Macquarie Prestige Developments Pty Ltd v Cavasinni Constructions Pty Ltd

January, 2013

Introduction:

The NSW Supreme Court has recently examined the ability of recipients of statutory demands to defend themselves from being deemed insolvent by raising an offsetting claim as defence to those demands under section 459H of the Corporations Act 2001 (Cth) (Act). In this case, the particular issue related to the sufficiency of the evidence that would be needed to satisfy the Court of the quantum of the set off claimed.

Facts:

Macquarie Prestige Developments Pty Limited (Plaintiff) and Cavasinni Constructions Pty Limited (Defendant) entered into a building contract, whereby the Plaintiff was the developer and the defendant was the builder. Under the contract, the defendant was entitled to make monthly progress claims. In January 2012, the defendant issued a progress claim for $115,854.75. This amount subsequently became the basis of the statutory demand under the Act (Statutory Demand). The plaintiff issued proceedings to set aside the Statutory Demand on the basis that it had an offsetting claim. Relevantly, this offsetting claim was made on two bases. The first was for rectification of building defects, in the amount of $88,802.37. The second was for expenses incurred due to breaches of the building contract, with the amount being “minimum sum of $300,000”.

Finding:

His Honour Brereton J found [at 17]:

“…the present plaintiff claims damages for “work done and expenses incurred as a result of the cross-defendant’s breach of contract.” In the relief claimed, there is a bare claim for “the minimum sum of $300,000 including GST” on that account…There is nothing in that pleading, nor is there anything in the evidence, extensive as it is, adduced before me, to support the sum of $300,000, or to show how it is calculated.”

His Honour continued [at 21]:

“….I am satisfied that the plaintiff has an offsetting claim to the extent of $88,802.37 only. The admitted total of the debt for the purposes of section 459H(5) is $115,854.75, and the offsetting total is $88,802.37. The substantiated amount of the demand is therefore $27,052.38.”

Impact:

Parties who are served with statutory demands, and who seek to avoid being deemed insolvent by claiming a set off to the demand, must ensure that their claims are sufficiently detailed so as to provide the Court with enough evidence to uphold the off set. A simple statement of why money is claimed as a set off will generally not be enough. There must be adequate evidence to support the set off claimed in order to avoid the statutory demand being upheld and the company being deemed insolvent or wound up in insolvency.

Contact Mills Oakley

If you have any questions regarding this article or any other building, construction or infrastructure matter, please contact:


Ziv Ben-Arie| Partner
T: +61 2 8289 5854
E: zbenarie@millsoakley.com.au

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