Aurenne Mt Ida Pty Ltd v Central West Concrete Pty Ltd
[2024] WASC 51
•11 MARCH 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: AURENNE MT IDA PTY LTD -v- CENTRAL WEST CONCRETE PTY LTD [2024] WASC 51
CORAM: FORRESTER J
HEARD: 16 JANUARY 2024
DELIVERED : 11 MARCH 2024
FILE NO/S: COR 150 of 2023
BETWEEN: AURENNE MT IDA PTY LTD
Plaintiff
AND
CENTRAL WEST CONCRETE PTY LTD
Defendant
Catchwords:
Application to set aside statutory demand - Whether genuine dispute established
Legislation:
Corporations Act 2001 (Cth)
Result:
Statutory demand set aside
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr J C Giles SC |
| Defendant | : | Mr A P Rumsley |
Solicitors:
| Plaintiff | : | Minter Ellison |
| Defendant | : | Western Legal |
Cases referred to in decision:
CA & Associates Pty Ltd v Fini Group Pty Ltd [2020] WASCA 31
Digga Excavations Tas Pty Ltd v Linear Capital Pty Ltd [2023] TASSC 22
Kiewit Australia Pty Ltd v New Energy Corp Pty Ltd [2018] WASCA 180; (2018) 130 ACSR 511
Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359; [1931] ALR 194
Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1989) 166 CLR 245
Taylor v Oakes Roncoroni & Co (1922) 127 LT 269; 27 Com.Cas. 266
WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2] [2023] WASCA 85
FORRESTER J:
Introduction
This is an application by the plaintiff, commenced on 22 September 2023, to set aside a statutory demand dated 1 September 2023, served on it by the defendant.
The grounds of the application were inconsistently articulated by the plaintiff, but can be distilled to grounds that:
(a)there is a genuine dispute about the existence of the debt (Ground 1);
(b)alternatively, that the plaintiff has a genuine dispute and offsetting claim in the total amount of $1,233,563.17 (Ground 2);
(c)alternatively, that the plaintiff has a genuine dispute and offsetting claim in the total amount of $338,534.82 (Ground 3);
(d)alternatively, that the plaintiff has a genuine dispute in relation to the amount of $105,600.03 (Ground 4).
The application is supported by the affidavits of John Roger Simpson Brice sworn 22 September 2023 and 12 January 2024.
Evidence of John Roger Simpson Brice
Mr Brice is the Acting Chief Executive Officer of the plaintiff. He deposes to the facts and as to the matters said to give rise to the genuine disputes as follows.
The plaintiff owns a new mining operation at Mt Ida, in Western Australia (the Project). The Project required the construction and development of a gold processing plant, associated mining operation and a camp for workers.
As part of the Project, concrete works were required. The defendant was selected as the contractor to provide those works. An agreement was executed on 7 February 2022 (the Contract).[1]
Contract
[1] Affidavit of John Roger Simpson Brice sworn 22 September 2023 [5], 26 (JB-3) (First Brice Affidavit).
The Contract is set out in five sections:
(1)Formal Instrument of Agreement;
(2)Special Conditions of Contract;
(3)General Conditions of Contract;
(4)Contract Schedules; and
(5)Description of Work under the Contract.
Pursuant to the Formal Instrument of Agreement, only the first four sections made up the Contract, and the sections take precedence in the order they are listed.
For the purposes of this matter, the relevant terms of the Contract are to be found in section 3 - the General Conditions of Contract, which are the Australian Standard AS 4906‑2002, Minor works contract conditions (Principal administered).
The relevant clauses are set out below.
1 Interpretation and construction of Contract
contract sum means:
(a)where the Principal accepted a lump sum, the lump sum;
(b)where the Principal accepted rates, the sum of the products ascertained by multiplying the rates by the corresponding quantities in the schedule of rates; or
(c)where the Principal accepted a lump sum and rates, the aggregate of the sums referred in in paragraphs (a) and (b).
excluding any additions or deductions which may be required to be made under the Contract.
…
direction includes agreement, approval, assessment, authorisation, certificate, decision, demand, determination, explanation, instruction, notice, order, permission, rejection, request or requirement.
…
the Works means the whole of the work to be carried out and completed in accordance with the Contract, including variations provided for by the Contract, which by the Contract is to be handed over to the Principal.
work includes the provision of materials;
WUC (from 'work under the Contract') means the work which the Contractor is or may be required to carry out and complete under the Contract and includes variations, remedial work, construction plant and temporary works ...
…
2.1 Performance and Payment
The Contractor shall carry out and complete WUC in accordance with the Contract and directions authorised by the Contract.
The Principal shall pay the Contractor:
(a)for work for which the Principal accepted a lump sum, the lump sum; and
(b) for work for which the Principal accepted rates, the sum of the products ascertained by multiplying the measured quantity of each section or item of work actually carried out under the Contract by the rate accepted by the Principal for the section or item,
adjusted by any additions or deductions made pursuant to the Contract.
2.2 Quantities
Quantities in a schedule of rates are estimated quantities only.
The Principal is not required to give a direction by reason of the actual quantity of an item required to perform the Contract being greater or less than the quantity shown in the schedule of rates.;
If the schedule of rates omits an item which should have been included, the item shall be a deemed variation.
…
5 Discrepancies
Figured (sic) shall prevail over scaled dimensions in a discrepancy. Otherwise, if any party discovers any inconsistency, ambiguity or discrepancy in any document prepared for the purpose of carrying out any WUC, that party shall give the other party written The Principal, thereupon, and upon otherwise becoming aware, shall direct the Contractor as to the interpretation and construction to be followed.
If compliance with any such direction under this subclause causes the Contractor to incur more or less cost than otherwise would have been incurred had the direction not been given, the difference shall be assessed by the Principal and added to or deducted from the contract sum.
…
15 Principal's direction
Except where the Contract otherwise provides, the Principal may give a direction orally but shall as soon as practicable confirm it in writing. If the Contractor in writing requests the Principal to confirm an oral direction, the Contractor shall not be bound to comply with the direction until the Principal does so.
…
18.1 Quality of material and work
Unless otherwise provided, the Contractor shall use suitable new material and proper and tradesmanlike workmanship.
18.2 Defective work
If the Principal becomes aware of work done (including material provided) by the Contractor which does not comply with the Contract, the Principal shall as soon as practicable give the Contractor written details thereof. If the subject work has not been rectified, the Principal may direct the Contractor to do any one or more of the following (including reasonable times for commencement and completion):
(a)remove the material from the site;
(b)demolish the work;
(c)reconstruct, replace or correct the work; and
(d)not deliver the work.
…
The Principal may give a direction pursuant to this subclause at any time before the expiry of the defects liability period.
22.1 Directing variations
The Contractor shall not vary WUC except as directed in writing.
The Principal, before the date of practical completion, may direct the Contractor to vary WUC or execute additional work but such variation shall be of a character and extent contemplated by, and capable of being carried out under, the provisions of the Contract.
22.2 Pricing
The Principal shall, as soon as possible, price each variation using the following order or precedence:
(a)prior agreement;
(b)applicable rates or prices in the Contract;
(c)rates of process in a schedule of rates or schedule of prices, even though not Contract documents, to the extent that it is reasonable to use them; and
(d)reasonable rates or prices, which shall include a reasonable amount for profit and overheads,
and any deductions shall include a reasonable amount for profit but not overheads.
That price shall be added to or deducted from the contract sum.
23.1 Progress claims
Contractor shall claim payment progressively in accordance with Item 14.[2]
[2] Item 14 provides that progress claims are made on the 28th day of each month for WUC done to the 25th day of that month.
An early progress claim shall be deemed to have been made on the date for making that claim.
Each progress claim shall be given in writing to the Principal and shall include details of the value of the WUC done and may include details of other moneys then due to the Contractor pursuant to provisions of the Contract.
23.2 Certificates
The Principal shall, within 14 days after receiving such a progress claim, assess the claim and shall issue a progress certificate stating the moneys due to the Contractor or the Principal, as the case may be. The Principal shall set out in the progress certificate the calculations employed to arrive at the amount certified and, if the amount is more or less than the amount claimed by the Contractor, the reasons for the difference.
Within 21 days after receipt by the Principal of such a progress claim, the Principal or the Contractor, as the case may be, shall pay:
(a)the amount certified, if the Principal has issued a progress certificate with respect to the progress claim; or
(b)the amount of the progress claim, if the Principal has not so certified.
Neither a progress certificate nor a payment of moneys shall be evidence that the subject WUC has been carried out satisfactorily. Payment other than final payment shall be payment on account only.
…
24.1 Workers and subcontractors
The Contractor shall give in respect of a progress claim, documentary evidence of the payment of moneys due and payable to:
(a)workers of the Contractor and the subcontractors; and
(b)subcontractors
in respect of WUC the subject of that claim.
If the Contractor is unable to give such documentary evidence, the Contractor shall give other documentary evidence of the moneys so due and payable to workers and subcontractors.
Documentary evidence, except where the Contract otherwise provides, shall be to the Principal's reasonable satisfaction.
24.2 Withholding payment
Subject to the next paragraph, the Principal may withhold moneys certified due and payable in respect of the progress claim until the Contractor complies with subclause 24.1.
The Principal shall not withhold payment of such moneys in excess of the moneys evidenced pursuant to subclause 24.1 as due and payable to workers and subcontractors.
Section 4 of Schedule A of the Contract is entitled 'Schedule of Prices'. Relevantly, it provides:
The whole of the work under the Contract has been priced and shown in the following Schedule of Remuneration.
…
The description of work in Schedule A - Schedule of Remuneration and in the description of the works are not necessarily complete in all respects and reference should be made to the documents constituting the Contract which are to be read in conjunction with the Schedule of Remuneration.
The Contractor has included in its rates the cost of all items and activities required to complete the Works. If any item is not priced by the Contractor it is deemed to be of no cost or that the cost has been spread throughout other items which have been priced.
…
Work methods used by the Contractor to facilitate a work practice and which increase the net quantities will not be measured and such work methods have been allowed for by the Contractor in the rates listed in Schedule A - Schedule of Remuneration.
…
Final measurement of quantities used in the permanent Works shall be based on the last and final revision of each approved for construction drawing and/or through agreed site measurement as directed by the Superintendent.
…
All quantities included in the Schedule of Rates are Provisional. The final quantities shall be measured from the last and final revision of each construction drawing and from approved Site Instructions and agreed surveys. The descriptions and units of measurement shall be as set out in the Schedule of Rates.
The matters said to give rise to the genuine disputes
The site instructions were provided to the defendant by way of a document known as the 'BOQ Spreadsheet',[3] which identifies a quantity of concrete for particular works in cubic metres and a corresponding rate per cubic metre.
[3] First Brice Affidavit (JB-4).
On or about 26 May 2023, the plaintiff received a tax invoice from the defendant numbered 8404 in the sum of $1,628,156.80,[4] together with some documents.[5]
[4] First Brice Affidavit [18].
[5] First Brice Affidavit (JB-5).
On or about 28 June 2023, the plaintiff received a tax invoice from the defendant numbered 8435 in the sum of $966,065.17,[6] together with some documents.[7]
[6] First Brice Affidavit [19].
[7] First Brice Affidavit (JB-6).
Mr Brice produces a table which he says, 'summarises the differences between invoices 8404 and 8435 and the BOQ Spreadsheet'. He deposes that 'the amount of concrete for the works the subject of invoices 8404 and 8435 totals 1,026 cubic metres'. The BOQ Spreadsheet stipulates that only 470.4 cubic metres of concrete was to be used for those works. Accordingly, he deposes, the value of the unauthorised work done by the defendant is $1,081.175.20.[8]
[8] First Brice Affidavit [20].
A further difference between the BOQ Spreadsheet requirements and the invoices is, according to Mr Brice, that the defendant invoiced 82.348t of reinforcing concrete for the 'HV-LV workshop'. The BOQ Spreadsheet stipulates only 28.8t for those works. The value of the unauthorised work done by the defendant in this regard is $152,387.97.[9]
[9] First Brice Affidavit [21].
In his second affidavit, sworn on 12 January 2024 (the Second Brice Affidavit), Mr Brice deposes that this table was authored by Mr Copeman (the person who deputised for Mr Brice on site) and believes it was prepared based on the BOQ Spreadsheet and invoices 8404 and 8435. He deposes that the site instructions in relation to the relevant works were in existence as at 28 April 2023, and the plaintiff's records did not show any variation for this item.[10]
[10] Affidavit of John Roger Simpson Brice sworn 12 January 2024 [14] (Second Brice Affidavit).
The plaintiff made a payment of $1m to the defendant on or about 26 July 2023.[11] The plaintiff claims the amount unpaid is therefore $1,594.221.97, and not the sum of the statutory demand, being $1,699,822.[12]
[11] First Brice Affidavit [22].
[12] First Brice Affidavit [23].
As part of invoice 8404, the plaintiff was also invoiced $2,220.55 from Abrolhos Steel and $6,880.50 from Flatline Civil Constructions.[13] However, the plaintiff did not receive any other document from the defendant relating to the payment of these subcontractors. Further, in relation to the invoices, the plaintiff did not receive any document from the defendant relating to payment of the defendant's workers.[14]
Delivery of materials to the defendant
[13] First Brice Affidavit [24] (JB-5).
[14] The First Brice Affidavit [25] - [26] refers to 'ADD's workers'. However, in the Second Brice Affidavit, Mr Brice corrected the reference to 'ADD', deposing that the affidavit should instead refer to the defendant's workers.
Section 4 of Schedule A of the Contract provides:
Material Supply
Unless specifically noted [in Schedule A – Schedule of Prices] as 'Install only' or 'Erect free issue' the prices shall include for the supply, delivery and installation of all materials, all labour costs together with all plant and equipment necessary to complete the item of work.[15]
[15] First Brice Affidavit [27], 88 (JB-3).
Similarly, section 5, subclause 3.1.1(b) of the Contract provides:
The work includes but is not limited to the following … Delivery to site of all materials required for the works.[16]
[16] First Brice Affidavit [28], 110 (JB-3).
Mr Brice deposes that the plaintiff arranged for a transport company, Lee's Transport, to deliver certain materials required by the plaintiff's contractors. The plaintiff was invoiced for those deliveries, and paid those invoices. Some of those deliveries were for the delivery of materials for use by the defendant.[17] A table was annexed setting out the total cost of the deliveries for which the defendant is responsible as being $291,728.19.[18]
[17] First Brice Affidavit [29].
[18] First Brice Affidavit (JB-8).
In the Second Brice Affidavit, Mr Brice deposes that this table was also prepared by Mr Copeman, who deputised for him on site, and believes that it was prepared from the records maintained by the plaintiff.[19]
[19] Second Brice Affidavit [11].
Mr Brice never communicated to the defendant that the plaintiff would not 'on‑charge' the transport costs, and does not believe that any one from the plaintiff did so. The defendant never informed him, and he does not believe the defendant informed anyone employed by the plaintiff, that it did not wish to accept the delivery services from Lee's Transport.[20]
Fuel supplied to the defendant
[20] First Brice Affidavit [30].
Section 2, Appendix A, subclause 8.4 of the Contract provided that fuel would be supplied to the defendant at 'cost price per litre at the bowser'.[21] A rebate received by the plaintiff on that fuel is also passed on to contractors.[22]
[21] First Brice Affidavit, 44 (JB-3).
[22] First Brice Affidavit [32].
Mr Brice deposes, by reference to a table at [32] of the First Brice Affidavit, that the value of the fuel used by the defendant (taking into account the rebate) was $16,030.74.
In the Second Brice Affidavit, Mr Brice deposes that all use of fuel is able to be monitored and tracked by the use of a tag. The calculation of the fuel used by the defendant was done at Mr Brice's instruction by Mr Copeman, and Mr Brice believes that the table was prepared by Mr Copeman using the records of the plaintiff.[23]
[23] Second Brice Affidavit [12].
Evidence of Gavin Cary Botica
Gavin Cary Botica is the sole director of the defendant, which is a company involved in the supply and installation of concrete in and around Western Australia. He deposes as follows.
On 7 September 2021, he received an email from Peter Jacques of Plant and Infrastructure Engineering (PIE). PIE was the Project Manager for the Project. Prior to receiving this email, Mr Botica had never heard of Mr Jacques, or the Project, and had never dealt with PIE.[24]
[24] Affidavit of Gavin Cary Botica sworn on 14 December 2023 [7] - [8] (Botica Affidavit).
Mr Jacques's email included a tender package on which he invited the defendant to quote.[25] Mr Botica formed the view that it was a 'schedule of rates' tender as the proposed works had not been finally detailed.[26]
[25] Botica Affidavit (GCB02).
[26] Botica Affidavit [9] - [11].
Mr Botica spoke with Peter Storey of the plaintiff, Keith Brown of PIE and Mr Jacques to try to better understand the scope of works. Mr Brown informed him that the scope of works had not been finalised and that the Bill of Quantities (BOQ)[27] would be progressively updated when final designed were achieved.[28]
[27] Botica Affidavit, 60 - 62 (GCB02).
[28] Botica Affidavit [12], [14].
Mr Botica deposed that, having worked extensively in the mining sector, he was 'comfortable' with the fact that the defendant would be paid for the final finished product that the defendant installed, applying the fixed rates to the measured quantities.[29]
Delivery of materials to the defendant
[29] Botica Affidavit [20].
The defendant has a regular freight contractor. In 2021, it was not possible to fix a freight rate. Mr Botica spoke to Mr Jacques, Mr Brown, Mr Copeman and Mr Brice, informing them that he was not comfortable fixing a freight rate. Mr Brown told him to omit the freight component as '[the defendant's] pricing was competitive and that a freight cost of materials to site had not been allowed for by others quoting the job.' Mr Brown told him that the plaintiff would attend to transporting materials to site. On this basis, Mr Botica said he would omit the freight component from his pricing.[30]
[30] Botica Affidavit [24] - [25], [28] - [30].
Apart from 'pre‑mix' material, the defendant transported 50t of cement to site, but was then informed by Mr Brown that Lee's Transport was to deliver materials thereafter. Mr Botica says that at no time was he informed that he would be on‑charged the costs of transporting materials to site, or what the cost would be, and he has never been provided with invoices or details.[31]
[31] Botica Affidavit [32] - [34].
Mr Botica deposes that he would not have used Lee's Transport had he known he would be charged for that transport, as it was about double the cost of the transport company Mr Botica regularly used.[32]
Fuel supplied to the defendant
[32] Botica Affidavit [35].
Prior to the filing of the First Brice Affidavit, the defendant had never received any invoice, claim or demand for the payment of fuel.[33]
Invoicing and BOQ Spreadsheets
[33] Botica Affidavit [38].
The defendant issued invoice 8404 on 26 May 2023. Pursuant to the Contract, the claim was deemed to have been made on 28 May 2023. The plaintiff then had until 11 June 2023 to assess the defendant's claim and certify the monies payable to the defendant. The defendant did not certify the claim, but also did not dispute it by the required date.[34]
[34] Botica Affidavit [44] - [46].
As for invoice 8435, that was issued on 28 June 2023. The plaintiff had until 12 July 2023 to assess the claim and certify the monies payable to the defendant. Again, the plaintiff did not certify the claim by that date, or dispute it.[35]
[35] Botica Affidavit [47] - [49].
Mr Botica disputes that the BOQ Spreadsheet referred to in the affidavit of Mr Brice was that being used by the parties. He says that was being used by the parties for the purpose of assessing progress claims, and was a suggested payment template.[36] Annexed to Mr Botica's affidavit as GCB03 is an email from Mr Brown of PIE dated 23 May 2022 which annexes a blank version of the document and includes the following:
Apologies for dragging my chain on this but please find attached a suggested payment template for your use. If new items come up as you progress simply add them as NEW ITEM under the appropriate area.
…
The quantities are rough and should me (sic) no means relied upon. As the IFC drawings are issued I will capture the Engineer's MTO quantities and issue the remeasures but I would advise that you jointly with Aurenne's representative, progressively remeasure the concrete yourself and rely upon the bending schedules for your rebar quantities.
[36] Botica Affidavit [53] - [56].
On 17 August 2022, an employee of the defendant emailed Mr Brown, writing that she was updating the payment template and had observed that the drawings and template were not corresponding. She noted that there were quite a few extras/variations/mobilisation charges and asked how to deal with them.[37] Mr Brown responded, admitting he was running behind on incorporating the remeasures issued to date into the BOQ, and said:
In regard to the additional works, Site instructions should have been issued to you by Aurenne for each separable portion of additional work. It sounds as though this has not happened so I would be most grateful if you could bundle each portion of Work Sheets or whatever you use, that records man hours, materials etc for each portion of additional works for which you require payment.[38]
[37] Botica Affidavit, 124 (GCB04).
[38] Botica Affidavit, 123 (GCB04).
On 24 August 2022, the defendant again asked whether Mr Brown had had the chance to update the BOQ. Mr Brown replied that he had not, but that the defendant should not let that hinder production of its invoice.[39]
[39] Botica Affidavit, 121 (GCB04).
On 24 March 2023, Mr Botica emailed Mr Copeman, Mr Brown and others, asking for an updated BOQ for the reinforcing for the Project, and noting that there had not been a revision of the BOQ since before the commencement of the Project. There is no evidence of any response to this email.[40]
[40] Botica Affidavit, 126 (GCB05).
On 2 April 2023, Mr Botica wrote to Mr Socratous, an employee of the plaintiff, regarding a variation of the height of the blinding for the HV workshop and the volume of the concrete for it and the slab. Mr Socratous responded, copying Mr Copeman, saying that he was happy to proceed, but asked if it were possible to reduce some of the thickness of a particular area.[41]
[41] Botica Affidavit, 127 (GCB06).
Again, there is no evidence of any further correspondence regarding this particular issue. However, on 3 May 2023, Mr Socratous wrote an email to the defendant (again, copied to Mr Copeman) saying that the plaintiff was looking at slowing down some works, but wanted particular works completed as soon as possible, saying:
Aurenne thank CWC management and crew for their excellent workmanship and efforts to this day.[42]
[42] Botica Affidavit, 128 (GCB07).
The defendant issued invoice 8374 for $986,910.03 on 28 April 2023, which was due on 19 May 2023. It was not paid on that date.[43]
[43] Botica Affidavit [84] (GCB09).
The defendant then issued invoice 8404 on 26 May 2023, for $1,628,156.86, due on 18 June 2023.[44]
[44] Botica Affidavit [86].
The plaintiff paid the sum of $881,310.03 on 1 June 2023. That was applied to invoice 8374, leaving $105,600 outstanding on this invoice.[45]
[45] Botica Affidavit [87].
On 15 June 2023, Mr Copeman wrote to the defendant asking for support documentation on the difference between the 'BQM[46] and actual' for the increase in the slab volume of the HV‑LV workshop and the volume for the Washbay walls. A response was provided by a Mr Goodreid (who was employed by a company other than the defendant), who said that he could see where Mr Copeman had got his quantities from, but believed it was wrong and suggested an onsite measure. Mr Goodreid explained the additional works were required as a result of the earthworks performed by someone else, and an additional hoist slab being added.[47]
[46] This term appears to have the same meaning as 'BOQ'.
[47] Botica Affidavit, 129 - 130 (GCB08).
In reply, on 20 July 2023 Mr Copeman wrote:
Will ask someone to measure on site and get this sorted asap.[48]
[48] Botica Affidavit, 129 (GCB08).
On 24 July 2023, Mr Copeman wrote to Mr Botica, saying that the outstanding invoices could not be reconciled to 'the contract, the BOQ Budget or any approved variations or site instructions'. Mr Copeman also noted that he had not received a response from the defendant to his email of 15 June 2023 and said, in relation to invoices 8404 and 8435:
As a result, these invoices are disputed and will not be paid. I have discussed the situation with John and as a gesture of good faith he has agreed to pay $1,000,000.00 whilst we resolve the dispute.[49]
[49] First Brice Affidavit, 246 (JB-9).
Mr Botica responded stating that:
The contract clearly states the drawings override anything in the BOQ and therefore cannot be reconciled.[50]
[50] First Brice Affidavit, 245 (JB-9).
However, Mr Copeman reiterated that, given the lack of site instructions or variations which would vary the volumes from the 'agreed BOQ' he did not see the invoices were valid.[51]
[51] First Brice Affidavit, 244 (JB-9).
Mr Botica sought clarification of the exact areas of the BOQ which were disputed, and referred to the emails from Mr Brown dated 17 August 2022. He pointed out that numerous emails had been sent to the various parties to update volumes and noted that the BOQ had not been updated once.[52]
[52] First Brice Affidavit, 243 - 244 (JB-9).
The plaintiff paid the sum of $1,000,000 on or about 26 July 2023.[53] Mr Botica deposes that the defendant allocated the first $105,600 to the outstanding balance on invoice 8374, and the remaining $894,400 was allocated to the part payment of invoice 8404. Accordingly, the outstanding sum is $1,699,822.03.[54]
[53] First Brice Affidavit [22].
[54] Botica Affidavit [90] - [91].
The plaintiff's lawyers wrote to the defendant on 3 August 2023 affirming that its position was as set out in Mr Copeman's email dated 24 July 2023.[55] The defendant's lawyers responded noting that, in the absence of timely certification by the plaintiff of the invoices, they were due and payable.[56]
[55] First Brice Affidavit, 247 - 248 (JB-10).
[56] Botica Affidavit, 136 - 138 (GCB11).
Further evidence of John Roger Simpson Brice
In the Second Brice Affidavit, Mr Brice denies ever meeting Mr Botica before the commencement of the Project, and deposes to having been told by Mr Copeman that he denies having the conversation with Mr Botica referred to at [33] above.[57]
[57] Second Brice Affidavit [10].
Statutory framework and applicable legal principles
Statutory demands
Section 459E of the Corporations Act 2001 (Cth) (the Act) provides that a creditor may serve a statutory demand on a company in respect of a debt which is, or debts which are, due and payable where the amount exceeds the statutory minimum ($2,000).
Pursuant to s 459G of the Act, a company served with a statutory demand may apply for an order setting aside the statutory demand, provided it does so within the statutory period of 21 days after the demand is served, and complies with the provisions of s 459G(3).
Section 459H provides for the means by which an application pursuant to s 459G is to be determined:
(1)This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a)that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b)that the company has an offsetting claim.
(2)The Court must calculate the substantiated amount of the demand in accordance with the formula:
Admitted total — Offsetting total
where:
admitted total means:
(a)the admitted amount of the debt; or
(b)the total of the respective admitted amounts of the debts;
as the case requires, to which the demand relates.
offsetting total means:
(a)if the Court is satisfied that the company has only one offsetting claim—the amount of that claim; or
(b)if the Court is satisfied that the company has 2 or more offsetting claims—the total of the amounts of those claims; or
(c)otherwise—a nil amount.
(3)If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.
(4)If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:
(a)varying the demand as specified in the order; and
(b)declaring the demand to have had effect, as so varied, as from when the demand was served on the company.
(5)In this section:
admitted amount, in relation to a debt, means:
(a) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt—a nil amount; or
(b)if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt—so much of that amount as the Court is satisfied is not the subject of such a dispute; or
(c)otherwise—the amount of the debt.
offsetting claim means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).
respondent means the person who served the demand on the company.
(6) This section has effect subject to section 459J.
Genuine dispute
The legal principles applicable to the determination of whether there is a 'genuine dispute' for the purposes of s 459H(1) of the Act were recently summarised by the Court of Appeal in WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2][58] in the following terms:
[58] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2] [2023] WASCA 85 (WA Glass).
There are numerous cases which have discussed what is required to constitute a genuine dispute about the existence or amount of a debt. In CA & Associates Pty Ltd v Fini Group Pty Ltd Buss P and Vaughan JA summarised the effect of the authorities. Buss P and Vaughan JA stated that it is well-established that:
1.The court's function is to determine whether there is a genuine dispute; the court is not expected to undertake an extended inquiry or attempt to weigh the merits of the dispute. It is not part of the court's function to resolve the dispute.
2.It suffices if there is a 'plausible contention' requiring 'further investigation' - something that may be equated to the criterion of whether there is a 'serious question to be tried'.
3. However, the applicant must establish that: (a) the dispute is bona fide and truly exists in fact; and (b) the grounds alleging the existence of the dispute are real and not spurious, hypothetical, illusory or misconceived (citations omitted).
Buss P and Vaughan JA also referred with approval to the often-cited words of McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd. Having said that the expression 'genuine dispute' connotes a plausible contention requiring investigation, thus raising much the same sort of considerations as 'serious question to be tried' criteria, his Honour stated:
This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit 'however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be' not having 'sufficient prima facie plausibility to merit further investigation as to [its] truth', or a patently feeble legal argument or an assertion of facts unsupported by evidence. (citations omitted)
Eyota Pty Ltd v Hanave Pty Ltd is the ultimate source for the many authorities that have accepted that, for the purpose of s 459H(1)(a) of the Corporations Act, a genuine dispute is established where a company applying to set aside a statutory demand raises a plausible contention requiring investigation.
Thus there must be an evidential basis for the asserted dispute. Mere assertion is insufficient. So too a claim that is spurious or fanciful is insufficient. The dispute must have a sufficient objective existence and prima facie plausibility.
The requirement is to refer to something more than the mere 'raising' of a dispute or, in the context of an offsetting claim, the mere 'making' of a claim. The provisions assume that the dispute or offsetting claim have an 'objective' existence the genuineness of which is capable of being assessed. The word 'genuine' is included to sound a note of warning that the propounding of spurious disputes or claims is to be expected but must be excluded from consideration.[59]
Offsetting claim
[59] WAGlass [46] - [50].
As to what is required to establish an offsetting claim for the purposes of s 459H(1)(b), the Court of Appeal in Kiewit Australia Pty Ltd v New Energy Corp Pty Ltd[60] said:
[60] Kiewit Australia Pty Ltd v New Energy Corp Pty Ltd [2018] WASCA 180; (2018) 130 ACSR 511 [50] (citations omitted).
The relevant legal principles are not in dispute. The following principles concerning offsetting claims under s 459H are well established:
(1) The onus is on the recipient of the statutory demand to establish the offsetting claim.
(2) The expression 'genuine claim' connotes a plausible contention requiring investigation and raises similar considerations as 'the serious question to be tried' criterion on an interlocutory injunction.
(3) Rather than deciding the merits of the alleged claim, the court examines whether there is a genuine claim sufficiently quantified to give rise to an offsetting amount. The court must identify the alleged claim which must 'be bona fide and truly exist in fact', and assess whether it is a genuine claim. If such a claim is raised, the court does not attempt to resolve the claim or predict its outcome.
(4) The demand must be set aside or varied if there is a genuine claim which is not based on spurious, hypothetical, illusory or misconceived grounds.
(5) This does not mean that the court must accept uncritically as giving rise to a genuine dispute, or a genuine claim, every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent or inherently improbable in itself. Nor does it require the acceptance of a 'patently feeble legal argument' or 'matters of fact unsupported by evidence'.
(6) A company seeking to set aside or reduce a statutory demand on the basis of an offsetting claim does not need to set out evidence supporting the amount of the claim in meticulous detail. It is enough that the company provides evidence of a plausible and coherent basis for quantifying the claim which it genuinely asserts, or showing that the claim exceeds the amount of the debt demanded. Precise quantification is unnecessary.
Contractual construction
The Court of Appeal in CA & Associates Pty Ltd v Fini Group Pty Ltd[61] summarised the well-established general principles which apply in construing a commercial contract:
[61] CA & Associates Pty Ltd v Fini Group Pty Ltd [2020] WASCA 31 (CA & Associates).
1.The rights and liabilities of parties under a provision of a contract are determined objectively by reference to its text, context (the entire text of the contract) and purpose.
2.In determining the meaning of the terms of a commercial contract it is necessary to ask what a reasonable business person would have understood the terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
3.The court approaches the task of giving a commercial contract an interpretation on the assumption that the parties intended to produce a commercial result, ie a commercial contract should be construed so as to avoid it making commercial nonsense or working commercial inconvenience.
4.Ordinarily the process of construction is possible by reference to the contract alone.
5.However, sometimes recourse to external events, circumstances or things is necessary; for example, to identify the commercial purpose or objects of the contract (by reference to the genesis of the transaction, the background, the context and the market in which the parties are operating) or to determine the proper construction where there is a constructional choice due to ambiguity.
The first of these principles illustrates the danger in construing a contractual provision selectively. An instrument must be construed as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed so as to have some operation.
In acknowledging the accepted wisdom that a commercial contract must be construed so as to avoid it making commercial nonsense or working commercial inconvenience it must also be kept in mind that reasonable minds might differ on business common sense. Nevertheless it is accepted that:
…if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate' …
A contract should be construed practically so as to better give effect to its commercial purpose. The law seeks to uphold commercial contractual obligations and the expectations that derive from them. The court should not adopt a narrow or pedantic approach to construction, particularly in the case of commercial arrangements.[62]
[62] CA & Associates [51] - [54] (citations omitted).
Disposition
Ground 1
The plaintiff's primary claim is that, as the work done was substantially in excess of that referred to in the BOQ Spreadsheet, the work claimed for in the invoices did not constitute 'WUC' within the meaning of the Contract. As such, the invoices are not 'in accordance with Item 14' of the Contract (because they do not seek payment for WUC) and therefore did not constitute 'progress claims' under the Contract. Accordingly, the fact that the plaintiff did not issue a progress certificate did not oblige it to pay the invoice in either case.
The defendant does not accept that the work it performed was not WUC or the plaintiff's interpretation of what constitutes a progress claim under the Contract. It contends that, if the plaintiff had wanted to dispute the invoices, it should have done so using the mechanism contained in subclause 23.2 of the Contract. The defendant submits that, the plaintiff having failed to do so, it is liable to pay the full amount of the invoices.
The submissions of the parties require consideration of whether an invoice which seeks payment of amounts not regarded as WUC by the Principal is a 'progress claim'. They also require consideration of whether what constituted the WUC was limited, as a matter of fact, to the quantities set out in the BOQ Spreadsheet. While it is not necessary to finally resolve these issues, it is necessary to consider them as part of determining whether there is a genuine dispute.
Was the claim a progress claim?
Subclause 23.1 of the Contract provides that payment shall be claimed progressively in accordance with Item 14. Such a claim is thereafter referred to in the Contract as a 'progress claim', without further definition.
A progress claim is required to include details of the value of the WUC done. Subclause 23.1 also contemplates that a progress claim may include details of other moneys then due to the Contractor pursuant to provisions of the Contract.
The plaintiff submitted that a condition to the engagement of subclause 23.1 is that the amount claimed meets the contractual description of 'WUC' and that, in circumstances in which the plaintiff unilaterally considered that the work the subject of the invoices was not 'WUC', it was entitled under the Contract to not comply with subclause 23.2 and instead to simply disregard the invoices rendered by the defendant. Further, it was not obliged to tell the defendant why it was refusing to pay the invoices, or how it came to that conclusion.
The plaintiff argued that such a construction was commercially sound, as it avoided the circumstance that the plaintiff may be liable for an amount claimed which was not for 'WUC'.
In so submitting, the plaintiff proposes a construction of subclause 23.1 of the Contract in isolation from its other terms. However, the prospect that the plaintiff could be liable for work which was not 'WUC' is dealt with in the very next provision: subclause 23.2.
Under that provision, if the Principal does not accept the claim, the remedy is for the Principal to issue a progress certificate which sets out what it regards as the amount owing, the calculations by which it arrived at that result, and the reasons for the difference between that amount and the amount claimed by the Contractor. That process must be carried out within 14 days. If the Principal chooses not to certify the claim, it must pay the claim in full within 21 days. If it chooses to certify only a part of the claim, it need only pay that part within 21 days.
As further protection against excessive claims being made by the Contractor, subclause 23.3 of the Contract also provides that any payment of a progress claim is payment on account only, and it is not evidence that the subject WUC has been carried out satisfactorily. The final payment process enables full reconciliation to account for any claims made by the defendant which should not have been paid.
The task of interpreting a commercial contract is to be approached on the basis that the parties intended to produce a commercial result, not one which worked commercial inconvenience. A construction which requires the Principal, on receipt of a progress claim, to assess it and, if it does not accept it, inform the Contractor of that fact and the reasons why, within a set timeframe, is commercially far superior to one which would leave a Contractor to speculate indefinitely as to whether a claim has been accepted and if not, why not, a situation which would be practically and commercially unworkable.
In my view, the language of the Contract is clear, and the plaintiff's proposed construction is not reasonably arguable. I am satisfied there is no genuine dispute as to the fact that the defendant submitted a 'progress claim' within the meaning of clause 23 and that, the plaintiff having failed to certify pursuant to subclause 23.1(a), the whole amount of the invoices was 'due and payable' to the defendant.
Was the WUC limited by the BOQ Spreadsheet?
While it is not strictly necessary to deal with the matter in light of my conclusion as to whether the invoices constituted progress claims, it is appropriate to consider whether, as a matter of fact, the BOQ Spreadsheet defined what constituted 'WUC'.
On behalf of the plaintiff, it was submitted that the defendant was responsible for compiling parts of the BOQ Spreadsheet, but in the absence of evidence about the compilation of that document, it is not possible to come to any conclusions regarding that matter.
It is plain from the evidence adduced by the parties that, at the time the Contract was executed on 7 February 2022, both parties agreed that the approved quantities for the WUC had not been finalised. The plaintiff acknowledged in May of 2022,[63] and again in August 2022,[64] that the document was still not finalised and that the BOQ Spreadsheet had not been properly updated. In April 2023, an employee of the plaintiff appears to have authorised at least some variations,[65] and a construction supervisor referenced further works which had been required as the result of the work of the earthworker.[66]
[63] Botica Affidavit, 116 (GCB03).
[64] Botica Affidavit (GCB04).
[65] Botica Affidavit (GCB06).
[66] Botica Affidavit (GCB08).
Despite these facts, a comparison of the document annexed to Mr Botica's affidavit as GCB03, which he describes as a payment template given to him on 23 May 2022 (the Payment Template),[67] and the BOQ Spreadsheet (which Mr Brice claims defines the scope of the WUC as at 28 April 2023[68]) reveals that the quantities referred to in each document in relation to the work areas covered by invoices 8404 and 8435 are identical. Indeed, in relation to the whole of the work to be done, the Payment Template refers to a total amount of concrete of 1,960.96t,[69] whereas the BOQ Spreadsheet only refers to a total amount of concrete of 1,970.36t.[70]
[67] Botica Affidavit [57].
[68] Second Brice Affidavit [14].
[69] Botica Affidavit, 120 (GCB03).
[70] First Brice Affidavit, 157 (JB-4).
In some cases, additional items have been added to the BOQ Spreadsheet, but no quantities have been added relating to those items. One example of this is the HV Diesel refuelling (2680).[71] This was not in the Payment Template, but has been added to the BOQ Spreadsheet referred to by Mr Brice. The defendant was requested to finish these works by email dated 3 May 2023.[72] Such a request constitutes a written 'direction' within the meaning of the Contract and thus the works should be included in the WUC. However, while the item itself is referred to in the BOQ Spreadsheet, no quantities have been specified in the BOQ Spreadsheet at all.
[71] First Brice Affidavit, 159 (JB-4).
[72] Botica Affidavit, 128 (GCB07).
In a number of cases, previous progress claims had been made in relation to items with no quantities specified in the BOQ Spreadsheet, or for amounts in excess of the amount specified in the BOQ Spreadsheet. While there is no evidence as to whether those claims were certified or paid, the amounts exceed any claim that the defendant has made in relation to previously unpaid invoices, and it is open to the court to infer that at least some of these invoices were paid. Further, on 3 May 2023, the Construction Project Manager thanked the defendant on behalf of the plaintiff for their 'excellent workmanship and efforts to this day',[73] suggesting a lack of dissatisfaction with the claims to that point.
[73] Botica Affidavit, 128 (GCB07).
The evidence attached to the affidavit of Mr Brice also indicates that site instructions were provided in ways other than being set out in the BOQ Spreadsheet. Numerous site instructions are referred to in the documents annexed to invoice 8404, as are variations.[74]
[74] First Brice Affidavit (JB-5).
In addition, Schedule A to the Contract - Schedule of Prices, provided, inter alia, that the rates set out in the Schedule:
… shall apply without variation for quantities of plus or minus 100% of each item to a maximum variation of plus or minus 30% of the Contracts Sum unless by agreement of the parties.[75]
[75] First Brice Affidavit, 99 (JB-3).
Accordingly, changes to the quantities contained in the BOQ were permitted within those boundaries set out in Schedule A without formal variation.
In light of this combination of the evidence, I do not accept the submission on the part of the plaintiff that the WUC was limited to the quantities set out in the BOQ Spreadsheet adduced by Mr Brice as giving rise to a genuine dispute. I am satisfied that that submission is not reasonably arguable.
What was the WUC?
It might be thought that the actual quantities constituting WUC could be easily established, based on the method set out in the Schedule of Prices, which states:
Final measurement of quantities used in the permanent Works shall be based on the last and final revision of each approved for construction drawing and/or through agreed site measurement as directed by the Superintendent.[76]
[76] First Brice Affidavit, 85 (JB-3).
However, despite submissions being made by both parties that the work invoiced for could not have been undertaken without final drawings, neither party sought to address this issue by way of evidence and, ultimately, it is unnecessary for me to consider it.
Was the plaintiff entitled to withhold payment pursuant to subclause 24.2?
As part of the plaintiff's contention that there is a genuine dispute as to the whole of the debt, the plaintiff also claimed that it was entitled not to pay the defendant's invoices on the basis that the defendant had not complied with subclause 24.1, which required the defendant to supply evidence of payment of subcontractors and workers. The plaintiff argued that pursuant to subclause 24.2 of the Contract, in the absence of such evidence it was entitled to withhold payment of the amount certified and accordingly, the amounts claimed by the defendant by way of the statutory demand were not 'due and payable' at the date of service of the statutory demand.
Subclause 24.2 entitles the Principal to 'withhold moneys certified due and payable'.[77] As such, the provision of the documentary evidence required by subclause 24.1 is not a precondition to certification of a progress claim, but the Principal can make it a precondition to payment of that claim.
[77] First Brice Affidavit, 70 (JB-3).
The defendant submitted that the word 'certified' in subclause 24.2 means that withholding may only occur in circumstances in which the progress claim was the subject of a certificate under subclause 23.2(a). There being no such certificate, the defendant argued, subclause 24.2 had no application.
The plaintiff submitted that there was no commercial reason why such a construction of subclause 24.2 should be favoured, and that a progress claim should be regarded as 'certified', for the purpose of subclause 24.2, once an amount becomes due and payable under subclause 23.2, whether it becomes due and payable as the result of the issuing of a certificate or the failure to issue a certificate.
The plaintiff's construction involves reading the words 'certified due and payable' as meaning simply 'due and payable', thus giving the word 'certified' no work to do. That counts against adopting the plaintiff's construction.
On the other hand, the construction urged by the defendant would substantially defeat the purpose of the provision, which is to ensure that before paying the Contractor, the Principal ensures that the workers and subcontractors have been or will be paid. There is no apparent reason for this safeguard to apply only when the Principal issues a certificate, and not also when the Principal accepts the entirety of the progress claim.
I am satisfied that a genuine dispute arises as to the construction of subclause 24.2; whether, once money is due and payable under the process outlined in subclause 23.2, it is 'certified due and payable' within the meaning of subclause 24.2, even if no certificate was actually issued.
Proceeding on the basis most favourable to the plaintiff, the next issue is what event triggers the operation of subclause 24.2.
The documentary evidence said to have been supplied by the defendant to the plaintiff in respect of each of the invoices was annexed to Mr Brice's first affidavit.[78] No documentary evidence to the effect that the workers and/or subcontractors had been paid, or at least as to the amounts due and payable to them, appears to have been supplied, and the defendant does not suggest that it was supplied.
[78] First Brice Affidavit JB-5; JB-6.
In Digga Excavations Tas Pty Ltd v Linear Capital Pty Ltd,[79] in relation to a standard construction contract provision (clause 38) analogous to clause 24, Brett J observed:
The commercial purpose of cl 38 is, in my view, to enable a principal to withhold monies in circumstances where the principal may incur a statutory obligation to pay or secure money owed by a contractor to a sub-contractor or employee. A number of Australian jurisdictions have legislation which creates this direct liability … Clause 38.2 is clumsily drafted, but, in my view, it is clear enough that it provides a mechanism which ensures that the principal has sufficient funds to meet any such obligation. Hence, until the contractor provides the necessary evidence, the principal can withhold the entire payment. The second paragraph of cl 38.2 really deals with a different circumstance, that is, where evidence has been provided as to what is due and payable, but the debt is still outstanding. In that circumstance, the principal's capacity to withhold money is limited to that established by the evidence to be still due and payable. Hence, there is no interaction between the two paragraphs, because one deals with the situation where there has not been compliance and the other where there has been. In my view, the phrase 'subject to the next paragraph' has no work to do, and is simply surplusage arising from clumsy drafting.[80]
[79] Digga Excavations Tas Pty Ltd v Linear Capital Pty Ltd [2023] TASSC 22 (Digga).
[80] Digga [62]. The antecedent issue which arose here as to the meaning of the word 'certified' did not need to be determined, as in Digga progress certificates had been issued.
On this basis, the plaintiff would have been entitled to withhold the full amount of the payment on the basis of non-compliance with subclause 24.1.
The defendant points to Mr Botica's affidavit, in which he deposes that all workers and subcontractors had been paid. Mr Botica explains that, as there were no amounts 'due and payable' to the workers or subcontractors, no documents were provided to the plaintiff.[81]
[81] Botica Affidavit [51].
In my view, this reflects a misunderstanding on the part of the defendant as to what is required by subclause 24.1. That provision requires documentary evidence of payment to those workers and subcontractors to be provided; if that evidence cannot be provided the Contractor is then permitted to provide evidence of amounts due and payable.
Further, in referring to the argument that there may well be no money outstanding to anyone at the date of the claim, in respect of work to which the claim relates, and hence, there would be no obligation to provide any evidence, Brett J said of the equivalent clause in Digga:
This may well be correct on a strict reading of the provision, but to then interpret cl 38.2 as not permitting the withholding of the payment in such circumstances, defeats the commercial intention of the scheme set up by the clause, and is clearly contrary to the intention of the parties evinced by that scheme. That construction should not be adopted. In this case, as in most cases, it is inconceivable that something would not have been due and payable to an employee, at least, in respect of relevant work, and this is confirmed in any event by the material provided under this provision by the plaintiff to the defendant in June 2017. In any event, cl 38.1 should be construed to include the provision of evidence that nothing is, or was, due and payable, if that is the case.[82]
[82] Digga [63].
In my view, having regard to the terms of the Contract, there is a genuine dispute as to whether the plaintiff would have been entitled to withhold payment of the invoices, to the extent that documentary evidence of payment of workers and subcontractors had not been supplied.
The defendant raised a further question, however, as to whether the plaintiff's refusal to pay the defendant was, at the time, in reliance on subclause 24.2 and, even if it was not, whether the plaintiff is now entitled to invoke subclause 24.2 in support of its contention that there is a genuine dispute as to whether amounts claimed in the statutory demand were, at the date of service, 'due and payable'.
Was the money withheld by the plaintiff pursuant to subclause 24.2 of the Contract?
At no point, either within or outside the 14‑day deadline, did the plaintiff inform the defendant that it was withholding payment in accordance with subclause 24.2. No reference whatsoever was made to that provision, and the defendant was not asked at any time to provide any documentary evidence to satisfy the requirements of subclause 24.1.
The only specific queries raised with the defendant regarding the invoices in question were the quantities of concrete used and the cost of flights for the defendant's staff.[83] As to the quantities, on 20 July 2023, in response to an email sent by a third party, Mr Copeman indicated an intention to have a measurement carried out.[84] There is no evidence of the outcome of that measurement, if it was ever done.
[83] Botica Affidavit, 130 (GCB08).
[84] Botica Affidavit, 129 (GCB08).
Then, on 24 July 2023, Mr Copeman wrote an email to the defendant, in which he stated:
I have reviewed your outstanding invoices, numbers 8404 and 8435, and cannot reconcile them to the contract, the BOQ Budget, or any approved variations or site instructions. In addition, I have not received any response from [the defendant] to my questions regarding invoice 8404 that were sent on 15th June 2023.
As a result, these invoices are disputed and will not be paid. I have discussed the situation with John and as a gesture of good faith he has agreed to pay $1,000,000.00 whilst we resolve the dispute.[85]
[85] First Brice Affidavit, 246 (JB-9).
By 24 July 2023, the certification period had passed. Accordingly, applying the construction of clause 24 contended for by the plaintiff, the full amount of both invoices was 'certified'.
Mr Copeman's email dated 24 July 2023 indicates that the invoices are 'disputed' 'as a result' of the issues referred to therein.[86] A letter sent by the plaintiff's lawyers to the defendant dated 3 August 2023 reiterated the plaintiff's position was as set out in the email of 24 July 2023, indicating that the plaintiff disputed any liability in relation to the invoices.[87]
[86] First Brice Affidavit, 246 (JB-9).
[87] First Brice Affidavit, 247 (JB-10).
There is a significant difference between disputing liability (which is to be achieved by using the mechanism in clause 23) and asserting an entitlement to withhold funds pursuant to subclause 24.2.
The plaintiff submitted that, in the event that the Principal was not satisfied with the documentary evidence supplied, the Contract did not carry any obligation to notify the Contractor of that fact. When asked how the Contractor was to know if non-compliance with subclause 24.1 was the reason for non-payment of its invoice, it was submitted that, in the absence of a particular mechanism in clause 24, the Contractor would no doubt raise the matter and then be told. Counsel did not address how his submission could be reconciled with the fact that in this case, the defendant raised an issue but was at no time told that the plaintiff was invoking subclause 24.2.
If a Principal were entitled to act in the manner in which the plaintiff contends is permitted by its preferred construction, the Principal would not need to tell the Contractor why it was failing to pay money otherwise apparently due and payable to the Contractor. Further, while the documentary evidence would need to be to the Principal's reasonable satisfaction, the Principal would not be required to notify the Contractor if the evidence did not meet that standard or why. The Principal would also not need to identify how it had calculated the amount withheld, notwithstanding the limit on the withholding.
It is unlikely that such a construction of the Contract would produce a commercial result, or be conducive to commercial convenience. A Principal taking such a position in relation to payment of progress claims is unlikely to maintain a sound working relationship with its Contractors. However, in circumstances where the Contract does not provide a mechanism for notice of withholding pursuant to subclause 24.2, in my view the issue is sufficiently arguable that it would be inappropriate for it to be determined in this application.
It is not in dispute that the first time that the plaintiff expressly raised its reliance on subclause 24.2 was in the First Brice Affidavit. Further, even when he did invoke subclause 24.2, Mr Brice wrongly referred to the employees of an entirely different company, a confusing error only acknowledged to be one very shortly before the hearing.
The evidence to which I have referred leads strongly to the conclusion that the plaintiff did not, at any time prior to the issue of the statutory demand, rely upon subclause 24.2 in refusing to pay invoices 8404 and 8435.
Is the plaintiff now entitled to rely on subclause 24.2 of the Contract?
Even if I were to find that the plaintiff's refusal to pay the amounts claimed by invoices 8404 and 8435 was not in reliance on subclause 24.2 of the Contract, the issue arises whether the plaintiff is now entitled to invoke that subclause in seeking to set aside the statutory demand on the basis of a genuine dispute.
It is a well-established principle that a contracting party's refusal to perform obligations under a contract can be supported by any justification which existed at the time, whether the contracting party gave the justification at the time, or even if it was not aware of it at the time.[88] As Dixon J observed in Shepherd v Felt & Textiles of Australia Ltd, citing Greer J in Taylor v Oakes Roncoroni & Co:[89]
It is a long established rule of law that a contracting party, who, after he has become entitled to refuse performance of his contractual obligations, gives a wrong reason for his refusal, does not thereby deprive himself of a justification which in fact existed, whether he was aware of it or not; (per Greer J., Taylor v. Oakes Roncoroni & Co.; see, too, per Lord Sumner in British and Beningtons Ltd. v. North Western Cachar Tea Co. and per Starke J. in Henry Dean & Sons (Sydney) Ltd. v. P. O'Day Pty. Ltd.).[90]
[88] Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359; [1931] ALR 194 (Shepherd); Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1989) 166 CLR 245, 262 and 274 ‑ 275.
[89] Taylor v Oakes Roncoroni & Co (1922) 127 LT 269; 27 Com.Cas. 266.
[90] Shepherd (378).
Dixon J's observations were made in the context of a party who terminated the contract. However, in my view there is no reason to limit the principle to cases of termination of contract, and it is appropriate to apply it this case. Indeed, in Digga, Brett J applied the principle to the withholding of payment under a building contract pursuant to a clause relevantly indistinguishable from subclause 24.2 in the present case.[91]
[91]Digga [71] - [75].
On this basis, accepting that the plaintiff's refusal, in July 2023, to pay the defendant the amount claimed by invoices 8404 and 8435 was not on the basis of subclause 24.2, it is at least arguable that the plaintiff is nevertheless now entitled to seek to set aside the statutory demand on the ground that there is a genuine dispute as to whether the amount was then due and payable as a result of the application of subclause 24.2.
As the plaintiff submitted, if it was entitled to withhold the money pursuant to subclause 24.2 at the time of the statutory demand, the fact that an officer of the defendant deposed after the statutory demand had been issued that the workers and subcontractors had been paid could not retrospectively operate to validate the statutory demand, even if that deposition were to constitute 'documentary evidence … to the Principal's reasonable satisfaction'.[92]
[92] Subclause 24.1.
I am satisfied that a genuine dispute has been established as to whether the plaintiff was entitled to withhold the payment of the invoices on the basis of subclause 24.2 of the Contract.
Ground 2
If it were necessary to decide it, Ground 2 can be shortly disposed of.
The plaintiff argues that, where the BOQ Spreadsheet shows total progress claims of more than is shown in the quantities column, there is either a genuine dispute as to part of the debt or, alternatively, an offsetting claim in the amount of the excess claimed.
Contrary to what is deposed to by Mr Brice, the table at [20] of the First Brice Affidavit does not set out the quantities of the works only the subject of invoices 8404 and 8435 and differentiate them from the figures in the BOQ Spreadsheet. The table sets out the totality of the works carried out and claimed for by the defendant over the life of the Project. Accordingly, where the total quantities claimed for the entire contract term to date were greater than the BOQ Spreadsheet quantities, Mr Brice has simply attributed the entirety of the overages to invoices 8404 and 8435. This is not an accurate representation of those invoices.
Subclause 23.2 provides that payments other than final payment shall be on account only. Notwithstanding this, the plaintiff is, by this claim, effectively seeking to treat invoices 8404 and 8435 as if they were the final payment claim, and to reconcile the moneys 'finally due and payable' under the contract across all of the progress claims made.
In my view, neither the factual basis asserted nor the terms of the contract permit treatment of invoices 8404 and 8435 in such a manner. The plaintiff has made no attempt to adduce any evidence of the quantities shown in the final drawings or any other document which would show that there is a valid offsetting claim in the amount claimed.
Accordingly, I do not consider there to be a genuine dispute in the amount claimed on this basis.
Ground 3
The plaintiff sought to establish that it has an offsetting claim in the sum of $307,758.93, by reason of provisions in the Contract allowing it to charge back costs of fuel and delivery of items to site on behalf of the defendant.
The defendant does not deny using the transport services, or the fuel. It points out that the plaintiff has not invoiced the defendant for either of the amounts said to constitute the offsetting claim, so it has an issue assessing what is owed.
The plaintiff has since provided further details as to the amounts owing. While I accept the defendant's complaint that it is difficult to assess the proper amount of the offsetting claim, the plaintiff need only provide evidence of a plausible and coherent basis for quantifying the claim.
It is unnecessary to decide this issue in light of the finding in respect of Ground 1. However, were it necessary to do so, I would be satisfied that the plaintiff has established a genuine claim sufficiently quantified to give rise to an offsetting amount in the sum claimed, such as to reduce the amount of the statutory demand.
Ground 4
The plaintiff disputes the defendant's calculation of the amount owing, on the basis that $1m was paid to the defendant on 26 July 2023. The plaintiff submits that it allocated the $1m solely to payment of invoices 8404 and 8435.
The defendant deposes that, at the time of the payment of the $1m, $105,600 remained outstanding on an earlier invoice, numbered 8374. It says that, when the defendant received the $1m from the plaintiff, it applied the first $105,600 to invoice 8374, and then the remainder to invoice 8404.[93]
[93] Botica Affidavit [90] - [91].
The evidence that is available is only to the effect that, in correspondence between the plaintiff and the defendant regarding invoices 8404 and 8435, the $1m was said to have been paid 'as a gesture of good faith' and 'on account'.[94]
[94] First Brice Affidavit, 245 - 246 (JB-9).
The Contract stipulated that any payment other than final payment was to be payment on account only.[95] As such, a full accounting was to take place after the expiry of the defects liability period, pursuant to subclause 23.3.
[95] Subclause 23.2.
The defendant has not adduced any evidence as to the manner in which invoice 8374 was dealt with by the plaintiff. There is no evidence as to how that claim was submitted by the defendant, and what steps were taken by the plaintiff in relation to it. It has not been established that the plaintiff did not issue a progress certificate, and thus it has not been established whether the whole of any progress claim made by invoice 8374 was due and payable, or whether any funds were withheld, either pursuant to subclause 24.2 or for any other reason.
In the absence of that evidence, I am unable to resolve whether the plaintiff was entitled to allocate the first $105,600 to invoice 8374. I am therefore satisfied that there is a genuine dispute as to whether this sum is owed by the plaintiff to the defendant in relation to invoices 8404 and 8435.
Conclusion
I am satisfied that there is a genuine dispute as to whether, at the time of the issue of the statutory demand, the plaintiff was obliged to pay the defendant the sum of invoices 8404 and 8435. Accordingly, I will order that the statutory demand be set aside.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
SI
Associate to the Honourable Justice Forrester
11 MARCH 2024
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