Statutory Demand Versus Volunteer Guarantor: When Can an Unconscionability Defence Create a Genuine Dispute That Forces a Creditor to Sue the Old-Fashioned Way?

Based on the authentic Australian judicial case In the matter of Tang & Cheung Investments Pty Ltd [2025] NSWSC 817, this article disassembles the Court’s judgment process regarding evidence and law. It transforms complex judicial reasoning into clear, understandable key point analyses, helping readers identify the core of the dispute, understand the judgment logic, make more rational litigation choices, and providing case resources for practical research to readers of all backgrounds.

Source judgment (for study and citation context only): :contentReference[oaicite:0]{index=0}

Chapter 1: Case Overview and Core Disputes

Basic Information

Court of Hearing: Supreme Court of New South Wales, Equity Division, Corporations List :contentReference[oaicite:1]{index=1}
Presiding Judge: Brereton J :contentReference[oaicite:2]{index=2}
Cause of Action: Application to set aside a creditor’s statutory demand under Corporations Act 2001 (Cth) s 459G, primarily on the ground of a genuine dispute as to the existence of the debt, and alternatively “some other reason” :contentReference[oaicite:3]{index=3}
Judgment Date: 24 July 2025 :contentReference[oaicite:4]{index=4}
Hearing Date: 4 July 2025 :contentReference[oaicite:5]{index=5}

Core Keywords

Keyword 1: Authentic Judgment Case
Keyword 2: Statutory demand
Keyword 3: Genuine dispute
Keyword 4: Guarantee and suretyship
Keyword 5: Unconscionability
Keyword 6: Corporations Act insolvency gateway

Background

A corporate Plaintiff found itself facing a statutory demand, a sharp-edged corporate debt collection mechanism that can quickly escalate into a presumption of insolvency if not dealt with properly and within strict time limits. The Defendant, as creditor, said the Plaintiff owed a substantial sum under a guarantee. The Plaintiff said: “We dispute the debt, because the guarantee itself should not be enforceable against us.”

At the centre of the factual matrix was a loan made by the Defendant to a separate Borrower Company. The loan was amended over time, and through those amendments the Plaintiff entered the documentation as a guarantor. The Borrower later fell into arrears, a security property sale reduced principal, and the creditor moved from demand letters to a statutory demand. :contentReference[oaicite:6]{index=6}

This chapter does not reveal the outcome. It frames what the Court had to decide: whether the statutory demand could remain on foot, or whether it had to be set aside because the dispute was sufficiently real to require ordinary litigation.

Core Disputes and Claims

Core legal focus question: Does the Plaintiff show a genuine dispute about the existence of the debt so that the statutory demand cannot stand, particularly where the Plaintiff alleges the guarantee is unenforceable due to unconscionability in the enforcement of a volunteer guarantee?

Plaintiff’s claim (relief sought):
– An order setting aside the statutory demand under Corporations Act 2001 (Cth) s 459G, supported by contentions about genuine dispute and other statutory grounds. :contentReference[oaicite:7]{index=7}

Defendant’s stance (relief sought in substance):
– The statutory demand should remain, because the debt is due and payable under the guarantee and there is no genuine dispute warranting set-aside.

The key contention that became decisive was the Plaintiff’s attempt to frame a bona fide dispute about enforceability: not that the Borrower did not owe money, but that the Plaintiff, as guarantor, had an arguable basis to resist enforcement.

Chapter 2: Origin of the Case

The story begins with a common commercial structure that is not always understood by the people who sign it: a loan to a borrower, secured by property, and backed by guarantees.

1. The Loan and Its Evolution
   The Defendant lent AUD $400,000 to the Borrower Company. Over time, the loan agreement was amended. During those amendments, the Plaintiff entered as a guarantor. The Plaintiff executed at least one amending instrument that preserved its role as guarantor. :contentReference[oaicite:8]{index=8}

2. The Relationship Dynamics Behind the Paperwork
   The Plaintiff’s directors said their participation did not arise from a purely commercial bargaining position. They attributed their entry into the guarantee to a close relationship with a key individual connected to the Borrower. They described that individual as trusted, financially sophisticated, and capable of applying strong relational pressure. :contentReference[oaicite:9]{index=9}

This is where real life often diverges from the neat logic of contract law. In many families and close networks, documents are signed to “help out”, based on trust rather than analysis. In court, however, signatures are usually treated as deliberate acts. The legal question becomes: in what circumstances will equity intervene to prevent a creditor from enforcing the transaction against someone who signed without proper understanding and without benefit?

1. The Default and Escalation
   The loan fell into arrears. A secured property sale in March 2024 repaid AUD $200,000 of principal (and some interest and costs). The creditor’s advisers later sent a written demand (including by email) claiming a sum comprised of principal, interest and costs. The Plaintiff’s directors denied receiving it. The demand went unanswered. :contentReference[oaicite:10]{index=10}

The Defendant then served a statutory demand dated 13 March 2025 for AUD $329,994.51. :contentReference[oaicite:11]{index=11}

1. The Decisive Moment
   The decisive moment is not merely the debt claim: it is the shift from ordinary enforcement to a statutory demand. A statutory demand is a pressure tool. It does not decide the dispute, but it can force a company into a defensive posture, because non-compliance may expose the company to winding up proceedings. That is why courts are careful: a statutory demand is not meant to replace proper litigation where a real dispute exists.

Chapter 3: Key Evidence and Core Disputes

Plaintiff’s Main Evidence and Arguments

The Plaintiff relied chiefly on a supporting affidavit from its director and the surrounding correspondence, raising the following disputed matters:

1. Uncertainty about the loan drawdown
   The Plaintiff raised uncertainty as to whether, and when, the loan was drawn down. :contentReference[oaicite:12]{index=12}

2. Undue influence by the Borrower-connected individual
   The Plaintiff alleged the guarantee was signed under undue influence from an individual closely linked to the Borrower, suggesting emotional and relational pressure and a lack of informed consent. :contentReference[oaicite:13]{index=13}

3. Lack of explanation and lack of understanding
   The Plaintiff asserted that the directors were not informed of the financial or legal implications of signing the guarantee. :contentReference[oaicite:14]{index=14}

4. Alleged settlement in March 2024
   The Plaintiff claimed it had been advised the debt was fully settled on 18 March 2024 following a property sale payment. :contentReference[oaicite:15]{index=15}

5. Questions about creditor enforcement choices
   The Plaintiff raised uncertainty about whether the Defendant had pursued the Borrower or other guarantors. :contentReference[oaicite:16]{index=16}

6. Quantum and calculation opacity
   The Plaintiff pointed to doubts arising from a lack of explanation of how principal and interest were determined in the statutory demand amount. :contentReference[oaicite:17]{index=17}

Defendant’s Main Evidence and Arguments

The Defendant’s case, in essence, was:

1. The statutory demand debt was properly particularised and due under the guarantee.
2. Some of the Plaintiff’s arguments should not be allowed because they went beyond what was disclosed in the supporting affidavit, relying on authority dealing with the need for proper articulation in set-aside applications. :contentReference[oaicite:18]{index=18}
3. The Plaintiff’s “abuse of process” theme was misconceived where the loan documents allowed the creditor to proceed against any guarantor without first suing the borrower, and where the creditor had in fact issued a pre-demand notice to the addresses for service. :contentReference[oaicite:19]{index=19}

Core Dispute Points

Core Dispute Point 1: Is there a genuine dispute about the existence of the debt because the guarantee may be unenforceable in equity as unconscionable to enforce against a volunteer guarantor? :contentReference[oaicite:20]{index=20}

Core Dispute Point 2: Are the Plaintiff’s asserted disputes real and properly particularised, or are they speculative, vague, or raised too late? :contentReference[oaicite:21]{index=21}

Core Dispute Point 3: Was there “some other reason” to set aside the demand, such as abuse of process, including issues about solvency, enforcement sequencing, or lack of prior demand? :contentReference[oaicite:22]{index=22}

Core Dispute Point 4: Quantum dispute: was the debt fully settled in March 2024, or was there a remaining balance? :contentReference[oaicite:23]{index=23}

Chapter 4: Statements in Affidavits

An affidavit is not just a story; it is a structured evidentiary vehicle. In statutory demand proceedings, affidavits must do more than assert “I believe there is a dispute”. They must set out the factual basis in a way that shows a real issue requiring investigation.

Here, the Plaintiff’s affidavit strategy had two faces:

1. The affidavit’s surface language
   It spoke of undue influence by a third party connected to the Borrower. :contentReference[oaicite:24]{index=24}

2. The affidavit’s deeper legal destination
   To defeat the creditor’s claim at the statutory demand stage, the Plaintiff needed to translate “pressure by a third party” into a legal basis that could affect enforceability against the creditor. The Court identified that, even if the alleged undue influence was not exerted by the creditor, the Plaintiff might still argue unconscionability in enforcement, drawing on principles used in creditor–surety contexts. :contentReference[oaicite:25]{index=25}

This reveals a practical boundary that litigants often miss:
– Alleging wrongdoing by someone other than the creditor does not automatically defeat a creditor’s enforcement rights.
– The affidavit must connect the wrongdoing and the relationship dynamics to a recognised equitable restraint on enforcement against the creditor.

Strategic intent behind the Judge’s procedural directions regarding affidavits:
The Court’s approach reflects a disciplined view of fairness in interlocutory-style applications. A set-aside application must give fair notice of the dispute case. The Court acknowledged that the affidavit was “far from clear”, yet accepted that a reasonably available inference could be drawn that the Plaintiff intended to raise an unconscionability argument. :contentReference[oaicite:26]{index=26}

In practical terms, the Judge’s approach encourages parties to:
– Articulate the legal label (genuine dispute) and the legal pathway (why the debt may not exist or be enforceable).
– Provide enough facts to make the pathway plausible.
– Avoid ambush by raising a wholly new case not foreshadowed by evidence.

Chapter 5: Court Orders

Prior to the final hearing, the proceeding involved procedural steps typical of statutory demand litigation:

1. Filing of the set-aside application within the strict statutory timeframe under Corporations Act 2001 (Cth) s 459G, supported by an affidavit. :contentReference[oaicite:27]{index=27}
2. Exchange and filing of written submissions and supporting materials.
3. A hearing at which oral submissions were made. :contentReference[oaicite:28]{index=28}
4. The Court’s management of post-hearing submissions, including its decision to disregard supplementary submissions filed without leave, reflecting appellate guidance that late material is repeatedly deprecated. :contentReference[oaicite:29]{index=29}

These directions matter because statutory demand proceedings are designed to be swift. The Court expects discipline and clarity. Deviations can affect costs and the Court’s receptiveness to arguments.

Chapter 6: Hearing Scene: Ultimate Showdown of Evidence and Logic

The hearing is best understood as a test of plausibility, not a full trial. The Court’s role is not to decide the final rights under the guarantee; it is to decide whether the statutory demand should be allowed to stand as a shortcut.

Process Reconstruction: Live Restoration

The Court had to evaluate whether the Plaintiff’s dispute was genuine. That requires:
– a dispute that is not plainly vexatious or illusory,
– sufficiently particularised grounds,
– and a real issue that warrants investigation. :contentReference[oaicite:30]{index=30}

The Plaintiff’s presentation contained internal tension:
– On one hand, it alleged the guarantee arose from relational pressure and lack of understanding.
– On the other, the creditor was not alleged to have personally exerted undue influence or misrepresented anything.

The Defendant pressed the technical objection: that unconscionability was not sufficiently raised in the affidavit. The Court treated this as a boundary question: can a party travel beyond the affidavit, or is there enough in the affidavit to infer the unconscionability pathway?

The Judge concluded there was just enough in the affidavit to give fair notice that such a case was to be made, and that it could therefore be advanced at the set-aside hearing. :contentReference[oaicite:31]{index=31}

Core Evidence Confrontation

The decisive confrontation was not about whether the Borrower owed money. The Judge indicated the Plaintiff’s “debt fully settled” theme did not provide a credible basis to deny any outstanding amount at this stage. :contentReference[oaicite:32]{index=32}

Instead, the critical battlefield was enforceability against the Plaintiff as guarantor:
– Did the Plaintiff act as a volunteer?
– Did it misunderstand the purport and effect of what it signed?
– Did the creditor fail to ensure the transaction was explained to the guarantor, in circumstances where the creditor knew (or should have known) of a trust-and-confidence relationship between the debtor-side actor and the guarantor-side actor?

The Court observed there was limited evidence of what the creditor did to explain the transaction, and limited evidence of what the creditor knew. The loan documents contained “independent advice” clauses, but the Court treated those clauses as evidential rather than conclusive. :contentReference[oaicite:33]{index=33}

Judicial Reasoning

This chapter must execute the Judicial Original Quotation Principle. The key is to select classic and authoritative dicta that reveal how the Court approached the statutory demand function and the genuine dispute threshold.

Context: the Court recited the orthodox principles about “genuine dispute” and emphasised that the statutory demand set-aside task is not demanding if there is one arguable issue with sufficient cogency.

A dispute is “genuine” if it is not “plainly vexatious or frivolous” or “may have some substance” or “involves a plausible contention requiring investigation”. A genuine dispute requires that it be bona fide and, to that effect, be premised on sufficiently particularised grounds that are “real and not spurious, hypothetical, illusory or misconceived” and which demonstrate the dispute’s “objective existence” and “prima facie plausibility”. :contentReference[oaicite:34]{index=34}

Why that statement was determinative: it set the threshold lens. The Court was not deciding whether unconscionability would ultimately succeed, only whether it was sufficiently real and particularised to warrant investigation. Once the Court accepted there was an arguable unconscionability pathway, the statutory demand mechanism was not an appropriate substitute for a full hearing.

Context: the Court then focused on the function of the Court at this stage.

The function of the court is merely to determine the existence of a genuine dispute. While this neither requires nor invites it to weigh or assess the merits of the dispute, the court will not exceed its legitimate function by having regard to evidence which bears upon whether the asserted dispute is genuine. :contentReference[oaicite:35]{index=35}

Why that statement was determinative: it explains why the Court could look at the evidential “glimpses” and still find the dispute genuine. The Court did not need a complete factual record; it needed a plausible, non-spurious issue that should be tested by ordinary litigation.

Context: the Court also articulated the practical consequence: if there is a genuine dispute, the creditor must sue on the guarantee in the conventional way, rather than using the statutory demand shortcut.

The Court held that, while the unconscionability claim might be difficult and unusual in a corporate surety context, it was not unarguable, and therefore the statutory demand route was not suitable to shut the Plaintiff out from contesting enforceability. :contentReference[oaicite:36]{index=36}

Chapter 7: Final Judgment of the Court

The Court made the following operative orders:

1. The statutory demand dated 13 March 2025 was set aside. :contentReference[oaicite:37]{index=37}
2. If either party wished to make submissions on costs, they were to notify the Associate by 4.00 pm on 29 July 2025, and directions would be made. :contentReference[oaicite:38]{index=38}

The reasons reveal the core conclusion: a genuine dispute existed about the whole of the debt as asserted in the statutory demand, because the Plaintiff had an arguable case that enforcement of the guarantee may be unconscionable, which warranted investigation in conventional proceedings. :contentReference[oaicite:39]{index=39}

Chapter 8: In-depth Analysis of the Judgment: How Law and Evidence Lay the Foundation for Victory

This chapter follows the mandatory internal order:
Special Analysis → Judgment Points → Legal Basis → Evidence Chain → Judicial Original Quotation → Analysis of the Losing Party’s Failure.

Special Analysis

1. The Court’s “two-lane” thinking: debt existence versus enforceability
   A common mistake is to treat a statutory demand dispute as only about arithmetic: whether the borrower owes money. This case demonstrates that a dispute about enforceability of the creditor’s right against the particular debtor (here, the guarantor company) can be enough to create a genuine dispute about “the existence of the debt” in statutory demand terms, because the statutory demand debt is the asserted liability of that company.

2. The unusual but viable extension of unconscionability reasoning
   The Court recognised it would be unusual to apply creditor–surety unconscionability concepts to protect a company guaranteeing in favour of a natural person, but the Court did not treat that novelty as fatal at the set-aside stage. :contentReference[oaicite:40]{index=40}

3. The doctrine’s practical function in corporate litigation
   Unconscionability here operated less as a final moral verdict and more as a gatekeeper against procedural overreach: it forced the dispute into the correct forum (ordinary proceedings) so that the full factual underpinnings could be tested. :contentReference[oaicite:41]{index=41}

4. The Court’s insistence on procedural discipline
   The Court’s decision to ignore further submissions filed without leave is not peripheral. It illustrates that credibility and procedural compliance can affect how a court receives a party’s case, and may affect costs. :contentReference[oaicite:42]{index=42}

Judgment Points

1. The statutory demand jurisdiction is a plausibility screen, not a mini-trial
   The Court applied the well-known “genuine dispute” threshold and treated the proceeding as analogous to interlocutory assessment. :contentReference[oaicite:43]{index=43}

2. A party is not necessarily shut out because its affidavit is imperfect
   The Defendant argued unconscionability went beyond the affidavit, but the Court accepted a reasonably available inference that the Plaintiff would contend enforcement was unconscionable and that there was just enough notice in the affidavit to permit the argument. :contentReference[oaicite:44]{index=44}

3. Equity can matter even when the alleged influencer is not the creditor
   The Plaintiff alleged undue influence by a third party, but the Court framed the relevant contest as whether it would be unconscionable for the creditor to enforce against a volunteer surety who was mistaken about the purport and effect, in circumstances where the creditor had not itself explained the transaction. :contentReference[oaicite:45]{index=45}

4. “Independent advice” clauses help, but they are not conclusive
   The documents contained terms advising independent legal advice, but the Court treated such clauses as evidential and not determinative, because a surety who proves lack of understanding may still succeed despite contractual recitals. :contentReference[oaicite:46]{index=46}

5. Allegations about full settlement and drawdown uncertainty were not the strongest ground
   The Court indicated the Plaintiff’s full-repayment contention did not provide a credible basis to deny an outstanding amount on the material presented. :contentReference[oaicite:47]{index=47}

6. Abuse of process arguments were not, on the Court’s analysis, the real engine of the set-aside
   The Court’s reasoning shows the “abuse of process” themes did not provide the decisive pathway in this case, because the documentation allowed pursuit of guarantors and because demand service complied with contractual notice provisions even if it did not come to actual attention. :contentReference[oaicite:48]{index=48}

Legal Basis

1. Corporations Act 2001 (Cth) s 459G: application to set aside statutory demand
   The statutory foundation for the Plaintiff’s application. :contentReference[oaicite:49]{index=49}

2. Corporations Act 2001 (Cth) s 459H: genuine dispute about the existence of the debt
   The Court must set aside a demand if there is a genuine dispute about the existence of the whole of the debt. :contentReference[oaicite:50]{index=50}

3. Corporations Act 2001 (Cth) s 459J: “some other reason”
   Alternative ground invoked by the Plaintiff in relation to abuse of process themes. :contentReference[oaicite:51]{index=51}

4. Equitable principle: unconscionable enforcement against a mistaken volunteer surety
   The Court accepted the possibility that the Plaintiff could frame a genuine dispute based on unconscionability in enforcement, informed by creditor–surety principles. :contentReference[oaicite:52]{index=52}

Evidence Chain

This section uses the Five-Link Structure: Statutory Provisions / Evidence Chain / Judicial Original Quotation / Losing Party’s Reasons for Failure. The required minimum is 5 to 8 in-depth victory points.

Victory Point 1: Identifying the correct statutory doorway, and staying inside it
Statutory provisions: Corporations Act 2001 (Cth) s 459G and s 459H. :contentReference[oaicite:53]{index=53}
Evidence chain: The Plaintiff filed the set-aside application supported by an affidavit asserting a belief in a genuine dispute, with enumerated grounds. :contentReference[oaicite:54]{index=54}
Judicial logic: The Court treated the exercise as determining whether a genuine dispute existed, not whether the Plaintiff would ultimately win. :contentReference[oaicite:55]{index=55}
Practical effect: The Plaintiff did not need to prove unconscionability; it needed to show an arguable issue with sufficient cogency.

Victory Point 2: Reframing “undue influence by a third party” into “unconscionability in enforcement by the creditor”
Statutory provisions: s 459H genuine dispute. :contentReference[oaicite:56]{index=56}
Evidence chain: The Plaintiff’s affidavit spoke in terms of undue influence and lack of understanding and lack of benefit. :contentReference[oaicite:57]{index=57}
Judicial logic: The Court accepted an inference that the Plaintiff would contend enforcement was unconscionable, with just enough in the affidavit to give fair notice. :contentReference[oaicite:58]{index=58}
Practical effect: This was the bridge that transformed a potentially misdirected grievance into a legally cognisable dispute for statutory demand purposes.

Victory Point 3: Anchoring the dispute in the volunteer surety concept
Statutory provisions: s 459H genuine dispute. :contentReference[oaicite:59]{index=59}
Evidence chain: The Plaintiff’s director evidence suggested the company did not gain from the guarantee and did not properly understand what it was signing. :contentReference[oaicite:60]{index=60}
Judicial logic: The Court treated “volunteer” and “mistaken about the purport and effect” as the right conceptual hooks for the unconscionability analysis. :contentReference[oaicite:61]{index=61}
Practical effect: Even in a corporate setting, the Court did not dismiss volunteer surety reasoning as impossible.

Victory Point 4: Exploiting evidential gaps on the creditor’s side without overreaching
Statutory provisions: s 459H genuine dispute. :contentReference[oaicite:62]{index=62}
Evidence chain: The Court observed there was little evidence about any acts by the creditor to explain the transaction, and limited evidence about what the creditor knew or should have known, including relationship cues suggested by addresses and naming. :contentReference[oaicite:63]{index=63}
Judicial logic: The Court did not require proof of the creditor’s knowledge; it required enough to make the issue plausible and worthy of investigation. :contentReference[oaicite:64]{index=64}
Practical effect: In statutory demand proceedings, a party can succeed by showing the opponent’s story is not yet complete and requires a proper forensic contest.

Victory Point 5: Neutralising the “independent advice clause” as non-conclusive
Statutory provisions: s 459H genuine dispute. :contentReference[oaicite:65]{index=65}
Evidence chain: The documentation included terms advising independent legal advice. :contentReference[oaicite:66]{index=66}
Judicial logic: The Court treated such clauses as important but not conclusive, because equity may intervene if the surety did not in fact understand the purport and effect. :contentReference[oaicite:67]{index=67}
Practical effect: Contractual recitals help, but they do not automatically extinguish equitable protections where the evidential reality is different.

Victory Point 6: Keeping the dispute in the correct procedural arena
Statutory provisions: s 459H (and conceptually, the purpose of the statutory demand regime). :contentReference[oaicite:68]{index=68}
Evidence chain: The Court described the unconscionability case as fact dependent and based on only a glimpse of the full underpinnings at this stage. :contentReference[oaicite:69]{index=69}
Judicial logic: Because the contentions were not so devoid of substance that no further investigation was warranted, the statutory demand had to be set aside. :contentReference[oaicite:70]{index=70}
Practical effect: The Plaintiff’s victory was not final vindication; it was procedural protection against being summarily shut out. :contentReference[oaicite:71]{index=71}

Victory Point 7: Avoiding over-reliance on weaker points
Statutory provisions: s 459H and s 459J. :contentReference[oaicite:72]{index=72}
Evidence chain: Some asserted grounds, such as “full settlement”, did not appear credible on the documents. :contentReference[oaicite:73]{index=73}
Judicial logic: The Court’s pathway shows the importance of choosing the strongest “one good arguable issue”, rather than scattering across multiple uncertain claims. :contentReference[oaicite:74]{index=74}
Practical effect: In statutory demand litigation, one cogent arguable issue is often more powerful than a list of tenuous ones.

Victory Point 8: The costs shadow as a strategic warning
Statutory provisions: UCPR r 42.1 (costs follow the event, subject to discretion) as discussed by the Court. :contentReference[oaicite:75]{index=75}
Evidence chain: The Plaintiff succeeded overall but failed on several arguments, and the Court noted the successful basis could have been more explicit and time was taken by inappropriate post-hearing submissions. :contentReference[oaicite:76]{index=76}
Judicial logic: Even a “win” can carry costs risk if the case was poorly marshalled.
Practical effect: The victory is meaningful but not cost-free in litigation management terms.

Judicial Original Quotation

Context: the Court drew on High Court surety reasoning to articulate unconscionability in enforcement against a mistaken volunteer.

Rather, it depends upon the surety being a volunteer and mistaken about the purport and effect of the transaction, and the creditor being taken to have appreciated that because of the trust and confidence between surety and debtor the surety may well receive from the debtor no sufficient explanation of the transaction’s purport and effect. To enforce the transaction against a mistaken volunteer when the creditor, the party that seeks to take the benefit of the transaction, has not itself explained the transaction, and does not know that a third party has done so, would be unconscionable. :contentReference[oaicite:77]{index=77}

Why that statement was determinative: it supplied the legal architecture that made the Plaintiff’s position plausible. The Court did not need to conclude those elements were proven; it needed to see they could be investigated with a full evidentiary record in conventional proceedings.

Analysis of the Losing Party’s Failure

The losing party at this stage (the Defendant, as the party seeking to uphold the statutory demand) failed not because her ultimate claim under the guarantee was adjudged wrong, but because she could not keep the dispute within the statutory demand shortcut.

Key reasons:

1. The statutory demand regime could not be used to sidestep a plausible equity-based contest
   Once the Court accepted the unconscionability issue was arguable and not spurious, the statutory demand could not stand. :contentReference[oaicite:78]{index=78}

2. The technical objection about affidavit scope did not shut the case down
   The Court found “just enough” in the affidavit to permit the unconscionability contention. :contentReference[oaicite:79]{index=79}

3. The creditor-side evidential record was thin on the creditor’s own explanatory conduct and knowledge
   In a surety unconscionability pathway, what the creditor did to explain and what the creditor knew are often pivotal. The record at this stage did not allow the Court to confidently conclude the dispute was illusory. :contentReference[oaicite:80]{index=80}

4. The Defendant’s strongest points did not answer the decisive issue
   The Defendant could point to contract clauses and to the availability of proceeding against guarantors. Those points are relevant, but they do not automatically extinguish an arguable equity defence at the statutory demand screening stage. :contentReference[oaicite:81]{index=81}

Key to Victory

The Plaintiff’s critical evidence and argument combination was:

• Evidence suggesting the Plaintiff did not understand the guarantee’s purport and effect and did not obtain independent explanation, paired with the assertion that the Plaintiff was a volunteer and received no gain. :contentReference[oaicite:82]{index=82}
• A legal reframing that moved from third-party “undue influence” language to creditor-enforcement “unconscionability” language, making the dispute legally relevant to the creditor’s asserted debt. :contentReference[oaicite:83]{index=83}

Reference to Comparable Authorities

Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Ratio summary: A “genuine dispute” is not one that is purely asserted; it must have real and non-spurious grounds. The Court’s task is to identify whether an arguable issue exists requiring investigation, not to resolve it finally.

Ligon 158 Pty Ltd v Huber (2016) 117 ACSR 495; [2016] NSWCA 330
Ratio summary: The threshold for genuine dispute is not demanding; if one cogent arguable issue is shown, the demand is set aside, but the Court guards against a threshold so low it defeats the statutory purpose. :contentReference[oaicite:84]{index=84}

Garcia v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48
Ratio summary: In creditor–surety contexts, enforcement may be unconscionable against a volunteer surety mistaken about the transaction’s purport and effect where the creditor has not explained and does not know that an independent person has done so, particularly in the presence of a relationship of trust and confidence between debtor and surety. :contentReference[oaicite:85]{index=85}

Implications

1. A signature is powerful, but it is not always the end of the story
   If you sign as a guarantor, the law generally treats that as a serious commitment. But equity recognises that trust relationships can distort true consent. Your protection depends on evidence and plausibility, not outrage.

2. The “fast lane” of debt recovery has guardrails
   A statutory demand is not meant to crush a real dispute. If there is a genuine issue, the creditor usually must prove the case in ordinary proceedings. That is not a loophole; it is procedural fairness in corporate form.

3. Clarity beats volume
   One coherent, legally recognised dispute can be stronger than many weak assertions. If you are resisting a demand, focus on the best arguable issue and support it with specifics.

4. Documents about independent advice matter, but so does reality
   Contract clauses saying you were advised to seek legal advice help the creditor. But if you truly did not understand and can show why, those clauses may not be decisive. The risk is still relatively high if you cannot provide credible detail.

5. Litigation discipline protects credibility
   Courts expect disciplined submissions. Late filings without leave and vague affidavits can damage the way your case is received, even if you win the main point.

Q&A Session

Q1: Does setting aside the statutory demand mean the Plaintiff “won” the debt dispute?
A: No. Setting aside a statutory demand generally means the Court found there was a genuine dispute requiring investigation. The creditor can still sue on the guarantee in conventional proceedings, where evidence can be tested fully. :contentReference[oaicite:86]{index=86}

Q2: Why was the unconscionability argument stronger than the “full settlement” argument?
A: The Court indicated the “full settlement” theme lacked credible support on the material at this stage, whereas the unconscionability pathway was fact dependent and not unarguable, making it suitable for investigation in a full proceeding. :contentReference[oaicite:87]{index=87}

Q3: If the creditor did nothing wrong personally, how can unconscionability still matter?
A: In surety contexts, the legal focus can be on whether it would be against conscience for the creditor to enforce against a volunteer surety who misunderstood the transaction, where the creditor did not ensure the transaction was explained and knew of a trust relationship between debtor-side and surety-side actors. :contentReference[oaicite:88]{index=88}

Appendix: Reference for Comparable Case Judgments and Practical Guidelines

1. Practical Positioning of This Case

Case Subtype: Corporate Insolvency Gateway Dispute — Statutory Demand Set-Aside Based on Genuine Dispute and Equity-Based Defence to Enforcement of a Guarantee
Judgment Nature Definition: Final Judgment (Principal judgment disposing of the set-aside application)

2. Self-examination of Core Statutory Elements

This case belongs to Category ④ Commercial Law and Corporate Law.

Core Test: Contract Formation

Step 1: Offer
Identify whether the creditor (or lender) made a clear offer capable of acceptance, including terms of lending, repayment, interest, costs, security, and the identity of parties.

Step 2: Acceptance
Determine whether the borrower and the guarantor accepted by execution of the loan agreement and any amending instruments, and whether the guarantee obligations were validly adopted through amendments.

Step 3: Consideration
Assess whether consideration moved. In guarantee contexts, consideration may include the lender’s advancement of funds to the borrower, or continued forbearance or extension of credit. The risk tends to be relatively high for a guarantor if the documentation clearly ties the guarantee to the loan advance or ongoing accommodation.

Step 4: Intention to create legal relations
In commercial documentation, intention is usually inferred. However, in cases with a strong non-commercial relational element, the dispute can shift from “intention” to “equitable restraint on enforcement”, because courts typically still treat signed documents as intended to be legally binding.

Step 5: Capacity and authority
For a corporate guarantor:
– Confirm the company’s capacity to enter the transaction.
– Confirm director authority and compliance with internal governance.
– Consider whether statutory assumptions about authority apply. Even where authority assumptions assist outsiders, internal governance disputes can still influence credibility and downstream claims.

Step 6: Certainty and completeness
Ensure essential terms are sufficiently certain: debt amount, interest mechanism, repayment triggers, enforcement rights, notice addresses, and guarantee scope.

Step 7: Variation and amendments
Where the loan agreement was amended multiple times, identify:
– Which amendment introduced the guarantor.
– Which amendments were executed by the guarantor.
– Whether amendments changed the debt quantum or enforcement triggers in a way that could affect a guarantor’s understanding and equity-based arguments.

Core Test: Section 18 of the Australian Consumer Law

Step 1: Conduct “in trade or commerce”
Assess whether the alleged conduct occurred in trade or commerce. Creditor enforcement and lending arrangements often satisfy this, but the analysis is fact dependent.

Step 2: Misleading or deceptive conduct, or conduct likely to mislead or deceive
Identify the representation:
– Who made it.
– What was said or implied.
– Whether it was about a matter of fact or future intention.
In this case type, a frequent risk point is where a trusted intermediary assures “no risk” while documentation creates significant risk; however, the remedy against a creditor depends on what the creditor did or knew.

Step 3: Causation and reliance
Show that the claimant relied on the misleading conduct and that reliance contributed to entering the transaction. The risk tends to be relatively high if the claimant cannot specify the representation and the reliance pathway with detail.

Step 4: Loss or damage
Identify the loss arising from reliance, including exposure to enforcement, legal costs, and any consequential financial harm.

Step 5: Remedy suitability
Consider whether ACL remedies are available against the creditor, or whether claims are primarily against the intermediary. Where the intermediary is not the creditor, ACL pathways may be more complex and may require careful analysis of agency, knowledge, or participation.

Core Test: Unconscionable Conduct

Step 1: Identify the “special disadvantage”
Special disadvantage can include lack of education, language barriers, financial illiteracy, strong relational dependence, vulnerability created by trust, or inability to make a judgment in one’s own interests.

Step 2: Knowledge of the stronger party
Determine whether the creditor knew or ought to have known of the disadvantage. Indicators can include shared addresses, family naming cues, non-commercial relationship context, and transactional irregularities.

Step 3: Exploitation or taking advantage
Assess whether the creditor took advantage of the disadvantage, including:
– proceeding without ensuring explanation,
– relying on the intermediary to explain,
– failing to check understanding,
– moving quickly to enforcement.

Step 4: Procedural fairness in formation
Examine whether the surety had:
– time to consider,
– independent advice,
– opportunity to refuse,
– clear explanation of purport and effect.

Step 5: Substantive unfairness
Consider whether the surety received any benefit or was a volunteer. A volunteer surety position can strengthen equity-based defences, but it does not guarantee success; the risk remains relatively high if evidence is thin or contradicted.

Step 6: Overall conscience evaluation
Conclude whether, in all circumstances, enforcement would be against conscience. This step is intensely fact dependent, and outcomes tend to be determined by credibility and documentary alignment.

3. Equitable Remedies and Alternative Claims

This section identifies feasible alternative paths when statutory avenues are exhausted. These are general frameworks only and must be applied carefully to the particular facts.

Promissory or Proprietary Estoppel

Step 1: Clear and unequivocal promise or representation
Identify whether a promise was made to the guarantor, such as “this guarantee is temporary”, “there is no risk”, or “the property will cover it”.

Step 2: Reliance
Show the guarantor acted or refrained from acting because of the promise, such as signing without advice, not negotiating, not insisting on security arrangements, or not monitoring the loan.

Step 3: Detriment
Demonstrate detriment, including exposure to enforcement, statutory demand pressure, and litigation costs.

Step 4: Unconscionability of resiling
Explain why it would be against conscience for the promisor to depart from the promise. Risk tends to be relatively high where the promise is vague, not clearly proved, or contradicted by documentation.

Step 5: Relief calibration
The Court may shape relief to avoid unconscionable departure from the promise, but relief is discretionary and fact dependent.

Unjust Enrichment or Constructive Trust

Step 1: Benefit received
Identify whether the debtor-side party or another received a benefit at the guarantor’s expense, such as access to funds, or release from obligations.

Step 2: At the guarantor’s expense
Show the connection between the guarantor’s liability and the benefit.

Step 3: Unjust factor
Identify the unjust factor: mistake, undue influence, failure of basis, unconscionable retention.

Step 4: Remedy
Seek restitution or declaration of beneficial interest if appropriate. Risk tends to be relatively high if the enrichment is indirect or difficult to quantify.

Procedural Fairness as a Conceptual Analogue

Even in private debt contexts, procedural fairness concepts can guide strategy:
– Ensure notice provisions were complied with.
– Examine whether contractual notice addresses were realistic and whether reliance on them created unfairness.
These arguments tend to have limited traction unless tied to a legal doctrine that changes enforceability.

Ancillary Claims

If a statutory demand is set aside:
– The creditor may sue on the guarantee.
– The guarantor may consider cross-claims against the borrower, contribution claims against co-guarantors, or claims against the intermediary or estate where relevant.
The success of such claims tends to depend on documentary rights, limitation periods, and provable factual misconduct.

4. Access Thresholds and Exceptional Circumstances

Regular Thresholds

1. Statutory demand set-aside timeframe
   An application under Corporations Act 2001 (Cth) s 459G must be brought within the strict statutory timeframe, and strict compliance tends to be determinative. The risk is relatively high if the application is late or procedurally defective.

2. Genuine dispute threshold
   A dispute must be bona fide and based on sufficiently particularised grounds that are real and not spurious. :contentReference[oaicite:89]{index=89}

3. “Some other reason” threshold
   Arguments such as abuse of process must show more than dissatisfaction with enforcement sequencing; they tend to require a clear misuse of the statutory demand procedure.

Exceptional Channels

1. Equity-based defences at the statutory demand stage
   Where a company can show an arguable equity-based defence to enforcement of the asserted liability, that can constitute a genuine dispute warranting set-aside, even if the underlying borrower debt appears outstanding. The dispute must still be plausible and sufficiently particularised.

2. Evidential “glimpse” sufficiency
   Because the Court’s role is limited to existence of dispute, a complete evidential record is not always required at the set-aside stage. This is not an invitation to vagueness; it is a recognition that full proof belongs in ordinary proceedings. :contentReference[oaicite:90]{index=90}

Suggestion

Do not abandon a potential defence simply because you suspect the paperwork is against you. Carefully test whether an equity-based pathway, grounded in evidence and plausibility, is available. However, the risk remains relatively high if your affidavit lacks detail or is contradicted by documents.

5. Guidelines for Judicial and Legal Citation

Citation Angle

It is recommended to cite this case in submissions involving:
– the genuine dispute threshold in statutory demand proceedings,
– the permissibility of advancing an arguable unconscionability pathway where the affidavit gives fair notice,
– the principle that statutory demands should not be used to summarily shut out a plausible equity-based contest.

Citation Method

As Positive Support:
Where your matter involves a statutory demand and the company has an arguable defence to enforceability requiring investigation, this authority can support a submission that the dispute is genuine and the demand should be set aside, with the creditor left to sue in the ordinary way. :contentReference[oaicite:91]{index=91}

As a Distinguishing Reference:
If the opposing party cites this case, you may emphasise distinctions such as:
– your dispute is merely a denial without particulars,
– there is clear evidence the surety understood and received independent explanation,
– there is strong evidence the surety received commercial benefit,
– your case lacks the relational trust dynamics that underpinned the plausibility of unconscionability here.

Anonymisation Rule

Do not use real names of the parties; strictly use procedural titles such as Plaintiff and Defendant, and neutral descriptors such as Borrower Company and other guarantors.

Conclusion

This case shows that statutory demand litigation is not a contest of who can apply the most pressure, but a test of whether the asserted corporate debt is truly beyond dispute. Where there is a real, arguable equity-based defence to enforcement of a guarantee, the Court may require the creditor to prove the claim through ordinary proceedings rather than allowing a statutory demand to function as a shortcut.

Everyone needs to understand the law and see the world through the lens of law. The in-depth analysis of this authentic judgment is intended to help everyone gradually establish a new legal mindset: True self-protection stems from the early understanding and mastery of legal rules.

Disclaimer

This article is based on the study and analysis of the public judgment of the Supreme Court of New South Wales (In the matter of Tang & Cheung Investments Pty Ltd [2025] NSWSC 817), aimed at promoting legal research and public understanding. The citation of relevant judgment content is limited to the scope of fair dealing for the purposes of legal research, comment, and information sharing.

The analysis, structural arrangement, and expression of views contained in this article are the original content of the author, and the copyright belongs to the author and this platform. This article does not constitute legal advice, nor should it be regarded as legal advice for any specific situation.

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