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[2026] NSWSC 924
Supreme Court of NSW
2026-08-04
Nixon J
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: In the matter of Hospitality Equipment 2020 Pty Ltd [2026] NSWSC 924
Hearing dates: 28 July 2026
Date of orders: 4 August 2026
Decision date: 04 August 2026
Jurisdiction: Equity - Corporations List
Before: Nixon J
Decision: 1. Order that the creditor’s statutory demand dated 13 January 2026 issued by the Defendant be varied by amending the amount of $22,834.00 claimed to $16,440.50.
2. Declare that the creditor’s statutory demand dated 13 January 2026 issued by the Defendant take effect, as varied by Order 1 above, from when the demand was served on the Plaintiff.
3. The Originating Process filed 9 February 2026 otherwise be dismissed.
4. The Plaintiff pay 60% of the Defendant’s costs of the proceeding, as agreed or assessed.
Catchwords: CORPORATIONS – winding up – statutory demand – application under s 459G of the Corporations Act 2001 (Cth) for order setting aside statutory demand – whether genuine offsetting claim established under s 459H of the Corporations Act 2001 (Cth) – amount of offsetting claim
Legislation Cited: Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, ss 54, 55
Corporations Act 2001 (Cth) ss 459G, 459H
Cases Cited: Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] 85 NSWLR 601; [2013] NSWCA 344
Re Citadel Financial Corporation Pty Ltd [2019] NSWSC 65
TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70
Category: Principal judgment
Parties: Hospitality Equipment 2020 Pty Limited (Plaintiff)
Jacelle Pty Limited as trustee for the Ghanem Family Trust trading as Comlink Solutions (Defendant)
Representation: Counsel:
A Jordan (Plaintiff)
G Cohen (Solicitor) (Defendant)
Solicitors:
Edward Kirby Lawyers (Plaintiff)
Gary Cohen Legal (Defendant)
File Number(s): 2026/55517
Publication restriction: Nil.
By Originating Process filed 9 February 2026, the Plaintiff, Hospitality Equipment 2020 Pty Ltd, makes an application under s 459G of the Corporations Act 2001 (Cth) (the Act) for an order setting aside a statutory demand dated 13 January 2026 (Statutory Demand) that was issued by the Defendant, Jacelle Pty Ltd.
The sole basis on which the Plaintiff sought to set aside the Statutory Demand at the hearing was that there was a genuine offsetting claim for an amount which exceeded the amount of the debts claimed in the Statutory Demand.
For the reasons set out below, I have determined that there is a genuine offsetting claim, but that the amount of that claim is substantially less than the amount of the debts claimed in the Statutory Demand.
The Plaintiff operates a business supplying commercial kitchen and catering equipment.
The Defendant operates a business providing information technology (IT) services, including server infrastructure, disaster recovery services and IT support.
In December 2023, the Plaintiff’s computer server failed. The Plaintiff engaged the Defendant to perform data recovery services and rented a replacement server from the Defendant (the Rental Server).
On 19 November 2024, the Rental Server failed. I address this event in more detail below when addressing the Plaintiff’s offsetting claim.
Following the failure of the Rental Server, the Defendant recovered files and folders for the Plaintiff, and restored the lost data to several USB devices, which were provided to the Plaintiff.
At around the same time, the Plaintiff engaged another firm, Project 3 IT Pty Ltd, to restore its server. The Plaintiff also engaged, on Project 3’s recommendation, Telephones Online Pty Ltd to set up its telephone lines so that they ran independently of the Plaintiff’s server, and therefore could continue to operate if the server went down.
This work was completed on around 2 December 2024.
On 31 March 2025, the Defendant issued two invoices to the Plaintiff. The first, which is in an amount of $14,815 (incl GST), is for the rent payable for the hire of the Rental Server up until November 2024, at a rate of $1,210 (incl GST) per month. The second, which is in the amount of $8,019 (incl GST), relates to the provision of various IT support services by the Defendant in the period from July 2023 to November 2024. This invoice includes an amount of $3,712.50 (incl GST) for the work done by the Defendant in late November 2024 to recover files for the Plaintiff following the failure of the Rental Server.
On 13 January 2026, the Defendant issued the Statutory Demand, claiming that it was owed an amount of $22,834. The affidavit accompanying the Statutory Demand identified this amount as the total of the two invoices referred to in the previous paragraph.
On 19 January 2026, the Statutory Demand was served on the Plaintiff at its registered office.
On 28 January 2026, the Plaintiff’s solicitor sent a letter to the Defendant’s solicitor, disputing the debt claimed in the Statutory Demand and, in addition, asserting the existence of a genuine offsetting claim, which was said to comprise the expenses and business interruption costs suffered as a result of the failure of the Rental Server. This claim was said to be, at that time, in the amount of $33,284.31. The Plaintiff’s solicitor stated as follows:
“Our client had been prepared to forgo this business interruption claim given your client’s services and simply write them off to a bad experience. Given your client’s actions in trying to recover payment for services which our client says were defective and negligent, our client is now intending to commence legal proceedings against your client to recover this debt.”
On 9 February 2026, the Plaintiff commenced this proceeding. In the supporting affidavit of its sole director, the Plaintiff asserted both that there was a genuine dispute as to the existence of the debts claimed in the Statutory Demand and that the Plaintiff had an offsetting claim.
Both of these issues were addressed by the evidence filed by the Defendant and by the written submissions of both parties.
On 9 July 2026, the Plaintiff filed its reply submissions, in which it abandoned its contention that there was a genuine dispute about the debts claimed in the Statutory Demand, but pressed its contention that it had an offsetting claim.
An “offsetting claim”, for the purpose of s 459H(1)(b) of the Act, means “a genuine claim that the company has against the respondent by way of a counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates)”: s 459H(5).
In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70 at [71], Dodds-Streeton JA (with whom Neave and Kellam JJA agreed) summarised what was necessary in order to establish an offsetting claim. Her Honour observed that the company which seeks to deploy such a claim:
“is required to evidence the assertions relevant to the … offsetting claim only to the extent necessary for that primary task [of establishing a genuine offsetting claim]. The dispute or offsetting claim should have a sufficient objective assistance and prima facie plausibility to distinguish it from a merely spurious claim, or assertion, and sufficient factual particularity to exclude the merely fanciful or futile … it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something between mere assertion and the proof that would be necessary in a court of law may suffice.”
“It is settled law that s 459H requires the Court to be satisfied that there is a ‘serious question to be tried’ … or ‘an issue deserving of a hearing’ as to whether the company has such a claim against the creditor … the claim must be made in good faith … in [Macleay Nominees v Belle Property East Pty Ltd [2001] NSWSC 743], Palmer J observed, at [18], that good faith, in this context, means that the offsetting claim was arguable on the basis of facts that were asserted ‘with sufficient particularity to enable the Court to determine that the claim is not fanciful’.”
The Court of Appeal also emphasised (at [47]) that the Court’s role is “to determine whether there was plausible evidence to establish the existence of a genuine dispute, not whether the evidence was disputed or even likely to be accepted on a final hearing of any such claim”. This observation, while made in relation to the genuine dispute ground, applies equally in respect of an offsetting claim.
Similarly, in Re Citadel Financial Corporation Pty Ltd [2019] NSWSC 65 at [30], White J observed that:
“In judging the sufficiency of the evidence to give rise to an offsetting claim, the question is not whether the evidence is sufficient to establish the offsetting claim or its amount, but whether it is sufficient to establish that the offsetting claim is genuine, and its genuine level ...
It is sufficient if there be a plausible contention requiring investigation ... The offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion and not be merely fanciful or futile ...”
In circumstances where the Court is satisfied that the company has an offsetting claim, the Court must calculate the “substantiated amount of the demand” by deducting, from the admitted amount of the debt (which is, in this case, $22,834), the amount of the offsetting claim: s 459H(2).
If the substantiated amount is less than the statutory minimum ($4,000), the demand will be set aside: s 459H(3). Otherwise, the Court may make an order varying the demand and declaring the demand to have had effect, as so varied, as from when the demand was served on the company: s 459H(4).
The Rental Server was hired from the Defendant for a fee of $1,210 per month (incl GST). The Plaintiff submitted, and the Defendant did not dispute, that:
it was implied term of the rental agreement that the Rental Server be fit for purpose; and
further, there were consumer guarantees under ss 54 and 55 of the Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, that the Rental Server would be of acceptable quality and reasonably fit for purpose.
It was common ground that the Rental Server failed. There was a period of around two weeks, from 19 November 2024 to 2 December 2024, between the failure of the Rental Server and the installation and testing of a replacement server. In that period, it was necessary for files to be recovered from the Rental Server, and for the Plaintiff’s data and systems to be moved to the replacement server.
I accept the Plaintiff’s submission that these matters give “prima facie plausibility” (TR Administration at [71]) to the Plaintiff’s claim that the Rental Server was not reasonably fit for purpose.
The Defendant referred to evidence that, on the day prior to the failure, a third party was granted access to the Rental Server at the request of the Plaintiff. The Defendant submitted that it was not informed of the work which this third party intended to perform; that the Plaintiff has not disclosed what the third party did on the server; and that “the proximate cause [of the failure] was the third-party access granted at the Plaintiff’s direction – not any conduct of the Defendant”.
Those matters do not establish either that the third party caused the failure of the Rental Server or that the Rental Server was in fact fit for purpose (particularly where there is no evidence of what the third party did, or why the Rental Server failed). At most, these matters indicate that there is, or may be, a genuine dispute about liability or causation. These matters do not provide a basis for concluding that the Plaintiff has failed to establish a “plausible contention requiring investigation”, and has therefore failed to establish a genuine offsetting claim (Citadel Financial at [30]; Britten-Norman at [31]).
The Defendant also referred to the fact that (as the Plaintiff conceded) there is no evidence of the Plaintiff asserting any claim against the Defendant arising from the failure of the Rental Server prior to the service of the Statutory Demand. However, as outlined below, the loss which the Plaintiff claimed to have suffered as a result of the failure of the Rental Server was similar to the amount which it owed the Defendant for the hire of the Rental Server and for IT services. In those circumstances, it is understandable that (as stated in the letter sent by the Plaintiff’s solicitor quoted in paragraph [14] above) the Plaintiff might have chosen not to pursue any claim in respect of the Rental Server’s failure until the Defendant issued the Statutory Demand in respect of its outstanding invoices. (In addition, there was evidence that, following the issue of the Defendant’s invoices, there were some discussions between the parties about a negotiated outcome, which may also explain why no claim was asserted at that time.)
The sole director of the Plaintiff, Mr Antoine (Tony) Hayek, swore two affidavits in support of the Plaintiff’s application to set aside the Statutory Demand. He deposed that, during the “Shutdown Period” (that is, the period of almost two weeks, from 19 November 2024 to 2 December 2024, during which the Plaintiff did not have an operational server), “the Plaintiff suffered loss and damages totalling $30,170.46 which I attribute to the crashing of the Defendant’s server”.
This amount of $30,170.46 was comprised of:
first, an amount of $10,666.91 representing “2 weeks worth of wages to staff” during this period “when the staff could literally do nothing”;
secondly, an amount of $13,672.05 representing the Plaintiff’s lost profits as a result of the failure of the Rental Server; and
thirdly, an amount of $4,306.50 paid to Project 3 “to come in and repair the problem” and a further amount of $1,525.00 paid to Telephones Online “to come and repair and re-set up the telephone lines”.
The first part of this claim may be put to one side. In oral address, Counsel for the Plaintiff conceded that his client could not claim any amount in respect of wages, as this represented a fixed cost (and therefore was not incurred as a result of the failure of the Rental Server).
As regards the claim for lost profits, Mr Hayek deposed that:
when the Rental Server crashed, “the Plaintiff had no server, no internet and no telephone which effectively brought the business to a halt”, such that “staff could not do any work and we were losing income and profit daily”;
during the financial year ending 30 June 2025 (FY2025), the Plaintiff generated income of $1,819,685, and made a net operating profit of $247,641 (which works out to be a 13% profit margin);
the FY2025 income of $1,819,685 represents an average monthly income of $151,640.41;
during December 2024, the Plaintiff achieved only $46,470.48 of sales;
the difference between the actual sales for December 2024 and the average monthly sales was $105,169.63, which represented the amount of sales lost as a result of the failure of the Rental Server; and
the application of a 13% profit margin to the estimated lost sales of $105,169.63 results in a loss of profit of $13,672.05.
The Defendant referred to evidence which indicated that Mr Hayek had overstated the impact of the failure of the Rental Server and, in particular, that the Plaintiff’s access to the internet was not disrupted for any significant period. For example, there was evidence that on 19 November 2024 (being the day of the failure of the Rental Server), Mr Hayek had called the Defendant and stated that the internet was “back on”. Further, on 26 November 2024, Mr Hayek sent an email to the director of the Defendant, Mr Paul Ghanem, stating that, we “have fixed the internet”, but that: “We still have telephone system is not working”.
The Defendant submitted that, given that the Plaintiff had access to the internet throughout the Shutdown Period, it was able to continue its online business following the failure of the Rental Server.
However, Mr Hayek explained in his affidavit that the Plaintiff’s business largely runs through a management program called “MYOB Exo”, which is a business management system and which relies on a server to operate. He deposed that:
“… For example, all of the orders run through the system and staff do quotes, updates, imports, update data, maintenance, links to the logistics side of the business, links to the Plaintiff’s website and CRM. Without access to this program the Plaintiff’s business comes to a halt and is wholly reliant on the server which it runs.”
“- Return server to site
- Reconnect all pc’s to server
- Reinstall Exo on all pc’s
- Resolve issue with pc’s connecting to Exo database
- Test Exo, printing etc”
Those matters provide a basis for concluding that there is a genuine claim that the failure of the Rental Server had an impact on the Plaintiff’s ability to use, for a period of around two weeks, a business management system which was essential to its business.
There are, however, several problems with the Plaintiff’s quantification of the loss claimed to have been suffered as a result of this interruption to its business.
First, and most importantly, the Plaintiff’s analysis of its loss commences with its reported income of $1,819,685 in the FY2025 report. However, according to the FY2025 report, this income is comprised of two separate components: namely, “Sales” ($805,156) and “Projects under proforma” ($1,014,529). The Plaintiff did not lead any evidence to explain this split in income or, in particular, to identify what “Projects under proforma” were, let alone whether there was any adverse impact on the income earned from such projects as a result of the failure of the Rental Server.
The Plaintiff sought to support its loss analysis by reference to statements made by a loss assessor in March 2024, to the effect that the Plaintiff had an annual income in the region of $2m, “which, at a rudimentary calculation, would equate to sales per day of $5,479.45”, such that if the system was offline for seven days or longer, there would be “a potential loss of income of over $38,000”. This evidence does not advance matters. There is no indication of the source from which the $2m figure for annual income was derived. Further, the figure of $2m is not far different from the reported income figure of $1.82m for FY2025. Accordingly, the $2m figure also likely consists of both income from “sales” and income from “projects”, in unidentified proportions.
Mr Hayek deposed that the shutdown of the Plaintiff’s business affected its capacity to earn income from sales. He did not give any evidence to the effect that the shutdown affected the Plaintiff’s ability to earn income from “projects”. Accordingly, there does not appear to be any basis for having regard to “project” income when determining the Plaintiff’s average monthly income from sales.
Given that the Plaintiff had total reported sales of $805,156 in FY2025, its monthly sales average was around $67,096. The difference between this figure and the actual December 2024 sales of $46,470 is an amount of $20,626. If this difference is regarded as representing the lost sales in December 2024, and the Plaintiff’s profit margin of 13% is applied to those lost sales, the result is a lost profit of around $2,681.
Secondly, there was no explanation as to why the Plaintiff’s analysis proceeded by reference to an alleged impact on sales in December 2024, when the consequences of the failure of the Rental Server occurred, for the most part, in November 2024, with the issue being addressed by 2 December 2024. It is plausible that the impact of events in November was primarily reflected in the invoices issued in December, but this was not addressed in the evidence.
Thirdly, as the Defendant submitted, the Plaintiff’s analysis of lost sales – which involves comparing actual sales in December 2024 against the monthly average – does not take account of seasonality. There was no evidence from the Plaintiff to the effect that its sales in the month of December are usually in line with the monthly average. Nor was there any evidence as to how the Plaintiff’s sales for December 2024 compared with its sales for December in prior or subsequent years. It might be the case that, for example, the Plaintiff’s business was usually closed for the latter part of December, or operating at a much-reduced level, such that its December sales were usually below the monthly average. However, it might also be the case, for a company connected with the catering industry, that the December / holiday period is usually busier than other times of the year. This gives rise to significant uncertainty about the quantification of the claim for lost profits.
Notwithstanding this uncertainty, I am satisfied that the evidence establishes a plausible contention requiring investigation that, as a result of the failure of the Rental Server, the Plaintiff suffered a loss in sales and consequently a loss in profits, and that one potential way of measuring this loss in sales is to calculate the difference between the actual sales for the relevant month and the average monthly sales, and to apply the Plaintiff’s profit margin to that difference.
For those reasons, I will allow an amount of $2,681 for this element of the Plaintiff’s offsetting claim.
The third element of the claimed loss set out in Mr Hayek’s affidavit consists of the amounts paid to Project 3 and Telephones Online for, respectively, the setting up of a replacement server and telephone system.
There is no dispute that these costs were incurred following the failure of the Rental Server.
The Defendant raised two issues in relation to this element of the Plaintiff’s offsetting claim.
The first was that the Defendant had no responsibility for the Plaintiff’s telephone service.
However, Mr Hayek deposed that:
he had been informed by Project 3 that the Defendant had linked the telephone lines to the server;
Project 3 had recommended, when doing their server restoration work, that the telephone lines should be set up so as to be independent from the server, in order to avoid any disruption to the telephone system in the event that the server went down; and
as a result, the Plaintiff engaged Telephones Online to perform this work.
Those matters are sufficient to establish a plausible connection between the failure of the Rental Server and the incurring of these costs.
The second issue raised by the Defendant was that the Plaintiff had, prior to November 2024, received from its insurer an amount of money for the costs of setting up a new server, and that this amount was greater than the amount in fact paid to Project 3 and Telephones Online for setting up a new server and telephone system, such that the Plaintiff had not suffered any loss as a result of incurring those costs.
In particular, there was evidence that:
following the failure of its server in December 2023, the Plaintiff made a claim on its insurer;
the Plaintiff’s insurer paid, in respect of this claim, an amount of $56,585 (excl GST), which was comprised of:
(a) an amount of $19,000 paid to the Defendant in order to investigate the issue, recover data and to build and install a temporary server; (b) plus an amount of $6,050, for the hire of the Rental Server from the Defendant for a period of five months, from 24 December 2023 to 31 May 2024, at a rate of $1,210 per month (incl GST); (c) plus an amount of $32,535 for a replacement server (based on a quotation obtained from the Defendant); (d) less the excess of $1,000.
Although the amount of rental paid by the Plaintiff in respect of the Rental Server was some $7,260 greater than the amount received from the insurer (because the Rental Server was hired for an additional six months beyond the end of May 2024), the amount paid by the Plaintiff to Project 3 and Telephones Online was some $25,000 less than the amount received from the insurer for a replacement server.
In circumstances where costs were incurred by the Plaintiff for the installation of a replacement server, and those costs were covered in full by moneys which the Plaintiff had previously received from its insurer in order to perform such work, I am not satisfied that there is a plausible contention that the Plaintiff suffered loss by incurring those costs.
In addition to the matters set out in Mr Hayek’s affidavit, Counsel for the Plaintiff referred to the fact that the Plaintiff had incurred, as a result of the failure of the Rental Server, costs of $3,712.50 (incl GST) which had been included in the Defendant’s invoice for IT services.
The narrative for this item in the Defendant’s invoice reads as follows:
“26/11/24 Task/Ticket: Server Recovery
...
Summary Notes: performed offline files and folders recovery, restored data to several USB disks provided by the customer …”
For the reasons set out above, I am satisfied that the Plaintiff has an offsetting claim, and I have determined that the amount of the offsetting claim is $6,393.50 (comprising $2,681.00 for lost profits and $3,712.50 for the cost of work undertaken by the Defendant following the failure of the Rental Server).
When the amount of the offsetting claim ($6,393.50) is deducted from the amount of the debt claimed in the Statutory Demand ($22,834.00), the resultant amount of $16,440.50 is above the statutory minimum of $4,000.
It follows that the Plaintiff has not established a basis for an order under s 459H(3) of the Act setting aside the Statutory Demand.
Instead, I will make an order, pursuant to s 459H(4) of the Act, that the Statutory Demand be varied by amending the amount claimed from $22,834.00 to $16,440.50, and will declare the Statutory Demand to have had effect, as so varied, from the date when the Statutory Demand was served on the Plaintiff (namely, 19 January 2026).
The Plaintiff abandoned its claim that there was a genuine dispute about the existence of a debt to which the Statutory Demand related, and has failed to establish that it has an offsetting claim of a sufficient amount so as to provide a basis for setting aside the Statutory Demand. It follows that the Defendant has enjoyed substantial success in the proceeding.
At the same time, the Defendant contended, unsuccessfully, that the Plaintiff did not have any offsetting claim at all, and a significant portion of its evidence and submissions were directed to this issue.
In those circumstances, I have determined that the appropriate order is that the Plaintiff pay 60% of the Defendant’s costs, as agreed or assessed.
For the reasons set out above, I make the following orders:
Order that the creditor’s statutory demand dated 13 January 2026 issued by the Defendant be varied by amending the amount of $22,834.00 claimed to $16,440.50.
Declare that the creditor’s statutory demand dated 13 January 2026 issued by the Defendant take effect, as varied by Order 1 above, from when the demand was served on the Plaintiff.
The Originating Process filed 9 February 2026 otherwise be dismissed.
The Plaintiff pay 60% of the Defendant’s costs of the proceeding, as agreed or assessed.
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