Two bites at the cherry: statutory demand based on SOPA determination set aside as an abuse of process
A statutory demand can be a powerful way to enforce an adjudication determination under the Building and Construction Industry (Security of Payment) Act 2021 (WA) (SOPA). But it carries real risks for the contractor.
In Grounded Construction Group Pty Ltd v KW Civil & Construction Pty Ltd [2025] WASC 307, Lundberg J set aside a statutory demand for about $1.03 million based on an adjudication determination. The subcontractor had already sued for overlapping amounts in separate court proceedings, and pursuing both was an abuse of process. His Honour also found that the head contractor had genuine offsetting claims, even though the adjudicator had rejected them.
Key takeaways
Don’t run parallel proceedings. Serving a statutory demand while court proceedings for overlapping amounts are on foot may be an abuse of process.
Rejected claims can return. Offsetting claims that an adjudicator rejected can still be relied on to set aside or reduce a statutory demand, if they are genuine.
But you can’t reargue the adjudication. A respondent cannot use a statutory demand application to argue the adjudicated amount is simply not payable.
Adjudication material is generally inadmissible. Submissions, responses and statutory declarations lodged in the adjudication generally can’t be used to prove or challenge the genuineness of claims. Fresh affidavits and contemporaneous business records can be.
Background
Grounded Construction Group (Grounded) engaged KW Civil & Construction (KW) on 1 June 2023 to perform civil works on the Rocklea Palms Village Expansion Project in Paraburdoo.
KW made two payment claims December 2023: $920,129.35 (inc GST) and May 2024 $1,585,203.10 (inc GST), covering all work to date and rolling up much of the December claim.
KW then pursued both claims, by different routes:
On 7 June 2024, it sued in the Supreme Court to recover the December claim as a debt under s 27 of SOPA (the Recovery Proceeding).
On 19 July 2024, it applied for adjudication of the May claim. On 30 August 2024, the adjudicator awarded $1,031,136 (inc GST), rejecting all of Grounded’s offsetting claims.
On 10 September 2024, KW served a statutory demand for the adjudicated amount.
Grounded applied to set aside the demand under the Corporations Act 2001 (Cth). It argued the demand was an abuse of process, and that it had genuine offsetting claims for liquidated damages, property damage and labour backcharges.
The decision
Abuse of process
Lundberg J found a substantial overlap between the amounts claimed in the Recovery Proceeding and the amount in the statutory demand.
KW had stayed the Recovery Proceeding and undertaken not to pursue any overlapping amounts in it. His Honour described this as commendable to an extent, but said it did not solve the problem. Two processes with different objectives remained on foot. The Recovery Proceeding was designed to obtain payment. The statutory demand was designed to obtain an event of insolvency. KW “ought not to have served” the demand while the Recovery Proceeding was on foot. The demand was set aside under s 459J(1)(b) of the Corporations Act.
Offsetting claims survive the adjudication
KW argued that claims rejected by the adjudicator could not be offsetting claims. Lundberg J disagreed. There is little in principle, policy or SOPA’s language to support that view.
The Court of Appeal’s decision in Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2012] WASCA 91 still prevents a respondent from attacking its liability for the adjudicated amount itself. But Grounded’s claims were legally and factually distinct from the matters the adjudicator decided, and no part of them formed part of the determination.
His Honour then considered whether each claim was genuine and found that liquidated damages and labour back charges were genuine. Had the demand not been set aside, his Honour would have reduced it by about $313,000 to reflect the two genuine claims.
Adjudication material excluded
Section 55(4) of SOPA makes evidence of anything said or done in an adjudication inadmissible in court without both parties’ consent. Lundberg J held that this applies in statutory demand applications where the material is used to support or challenge the genuineness of a claim. Parties must instead rely on affidavits prepared for the court proceedings and contemporaneous records.
What this means
For contractors and subcontractors
Choose your enforcement path carefully. A determination can be filed as a judgment and enforced under s 54 of SOPA. A statutory demand may expose you to set-aside applications based on offsetting claims.
Avoid overlapping proceedings. If you have already sued for amounts that overlap with a determination, don’t also serve a statutory demand for them.
For principals and head contractors
Your claims aren’t lost. A rejected set-off in an adjudication may still be raised against a statutory demand.
Put claims in your payment schedule. Raising claims early helps show they are genuine and not contrived.
Prepare fresh evidence. Don’t simply recycle your adjudication response. Use affidavits and business records prepared for the court proceedings.
How we can help
Lang Litigation and Construction Law advises on enforcing and resisting adjudication determinations, statutory demands and recovery proceedings under the Building and Construction Industry (Security of Payment) Act 2021 (WA).
If you have received a statutory demand, or need help enforcing a determination, contact us promptly. Strict time limits apply.
This article is general information only and is not legal advice. You should seek specific advice about your circumstances.