JUDGE:	Hetyey AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	26 April 2024, further material filed 10 May 2024 and 24 May 2024
DATE OF JUDGMENT:	12 December 2024
CASE MAY BE CITED AS:	Re Wallace Building Systems Pty Ltd
MEDIUM NEUTRAL CITATION:	[2024] VSC 767

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CORPORATIONS – Corporations Act 2001 (Cth) – Part 5.4 – Insolvency – Statutory demand – s 459G – Application to set aside – Demand claims unpaid amounts owing under payment plan agreement – Plaintiff company agreed not to apply to set aside statutory demand issued by defendant creditor – Whether purported waiver or contracting out of right to bring s 459G application enforceable in context of public policy objectives of Part 5.4 – Whether s 459G affidavit supports certain grounds argued at hearing – s 459H(1)(a) – Whether genuine dispute about existence and/or amount of debt – s 459H(1)(b) – Whether genuine offsetting claims – Whether offsetting claims can include declaration that amount claimed in demand not owing – Offsetting claims must offensively assert a right of recovery.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Korman of counsel	Wyndham Partners
For the Defendant	Mr A Di Stefano of counsel	Becketts Lawyers Pty Ltd

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Background......................................................................................................................................... 1

Procedural history and material relied upon.............................................................................. 11

Statutory provisions and legal principles................................................................................... 11

Grounds advanced........................................................................................................................... 15

Evidence............................................................................................................................................. 18

Plaintiff’s evidence...................................................................................................................... 18
Defendant’s evidence................................................................................................................. 20
Plaintiff’s evidence in reply....................................................................................................... 22
Defendant’s supplementary evidence..................................................................................... 23

Consideration.................................................................................................................................... 23

Anterior issue – whether waiver of right to make s 459G application enforceable.......... 24
First ground – breach of contract for failure to render services with due care and skill. 36
Second ground - no work performed or services delivered................................................. 43
Third ground - holiday pay and notice period....................................................................... 45

Conclusion......................................................................................................................................... 48

HIS HONOUR:

Introduction

By originating process dated 19 December 2023, Wallace Building Systems Pty Ltd (‘Wallace’ or ‘plaintiff’) applies under s 459G of the Corporations Act 2001 (Cth) (‘Act’) to set aside a statutory demand dated 5 December 2023 (‘statutory demand’ or ‘demand’) served on it by Invenio Pty Ltd (‘Invenio’ or ‘defendant’) for the sum of $105,000.00 in connection with unpaid amounts owing pursuant to a document styled ‘Payment Plan Agreement’ and entered into by the parties on 20 October 2023 (‘PPA’). The plaintiff seeks to set aside (or alternatively vary) the demand on the grounds of both genuine dispute and offsetting claims under s 459H of the Act. Among other things, the defendant argues that by virtue of the terms of the PPA the plaintiff has waived or contracted out of its right to make…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Wallace Building Systems Pty Ltd

Details

AGLC: Re Wallace Building Systems Pty Ltd [2024] VSC 767
Case: [2024] VSC 767
Decision Date: 12 December 2024

CaseChat Overview and Summary

Wallace Building Systems Pty Ltd was the subject of a statutory demand issued by one of its creditors. The defendant subsequently sought to set aside the statutory demand, raising questions about the enforceability of a purported agreement not to apply for such relief. The matter was heard in the Federal Circuit Court of Australia. The central legal issues were whether the parties could effectively waive the debtor's right to seek relief under section 459G of the Corporations Act 2001, and whether the affidavit supporting the application could include grounds not specifically mentioned in the initial affidavit.

The court determined that the purported waiver was not enforceable because it contravened the public policy objectives of Part 5.4 of the Act, which aims to protect companies from coercive tactics by creditors. The court found that the statutory demand process was intended to safeguard small businesses from undue pressure and that allowing a waiver would undermine this purpose. Additionally, the court clarified that the grounds for setting aside a statutory demand under section 459H(1) must be supported by the affidavit. The court held that while a genuine dispute about the existence or amount of the debt was a valid ground, the debtor could not simply assert that the claimed amount was not owed without offensively asserting a right of recovery.

Consequently, the court rejected the creditor's application to set aside the statutory demand. The court's reasoning was that any agreement purporting to waive the debtor's rights under section 459G was ineffective and that the affidavit must affirmatively assert a right to recover the claimed amount. The court emphasised that offsetting claims must be offensively asserted and cannot merely negate the creditor's claim without providing a basis for recovery. This decision reinforces the protection afforded to debtors under the statutory demand process and underscores the importance of adhering to the legislative framework designed to safeguard small businesses.

Orders