Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence Construction Pty Ltd & Ors

Southern Han Breakfast Point Pty Ltd (in Liquidation) (the appellant) appealed to the High Court of Australia against the decision of the New South Wales Court of Appeal, which had overturned a judgment in favour of the appellant. The dispute concerned the enforceability of a statutory demand issued by Southern Han to Lewence Construction Pty Ltd (the respondent) and two related companies, arising from an alleged debt for building works. The respondent sought to set aside the statutory demand on the basis that it had a genuine dispute with respect to the existence of the debt.

The High Court was required to determine whether the New South Wales Court of Appeal erred in finding that there was a sufficient basis for the respondent to claim a genuine dispute regarding the debt, thereby entitling it to have the statutory demand set aside. Specifically, the Court considered the nature of the evidence required to establish a "genuine dispute" for the purposes of setting aside a statutory demand under the Corporations Act 2001 (Cth).

The High Court held that the Court of Appeal had erred in its assessment of the evidence. The Court reiterated that to establish a genuine dispute, a respondent must demonstrate that it has an honestly arguable case, not merely a claim that is not frivolous or vexatious. The evidence presented by the respondent, which primarily consisted of allegations of defective work and counterclaims that were unsubstantiated by any contemporaneous documentation or expert evidence at the time the statutory demand was issued, did not rise to the level of demonstrating an honestly arguable case. The Court emphasised that the onus is on the applicant seeking to set aside the demand to show a genuine dispute, and mere assertions of defects without supporting evidence are insufficient.

The High Court allowed the appeal, set aside the orders of the New South Wales Court of Appeal, and reinstated the orders of the primary judge which dismissed the respondent's application to set aside the statutory demand.