A Cautionary Tale from Re Duke Ventures Wellington Street Pty Ltd [2025] VSC 75
Adjudication Determinations can be a very effective tool for contractors and subcontractors to receive interim payments for their works. One method of enforcing an Adjudication Determination is to serve a Statutory Demand. However, users should be aware that there can be serious risks to issuing a Statutory Demand based on an Adjudication Determination.
Re Duke Ventures is a recent case decided in the Supreme Court of Victoria which provides a useful summary of when a Statutory Demand based on an Adjudication Determination will be set aside. These principles set out in that judgment should be kept in mind before issuing a Statutory Demand based on an Adjudication Determination.
What are Statutory Demands?
A Statutory Demand is a written demand made by a creditor to a company in the form prescribed in Schedule 2 of the Corporations Regulations for payment of a debt. It is issued under section 459E of the Corporations Act 2001 (Cth).
A company must respond to the statutory demand within 21 days, by either:
- agreeing to a settlement with the creditor;
- paying the debt; or
- applying to the court to set it aside.
The consequence of not responding to a Statutory Demand within 21 days is that the company is automatically presumed to be insolvent and may be wound up upon application to the Court. Such a petition can be filed by the creditor who issued the statutory demand or any other creditor who knows of the failure by the company to comply with the statutory demand.
Statutory Demands based on Adjudication Determinations
A Statutory Demand based on an Adjudication Determination should not be issued if the company is asserting that it has offsetting claims available to it which would reduce the debt owing to below the statutory minimum (currently $4,000).
Such an offsetting claim can be raised even if that offsetting claim was considered and rejected by the adjudicator before issuing their adjudication determination.
Summary of facts:
Cobolt is a builder who was engaged by Duke Ventures to construct a 10-storey apartment building known as Duke Apartments. Cobolt issued a Payment Claim under the Security of Payments Act 2002 (VIC) and subsequently obtained an Adjudication Determination in its favour in the sum of $142,696.02. Cobolt then proceeded to obtain judgment against Duke Ventures in the sum of $158,422.34. Cobolt served a Statutory Demand on Duke based on that judgement. Duke applied to have the Statutory Demand set aside on the basis that it had an offsetting claim in an amount that exceeded the judgment debt.
Key Issues
Duke Ventures argued that it had offsetting claims in three categories including rectification costs, liquidated damages and costs to complete works taken out of Cobolt’s hands.
As a result of these offsetting claims, which Duke Ventures claimed was more than the amount claimed in the statutory demand, Duke argued that the Statutory Demand must be set aside.
Cobolt argued that:
- a number of claims raised by Duke were raised in and merged in the Adjudication Determination;
- the claims to complete the works are speculative and have no evidentiary value;
- the liquidated damages claim was premature and had not yet crystallised; and
- to allow the offsetting claims would subvert the terms of the contract and the SOPA regime.
Court’s view
The Court applied Re Douglas Aerospace Pty Ltd [2015] NSWSC 167 and confirmed that any offsetting claim, whether connected to the debt or not, or arising from the same transaction or not, may be relied on as an offsetting claim, except to the extent that allowance has already been made for it in the Adjudication Determination.
In this instance, Duke raised multiple offsetting claims some which were rejected in the Adjudication Determination in relation to the works performed. The Courts considered and determined that these claims were arguable and could form part of an offsetting claim, notwithstanding those offsetting claims had been rejected by the adjudicator.
The Court gave a helpful summary of what a debtor may rely upon when applying to set aside a Statutory Demand based on a SOPA determination:
- a debtor may not rely on a ‘genuine dispute’ in relation to that debt;
- a debtor may not rely on an offsetting claim to the extent allowance has been made for that claim in the adjudication;
- a debtor may rely on an offsetting claim to the extent the claim was raised before the adjudicator but was rejected;
- a debtor may rely on an offsetting claim that was not raised before the adjudicator; and
- a debtor may rely on an offsetting claim that arises from transactions separate to the one giving rise to the debt.
The Court also made clear that:
- if an offsetting claim is totally rejected by an adjudicator, then the whole claim may be relied upon as an offsetting claim; and
- if the claim is partially rejected by the adjudicator, then the rejected part only may constitute an offsetting claim.
This prevents a creditor from double dipping against an offsetting claim which has already been taken into account by the adjudicator and reflect in the judgment issued.
Conclusion
The decision in Re Duke Ventures serves as an important reminder that Adjudication Determinations and Statutory Demands work on a different set of rules.
Creditors seeking to enforce a determination through a Statutory Demand must carefully consider whether the debtor has any offsetting claims that may justify setting aside the demand.
Statutory Demands are highly technical documents which, while often very effective, carry strict requirements which must be complied with. Before issuing a Statutory Demand, or if your company receives one, you should seek expert legal advice as quickly as possible given the tight, inflexible time frames involved.
Our expert Commercial & Insolvency team is well placed to assist you and is only a phone call away.
If you would like to discuss this article with us, please contact David Greenberg, Partner, or Ibrahim Khalil, Paralegal on (02) 9261 5900.