The WA Supreme Court in the decision of Pravenkav Group Pty Ltd v Diploma Construction Pty Ltd [No 3] [2014] WASCA 132 has challenged the application of the Graywinter principle in cases involving an application to set aside a statutory demand saying, somewhat harshly:

“[I]t can be a mark that a principle is opaque when the principle is named after a case”

The Graywinter case stands for the proposition that, where a party is seeking to set aside a statutory demand under s.459 of the Corporations Act they must file an affidavit with the application setting out the basis for the genuine dispute or offsetting claim alleged to provide the grounds to set aside the statutory demand.  There must be substance to a genuine dispute and not merely a bare assertion of a dispute.  Supplementary affidavits may only expand on matters raised in the initial affidavit.  The case has been applied in a number of decisions and considered good law.

In Pravenkav however, the applicant relied on supplementary affidavits going to the sum of an alleged loss which had not been included in the initial affidavit.  The WA Court of Appeal accepted that there was enough information in the initial affidavit to explain the basis for the offsetting claim alleged and did not exclude the supplementary affidavits.

The statutory demand was ultimately set aside in the matter and Pravenkav didn’t have to pay while their dispute and offsetting claim could be heard.

This case illustrates an ongoing lowering of the bar to setting aside statutory demands which should give creditors pause before moving to issue a demand in connection with a debt which may be disputed.