A contractor owed monies for work performed under a construction contract may, amongst other options (such as mediation, etc):

1. issue a payment claim under the Building and Construction Industry (Security of Payment) Act 2021 (WA) (SOP Act), and if the payment remains disputed or payment is not made, where available, apply for adjudication (obtain a determination and register it as a judgment) or seek summary judgment;¹
2. commence proceedings in a Court of competent jurisdiction and obtain judgement; or
3. issue a statutory demand for payment of the debt.

The relief available under options A and B, compared with option C is different:

• If payment is not forthcoming upon a judgment being obtained under options A or B, a party may enforce the judgment under the Civil Judgment Enforcement Act 2004 (WA).
• If payment is not made upon a valid statutory demand being issued under option C, a party may commence proceedings to wind up the debtor.

Of course, a party owed money may be tempted to adopt a belts and braces approach, pursuing different recovery options available to it in parallel.

But be warned that this approach may not always serve best. The decision in Grounded Construction Group Pty Ltd v KW Civil & Construction Pty Ltd² comes as a reminder that doing so may be deemed an abuse of process.

It was also made clear in this case that offsetting claims under the Corporations Act 2001 (Cth) (Corporations Act) can be asserted even where they have been rejected by an adjudicator. This will extend even to claims unable to be raised as part of the adjudication process.

Grounded v KW Civil & Construction – Facts

In Grounded v KW Civil & Construction the Court considered the interaction between the provisions of the SOP Act with the statutory demand process under the Corporations Act.

The plaintiff in these proceedings was Grounded Construction Group Pty Ltd, a construction company working on the Rocklea Palms Village Expansion Project in Paraburdoo. The defendant subcontractor was KW Civil and Construction Pty Ltd, a civil construction company hired to perform various civil works for the Project.

The defendant issued two payment claims to the plaintiff under the Subcontract in December 2023 and in May 2024. The non-payment of these claims led to the institution by the defendant of two legal processes:

1. A civil action commenced against the plaintiff seeking recovery of the December 2023 Claim (Recovery Proceeding).
2. An adjudication proceeding pursuant to the SOP Act (Adjudication Proceeding) seeking payment of the May 2024 Claim. A successful adjudication determination was delivered on 30 August 2024 in which over $1M was awarded.

On 10 September 2024, the defendant served a Statutory Demand on the plaintiff in respect of the determined amount.

In the proceedings, the plaintiff argued that the Statutory Demand constituted an abuse of process, and that the plaintiff had offsetting claims which should reduce the amount claimed.

The plaintiff sought to either have the Statutory Demand set aside, or to have it varied by reducing the amount of the demand. The defendant sought orders that the Application be dismissed.

Abuse of process

The plaintiff submitted that an abuse of process will occur where the purpose of bringing the proceedings is to use them as a means of obtaining some advantage for which they were not designed or some collateral advantage beyond what the law offers.

Further, the plaintiff submitted it is an abuse of the statutory demand process to continue to press and rely on a statutory demand while at the same time suing for the relevant debt.

In response, the defendant submitted that the overlap between the Recovery Proceeding and the Statutory Demand was addressed by its unequivocal indication that it would not prosecute claims in the Recovery Proceeding to the extent they overlap with any amounts claimed in the Statutory Demand.

The Court found that, regardless of the defendant’s unequivocal indication, there remained two proceedings on foot with different objectives, being the extraction of payment sought in the Recovery Proceedings and the use of the Statutory Demand to obtain an event of insolvency.³

Ultimately, it was held that the inconsistency of purpose in the overlapping proceedings gave rise to an abuse of process.⁴

However, an applicant in the more recent case of William George Trading Pty Ltd v Enhalo En Ltd⁵ attempted to rely on the decision in Grounded v KW Civil & Construction to argue that any pursuit of parallel processes would constitute an abuse of process, but the facts of the case were distinguished by the Court, and it was ultimately found that where there is no “other reason” why the demand should be set aside, the issuing of a statutory demand alongside adjudication proceedings will not in itself be considered an abuse of process.⁶

Set-off

The Court referred to the case of Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd⁷ to discuss whether an offsetting claim that has been rejected in an adjudication determination under the SOP Act can be relied upon as a ‘true’ offsetting claim for the purposes of setting aside a statutory demand.

The defendant relied on the decision in Diploma to state that the alleged offsetting claims identified were attempts to re-agitate the matters determined by the adjudicator as part of the payment claim dispute.

However, Lundberg J found that as the adjudicator had rejected all of the plaintiff’s offsetting claims, they did not form part of the Determination. As such, the defendant’s submission that the claims were not true ‘offsetting claims’ was rejected and the Court was required to consider whether those claims were genuine notwithstanding the adjudication outcome.⁸

This is notably in contrast with a scenario where summary judgment is obtained under the SOP Act (ie option A), where section 27(3) provides that a respondent is not entitled to bring any cross claim or raise any defence in the proceedings, subject to the observations we have previously raised in our articles (here and here).

Justice Lundberg granted the plaintiff’s Application and the Statutory Demand was set aside pursuant to s 459J(1)(b) of the Corporations Act, based on the existence of the parallel proceedings.⁹

His Honour noted that in any event, he would have ordered that the Statutory Demand be varied to reflect the offsetting claims raised by the plaintiff for liquidated damages and backcharges.¹⁰

Considering the decision of Grounded v KW Civil and Construction, contractors should proceed with caution when seeking to enforce adjudication determinations via parallel proceedings which may constitute an abuse of process.

This article was written by Kate Morrow, Partner, Michael Harris, Special Counsel, and Tara Prentice, Law Graduate.

¹ On a Proper Construction Issue 9: The New WA Security of Payment Bill; On a Proper Construction Issue 17: The New Security of Payment Act.
² Grounded Construction Group Pty Ltd v KW Civil & Construction Pty Ltd [2025] WASC 307 (Grounded v KW Civil & Construction).
³ Grounded v KW Civil & Construction [261].
⁴ Grounded v KW Civil & Construction [263].
⁵ William George Trading Pty Ltd v Enhalo En Ltd [2025] QSC 296 (William George v Enhalo).
⁶ William George v Enhalo [42].
⁷ Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2013] WASC 407 (Diploma).
⁸ Grounded v KW Civil & Construction [201].
⁹ Grounded v KW Civil & Construction [296].
¹⁰ Grounded v KW Civil & Construction [297].