CM Luxury Pty Ltd v Menzies Civil Australia Pty Ltd

CM Luxury Pty Ltd sought to set aside a statutory demand issued by Menzies Civil Australia Pty Ltd, which claimed a debt of approximately $1.5 million. The dispute arose from a construction contract for the renovation of a building in Subiaco. Menzies Civil Australia issued the statutory demand, but CM Luxury argued that there was no signed contract and thus no basis for the claim. Menzies Civil Australia later argued that the debt arose on a quantum meruit or from an inferred contract. The primary legal issues were whether the misstatement of the legal basis for the debt in the statutory demand constituted a defect, and whether there was substantial injustice if the demand was not set aside. Another issue was whether the accompanying affidavit properly verified the debt.

The court found that the statutory demand incorrectly stated the legal basis for the debt, which was a defect. Additionally, the accompanying affidavit failed to properly verify the debt, as it did not address the lack of a signed contract and the absence of a quantum meruit or inferred contract. The court noted that the statutory demand must be based on a debt that is certain, liquidated, and undisputed. Since there was a genuine dispute about the existence of the debt, and the affidavit did not properly verify the debt, the court found substantial injustice in not setting aside the demand. The court also considered that if the statutory demand was not set aside, CM Luxury would be prejudiced by the presumption of insolvency that arises from failing to comply with the demand.

The court ordered that the statutory demand be set aside and that Menzies Civil Australia pay CM Luxury's costs of the application. The court also noted that if the statutory demand was not set aside, it would vary the demand to reflect the offsetting claims, resulting in a demand for $825,624.04. The court found that this amount was above the statutory minimum and thus valid if the demand was not set aside. However, since the demand was set aside, this variation did not come into effect.