Statutory Demands: Can they be set aside?
By Craig Painter
Statutory Demands can be set aside in certain circumstances. In a recent decision, a court considered Section 459H of the Corporations Act in relation to an application to set aside a statutory demand issued against one of the parties.
Facts
The plaintiff was involved in the construction of the Cotter dam expansion project. The defendant was engaged as a sub-contractor for electrical works (sub-contractor). The initial lump-sum contract was for approximately $3 million including GST.
Between October 2009 and February 2010, the contractor paid the sub-contractor a total of approximately $1.7 million by way of progress payments. In December 2010 the sub-contractor issued the contractor with a statutory demand for approximately $1.5 million in respect of six invoices issued by the sub-contractor. The contractor alleged that the sub-contractor was not entitled to payment because the contract had not been completed, either on time or in accordance with its terms. The contractor claimed that a significant portion of the work remained incomplete and a substantial amount of the completed work required rectification. Alternatively, the sub-contractor argued that there had been substantial performance of the contract.
Offsetting Claim
Section 459H of the Corporations Act provides that where a company in receipt of a statutory demand has a genuine claim against the issuing party, the statutory demand may be set aside or varied depending on the amount of the debt and the amount of the claim.
Decision
The court determined that the dispute did amount to a genuine dispute as the contractor had an offsetting claim against the sub-contractor. The court struck out the sub-contractor’s by reducing it. The sub-contractor was required to pay the contractor’s legal costs.
Comment
This decision confirms the principles of s 459H of the Corporations Act that where a company in receipt of a statutory demand genuinely disputes the debt, the statutory demand may be set aside or varied.
If you are involved in a dispute involving a statutory demand, you may be able to have it set aside.
For more information, please contact Craig Painter.
- email Craig at: cpainter@elringtons.com.au
- call Craig on: 02 6206 1300
