In the matter of Forte Sydney Construction Pty Ltd

By Originating Process filed on 26 August 2025, Forte Sydney Construction Pty Ltd ("Forte") applies to set aside a creditor's statutory demand dated 1 August 2025 (“Demand”) issued by Access Elevators Australia Pty Ltd ("Access"). First, Forte seeks to set aside the Demand on the basis of an alleged genuine dispute and, second, on the basis of an offsetting claim under s 459H of the Corporations Act 2001 (Cth) (“Act”). The Originating Process also raised a third basis to set aside under the Demand under s 459J of the Act, which it appears was not pressed. Forte alternatively sought an order extending the time for it to comply with the Demand, but that matter was not addressed in oral submissions, nor, as far as I can tell, in the evidence in chief led in Forte's case, and there is no apparent reason why the statute should not be left to operate in its terms in that regard.

The Demand claims four amounts. The first is an amount of $1,254 invoiced by a tax invoice dated 21 March 2025, which it appears to be common ground has been paid. In those circumstances, I will vary the Demand to determine the substantiated amount, by deducting that amount, if Forte is not successful in setting aside the Demand as a whole. The second amount claimed is an amount of $43,043, referable to a tax invoice dated 17 April 2025 and relying also on payment schedules prepared by Forte in response to the invoice. The third amount claimed is $42,130, referable to a tax invoice dated 22 May 2025, which was a reduction of the amount invoiced by an earlier invoice, and the fourth is a claim for the amount of that difference, relying on a conversation between Mr Hanson, a director of Access and Ms Li, the director of Forte, by which Forte allegedly agreed to pay that difference. The Demand then deducts an amount paid in part payment which, as I understand it, does not adjust for the amount of $1,254 to which I referred above. The Demand was verified by an affidavit of Mr Hanson which is in evidence in the exhibit to Ms Li's affidavit, which I will address below.

The parties led voluminous affidavit and other evidence in support of and in response to the application to set aside the Demand. If it were necessary to determine the range of factual matters raised by the affidavit evidence, then a question might have arisen as to whether there was a genuine dispute in respect of aspects of the Demand. It is not, for the reasons that I note below. I will address that evidence, at least in some detail, in deference to the fact that it was read, but ultimately it seems to me that the bulk of that evidence does not, in the relevant circumstances, give rise to either a genuine dispute or an offsetting claim, because the underlying lack of good faith in the claims raised by Forte means that the multiplication of evidence concerning them does not establish that they have a genuine character.

Forte reads the affidavit dated 26 August 2025 of its director, Ms Li, which exhibits a voluminous bundle of documents. Ms Li refers to her experience in the construction industry and to the receipt of the Demand from Access. She addresses the circumstances in which the Demand was received, but nothing turns upon that where no point is taken by Forte that the application to set aside the Demand was not brought within time. Ms Li refers to the engagement of Forte, as builder and head contractor, by a possibly associated entity in respect of a residential property development situated at Burwood, and to Forte’s entry into a contract with Access, by which Access was to carry out works in relation to the installation of two elevators at the project.

Ms Li then refers to a chronology of the commencement of works, noting that Access commenced works on 20 November 2024; that it substantially completed lift B works by about 14 February 2025; that it commenced carrying out works in relation to lift A on 28 March 2025; and that it claimed to have substantially completed the lift A works on or about 14 May 2025, although Ms Li does not wholly accept that proposition. Ms Li does not, in terms, suggest that there was any delay by Forte in breach of the subcontract in that respect or that any claim by Forte for liquidated damages then arose. She also does not address the fact, which is common ground, that Access was unable to commence the lift works until after the date that it was contractually obliged to complete them, because Forte had not previously completed the construction works that would be necessary for it to do so. Notwithstanding that matter, and notwithstanding the absence of any express complaint by Ms Li of delay or allegation as to liquidated damages in her affidavit, Mr Campbell, who appears for Forte, put significant weight in submissions on a claim for liquidated damages, which is said to support an offsetting claim against Access.

Ms Li in turn refers to the invoices issued by Access for Forte and addresses the fact that they did not refer, in terms, to being payment claims under the Building and Construction Industry Security of Payment Act 1999 (NSW) ("SOPA"). Nothing turns on that proposition for present purposes, where it is common ground that a debt can arise other than by reason of the statutory provisions in SOPA, including through the contractual and other arrangements between the parties.

Ms Li also refers to a suggested handrail defect in a lift, which it is common ground has since been rectified. She then refers, in a section headed "Mirror Defect", to an issue as to the mirror in a lift. Part of her evidence in that respect was inadmissible and was not admitted. The admissible evidence indicates that a mirror was installed; there is no admissible evidence establishing that the mirror or its installation was itself defective although I will refer to a cryptic email in that respect below; and it appears that Forte did not have the necessary approval for the inclusion of a mirror in the lift, although its subcontract with Access provided for that installation, and the mirror was subsequently removed by Access at Forte’s request. Plainly, that was not particularly prospective territory for Forte to allege a genuine dispute arising from the non-installation or any defect in the mirror, or to complain of the removal of the mirror in accordance with Forte’s direction when it did not have the necessary approval for that mirror, but there were more fundamental difficulties with this and other claims which I address below.

Ms Li also referred to seven "incidents" involving the lifts between 2 March 2025 and 14 April 2025 and a further malfunction of lift B on 29 May 2025, although she there acknowledged that the “incidents” ceased recurring from June 2025 onwards. She sought to qualify that acknowledgment by evidence that was not admissible and was not admitted. There was also reference to one subsequent occasion where a lift was out of service because it was under ordinary course inspection and maintenance, but that is not a matter on which Ms Li relies in her affidavit in Forte's case.

Ms Li’s affidavit evidence was that she did not recall the conversation with Mr Hanson on which Access relied for the fourth amount claimed in the Demand, being the reduction in the invoice dated 22 May 2025, with the result that she could not and did not deny it. That left Mr Hanson’s evidence as to that matter unchallenged, where he was not cross-examined, and would have been fatal to Forte’s challenge to the claim for that amount, even part from the wider issues that I address below. Ms Li also refers to a letter sent by Forte's solicitors to Access' solicitors in respect of the matters subsequently raised to set aside the Demand, and I will refer to that letter in dealing with the exhibit to Ms Li's affidavit below.

As I noted, Ms Li's affidavit exhibited a substantial volume of documents (Ex P1). I will address the documents, largely in the sequence in which they appear in the exhibit, although those documents are not there arranged in chronological order. Ms Li there exhibits the Subcontract between Forte and Access in respect of the installation of the elevators and I was taken to the provisions of that Subcontract in some detail. I bear in mind, of course, that the Court will not ordinarily address complex questions of contractual construction in dealing with an application to set aside a creditor's statutory demand; I have summarised the relevant authorities in that respect in One GC MQ Park Pty Ltd [2024] NSWSC 820 at [16]ff. There is, of course, an important qualification to that principle noted by the Court of Appeal in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd [2019] 99 NSWLR 397; [2019] NSWCA 60 ("Grandview") at [90], namely, that the Court may decide a matter where there is no element of rational controversy about it. It is not necessary here to decide any complex question of contractual construction as to the Subcontract in order to determine the proceedings.

Clause 2.3 of the Subcontract which requires Access to comply with a direction of Forte, and I accept that that is a significant matter so far as the evidence indicates that Access complied with Forte’s direction to remove the mirror to which I referred above, where Forte now complains that the mirror is defective, or more precisely that would be defective had its inclusion in the lift had the necessary approval and had it not been removed at Forte’s direction. I was taken to provisions dealing with changes of design, but it is not apparent that they are of material relevance. I was also taken to provisions dealing with the calculation of time under the Subcontract, and to cl 7 which deals with liquidated damages. I bear in mind that, as Mr Campbell points out, that those provisions are in turn effected by provisions that allow for extensions of time. Here, as I have noted above, the application of the liquidated damages provisions were, at least in a practical sense, undermined or displaced from before the commencement of Access' work, because, as I noted above, Forte had not completed the building works to the stage necessary for Access to commence lift works until after the time for substantial completion of the lift works (as defined in the Subcontract) had already expired.

Clause 10 of the Subcontract in turn deals with payments to Access, and, importantly, includes an obligation upon Forte to undertake an assessment of each Payment Claim (as defined) made by Access. I recognise that Forte appears to have undertaken at least one assessment of the claim in the second invoice in issue, before the Demand was served and Forte sought to develop grounds to set it aside, which recognised that the amount claimed by that invoice was properly payable to Access. A later payment assessment, which I address below, maintained that conclusion but sought to reduce the claim in the third invoice by matters raised in opposition to the Demand.

Clause 10.4 of the Subcontract deals with payment requirements, and Mr Campbell places heavy emphasis upon cl 10.4(b), which is a qualification to Forte's obligation to pay within 60 days after the end of the month in which a Payment Claim (as defined) is made. That clause provides that Forte is not obliged to make any payment under the Subcontract, and Access shall not take any action to seek any payment, until Access has, to Forte's reasonable satisfaction, remedied any breach of the Subcontract of which Forte has notified Access. Clause 10.4(d) in turn provides that a claim by Access will not become payable by Forte until all defects of which notification has been made by Forte to Access has been rectified. I have not neglected the operation of these provisions. However, the fundamental difficulties with Forte's reliance upon them here include, among other matters, the fact that Forte does not appear to have given any contemporaneous notification, whether in the manner specified in the Subcontract or by less formal means, of the manner in which it now seeks to formulate the Defects, particularly so far as the question of late completion of lift works is concerned, and Ms Li does not give evidence that Forte was in fact not reasonably satisfied of the relevant matters, whether in terms or by any reasonable implication from the evidence that she does give. In those circumstances, I am entitled to proceed, and I do proceed, on the basis that Ms Li's evidence as to that matter, which is not led, would not have assisted Forte in respect of that matter.

Mr Grace, with whom Mr Nash appeared for Access, in turn refers to the fact that Access gives warranties under cl 33 of the Subcontract and pointed to the notice provisions under the Subcontract, although it is not necessary here to decide whether any failure by Forte to give formal notice in the manner contemplated by those provisions was significant or whether aspects of those provisions are, as Mr Campbell plausibly submits, permissive rather than mandatory. I was also taken, in the Subcontract, to the date for commencement of Access on site, and the date for substantial completion for the work under the Subcontract, but I have noted above that it is common ground that Access could not commence the work prior to the stated date for substantial completion for the work, because Forte had not sufficiently advanced the building works to allow it to do so.

I was also taken to the liquidated damages provisions in the schedule to the Subcontract and there is a question as to the manner in which any liquidated damages would be calculated, had an entitlement to them arisen. Given the conclusions which I reach on other grounds, it is not necessary to address that question. I also recognise that a list of items, appearing under the heading "Specific allowances", includes reference to a "half-height mirror to rear wall", implicitly of a lift, and I bear in mind that that appears to have contemplated the inclusion of a mirror in the lift, although the correspondence indicates that that did not have the necessary approval, and, as I noted above, Forte later gave Access a direction to remove that mirror.

Further invoices issued by Access, and reissued by Access in response to the assessment of those invoices by Forte, are in evidence, but it is not necessary to address those invoices sequentially, where there is no suggestion that the claims in the Demand do not reflect the amounts of the invoices as they were ultimately issued.

The exhibit to Ms Li’s affidavit also includes a schedule of incidents with the lift, between March and April 2025, consistent with the reference to incidents in that period in Ms Li's affidavit. It is notable that that schedule does not record incidents after that date. There is in turn exchanges of messages as to service calls to the lifts, which are also addressed at some length in evidence led by Access. That exhibit also includes communications in mid-June 2025 by which Forte requested the inclusion of the mirror on the rear wall on 14 June 2025, and a cryptic email from Mr or Ms Seo of Forte on 17 June 2025 which observed that "the approved design does not have any mirror incorporated"; referred to an aspect of requirements under the Building Code; and then requested that Access remove the mirror from both lifts A and B. The evidence led by Access indicates that no subsequent request was made by Forte for the reinstallation of the mirror, possibly because, as Mr or Ms Seo had noted, the approved design did not permit its incorporation.

Ms Li's exhibit also includes an email dated 22 July 2025 where Forte proposed to make a final payment in respect of the lift, but to do so in a manner that would hold back part or possibly all of it by way of a retention amount. That proposal was ultimately not implemented and no such payment was made by Forte. Ms Li also there exhibited a text message which extracted part of a report prepared by the certifier for the project, which indicated only one issue in respect of the lift, relating to the handrail, which was subsequently remedied as I noted above. I refer to the full version of that report which was tendered by Access below.

By a letter dated 11 August 2025, after the Demand had been served, Forte raised a complaint as to breakdowns in the lift during the builder's lift phase and after handover, although it did not there refer to the fact, acknowledged by Ms Li in her affidavit, that there had been no further “incidents” since June 2025. Forte there raised a suggested concern about the quality and compliance of the lift arising from those matters. Forte also there articulated a claim for liquidated damages, which did not refer to the fact that Access had not been able to commence its work until after the time specified in the Subcontract for completion of the lift work had expired, by reason of the delay in Forte's building work. It is plain enough that those matters were raised by Forte to advance an application to set aside the Demand, because that letter concluded with the proposition that:

Access' solicitors responded by letter dated 19 August 2025, taking issue with those propositions. By a further letter dated 27 August 2025, written on the same day as the application to set aside the Demand was filed by Forte, Forte's solicitors again asserted defects in the works in respect of the operation of the lifts, and a delay in bring the works to substantial completion, quantified the loss that was said to be attributable to that delay and invited withdrawal of the Demand.

Access in turn led voluminous evidence in response to the application to set aside the Demand. Access read the affidavit dated 24 September 2025 of its director, Mr Hanson, which contended that the relevant works had been completed, the lifts were installed and operating, and the occupation certificate for the site had been issued and he had seen people living in the premises using the lifts every day. It appears there is no real controversy about that proposition, so far as Ms Li herself accepts that the defects in respect of the lifts had ceased by June 2025.

Mr Hanson also refers to the history of payment issues in respect of claims against Forte in respect of the work that was done by Access, and to the discussions which had led to variations of invoices to address matters raised by Forte and culminated in the invoices in the final versions which are now claimed in the Demand. Mr Hanson also addressed the timing of work in respect of both lifts A and B at the premises. As I noted above, it is not necessary to address that matter in detail, where it is common ground that the work could be, and was not, commenced until after the time for its completion under the Subcontract had expired, because Forte did not complete the necessary building works prior to that date. Mr Hanson also addressed the position in respect of the mirror in the lift.

The exhibit to Mr Hanson's affidavit included (Ex D1, 351) Forte’s assessment of a progress payment claim made by Access which (as I noted above) acknowledged that the amount claimed in the second of the invoices now in dispute was properly founded, although it identified, after the Demand was issued, asserted offsetting claims in respect of liquidated damages in respect of the third invoice.

It is apparent, from the documents exhibited to Mr Hanson's affidavit, that Ms Li was plainly conscious of the delays which arise from legal proceedings in respect of amounts claimed by creditors. On 11 June 2025 (Ex D1, 331), in the course of a discussion with Access as to amounts then claimed by Access but not paid by Forte, she suggested that it was time to get payment "as per agreement", although raising a complaint as to the operation of the lift, and advised Access that if it won from an adjudication, it would take at least 30 business days, or if "we are going to the legal way, it will be around one year's time". Forte’s expectations as to delay will have been disappointed in that respect, since this matter has reached hearing and judgment in a lesser period. I also note that Access appears to have there responded to the threat of delay by a compromise in respect of the amounts then claimed, but that did not bring about payment of those amounts by Forte.

Access also tenders the report of the project certifier (Ex D2), and I referred to an extract of that report which Forte had sent to Access above. That report identifies multiple defects in respect of the building work, some 39 or more of them, only one of which related to Access’ work on the lift, namely the handrail issue which has now been resolved. The certifier there identified no issue as to the continuing operation of the lift or as to the mirror in the lifts, as removed from the lifts in accordance with Forte’s instruction, or had they been installed in the lifts.

Access also reads the affidavit dated 24 September 2025 of the relevant site supervisor, Mr Pirona, and several affidavits of service personnel who had attended to address particular defects in respect of the lifts in the period prior to June 2025 and the steps which had been taken to resolve those defects.

Both parties made detailed submissions as to the matters which are said to give rise to a genuine dispute, being the position in respect of the mirror and the breakdowns in respect of the lift that had occurred in the period prior to June 2025.

I bear in mind the applicable principles. Obviously enough, the Court has power to set aside a creditor's statutory demand under s 459H(1)(a) of the Act where there is a genuine dispute between a company and the issuer of the demand about the existence or amount of the debt to which the demand relates. In Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 464; [1997] FCA 681, the Full Court of the Federal Court observed that a genuine dispute be bona fide and truly exist in fact, and the grounds for it must be real and not spurious, hypothetical, illusory or misconceived. The reference to a requirement that the dispute be "bona fide", and not "spurious" is significant and I will return to it below. The Courts have often recognised that the threshold to establish a genuine dispute is not high, and I proceed on the well-established basis that, once a genuine issue arises for determination, then the Court would not deal with any balancing exercise in respect of the strength of the claim put by Forte on the one hand, and Access' response on the other.

It is important, however, also to recognise a fundamental principle noted in Spencer Constructions and subsequent appellate authority. In Lygon 158 Pty Ltd v Huber (2016) 117 ACSR 495; [2016] NSWCA 330 ("Lygon 158") at [8]ff, after approving my observations as to the content of the concept of "genuine dispute" in Re Wollongong Coal Ltd [2015] 110 ACSR 134; [2015] NSWCA 1680 at [9]ff, Barrett AJA went on to observe that the Court was required to distinguish a genuine dispute on the one hand from "one that is merely a constructed response to the claim advanced through the statutory demand". In Creata (Aust) Pty Ltd v Faull (2017) 125 ACSR 212; [2017] NSWCA 300 ("Creata"), Barrett AJA distinguished at [47] between the aspect of a genuine dispute that is concerned with the identification a serious question to be tried or a plausible contention requiring investigation and:

Similarly, in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd [2019] 99 NSWLR 297; [2019] NSWCA 60 at [95], White JA referred to Creata at [47], and observed, in that case, that the offsetting claims asserted by Grandview were constructed in response to the service of the statutory demand, and were not genuine on that basis. His Honour there agreed with the orders proposed by Bell P, which set aside the creditor’s statutory demand in that case.

It seems to me clear, on the evidence to which I have referred above that, even if it could be said that a dispute as to the mirrors in the lift or as to the several “incidents” in the operation of the lift in the period prior to June 2025 were genuinely arguable, these disputes are here raised merely a constructed response to the claim advanced by the Demand. There are several reasons to take that view. The first is that, during the period to June 2025, when issues were raised in respect of the operation of the lift, on several occasions, they were promptly addressed. Second, Ms Li's evidence is that those issues ceased by June 2025. Third, so far as the mirror is concerned, the issue appears to have been addressed by the removal of the mirrors in accordance with any instruction given by Forte, where the necessary approval form inclusion of the mirrors in the lifts had not been obtained. Fourth, if the mirrors were reinstalled, the only apparent loss to Forte would be the cost of the mirrors plus the cost of reinstallation, figures which would be a minor portion of the amounts claimed by Access for unpaid work. Fifth, so far as Forte contends that it is not reasonably satisfied as to the matters that would give rise to a payment obligation to Access, Ms Li gives no evidence to that effect, and there is no evidence that Forte has devoted its mind to those matters, at least prior to the point at which it raised arguments which might support an application to set aside the Demand, initially in its letter which plainly focused on the Demand, and subsequently in its solicitor's correspondence.

For these reasons, consistent with the approach taken by Barrett AJA in Creata and by White JA in Grandview, it seems to me that, even if the relevant disputes were (faintly) arguable, they are not genuine disputes and no genuine dispute in respect of the Demand is established. I do not exclude, in that regard, the need to adjust the Demand to reduce it for the first amount that has been paid.

As I noted above, Forte also seeks to establish an offsetting claim in respect of delay. Again, I should address the applicable principles, although it is only necessary to do so briefly. An offsetting claim for the purposes of s 459H(1)(b) of the Act is the amount of a claim or claims that a company has against the person who served the statutory demand by reason of counter-claim, set-off or cross demand, whether or not that demand arises out of the same transaction or circumstances as the debt to which the demand relates. Again, to establish an offsetting claim, the company must show that there is a "serious question to be tried", or "an issue deserving of a hearing, as to whether the company has such a claim against the creditor and, critically, that the claim is made in good faith: Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] 120 ALR 173; 12 ACSR 341 at 356-357. The principles to which I have referred above, in respect of a claim that is constructed in response to the pressure of a creditor's statutory demand equally apply to an offsetting claim.

It seems to me that Forte’s offsetting claim for liquidated damages is also here constructed in response to the Demand and is not made in good faith. I reach that view because, first, it was apparent or should have been apparent to Forte that the scheduled commencement and completion dates in the Subcontract had been displaced, in their practical operation, by the fact that Forte had not completed the building works that would allow the lifts to be installed before the time specified in the Subcontract for their installation had expired. Second, there was no contemporaneous suggestion, before the Demand was issued, that Forte took the view that, because Forte’s delay had prevented Access beginning its work before the date for it to be completed had expired, Forte had a claim for liquidated damages against Access. Third, Ms Li does not, herself, express a view that such a claim exists in her affidavit, although she refers to the dates from which such a claim might be constructed. Fourth, the present articulation of that claim only emerges in the letter from Forte and the letter from its solicitors, sent after the Demand was issued. For these reasons, the offsetting claim is also not established.

As I have noted above, nothing was said in Ms Li's evidence as to this matter. Section 459F of the Act deals with the position where a creditor's statutory demand is not set aside on application to the Court, and provides for payment within a specified time to avoid a presumption of insolvency arising. I am not satisfied, here, that there is any reason to extend the time beyond that specified by the Act.

After I delivered judgment indicating that I proposed to order that Forte pay Access’ costs of the proceedings on the ordinary basis, Access tendered a letter dated 26 September 2025, sent on a without prejudice except as to cost basis, in support of an application for indemnity costs. I recognise that an offer relying on the principle in Calderbank v Calderbank [1975] 3 All ER 333 may support an order for indemnity costs, if it was unreasonable for the other party not to accept the offer. On the face of it, the amount claimed in this letter was a reasonable settlement offer, reducing the amount claimed in the Demand by an allowance for the maximum amount claimed by Forte in respect of liquidated damages, and by a modest amount in respect of the alleged mirror defects, and offering to accept a significant discount, of in the order of $30,000, from the amount claimed in the Demand. However, the letter also contemplated a release of all claims in connection with or arising out of the debts set out in the Demand, but excluding the recovery of the retention, and also sought a release of all claims in connection with or arising from matters sent out in several letters. It seems to me that the latter releases travelled beyond the scope of these proceedings. While it would have been unreasonable for Forte to proceed with its application to set aside the Demand, had Access simply offered was to accept the lesser amount in payment of the amount claimed, it was not unreasonable for Forte to do so where the requirement for releases was added to that offer. For these reasons, the basis for a claim for indemnity costs under Calderbank principles is not established, and I do not alter my proposed costs order.

As I noted above, the fact that the first amount claimed in the Demand has been paid requires an adjustment so as to calculate the substantiated amount for the purposes of the Act. That amount is the amount claimed in the Demand, $83,434, less $1,254, being a total of $82,180.

Accordingly, I make the following orders;