In the recent case of Brandon Industries (VIC) Pty Ltd v V
Locker Pty Ltd  VSC 373, the respondent successfully
opposed an application to set aside a statutory demand on the basis
that the alleged dispute and offsetting claim did not presently
exist and were therefore not genuine.
Critically, the Court held that in order to have a statutory
demand set aside, any dispute or offsetting claim must exist at the
date of the hearing of the application and not some later date.
Kemp Strang's Brisbane office acted for the successful
Brandon and V Locker supplied refrigerated locker systems to the
Coles Group (Coles) for Coles Click 'n'
Collect, whereby customers of Coles can order groceries online
through the Coles website and collect their groceries from
refrigerated lockers.V Locker supplied the software and electronic
locking system components for the lockers and Brandon supplied the
Coles paid Brandon in full for the lockers but Brandon did not
pass on payment to V Locker for its contribution to the lockers in
accordance with the unwritten agreement between them.
Before V Locker issued the statutory demand, the director of
Brandon made a number of promises to pay V Locker and part paid one
of V Locker's invoices. Brandon did not pay the balance of the
amount claimed by V Locker, as a consequence of which V Locker
issued a statutory demand for payment of $225,486.31.
Only days after V Locker served the statutory demand, Brandon
served a number of invoices on V Locker to substantiate its alleged
Brandon argued that it had a latent defects case in that the
lockers were defective and it believed Coles would eventually make
a claim against Brandon for the defects.
Brandon also argued that its promises to pay V Locker were made
in order to have V Locker complete the job and the part-payment was
made before defects in the lockers became apparent.
Relevant legal standard
Sections 459G and H of the Corporations Act allow a
company to apply to set aside a statutory demand if it can satisfy
the court that there is a genuine dispute about the existence or
amount of the relevant debt or that the company has an offsetting
The standard to be met to evidence the genuine dispute or
offsetting claim is low and not difficult to meet, as it does not
require the court to engage in an in-depth examination of the
merits of the dispute: Malex Holdings Pty Ltd v Scotts Agencies
Pty Ltd (in liq)  VSCA 330.
However, the applicant company must show that the alleged
dispute or offsetting claim is genuine. It must be able to show
that the dispute is bona fide and truly exists, by evidencing that
the grounds for alleging the dispute are real, not spurious and
supported by factual particularity.
At the hearing, Brandon conceded that one year after the
completion of the installation of the lockers, Coles had not made
any allegation or demand that the lockers were defective and that
there was no current claim by Coles. Brandon's submission was
that the lockers had latent defects that would result in Coles
making a claim against Brandon at a later stage.
His Honour Justice Gardiner considered whether the
"potential or future" claim alleged by Brandon could give
rise to a genuine dispute for the purpose of section 459G.
His Honour affirmed previous authorities that a genuine dispute
or offsetting claim must exist at the date of the hearing of the
application and not some later date: Spencer Constructions Pty
Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452;
Advance Ship Design Pty Ltd v D J Ryan (1995) 16 ACSR
As Brandon could not at present issue a proceeding for damages
against V Locker for the alleged claims, His Honour considered that
there was no current genuine dispute.
As to the alleged offsetting claims, His Honour held that they
were also hypothetical, not real and not warranting further
investigation. In this regard, His Honour agreed with V
Locker's submission in adopting the observations of McPherson
JA in JJMR Pty Ltd v LG International Corp  QCA 519
"The claim to set off against the debt demanded must
not have been manufactured or got up simply for the purpose of
defeating the demand made against the company. It must have an
existence that is objectively demonstrable independently of the
exigencies of the demand that evoked it."
This case reaffirms that a genuine dispute and offsetting claim
must exist at the time of the hearing of an application to set
aside a statutory demand and that an alleged potential future
dispute (such as a latent defects case) will not be enough to set
aside a statutory demand.
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.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
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