Independent Portable Buildings Pty Ltd v Modular Building Systems Pty Ltd

Independent Portable Buildings Pty Ltd (IPB) brought an application to set aside a statutory demand issued by Modular Building Systems Pty Ltd (MBS). The application was heard and determined by Justice Gilmour of the Federal Court of Australia. The statutory demand required IPB to pay MBS the amount of $178,790.26, citing two tax invoices as the basis for the debt. IPB contended that there was a genuine dispute regarding the debt due to defects in the work performed by MBS, which IPB argued entitled it to offset the amount owed against the costs of rectifying those defects.

The central legal issue was whether IPB had a genuine dispute about the existence or amount of the debt claimed by MBS, which would entitle IPB to seek to set aside the statutory demand under the Corporations Act 2001 (Cth). In particular, IPB argued that the defects identified in the work performed by MBS constituted a breach of contract that justified a reduction in the amount owed. The court needed to determine if the defects alleged by IPB were sufficient to establish a genuine dispute.

Justice Gilmour found that IPB had established a genuine dispute regarding the amount of the debt claimed by MBS. The court accepted IPB's evidence that MBS had not performed the work in accordance with the contract specifications, resulting in defects that IPB was entitled to have rectified at MBS's expense. Given that the defects were material and remained unresolved, the court concluded that IPB had demonstrated a genuine dispute about the debt. Consequently, the statutory demand was set aside.

As a result, the court ordered that the statutory demand issued by MBS on 22 December 2010 and served on IPB on 11 January 2011 be set aside. This determination allowed IPB to avoid the immediate payment of the amount claimed by MBS and to pursue its claim for rectification of the defects and offsetting the costs against the debt.