Background
Griffith Group Ripley Pty Ltd owned commercial premises at Ripley, Queensland, leased to Starbucks Coffee Australia Pty Ltd. Under an Incentive Deed, Griffith agreed to rent incentives and an ongoing rent abatement dependent on Starbucks’ average weekly sales during the first lease year. If sales were $45,000 or less per week, Starbucks would receive the higher abatement for the remaining lease term.
Before selling the premises, Griffith elected to pay out the incentive. The parties executed a variation allowing Griffith to pay the maximum incentive before Starbucks supplied its sales statement, subject to an adjustment. Starbucks’ sales were below $45,000 per week. After Griffith paid $82,500 for part of the incentive but did not pay the agreed balance, Starbucks served a statutory demand for $449,441.08. Griffith applied to set it aside.
The Court’s Holding
Smith J dismissed the application. Griffith had made a binding election under clause 5(a) to pay out the incentive: it had proposed the payout, executed the variation to facilitate it, agreed to calculations in correspondence, and made a partial payment. That election engaged the contractual mechanism for calculating the amount payable to Starbucks.
The Court held that the sales statements established the relevant threshold had not been met. The deed did not require an independent auditor, and in any event PwC’s subsequent report resolved any issue about the statement. The outstanding sum was a contractual debt, not unliquidated damages. Griffith’s challenges to the sales figures and Starbucks’ trading operations were unsupported bare assertions, so no genuine dispute or other reason existed to set aside the demand.
Key Takeaways
- An election to exercise a contractual payout right can be established by clear conduct and correspondence, not only formal language.
- A statutory-demand applicant must advance a genuine, factually supported dispute; bare assertions will not suffice.
- A quantified payment obligation under a contract may be a debt capable of supporting a statutory demand.
Why It Matters
The decision illustrates that statutory-demand proceedings are not a forum for speculative contractual disputes. A company seeking to set aside a demand must identify a plausible dispute supported by evidence, particularly where contemporaneous documents show agreement on the contractual payment mechanism.
It also highlights the importance of documenting incentive payouts when leased property is sold. A landlord that elects to buy out future rent concessions may become immediately liable under the agreed calculation process once the relevant conditions are established.