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Navigating Statutory Demands and Offsetting Claims in Construction Disputes: Key Takeaways from Recent Cases:
The recent cases, CBS Commercial Canberra Pty Ltd v Axis Commercial (ACT) Pty Ltd, and Dask Entertainment Melbourne Pty Ltd v Aussie Fitouts Pty Ltd, have shed light on the complex relationship between statutory demands under the Corporations Act 2001 (Cth) and offsetting claims in the context of construction disputes, particularly those involving adjudication determinations under Building and Construction Industry Security of Payment Act 2002 (Vic)(‘SOPA’). The decisions offer valuable insights into the use of offsetting claims to challenge statutory demands, particularly those arising from adjudication determinations.
The CBS Commercial Case: Offsetting Claims Beyond Adjudication
In CBS Commercial, the plaintiff successfully challenged a statutory demand based on an adjudication determination by raising offsetting claims for liquidated damages and back charges. The court emphasised that these claims, even if previously rejected in the Adjudication, could still be used to demonstrate a genuine dispute, provided they were ‘true’ offsetting claims that are capable of being quantified and measurable. The key takeaway is that Adjudication doesn’t extinguish all potential defences against a statutory demand. The parties can still rely on legitimate offsetting claims that were not resolved in the Adjudication.
The Dask Entertainment Case: A Cautionary Tale
The Dask Entertainment case highlights a crucial distinction. While offsetting claims are permissible, they cannot be used to challenge the adjudicator’s decision on the underlying debt directly. The Adjudication remains binding until overturned in separate proceedings. In Dask Entertainment, the plaintiff’s attempt to dispute the contractual basis of the debt, rather than raising a distinct offsetting claim, led to the dismissal of their application to set aside the statutory demand.
The Key Takeaways
For offsetting claims to be effective based on the adjudication certificate, the claim must be:
- Genuine: The offsetting claim must have a plausible basis in fact and law, not merely a frivolous or speculative attempt to avoid payment.
- Quantifiable: The offsetting claim must be quantified and measurable, allowing the court to assess its potential to offset the debt.
- Discrete: The offsetting claim should be a legitimate claims that were not resolved in the Adjudication.
Conclusion
The cases offer valuable guidance for navigating statutory demands and offsetting claims in construction disputes. The interplay between statutory demands and offsetting claims is a complex area of law, particularly in the construction industry. Understanding the interplay between the Corporations Act and SOPA is essential for effectively navigating statutory demands and offsetting claims, safeguarding your business interests in the construction industry.
Contact Cogent Legal if you have a Statutory Demand that has been sent to your company. Please remember that you only have 21 days to respond and should get immediate legal advice to ensure that your company is not irrevocably harmed.
References:
Cases
CBS Commercial Canberra Pty Ltd v Axis Commercial (ACT) Pty Ltd, in the matter of CBS Commercial Canberra Pty Ltd [2022] FCA544
Dask Entertainment Melbourne Pty Ltd v Aussie Fitouts Pty Ltd, in the matter of Dask Entertainment Melbourne Pty Ltd [2023] VSC 660
Legislation
Corporations Act 2001
Building and Construction Industry Security of Payment Act 1999 (NSW)
Building and Construction Industry Security of Payment Act 2002 (Vic)