Background
Hospitality Equipment 2020 Pty Ltd, a supplier of commercial kitchen and catering equipment, hired a replacement server from Jacelle Pty Ltd, trading as Comlink Solutions, after its own server failed in December 2023. The rental server failed on 19 November 2024. The company said the failure left it unable to use its essential business-management system for almost two weeks, until a replacement server was installed and tested.
Jacelle issued invoices totalling $22,834 for server rental and IT support, including $3,712.50 for data-recovery work after the server failure. It served a statutory demand on 19 January 2026. Hospitality Equipment applied under s 459G of the Corporations Act 2001 (Cth) to set it aside, ultimately relying only on an alleged offsetting claim for losses arising from the failure.
The Court’s Holding
Nixon J held that Hospitality Equipment had established a genuine offsetting claim, but not one large enough to require the statutory demand to be set aside. The undisputed failure of the rental server gave prima facie plausibility to a claim that it was not fit for purpose. Evidence about a third party’s access to the server did not defeat the claim at this interlocutory stage; it raised a potential causation dispute requiring investigation.
The Court allowed $2,681 for a plausible lost-profits claim and $3,712.50 for Jacelle’s data-recovery work, producing an offsetting claim of $6,393.50. It rejected the claimed staff wages, which were conceded to be fixed costs, and did not allow replacement-server and telephone-system costs because insurance proceeds previously received covered those costs. Deducting the offsetting claim left $16,440.50—above the $4,000 statutory minimum—so the Court varied the demand rather than setting it aside.
Key Takeaways
- An offsetting claim need only be genuinely arguable and supported by sufficiently particular facts; it need not be proved as at a final trial.
- Where an offsetting claim reduces a statutory demand but leaves more than the statutory minimum outstanding, the Court may vary the demand and preserve its effect from service.
- Loss calculations must be grounded in the evidence: unsupported revenue assumptions, fixed costs, and losses already covered by insurance may not be allowed.
Why It Matters
The decision illustrates the distinct role of a statutory-demand application: the Court assesses whether a claim is plausible and its genuine level, rather than finally determining liability. A creditor cannot defeat an otherwise plausible offsetting claim merely by pointing to contested causation.
But a company seeking to set aside a demand must also show an offsetting amount sufficient to reduce the substantiated debt below $4,000. Here, the demand remained effective for $16,440.50, and Hospitality Equipment was ordered to pay 60% of Jacelle’s costs.