Torrens Aloha P/L v San Modern Painting P/L

The defendants, San Modern Painting P/L, applied to set aside a statutory demand made by the plaintiff, Torrens Aloha P/L, under a subcontract for painting works. The defendants contended that the claim was not a genuine debt due to alleged defects in the works, which they claimed were discovered after the statutory demand was issued. The case was heard in the Federal Circuit Court of Australia.

The legal issues before the court were whether the statutory demand constituted a debt presently due and owing when the defects were later claimed to be found, and whether the defendants' offsetting claim could be considered unliquidated if it was genuine and not dishonest or colourable. The court also had to determine whether the offsetting claim could be for more than a nominal amount of $1 if the damage was reasonably ascertainable.

The court found that an offsetting claim can be unliquidated as long as it is genuine, i.e., not dishonest or colourable. However, it cannot be for more than a nominal amount of $1 unless the damage is reasonably ascertainable. The court held that there was scope for construing the contract and considering the undenied facts in concluding that the claim for liquidated damages was spurious. Based on this, the court set aside the statutory demand.

The court ordered that the statutory demand be set aside, and the defendants' application for costs was dismissed. The parties were ordered to bear their own costs of the application.