Aromas Cafe Toowoomba Pty Ltd v Aromas Tea & Coffee Merchants Pty Ltd, in the matter of Aromas Cafe Toowoomba Pty Ltd

Federal Court of Australia|2019-10-16|Before: Mr J, Reeves J

The statutory demand issued by Aromas Tea & Coffee Merchants Pty Ltd and dated 13 December 2018 is set aside.
With the exception of the costs order made on 14 March 2019, the defendant is to pay the plaintiff's costs of and incidental to the application filed on 31 December 2018 to be taxed failing agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE THREE QUESTIONS POSED 1 According to Aromas Cafe Toowoomba Pty. Ltd. (Aromas Cafe), three questions are posed by this application under s 459G of the Corporations Act 2001 (Cth) (the Act) to set aside the statutory demand served on it by Aromas Tea & Coffee Merchants Pty Ltd (Aromas Merchants). They are: (a) Is there a genuine dispute about the existence, or the amount, of the debt in the terms of s 459H(1)(a) of the Act? (b) If not, does Aromas Cafe have an offsetting debt in the terms of s 459H(1)(b) of the Act? (c) If not, is there a relevant defect in the statutory demand, or some other reason why the statutory demand should be set aside under s 459J of the Act? 2 For the reasons that follow, the second question, together with the first part of the third question, must be answered in the negative. However, I consider that the first question and the second part of the third question should be answered in the affirmative. That being so, Aromas Cafe's application to set aside Aromas Merchants' statutory demand will succeed to that extent and orders will be made accordingly.

A DISPUTE OVER THE SALE OF A cafE BUSINESS 3 Ms Thi Thanh Diem Nguyen, also known as Anna, is the director of Aromas Cafe. 4 Messrs Stephen Skarparis, Andrew Skarparis and John Skarparis are directors and shareholders of Aromas Merchants and an associated entity, Aromas Toowoomba Leasing Pty Ltd (Aromas Leasing). Both of these Aromas entities occupy the same business premises at Unit 1, 60 Alexandra Place, Murarrie, Brisbane. Aromas Merchants is engaged in the business of supplying coffee, tea and other associated products to retail and wholesale clients under the Aromas brand. Aromas Leasing's role is to lease cafe premises in suitable locations and sub-leasing them to sub-tenants that operate cafes under the Aromas brand. In that capacity, Aromas Leasing is the owner of the cafe business which is at the centre of this application. It is situated in the city of Toowoomba in South East Queensland. 5 On 28 October 2016, following negotiations which included Ms Nguyen and her brother-in-law, Mr Chung Tran, also known as Jack, on the one part, and Messrs Andrew Skarparis, Stephen Skarparis and John Skarparis, on the other, Aromas Leasing entered into a contract with Ms Nguyen, or her nominees, to sell the Toowoomba cafe business to her for the sum of $500,000.00 (the First Contract). Completion on that First Contract was subject to a number of conditions, including Ms Nguyen obtaining finance for the purchase and, subject to the lessor granting its consent, the assignment to her, or her nominee, of the lease over the cafe premises. 6 Clauses 9 and 16 of the First Contract provided: 9.1 Until the date of Completion, the Seller [Aromas Leasing] will: (a) remain in possession of the Business and the premises and will manage the Business as a going concern; (b) ensure that the Business is carried on in its usual way (having regard to the nature of the Business and past practice), including, without limitation, the maintenance of the trading hours of the Business that apply as at the Contract Date. … 16.1 Subject to clause 16.9 the Seller [Aromas Leasing] agrees to pay, satisfy and discharge in the proper time all debts and liabilities of the Business incurred before Completion and agrees to indemnify, and keep indemnified, the Buyer with respect to all claims arising from those debts and liabilities. … 7 On or about 9 January 2017, in anticipation of the completion of the First Contract, Ms Nguyen began to assist Mr Andrew Hely, the existing manager of the cafe business, with the management of the cafe business. As well, she, together with Mr Tran and Ms Jodie Nguyen, her sister, began to work in the cafe. 8 From late February 2017 until early August 2018, coffee, tea and other products were ordered from Aromas Merchants for use in the cafe business. In her supporting affidavit to this application, Ms Nguyen claimed that "[a]t no time did [Aromas Cafe] ever sign an agreement with Aromas [Merchants] which permitted for the supply of goods for the business from Aromas [Merchants] to [Aromas Cafe]". In a subsequent affidavit, Ms Nguyen also claimed that she had never been asked to sign an account application form to establish an account with Aromas Merchants and, if she had been, she would not have signed such a form until after the completion of the contract to purchase the cafe business. 9 Nonetheless, it is not in dispute that Aromas Merchants supplied products for use in the cafe business and rendered invoices to "AROMAS CAFE TOOWOOMBA" for the price of the goods so supplied and the associated freight costs. Curiously, most of the invoices had the words "(don't use)" inserted after the words "AROMAS CAFE TOOWOOMBA". Furthermore, the following notice appeared at the end of each invoice below the words "DUE for Payment: $": All goods and products supplied remain the sole property of Aromas ABN: 98 832 273 181 until full payment of this invoice has been received. Our standard terms and conditions apply to this invoice. All prices are subject to change without prior notice. 10 During 2017, difficulties arose with respect to the settlement of the First Contract. Ultimately that settlement did not occur. Nonetheless, Ms Nguyen continued to assist with the management of the cafe business and she, Mr Tran and Ms Jodie Nguyen continued to work in the cafe. As well, the ordering of coffee, tea and other products continued and Aromas Merchants continued to supply those orders and render invoices in the manner described above. 11 On or about 24 October 2017, following negotiations between the parties to address the difficulties with settlement of the First Contract, Aromas Leasing entered into a further contract for the sale of the cafe business (the Second Contract). Under the Second Contract, Aromas Cafe replaced Ms Nguyen as the purchaser and the purchase price was reduced to $350,000. That contract also provided that the lease over the cafe premises would be assigned to Aromas Cafe and it also contained clauses 9 and 16 in identical terms to the First Contract (see at [6] above). 12 The settlement of the Second Contract encountered similar difficulties to the First Contract. They included problems in obtaining the lessor's consent to the assignment of the lease over the cafe premises and difficulties in obtaining finance to complete the purchase. A meeting was held on 13 March 2018 to discuss those difficulties. There is a dispute between the parties about what, if anything, was agreed during that meeting. In an affidavit he made for the purposes of this application, Mr Andrew Skarparis annexed what he claimed to be a true and correct copy of the minutes of that meeting as follows: Present: Steve [Skarparis], John [Skarparis], Andrew Skarparis, Michael Sountas, Suzanne Burgess-Dean Jack Tran, Jodie Nguyen, Anna Nguyen Jack advised that the bank has not approved finance. Jodie produced an audio recording of an apparent conversation with Geoff from Bank of Qld. Geoff advised that the bank was not concerned about their finances or ability to service the debt. But the bank was declining finance as they could not produce trading results for past 3 years. Jack put forward a new proposal for the $350,000 contract: $10,000 deposit to be paid on preparation of unconditional contract (this week) $100,000 payable 23 April $240,000 payable 23 June

Current stock balance of more than $100K - to be paid on 23 July All stock from today will be paid for via EFT. Jack indicated that Grand Central was to go ahead, although was still in the planning stages. He is also keen to move on Vietnam projects - brief discussion about this, agreements will need to be prepared. (Emphasis added) 13 Based on these minutes, Mr Andrew Skarparis claimed in his affidavit that Aromas Cafe had agreed to pay Aromas Merchants $100,000 for the "stock balance" by 23 July 2018. He also claimed that, subsequent to that meeting, Aromas Leasing's lawyers sent a set of amended special conditions to the Second Contract to Aromas Cafe's lawyers with a request that their client execute and return the same. While he acknowledged that Aromas Cafe never returned an executed copy of those amended special conditions, Mr Andrew Skarparis pointed to the fact that, on 4 April 2018, Aromas Cafe paid the $10,000 non-refundable deposit to Aromas Leasing's lawyers' trust account as required by clause 5 of those amended special conditions. 14 For its part, Aromas Cafe claimed that no agreement was made at that meeting and, in particular, that the Second Contract was not varied as a result of that meeting. Furthermore, it claimed that "the fact that discussions about stock took place simultaneously with discussions about the First Contract and Second Contract further evidences that the issue of the [d]isputed [i]nvoices is closely tied to the issue [of] the sale of the business". 15 On 2 August 2018, Aromas Leasing received correspondence from the lawyers for the lessor of the cafe premises claiming that the conditions for their client's consent to the assignment of the lease over those premises had not been satisfied. As a result, they notified Aromas Leasing that the lessor's conditional consent to the assignment of the lease had been withdrawn. 16 On or about 18 August 2018, the locks on the cafe premises were changed thereby preventing Ms Nguyen, Mr Tran and Ms Jodie Nguyen from continuing to access, and work in, the cafe. 17 On 4 September 2018, Aromas Leasing formally terminated the Second Contract. 18 On 18 September 2018, the lawyers for Aromas Leasing and Aromas Merchants sent a letter to Aromas Cafe's lawyers demanding payment of the sums of $122,956.47 and $31,404.69. That the lawyers concerned were acting for both of the Aromas entities was apparent from the first paragraph of that letter, as follows: We refer to the abovementioned matter and note that, as you are already aware, we represent Aromas Tea and Coffee Merchants Pty Ltd ("Aromas") and Aromas Leasing Toowoomba Pty Ltd ("Aromas Leasing") (collectively "our clients"). (Bold in original) 19 After setting out a summary of the history similar to that set out above, the letter went on to explain how the sums mentioned above were calculated. It stated: 10. From 9 January 2017 until 16 August 2018, your clients had complete control over the business and the premises which the business operated from. As such, the parties agreed that your clients were liable to pay (and would indemnify our clients in relation to) all costs associated with the business and the business premises including (but not limited to):- a. all costs and charges under the lease for the business premises (notwithstanding the fact that Aromas Leasing would continue to be the lessee until the lease was assigned); b. all costs and expenses for purchasing the stock and inventory required by the business (a substantial amount of which was purchased from Aromas [Merchants]); and c. paying the wages of the employees of the business (which we are instructed was done under the cover of [Ms Nguyen's] A.B.N.). 11. The costs of the lease for the business premises were diligently paid to the lessor by Aromas Leasing and each payment was on-charged to your clients. Notwithstanding, your clients have failed to keep up to date with those payments. 12. The costs of the stock for the business which was purchased from Aromas [Merchants] was consistently charged to your clients. Notwithstanding, your clients have failed to keep up to date with those payments. 13. Our clients have recently reconciled their accounts and we are instructed that your clients are liable to pay the following amounts:- a. the sum of $122,956.47 in relation to stock and inventory purchased from Aromas [Merchants]; and b. the sum of $31,404.69 in relation to the costs of the lease for the business premises. (Emphasis in original) 20 The letter concluded by stating, under the heading "Demand": Naturally, our clients are prepared to commence formal proceedings so that they may recover the substantial amounts which they are owed. Notwithstanding, our clients are aware of the commercial realities of litigation and we have advised our clients that they should allow your clients one final opportunity to settle this matter. In that context, our clients hereby demand your clients' payment of the outstanding amounts. 21 On 15 December 2018, Ms Nguyen received a letter from Aromas Merchants' lawyers enclosing the statutory demand the subject of this application and an accompanying affidavit sworn by Mr Andrew Skarparis. In the body of that letter, the lawyers stated: We are instructed that you owe an amount of $122,956.47 (including GST) to [Aromas Merchants]. That amount is comprised of unpaid invoices relating to stock which [Aromas Merchants] provided to you between February 2017 and August 2018 which remain unpaid. (Emphasis in original) 22 The enclosed statutory demand relevantly stated: 1. [Aromas Cafe] owes [Aromas Merchants] of Unit 1, 60 Alexandra Place, Murarrie, Qld, 4172 the amount of $122,956.47, being the amount of the debt described in the Schedule. 2. Attached is the affidavit of Andrew Skarparis, dated 13th December 2018 verifying that the amount is due and payable by [Aromas Cafe]. 3. [Aromas Merchants] requires [Aromas Cafe], within 21 days after service on [Aromas Cafe] of this demand: (a) to pay to [Aromas Merchants] the amount of the debt; or (b) to secure or compound for the amount of the debt, to [Aromas Merchants'] reasonable satisfaction. 4. [Aromas Merchants] may rely on a failure to comply with this demand within the period for compliance set out in subsection 459F (2) as grounds for an application to a court having jurisdiction under the Corporations Act 2001, for the winding up of [Aromas Cafe]. … 6. The address of [Aromas Merchants] for service of copies of any application and affidavit is ... (Emphasis in original) 23 It can be seen that the Statutory Demand stated that Aromas Cafe owed "the amount of $122,956.47, being the amount of the debt described in the Schedule" (emphasis removed). The schedule in question listed 109 invoices rendered between 27 February 2017 and 10 August 2018 totalling $122,956.47 as follows: SCHEDULE Date Invoice No. Amount payable Amount unpaid Amount outstanding 27.02.2017 242000 $1,863.29 $1,863.29 $1,863.29 06.03.2017 242208 $1,927.52 $1,927.52 $1,927.52 13.03.2017 242451 $2,056.16 $2,056.16 $2,056.16 14.03.2017 242511 $767.71 $767.71 $767.71 20.03.2017 242664 $1,746.47 $1,746.47 $1,746.47 23.03.2017 242821 $70.91 $70.91 $70.91 27.03.2017 242871 $21.50 $21.50 $21.50 28.03.2017 242927 $108.71 $108.71 $108.71 29.03.2017 242974 $275.99 $275.99 $275.99 30.03.2017 243004 $1,255.30 $1,255.30 $1,255.30 04.04.2017 243150 $4,451.53 $4,451.53 $4,451.53 05.04.2017 243170 $400.00 $400.00 $400.00 13.04.2017 243438 $108.50 $108.50 $108.50 19.04.2017 243549 $579.56 $579.56 $579.56 14.04.2017 243610 $130.44 $130.44 $130.44 20.04.2017 243615 $291.00 $291.00 $291.00 24.04.2017 243696 $2,121.48 $2,121.48 $2,121.48 02.05.2017 243965 $1,638.52 $1,638.52 $1,638.52 08.05.2017 244138 $1,393.95 $1,393.95 $1,393.95 08.05.2017 244158 $215.60 $215.60 $215.60 15.05.2017 244388 $935.80 $935.80 $935.80 16.05.2017 244454 $2,339.32 $2,339.32 $2,339.32 19.05.2017 244587 $103.02 $103.02 $103.02 22.05.2017 244656 $1,449.90 $1,449.90 $1,449.90 24.05.2017 244727 $150.50 $150.50 $150.50 25.05.2017 244788 $308.41 $308.41 $308.41 29.05.2017 244846 $1,533.37 $1,533.37 $1,533.37 05.06.2017 245093 $1,512.49 $1,512.49 $1,512.49 09.06.2017 245276 $779.33 $779.33 $779.33 12.06.2017 245324 $1,550.79 $1,550.79 $1,550.79 19.06.2017 245509 $2,313.92 $2,313.92 $2,313.92 21.06.2017 245627 $130.61 $130.61 $130.61 26.06.2017 245732 $1,742.74 $1,742.74 $1,742.74 03.07.2017 245978 $1,361.99 $1,361.99 $1,361.99 10.07.2017 246184 $1,976.27 $1,976.27 $1,976.27 17.07.2017 246431 $1,322.44 $1,322.44 $1,322.44 24.07.2017 246654 $1,621.17 $1,621.17 $1,621.17 25.07.2017 246691 $358.80 $358.80 $358.80 31.07.2017 246899 $1,853.53 $1,853.53 $1,853.53 01.08.2017 246987 $213.71 $213.71 $213.71 02.08.2017 247027 $215.00 $215.00 $215.00 04.08.2017 247100 $339.55 $339.55 $339.55 07.08.2017 247132 $1,533.96 $1,533.96 $1,533.96 14.08.2017 247366 $1,733.02 $1,733.02 $1,733.02 21.08.2017 247553 $1,582.04 $1,582.04 $1,582.04 22.08.2017 247634 $155.53 $155.53 $155.53 28.08.2017 247784 $1,211.93 $1,211.93 $1,211.93 28.08.2017 247794 $250.20 $250.20 $250.20 04.09.2017 248057 $2,108.32 $2,108.32 $2,108.32 08.09.2017 248227 $519.55 $519.55 $519.55 11.09.2017 248264 $1,979.12 $1,979.12 $1,979.12 18.09.2017 248504 $1,599.19 $1,599.19 $1,599.19 19.09.2017 248542 $102.39 $102.39 $102.39 25.09.2017 248675 $1,617.90 $1,617.90 $1,617.90 29.09.2017 248882 $1,567.32 $1,567.32 $1,567.32 09.10.2017 249105 $1,593.85 $1,593.85 $1,593.85 16.10.2017 249321 $1,862.68 $1,862.68 $1,862.68 23.10.2017 250551 $1,413.03 $1,413.03 $1,413.03 26.10.2017 250701 $220.00 $220.00 $220.00 20.10.2017 250716 $228.18 $228.18 $228.18 30.10.2017 250776 $1,584.22 $1,584.22 $1,584.22 31.10.2017 10659777 $500.00 $500.00 $500.00 01.11.2017 251919 $288.12 $288.12 $288.12 06.11.2017 251998 $1,705.88 $1,705.88 $1,705.88 09.11.2017 252140 $779.33 $779.33 $779.33 13.11.2017 252209 $1,498.76 $1,498.76 $1,498.76 17.11.2017 252388 $102.21 $102.21 $102.21 20.11.2017 252424 $1,678.77 $1,678.77 $1,678.77 27.11.2017 252650 $1,714.10 $1,714.10 $1,714.10 04.12.2017 252862 $1,316.26 $1,316.26 $1,316.26 05.12.2017 252929 $228.18 $228.18 $228.18 11.12.2017 253083 $1,578.15 $1,578.15 $1,578.15 18.12.2017 253293 $1,158.40 $1,158.40 $1,158.40 19.12.2017 253349 $102.55 $102.55 $102.55 27.12.2017 253491 $1,533.29 $1,533.29 $1,533.29 02.01.2018 253579 $1,338.98 $1,338.98 $1,338.98 08.01.2018 253723 $1,115.65 $1,115.65 $1,115.65 16.01.2018 253968 $2,210.99 $2,210.99 $2,210.99 18.01.2018 254044 $89.53 $89.53 $89.53 22.01.2018 254125 $1,435.74 $1,435.74 $1,435.74 25.01.2018 254268 $228.18 $228.18 $228.18 30.01.2018 254370 $1,267.23 $1,267.23 $1,267.23 05.02.2018 254494 $1,777.49 $1,777.49 $1,777.49 12.02.2018 254733 $1,652.40 $1,652.40 $1,652.40 12.02.2018 254737 $779.33 $779.33 $779.33 19.02.2018 254942 $1,334.46 $1,334.46 $1,334.46 26.02.2018 255132 $1,577.02 $1,577.02 $1,577.02 05.03.2018 255336 $1,066.12 $1,066.12 $1,066.12 12.03.2018 255536 $2,069.66 $2,069.66 $2,069.66 14.05.2018 260262 $1,427.08 $1,427.08 $1,427.08 21.05.2018 260498 $1,860.62 $1,860.62 $1,860.62 28.05.2018 260715 $1,860.99 $1,860.99 $1,860.99 01.06.2018 260871 $399.99 $399.99 $399.99 04.06.2018 260902 $1,534.14 $1,534.14 $1,534.14 05.06.2018 260959 $60.50 $60.50 $60.50 11.06.2018 261130 $1,507.98 $1,507.98 $1,507.98 18.06.2018 261344 $1,405.86 $1,405.86 $1,405.86 19.06.2018 261403 $261.18 $261.18 $261.18 21.06.2018 262449 $178.37 $178.37 $178.37 25.06.2018 262545 $1,493.36 $1,493.36 $1,493.36 02.07.2018 262761 $1,217.98 $1,217.98 $1,217.98 09.07.2018 262949 $1,473.13 $1,473.13 $1,473.13 17.07.2018 263208 $1,615.47 $1,615.47 $1,615.47 23.07.2018 263391 $1,309.24 $1,309.24 $1,309.24 23.07.2018 263400 $92.39 $92.39 $92.39 30.07.2018 263652 $1,461.30 $1,461.30 $1,461.30 03.08.2018 263824 $228.18 $228.18 $228.18 06.08.2018 263877 $1,265.29 $1,265.29 $1,265.29 10.08.2018 264067 $1,777.41 $1,777.41 $1,777.41 GRAND TOTAL OUTSTANDING

24 Mr Andrew Skarparis' accompanying affidavit relevantly stated: I, Andrew Skarparis of Unit 1, 60 Alexandra Place, Murarrie in the State of Queensland, Company Director, state on oath: 1. I am a duly authorised director of [Aromas Merchants] in named in the statutory demand which this affidavit accompanies, relating to the debt owed by [Aromas Cafe]. 2. I am duly authorised by [Aromas Merchants] to make this affidavit. 3. I have carriage of the financial affairs of [Aromas Merchants]. 4. [Aromas Merchants] operates a business which supplies coffee, tea, and other associated products to retail and wholesale clients. 5. Between January 2017 and August 2018 [Aromas Cafe] operated a café business which was located at Shop 14, 52 High Street, Rangeville, Qld, 4350 ("the Debtor Company's business"). 6. In the course of operating the Debtor Company's business [Aromas Cafe] had an account with [Aromas Merchants]. Using that account [Aromas Cafe] issued purchase orders which [Aromas Merchants] subsequently filled by providing [Aromas Cafe] with the stock which had been ordered and also an invoice in relation to costs associated with the same. 7. The debt of $122,956.47 mentioned in the statutory demand relates to unpaid invoices for the costs associated with stock which was provided to [Aromas Cafe] for the period February 2017 to August 2018 (inclusive) which are due and payable by [Aromas Cafe]. 8. I believe there is no genuine dispute about the existence or amount of the debt. (Emphasis in original)

THE GRAYWINTER PRINCIPLE 25 Because Aromas Merchants placed much reliance on the principle outlined by Sundberg J in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 (Graywinter) in its response to this application, it is convenient to begin by describing how that principle may apply in the context of this application. First, it should be noted that s 459G of the Act prescribes the following requirements for an application to set aside a statutory demand: (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 21 days after the demand is so served. (3) An application is made in accordance with this section only if, within those 21 days: (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. 26 Next, it should be noted that, in David Grant & Co Pty Limited (Receiver Appointed) v Westpac Banking Corporation (1995) 184 CLR 265 (David Grant), the High Court held that it was an essential condition of the jurisdiction to set aside a statutory demand that an application under s 459G and the affidavit supporting that application be filed in the Court and served on the person issuing the statutory demand within 21 days after the service of that demand on the company concerned. 27 Then, in Graywinter, relying on David Grant, Sundberg J held that a supporting affidavit that fails to comply with the minimum requirements for such an affidavit under s 459G(3) constitutes a "jurisdictional impediment" to the validity of an application to set aside a statutory demand (see at 459). His Honour went on to make the following observations about what those minimum requirements were (at 459): In order to be a "supporting affidavit", an affidavit must say something that promotes the company's case … the affidavit need not detail, in admissible form, all the evidence that supports the contention of a genuine dispute … In a s 459H(1)(a) case, the affidavit must in my view disclose facts showing there is a genuine dispute between the parties. A mere assertion that there is a genuine dispute is not enough. Nor is a bare claim that the debt is disputed sufficient. It follows from the fact that the affidavit need not go into evidence, which is the customary function of an affidavit, that it may read like a pleading. 28 Sundberg J also observed in Graywinter that, once the above threshold had been met, an applicant may provide additional material to supplement the material in the initial supporting affidavit (at 460). These principles were discussed recently by Rares J (dissenting, but not as to the relevant principles) in MNWA Pty Ltd v Deputy Commissioner of Taxation (2016) 250 FCR 381; [2016] FCAFC 154 (MNWA) (at [93]-[95]). 29 Notwithstanding that Sundberg J was dealing with an application under s 459H(1)(a), the principle outlined in Graywinter has been held to apply to an application to set aside a statutory demand relying upon an offsetting claim under s 459H(1)(b) (see Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liquidation) [2015] VSCA 330 (Malec) per Kyrou, Ferguson and Kaye JJA at [55]) and to applications relying upon the grounds in s 459J (see Saferack Pty Ltd v Marketing Heads Australia Pty Ltd (2007) 214 FLR 393; [2007] NSWSC 1143 per Barrett J at [25] and Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 per Beazley P, Meagher and Gleeson JJA at [45]). 30 There has, however, been some variation in the strictness with which the Graywinter principle has been applied over the past two decades. In Malec, the Victorian Court of Appeal reviewed the authorities on its application (at [52]-[65]), including the judgment of Barrett J in Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560 (Malec at [59]-[61]). In the concluding paragraphs of that review, the Court made the following observations: 63 In Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [(2007) 214 FLR 393 ('Saferack')], Barrett J reviewed his judgment in Elm, the judgment of Austin J in POS Media Online Ltd v B Family Pty Ltd [(2003) 21 ACLC 533 ('POS')] and the judgment of White J in Hansmar Investments Pty Ltd v Perpetual Trustee Co Ltd [(2007) 61 ACSR 321 ('Hansmar')]. He concluded that his observation in Elm to the effect that the ground of challenge to a statutory demand must be raised expressly in, or appear by necessary inference from, the supporting affidavit, was 'too strict' and that the correct approach was to treat a ground as having been raised within the 21 day period 'if the ground is evident from the supporting affidavit, even if only because it can be discerned from some annexed document the content of which "reveals" it.' [Saferack (2007) 214 FLR 393, 399-400 [25]]. 64 More recently, in Re UGL Process Solutions Pty Ltd [[2012] NSWSC 1256 ('UGL')], Black J referred to POS, Hansmar and Saferack and concluded that 'the strictness of the Graywinter principle has been qualified at least to the extent that the initial affidavit will sufficiently raise a dispute if that ground is raised by a necessary or reasonably available inference, including from documents exhibited to the initial affidavit' [UGL [2012] NSWSC 1256, [30]]. 65 In Re Australia Zhongfu Oil Gas Resources Pty Ltd [[2012] NSWSC 1208 ('Zhongfu')], Brereton J reviewed the judgments of Barrett J in Elm and Saferack and the judgment of Campbell J in Tuta, and concluded: [I]t will be sufficient if the material facts on which the applicant intends to rely to support the genuine dispute are discernible from the supporting affidavit and/or the annexures and exhibits to it. Nonetheless, while explicit reference to the ground or necessary implication may not be necessary, it remains important that the affidavit convey some fair notice to the [respondent] of the case that is to be made [Zhongfu [2012] NSWSC 1208, [31]]. (Emphasis added)

THE GENUINE DISPUTE QUESTION 31 With these principles in mind, I turn to the first of the three questions posed at the outset of these reasons: the genuine dispute question (see [1(a)] above). 32 Section 459H(1) provides for two circumstances upon which the recipient of a statutory demand may rely to apply to set that demand aside. They are: This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following: (a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates; (b) that the company has an offsetting claim. This first question concerns s 459H(1)(a) above. The second question, considered later in these reasons, concerns s 459H(1)(b) above. 33 In its written submissions, Aromas Cafe cited the following helpful summary of McKerracher J in Citation Resources Ltd (ACN 118 710 508) v IBT Holdings Pty Ltd (ACN 157 759 138) (2016) 116 ACSR 274; [2016] FCA 1265 (at [17]) as to what is required to establish a genuine dispute under s 459H(1)(a) above: (a) For there to be a genuine dispute, there must be a 'plausible contention requiring investigation'. It raises the same sort of considerations as the 'serious question to be tried' criterion applicable to interlocutory injunctions. (b) The company will fail in that task only if it is found upon the hearing of its s 459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. (c) The Court is not called on to determine the merits of, or to resolve, the dispute. (d) The threshold is not high or demanding; however the claim must have some merit and be genuine. That requirement has been described variously as the claim must be 'real and not spurious', the claim must have a 'real chance of success', there must be 'a serious question to be tried'. (e) The Court does not engage in any form of balancing exercise between the strengths of competing contentions. (f) The essential task is relatively simple - to identify the genuine level of a claim (not the likely result of it). (g) A mere assertion of an oral agreement will not necessarily suffice. 34 In her affidavit filed in support of this application on 31 December 2018, Ms Nguyen described the details of the genuine dispute which she claimed existed in this matter, in the following terms: 21. The First and Second Contract, was conditional upon receiving consent from the Head Lessor to assign the lease for the Premises. As consent was never provided by the Head Lessor, it was not possible to complete the First and Second Contract. 22. I verily believe that [Aromas Cafe] is not liable for the Debt listed under the demand as [Aromas Cafe] was not the legal entity in possession of the Business and therefore did not incur any of the liabilities of the Business. Neither [Aromas Cafe] or I completed the purchase of the First or Second Contract. 23. I am instructed by my solicitors Madison Marcus Law Firm Pty Ltd ('Madison Marcus') that it was a condition of the First and Second Contract that Aromas Leasing was to remain in possession until completion. 24. Clause 9 of the Second Contract says that "the seller is to remain in possession until completion". Further clause 16.1 says that the Aromas Leasing agreed to "pay, satisfy and discharge.....all debts and liabilities of the business incurred before completion". 25. Aromas Leasing says that [Aromas Cafe] agreed and was liable to pay all costs associated with the Business and the Business Premises. I dispute that this is correct and disagree that either I or [Aromas Cafe] would provide such an indemnity. 26. The true owner of the Business was Aromas Leasing and not [Aromas Cafe] as neither the First or Second Contract was Completed. Mr Tran, Mrs Nguyen and I only assisted with the management of the Business due to Mr Helys departure and until we could formally take possession of the Business. 27. At no time did [Aromas Cafe] ever sign an agreement with Aromas [Merchants] which permitted for the supply of goods for the business from Aromas [Merchants] to [Aromas Cafe]. (Emphasis in original; errors in original) 35 For its part, Aromas Merchants claimed that there was no such genuine dispute in this matter. In support of this contention, it cited TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67; [2008] VSCA 70 where Dodds-Streeton JA (with whom Neave and Kellam JJA agreed), stated that a genuine dispute, or an offsetting 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" (at [71]). Aromas Merchants submitted that these requirements could be expressed as having two elements: first, that "the dispute [must] be bona fide and truly exist in fact"; and secondly, that the "grounds for alleging the existence of a dispute [must be] real and not spurious, hypothetical, illusory, or misconceived" (see Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 (Spencer Constructions) per Northrop, Merkel and Goldberg JJ at 464). 36 For the reasons that follow, Aromas Merchants' contentions are rejected. First, it is clear from the history outlined above that the debt for the products supplied by Aromas Merchants to the cafe business is part of a broader dispute between Aromas Cafe, on the one hand, and the two Aromas entities, on the other. The central question in that dispute is whether Aromas Cafe "operated" the cafe business owned by Aromas Leasing prior to the completion of the two contracts for sale of that business (neither of which eventuated) such that it accepted responsibility to pay the operating costs of that business, including the costs of the products supplied by Aromas Merchants. 37 The letter of demand dated 18 September 2018 that the Aromas entities' lawyers sent to Aromas Cafe prior to the delivery of the statutory demand aptly, albeit tendentiously, describes the parameters of that broader dispute and the part Aromas Merchants' debt played in it. As can be seen from the description of the contents of that letter above (see at [18]-[20]), it began by expressly stating that it had been sent on behalf of both Aromas entities. I interpose to record that, on this aspect, I reject Aromas Merchants' contention that this statement was merely a "convenient shorthand" way of describing the situation. That letter then described the background to the dispute and the central issue mentioned above, namely whether "[f]rom 9 January 2017 until 16 August 2018, your clients [Aromas Cafe] had complete control over the business and the premises which the business operated from ... such … that your clients [Aromas Cafe] were liable to pay (and would indemnify our clients [Aromas Merchants and Aromas Leasing] in relation to) all costs associated with the business and the business premises". That the debt Aromas Cafe allegedly owed to Aromas Merchants formed a part of that broader dispute is then demonstrated by its inclusion in the final demand for payment that was made at the conclusion of the letter, in default of which litigation was threatened (see at [19]-[20] above). 38 While it relates more to the "some other reason" ground discussed later in these reasons, it is worth making the following observations, at this juncture, about the course that the two Aromas entities have pursued since Aromas Cafe failed to comply with the demand described above. Instead of both commencing the litigation threatened in that demand, Aromas Merchants alone issued the statutory demand which is at the heart of the present application. In doing so, it has essentially ignored the broader dispute described above and attempted to use the process in Part 5.4 of the Act to recover its alleged debt, as if it were free of that dispute. Moreover, if Aromas Merchants is able to achieve the liquidation of Aromas Cafe by this statutory demand process, that outcome is likely to provide a commercial advantage to Aromas Leasing in the broader dispute by foreclosing on, or at least hampering, any litigation that Aromas Cafe may seek to commence against it. I do not consider this course is consistent with the legislative purpose of the statutory demand process established by Part 5.4 of the Act. That purpose was described by Martin CJ in Createc Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602; [2009] WASCA 85 (at [2]): … Its purpose is not to provide a means whereby those claiming a genuinely disputed debt can avoid the obligation of establishing their entitlement to that debt in a court of appropriate jurisdiction by placing commercial pressure on the party resisting payment. 39 Returning to the genuine dispute issue raised by this question, as Ms Nguyen disclosed in her supporting affidavit in this application, the resolution to this broader dispute described above depends, in part, on two matters: the terms of the two contracts that Ms Nguyen, and subsequently, Aromas Cafe, entered into with Aromas Leasing; and whether Ms Nguyen, or Aromas Cafe, separately entered into an agreement with Aromas Merchants for the supply of the products in question. Ms Nguyen outlined the details of the dispute concerning the former aspect in her supporting affidavit at [21]-[26] and she also stated her claims with respect to the latter aspect at [27] (see at [34] above). Further, with respect to the latter aspect, in her subsequent affidavit filed in this application, Ms Nguyen also claimed that she had never been asked to sign an account application form to establish an account with Aromas Merchants and, if she had been asked to do so, she would not have signed that form until after the completion of the contract to purchase the cafe business (see at [8] above). 40 Both of these statements respond directly to the claims made at [6] of Mr Andrew Skarparis' affidavit in support of the statutory demand (see at [24] above) where he said that Aromas Cafe "had an account" with Aromas Merchants and that account was used to issue purchase orders for the products that Aromas Merchants provided (see at [24] above). Moreover, they are consistent with the true state of affairs as disclosed in Mr Andrew Skarparis' subsequent affidavit where he acknowledged that, although a copy of the account application form had been provided to Aromas Cafe "on multiple occasions", an executed copy of that form was never returned to Aromas Merchants. Put differently, Mr Andrew Skarparis' statement in his affidavit in support of the statutory affidavit appears to inaccurately describe the position with respect to the establishment of the account in question. Hence, to the extent that Aromas Merchants has raised the Graywinter principle in respect of this issue, I do not consider that principle prevents Aromas Cafe from relying upon this additional and supplementary evidence in Ms Nguyen's own affidavit and that of Mr Andrew Skarparis. 41 Having regard to all of these matters, I consider Aromas Cafe has raised a genuine dispute about the existence of the debt to which Aromas Merchants' statutory demand relates. In her affidavits, Ms Nguyen has provided evidence which indicates, at least on a prima facie basis, that there is a factual foundation to her claims. That factor, together with the nature of the claims themselves, leads me to conclude that they are real and not spurious, or bluster, or assertion. Furthermore, without descending too deeply into their merits, I consider that they are sufficiently cogent to raise a serious question to be tried. Accordingly, I consider Aromas Cafe has established a genuine dispute in the terms of s 459H(1)(a) of the Act. 42 This conclusion is sufficient, in itself, to order that Aromas Merchants' statutory demand be set aside. Nonetheless, it is appropriate, in the circumstances of this matter, to at least briefly address the other two questions posed above.

THE OFFSETTING CLAIM QUESTION 43 In her affidavit, Ms Nguyen went on to describe the offsetting claim which she contended fell within the terms of s 459H(1)(b) above. She described that claim in the following terms: 28. I verily believe that I have a genuine off-setting claim against Aromas Leasing and Aromas [Merchants], which are both related entities. During the management of the Business, I incurred various debts for the Business including payment of wages and staff on behalf of Aromas Leasing and Aromas Cafe. 29. I estimate that those costs associated with the running of the Business are approximately between $80,000.00 - $120,000.00. I am yet to calculate the total amount of that offsetting claim however I will attend to provide a supplementary affidavit clarifying the off-setting position of the claim. 30. Upon exchange of contracts, I paid a deposit of $10,000.00. I seek that the sum of $10,000.00 be offset with the total amount of the Debt. 44 In respect of this offsetting claim, Aromas Merchants submitted that Aromas Cafe could not "point to a genuine claim it has against [Aromas Merchants], as opposed to [Aromas Leasing]". It cited the judgments of McPherson J in JJMMR P/L v LG International Corp [2003] QCA 519 (at [18]) and Hamilton J in Glazier Holdings Pty Ltd v Meehan [2004] NSWSC 185. It specifically referred to [13] of the latter judgment where it was held that "[i]n the relevant definition, offsetting claim is stipulated to mean a 'claim that the company has against the respondent'". Accordingly, it contended that Aromas Cafe's offsetting claims above "would be struck out or subject to summary judgment as having been commenced against the wrong defendant". 45 In my view, these contentions are correct. The offsetting claims outlined in Ms Nguyen's affidavit above hinge on clauses 9.1 and 16.1 of the First and Second Contracts which are mentioned earlier in that affidavit (see [24] at [34] above). The counterparty in both of those contracts was Aromas Leasing. If Aromas Cafe or Ms Nguyen has any claims under those clauses, they are claims against Aromas Leasing. They do not describe any claims Aromas Cafe may have against Aromas Merchants. It follows that I do not consider Aromas Cafe has established that it has a valid offsetting claim within the terms of s 459H(1)(b) of the Act.

THE DEFECT IN THE STATUTORY DEMAND QUESTION 46 Sections 459J(1)(a) and (b) provide two further circumstances in which a statutory demand may be set aside, as follows: On an application under section 459G, the Court may by order set aside the demand if it is satisfied that: (a) because of a defect in the demand, substantial injustice will be caused unless the demand is set aside; or (b) there is some other reason why the demand should be set aside. 47 Sections 459E(2) and (3) of the Act are relevant to the grounds stated above. They set out the prerequisites for a statutory demand as follows: (2) The demand: (a) if it relates to a single debt - must specify the debt and its amount; and (b) if it relates to 2 or more debts - must specify the total of the amounts of the debts; and (c) must require the company to pay the amount of the debt, or the total of the amounts of the debts, or to secure or compound for that amount or total to the creditor's reasonable satisfaction, within 21 days after the demand is served on the company; and (d) must be in writing; and (e) must be in the prescribed form (if any); and (f) must be signed by or on behalf of the creditor. (3) Unless the debt, or each of the debts, is a judgment debt, the demand must be accompanied by an affidavit that: (a) verifies that the debt, or the total of the amounts of the debts, is due and payable by the company; and (b) complies with the rules. 48 First, it is to be noted that the grounds stated in s 459J(1)(a) and (b) above are mutually exclusive (see Spencer Constructions at 460 and MNWA at [100]). Among other things, this means that the "substantial injustice" criterion applies to the ground under s 459J(1)(a), but it is not a necessary requirement for the ground under s 459(1)(b). It is also important to note that a statutory demand and its accompanying affidavit are independent. Thus a demand may still be valid notwithstanding a defect in the affidavit provided to support it (see Radiancy (Sales) Pty Limited v Bimat Pty Limited [2007] NSWSC 962 per White J at [45] and the discussion in Assaf F, Statutory Demands: Law and Practice (LexusNexus Butterworths, 2008) (Assaf F, Statutory Demands: Law and Practice) at [7.13]). I will therefore address these two grounds separately. 49 In MNWA, Rares J described the former ground in the following terms (at [99]): Moreover, s 459J(1)(a) and (2) operate together as a code for dealing with defects in a statutory demand. Those provisions authorise the Court to set a demand aside only if substantial injustice will be caused because of a defect in it: Equuscorp at 299G-300A per French, Kiefel and Sundberg JJ applying what Northrop, Merkel and Goldberg JJ had held in Spencer at 460G-461B. 50 Aromas Cafe claimed that the statutory demand in this matter was defective because, while it identified the relevant invoices which were the subject of Aromas Merchants' claimed debt, it did not identify the "source of the legal obligation" upon which that debt was based. Further, it claimed that the "substantial injustice" element was met by the fact that many of the invoices listed in the statutory demand were "unrelated to stock and, in some cases … irrelevant to the [cafe business]". They identified the following in their written submissions: (a) licensing fees by the Phonographic Performance Company of Australia and APRA; (b) telephone and internet connection bills; (c) the renewal of a domain name registration for www.aromascoffee.vn and aroms.vn, Vietnam-based ccTLD domains [sic - domain] names, which domain names are unrelated to the Business; (d) invoices for Cleanaway; and (e) utilities bills. (Footnotes omitted) 51 With respect to these items, Aromas Cafe contended that: 32. These anomalies, and the basis upon which [Aromas Cafe] should pay these invoices, are unexplained by Aromas Merchants. 33. In relation to item (c), the invoices appear to relate to the dealings and discussions between Aromas Merchants and Mr Tran and Ms Nguyen about expansion of the "Aromas" brand into Vietnam … The other classes of invoices relate to expenses which, again, are the types of expenses for which Aromas Leasing were liable. On any view, they are not invoices for amounts related to stock. It is unclear why Aromas Merchants issued the invoices in relation to expenses seemingly being incurred by Aromas Leasing, or whether Aromas Merchants had incurred these expenses itself. 34. That Aromas Merchants sought fit to invoice [Aromas Cafe] for the domain name and items other than stock, supports the view that Aromas Merchants and Aromas Leasing (in practice) … operated interchangeably from time to time. 52 In response, Aromas Merchants contended that "[t]he failure of a creditor to specify in the demand the precise legal basis upon which a debt is claimed will also usually be insufficient to justify an order setting the demand aside" (relying on Assaf F, Statutory Demands and Winding Up in Insolvency (2nd ed, LexisNexis Butterworths, 2012) at [7.35]). Further, it contended that "[a]ny conceivable defect [Aromas Cafe] may allege in the demand or its supporting affidavit does not amount to substantial injustice under [s] 459(1)(a)". In this respect, it relied on the judgment in Randall Pty Ltd v Chepan Pty Ltd (2009) 73 ACSR 267; [2009] NSWSC 783 where White J referred to Assaf F, Statutory Demands: Law and Practice and agreed with the following proposition (at [14]): … the learned author says … that "substantial injustice" in s 459J(1)(a) requires that the defect in the demand "have some significant effect or ramification upon the recipients of the demand" or be "causative of significant and considerable unfairness" and … that "the common thread within the case law in determining whether a defect records substantial injustice is an examination of the likely effect the defect will have upon the recipient of the demand". I agree. 53 Aromas Cafe's contentions above are rejected. First, there is no requirement in s 459E(2) to state the "source of the legal obligation" for the debt specified in the statutory demand. That requirement may arise under s 459E(3), but that provision relates to the need to provide a supporting affidavit where the debt concerned is not a judgment debt. It does not apply to the statutory demand per se which, as noted above (at [48]) operates independently of its supporting affidavit. That aside, I consider the statutory demand in this matter complied with all of the prerequisites set out in s 459E(2) above. In particular, it specified the debts concerned by reference to the invoices listed in the attached schedule and it specified the total amounts of those debts at the end of that schedule. There is, therefore, no relevant defect in the statutory demand in this matter. That being so, it is unnecessary to consider whether Aromas Cafe suffered any "substantial injustice" as a result of this non-existent defect. It is also unnecessary to consider the application of the Graywinter principle upon which Aromas Merchants relied in connection with this question.

THE "SOME OTHER REASON" QUESTION 54 Finally, I turn to the separate ground stated in s 459J(1)(b) of the Act: whether there is "some other reason" why the statutory demand should be set aside. In this respect, Aromas Cafe has relied on defects it claims to exist in the affidavit of Mr Andrew Skarparis that accompanied the statutory demand in this matter. Since Aromas Merchants' debt was not a judgment debt, such an affidavit was required under s 459E(3). 55 In Assaf F, Statutory Demands: Law and Practice, the author discusses the authorities concerning what constitutes "some other reason" under s 459J(1)(b) (see at [7.22]-[7.24]). Without closely reviewing that discussion, it reveals that the expression "some other reason" has a "broad compass" and that the courts have therefore eschewed adopting any fixed categories. Nonetheless, the following general principles have been adopted: that the reason should not fall under any other ground in the Act; and that it should be a "sound or positive ground or good reason" for setting aside the demand. Furthermore, where the reason relates to defects in supporting affidavits under s 459E, those defects should constitute substantive deficiencies and not be merely formal or technical (see at [7.49]. See also the discussion in MNWA at [103]-[105] and [114]-[117]). 56 Aromas Cafe claimed there are two defects in Mr Andrew Skarparis' affidavit supporting the statutory demand. First, it submitted that he had not stated the source of the knowledge he relied upon to make that affidavit. That submission can be rejected immediately. Mr Andrew Skarparis clearly stated the source of his knowledge and his capacity to make the affidavit on behalf of Aromas Leasing at [1]-[3] of his affidavit (see at [24] above). 57 Secondly, Aromas Cafe claimed that the words "unpaid invoices for the costs associated with stock which was provided" in [7] of that affidavit gave rise to a defect. In particular, it pointed to the fact that the invoices listed in the schedule to the statutory demand contained items which were not associated with the supply of stock. Those items are set out above (see at [50]). 58 In response, Aromas Merchants accepted that the above words were inaccurate and it agreed that the debt in this matter was not created by it issuing the invoices to Aromas Cafe, citing Growth Equities Corporation Ltd v Genesis Growth Investments Pty Ltd [2010] NSWSC 1302 per Barrett J at [4]. Rather, it said that the debt arose from the ordering by Aromas Cafe, and the supply by Aromas Merchants, of the goods concerned. Nonetheless, it submitted that Aromas Cafe could not rely on this ground because this defect was not mentioned anywhere in Ms Nguyen's supporting affidavit and therefore the Graywinter principle applied to prevent it being relied upon in this application. Finally, it also appeared to contend that this was only a technical defect or formal defect. 59 I do not accept that the Graywinter principle applied to prevent Aromas Cafe relying on this ground in this application. Before explaining why that is so, it is appropriate to record the following. First, having regard to Aromas Merchants' contentions above that its debt essentially arose out of a straightforward claim for the sale and delivery of goods to Aromas Cafe, I consider the subject words in Mr Andrew Skarparis' affidavit above were ambiguous and therefore did not provide the requisite verification of the debt it claimed in the statutory demand as required by s 459E(3)(a) of the Act. Moreover, I consider that ambiguity effectively masked the fact that approximately 20% of the invoices upon which the statutory demand was based related to items that could not have been genuinely claimed as debts by Aromas Merchants. Specifically, the items described at [50] above, which related to the operating costs of the cafe business and to other dealings between Aromas Cafe and the two Aromas entities. To these observations may be added the apparent inaccuracy in [6] of the same affidavit discussed at [40] above. In my view, these ambiguities and inaccuracies constitute fundamental and substantive defects in the affidavit supporting Aromas Merchants' statutory demand. Secondly, and conversely, I do not consider that these defects in Mr Andrew Skarparis' supporting affidavit are matters of formality or technicality. Thirdly, and finally, I consider these matters are compounded by the circumstances in which Aromas Merchants has sought to use the statutory demand process under Part 5.4 of the Act in the manner discussed earlier in these reasons (see at [38] above). Accordingly, I consider these matters constitute "some other reason" under s 459J(1)(b) why Aromas Merchants' statutory demand should be set aside. 60 Turning, then, to the Graywinter principle and the reasons why I do not accept it applies to prevent this ground being relied upon by Aromas Cafe in this application. First, I consider those defects were raised by "reasonably available inference" (see at [30] above) in Ms Nguyen's supporting affidavit in the sense that they were subsumed in her statements about the broader dispute that existed between Aromas Cafe and the two Aromas entities, Aromas Leasing and Aromas Merchants. Specifically, her claims that Aromas Cafe was not responsible for any of the operating costs of the business under the terms of the two contracts to purchase the cafe business and that Aromas Cafe had not entered into any agreement with Aromas Merchants for the supply of the products in question. Secondly, and additionally, I consider these defects were "revealed" (see at [30] above) by Ms Nguyen's supporting affidavit. That is so because she annexed Mr Andrew Skarparis' affidavit accompanying the statutory demand to her affidavit and the words underpinning these defects are apparent on the face of that affidavit. Consequently, consistently with the Graywinter principle, I consider Aromas Cafe is able to rely upon the supplementary evidence which emerged at the hearing, including Mr Andrew Skarparis' subsequent affidavit and its annexures. 61 Thirdly, and in any event, I do not consider the Graywinter principle applies in the present circumstance. The primary purpose of an applicant's supporting affidavit under s 459G of the Act is to "convey some fair notice to the [respondent] of the case that is to be made" (see at [30] above). That being so, it is difficult to see why an applicant should be prevented by the Graywinter principle from relying upon a matter which is hidden by a latent defect in a supporting affidavit provided under s 459E(3)(a). That is, a defect the import of which is not reasonably discernible from the information provided in that affidavit, as was the case with Mr Andrew Skarparis' affidavit in this matter. Accordingly, I do not consider the Graywinter principle prevents Aromas Cafe from relying on this ground in this application. 62 For these reasons, I consider that Aromas Cafe has established some other reason why Aromas Merchants' statutory demand should be set aside under s 459J(1)(b) of the Act.

CONCLUSION 63 While Aromas Cafe has not established the grounds in ss 459H(1)(b) or s 459J(1)(a) of the Act, I consider it has established the grounds in ss 459H(1)(a) and 459J(1)(b) such that Aromas Merchants' statutory demand should be set aside on either, or both, of those grounds. Accordingly, the orders will be:

The statutory demand issued by Aromas Tea & Coffee Merchants Pty Ltd and dated 13 December 2018 is set aside.
With the exception of the costs order made on 14 March 2019, the defendant is to pay the plaintiff's costs of and incidental to the application filed on 31 December 2018 to be taxed failing agreement. I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.

At a glance

Court

Decision date

Before

Source

Judgment (11 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (21)