This week's TGIF considers the case of Brandon
Industries (Vic) Pty Ltd v Locker Pty Ltd  VSC 373 where
the Court dismissed an application to set aside a statutory demand
due to the applicant's failure to establish a genuine dispute
or offsetting claim pursuant to section 459H of the
Corporations Act 2001 (Cth).
From 2013, Brandon (Vic) Pty Ltd (Brandon)
subcontracted V Locker Pty Ltd (V Locker) to fit
out their design for a refrigerated locker network requested by the
Coles supermarket chain.
On 14 December 2015, V Locker served a statutory demand on
Brandon for $225,486.31 – the statutory demand annexing 8
invoices (Demand). On 23 December 2015, Brandon
applied for orders setting aside the Demand pursuant to sections
459G and 459J of the Corporations Act 2001 (Cth)
EVIDENCE OF A GENUINE DISPUTE AND OFFSETTING CLAIM
To determine an application to set aside a statutory demand,
under section 459H of the Act, an applicant is only required to
adduce evidence that establishes a genuine dispute or offsetting
claim. There is no need for a Court to engage in an in-depth
examination of the merits – all that is required is "a
plausible contention requiring investigation of the existence of
either a dispute as to the debt or an offsetting claim". The
applicant will fail in this regard if the evidence which the
applicant seeks to rely upon is so devoid of substance that a
further investigation by the Court is not warranted.
A key issue is whether the dispute or offsetting claim exists at
the date of the application. If the alleged dispute or offsetting
claim will arise upon the occurrence of a future event, then there
is no present genuine dispute as the claim is not in respect of an
action which has already accrued.
At the hearing of Brandon's application, there was a
voluminous amount of affidavit evidence relied upon by Brandon to
demonstrate why payments had not been made, including allegations
that the lockers provided by V Locker were defective and required
A review of the evidence revealed that, after V Locker's
installation of the lockers, Brandon was aware of the outstanding
debt to V Locker and did not dispute it. In early 2015, many months
prior to the service of the statutory demand, the parties were in
discussions to establish a payment plan on the basis that Brandon
had a cash shortage and was waiting for payment from its debtors.
Also, Coles had already paid Brandon in full for the lockers. This
evidence, together with evidence of part payments having already
been made, was not consistent with Brandon's allegations that
the lockers were defective – that allegation only appearing
for the first time in Brandon's affidavit material.
His Honour Gardiner J found that, upon his review of the
correspondence and after hearing the unconvincing explanations
provided by the director of Brandon at the application, Brandon had
not discharged the onus of establishing the existence of a genuine
dispute as the evidence adduced was not bona fide or real. His
Honour criticised Brandon, stating that the alleged dispute and
offsetting claims were "spurious" and
This case confirms the key principles for setting aside a
statutory demand on the grounds of a genuine dispute / offsetting
claim. Despite the low threshold of evidence required to establish
a genuine dispute / offsetting claim, this case is a good reminder
that a genuine dispute must exist at the date of the hearing of the
application and cannot be concocted after the statutory demand has
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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