The Queensland Supreme Court recently considered a number of issues concerning the use of a statutory demand in pursuing amounts owed to a builder under a building contract.

A statutory demand is a process where a creditor issues a demand to the debtor company, requiring payment within 21 days or an application to be filed in the Supreme court to set it aside within that period (setting out all grounds relied on), failing which the debtor company is deemed insolvent and might be wound up. In this case, a builder had commenced an action against a developer for money and damages under its contract. It also had issued a payment claim under the BIFSA for money under the contract, and issued a statutory demand for payment.

These matters considered included :

(a) whether the application relied on a ground which was additional to the grounds set out in the initial application – see paras 6 – 9;

(b) whether there was a genuine dispute as to the debt – paras 36 – 37;

(c) whether the failure to lodge a payment schedule to the builders payment claim had the result that the debt could not be disputed – paras 44 – 51; and

(d) whether the statutory demand process was an abuse of process given that a claim had already issued for the debt – paras 55 – 58.

The decision is interesting and worth ready for its detailed backgrounding of the way in which courts approach these questions

Perhaps the most interesting part of the judgment for building matters is the consideration of whether the failure to lodge a payment schedule and dispute a payment claim through the BIFSA processes has the result that a genuine dispute could not be raised in the application to set aside the statutory demand. While His Honour found it unnecessary to decide, he indicated his agreement with decisions to the effect that the only dispute that could be raised in those circumstances would be as to whether the developer was obliged to dispute the payment claim through the BIFSA processes, and that if those processes applied and were not followed, then the existence of the debt is conclusive.

For advice in relation to statutory demands and building disputes, please contact Justin Mathews at Justin has specialist accreditation in commercial litigation, and is a registered adjudicator.