Re Bendigo Central Pharmacy Pty Ltd [2017] VSC 419 (21 July 2017): setting aside statutory demand, Graywinter affidavit, genuine dispute

July 26, 2017 |

The Supreme Court, per Randall AsJ, considered an application to set aside a statutory demand in Re Bendigo Central Pharmacy Pty Ltd [2017] VSC 419. The key issue was whether issues ultimately relied upon were raised in the Plaintiff’s initial affidavit, filed within 21 days of the statutory demand being served and the scope and operation of Graywinter affidavits.


The debt relied upon in the statutory demand dated 28 October 2016 i, at [1], as follows:

Money owed as at 28 October 2016 to the creditor by the company pursuant to a Guarantee and Indemnity granted by the company in favour of the creditor dated 17 May 2016 of $527,759.96.

The plaintiff argued that there was a genuine dispute [2].

The affidavit filed in support of the application pursuant to s 459G of the Corporations Act 2001 (Cth)  was sworn by Jeremy David Taylor, a director of Central Pharmacies Pty Ltd.

In the affidavit Taylor:

  • set out a loan agreement between Central Pharmacies Pty Ltd with Xian Heng Qu dated 26 February 2016 (‘the Qu agreement’) and that pursuant to it the sum of $500,000 was advanced and deposited on 4 March 2016.
  • stated that  The defendant produced a further Loan Agreement which was signed by Central Pharmacies Pty Ltd with me the deponent and the plaintiff as guarantor and the defendant as lender and dated 17 May 2016. No monies were paid under this agreement [4]
  • stated that  the sum of $250,000 had been repaid in respect to the Qu agreement and the sum of $128,260 was retained by Central Pharmacies Pty Ltd for services provided [6].

The affidavit in opposition:

  • set out all the relevant documentation
  • explained the assignment of the original loan agreement dated 26 February 2016
  • stated there had been in repayment so the defendant paid out Mr Qu and was substituted as the lender [7].
  • the February Agreement was for a term of ‘upon receipt of business valuation results or within 45 days whichever is earlier.’ [8]

There was a supplementary Agreement between Mr Qu and Central Pharmacies Pty Ltd which substituted the defendant as the lender and, save that a new loan agreement would be entered into at a later date, that the terms and conditions of the February agreement applied. The term was not extended [9] A new loan agreement, dated 17 May 2016, was by deed between the defendant and Central Pharmacies Pty Ltd as borrower; incorporating guarantees from Jeremy Taylor, Ross Taylor and the plaintiff.The repayment date was 60 days from 17 May 2016 as agreed by the lender and the borrower [10].

The guarantee and indemnity provided by Bendigo Central Pharmacy Pty Ltd dated 17 May 2016 stated

2.1 Obligations Guaranteed

In consideration of any financial accommodation that the Beneficiary may make available to or for the benefit of the Company the Guarantor guarantees to the Beneficiary the due and punctual payment by the Debtor Company to the Beneficiary of the Guarantee Money and performance by the Debtor Company of the Guaranteed Obligations. [12]

On 17 June 2016, Central Pharmacies Pty Ltd made an interest payment to the defendant in the sum of $6,250 [13]. On 15 July 2016, Ross Taylor for Central Pharmacies Pty Ltd requested an extension of the repayment date of the loan by a further 90 days from 17 July 2016 [14].  The response was a demand dated 15 August 2016 with for repayment pursuant to the Guarantee [15].

The court stated that notwithstanding an argument that no funds had been advanced pursuant to the New Loan Agreement, it was clear that Central Pharmacies knew exactly what the position was [16].



Notwithstanding the plaintiff claiming that the demand should be set aside because no monies were advanced under the loan agreement to which the plaintiff became guarantor [5] the court found that the documents produced demonstrated that:

(a) the sum of $500,000 was advanced to Central Pharmacies Pty Ltd by Xiang Heng Qu pursuant to the February agreement;

(b) Central Pharmacies Pty Ltd failed to repay the advance within the 45 day term set out in the agreement;

(c) the defendant paid out Mr Qu and took an assignment of the loan; and

(d) on 17 May 2016, Central Pharmacies entered into the ‘New Loan Agreement’. The parties to the New Loan Agreement were Kwan (as lender) and Central Pharmacies Pty Ltd (as borrower), Jeremy David Taylor (Guarantor A), Ross David Taylor (Guarantor B) and the plaintiff (as Guarantor C) [26]

(e)The New Loan Agreement governed the previous $500,000 as well as any further advance [30]

In the 21 day affidavit, Taylor:

  • set out the New Loan Agreement which had been executed by Central Pharmacies Pty Ltd and by the plaintiff as guarantor.
  • He maintained that no moneys were paid under this Agreement [35]
  • referred to the Supplementary Agreement stating that it purported to assign Loan Agreement to the defendant but that he had not seen this agreement before, did not agree to it and I had not executed such agreement [36].

The New Loan Agreement and the Guarantee provided by the plaintiff were executed by its director, Tanya McKay – not by David Taylor. In a responsive affidavit sworn by the defendant on 2 December 2016, the defendant deposed that the [New Loan Agreement] and the Guarantee by the plaintiff were subsequently provided to him by Ross Taylor after the meeting of 17 May 2016 [37]. The plaintiff’s counsel seized upon this and sought to argue that given the timing of execution of the Guarantee, there was no consideration for the same.

The court noted that issue then became provided the plaintiff is entitled to raise the issue, the timing of the execution of the Guarantee raised an issue about whether or not the consideration for the giving of the Guarantee is ‘past consideration’. If it is, then the Guarantee is not supportable [38].

The Court’s requested that the parties file supplementary submissions to address the issue of whether or not he could characterise the question of ‘past consideration’ as falling within the category of genuine dispute notwithstanding that the point was not raised in the 21 day affidavit [38].

The plaintiff’s argument was that:

  • it was unequivocal on the materials that a loan agreement was signed by the parties on 17 May 2016, the loan first in time, and the guarantee subsequently [39].
  • the 21 day affidavit squarely raised the issue of consideration on the guarantee by virtue of the express allegation by the Plaintiff that no moneys were advanced pursuant to the loan agreement the basis of the Statutory Demand and alleged that the loan agreement upon which the moneys were advanced was the loan agreement dated 26 February 2016 [41].
  • whilst it is accepted that no new ground may be raised by the Plaintiff, not already raised in the affidavit filed and served within the 21 days of the Statutory Demand, Graywinter does not preclude a scenario where grounds are raised and evidence is later deposed to . The test was satisfied by the Affidavit, as it clearly deposed to a disputed debt, was not a mere assertion, and supported the allegation of a deposed dispute by reference to an earlier loan agreement (with no guarantee) to which the moneys were actually advanced [42].
  • the Defendant elected to file materials which clarified or distilled the evidence as to what occurred on 17 May 2016 . In fact, if the Court here determines that the issue of timing of the execution of document(s) on 17 May 2016 is a ‘new’ ground, then it was not the plaintiff which raised the ground, but the defendant who did so [42].

The court did not accept that the issue about past consideration was raised in the 21 day affidavit[41].

The court undertook an analysis of the Graywater principle noting:

  • It is not necessary for the applicant to expressly articulate the grounds in the affidavit, or to do so by necessary inference, as distinct from available inference. All that can be implied from the requirement of s 459G, that there be an affidavit filed and served within 21 days supporting the application, is that the grounds to challenge must be raised in that affidavit [43].
  • It is useful to set out his Honour’s analysis as follows:
  • the relevant concept of ‘raising’ or ‘identifying’ a particular ground involves some verbal delineation of that ground in the s.459G(3)(a) affidavit.
  • the application and affidavit filed and served within the 21 day period must fairly alert the claimant to the nature of the case the company will seek to make in resisting the statutory demand. The content of the application and affidavit must convey, even if it be by necessary inference, a clear delineation of the area of controversy so that it is identifiable with one or more of the grounds made available by ss.459H and 459J.
  • the Graywinter principle is based upon an implication from the requirement in s 459G that an application to set aside a statutory demand be accompanied by an “affidavit supporting the application” which must be filed and served within 21 days after service of the demand. The implication is no more than that the grounds of the application to set aside the demand must be raised by the supporting affidavit.
  • an affidavit under s 459G may read like a pleading . Thus, a supporting affidavit may raise a ground of dispute in a form which is inadmissible to prove the facts giving rise to the dispute, and those facts may be proved in a later affidavit filed and served outside the 21-day period. However, there is no requirement in s 459G that the supporting affidavit read like a pleading.
  • the grounds for applying to set aside a statutory demand must be raised in the supporting affidavit, so that a ground which is not so raised cannot be relied upon. Whether it is raised expressly, by necessary inference, or by a reasonably available inference, provided it is raised the requirements of s 459G are satisfied.

The court also noted that the scope of what may be comprehended by ‘some other reason’ is impliedly narrowed by the terms of the three other bases. The broad comprehensive scope of the expression ‘some other reason’ cannot be narrowed by reading it as referring only to ‘other reasons’.  The discretion ‘extends to conduct that may be described as unconscionable, an abuse of process, or which gives rise to substantial injustice’ [51].  The operation of the subsection was not confined to cases coming within established categories such as unconscionability and abuse of process but that the section applied wherever there was a need to counter some attempted subversion of the statutory scheme [52].

The Court determined that:

  • the issue of consideration has not been raised in the 21 day affidavit.
  • the ground was not articulated in the 21 day affidavit by necessary influence.
  • the phrase ‘available inference’ is not intended to be a term of art, rather a phrase of literal meaning [55].
  • merely raising an argument about the timing of execution which might, after investigation, lead to the conclusion that there has been past consideration and that the guarantee may not be enforceable, falls into the category of unconscionable or an abuse of process.
  • although the order in which documents were executed could be questioned by what is set out in the defendant’s material there were no paragraphs of the affidavits filed on behalf of the defendant nor submissions made on behalf of the defendant to concede that the guarantee was not enforceable [56].
  • s 459J is not to be used as a ‘back door’ to ventilating a genuine dispute as to the existence or amount of the debt. Accordingly, I decline to exercise any power pursuant to s 459J(2) [58].


The Plaintiff claimed the sum of $250,000 has been repaid in respect of the Qu agreement (the original loan agreement) and the sum of $128,000 was retained by Central Pharmacies Pty Ltd for services provided [59]. The issue is whether there is an offsetting claim.

The court set out the test, at [60], which is distilled as follows:

  •  on an application to set aside a statutory demand, the applicant is required only to establish a genuine dispute or offsetting claim.
  • 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.
  • the court is required to determine whether the dispute or offsetting claim is ‘genuine’. 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.
  • 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.

The court found that the statements by Mr Taylor regarding the off-setting claims, are nothing more than bluster [61].  While he raised the question of an off-setting claim or off-setting claims in the 21 day affidavit, neither he as a director of Central Pharmacies Pty Ltd, nor did the plaintiff itself, provide:

  • any further material which would verify or go to verifying the amount claimed to have been paid, nor
  • any explanation as to the sums said to have been retained.

The court also found that the bluster is ‘inherently improbable’ given the request for the extension for time to repay in the 15 July 2016 email transmission. The court found there was no offsetting claim [62].


This case provides a useful and comprehensive consideration of the Graywinter principle.  It also highlights the fundamental necessity that all issues which are to be pressed at hearing be included in the original affidavit filed within 21 days of the statutory demand being served.  The Graywinter affidavit allows for a pleadings style affidavit which can set out all claims.  As this case shows, it is often complicated to argue by inference or supposition that matters relied upon were in the original affidavit unless they are clearly set out, even in a pleadings format.




One Response to “Re Bendigo Central Pharmacy Pty Ltd [2017] VSC 419 (21 July 2017): setting aside statutory demand, Graywinter affidavit, genuine dispute”

  1. Re Bendigo Central Pharmacy Pty Ltd [2017] VSC 419 (21 July 2017): setting aside statutory demand, Graywinter affidavit, genuine dispute | Australian Law Blogs

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