Re Tarrawarra Yarra Valley Holding Pty Ltd [2025] VSC 293: A case of ‘everything but the kitchen sink’

Litigation: 20 July 2025

Author: Caroline Skeoch - Our People

This case that involved a party seeking to have a Creditors Statutory Demand (CSD) set aside by raising a multitude of arguments including: an off-setting claim, a genuine dispute claim; a penalty claim and contravention of other legislation

In February 2025, Tarrawarra applied under s 459G(1) of the Corporations Act 2001 (Cth) (Act) to set aside a CSD issued to it on 14 January 2025 by YYW Financial.  The CSD sought the sum of $3,855,420.47 and was supported by a default judgment obtained by YYW Financial on 17 December 2024, in the prior County Court proceeding between the parties.

Tarrawarra asked the Victorian Supreme Court to set aside the CSD because:

• There is an offsetting claim within the meaning of s 459H(1)(b) of the Act and /or;
• There is ‘some other reason’ why the CSD should be set aside within the meaning of s 459J(1)(b) of the Act

(collectively, the application to set aside)

The application to set aside raised the following issues:

• YYW Financial had engaged in unconscionable dealing;
• the interest payable under the terms of the contract between the parties (as reflected in the default judgment) was a penalty and therefore unenforceable; and
• there had been a contravention of the Farm Debt Mediation Act 2011 (FDM Act) because the parties had not mediated the dispute before proceedings were commenced in the County Court.

Timetabling orders were made requiring the parties to file and serve evidence and submissions by 7 March 2025 and set down a hearing date for 20 May 2025.  YYW Financial complied with the orders regarding filing and service of material however, Tarrawarra did not.  In late April 2025, Tarrawarra sought an adjournment of the hearing of its application to set aside the CSD until the County Court determined Tarrawarra’s proposed application to set aside the default judgment, which formed the basis of the CSD (the adjournment application).  In support of its adjournment application, Tarrawarra sought to rely on an affidavit in support, totaling 455 pages which was provided to the Court and YYW Financial at 6.30pm the day before the hearing of the application to set aside.

His Honour Justice Delany refused permission for Tarrawarra to rely on the affidavit, and refused to allow the adjournment application, stating, respectively:

•  “..the late service of such evidence is inconsistent with the overarching obligation in s 25 of the Civil Procedure Act 2010 (Vic) (CPA) owed by Tarrawarra and by the legal practitioners acting on its behalf to act promptly and to minimise delay.” (Re Tarrawarra Yarra Valley Holding Pty Ltd [2025] VSC 293, [27])
• “this is a case of too little and far too late on the part of Tarrawarra” (concerning the adjournment application) (Re Tarrawarra Yarra Valley Holding Pty Ltd [2025] VSC 293, [41]) This was because, although Tarrawarra commenced its application to set aside on 7 February, it did not at the same time issue an application to set aside default judgment in the County Court.  

His Honour also made comments about Tarrawarra’s breach of its overarching obligations under the Civil Procedure Act 2010 (Vic) identifying their conduct as disruptive and oppressive. At paragraph 48, his Honour declared that “Orders of the Court are not guidelines. That is particularly the case in time sensitive applications such as an application to set aside a statutory demand.”  His Honour went on at paragraph 49, “In future cases involving applications to set aside statutory demands timetabling orders will include a warning in ‘Other Matters’ that without an application by summons supported by an affidavit explaining the delay no party will be permitted to rely upon evidence or submissions filed outside the time specified in those orders.”  

The Supreme Court has since issued a Practice Note to the legal profession and the parties who bring applications to set aside Statutory Demand about the conduct of such applications and imposing strict timetabling requirements. 

Grounds seeking to set aside – offsetting claim / interest / FDM Act - s 459H(1)(b)

Tarrawarra claimed it had an offsetting claim for monies it said it was owed, which would have the effect of reversing the County Court default judgment.  The offsetting claim was based on:

• alleged unconscionable dealing by YYW Financial;
• that the interest payable under the terms of the contract between the parties (as reflected in the default judgment) was a penalty and therefore unenforceable, and
• there had been a contravention of the Farm Debt Mediation Act 2011 (FDM Act) in that the parties had not mediated before proceedings were commenced in the County Court.

Concerning the first ground, his Honour Justice Delany was not satisfied that the evidence filed on behalf of Tarrawarra was sufficient to establish there is a serious question to be tried in relation to alleged unconscionable dealing, which was characterised by Tarrawarra as “general assertions” with “no direct evidence in support of the asserted claim.”

Concerning the second ground, even if Tarrawarra could establish the interest on the loan amounted to a penalty (based on the loan agreement which allowed for a standard rate of 9.5% and a default rate of 24%), the result would be an offsetting claim for only that portion of the CSD that relates to the interest component. Even if the County Court held the interest was a penalty and was not recoverable, there would not be an offsetting claim for the amount of the CSD which otherwise exceeds the statutory minimum for issuing a CSD.  In those circumstances, the Court held, the ‘penalty’ argument does not form a proper basis to set aside the CSD pursuant to s 459H(1)(b).

Considering the third ground, his Honour Justice Delany stated while it may theoretically be possible for Tarrawarra to rely on an alleged contravention of the FDM Act to seek to set aside the default judgment, but to do so Tarrawarra would need to demonstrate, amongst other things, that Tarrawarra is itself a ‘farmer’ within the meaning of the FDM Act. No evidence of that issue was given in application to set aside.

Grounds seeking to set aside – ‘Some other reason’  - s 459J(1)(b)

Tarrawarra relied on the same grounds for seeking the court set aside the CSD pursuant to s 459J(1)(b) of the Act, that is, there is some other reason to set aside the CSD.

His Honour found that there was insufficient evidence in respect of the alleged unconscionable conduct allegation and the breach of the FDM Act, such it was not appropriate to set aside the CSD based on s 459J(1)(b) of the Act.

As to the consideration relating to the interest component on the CSD, his Honour held it was not his role to determine whether the interest was in fact a penalty especially considering this argument was not supported by any expert evidence which would evaluate the rate specified against the level of risk assumed, and the circumstances of the case.  There was also no caselaw authority provided to direct his Honour on the issue. Therefore, His Honour held it was not appropriate to try and evaluate of determine the merits of such an argument ‘on the run.’

His Honour concluded that the proper exercise of s 459J(1)(b) of the Act, is appropriately confined to cases where the matters relied on, if not acted upon to set aside the demand, would give rise to substantial injustice, would result in an outcome that is unconscionable or would amount to an abuse of process. (Re Tarrawarra Yarra Valley Holding Pty Ltd [2025] VSC 293, [93])

Key Takeaways

• Compliance with Courts timetabling is not optional nor is it a guideline – it is mandatory.

• The Court does take notice when one party doesn’t follow court orders and procedures – in this case, the Court not only refused the application to set aside but ordered Tarrawarra to pay YYW Financials’ costs defending the application based on Tarrawarra’s inordinate delay and repeated failure to comply with Court orders.

• Parties must be mindful of their overarching obligations owed under the Civil Procedure Act, in the conduct of the litigation.

• An application to set aside a CSD which is brought pursuant to s 459H(1)(b) of the Act based on an offsetting claim must be supported by sufficient to establish there is a serious question to be tried in relation to alleged offsetting claim and not merely general assertions about the existence of such a claim.

• An application to aside a CSD which is brought pursuant to s 459J(1)(b) of the Act for ‘some other reason’ required evidence that to set aside the CSD was required to avoid a substantial injustice, an outcome that is unconscionable or would amount to an abuse of process.