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CITE

Unreported Judgment

K2M Investments Pty Ltd v Unita (Qld) Pty Ltd[2022] QSC 274Cooper J
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K2M Investments Pty Ltd v Unita (Qld) Pty Ltd[2022] QSC 274

SUPREME COURT OF QUEENSLAND

CITATION:	K2M Investments Pty Ltd v Unita (Qld) Pty Ltd [2022] QSC 274
PARTIES:	K2M INVESTMENTS PTY LTD ACN 652 469 433 (applicant) v UNITA (QLD) PTY LTD ACN 111 488 049 (respondent)
FILE NO/S:	BS No 11909 of 2022
DIVISION:	Trial Division
PROCEEDING:	Application
ORIGINATING COURT:	Supreme Court at Brisbane
DELIVERED ON:	13 December 2022
DELIVERED AT:	Brisbane
HEARING DATE:	27 October 2022
JUDGE:	Cooper J
ORDERS:	The application filed 4 October 2022 to set aside the statutory demand is dismissed. The applicant pay the respondent’s costs of and incidental to the application to be assessed on the standard basis if not agreed.
CATCHWORDS:	CORPORATIONS – WINDING UP – WINDING UP IN INSOLVENCY – STATUTORY DEMAND – APPLICATION TO SET ASIDE DEMAND – GENUINE DISPUTE AS TO INDEBTEDNESS – ASSESSING GENUINENESS – GENERALLY – where the applicant and respondent entered into a contract relating to the construction of a residential apartment development on land owned by the applicant – where the applicant terminated the contract in circumstances where it was unable to obtain finance – where the respondent issued a progress claim and an invoice for works performed under the contract up to the date of termination – where the applicant did not pay the amount of the progress claim and did not serve a payment schedule pursuant to s 75 of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) – where the respondent served a statutory demand on the applicant pursuant to s 459G of the Corporations Act 2001 (Cth) – whether there is a genuine dispute as to the existence of the debt PROCEDURE – CIVIL PROCEEDINGS – PROCEDURAL ASPECTS OF EVIDENCE – AFFIDAVITS – where an affidavit was filed pursuant to s 459G of the Corporations Act 2001 (Cth) in support of an application to set aside a statutory demand – where the supporting affidavit was filed pursuant to s 459G(3) of the Corporations Act 2001 (Cth) within the 21 day period – where a supplementary affidavit was filed outside the 21 day period – whether the supplementary affidavit raised new grounds upon which to set aside the statutory demand PROCEDURE – STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY – INHERENT AND GENERAL STATUTORY POWERS – TO PREVENT ABUSE OF PROCESS – OTHER PARTICULAR CASES – where the respondent instituted proceedings for a debt associated with the alleged breach of a construction contract – where the respondent subsequently served a statutory demand relating in part to the same debt – whether the statutory demand subsequently served is an abuse of process Building Industry Fairness (Security of Payment) Act 2017 (Qld), s 75, s 76, s 77, s 78, s 100, s 101 Corporations Act 2001 (Cth), s 459G, s 459H, s 459J Accordent Pty Ltd v RMBL Investments Ltd (2009) 105 SASR 62, cited Createc Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602, cited Diploma Constructions (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91, applied Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560, cited Energy Equity Corporation Ltd v Sinedie Pty Ltd (2001) 166 FLR 179; [2001] WASCA 419, cited Equipped Constructions Pty Ltd v Form Architects Pty Ltd [2006] NSWSC 500, cited Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22, cited Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452, applied Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd [1995] 2 Qd R 350, cited In the matter of Douglas Aerospace Pty Ltd [2015] NSWSC 167, considered Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330, cited Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd (in liq) [2001] WASCA 360, cited Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290, cited Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427; [2011] HCA 48, cited QNI Resources Pty Ltd v North Queensland Pipeline No 1 Pty Ltd [2017] QCA 297, cited Re Syncordia Group Operations Pty Ltd [2021] VSC 732, cited Reed Construction (Qld) Pty Ltd v Dellsun Pty Ltd [2010] 2 Qd R 481; [2009] QSC 263, considered Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd [2017] SASC 187, cited Williams v Spautz (1992) 174 CLR 509; [1992] HCA 34, cited
COUNSEL:	P G Jeffery for the applicant W D J Macintosh for the respondent
SOLICITORS:	Hall & Co Solicitors for the applicant Macpherson Kelley for the respondent

[1]
The applicant (K2M) has applied to set aside a statutory demand served on it on 14 September 2022 (Demand) by the respondent (Unita).^[1] The debt claimed in the Demand is for payment for work under a Commercial Cost Plus Contract (Contract) for the construction of a residential apartment development on land owned by K2M.
[2]
K2M submitted that there is a genuine dispute as to the existence of the debt^[2] because:
1. (a)
  K2M was induced to enter into the Contract by representations by Unita that the Contract would not come into effect until Unita had provided a detailed cost estimate and scope of works for the construction, and Unita’s failure to provide those items meant the Contract did not take effect;
1. (b)
  alternatively, if the Contract did take effect, K2M’s inability to perform its obligation to pay was caused by Unita’s own breach of contract in failing to provide a detailed cost estimate and scope of works for the construction which prevented K2M from obtaining finance.
[3]
K2M further submitted that the Demand is an abuse of process, that being “some other reason” why it should be set aside.^[3]
[4]
Unita objected to a supplementary affidavit filed by K2M outside the 21 day period from service of the Demand^[4] by which, Unita submitted, K2M had impermissibly sought to expand the grounds for setting aside the Demand. Unita submitted that the matters raised by K2M in the affidavit material filed within the 21 day period do not give rise to a genuine dispute as to the existence of the debt because:
1. (a)
  the terms of the Contract required that K2M pay Unita for work completed under the Contract prior to any termination resulting from K2M’s failure to obtain finance; and
1. (b)
  the existence of the debt could not be disputed as it is a statutory debt pursuant to the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act).
[5]
The application raises the following issues for consideration:
1. (a)
  the scope of the evidence which K2M is permitted to rely upon to demonstrate there is a genuine dispute as to the existence of the debt;
1. (a)
  whether K2M’s evidence demonstrates there is a genuine dispute as to the existence of the debt, having regard to the matters identified by Unita;
1. (c)
  whether the Demand should be set aside as an abuse of process.

The evidence K2M is permitted to rely upon to demonstrate a genuine dispute

Principles governing reliance on supplementary affidavits filed after the 21 day period

[6]
In Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund,^[5] Sundberg J held that a court will not have jurisdiction to set aside a statutory demand where an affidavit filed within the 21 day period does not satisfy the requirements for a supporting affidavit for the purposes of s 459G(3) of the Act. This has since been referred to in numerous subsequent authorities as the Graywinter principle. Sundberg J described the minimum requirements of a supporting affidavit as follows:^[6]
1. (a)
  the affidavit must contain a statement of the material facts on which the applicant intends to rely to show that there is a genuine dispute;
1. (b)
  neither a mere assertion that there is a genuine dispute nor a bare claim that the debt is disputed is sufficient;
1. (c)
  the affidavit need not detail, in admissible form, all the evidence that supports the contention of a genuine dispute but may read like a pleading.
[7]
The application and supporting affidavit must fairly alert the respondent to the nature of the case the applicant company will seek to make in applying to have the statutory demand set aside. The content of those documents must convey, even if it is only by necessary inference, a clear delineation of the area of controversy so that it is identifiable with one or more of the grounds available to set aside a statutory demand.^[7]
[8]
Where an affidavit filed within the 21 day period meets the minimum requirements of a supporting affidavit, an applicant may supplement that initial affidavit with further evidence relevant to the area of controversy identified within the statutory period.^[8]
[9]
However, the process of delineating the area of controversy may not be extended after the end of the 21 day period.^[9] For this reason, an affidavit filed outside the 21 day period which raises a new ground or grounds to set aside a statutory demand (as opposed to an affidavit which expands on grounds in an earlier affidavit which has satisfied the threshold test) cannot be used in an application to set aside a statutory demand.^[10] In that respect, the Graywinter principle is not satisfied simply because the ground relied upon in the supporting affidavit and the ground sought to be raised in a supplementary affidavit filed after the expiration of the 21 day period deal with the same broad issue.^[11]

K2M’s supporting affidavit

[10]
K2M read two affidavits of its sole director, Mr Morris.
[11]
The first of Mr Morris’ affidavits was filed, together with the application to set aside the Demand, within the 21 day period.^[12] It is the supporting affidavit for the purposes of s 459G(3) of the Act. In paragraph 4 of that supporting affidavit, Mr Morris deposed to his belief that there is a genuine dispute as to the existence of the debt and that the Demand should be set aside for the reasons deposed to in the balance of that affidavit.
[12]
The supporting affidavit then described the background to, and negotiation of, the Contract as follows:

“Background

5.…

6.The intention of [K2M] was to carry on a development at a property described as Lot 260 on Registered Plan 57056 situated at 172 Prince Edward Parade, Scarborough in the State of Queensland.

7.That property was purchased by [K2M] on 24 December 2021 at a cost of 1.2 million dollars plus costs.

8.At the recommendation of one of my colleagues, I then met with a representative of [Unita] to undertake preliminary works which included but was not limited to development approval and updating the building approval. The terms of the agreement relating to those works were set out in a document titled ‘Early Contractor Involvement Deed.’ Exhibited hereto and marked with the letters SM2 is a true copy of that document.

9.The Early Contractor Involvement Deed at schedule 2 sets out the services to be provided by Unita and that on completion a detailed cost estimate and scope of works was to be provided to be used in conjunction with a Master Builders Cost Plus Contract.

Building Works Negotiations

10.Both myself and the representatives of Unita then met regularly regarding matters of town planning, civil engineering etc. The first formal meeting occurred on 20 December 2021 where we were advised that Jared Kelly of Unita was still working with the town planner towards a pre-lodgement meeting with Council, as well as designs being under review for both efficiency and reduction of costs by limiting services and numerous other points. Exhibited hereto and marked with the letters SM3 is a true copy of the minutes of 20 December 2021 identifying the matters required to be undertaken by Unita.

11.In the course of negotiations representatives of Unita highlighted the concerns regarding the increased cost of materials and also the difficulty in obtaining trades and strongly recommended that I complete the [Contract] in order to ensure that I reserved a place within their construction schedule. The contract in the original version did not contain a finance condition which I required to be inserted. I subsequently executed the [Contract] prepared by Unita on 6 January 2022. Exhibited hereto and marked with the letters SM4 is a true copy of that contract.”

[13]
The Early Contractor Involvement Deed (exhibit SM2) provided that it would continue until the date on which the Contract was executed.^[13] Schedule 2 of that deed described the services to be performed by Unita as relevantly including:

“[Unita] to provide and monitor preconstruction program outlining key dates to ensure client expectations of starting construction no later than April 2022. (Council approval dependent)

[Unita] to provide ongoing support and advice on best building practices to ensure construction cost aligns with client budget expectations

Perform weekly Project Control Group (PCG) meetings which include all stakeholders providing updates and task for the following week

…

On completion of documentation [Unita] to provide a detailed cost estimate & scope of works which is to be used in conjunction with Master Builders Cost Plus Contract on the agreed methodology of open book cost plus”

[14]
The minutes of the meeting held on 20 December 2021 (exhibit SM3) recorded:
1. (a)
  at item 3.1, that a representative of Unita had sent a “cost guide” to Mr Morris on Thursday, 16 December 2021;
1. (b)
  at item 7.1, that “Based on construction forecast Sam Morris approves construction - [Unita] to provide cost plus contract for Sam to review ready to sign off as per pre construction program”.
[15]
Those minutes did not contain any further reference to the Contract, or its negotiation.
[16]
The Contract was conditional on K2M obtaining finance for the estimated total cost of the works by 7 February 2022.^[14] Mr Morris deposed that the date for obtaining finance approval was subsequently extended.
[17]
The supporting affidavit also contained reference to matters discussed at meetings held between K2M and Unita on 13 January, 18 January, 24 January, 31 January, 7 February, 9 February, 14 February, 21 February, 28 February and 7 March 2022 and exhibited the minutes of each of those meetings (exhibits SM5 to SM12). On the question of cost estimates and finance arrangements, Mr Morris deposed that:
1. (a)
  at the meetings held on 13 January and 9 February 2022, he explained that until K2M received final costings it would be unable to finalise finance for the construction work;
1. (b)
  as at the meeting held on 7 March 2022, there had been no finalisation of the costings which were required for K2M to obtain finance approval.
[18]
Mr Morris then deposed to a meeting on 10 May 2022, at which he advised a representative of Unita that K2M had not obtained finance for the construction work because the cost estimates had not been resolved. By that time, K2M had been approached by a purchaser seeking to purchase the proposed site of the development. Unita’s position at that meeting was that it required K2M to pay the balance of monies which were owed under the Early Contractor Involvement Deed. Mr Morris stated that he caused K2M to pay those outstanding monies in the amount of $42,621.76.
[19]
Mr Morris exhibited a letter which Unita sent to K2M on 20 May 2022 (exhibit SM15) in the following terms:

“Unita confirms the existence of the Contract, the terms of which it is bound to perform. Unita confirms it has commenced performance of the Contract and is continuing to perform in accordance with its terms.

Unita is somewhat concerned by recent representations that have been made by representatives of K2M to representatives of Unita in relation to K2M’s ongoing ability to perform the Contract in circumstances where K2M has indicated it may sell the relevant property where the construction site is located and the project to a third party.

In this regard, Unita hereby requests K2M advise it, by way of written response to this letter, what its intentions are in relation to the project and the Contract. …

Unita reiterates its position under the Contract as set out above and otherwise reserves all of its rights under the Contract and at law.”

[20]
Mr Morris caused K2M’s solicitors to reply to that letter (exhibit SM16). The relevant part of that reply stated:

“We are instructed that our client has failed to obtain finance and we enclose a copy of that correspondence confirming same for your records.

On that basis, our client seeks to terminate the contract and we would ask you to provide particulars of the cost plus fee component to be provided to our client.”

[21]
Following service of the Demand, Mr Morris also caused K2M’s solicitors to write to the solicitors for Unita (exhibit SM18) stating the grounds of the genuine dispute about the existence of the debt. The relevant part of that letter stated:

“We have now received instructions to make application to the Supreme Court to set aside the [Demand] on the basis that our client had failed to obtain finance and subsequently the Contract was terminated.”

K2M’s supplementary affidavit

[22]
The affidavit of Mr Morris filed 26 October 2022 (supplementary affidavit)^[15] was filed outside the 21 day period.
[23]
In that supplementary affidavit, Mr Morris deposed as follows:

“2.In relation to the meeting which occurred on or about 20 December 2021, the persons present at the meeting were Robert Rowe, Nick Bidois and Jarrod Kelly (on behalf of Unita) and Sam Morris and Greg Kimming (on behalf of [K2M]). During the meeting, Jarrod Kelly said words to the effect that:

a.Unita acknowledged that the services described in Schedule 2 of the Early Contractor Involvement Deed (‘the Deed’) had not been completed by Unita; and

b.the [Contract] should nevertheless be entered into to only secure a position within Unita’s construction queue and would not come into effect until the services described in Schedule 2 of the Deed had been completed by Unita.

3.In reliance upon the representations referred to in the preceding paragraph, I caused [K2M] to enter into the [Contract] on or about 6 January 2022.

4.Unita did not provide a detailed cost estimate and scope of works as required by Schedule 2 of the Deed.

5.At each of the meetings on or about 13 January 2022, 18 January 2022, 24 January 2022, 31 January 2022 and 7 February 2022, I orally advised Robert Rowe, Nick Bidois and Jarrod Kelly (on behalf of Unita) that, among other things, until a detailed cost estimate, scope of works [sic] provided by Unita and until the building approval was obtained to complete the Early Contractor Involvement Deed, [K2M] was not able to obtain finance as [K2M] was not aware of the amount of finance to be obtained. None of them raised any issue with that.”

[24]
After further addressing Unita’s failure to provide a detailed cost estimate and scope of works, Mr Morris expressed the following conclusion:

“9.Consequently, for these reasons, the [Contract] did not come into effect or alternatively its terms should not be binding on the company.”

[25]
The supplementary affidavit also exhibited a copy of a notice of intention to defend and defence which K2M filed in proceeding BS No 10089 of 2022 brought by Unita in this court to recover the debt claimed in the Demand, as well as further damages for breach of the Contract. That defence, which was filed shortly before the supplementary affidavit was filed in this proceeding (and outside the 21 day period referred to in s 459G(3) of the Act), pleaded that by reason of K2M’s reliance on the representations the subject of the supplementary affidavit the Contract was not binding on K2M.

Consideration

[26]
K2M submitted that, on its face, the supporting affidavit reveals a genuine dispute as to the existence of the debt such that it may be supplemented by further affidavits filed outside the 21 day period.
[27]
Having regard to the principles discussed in [9] above, this submission is too broadly stated. The issue is whether the supplementary affidavit raised a new ground upon which K2M seeks to have the Demand set aside.
[28]
As to this, K2M submitted that the evidence of representations that are said to have been made at the meeting on 20 December 2021 does no more than expand upon the evidence given in the supporting affidavit as to what happened at that meeting. I am unable to accept that submission.
[29]
Having regard to the content of the two affidavits, my view is that the supplementary affidavit raised a new ground upon which to set aside the Demand.
[30]
The supporting affidavit delineated the area of controversy as being whether K2M’s purported termination of the Contract, by reason of it not obtaining finance, gave rise to a genuine dispute as to the existence of the debt. That is the effect of Mr Morris’ statement at paragraph 4 of the supporting affidavit which effectively adopted the correspondence Mr Morris caused K2M’s solicitors to write (see [20] and [21] above).
[31]
There was nothing in the supporting affidavit or its annexures that was capable of conveying to Unita, even by inference, that K2M would seek to raise a genuine dispute as to the existence of the debt based on the assertion that the Contract did not take effect or that K2M did not become bound by its terms, whether by reason of any representation by Unita or because K2M’s inability to perform its obligation to pay was said to have been caused by Unita’s own breach of contract in failing to provide a detailed cost estimate and scope of works for the construction which prevented K2M from obtaining finance.
[32]
The assertion in the supplementary affidavit that, by reason of a representation that the Contract would not come into effect until (among other things) Unita provided a detailed cost estimate and scope of works, the Contract did not come into effect or that its terms should not be binding on K2M sought to raise a dispute of a different character than that set out in the supporting affidavit. If the Contract never took effect (or K2M was not bound by its terms) then it would be unnecessary for K2M to terminate. This inconsistency simply highlights the different character of the grounds relied on in the two affidavits to demonstrate a genuine dispute. It does not matter that both grounds raised the same broad issue of K2M’s inability to obtain finance without final costings.
[33]
It follows that, by reading the supplementary affidavit, K2M impermissibly sought to extend the process of delineating the area of controversy after the end of the 21 day period.
[34]
K2M also submitted that exhibiting the notice of intention to defend and defence to the supplementary affidavit was permitted on this application as K2M had to address evidence given by Mr Fraser, the chief financial officer of Unita, that K2M had not filed a defence to proceeding BS No 10089 of 2022 referred to in [25] above.^[16] Having regard to the date the relevant affidavit was sworn (24 October 2022) and the date the notice of intention to defend and defence was filed (21 October 2022), it appears that aspect of Mr Fraser’s evidence was wrong. However, I cannot see how that alters the operation of the Graywinter principle as referred to in [9] above. It remains the fact that exhibiting the notice of intention to defend and defence to the supplementary affidavit impermissibly sought to raise a new ground upon which to set aside the Demand outside the 21 day period.
[35]
In circumstances where I have found that the supplementary affidavit filed outside the 21 day period raised new grounds to set aside the Demand, K2M cannot use those new grounds in this application. That is, on this application, K2M cannot seek to demonstrate a genuine dispute as to the existence of the debt on the basis that by reason of Unita’s representation the Contract did not come into effect or its terms were not binding on K2M, or that K2M’s inability to perform its obligation to pay was caused by Unita’s own breach of contract in failing to provide a detailed cost estimate and scope of works for the construction which prevented K2M from obtaining finance. K2M can only rely upon the ground raised in the application and the supporting affidavit: that the termination of the Contract due to its inability to obtain finance gave rise to a genuine dispute as to the existence of the debt.

Whether K2M’s termination of the Contract means there is a genuine dispute

General principles

[36]
There was no dispute as to the principles which govern the court’s task in determining whether there is a genuine dispute about the debt. That task is to ascertain whether or not there is a genuine dispute as to the existence of the debt. It is not part of the court’s function to resolve that dispute; nor is it the court’s task to determine whether the debt exists.^[17]
[37]
The bar for establishing a genuine dispute is not set high. The expression “genuine dispute” can be read as meaning a plausible contention requiring investigation.^[18] A statutory demand will be set aside if there is a bona fide disputed issue of fact or law, which is not spurious, hypothetical, illusory or misconceived.^[19] However, determination of a legal argument may be appropriate where the argument is “patently feeble”.^[20]

Work completed under the Contract prior to termination

[38]
As set out in [19] to [21] above, the supporting affidavit of Mr Morris establishes that K2M terminated the Contract after it failed to obtain finance.
[39]
K2M’s entitlement to terminate the Contract in those circumstances, and the consequences of termination, are set out in cl 2 of the Contract, as follows:

“2 Finance

a)Subject to this Clause, where stated in the Schedule the performance of the Contract is conditional upon [K2M] obtaining finance from the Lending Authority.

b)…

c)Where [K2M] is unable to obtain the loan by the date stated in the schedule:

iii)…, [K2M] may end the Contract by notice in writing to [Unita].

d)Where the Contract is ended in accordance with this Clause, [Unita] is entitled to be paid the cost of any work performed by [Unita] under the Contract prior to receiving [K2M’s] notice, together with the Cost Plus Fee applied to that total cost.”

[40]
It is apparent from the words of cl 2(d), and the fact that K2M’s right to terminate the Contract for want of finance was made subject to it, that K2M’s obligation to pay the cost of work performed prior to termination of the Contract and Unita’s margin on those costs was intended to continue to govern the relation of the parties after termination.^[21]
[41]
Unita’s evidence on the application was that the debt the subject of the Demand arose from works performed under the Contract up to the date of termination.^[22]
[42]
Even though K2M asserted that the Demand should be set aside because of the termination of the Contract,^[23] the supporting affidavit of Mr Morris did not dispute that Unita performed the work before the Contract was terminated.
[43]
In those circumstances, by reason of the continued operation of cl 2(d) after K2M terminated the Contract, the termination did not give rise to a genuine dispute as to the existence of the debt.

The character of the debt as a statutory debt under the BIF Act

[44]
The supporting affidavit,^[24] and the affidavit material Unita read on the application,^[25] establish that:
1. (a)
  the debt to which the Demand relates arose on 6 June 2022 when Unita issued Progress Claim 1, together with an invoice for the amount of that progress claim, to K2M for works performed under the Contract up to the date of termination;
1. (b)
  Unita issued Progress Claim 1 under s 75 of the BIF Act;
1. (c)
  K2M did not pay any amount to Unita in respect of Progress Claim 1, nor did it serve a payment schedule pursuant to s 75 of the BIF Act.
[45]
Under the Contract, Unita was entitled to issue progress claims fortnightly.^[26] K2M was required to pay a progress claim within five business days of receiving that claim.^[27]
[46]
Pursuant to the BIF Act:
1. (a)
  a person who is, or who claims to be, entitled to a progress payment may give a payment claim to the person who, under the relevant construction contract, is or may be liable to make the payment;^[28]
1. (b)
  the person who receives a payment claim must respond to that payment claim by giving the claimant a payment schedule within the period required under the relevant construction contract;^[29]
1. (c)
  if a person given a payment claim does not respond to that claim by giving a payment schedule that person is liable to pay the amount claimed under the payment claim to the claimant on the due date for the progress payment to which the payment claim relates;^[30]
1. (d)
  failure to pay the amount owed to the claimant in full on or before the due date for the progress payment entitles the claimant to recover the unpaid portion, as a debt owing to it, in a court of competent jurisdiction;^[31]
1. (e)
  in court proceedings brought to recover an unpaid amount of a progress payment as a debt owing to the claimant:^[32]
1. (i)
  judgment in favour of the claimant is not to be given unless the court is satisfied that the respondent did not give the claimant a payment schedule and did not pay the amount to the claimant on or before the due date for the progress payment to which the payment claim relates;
  1. (ii)
    the respondent is not entitled to bring any counterclaim against the claimant or to raise any defence in relation to matters arising under the construction contract;
1. (f)
  none of the foregoing provisions affects any right that a party to construction contract may have under the contract, or in relation to anything done or omitted to be done under the contract.^[33]

[47]
In those circumstances, Unita submitted that the operation of the provisions of the BIF Act makes the debt the subject of the Demand conclusive and precludes a genuine dispute being raised for the purposes of s 459H(1)(a) of the Act, unless that dispute concerns the existence of the conditions required before judgment could be given pursuant to s 100 of the BIF Act. In support of that submission, Unita relied upon decisions from other states in relation to materially similar statutory schemes for the security of payment in the building industry.^[34]
[48]
K2M relied upon the contrary decision of Reed Construction (Qld) Pty Ltd v Dellsun Pty Ltd,^[35] in which Martin J (as his Honour then was) followed a line of New South Wales authorities which predated the decisions relied upon by Unita. Based on that earlier line of authorities, Martin J concluded:^[36]

“It would be a curious, indeed unsatisfactory and inconsistent, construction of BCIPA which would result in a contractor being estopped from raising a dispute or an offsetting claim in an application under s 459G of the Corporations Act in circumstances where it is specifically allowed to do so in an action contemplated by the provisions of s 100. The reasoning advanced by Master Macready in Max Cooper & Sons (Builders) Pty Ltd v M & E Booth & Sons Pty Ltd has been adopted and refined by the authorities which have followed it. The terms of BCIPA cannot be used to constrain the operation of a Commonwealth statute such as the Corporations Act. It is sufficient, for the purposes of this decision, to hold that s 100(1)(c), by providing that nothing in pt 3 of BCIPA affects any right that a party to a construction contract may have apart from the Act in relation to anything done or omitted to be done under the contract, is sufficient to allow (if it is otherwise needed) a party to raise a genuine dispute or an offsetting claim under s 459G of the Corporations Act.”

[49]
The provisions of s 100 of the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA), referred to in that passage, are repeated in s 101 of the BIF Act (see [46](f) above).
[50]
To determine this application, it is not necessary for me to resolve which line of authorities should be followed. That is because, even if I were to follow the decision in Reed Construction (Qld) Pty Ltd v Dellsun Pty Ltd that the application of the BIF Act does not prevent K2M from raising a dispute as to the existence of the debt on this application to set aside the Demand, for reasons already set out in [38] to [43] above, the ground which K2M relied upon in the application and the supporting affidavit to establish that a genuine dispute existed – being the termination of the Contract due to its inability to obtain finance – does not give rise to a genuine dispute.
[51]
However, in the event that conclusion is found to be wrong, I consider that I should follow the decision of the Western Australia Court of Appeal in Diploma Constructions (WA) Pty Ltd v KPA Architects Pty Ltd^[37] on the application of national legislation such as the Act unless I was satisfied that it is plainly wrong.^[38] I am not satisfied of that. In that respect, I agree with the view expressed by Brereton J in In the matter of Douglas Aerospace Pty Ltd^[39] that a debt which arises under s 14(4) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the New South Wales equivalent to s 77(2) of the BIF Act) is made conclusive by the operation of the statute such that the only way in which a genuine dispute could be raised in respect of such a debt would be by disputing whether the circumstances required by the equivalent to s 100(2) of the BIF Act existed: that is, failure to give a payment schedule and failure to pay the amount claimed. In the present case there is no dispute about those matters. That would provide a further basis to find that there is no genuine dispute as to the existence of the debt.

Abuse of process

[52]
K2M’s submission that the Demand constitutes an abuse of process was based on Unita serving the Demand after it had instituted proceeding BS No 10089 of 2022 seeking, in part, the same debt claimed in the Demand. This, K2M submitted, brings the present case within a recognised class of abuse of process where proceedings are instituted against a party in a second forum when there are proceedings against that party pending in another and the continuance of the second would be an abuse of process of the first.^[40] In oral submissions, counsel for K2M argued that the abuse arises from the potential for inconsistent decisions to be made in the two proceedings.^[41]
[53]
The first difficulty with this submission is that K2M’s application makes no reference to s 459J of the Act, and K2M did not apply to amend the application to refer to that section. Even if K2M had applied to amend, permitting K2M to raise a new ground as a basis for setting aside the Demand at such a late stage would offend the Graywinter principle.^[42]
[54]
In any event, I am not satisfied that Unita’s service of the Demand constitutes an abuse of process.
[55]
A creditor who serves a statutory demand does not invoke the process of a court.^[43] A statutory demand is not a proceeding, either curial or non-curial in nature.^[44] Instead, the function of a statutory demand is to facilitate proof of a company’s inability to pay its debts by creating a rebuttable presumption of insolvency if the demand is properly served and not met.^[45] Accordingly, the issuing of a statutory demand cannot strictly constitute an abuse of process, although analogous considerations can apply and inform the scope of s 459J(1)(b) of the Act.^[46]
[56]
Used in that sense, an abuse of process will occur where the purpose of bringing proceedings is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed or some collateral advantage beyond what the law offers.^[47] In the context of the statutory demand procedure, there will be an abuse of process if the purpose of the party issuing the statutory demand is not the purpose of pursuing the statutory demand to wind up the company on the ground of insolvency, but rather to use the process as a means of obtaining an advantage for which the process is not designed or to obtain some collateral advantage beyond what the law offers — such as the application of pressure to compel payment of the disputed debt.^[48]
[57]
While improper purpose might exist if the creditor uses the statutory demand facility knowing that the debt is the subject of a genuine dispute, or knowing that the company is solvent, there is no evidence of that in the present case. Here, the Demand was served on K2M on 14 September 2022, more than a month before K2M filed its notice of intention to defend and defence in proceeding BS No 10089 of 2022 on 21 October 2022. I am not satisfied that Unita’s conduct in making of the Demand after it instituted proceeding BS No 10089 of 2022 but before the filing and serving of a defence, demonstrates that the Demand was made for an improper purpose.^[49]
[58]
I am also not satisfied that the possibility of different outcomes in this application and in proceeding BS No 10089 of 2022 means that the Demand amounts to an abuse of process. It might be that K2M ultimately succeeds in defending the claims made in proceeding BS No 10089 of 2022 if the court accepts that the representations described in the supplementary affidavit of Mr Morris mean that the Contract did not take effect or that K2M should not be bound by its terms. In that event, the outcome of that proceeding would be different to the outcome of this application. That is because the two proceedings will have been decided on different bases. In those circumstances, although the outcome of the proceedings would be different, I do not consider that they would be inconsistent. Further, the cause of that state of affairs would be K2M’s failure to identify the ground it now relies upon to defend proceeding BS No 10089 of 2022 and raise it within the 21 day period as a ground for setting aside the Demand.

Disposition of the application

[59]
The orders will be:

The application filed 4 October 2022 to set aside the statutory demand is dismissed.
The applicant pay the respondent’s costs of and incidental to the application to be assessed on the standard basis if not agreed.

Footnotes

[1] The application was brought pursuant to s 459G of the Corporations Act 2001 (Cth) (Act) and seeks an order under s 459H of the Act.

[2] See s 459H(1)(a) of the Act.

[3] See s 459J(1)(b) of the Act.

[4] See s 459G(3)(a) of the Act.

[5] (1996) 70 FCR 452.

[6] (1996) 70 FCR 452, 459.

[7] Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560, [7].

[8] Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560, [7]. An example of this can be seen in Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd (in liq) [2001] WASCA 360, [23], [27] and [29].

[9] Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560, [7].

[10] Energy Equity Corporation Ltd v Sinedie Pty Ltd (2001) 166 FLR 179, 185 [29].

[11] Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSCA 330, [105].

[12] Affidavit of Sam Frank Morris filed 4 October 2022 (Court document 2) (supporting affidavit).

[13] See cl 3.2 at p. 15 of exhibit SM2 to the affidavit of Sam Frank Morris filed 4 October 2022 (Court document 2).

[14] Affidavit of Sam Frank Morris filed 4 October 2022 (Court document 2), exhibit SM4, p. 30 (Schedule, reference to cl 2) and p. 35 (cl 2).

[15] Court document 4.

[16] Affidavit of William Shane Fraser filed 25 October 2022 (Court document 3) at [16].

[17] Createc Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602, 604 [4]; QNI Resources Pty Ltd v North Queensland Pipeline No 1 Pty Ltd [2017] QCA 297, [20].

[18] Createc Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602, 610 [44]; QNI Resources Pty Ltd v North Queensland Pipeline No 1 Pty Ltd [2017] QCA 297, [20].

[19] Createc Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602, 610 [45].

[20] QNI Resources Pty Ltd v North Queensland Pipeline No 1 Pty Ltd [2017] QCA 297, [20].

[21] Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd [1995] 2 Qd R 350, 361.

[22] Affidavit of William Shane Fraser filed 25 October 2022 (Court document 3), [11].

[23] Affidavit of Sam Frank Morris filed 4 October 2022 (Court document 2), exhibit SM18.

[24] Affidavit of Sam Frank Morris filed 4 October 2022 (Court document 2), exhibit SM1, page 6.

[25] Affidavit of William Shane Fraser filed 25 October 2022 (Court document 3), [11]-[13] and exhibit WF-2.

[26] Affidavit of Sam Frank Morris filed 4 October 2022 (Court document 2), exhibit SM4 pp. 31 and 38, cl 14(a) and the reference to cl 14(a) in the Schedule.

[27] Affidavit of Sam Frank Morris filed 4 October 2022 (Court document 2), exhibit SM4 pp. 31 and 38, cl 14(c) and the reference to cl 14(c) in the Schedule.

[28] See s 75(1) of the BIF Act.

[29] See s 76(1)(a) of the BIF Act.

[30] See s 77 of the BIF Act.

[31] See s 78 of the BIF Act.

[32] See s 100 of the BIF Act.

[33] See s 101 of the BIF Act.

[34] Diploma Constructions (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91, [60]-[61]; In the matter of Douglas Aerospace Pty Ltd [2015] NSWSC 167, [76] and [91].

[35] [2010] 2 Qd R 481.

[36] [2010] 2 Qd R 481, 502 [46].

[37] [2014] WASCA 91.

[38] Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 152 [135].

[39] [2015] NSWSC 167, [76].

[40] Citing Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427, 452 [90].

[41] Transcript 1-10:39-47.

[42] Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560, [7].

[43] Accordent Pty Ltd v RMBL Investments Ltd (2009) 105 SASR 62, 71 [55].

[44] Re Syncordia Group Operations Pty Ltd [2021] VSC 732, [24].

[45] Equipped Constructions Pty Ltd v Form Architects Pty Ltd [2006] NSWSC 500, [24].

[46] Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd [2017] SASC 187, [58].

[47] Williams v Spautz (1992) 174 CLR 509, 526-527.

[48] Createc Pty Ltd v Design Signs Pty Ltd (2009) 71 ACSR 602, 611 [50].

[49] Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290, 297.

Editorial Notes

Published Case Name:
K2M Investments Pty Ltd v Unita (Qld) Pty Ltd
Shortened Case Name:
K2M Investments Pty Ltd v Unita (Qld) Pty Ltd
MNC:
[2022] QSC 274
Court:
QSC
Judge(s):
Cooper J
Date:
13 Dec 2022

Appeal Status

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Cases Cited List of Cases Cited by this judgment

Case Name	Full Citation	Frequency
Accordent Pty Ltd v RMBL Investments Ltd	(2009) 105 SASR 62	2 citations Jump To Cite 1 - (2009) 105 SASR 62 Cite 2 - (2009) 105 SASR 62
Createc Pty Ltd v Design Signs Pty Ltd	(2009) 71 ACSR 602	5 citations Jump To Cite 1 - (2009) 71 ACSR 602 Cite 2 - (2009) 71 ACSR 602 Cite 3 - (2009) 71 ACSR 602 Cite 4 - (2009) 71 ACSR 602 Cite 5 - (2009) 71 ACSR 602
Diploma Construction Pty Ltd v KPA Architects Pty Ltd	View on:JADE[2014] WASCA 91	3 citations Jump To Cite 1 - [2014] WASCA 91 Cite 2 - [2014] WASCA 91 Cite 3 - [2014] WASCA 91
Elm Financial Services Pty Ltd v MacDougal	View on:JADE[2004] NSWSC 560	5 citations Jump To Cite 1 - [2004] NSWSC 560 Cite 2 - [2004] NSWSC 560 Cite 3 - [2004] NSWSC 560 Cite 4 - [2004] NSWSC 560 Cite 5 - [2004] NSWSC 560
Energy Equity Corporation Ltd v Sinedie Pty Ltd	(2001) 166 FLR 179	2 citations Jump To Cite 1 - (2001) 166 FLR 179 Cite 2 - (2001) 166 FLR 179
Energy Equity Corporation Ltd v Sinedie Pty Ltd	View on:JADE[2001] WASCA 419	1 citation Jump To Cite 1 - [2001] WASCA 419
Equipped Constructions Pty Ltd v Form Architects Pty Ltd	View on:JADE[2006] NSWSC 500	2 citations Jump To Cite 1 - [2006] NSWSC 500 Cite 2 - [2006] NSWSC 500
Farah Constructions Pty Ltd v Say-Dee Pty Ltd	View on:JADE[2007] HCA 22	1 citation Jump To Cite 1 - [2007] HCA 22
Farah Constructions Pty Ltd v Say-Dee Pty Ltd	View on:JADE(2007) 230 CLR 89	2 citations Jump To Cite 1 - (2007) 230 CLR 89 Cite 2 - (2007) 230 CLR 89
Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund	(1996) 70 FCR 452	3 citations Jump To Cite 1 - (1996) 70 FCR 452 Cite 2 - (1996) 70 FCR 452 Cite 3 - (1996) 70 FCR 452
In the matter of Douglas Aerospace Pty Ltd	View on:JADE[2015] NSWSC 167	3 citations Jump To Cite 1 - [2015] NSWSC 167 Cite 2 - [2015] NSWSC 167 Cite 3 - [2015] NSWSC 167
Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq)	View on:JADE[2015] VSCA 330	2 citations Jump To Cite 1 - [2015] VSCA 330 Cite 2 - [2015] VSCA 330
Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd (in liq)	View on:JADE[2001] WASCA 360	2 citations Jump To Cite 1 - [2001] WASCA 360 Cite 2 - [2001] WASCA 360
Mibor Investments Pty Ltd v Commonwealth Bank of Australia	View on:VR[1994] 2 VR 290	2 citations Jump To Cite 1 - [1994] 2 VR 290 Cite 2 - [1994] 2 VR 290
Michael Wilson & Partners Ltd v Nicholls	View on:JADE[2011] HCA 48	1 citation Jump To Cite 1 - [2011] HCA 48
Michael Wilson & Partners Pty Ltd v Nicholls	View on:JADE(2011) 244 CLR 427	2 citations Jump To Cite 1 - (2011) 244 CLR 427 Cite 2 - (2011) 244 CLR 427
QNI Resources Pty Ltd v North Queensland Pipeline No 1 Pty Ltd	[2017] QCA 297	4 citations Jump To Cite 1 - [2017] QCA 297 Cite 2 - [2017] QCA 297 Cite 3 - [2017] QCA 297 Cite 4 - [2017] QCA 297
Reed Construction (Q) Pty Ltd v Dellsun Pty Ltd	[2010] 2 Qd R 481; [2009] QSC 263	4 citations Jump To Cite 1 - [2009] QSC 263 Cite 2 - [2010] 2 Qd R 481 Cite 3 - [2010] 2 Qd R 481 Cite 4 - [2010] 2 Qd R 481
Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd	View on:JADE[2017] SASC 187	2 citations Jump To Cite 1 - [2017] SASC 187 Cite 2 - [2017] SASC 187
Syncordia Group Pty Ltd v Nexia Melbourne Pty Ltd	View on:JADE[2021] VSC 732	2 citations Jump To Cite 1 - [2021] VSC 732 Cite 2 - [2021] VSC 732
Watkins Pacific (Qld) Pty. Ltd. v Iezzi Constructions Pty. Ltd.	[1995] 2 Qd R 350; [1994] QCA 49	2 citations Jump To Cite 1 - [1995] 2 Qd R 350 Cite 2 - [1995] 2 Qd R 350
Williams v Spautz	View on:JADE(1992) 174 CLR 509	2 citations Jump To Cite 1 - (1992) 174 CLR 509 Cite 2 - (1992) 174 CLR 509
Williams v Spautz	View on:JADE[1992] HCA 34	1 citation Jump To Cite 1 - [1992] HCA 34

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K2M Investments Pty Ltd v Unita (Qld) Pty Ltd[2022] QSC 274