Independent Portable Buildings Pty Limited v Modular Building Systems Pty Limited

The Evidence 10 The originating process filed on 1 February 2011 was supported by an affidavit sworn the same day by Robert James Nalder, the managing director of IPB. 11 At the hearing on 11 May 2011 IPB sought leave under O 14 r 6 of the Federal Court Rules to rely on that affidavit notwithstanding some defects in form as to the deponent's signature and as to the timing of the compliance certificate. Mr Spencer did not oppose that leave and I granted it. 12 There were objections to two sentences of Mr Nalder's affidavit. One of those sentences was not pressed and the other I rejected as inadmissible. 13 Also tendered and admitted, without objection, was an exhibit (RN1) to Mr Nalder's affidavit. This exhibit was largely made up of a substantial amount of email correspondence exchanged between IPB and MBS, some of it involving Gujarat NRE, between 23 September and 22 December 2010. 14 I shall return to the detail of Mr Nalder's evidence below. 15 By leave, Mr Nalder gave some short supplementary oral evidence to identify the handwriting on the copy of the Metropolitan Building Approvals' report which was part of the exhibit to his affidavit. He said, and I accept, that the handwriting and the handwritten ticks in the right hand columns were his. 16 Mr Nalder was not cross-examined. 17 An affidavit of Sandra Carniato sworn on 29 April 2011 was filed but not read. This was because there was no dispute between the parties at the hearing that the application by IPB had been made within the 21 days after the demand was served, that period being prescribed by s 459G(2). 18 No evidence was called by MBS.

The facts 19 The statutory demand states, in effect, that IPB owes MBS the amount of $178,790.26, being the amount of the debt described in the Schedule. The Schedule refers to two tax invoices: No 100478 dated 9 August 2010 in the amount of $577,450.50 and No 100499 dated 31 August 2010 in the amount of $63,300.16. The Schedule also refers to payments received in the sum of $461,960.40 and states a total balance outstanding as $178,790.26. The same tax invoices and amounts are referred to in the affidavit accompanying the statutory demand, sworn by Mr Glenn Smith on 22 December 2010. In that affidavit Mr Smith states that the debt is due because IPB has failed to pay outstanding moneys due under the two tax invoices. Mr Smith states that he believes that there is no genuine dispute about the existence or the amount of the debt. 20 Mr Nalder, in his affidavit, refers to MBS' demand as a "purported Creditor's Statutory Demand". He states that there is a genuine dispute as to the debt claimed in the demand. As I read his affidavit he then goes on to identify the basis for that contention. 21 At paragraph 13 of his affidavit, Mr Nalder states that IPB: contends, and it is the fact, that MBS failed to undertake the Works in accordance with the terms of the Contract and otherwise in a satisfactory and workmanlike manner ["the Defects"], in that: a. The floor of the shower area of the washroom has not been constructed with a 1:10 gradient as specified in the Building Specifications; b. The disabled toilet in the washroom has not been constructed in accordance with the Building Code of Australia as specified in the Purchase Order; c. The windows in the washroom have not been constructed as sliding windows as specified in the Building Specification; d. The electrical fuse box in the washroom has burnt out. 22 In paragraph 15, Mr Nalder says that a number of issues have already been addressed but the issues relating to the Defects remain outstanding. He refers then to some 260 pages of print outs of emails and states: Despite these exchanges the Defects remain unaddressed. 23 He next refers to a report IPB obtained from Grant McGrath of Building Code Professionals dated 20 May 2010. A copy of that report is in evidence. 24 Mr Nalder then refers in his affidavit to a second report, also in evidence, from Camile Haddad of Metropolitan Building Approvals dated 15 November 2010 dealing with whether an occupancy certificate may be issued in respect of the washroom. 25 Lastly, Mr Nalder says that IPB denies any further liability to MBS: In particular, IPB contends that, as a result of the Defects, it is not liable for the full amount of the contract sum. IBP contends that the costs associated with rectifying the defects are to be offset against the contract sum. 26 The terms of the contract were in evidence and Mr Spencer accepted, for the purposes of these proceedings, that the documents in evidence constituted the contract. 27 I now set out the relevant parts of the contractual documents. 28 First, there is a purchase order dated 19 May 2010 from IPB to MBS saying: Please proceed with Your Quotation 10157 Rev C dated 19th May 2010. The amount of the building cost was said to be $564,998.50 and the delivery and installation cost was said to be $57,200.00. The quotation was not in evidence. 29 Importantly, under the heading "PAYMENT TERMS" the following is said in relation to the building invoice ($513,635.00 + GST): - IPB are contracted to be paid fifteen (15) days from the building being delivered to site & MBS will be paid within (24) hours from IPB receiving this payment. and as to the installation invoice ($52,000.00 + GST): - IPB are contracted to be paid fifteen (15) days from the building's installation works being completed & MBS will be paid within (24) hours from IPB receiving this payment. 30 There is a note stating that: If, upon usage after commissioning NRE finds ventilation, cooling & heating is not adequate then the following is to apply: - MBS will at it's [sic] own cost, no cost to NRE or IPB, install the required number of split system air-conditioners, ventilation fans & heaters required to meet effectiveness. 31 Under the heading "Other requirements" relating to the purchase order, the following appears: - Building must comply with all BCA Codes and all AS/NS standards. 32 At the foot of the purchase order it is said that the total including GST is $622,198.50. This figure is made up of $565,635.00 plus $56,563.50 GST. 33 Following the first page of the purchase order there is a document of seven pages on IPB letterhead dated 15 April 2010 and described as: Clean - Dirty Bathrooms Building Specification as per drawing no: 11329 17 May 2010. 34 Under a subheading "Flooring" as to both change rooms and shower and toilets, the following appears "(1:10 Graded)". 35 Under "Windows" there is reference to a total of 21 windows "fitted with sliding sash". 36 There is a subheading "Disabled Toilet Area - AS 1428-1-2001". 37 There is also detail under a heading "Electrical Scope to AS 3000, as required for Mine Site Electrics".

Whether the demand was defective and whether, unless set aside, substantial injustice would result. 38 Mr Harding contended that the demand was defective in that: (a) it did not identify the legal basis for the claim; (b) it did not identify the works, the subject of the demand; (c) it claimed an amount that differed from the contract sum specified in the Subcontract in that it claimed an entitlement to an amount (before deductions for payment made) of $640,750.66 whereas the Subcontract sum was only $622,198.50. It was said that it was impossible to identify from the demand the reasons for this discrepancy and the basis for the claimed higher sum. Reference was made to LSI Australia Pty Ltd v LSI Holdings Ltd (2007) 25 ACLC 1,602; [2007] NSWSC 1406 at [50]-[59]; and to John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250 at 253. 39 Mr Spencer submitted that Mr Nalder expressed no confusion as to what the demand related to and that Mr Nalder did not cavil with the contract sum. Mr Spencer also contended that s 459J had not been relied on in the originating process and should not be allowed to be deployed. He further submitted that it was clear that the test in LSI Australia involved a misapprehension of the basis on which the amount was claimed. Here, he submitted, there was no misapprehension by Mr Nalder about what the demands related to and that there was no doubt about the contract, the work or the matters of liability. 40 Turning to consider these submissions, I see nothing in John Holland Construction which supports IPB's submission that the demand was defective. 41 Further, LSI Australia was a quite different factual case. There, the statutory demands were vague or ambiguous and in a manner which affected the perception and understanding of a reasonable reader. 42 In the case before me there is nothing to support the conclusion that a reasonable person in the shoes of a director of IPB could not identify the general nature of the debt to a sufficient degree that the director could assess whether there was a genuine dispute as to the existence or amount of the debt or of an offsetting claim. Indeed, Mr Nalder makes that assessment and asserts that there is a genuine dispute as to the existence or amount of the debt or an offsetting claim. 43 Looking at this issue as a matter of substance, the only word in Mr Nalder's affidavit or in the originating process that goes to the present issue is the word "purported". Nothing else relevant to the issue of the demand being defective emerges from the affidavit or the exhibit to it. The demand is expressed as a claim in debt. There is no dispute as to the source of the claim in the contract for the delivery and installation of the washroom. The sum of $178,790.26 is stated in an email dated 9 December 2010 from Mr Smith to Mr Nalder and Gujarat NRE without any demur by Mr Nalder as to its calculation. 44 It is the case that the tax invoices are not in evidence but there is no dispute raised expressly or by implication in Mr Nalder's evidence as to the arithmetic. 45 Thus I find that, on the assumption that it is necessary that it do so, the demand does identify the legal basis for the claim and the works the subject of the demand. I also find there was no material defect flowing from the mere difference between the contract sum and the amount of the demand. 46 For these reasons I reject IPB's submission that the demand is defective. 47 I do not therefore find it necessary to decide on the merits of the submission by MBS that IPB should not be permitted to raise this ground. 48 Nevertheless I do find that there was no articulation in the affidavit of Mr Nalder of the s 459J ground and I also find that that ground is not evident on the face of the documents: see Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 at 456C - 456D. I note however that O 71 r 36B of the Federal Court Rules which was referred to by Sundberg J in Graywinter has since been repealed and there appears to be no equivalent provision in the Corporations Act or in the Federal Court (Corporations) Rules 2000 requiring that an application under s 459G must be accompanied by an affidavit identifying the grounds on which it is said that the Court should make an order under s 459H or 459J. 49 In contrast, the Federal Court (Corporations) Rules 2000 r 2.2(3) provides that an originating process must: (a) be in accordance with Form 2; and (b) state: (i) each section of the Corporations Act or the ASIC Act, or each regulation of the Corporations Regulations, under which the proceeding is brought; and (ii) the relief sought. 50 I do not, therefore, decide that IPB was not entitled to raise this ground in submission. Instead, I find that, on the assumption it was entitled to raise the ground, the demand was not defective.

Is there a genuine dispute as to the existence or amount of the debt to which the demand relates? 51 In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 464F-464G a Full Court of this Court said: In our view a "genuine" dispute requires that: • the dispute be bona fide and truly exist in fact; • the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived. We consider that the various formulations referred to above can be helpful in determining whether there is a genuine dispute in a particular case, so long as the formulation used does not become a substitute for the words of the statute. 52 In Solarite v York [2002] NSWSC 411 Barrett J of the Supreme Court of New South Wales reviewed the authorities, including Spencer Constructions (above) and said, at [23]: The tests of "plausible contention requiring investigation", "real and not spurious, hypothetical, illusory or misconceived" and "perception of genuineness (or lack of it)", applied in the context of a summary procedure where "it is not expected that the court will embark on any extended inquiry", mean that the task faced by a company challenging a statutory demand on the "genuine dispute" ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s.459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger. 53 This approach has been followed recently in this Court by Greenwood J in Baa Baa Black Cow Pty Limited v CAFGA Livestock Pty Limited [2010] FCA 1191 at [40]. I will also follow it as a convenient explication of the statutory language. 54 There is a dispute, which I find from Mr Nalder's affidavit and from the contemporaneous email correspondence between the parties to be genuine, as to whether or not MBS has complied with the contractual terms but a question remains whether that goes to the existence or amount of the debt to which the demand relates. 55 In the evidence, there is no detail as to the tax invoices or the payments received beyond the figures and the date of the two tax invoices, being 9 August 2010 and 31 August 2010. 56 I get no assistance from the report entitled "BCA Assessment Report" because it is dated 20 May 2010, before the dispute arose, and refers to the proposed construction of a bath house/office facility at the colliery. The purpose of the report was to detail "all relevant deemed-to-satisfy provisions" of the Building Code of Australia that relate to the proposed building and to make recommendations for the upgrading of the plans to ensure compliance with the BCA. 57 As to the other report in evidence, by Metropolitan Building Approvals, the revised version by Camile Haddad dated 15 November 2010 is a project certification report or a checklist to enable the issue of the Occupation Certificate. In relation to the four Defects as defined in Mr Nalder's affidavit, there is only limited material in this report. 58 As to the gradient on the floor of the shower area, there is reference to the floor wastes and floor falls not being as per the floor plan. In the comments column under Item 12 "Clean Side" the report says: Waiting for MBS to respond by COB 4.11.10; Reply from IPB 04.11.10 stated no requirements for floor wastes under the BCA. IPB requested to address as spec states graded floor; awaiting rectification proposal and quote from CPFS as agreed by R Nalder". The same comment appears on other entries relevant to this topic. 59 There is also a reference under Mechanical Ventilation in relation to Installation Certificates that the fixed windows installed throughout the building do not comply with the plans (ie. sliding windows shown). It is said "As such, provide mechanical engineer's certificate of compliance with BCA F4.5 or AS1668. " 60 As to the disabled toilet in the washroom, there is a page and a half reporting results of an inspection on 10 November 2010. Some of that refers to Australian standards. From the handwritten annotations it appears that in Mr Nalder's view some of this is the responsibility of MBS. 61 The electrical fuse box in the washroom being burnt out does not seem to be referred to in this report, at least in terms. 62 I come now to the email correspondence. As a preliminary observation, while contemporaneous correspondence between the parties may be very useful in delineating any dispute, it should not be put forward, as was done in this case, without regard to specific subject matter or chronology. So handicapped, I attempt below to refer to those emails which relate to the Defects deposed to by Mr Nalder. 63 There is an email dated 23 September 2010 from Mr Nalder to Mr Smith concerning the bath house switchboard. A further email dated 23 September 2010 concerning switchboard issues takes the matter no further. The bath house electrical issues continue to be the subject of emails over the ensuing days. 64 An email of 1 October 2010 from Mr Nalder to Mr Smith concerning the bath house punch list says: Should IPB need to commence and complete all outlined defects we will have to do so and deduct same from our account to MBS. I do stress this is not our preferred option and hopefully we do not have to go down this path. 65 Also on 1 October 2010, Mr Smith of MBS sent an email to Mr Nalder saying that he had looked at the punch list and: we reckon to be able to complete all our issues by Thursday next week. The only consideration is that there may be material issues that are not off the shelf. 66 An email dated 9 October 2010 from Mr Nalder refers to "getting it all working so as to utilize the facility". 67 On 11 October 2010 another email from Mr Nalder to Mr Glenn Smith states: They are desperate to utilize the building and can't and will not accept the board was not fully tested prior to delivery & install, not to mention the time delay in supply and fitting the board. Look all we wish for is closure on the total job. As such there is no point in going back and forth with why we are not able to finalize the job let us just get out of there ASAP. 68 Email traffic concerning the electricity commissioning continued to at least 16 October 2010. 69 More generally, on 27 October 2010, there was a report from Mr Babbage for Gujarat NRE referring to a project management meeting that afternoon and saying: A strong suggestion was also made that NO payments are to be made until these items are completed and approved by NRE. 70 A copy was sent by Mr Babbage to Mr Smith and to Mr Nalder. Mr Smith responded to Mr Babbage on 28 October 2010 by saying in part: With respect to withholding legitimate outstanding payments, IPB are already using this tactic for their own benefit, understand that our patience will only last so long. Our contractual position with IPB currently is well outside the reality detailed by the agreement, this cannot continue. We seek also the rapid solution to the project as well. Continual threats and innuendo will not achieve this goal any sooner. That email was copied to Gujarat NRE and to Mr Nalder. 71 Mr Nalder responded to this email also on 28 October 2010, although the time is shown as 7.34am. Another version shows the time of it as being 8.40am. He wrote: IPB is not interested in continuing with the present situation the way it is. IPB requires a full response to all outstanding issues under one document along with completion - rectification dates against each action item. . . . We do not wish to voice our options other than to state that IPB is committed to servicing our clients contractual needs and obligations, what is deemed to be in the best interest of our client will be the direction IPB undertake. 72 Mr Smith, at 9.09am on 28 October 2010, referred to this question of non-payment as follows: Further, given that we are ostensibly being threatened with continued non payment continuously by your organisation, which I might add is totally outside our contractual conditions set by yourself, I can only assure you that we are doing what we can in order to complete the project and receive just recompense for our labour and materials invested into the NRE project. It does not serve our cause to have any delays which have seemed to provide you with the apparent motive for withholding legitimate payments further exacerbating, not assisting, our ability to act on your behalf. 73 On 12 November 2010 there is email correspondence between Mr Nalder and Mr Smith concerning MBS installing an aluminium strip in the shower area to stop the water flowing past the floor waste. Mr Nalder wrote: This only helps their case for non-conformity to the BCA. 74 On 15 November 2010 Mr Smith of MBS sent an email to Mr Nalder concerning the NRE punch list. On 15 November 2010 Mr Nalder sent an email to Mr Smith saying, in part: … nothing will go away unless we comply to original awarded tender specification. 75 By mid November 2010, Mr Nalder was repeatedly asking Mr Smith for a single final document. Mr Smith sent emails with NRE plumbing certifications in three emails saying NRE "have these already". 76 An email of 16 November 2010 refers to a complete sign off sheet. It appears that of the 134 sign offs IBP were waiting on seven items only to be confirmed. Mr Nalder asked Mr Smith on 16 November 2010 by email to follow up on the seven items as a matter of extreme urgency "as I wish to close off on everything by Thursday on this week". 77 On 18 November 2010, Mr Nalder emailed Mr Smith about a number of issues including the floor waste grading issue. NRE were to have an independent assessment along with options that could be undertaken to fix those issues and the final resolution within seven days of 18 November. Mr Nalder said: As for payment to IPB they are adamant that ALL DOCKUMENTATION [sic] as requested by them, must be handed over and once final verification and acceptance on the Waste floor issue is resolved we will have payment through within 48 hours into our bank account. From our point of view yesterday's meeting was very productive and I am comfortable that once we can get them everything requested, then payment & closure will follow as they have stated. 78 Mr Smith responded and Mr Nalder responded to Mr Smith response. This was by further emails on 18 November 2010. In part, Mr Nalder said: … just remember between you & I the waste drains do not work and I am in between the situation doing the best so as you can get paid along with I. 79 Mr Smith had previously written: This may seem like a good outcome for you Rob but from our perspective it is still unacceptable behaviour on behalf of your customer. We understand your out of pocket but we more so. I note that the lack of payment has not stopped NRE from using the facilities as they see fit. What guarantee does MBS have that co operation will result in our outstanding monies being paid. Given where we are now this is a very valid question. 80 Mr Nalder's response was: We must comply to the contract specifications. 81 There is also further reference to the project being finished and then asking for payment: We have to furnish what was outlined in building specification, inclusive of all documentation. This we clearly have not done, once done then and only then can we take a stronger hand on payments. Because up till this is done payments are not due. I infer that this is Mr Nalder's comment. 82 On 19 November 2010, by email from Mr Smith to Mr Nalder, Mr Smith says: Given the floor issue is ongoing we have some time I suppose as they're not likely to pay anyone till then. There's probably a legal case developing rather sweetly to recover costs from these guys and have them spanked for potential breaches of the trade practices act. That will wake them up. 83 Mr Nalder responded also by email on 19 November, in part saying: However the job is not finished until we both get paid and this has no chance of happening until we give them what is spelt out in our tender specification documentation. 84 In an email from Mr Smith on 7 December 2010 to Mr Nalder there is reference to certification documentation being provided and the question: So, what do we need to do to get funds released fro [sic] this project? 85 Mr Nalder responded on 7 December with reference to certain unresolved issues and saying: Finally Glenn I am totally committed to finalising everything as a matter of urgency as we are aware of the need to have everything competed [sic] including our payments in & out. 86 By email from Mr Smith to Mr Nalder on 8 December 2010, there is further correspondence but with Mr Smith saying to Mr Nalder: This is likely to go beyond Xmas and I have to say if that is so we may have to look at remedies for us, we will support you if you go heavy on them. We can start with the Trade Practices Act to begin with, then depending on what your contract actually says. By the way what are these back charges noted on the Pick list. I hope someone has done their homework because we have. Any back charges will be vigorously defended. You are putting the cart in front of the horse, once we are in a position of complying with specification then we can demand action on payment terms. 87 An email of 8 December 2010 from Mr Nalder to Mr Smith refers to the question of the disabled toilet: … which by the way has never been finalised even to this day. Also by email on 8 December 2010 Mr Smith wrote to Mr Nalder: This is getting us nowhere, we simply wish to complete the job. 88 On 9 December 2010, there is a long email from Mr Smith to Mr Nalder probably interspersed with Mr Nalder's comments on it. It includes: Am I correct in presuming that you have received something from NRE since your last meeting? All moneys held by NRE are against the Building supplied by MBS to IPB under this contract. Furthermore NRE have verbally instructed IPB to not pay anything further to MBS until all outstanding issues are addressed. NRE know exactly what is outstanding to IPB suppliers on this project. 89 On 9 December 2010 Mr Smith emailed Mr Nalder and Gujarat NRE. This email refers to the outstanding debt of $178,790.26 to MBS on behalf of IPB. Mr Smith sought immediate payment for all outstanding moneys on the basis: • The building has been delivered. • The building is well beyond practical completion. • The building is being occupied. This email concluded by stating: After advice has been taken, MBS is placing IPB on notice that it intends to commence legal proceedings against it and in a separate action, seek damages against NRE. To be clear, if at the passing of seven days (close of trade 16/12/2010) we have not received moneys that are outstanding we will have no alternative other than seek relief through the courts. 90 It is not clear to me to which email this is a response. Also, it refers to attaching three separate documents but one of them, the MBS quotation, is not in evidence and it may be that only part of the IPB specification dated 17 May 2010 was attached to that email. 91 Emails continued to be exchanged between the parties up to 22 December 2010. I note that that is the date of the statutory demand and affidavit accompanying that demand. 92 In an email dated 17 December 2010 from Mr Smith, annotated by Mr Nalder on 18 December 2010, Mr Smith says: It should be noted however that we are fully aware that the timing for our previous requests for payment has passed with no apparent action occurring, no gestures of goodwill either in part nor in guarantee. Mr Nalder's annotation was: As for your point on payment, once again I will explain that until all contractual specifications and conditions have been complied too [sic] no payments will be released either from our client to IPB or from IPB to MBS. 93 On 21 December 2010, Mr Nalder sent an email to Mr Smith: What we have received to date is not what we need to allow MBS Compliance, as such I will ask a final time for "Design C1 documentation". What more do I need to do? Without "MBS Design C1 documentation" the building will not be able to be certified as compliant to the BCA code. 94 On 22 December 2010 Mr Nalder emailed Mr Smith in terms which included the following: Let me know if you now require anything else to be undertaken by IPB. I might add we at IPB, feel that all that has taken place to date has been to satisfy your need to place blame elsewhere if it all possible on every issue. Hopefully now MBS being the manufacturer of the Building can at long last take full responsibility in rectifying what ever is needed to bring the building into full conformity to awarded contract. IPB now waits MBS response as to how you intend to rectify the non performance and in our opinion non compliance to building specification as supplied and installed by MBS? 95 This review of the email correspondence shows that, with the possible exception of the Defect in relation to the electrical fuse box, the remaining three Defects have been, to a greater or lesser extent, the subject of continual communications between the parties. 96 One theme is whether the contractual work has been completed by MBS. Another is the terms of payment by Gujarat NRE to IPB and by IPB to MBS and whether or not the latter are dependent on the former. 97 Of course, on an application such as the present it is not the role of the Court finally to determine the merits of such disputes. 98 In that context I do not draw the inference which Mr Spencer asked me to draw that Mr Nalder for IPB was raising matters in the correspondence to avoid payment to MBS. 99 Applying the statutory language of whether there is a genuine dispute as to the existence of the debt to which the demand relates, I find that it is arguable that IPB does not have a liability to MBS until the building has been supplied in conformity with the contract between IPB and Gujarat NRE in accordance with the specifications. This is distinct from any claim for damages for breach of warranty. 100 I also find in light of the terms of the contract between IPB and MBS which I have set out at [29] above, that it is arguable that IPB's obligation to pay MBS is only complete once Gujarat NRE is obliged to or does pay IPB. 101 I find that the terms of the contractual arrangements between IPB and MBS are such, although in an incomplete state, that IPB is arguably not limited to an offsetting claim in damages in contract or in tort or under statute. 102 On this basis I set aside the demand. I am satisfied that there is a genuine dispute between the company and the defendant about the existence of a debt and thus the "admitted amount" in relation to the debt is a nil amount and thus the substantiated amount is less than the statutory minimum: s 459H(3). 103 I am not however satisfied that there is a genuine dispute between the company and the defendant about the amount of the debt, considered separately from the existence of the debt. There is insufficient material to quantify the value of the Defects. 104 Mr Spencer for the defendant, relied on the ex tempore judgment of Brereton J of the Supreme Court of New South Wales in Construction Management Services Pty Ltd v Bidnia Group Pty Ltd [2008] NSWSC 1152. There Brereton J said, at [5]: Bidnia has done the work it was contracted to perform. Defective work may sound in damages for breach of warranty or for negligence, but it provides no basis for any suggestion that there has been a total failure of consideration. The contract price is payable, and there is no genuine dispute in respect of the debt. The only real question is whether there is any offsetting claim for damages for breach of warranty or negligence. 105 In contrast, in the present case, as will be apparent from my consideration of the email correspondence, it is arguable that MBS has not done the work it was contracted to perform. Further, it is arguable, in light of the terms of the contract between IPB and MBS which I have set out at [29] above, that the contract price is not payable by IPB to MBS until IPB has been paid by Gujarat NRE. 106 In relation to John Holland Construction (above), the facts of the case, and particularly the specificity the parties brought to bear on dollar figures, show that Young J (as his Honour then was) was dealing with quite a different factual case. However, I would agree with his Honour's observation that it is far more appropriate in a case such as the present for the court to take a broad brush approach. 107 This obiter observation by Young J is referred to in Assaf F, Statutory Demands; Law and Practice, (LexisNexis Butterworths, 2008) para 5.19, footnote 84. The author there notes that his Honour's comments have not been construed as explaining the operation of s 459J(1)(b) but rather the court's approach in determining the existence of a genuine dispute or offsetting claim. So construed, Young J's dictum is a particular application of the general "low threshold" criterion on an application to set aside a statutory demand. 108 In my opinion, for the reasons I have given, that criterion has been met by IPB in the present case. 109 It may well be that the criticisms Mr Spencer made on behalf of MBS of the contentions advanced on behalf of IPB turn out to be good ones on a final hearing. However, it is not my task to attempt to resolve those issues in any final way on this application which invokes, in effect, a summary procedure.

Does IPB have an offsetting claim? 110 The bulk of Mr Spencer's submissions was directed to the question of whether IPB had an offsetting claim. In that respect he referred to Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 and to Edge Technology Pty Ltd v Lite-On Technology Corporation (2000) 156 FLR 181. 111 I find that IPB has not established that it has an offsetting claim. There is insufficient material in the evidence to quantify such a claim.

Costs 112 I was asked by the parties not to deal with the question of costs. My tentative view is that costs should follow the event and that the defendant should pay the plaintiff's costs. If either party wishes to be heard in relation to a costs order in that form that party should, after informing the other party, contact my associate on or before 24 May 2011.

Order 113 The order I make is that the demand dated 22 December 2010 and served on the plaintiff on 11 January 2011 is set aside. I certify that the preceding one hundred and thirteen (113) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.