitor-client basis. The key factors contributing to that decision are:
(a) the inordinate delay and repeated failure to comply with orders of the Court on the part of Tarrawarra discussed in this judgment; and
(b) on 6 February 2025, prior to the commencement of this proceeding, YYW Financial foreshadowed making an application for indemnity costs.
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