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[2026] NSWSC 1111
Supreme Court of NSW
2026-09-15
Nixon J
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 Phoenix Fitouts and Construction Pty Ltd [2026] NSWSC 1111
Hearing dates: 27 August 2026
Date of orders: 15 September 2026
Decision date: 15 September 2026
Jurisdiction: Equity - Corporations List
Before: Nixon J
Original judgment source is linked above.
Decision: 1. Order, pursuant to section 459H of the Corporations Act 2001 (Cth), that the statutory demand dated 24 June 2026 served by the Defendant on the Plaintiff be set aside.
2. The Defendant pay the Plaintiff’s costs of the proceeding, as agreed or assessed.
Catchwords: CORPORATIONS – statutory demand – where statutory demand served on Plaintiff claiming judgment debt arising from adjudication determination – where Plaintiff has commenced proceedings against Defendant in Supreme Court of Queensland seeking damages for defective and incomplete construction work – whether statutory demand failed to specify the debt due – whether genuine dispute regarding the claim for post-judgment interest – where Defendant accepts there is a genuine offsetting claim arising from construction defects but disputes quantum of claim – where dispute regarding construction of provisions of contract – whether quantum of genuine offsetting claim is greater than admitted amount of debt – whether relief ought to be conditional of payment of adjudicated amount into Supreme Court of Queensland
Legislation Cited: Building Industry Fairness (Security of Payment) Act 2017 (Qld) ss 91, 93, 96
Civil Proceedings Act 2011 (Qld) s 59
Corporations Act 2001 (Cth) ss 459E, 459H, 459J, 459M
Cases Cited: CBS Commercial Canberra Pty Ltd v Axis Commercial (ACT) Pty Ltd (2022) 159 ACSR 98; [2022] FCA 544
Creata (Aust) Pty Ltd v Faull (2017) 125 ACSR 212; [2017] NSWCA 300
Drillsearch Energy Ltd v Carling Capital Partners Pty Ltd [2009] NSWSC 1192
Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corporation t/as Verve Energy (2014) 251 CLR 640; [2014] HCA 7
Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd [2018] NSWSC 1647
Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; [2019] NSWCA 60
In the matter of Access Elevators Australia Pty Ltd [2016] NSWSC 739
In the matter of Citadel Financial Corporation Pty Ltd [2019] NSWSC 65
In the matter of Douglas Aerospace Pty Ltd [2015] NSWSC 167
In the matter of Kay Investment Holdings Pty Ltd - Kay Investment Holdings Pty Ltd v North East Developments Pty Ltd (in liq) [2011] NSWSC 1121
In the matter of Litigation Insurance Pty Ltd [2017] NSWSC 334
In the matter of Malvern Developments (Vic) Pty Ltd [2021] NSWSC 888
In the matter of Universal Property Group Pty Ltd [2019] NSWSC 796
In the matter of YCH Logistics (Australia) Pty Ltd ACN 078 330 837 [2013] NSWSC 1874
Parkview Constructions Pty Ltd v Futuroscop Enterprises Pty Ltd [2023] NSWSC 178
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4
Re Ad-A-Cab Holdings Pty Ltd [19976] 2 Qd R 115
Category: Principal judgment
Parties: Devmcoz Development Pty Ltd (Plaintiff)
Phoenix Fitouts and Construction Pty Ltd (Defendant)
Representation: Counsel:
I G Roberts SC and S Sykes (Plaintiff)
J Hastie (Defendant)
Solicitors:
McCullough Robertson Lawyers (Plaintiff)
Shannon Clark Tuhtan (Defendant)
File Number(s): 2026/00290646
Publication restriction: Nil
By Originating Process filed 14 July 2026, the Plaintiff, Devmcoz Development Pty Ltd, brings an application pursuant to s 459G of the Corporations Act 2001 (Cth) for orders setting aside or, alternatively, varying a statutory demand issued by the Defendant, Phoenix Fitouts and Construction Pty Ltd, on 24 June 2026 (Statutory Demand).
The Statutory Demand claimed an amount of $1,254,769.73, which was described as a “judgment debt” arising from the determination of an adjudication application under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (Qld SOPA). The amount claimed included the Adjudicated Amount, plus the adjudication fees and interest.
Devmcoz did not contend that there was a genuine dispute about the Adjudicated Amount. Instead, Devmcoz advanced three main contentions in relation to the Statutory Demand:
first, that there was a “defect” in the Statutory Demand, by reason that the Statutory Demand claimed post-judgment interest as part of the “judgment debt”, and substantial injustice will be caused unless the demand is set aside (s 459J(1)(a));
secondly, that there was a genuine dispute regarding the calculation of post-judgment interest (s 459H(1)(a)); and
thirdly, that Devmcoz had a genuine offsetting claim which exceeded the amount claimed in the Statutory Demand (s 459H(1)(b)).
Phoenix disputed each of these contentions and submitted that, in the event that the Court determined that the Statutory Demand should be set aside or varied, such relief should be made conditional on Devmcoz paying the Adjudicated Amount into Court.
On 26 September 2023, Devmcoz engaged Phoenix to carry out construction works on a development in Yatala, Queensland, which involved the construction of 14 commercial units and one common area (Project). On that date, the parties entered in a written agreement entitled “Contract Relating to the Construction of Lot 18 Warehouse Circuit, Yatala” (Contract).
On 1 October 2024, Mr Bruce Ballard, the superintendent appointed by Devmcoz, issued a “Practical Completion Certificate” which recorded that the Project had reached Practical Completion as at 5 September 2024.
On 5 March 2025, Phoenix served a final payment claim on Devmcoz in an amount of $2,379,093.70 (inclusive of GST) (Final Payment Claim).
On 19 March 2025, Devmcoz issued a Payment Schedule in response to the Final Payment Claim. The Payment Schedule asserted that there was a balance owing by Phoenix to Devmcoz, due to various matters including defective and incomplete work.
On 28 April 2025, Phoenix made an adjudication application in respect of its Final Payment Claim, pursuant to the Qld SOPA.
On 7 July 2025, the Adjudicator handed down his determination of Phoenix’s adjudication application (Adjudication Determination). The Adjudicator relevantly determined as follows:
“Adjudicator’s Decision
| … | | | | Adjudicated Amount | : | $958,483.37 including GST | | Due Date for Payment | : | 20 March 2025 | | Rate of Interest | : | $500 per day | | Claimant Application Fee Proportion (%) | : | 0% | | Respondent Application Fee Proportion (%) | : | 100% | | Claimant Fee Proportion (%) | : | 0% | | Respondent Fee Proportion (%) | : | 100%” |
Section 91 of the Qld SOPA provides that no later than five business days after an adjudicator’s decision, the registrar must provide the claimant with an adjudication certificate which, relevantly, states the “adjudicated amount” (s 91(1)(c)), the “rate of interest payable on the adjudicated amount” (s 91(1)(e)) and “the fees, identified in the decision, that the respondent is to pay” (s 91(1)(f)).
The A****djudication C****ertificate in respect of the Adjudication Determination was issued on 15 July 2025, and recorded the following information:
| NAME OF CLAIMANT: | Phoenix Fitouts and Constructions Pty Ltd | | NAME OF RESPONDENT WHO IS LIABLE TO PAY THE ADJUDICATED AMOUNT: | Devmcoz Development Pty Ltd | | ADJUDICATED AMOUNT: | $958,483.37 including GST | | DATE ON WHICH PAYMENT OF THE ADJUDICATED AMOUNT WAS REQUIRED TO BE PAID TO CLAIMANT: | 20 March 2025 | | RATE OF INTEREST PAYABLE ON THE ADJUDICATED AMOUNT: | $500 per day | | FEES, IDENTIFIED IN THE DECISION, THAT THE RESPONDENT IS TO PAY: | S96(1)(a): 100% | | S96(1)(b): 100% |
The final row of the Adjudication Certificate identified that Devmcoz was required to pay 100% of the Adjudicator’s fees and expenses (s 96(1)(a)) and to reimburse Phoenix for 100% of the adjudication application fee (s 96(1)(b)). This reflected the Adjudicator’s determination (see paragraph [10] above).
Section 93 of the Qld SOPA provides that an adjudication certificate may be filed as a judgment for a debt, and may be enforced, in a court of competent jurisdiction.
On 15 July 2025, the Adjudication Certificate was registered as a judgment of the Supreme Court of Queensland (Judgment).
On 12 August 2025, Devmcoz commenced proceedings against Phoenix in the Supreme Court of Queensland, claiming damages for defective and incomplete work (QSC Proceeding).
On 4 December 2025, Phoenix made an application in the QSC Proceeding seeking, amongst other things, an order that Devmcoz pay the Adjudicated Amount into Court.
On 16 December 2025, Devmcoz’s solicitors wrote to Phoenix’s solicitors, proposing that, in order to avoid the costs of determining Phoenix’s application, Devmcoz would consent to an order staying those parts of its Statement of Claim which related to the Adjudication Determination.
On 14 January 2026, Phoenix agreed to Devmcoz’s proposal.
On 30 January 2026, proposed consent orders were provided to the Supreme Court of Queensland. The Senior Judge sitting in Applications refused to make the orders, on the basis that the proposed “stay” of parts of the Statement of Claim did not make sense.
On 3 February 2026, the parties provided revised consent orders to the Court. Relevantly, the revised orders were to the effect that:
Devmcoz was to file and serve an Amended Claim and Amended Statement of Claim, which deleted those paragraphs relating to the Adjudication Determination; and
Phoenix’s application filed 4 December 2025 (seeking orders that the Adjudication Amount be paid into Court) was dismissed.
The Supreme Court of Queensland made those orders, by consent, on the same day.
On 23 February 2026, Devmcoz filed an Amended Claim and an Amended Statement of Claim, in accordance with the consent orders.
On 25 June 2026, Phoenix served the Statutory Demand on Devmcoz.
The Schedule to the Statutory Demand describes the debts claimed as follows:
“SCHEDULE
Description of Debts Amount of Debt
Judgment debt, arising from Adjudication Application No. 2832143 (the Decision) under the Building Industry Fairness (Security of Payment) Act 2017 (Qld), particularised as follows:
| Adjudication Application No. 2832143 | | Item | Amount ($ inc GST) | | Principal Adjudicated Amount (inc. GST) | $958,483.37 including GST | | Interest on Adjudicated Amount | $230,000 | | The sum of $500 per day (as determined by the Adjudicator in the Decision), multiplied by 460 days, representing the period from the due date for payment under the Decision (20 March 2025) to the present. | | Adjudicator’s Fees | $64,350.00 | | Adjudication Application Fee | $1,936.36 | | Adjudicated Amount - Total | $1,254,769.73 |
Total $1,254,769.73**”.**
“The debt the subject of the judgment comprises the following amounts:
(a) the adjudicated amount of $958,483.37 including GST;
(b) interest on the adjudicated amount at the rate of $500 per day, as prescribed by the Adjudicator, from the due date for payment being 20 March 2025, totalling $230,000, calculated as follows:
| Principal | Daily Rate | Number of days from 20 March 2025 | Total Amount | | $958,483.37 | $500 | 460 | $230,00[0] |
(c) the adjudicator’s fees of $64,350.00, a copy of the paid invoice being annexed to this affidavit and marked ‘JH2’; and
(d) the adjudication application fee of $1,936.36, paid on 28 April 2025 and receipted on 29 April 2025.”
Section 459E(2) of the Corporations Act relevantly provides that if a statutory demand relates to a single debt, it “must specify the debt and its amount”; and if a statutory demand relates to two or more debts, it “must specify the total of the amounts of the debts”.
Specification of the debt owed is considered a fundamental requirement for a statutory demand and accordingly, a failure to specify the debt will constitute a defect in demand: In the matter of Access Elevators Australia Pty Ltd [2016] NSWSC 739 at [95] (Robb J).
It is a question of fact in each case whether the statutory demand sufficiently specifies the debt and the basis upon which it is calculated: Re Ad-A-Cab Holdings Pty Ltd [1997] 2 Qd R 115 at 118 (Mackenzie J).
In In the matter of YCH Logistics (Australia) Pty Ltd ACN 078 330 837 [2013] NSWSC 1874 at [10], Brereton J made the following observations:
a statutory demand “must contain a sufficiently clear and accurate description of the debt claimed as to identify to a reasonable person in the shoes of a director of the debtor company the general nature of the debt to a sufficient degree that the director can assess whether there is a genuine dispute as to its existence or amount, or any offsetting claim”;
the demand “must enable a company served with it to identify with precision the debt or each and every one of the multiple debts upon which the demand is based”; and
where multiple debts are claimed, “each must be itemised, together with the total sum claimed”.
Section 459J(1)(a) of the Corporations Act provides that the Court may set aside a statutory demand if it is satisfied that “because of a defect in the demand, substantial injustice will be caused unless the demand is set aside”.
The precise basis on which Devmcoz submitted that there was a “defect” in the Statutory Demand was unclear. It appeared that the substance of Devmcoz’s complaint was that, although the Statutory Demand described the total amount claimed as a “judgment debt”:
pursuant to s 93(1) of the Qld SOPA, it is an adjudication certificate which may be “filed as a judgment for a debt”; and
the Statutory Demand included amounts additional to the amount set out in the adjudication certificate and, in particular, included an amount for post-judgment interest.
I do not accept that this meant that the Statutory Demand failed to “specify” the debts claimed or that there was a “defect” in the Statutory Demand.
The Schedule to the Statutory Demand and the affidavit of Ms Harris accompanying the Statutory Demand identified, with precision, the debts comprising the total amount claimed in the Statutory Demand.
Three of the four elements of the total amount claimed (namely, the “Adjudicated Amount”, the “Adjudication Application Fee”, and the “Adjudicator’s Fees”) were specified in the Adjudication Certificate to be payable by Devmcoz.
As regards the fourth element, I accept that the amount claimed by way of interest included both:
interest from the due date determined by the Adjudicator (20 March 2025) up to the date when the Adjudication Certificate was registered as a judgment (15 July 2025); and
post-judgment interest up to the date of the Statutory Demand.
However, both the Schedule to the Statutory Demand and the accompanying affidavit of Ms Harris identified how this amount of interest had been calculated, specifying the rate claimed ($500 per day); the source of the rate (the Adjudication Determination); the date from which interest was claimed (20 March 2025); and the total number of days in the period for which interest was claimed (460 days).
Having regard to those matters, I am satisfied that the Statutory Demand contained a sufficiently clear and accurate description of the debt claimed so as to enable a reasonable person in the position of a director of Devmcoz to identify the general nature of the debt claimed and to form a view (as Devmcoz plainly has done) as to whether there is a genuine dispute as to the existence or amount of the debt, or any offsetting claim.
For those reasons, I reject the contention that there was a “defect” in the Statutory Demand. Even if I had determined any such defect was present, I would not have been satisfied that substantial injustice will be caused unless the Statutory Demand is set aside.
A person served with a statutory demand may raise a genuine dispute about either the existence or the amount of the debt claimed in the statutory demand.
In the present case, Devmcoz did not raise a genuine dispute about the existence of the debt, insofar as it was based on the Adjudication Certificate, but did assert that there was a genuine dispute about the amount of the debt and, specifically, about the quantum of post-judgment interest claimed in the Statutory Demand.
In short, Devmcoz submitted that, once the Adjudication Certificate was filed as a judgment in the Supreme Court of Queensland, Phoenix’s rights under the Qld SOPA merged with the Judgment; and, accordingly, from the date of the Judgment, Phoenix was not entitled to interest at the rate determined by the Adjudicator (which matched the rate specified in the Contract), but instead was entitled to post-judgment interest in accordance with the relevant provisions of the Civil Proceedings Act 2011 (Qld) (Qld CPA).
Section 59 of the Qld CPA relevantly provides as follows:
Interest after money order
(1) This section applies in relation to a money order except to the extent the court otherwise orders.
(2) Interest is payable from the date of the money order on the money order debt.
(3) The interest is payable at the rate prescribed under a practice direction made under the Supreme Court of Queensland Act 1991.
…
(6) In this section –
money order –
(a) includes an order for the payment of costs in an amount to be ascertained, under the rules or otherwise, after the order is made; and
(b) does not include an order of the registrar, made under the rules, about the amount payable for costs under a money order.
money order debt, for a money order for the payment of costs in an amount to be ascertained after the order is made, means the amount ascertained under the rules or otherwise.
Phoenix disputed that there was any genuine dispute about the calculation of interest. The thrust of its submission was that:
section 59(1) of the Qld CPA provides that interest is payable at the prescribed rate “unless the court orders otherwise”; and
in this case, the Supreme Court of Queensland had ordered “otherwise” by registering as a judgment the Adjudication Certificate, which specified that interest was payable at a rate of $500 per day.
Devmcoz responded that it is necessary for “the court” to otherwise order, and in this case the Supreme Court of Queensland had made no such order. Devmcoz submitted that the item in the Adjudication Certificate relating to interest was not an “order” of “the court”, and any rights in respect of the Adjudication Certificate merged in the Judgment, with post-judgment interest then being determined solely in accordance with the relevant legislative provisions.
It is unnecessary to resolve this issue of statutory interpretation. The question for present purposes is whether there is a genuine dispute regarding the calculation of post-judgment interest.
There is a low threshold in establishing a genuine dispute. A genuine dispute is a dispute which is bona fide and truly exists in fact, and is not spurious, hypothetical, illusory or misconceived. A genuine dispute exists where there is a plausible contention which places the debt in dispute and which requires further investigation: In the matter of Kay Investment Holdings Pty Ltd - Kay Investment Holdings Pty Ltd v North East Developments Pty Ltd (in liq) [2011] NSWSC 1121 at [105] (Ward J, as her Honour then was).
I am satisfied that the low threshold for establishing a genuine dispute has been met. In particular, there is a plausible issue requiring investigation as to whether an adjudicator’s determination as to the rate of interest payable from the due date for payment, which is recorded (pursuant to s 91(1)(e) of the Qld SOPA) in an adjudication certificate that is filed as a judgment, has the effect of displacing the rate of post-judgment interest prescribed by the Qld CPA. This is a contestable issue of statutory interpretation, which requires consideration of the terms of each of the Qld SOPA and of the Qld CPA and the interaction between them.
Where the Court determines that there is a genuine dispute about the amount claimed in a statutory demand, it is necessary to determine how much of the amount claimed is not the subject of a genuine dispute. This amount is the “admitted total” for the purposes of s 459H of the Corporations Act.
Phoenix calculated that the amount of post-judgment interest, up to the date of the Statutory Demand, to which Phoenix would be entitled if Devmcoz’s contention on interest is correct is $119,180.18. Devmcoz did not dispute this calculation.
It follows that the “admitted total” of the Statutory Demand (for the purposes of s 459H) is this amount plus the other elements of the Statutory Demand (being the Adjudicated Amount and the amounts in respect of adjudication fees). The total of those amounts is $1,135,589.55.
In circumstances where (as is admitted here) there is an offsetting claim, it is necessary to determine the amount of that offsetting claim. The “admitted total” less this “offsetting total” will be the “substantiated amount” of the Statutory Demand: s 459H(2).
If the substantiated amount is less than the statutory minimum of $4,000, the Court must set aside the Statutory Demand: s 459H(3). Otherwise, the Court may make an order varying the Statutory Demand such that the amount claimed is the substantiated amount, and declaring the demand to have had effect, as so varied, as from when the demand was served on the company: s 459H(4).
An offsetting claim, for the purposes of s 459H(1)(b) of the Corporations Act, is the amount of a claim or claims that a company has against the person who served a creditor’s statutory demand by way of counter-claim, set-off or cross-demand, whether or not the amount arises out of the same transaction or transactions as the debt to which the demand relates: s 459H(5).
Although it is not open to a party in Devmcoz’s position to raise a genuine dispute in respect of a debt which is the subject of an adjudication certificate that has been filed as a judgment, such a party may advance an offsetting claim for defective or incomplete work: see In the matter of Douglas Aerospace Pty Ltd [2015] NSWSC 167 at [90]-[100] (Brereton J); Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; [2019] NSWCA 60 at [5]-[6] per Bell P (as his Honour then was), with whom Sackville JA agreed at [98].
It was common ground that Devmcoz was able to advance, as an offsetting claim, a claim which had been rejected by the Adjudicator, but not a claim which was accepted by the Adjudicator and taken into account in determining the Adjudicated Amount (see CBS Commercial Canberra Pty Ltd v Axis Commercial (ACT) Pty Ltd (2022) 159 ACSR 98; [2022] FCA 544 at [80]-[82] (Halley J)).
In Grandview at [65]-[66], Bell P referred to the “relatively low threshold that is necessary to be satisfied to establish an offsetting claim for the purposes of s 459H(1)(b)”, and quoted with approval the following observations of White JA in In the matter of Citadel Financial Corporation Pty Ltd [2019] NSWSC 65 at [30] (citations omitted):
“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 …”
It was common ground that Devmcoz has an offsetting claim. There was, however, a dispute about the quantum of that claim.
Devmcoz asserted that there were multiple defects in the works performed by Phoenix in respect of the Project, and claimed that Phoenix was liable for the costs of rectifying those defects. Devmcoz also claimed that Phoenix caused damage to the development site in various ways; that Phoenix was overpaid for certain works and services; and that Phoenix was liable to pay liquidated damages for delay.
Devmcoz did not advance any claims in respect of matters which had been adjudicated and allowed by the Adjudicator, but did claim in respect of some matters which had been adjudicated and rejected by the Adjudicator.
The total of the offsetting claim was said to be $1,402,214.15 (comprising $1,210,727.16 in respect of items not determined by the Adjudicator, and $191,486.99 in respect of items rejected by the Adjudicator). In addition, Devmcoz asserted that Phoenix was liable for pre-judgment interest on the claimed amounts, from 30 July 2025 to 27 August 2026, which Devmcoz calculated to amount to at least $105,423.00 as at the date of the hearing (27 August 2026).
It is unnecessary to specify the detail of each claim advanced by Devmcoz. That is because, with only a few exceptions (referred to below), Phoenix accepted that there was a genuine dispute about whether the defects existed.
However, Phoenix submitted that the Contract provided a complete code of the parties’ rights in respect of defects, and Devmcoz had only complied with that code in respect of a subset of the defects at issue, with the result that Devmcoz was able to pursue a claim only in respect of that subset. On that basis, Phoenix submitted that the total amount of the offsetting claim which Devmcoz could establish was $342,898.69.
“The Defects Liability Period stated in Annexure Part A shall commence at 4:00 pm on the Date of Practical Completion.
As soon as possible after the Date of Practical Completion, the Contractor shall rectify any defects or omissions in the work under the Contract existing at the Date of Practical Completion.
At any time during the Defects Liability Period, the Superintendent may direct the Contractor to promptly rectify any omission or defect in the work under the Contract for which the Contractor is responsible. The direction shall identify the omission or defect and state a date by which the Contractor shall complete the rectification work and may state a date by which the rectification work shall commence. The direction may provide that in respect of the rectification work there shall be a separate Defects Liability Period of a stated duration not exceeding the period stated in Annexure Part A. The separate Defects Liability Period shall commence on the date the rectification work is completed. This Clause 37 shall apply in respect of the rectification work and the Defects Liability Period for that rectification work.
If the rectification work is not commenced or completed by the stated dates, the Superintendent may have the rectification work carried out at the Contractor’s expense, but without prejudice to any other rights that the Principal may have against the Contractor with respect to such omission or defect and the reasonable cost of the rectification work incurred by the Principal shall be a debt due from the Contractor to the Principal.
If it is necessary for the Contractor to carry out rectification work the Contractor shall do so at times and in a manner which cause as little inconvenience to the occupants or users of the Works as is reasonably possible.”
The Date of Practical Completion was, as noted above, 5 September 2024. The “Defects Liability Period” was a period of six months commencing on the Date of Practical Completion (and therefore expiring on 5 March 2025).
Phoenix submitted that cl 37 was “highly prescriptive”, specifying a series of steps which the parties agreed to follow in the event that there was defective or incomplete work as at, or after, the Date of Practical Completion. These steps included that:
the Superintendent was able to issue a direction to Phoenix “to promptly rectify any omission or defect” in Phoenix’s work under the Contract;
the direction had to “identify the omission or defect” and “state a date” by which the rectification work was to be completed (and could also state a date by which the rectification work must commence); and
if the rectification work did not commence or was not completed by the stated dates:
(a) the Superintendent could have “the rectification work carried out at [Phoenix’s] expense, but without prejudice to any other rights” that Devmcoz may have with respect to the defective work; and (b) the reasonable cost of the rectification work incurred by Devmcoz would be a debt due from Phoenix to Devmcoz.
Phoenix submitted that the Court should find that the parties intended that cl 37 “would serve as a complete code – or a definitive statement of their respective rights and obligations in respect of defective or incomplete work existing at, or after, the Date for Practical Completion”, and that this conclusion, which turned solely upon the proper construction of the Contract, was consistent with various authorities which had considered similarly worded provisions, including Parkview Constructions Pty Ltd v Futuroscop Enterprises Pty Ltd [2023] NSWSC 178 (Rees J).
In Parkview at [260], Rees J concluded that the parties had, by agreeing to a detailed provision regarding rectification of defects, “surrendered their common law right to damages”, such that, absent compliance with the requirements of the provision, no entitlement for damages for defective or incomplete work could be maintained.
The same result was said to follow in the present case. In particular, Phoenix contended that the only defective or incomplete work in respect of which Devmcoz could raise a genuine offsetting claim was defective or incomplete work which was the subject of a direction given by the Superintendent in the Defects Liability Period. It was on this basis that Phoenix submitted that Devmcoz could only establish a genuine offsetting claim in an amount of $342,898.69.
I do not accept this submission, for the following reasons.
First, Phoenix’s submission depends on an interpretation of cl 37, which is contestable (as explained below).
Where on an application to set aside a statutory demand the asserted “genuine dispute” is as to the meaning of a contract, it may be appropriate to determine the contract’s meaning if a “patently feeble legal argument” is put forward: In the matter of Universal Property Group Pty Ltd [2019] NSWSC 796 at [15] (Rees J).
However, “where the question of construction has any element of rational controversy to it, the Court must exercise particular restraint”: Creata (Aust) Pty Ltd v Faull (2017) 125 ACSR 212; [2017] NSWCA 300 at [26] per Barrett AJA (with whom Gleeson and White JJA agreed).
In Creata at [29], Barrett AJA referred with approval to the following observations of Gleeson JA in In the matter of Litigation Insurance Pty Ltd [2017] NSWSC 334 at [31] (emphasis added):
“The important points to be derived from the authorities are as follows. First, the court dealing with a s 459G application is not compelled to determine questions of construction of documents. Second, s 459G proceedings are not ordinarily the occasion for the court to construe a contract where there are competing views about its meaning. Third, cases in which it will be appropriate for the court to entertain a construction argument on a s 459G application are likely to be few in number. Fourth, the court’s state of mind concerning the existence of a genuine dispute may range from a clear conviction that the debt does not exist to an opinion that the genuine dispute hurdle has only just been cleared.”
Accordingly, where there are clearly arguable alternatives as to the meaning of a term and related questions of construction, this of itself gives rise to a genuine dispute within s 459H(1)(a) and no attempt should be made to determine the question in an application to set aside a statutory demand: Drillsearch Energy Ltd v Carling Capital Partners Pty Ltd [2009] NSWSC 1192 at [47] (Barrett J).
In Grandview at [90], White JA made the following observations (citations omitted):
“It is usually inappropriate on an application to set aside a statutory demand that the court attempt to decide competing contentions as to contractual interpretation, partly because to do so might embarrass a judge before whom that issue arises and fundamentally because if the disputed question of contractual interpretation is arguable there will be a genuine dispute as to the existence of the debt, albeit one that does not depend upon a disputed matter of fact. But where the legal argument propounded in support of a particular construction is ‘patently feeble’ …, or where it is ‘as plain as a pikestaff’ that it has no basis … then there will be no genuine dispute …”
Secondly, I do not regard Devmcoz’s contention that cl 37 does not provide a code in respect of rectification claims as “patently feeble”. It is sufficient to note for present purposes that Devmcoz referred to the following matters:
Phoenix’s primary obligation was to “execute and complete the work under the Contract in accordance with the requirements of the Contract and directions [of] the Superintendent” (General Conditions, cl 3.1(a)(i));
Phoenix also had obligations:
(a) to execute and complete the work under the Contract in accordance with the Design Documents, so that the works, when completed, would be fit for purpose and would comply with all requirements of the Contract, legislative requirements, Australian Standards and the Building Code of Australia (General Conditions, cl 4.1(e)); and (b) to use in the performance of the Contract (General Conditions, cl 30.1):
(i) suitable new materials which are in good condition, are of high quality and suitable for the purpose for which they are intended; (ii) all proper care, skill and diligence; and (iii) all proper and tradesmanlike workmanship.
(a) in Parkview, Rees J placed significant weight on the fact that the relevant clause in that case envisaged that a final certificate would be issued evidencing the moneys finally due and payable “on any account whatsoever in connection with the subject matter of the Contract”, would provide “conclusive evidence of accord and satisfaction”, and would be “in discharge of each party’s obligations in connection with the subject matter of the Contract”, other than specified exceptions (see at [257]-[258] and [260]); and (b) in contrast, cll 42.4-42.5 of the General Conditions of the Contract in this case provided that the final payment claim “is not subject to defects or omissions or variations” and that the issue of a payment certificate “shall not constitute approval of any work or other matter nor shall it prejudice any claim by [Devmcoz]…”.
The question of the proper construction of cl 37 of the Contract requires consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purposes and objects to be secured by the contract: Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corporation t/as Verve Energy (2014) 251 CLR 640; [2014] HCA 7 at [35] (French CJ, Hayne, Crennan and Kiefel JJ).
Devmcoz and Phoenix have advanced competing constructions of the Contract, each of which is at least fairly arguable. In those circumstances, and having regard to the principles set out at paragraphs [73]-[77] above, it is inappropriate on the present application to express a view as to whether one construction is to be preferred over the other. It is sufficient to state that I do not consider Devmcoz’s construction of the Contract to be a “patently feeble argument”.
Thirdly, the proper forum for the resolution of the issue regarding the proper construction of cl 37 is the QSC Proceeding. It is notable that Phoenix has not sought summary dismissal of any of the defect claims advanced by Devmcoz in the QSC Proceeding (which substantially overlap with the matters raised as offsetting claims on the present application). Nor has Phoenix sought to have any issue regarding the construction of cl 37 determined as a separate question, on the basis that it presents a complete answer to the majority of Devmcoz’s claims. Instead, orders have been made in the QSC Proceeding for evidence and discovery.
Having regard to those matters, I am satisfied that there is a genuine dispute regarding the proper construction of cl 37 of the Contract, and therefore that Devmcoz has a genuine offsetting claim for defective or incomplete works (both in respect of those defects which were notified in accordance with cl 37 of the Contract, and those which were not).
Leaving aside the issue concerning cl 37, Phoenix contended that several of the claims for defective work advanced by Devmcoz were so patently feeble as to fail to meet the test for an offsetting claim, namely:
a claim for $113,680 in respect of an alleged failure to install 420 metres of a perimeter fence;
a claim for $30,000 in respect of “replacement” project management services in the period after the Date of Practical Completion; and
a claim for $133,757.54 in respect of rent paid by Devmcoz on behalf of a related entity.
One immediate point to note is that, even if it were determined that each of these claims did not meet the test of a genuine offsetting claim, this would not affect the outcome of the present application. That is because the balance of the offsetting claims identified by Devmcoz (excluding those listed in the previous paragraph) amount to $1,124,776.61. When interest up to 27 August 2026 is added to this amount, the total offsetting amount exceeds the “admitted amount” of the Statutory Demand (namely, $1,135,589.55), with the result that the Statutory Demand must be set aside, pursuant to s 459H(3) of the Corporations Act.
In any case, I do not accept Phoenix’s assertion that each of these claims was patently feeble. For example, Phoenix contended that the claim in respect of an alleged failure to install fencing was “fundamentally misconceived and spurious”, because Phoenix was contractually obliged to erect 115.71m of fencing and, on Devmcoz’s own evidence, Phoenix erected 130m of fencing.
However, Devmcoz submitted, by reference to the Design Documents which formed part of the Contract, that Phoenix was required to erect two separate fences: the first was a fence around the delivery yard which was to be 115.71m long; and the second was a spear head fence around the perimeter of the Project which was to be 420m long. Devmcoz led evidence from Mr Ballard that Phoenix did not construct 7.45m of the delivery yard fence, and only constructed 130m of the perimeter fence.
Again, it is unnecessary to resolve any contested issue about the requirements of the Contract or the length of the fence that was in fact constructed. It is sufficient for present purposes that I am satisfied that there is a genuine dispute about those matters.
For the reason set out above, I am satisfied that Devmcoz has established that the amount of its offsetting claim is greater than the admitted amount of the Statutory Demand.
It follows that, pursuant to s 459H(3) of the Corporations Act, the Court must set aside the Statutory Demand.
Section 459M of the Corporations Act provides that an order under s 459H may be made subject to conditions.
Phoenix submitted that, in the event the Court determines that the Statutory Demand should be set aside, any order should be subject to a condition that Devmcoz pay the Adjudicated Amount into the Supreme Court of Queensland. This was said to be for two main reasons:
first, the policy of the Qld SOPA is to promote and facilitate the prompt payment of amounts due in respect of construction work and the quick resolution of disputes in relation to payment, so as to ensure cash flow to persons undertaking construction work (referring to Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 at [39]-[40] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ); and
secondly, the offsetting claims advanced by Devmcoz are “feeble” and have “poor prospects of success”.
I do not accept the second of these submissions, for reasons set out above.
As regards the first, I accept that the policy of the Qld SOPA is as stated. Phoenix submitted that these policy considerations are similar to those which led Parker J to impose conditions under s 459M in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd [2018] NSWSC 1647.
However, two points should be noted.
First, in that case, Grandview had not commenced any proceedings to vindicate the offsetting claim which it asserted in response to the statutory demand. This was a critical factor for Parker J in determining that the Court should exercise its discretion under s 459M to impose conditions (at [68]):
“In my view, a company facing a statutory demand which it contests on the ground of an offsetting claim should be expected to take immediate action to bring that claim forward for determination in the proper forum. If the company does not do so, it is at risk of the Court concluding that the asserted offsetting claim is not genuine … The Court may also exercise its discretion to refuse to set aside the statutory demand even if an offsetting claim is established, or exercise its power under s 459M to impose conditions on the grant of relief.”
This explains the form of the condition imposed by his Honour, namely, “that Grandview undertake to commence proceedings as quickly as reasonably practicable to assert its offsetting claim (along with any other claim arising out of the subcontract), to pay the sum of $220,000 into Court in those proceedings, and thereafter to prosecute the proceedings with all due dispatch” (at [70]). The payment into Court was only one element of that condition, which was primarily focussed on the commencement and prosecution of proceedings in relation to the offsetting claim.
In contrast, Devmcoz commenced the QSC Proceeding to vindicate its offsetting claim on 12 August 2025, more than 10 months before Phoenix served the Statutory Demand.
Secondly, as Black J observed in In the matter of Malvern Developments (Vic) Pty Ltd [2021] NSWSC 888 at [13], the approach adopted in Grandview has not been universally adopted in cases of a similar character:
“In SBC Construction Pty Ltd v Quick Construction Pty Ltd [2019] 136 ACSR 228; [2019] NSWSC 310 …, White J distinguished the position between judgment debts arising after a contested hearing before a judge, and judgment debts arising by force of statute, including the SOPA, which his Honour characterised as ‘ministerial acts and not true judgment debts’. White J there declined to make it a condition of setting aside a statutory demand that the amount demanded should be paid into Court, while recognising that the party claiming to be a creditor was entitled to pursue his remedies as a judgment creditor. In a subsequent decision, Re Ming Tian Real Property Pty Ltd (2020) 145 ACSR 329; [2020] NSWSC 212 …, again arising in the context of an adjudication certificate under the SOPA that gave rise to a deemed judgment, Gleeson J reviewed the relevant authorities at some length, and also declined to make an order as a condition of setting aside the statutory demand that the amount demanded should be paid into Court.”
One matter which is relevant to the exercise of the discretion whether to impose the condition sought is that Phoenix previously brought an application in the QSC Proceeding for the Adjudicated Amount to be paid into Court by Devmcoz and consented to an order that this application be dismissed (see paragraphs [17]–[23] above).
Counsel for Phoenix said that his client agreed to those orders because, in circumstances where Devmcoz agreed to the striking-out of those parts of its claim which challenged the Adjudication Determination, Phoenix formed the view that there was no basis to press its application for payment of the Adjudicated Amount into court. However, this submission only serves to underline the difficulty with Phoenix’s position in the present proceeding.
In circumstances where Phoenix has formed the view that there is no basis for it to press its application in the QSC Proceeding for payment of the Adjudicated Amount into court, and has therefore agreed to orders being made by the Supreme Court of Queensland dismissing this application, I am not satisfied that this Court should exercise its discretion to require payment into the Supreme Court of Queensland as a condition of setting aside the Statutory Demand.
For the reasons given above, Devmcoz has established that it is entitled to an order pursuant to s 459H of the Corporations Act setting aside the Statutory Demand. Costs will follow the event.
Accordingly, I make the following orders:
Order, pursuant to section 459H of the Corporations Act 2001 (Cth), that the statutory demand dated 24 June 2026 served by the Defendant on the Plaintiff be set aside.
The Defendant pay the Plaintiff’s costs of the proceeding, as agreed or assessed.
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(2014) 251 CLR 640
(2019) 99 NSWLR 397
(2018) 264 CLR 1