Grounded Construction Group Pty Ltd v KW Civil & Construction Pty Ltd [2025] WASC 307

Tom French  |  Shevaun Stringer  |  Sasha Thomas

Key takeouts

• A respondent to a statutory demand under the Building and Construction Industry (Security of Payment) Act 2021 (WA) (SOP Act) can bring an application to set aside the amount demanded on the basis that it has ‘genuine offsetting claims’ (or a ‘genuine dispute’) under the Corporations Act 2001 (Cth).
• Such offsetting claims can be asserted, even where they have been rejected by an adjudicator. This extends to claims which cannot be raised as part of the adjudication process (ie not raised in a response to a payment claim under the SOP Act).
• Accordingly, contractors should proceed cautiously when seeking to enforce adjudication determinations by way of statutory demand given the ease with which a statutory demand can be set aside. Instead, contractors should give consideration to seeking enforcement of adjudication determinations under section 54 of the SOP Act.  

Facts

In June 2023, Grounded Construction Group Pty Ltd (Grounded) entered into a contract with KW Civil & Construction Pty Ltd (KW Civil) for the performance of civil works at Rio Tinto’s Rocklea Palms Project.

KW Civil issued two payment claims, the first was made on 22 December 2023 for approximately $920,000 (First Claim) and the second was made on 31 May 2024 for approximately $1,500,200 (Second Claim).  The Second Claim included amounts which had also been claimed under the First Claim.

On 7 June 2024 KW Civil commenced an action in the Supreme Court of Western Australia in relation to the First Claim.

Around 6 weeks later on 19 July 2024, KW Civil commenced adjudication proceedings under the SOP Act in relation to the Second Claim. On 30 August 2024 the adjudicator awarded KW Civil approximately $1,030,000.

On 10 September 2024 KW Civil sought to enforce the adjudicators determination by issuing a statutory demand for the adjudicated amount.

Grounded applied to have the statutory demand set aside on the basis that:

• the earlier proceeding dealt with overlapping amounts claimed, which was an abuse of process; and
• it had offsetting claims in relation to the Second Claim.  These offsetting claims had previously been considered and rejected in the adjudication determination. 

Decision

Lundberg J set aside the statutory demand on the basis that KW Civil should not have served a statutory demand while the earlier proceeding was on foot. This was an abuse of process, because both proceedings sought relief in respect of overlapping amounts and both proceedings had different objectives being:

• the Supreme Court proceeding was designed to extract payment from Grounded for the First Claim; and
• the statutory demand was designed to obtain an event of insolvency.

Lundberg J would also have varied the amount of the statutory demand to reflect Grounded’s genuine offsetting claims under section 459 of the Corporations Act (in the form of liquidated damages and labour back charges), even though such claims were dismissed by the adjudicator. 

His Honour also considered, that where offset claims are raised and rejected by an adjudicator, there is little in the way of principle or policy in the SOP Act to stop those claims from being characterised as ‘offsetting claims’ for the purposes of disputing a statutory demand.

While material adduced in an adjudication will ordinarily be precluded under section 55(4) of the SOP Act from being admitted by a court in proceedings to set aside a statutory demand, parties can still lead affidavit evidence for such proceedings in order to address the genuineness of a dispute or claim.

Despite this conclusion, Lundberg J cautioned that proceedings to set aside a statutory demand are typically ill-suited to resolve factual controversies and contested contractual construction arguments.