In the matter of BPS Developments Pty Ltd

[2025] NSWSC 700

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of BPS Developments Pty Ltd [2025] NSWSC 700

Hearing dates:

13 June 2025

Date of orders:

13 June 2025

Decision date:

13 June 2025

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Order setting aside creditor’s statutory demand

Catchwords:

CORPORATIONS — statutory demand — application to set aside — offsetting claim — whether Graywinter principle applicable — where plaintiff contends that defendant’s delay and representations as to costs of building works created offsetting claim — statutory demand set aside

Legislation Cited:

- Building and Construction Industry Security of Payments Act 1999 (NSW)

- Corporations Act 2001 (Cth), ss 459G, 459H, 459J(1)(b)

Cases Cited:

- Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] 85 NSWLR 601; [2013] NSWCA 344

- Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; [2019] NSWCA 60

- Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; [1996] FCA 882

- Re Douglas Aerospace Pty Ltd [2015] NSWSC 167

- Re Showground Corporation Pty Ltd (Supreme Court (NSW), Black J, 25 October 2022, unrep)

- Sceam Construction Pty Ltd v Clyne [2021] 64 VR 404; [2021] VSCA 270

- TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] 66 ACSR 67; [2008] VSCA 70

Category:

Principal judgment

Parties:

BPS Developments Pty Ltd (Plaintiff)
AVR Joinery Pty Ltd (Defendant)

Representation:

Counsel:
JJ Young (Plaintiff)
J Sukkar (Defendant)

Solicitors:
Brooklyn Bennett (Plaintiff)
Joseph G Capogreco & Associates (Defendant)

File Number(s):

2024/458510

JUDGMENT – EX TEMPORE (Revised 16 June 2025)

Nature of the application

1. By Originating Process filed on 10 December 2024, the Plaintiff, BPS Developments Pty Ltd (“BPS”) seeks to set aside a creditor’s statutory demand dated 15 November 2024 (“Demand”) issued by AVR Joinery Pty Ltd (“AVR”).

2. The Demand claimed the amount of $67,825.48, which was identified in the schedule as derived from three judgments of the Local Court totalling that amount. Those judgments arose from the registration of adjudications under the Building and Construction Industry Security of Payments Act 1999 (NSW) (“SOPA”). BPS complains of the circumstances in which those adjudications were undertaken; it contends that it did not have notice of them or the opportunity to participate in them; but it rightly recognises that that does not provide a basis to set aside the Demand, where the adjudication outcomes are now reflected in those judgments.

3. BPS instead seeks to set aside the Demand on the basis that it has an offsetting claim which exceeds the amount of the Demand. That offsetting claim is quantified, first, as an amount of $61,943.81, referrable to additional financing costs resulting from delay in a project at Bexley North which BPS attributes to AVR’s delay in completing its work on that project; and, second, an amount of $51,588.62, being a loss which BPS would suffer in respect of a project at Carlton, if AVR claims, as it does, an amount that exceeds the amount which BSP contends it quoted for, and contracted, to complete that project. Those amounts together would give rise to an offsetting amount which significantly exceeds the total claimed in the Demand.

A preliminary issue – the “Graywinter” principle

4. A preliminary issue arises as to the application of the so-called Graywinter principle, in respect of both the first and second affidavits of Mr Skaf in support of the application to set aside the Demand: Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; [1996] FCA 822.

5. Mr Sukkar, who appears for AVR, submits that several of the paragraphs in Mr Skaf's first affidavit do not advance the matters to which that affidavit is directed. In particular, Mr Sukkar submits, likely correctly, that that affidavit was directed to establishing a genuine dispute as to the Demand, and a claim to set aside the Demand under s 459J(1)(b) of the Corporations Act 2001 (Cth) (“Act”). That may be accepted, but in dealing with those matters, Mr Skaf led evidence which raised issues that are relevant to the claim now put by BPS. In respect of the project at Bexley North, he led evidence which plainly raised the question of delay in the project and asserted at least the fact of loss suffered by the principal of another company associated with the project by reason of that delay. That proposition did not establish any loss suffered by BPS in that respect, but it plainly raised the question of delay in respect of the project. Mr Skaf’s evidence as to the Carlton project also raised the proposition that, first, AVR had a quoted cost to complete for that project and, second, that AVR did not then make a further claim beyond that quoted cost and, by extension, any claim beyond that quoted cost would be in breach of contract or contrary to a representation as to the cost to complete that project.

6. In any event, the so called Graywinter principle has no application to Mr Skaf's first affidavit, because that first affidavit was filed within the 21-day period to set aside the Demand, and is only applicable to Mr Skaf's second affidavit, which was filed and served outside the 21-day period specified in s 459G of the Act. I bear in mind that, as Bell P (as the Chief Justice then was) observed in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; [2019] NSWCA 60, that principle depends in large part upon the language of the statute and has to some extent been modified by later case law. The Court of Appeal of the Supreme Court of Victoria has considered its application at length in Sceam Construction Pty Ltd v Clyne [2021] 64 VR 404 at [11]ff; [2021] VSCA 270 and I summarised its scope in Re Showground Corporation Pty Ltd (Supreme Court (NSW), Black J, 25 October 2022, unrep) and I adopt, without repeating, that summary.

7. The principle requires, in substance, that the application to set aside the Demand and the affidavit evidence in support raises the relevant issue, whether expressly or by implication. Here, Mr Skaf's first affidavit raised, expressly, the fact of delay in respect of the Bexley North project, and the fact of a representation as to the cost to complete the Carlton project. It raised, implicitly, the prospect of loss suffered by reason of the delay, including by BPS as distinct from its co-venturer, and it also raised, implicitly, the prospect of loss suffered by reason of any departure from the representation as to the cost of the Carlton project, which would be more straightforward so far as an amount claimed was claimed against BPS contrary to the asserted representation.

8. Where those matters were raised, expressly and by implication, by the first affidavit, there is no contravention of the statutory provisions, or of the so called Graywinter principle, by leading further evidence to elaborate them in Mr Skaf's second affidavit. It is not to the point that that may then have the consequence that a ground is then available to BPS, which would otherwise not have been available to it, to set aside the Demand because that additional ground was always implicit in the evidence that was led in the first affidavit, and there is nothing to prevent it then being raised where the evidence to support it was led within that 21-day period. For those reasons, I admit the relevant evidence in the first affidavit, to which the Graywinter principle has no direct application, and in the second affidavit where the relevant issues were sufficiently raised by the first affidavit.

Affidavit and other evidence

9. I now turn to the evidence led by the parties, before returning to the applicable principles and the determination of the proceedings.

10. BPS reads the affidavit dated 9 December 2024 of its director, Mr Skaf, which was largely directed to seeking to establish complaints as to the circumstances in which the adjudications took place, possibly with a view to establishing a genuine dispute in respect of the Demand, although that was not available to BPS in these circumstances. However, that affidavit also addresses matters which are relevant to BPS’s claim for an offsetting claim. In particular, BPS there refers to the Bexley North project and the circumstances in which AVR was retained to undertake work in respect of the project and emphasises a claim that AVR had agreed to complete the work within a period of eight weeks, or at the latest, ten weeks. Mr Skaf there refers to a text message exchange with Mr Maalouf, the principal of AVR, sometime into the project, which indicates at least a degree of impatience as to the time taken to do the work. That exchange was consistent with, although not sufficient to establish, a representation having been previously made by AVR that the work would be completed within a relatively short time. That affidavit indicates that the work was still not completed as at late October 2023, and ultimately not completed until November 2023. Mr Skaf there says that the principal of another entity, Mr Antonios, involved in the project, had incurred “approximately $100,000 in additional loan repayments”. It is apparent that that statement is a loose one, because those additional loan repayments had been made by a corporate entity, Kingsland Road Pty Ltd (“Kingsland”) which owned the Bexley North property. Having said that, I will refer below to the manner in which the evidence indicates that that affected BPS.

11. Mr Skaf also there refers to the position in respect of a Carlton property, which is another element of the claim, where he develops the straightforward claim that Mr Maalouf had represented that the work to be done by AVR would be done for $10,000, more cheaply than a competing quote, and the additional amount claimed by AVR in respect of the work is in breach of that representation and in breach of a contracted price arising from that representation.

12. An exhibit to Mr Skaf’s affidavit contains a quote for the work at the Bexley North property issued by AVR, which Mr Sukkar points out does not record an expected eight-to-ten week completion period, and a subsequent exchange of text messages where, as I noted above, Mr Skaf was at least emphasising the urgency of the competition. Mr Sukkar also draws attention to several subsequent payments made by BPS to AVR which, he contends, are inconsistent with BPS then having had a substantial claim against AVR for delay. I appreciate that point may well have substance in a determination on the merits, but it is important to recognise that, as the case law to which I will refer establishes, this application is not a determination of the claims as between the parties on the merits. The question that I must determine is only whether there is a genuinely arguable offsetting claim, which exceeds the amount of the Demand, such that the Demand should be set aside.

13. By his second affidavit dated 3 March 2025, Mr Skaf gives more extended evidence than in his first affidavit. He there refers, more precisely, to the fact that the property at Bexley North was acquired by Kingsland, with finance provided by National Australia Bank, and he provides an extended account of the engagement of AVR in respect of the project, including setting out conversations in which he claimed that Mr Maalouf committed the completion of the relevant work within eight-to-ten weeks. I recognise that no contemporaneous documentation is in evidence which supports the oral representations on which BPS relies, but I will refer below to the limited weight that has been given in appellate authority to that matter in applications of this kind. Mr Skaf also there refers to his belief that he had been given an assurance that the works would be completed within that time, on which he relies to support the offsetting claim arising from delay.

14. Mr Skaf then sets out, at some length, the circumstances that gave rise to the delay in the work done by AVR at the Bexley North property and refers to additional financing costs incurred by Kingsland in the period. He refers to the sale of the property, the amount of the net sale proceeds and, importantly, the fact that BPS received a 50% share of those proceeds “under the joint venture”. I appreciate that there is here little evidence to establish the terms of, or parties to, or conversations which gave rise to the joint venture. Nonetheless, it is apparent from that affidavit, and a settlement schedule which is exhibited to it, that BPS in fact received a payment when the property was sold and, implicitly, with the consequence that it is at least arguable that BPS would have received a larger payment, but for the financing costs apparently incurred by Kingsland by reason of the alleged delay. Mr Skaf also there sets out the conversation in which he claims that Mr Maalouf, for AVR, committed to undertake the work on the Carlton property for a quoted price of $10,000, which the invoices later issued by AVR substantially exceeded. I also recognise that, importantly, a settlement statement that is exhibited to Mr Skaf's second affidavit records that, when the Bexley North property was sold, a significant amount, being half of the net sale proceeds, was distributed to Mr Skaf and Mr Skaf's affidavit evidence is that that amount was in fact paid to BPS, rather than to Mr Skaf personally.

15. BPS also reads an affidavit of Mr Antonios, the principal of the other entity involved in Kingsland and the development of the Bexley North property, which contends that he, or possibly his company, entered into a joint venture with BPS in respect of the development of that property, and also refers to the additional financing costs incurred in respect of that property and the delay which had arisen in respect of AVR's works in respect of that property.

16. BPS reads an affidavit dated 10 June 2025 of Mr Lin, its solicitor, who refers to BPS’s commencement of proceedings in the District Court at Parramatta, by which BPS brings claims against AVR in respect of these matters. I give limited weight to that evidence where, here, an offsetting claim will be established on the basis of the underlying evidence of the facts of the arrangements between the parties, or it will not, and the commencement of the proceedings will neither assist nor retard the establishment of that offsetting claim.

17. In response, AVR leads the evidence of Mr Maalouf who accepts that there were delays in respect of the completion of the Bexley North property but attributes the causes of those delays to matters involving BPS's conduct of the project, and denies that he made a commitment to undertake the work at the Carlton property for the amount claimed by BPS. Those, of course, are both matters of fact, which are the kind of issue that will ordinarily be determined in substantive proceedings between the parties, such as those which have now been commenced by BPS in the District Court. Mr Sukkar also draws attention to documents issued at the relevant time, including a relatively late variation in respect of the Bexley North project which, he contends, is inconsistent with the position for which BPS now contends. Again, however, it is important to recognise the nature of this application and the fact that the Court's role is ultimately not to determine who has the stronger case on the merits, if BPS can establish an arguable offsetting claim.

The applicable principles

18. I now turn to the applicable principles. The parties rightly recognised that it was here not open to BPS to challenge the result of the adjudications, so far as they were now reflected in judgments which had been entered in the Local Court. However, it is open to BPS, notwithstanding the SOPA, to assert a "true" offsetting claim, such as a claim for breach of contract in respect of the relevant construction works: Re Douglas Aerospace Pty Ltd [2015] NSWSC 167 at [93].

19. An offsetting claim, for the purposes of s 459H(1)(b) of the Act is the amount of a claim, or claims, that a company has against a person who served a creditor's statutory demand by way of, relevantly, counterclaim, whether or not the amount arises out of the same transactions or transactions as the debt to which the demand relates. In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] 66 ACSR 67; [2008] VSCA 70 at [71], Dodds-Streeton JA summarised what was necessary for an offsetting claim, noting that the company that 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. 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.”

20. Importantly, in Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd [2013] 85 NSWLR 601; [2013] NSWCA 344 at [30], the Court of Appeal observed that:

“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], 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'.”

21. The Court also there 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.” Although the Court there referred to the genuine dispute ground, the same principle applies in respect of an offsetting claim. That is important, here, since significant parts of the evidence on which Mr Sukkar may be relevant to whether BPS would succeed, at a final hearing of its offsetting claim; but that is not sufficient to exclude the existence of such a claim.

Determination

22. Turning now to the offsetting claims that are now put by BPS, I can deal with them relatively briefly, with no disrespect to Counsels' written outlines of submissions and oral submissions. The first claim is that BPS suffered loss by reason of the delay in AVR completing the joinery work at the Bexley North property, quantified by reference to the additional financing costs as set out in Mr Skaf's evidence, to the extent that they would be attributable to BPS. It is arguable that a representation was made, or a contractual term existed, as to the completion of the work by AVR within the eight-to-ten week period, so far as that is Mr Skaf's evidence, and there is at least some contemporaneous communication indicating a sense of urgency for the work. It appears to be common ground that the work was not completed within that time, although I recognise that Mr Maalouf denies the existence of any representation that it would be, in a defence that would be determined in a merits hearing and also attributes the delay to default on the part of BPS. It is apparent that significant financing costs were paid in respect of the period of the delay.

23. I appreciate that there are weaknesses in the claim, to which Mr Sukkar pointed, and those weaknesses are by no means trivial. The first is that there is an open question whether BPS had any entitlement to receipt of a surplus from the relevant property, whether contractual or otherwise, where the evidence as to the terms of the joint venture arrangements is scant; there is a legal question, of some complexity, whether loss suffered by Kingsland could be attributed to BPS, if it were a shareholder in Kingsland, under principles of "reflexive loss"; but there remains one fact that here support the claim by BPS, sufficiently, in my view to establish an offsetting claim. That fact is that, on Mr Skaf’s evidence, BPS received its half share of the surplus of the property; that half share was determined after financing costs; and those financing costs would have been less and that share would have been greater had the project completed more quickly. That is not to say that that claim will succeed in a hearing on the merits; but it seems to me that it is more than merely spurious or speculative, and has at least some support in contemporaneous materials, such that the Court must find that a genuine offsetting claim is available on that basis.

22. The position in respect of the Carlton property is more straightforward. Mr Skaf’s evidence is that a representation as to the cost of the works was made; Mr Maalouf takes issue with the fact of that representation; it cannot be said that that representation is implausible, or inconsistent with the surrounding factual circumstances, although I recognise that it is not reflected in contemporaneous documentation; and the issue for the Court is not to determine who will succeed, in a claim based on that representation or liability for a misleading representation or breach of contract, but whether it is sufficiently plausible to support an offsetting claim. If that representation is established, or a contractual term to similar effect is established, then a departure from it will give rise to loss on BPS’s part, being the additional amount for which it was invoiced beyond the amount which it had been promised would be payable. That, again, is sufficient to establish an offsetting claim, whether or not that claim will ultimately succeed at a final hearing.

23. For these reasons, BPS has been successful in establishing its offsetting claim, and the Demand must be set aside. I should emphasise, as is always the case in matters of this kind, that that says nothing as to the ultimate outcome of any proceedings on the merits, where BPS may well fail, on the basis that it cannot establish the claims which it asserts on the balance of probabilities at such a hearing. However, that is not to the point, where the question here is whether a genuine offsetting claim exists, not whether it will succeed at a hearing on the merits. The result of this judgment is simply that AVR cannot proceed on the basis that the debt is undisputed, in reliance on the Demand, and must instead establish its debt, whether by its own proceedings against BPS or now, perhaps more likely, by a cross-claim in the proceedings which BPS has commenced against it.

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Decision last updated: 03 July 2025