Bailey v MCH Building Pty Ltd
[2011] FMCA 124
•24 June 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BAILEY v MCH BUILDING PTY LTD | [2011] FMCA 124 |
| BANKRUPTCY – Application to set aside bankruptcy notice and for an extension of time for compliance – whether the applicant had a counter-claim, set off or cross demand of equal or greater value than the debt due to the creditor which could not have been set up in the proceedings resulting in that debt considered. |
| Bankruptcy Act 1966, ss.40, 41 Bankruptcy Regulations 1996 (Cth) Building and Construction Industries Security of Payment Act 1999 (NSW), ss.9, 10, 13, 14, 15, 16, 17, 18, 20, 21, 22, 23, 24, 25, 32 Civil Procedure Act 2005 (NSW), ss.40, 133 Competition and Consumer Act 2010 (Cth) Corporations Act 2001 (Cth), s.459 Fair Trading Act 1987 (NSW) Home Building Act 1989 (NSW), s.18B Legal Profession Act 1987 (NSW) Uniform Civil Procedure Rules |
| AJ Richardson Properties Pty Ltd v Segboer [2009] NSWSC 576 Bhagat v Global Custodians Ltd [2002] FCA 223 Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 Cavanah & Anor v Advance Earthmoving & Haulage Pty Ltd [2008] FMCA 427 Chase Oyster Bar v Hamo Industries [2010] NSWCA 190 Chen v Bannerman [2001] FCA 160 Dekkan v Evans [2008] FCA 1004 Diddy Boy v Design [2009] NSWSC 14 Grave v Blazevic Holdings Pty Ltd [2010] FMCA 386 Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico & Ors [2004] NSWSC 344 Gus v Johnstone (2000) 74 ALJR 884; 171 ALR 598 Jem v St Hilliers [2007] NSWSC 245 Kerslake Superannuation Pty Ltd v C & L Building Pty Ltd [2010] NSWSC 424 Kirk v Industrial Relations Commission [2010] HCA 1 Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 1008 Peakhurst Pty Ltd v Wallace & Anor [2007] QSC 159 and Pacific Islands Express [2008] NSWSC 576 Project TQM [2009] NSWSC 699 Re Cox (1934) 7 ABC 98 St George Bank v Klintworth (1998) 86 FCR 240 |
| Applicant: | ROBERT BAILEY |
| Respondent: | MCH BUILDING PTY LTD |
| File Number: | SYG 2698 of 2010 |
| Judgment of: | Driver FM |
| Hearing dates: | 1 March & 1 April 2011 |
| Delivered at: | Sydney |
| Delivered on: | 24 June 2011 |
REPRESENTATION
| Solicitors for the Applicant: | Mr McCooe McCooe, Raves and Poole |
| Counsel for the Respondent: | Mr Lynch |
| Solicitors for the Respondent: | Craddock Murray Neumann |
ORDERS
The application filed on 14 December 2010 is dismissed with costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2698 of 2010
| ROBERT BAILEY |
Applicant
And
| MCH BUILDING PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction and background
The applicant, Robert Bailey, seeks to set aside Bankruptcy Notice NN49995/2010 on the basis of s.40(1)(g) and s.41(5) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”). The application also sought an extension of time for compliance with the Bankruptcy Notice, pursuant to ss.41(6A) and (7) of the Bankruptcy Act. A registrar extended time for compliance, pursuant to s.41(6A) until 21 December 2010. At that time I determined that the applicant was entitled to the benefit of the automatic extension of time, pursuant to s.41(7) of the Bankruptcy Act, noting that Mr Bailey claims that he has a counter-claim, set off or cross demand as referred to in that provision.
The Bankruptcy Notice was issued in consequence of non payment of a judgment debt. The parties entered into a building contract in
October 2008. The building contract was for work on a property at
37 Mitchell Street, Naremburn which, at the time, was owned by
Mr Bailey. Mr Bailey at the time lived at the property.
Substantial building work was carried out at the property and
Mr Bailey, by November 2009, had paid $207,331.65 for that work. There was a dispute as to whether Mr Bailey had any further liability to the respondent, MCH, and MCH made a payment claim under the Building and Construction Industries Security of Payment Act 1999 (NSW) (“the BCISP Act”). That claim resulted in an adjudication determination in the sum of $231,963.96 in August 2010.
In September 2010, MCH moved to register the adjudication certificate issued following the adjudication with the District Court of New South Wales. The District Court entered a judgment against Mr Bailey in the sum of $239,506.81 on 15 September 2010. MCH made application in the District Court for a writ of execution against Mr Bailey’s property in consequence of non payment of the judgment debt and the writ was registered on the title of Mr Bailey’s property in November 2010.
In further pursuit of the judgment debt, the Bankruptcy Notice was issued on 3 November 2010 and served on Mr Bailey.
On 20 December 2010 Mr Bailey applied to the New South Wales Consumer Trader and Tenancy Tribunal (“the CTTT”) in respect of his claims against MCH.
In his application, Mr Bailey contends that an adjudication determination pursuant to the BCISP Act is not a final determination of monies owed by parties to a building contract and that there has been no final determination of what money, if any, he owes. He also asserts that he has a counter-claim, set off or cross demand of equal or greater value than the amount claimed in the Bankruptcy Notice which he could not raise in the adjudication proceedings and which he is now pursuing in the CTTT.
The evidence and submissions
At the trial of this matter, Mr Bailey abandoned all objections to the Bankruptcy Notice apart from the contention that he has a counter-claim, set off or cross demand that could not have been set up in the adjudication proceedings. However, during the course of the hearing another issue arose of whether the adjudication certificate was required to be attached to the Bankruptcy Notice and, if it was, what was the consequence of it not being attached.
The application is supported by the affidavit of Mr Bailey made on
13 December 2010, the affidavit of John Worthington relating to his opinion on the value of the work done by MCH, made on 26 February 2011 and the affidavit of John Bernard McCooe (the solicitor for
Mr Bailey) made on 26 February 2011. MCH presented no evidence of its own but contests whether Mr Bailey has established any basis for the relief he claims.
Consideration
The BCISP Act provides security to the building industry for building progress payments. The scheme of the legislation is that progress payments due and payable for building work should be paid notwithstanding that there may be legal issues requiring resolution that could impact upon a builder’s entitlement to retain monies paid.
The BCISP Act relevantly provides:
Section 9
The amount of a progress payment to which a person is entitled in respect of a construction contract is to be:
(a) the amount calculated in accordance with the terms of the contract, or
(b) if the contract makes no express provision with respect to the matter, the amount calculated on the basis of the value of construction work carried out or undertaken to be carried out by the person (or of related goods and services supplied or undertaken to be supplied by the person) under the contract.
Section 10
(1) Construction work carried out or undertaken to be carried out under a construction contract is to be valued:
(a) in accordance with the terms of the contract, or
(b) if the contract makes no express provision with respect to the matter, having regard to:
(i) the contract price for the work, and
(ii) any other rates or prices set out in the contract, and
(iii) any variation agreed to by the parties to the contract by which the contract price, or any other rate or price set out in the contract, is to be adjusted by a specific amount, and
(iv) if any of the work is defective, the estimated cost of rectifying the defect.
(2) Related goods and services supplied or undertaken to be supplied under a construction contract are to be valued:
(a) in accordance with the terms of the contract, or
(b) if the contract makes no express provision with respect to the matter, having regard to:
(i) the contract price for the goods and services, and
(ii) any other rates or prices set out in the contract, and
(iii) any variation agreed to by the parties to the contract by which the contract price, or any other rate or price set out in the contract, is to be adjusted by a specific amount, and
(iv) if any of the goods are defective, the estimated cost of rectifying the defect,
and, in the case of materials and components that are to form part of any building, structure or work arising from construction work, on the basis that the only materials and components to be included in the valuation are those that have become (or, on payment, will become) the property of the party for whom construction work is being carried out.
Section 13
(1) A person referred to in section 8 (1) who is or who claims to be entitled to a progress payment (the "claimant") may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.
(2) A payment claim:
(a) must identify the construction work (or related goods and services) to which the progress payment relates, and
(b) must indicate the amount of the progress payment that the claimant claims to be due (the "claimed amount"), and
(c) must state that it is made under this Act.
(3) The claimed amount may include any amount:
(a) that the respondent is liable to pay the claimant under section 27 (2A), or
(b) that is held under the construction contract by the respondent and that the claimant claims is due for release.
(4) A payment claim may be served only within:
(a) the period determined by or in accordance with the terms of the construction contract, or
(b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied),
whichever is the later.
(5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
(6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.
Section 14
(1) A person on whom a payment claim is served (the "respondent") may reply to the claim by providing a payment schedule to the claimant.
(2) A payment schedule:
(a) must identify the payment claim to which it relates, and
(b) must indicate the amount of the payment (if any) that the respondent proposes to make (the "scheduled amount").
(3) If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent’s reasons for withholding payment.
(4) If:
(a) a claimant serves a payment claim on a respondent, and
(b) the respondent does not provide a payment schedule to the claimant:
(i) within the time required by the relevant construction contract, or
(ii) within 10 business days after the payment claim is served,
whichever time expires earlier,
the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates.
Section 15
(1) This section applies if the respondent:
(a) becomes liable to pay the claimed amount to the claimant under section 14 (4) as a consequence of having failed to provide a payment schedule to the claimant within the time allowed by that section, and
(b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates.
(2) In those circumstances, the claimant:
(a) may:
(i) recover the unpaid portion of the claimed amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or
(ii) make an adjudication application under section 17 (1) (b) in relation to the payment claim, and
(b) may serve notice on the respondent of the claimant’s intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract.
(3) A notice referred to in subsection (2) (b) must state that it is made under this Act.
(4) If the claimant commences proceedings under subsection (2) (a) (i) to recover the unpaid portion of the claimed amount from the respondent as a debt:
(a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and
(b) the respondent is not, in those proceedings, entitled:
(i) to bring any cross-claim against the claimant, or
(ii) to raise any defence in relation to matters arising under the construction contract.
Section 16
(1) This section applies if:
(a) a claimant serves a payment claim on a respondent, and
(b) the respondent provides a payment schedule to the claimant:
(i) within the time required by the relevant construction contract, or
(ii) within 10 business days after the payment claim is served,
whichever time expires earlier, and
(c) the payment schedule indicates a scheduled amount that the respondent proposes to pay to the claimant, and
(d) the respondent fails to pay the whole or any part of the scheduled amount to the claimant on or before the due date for the progress payment to which the payment claim relates.
(2) In those circumstances, the claimant:
(a) may:
(i) recover the unpaid portion of the scheduled amount from the respondent, as a debt due to the claimant, in any court of competent jurisdiction, or
(ii) make an adjudication application under section 17 (1) (a) (ii) in relation to the payment claim, and
(b) may serve notice on the respondent of the claimant’s intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract.
(3) A notice referred to in subsection (2) (b) must state that it is made under this Act.
(4) If the claimant commences proceedings under subsection (2) (a) (i) to recover the unpaid portion of the scheduled amount from the respondent as a debt:
(a) judgment in favour of the claimant is not to be given unless the court is satisfied of the existence of the circumstances referred to in subsection (1), and
(b) the respondent is not, in those proceedings, entitled:
(i) to bring any cross-claim against the claimant, or
(ii) to raise any defence in relation to matters arising under the construction contract.
Section 17
(1) A claimant may apply for adjudication of a payment claim (an "adjudication application") if:
(a) the respondent provides a payment schedule under Division 1 but:
(i) the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim, or
(ii) the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount, or
(b) the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or any part of the claimed amount by the due date for payment of the amount.
(2) An adjudication application to which subsection (1) (b) applies cannot be made unless:
(a) the claimant has notified the respondent, within the period of 20 business days immediately following the due date for payment, of the claimant’s intention to apply for adjudication of the payment claim, and
(b) the respondent has been given an opportunity to provide a payment schedule to the claimant within 5 business days after receiving the claimant’s notice.
(3) An adjudication application:
(a) must be in writing, and
(b) must be made to an authorised nominating authority chosen by the claimant, and
(c) in the case of an application under subsection (1) (a) (i)-must be made within 10 business days after the claimant receives the payment schedule, and
(d) in the case of an application under subsection (1) (a) (ii)-must be made within 20 business days after the due date for payment, and
(e) in the case of an application under subsection (1) (b)-must be made within 10 business days after the end of the 5-day period referred to in subsection (2) (b), and
(f) must identify the payment claim and the payment schedule (if any) to which it relates, and
(g) must be accompanied by such application fee (if any) as may be determined by the authorised nominating authority, and
(h) may contain such submissions relevant to the application as the claimant chooses to include.
(4) The amount of any such application fee must not exceed the amount (if any) determined by the Minister.
(5) A copy of an adjudication application must be served on the respondent concerned.
(6) It is the duty of the authorised nominating authority to which an adjudication application is made to refer the application to an adjudicator (being a person who is eligible to be an adjudicator as referred to in section 18) as soon as practicable.
Section 18
(1) A person is eligible to be an adjudicator in relation to a construction contract:
(a) if the person is a natural person, and
(b) if the person has such qualifications, expertise and experience as may be prescribed by the regulations for the purposes of this section.
(2) A person is not eligible to be an adjudicator in relation to a particular construction contract:
(a) if the person is a party to the contract, or
(b) in such circumstances as may be prescribed by the regulations for the purposes of this section.
Section 20
(1) Subject to subsection (2A), the respondent may lodge with the adjudicator a response to the claimant’s adjudication application (the "adjudication response") at any time within:
(a) 5 business days after receiving a copy of the application, or
(b) 2 business days after receiving notice of an adjudicator’s acceptance of the application,
whichever time expires later.
(2) The adjudication response:
(a) must be in writing, and
(b) must identify the adjudication application to which it relates, and
(c) may contain such submissions relevant to the response as the respondent chooses to include.
(2A) The respondent may lodge an adjudication response only if the respondent has provided a payment schedule to the claimant within the time specified in section 14 (4) or 17 (2) (b).
(2B) The respondent cannot include in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant.
(3) A copy of the adjudication response must be served on the claimant.
Section 21
(1) An adjudicator is not to determine an adjudication application until after the end of the period within which the respondent may lodge an adjudication response.
(2) An adjudicator is not to consider an adjudication response unless it was made before the end of the period within which the respondent may lodge such a response.
(3) Subject to subsections (1) and (2), an adjudicator is to determine an adjudication application as expeditiously as possible and, in any case:
(a) within 10 business days after the date on which the adjudicator notified the claimant and the respondent as to his or her acceptance of the application, or
(b) within such further time as the claimant and the respondent may agree.
(4) For the purposes of any proceedings conducted to determine an adjudication application, an adjudicator:
(a) may request further written submissions from either party and must give the other party an opportunity to comment on those submissions, and
(b) may set deadlines for further submissions and comments by the parties, and
(c) may call a conference of the parties, and
(d) may carry out an inspection of any matter to which the claim relates.
(4A) If any such conference is called, it is to be conducted informally and the parties are not entitled to any legal representation.
(5) The adjudicator’s power to determine an adjudication application is not affected by the failure of either or both of the parties to make a submission or comment within time or to comply with the adjudicator’s call for a conference of the parties.
Section 22
(1) An adjudicator is to determine:
(a) the amount of the progress payment (if any) to be paid by the respondent to the claimant (the "adjudicated amount"), and
(b) the date on which any such amount became or becomes payable, and
(c) the rate of interest payable on any such amount.
(2) In determining an adjudication application, the adjudicator is to consider the following matters only:
(a) the provisions of this Act,
(b) the provisions of the construction contract from which the application arose,
(c) the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim,
(d) the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule,
(e) the results of any inspection carried out by the adjudicator of any matter to which the claim relates.
(3) The adjudicator’s determination must:
(a)be in writing, and
(b) include the reasons for the determination (unless the claimant and the respondent have both requested the adjudicator not to include those reasons in the determination).
(4) If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined:
(a) the value of any construction work carried out under a construction contract, or
(b) the value of any related goods and services supplied under a construction contract,
the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination.
(5) If the adjudicator’s determination contains:
(a)a clerical mistake, or
(b) an error arising from an accidental slip or omission, or
(c) a material miscalculation of figures or a material mistake in the description of any person, thing or matter referred to in the determination, or
(d) a defect of form,
the adjudicator may, on the adjudicator’s own initiative or on the application of the claimant or the respondent, correct the determination.
Section 23
(1) In this section:
“relevant date" means:
(a) the date occurring 5 business days after the date on which the adjudicator’s determination is served on the respondent concerned, or
(b) if the adjudicator determines a later date under section 22 (1) (b)-that later date.
(2) If an adjudicator determines that a respondent is required to pay an adjudicated amount, the respondent must pay that amount to the claimant on or before the relevant date.
Section 24
(1) If the respondent fails to pay the whole or any part of the adjudicated amount to the claimant in accordance with section 23, the claimant may:
(a) request the authorised nominating authority to whom the adjudication application was made to provide an adjudication certificate under this section, and
(b) serve notice on the respondent of the claimant’s intention to suspend carrying out construction work (or to suspend supplying related goods and services) under the construction contract.
(2) A notice under subsection (1) (b) must state that it is made under this Act.
(3) An adjudication certificate must state that it is made under this Act and specify the following matters:
(a) the name of the claimant,
(b) the name of the respondent who is liable to pay the adjudicated amount,
(c) the adjudicated amount,
(d) the date on which payment of the adjudicated amount was due to be paid to the claimant.
(4) If any amount of interest that is due and payable on the adjudicated amount is not paid by the respondent, the claimant may request the authorised nominating authority to specify the amount of interest payable in the adjudication certificate. If it is specified in the adjudication certificate, any such amount is to be added to (and becomes part of) the adjudicated amount.
(5) If the claimant has paid the respondent’s share of the adjudication fees in relation to the adjudication but has not been reimbursed by the respondent for that amount (the "unpaid share"), the claimant may request the authorised nominating authority to specify the unpaid share in the adjudication certificate. If it is specified in the adjudication certificate, any such unpaid share is to be added to (and becomes part of) the adjudicated amount.
Section 25
(1) An adjudication certificate may be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly.
(2) An adjudication certificate cannot be filed under this section unless it is accompanied by an affidavit by the claimant stating that the whole or any part of the adjudicated amount has not been paid at the time the certificate is filed.
(3) If the affidavit indicates that part of the adjudicated amount has been paid, the judgment is for the unpaid part of that amount only.
(4) If the respondent commences proceedings to have the judgment set aside, the respondent:
(a) is not, in those proceedings, entitled:
(i) to bring any cross-claim against the claimant, or
(ii) to raise any defence in relation to matters arising under the construction contract, or
(iii) to challenge the adjudicator’s determination, and
(b) is required to pay into the court as security the unpaid portion of the adjudicated amount pending the final determination of those proceedings.
Section 32
(1) Subject to section 34, nothing in this Part affects any right that a party to a construction contract:
(a) may have under the contract, or
(b) may have under Part 2 in respect of the contract, or
(c) may have apart from this Act in respect of anything done or omitted to be done under the contract.
(2) Nothing done under or for the purposes of this Part affects any civil proceedings arising under a construction contract, whether under this Part or otherwise, except as provided by subsection (3).
(3) In any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal:
(a) must allow for any amount paid to a party to the contract under or for the purposes of this Part in any order or award it makes in those proceedings, and
(b) may make such orders as it considers appropriate for the restitution of any amount so paid, and such other orders as it considers appropriate, having regard to its decision in those proceedings.
There has been doubt whether an adjudication certificate would sustain an action under s.459 of the Corporations Act 2001 (Cth) for winding up[1]. This Court has taken the view that a judgment obtained following an adjudication can found a claim in bankruptcy[2]. Pursuant to s.133 of the Civil Procedure Act 2005 (NSW) (“Civil Procedure Act”) an adjudication or award of a person having authority to make an adjudication award that may be filed or registered in a court, or of which a certificate may be filed or registered in a court, may not be enforced until it has been entered in accordance with the uniform rules. I agree with the views previously expressed in this Court that a certificate issued pursuant to the BCISP Act which has been filed in accordance with that Act and judgment entered in accordance with the Uniform Civil Procedure Rules 2005 (NSW) (“Uniform Civil Procedure Rules”) is enforceable as a judgment debt which is a final judgment or order for the purposes of s.40(1)(g) of the Bankruptcy Act.
[1] see Jem v St Hilliers [2007] NSWSC 245; cf Peakhurst Pty Ltd v Wallace & Anor [2007] QSC 159 and Pacific Islands Express [2008] NSWSC 576
[2] see Cavanah & Anor v Advance Earthmoving & Haulage Pty Ltd [2008] FMCA 427 at [24]-[50]
A New South Wales court will consider the existence of a serious dispute about the existence of an off-setting claim in relation to an adjudication certificate under the BCISP Act when dealing with a statutory demand under the Corporations Act[3]. Following a period of uncertainty, the High Court decision in Kirk v Industrial Relations Commission[4] and the NSW Court of Appeal decision in Chase Oyster Bar v Hamo Industries[5] establish that prerogative relief is also available to correct jurisdictional error by an arbitrator. Further, in New South Wales relief is available to overcome any irremediable prejudice that may flow from the conversion of an interim payment liability into a final payment liability[6]. An attempt at enforcement by use of a statutory demand may be defeated where the claimant knows of an allegation of a significant claim that is currently under litigation[7]. In that matter indemnity costs were awarded against the claimant. However, a challenge to insolvency proceedings may fail where the disputed issue has already been considered in a challenge to the validity of an adjudication[8]. There is also authority that a statutory demand for the winding up of a company based on an adjudicator’s determination may be varied after consideration of a pleaded off-setting claim without disturbing the validity of the demand itself[9].
[3] see Project TQM [2009] NSWSC 699
[4] [2010] HCA 1
[5] [2010] NSWCA 190
[6] see Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico & Ors [2004] NSWSC 344
[7] see AJ Richardson Properties Pty Ltd v Segboer [2009] NSWSC 576
[8] see Diddy Boy v Design [2009] NSWSC 14
[9] see Kerslake Superannuation Pty Ltd v C & L Building Pty Ltd [2010] NSWSC 424
I proceed, consistently with this Court’s judgment in Cavanah, on the basis that an adjudication certificate obtained under the BCISP Act, once filed in a court of competent jurisdiction in NSW and entered in accordance with the Civil Procedure Act, is a final judgment or order obtained in an action or proceeding for the purposes of the Bankruptcy Act and may support a bankruptcy notice. I further proceed on the basis that an offsetting claim that could not have been set up in an adjudication may be raised in enforcement or other proceedings (including bankruptcy proceedings).
The form of the Bankruptcy Notice
The Bankruptcy Notice in issue, which Mr Bailey concedes was served on him, is Annexure A to his affidavit of 13 December 2010. Annexed to the Bankruptcy Notice is a document purporting to be a certificate of judgment of the District Court made on 3 September 2010 and entered on 15 September 2010. The terms of the judgment are said to be pursuant to s.25 of the BCISP Act. It was common ground that the adjudication certificate obtained under that Act was not also annexed to the Bankruptcy Notice.
I accept that the adjudication certificate, accompanied by an affidavit as to the amount outstanding under it was filed in the District Court as a judgment for the amount outstanding in accordance with s.25 of the BCISP Act. As I have already noted, the judgment so obtained was not enforceable until it was entered in accordance with s.133 of the Civil Procedure Act. Entry was effected by the judgment being recorded in the District Court’s “computerised court record system”[10]. Entry may be proven by furnishing a sealed copy of the judgment so entered or by sealing a document that sets out the terms of the judgment or order[11].
[10] rule 36.11, Uniform Civil Procedure Rules
[11] rule 36.12(1), Uniform Civil Procedure Rules
The certificate of judgment annexed to the Bankruptcy Notice is entitled “Judgment” and purports to bear the seal of the District Court of New South Wales and the signature of a registrar of that Court.
As I have noted, it is expressed as being a judgment pursuant to s.25 of the BCISP Act.
I am satisfied that the document annexed to the Bankruptcy Notice is a certificate of the judgment obtained in the District Court, sealed by that Court for the purposes of regulation 4.01 of the Bankruptcy Regulations 1996 (Cth). I am also satisfied that the annexure of that certificate of judgment is sufficient for the purposes of the Bankruptcy Notice[12]. I reject the contention that the Bankruptcy Notice is defective in form.
[12] see St George Bank v Klintworth (1998) 86 FCR 240
The asserted counter-claim, set off or cross demand
Mr Bailey asserts that he has a counter-claim, set off or cross demand which could not have been set up in the action or proceeding in which MCH’s judgment was obtained. Mr Bailey claims damages for breach of the statutory warranties in s.18B of the Home Building Act 1989 (NSW) (“the Home Building Act”) of $54,000 for lost rents and $239,506.81 being the amount unpaid under the adjudication. He also claims damages for false or reckless representations or misleading or deceptive conduct under the Fair Trading Act 1987 (NSW) and the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)). The amount of damages so claimed is the amount unpaid under the adjudication. Finally, Mr Bailey claims damages for breach of a collateral contract warranting the correctness of the representations made, again for not less than the amount unpaid under the adjudication. The counter-claims, if successfully made out, would deprive MCH’s progress payments judgment of any value.
I accept that the proceeding in question was a two stage process of obtaining the adjudication and registering it and obtaining a judgment in the District Court. It is a similar process to obtaining an assessment of costs under the Legal Profession Act 1987 (NSW) and the registration of a certificate of costs as a judgment[13]. It follows that if Mr Bailey could have set up his claim in either the adjudication process or in the District Court proceeding, he cannot succeed on the basis of s.41(7) of the Bankruptcy Act.
[13] see Chen v Bannerman [2001] FCA 160 at [4]
Mr Bailey had no opportunity to raise these claims in the adjudication because he did not provide a payment schedule in accordance with s.14 of the BCISP Act. However, an opportunity lost because a litigant fails to take advantage of it does not establish that a counter-claim, set off or cross demand could not, as a matter of law, have been set up in the other proceedings[14]. If Mr Bailey had lodged a payment schedule asserting a zero liability, pursuant to s.14 of the BCISP Act, he could have lodged a response to the adjudication application making submissions as to why nothing further was payable[15]. However, having regard to the terms of s.22 of the BCISP Act, the adjudicator would have been able only to consider the contractual claims based upon the alleged collateral contract and asserted statutory warranties under s.18B of the Home Building Act which take effect as contractual terms[16]. The adjudicator could not have considered the asserted misleading and deceptive conduct. Neither would those claims have been able to be considered by the District Court upon registration of the adjudication certificate[17].
[14] see Grave v Blazevic Holdings Pty Ltd [2010] FMCA 386 at [22]
[15] see s.20 of the BCISP Act
[16] cf Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 at [74]
[17] see s.25(4) of the BCISP Act
Accepting, then, that the fair trading/trade practices claim could not have been set up in the proceedings leading to the judgment debt, the questions are, is that claim a counter-claim, set off or cross demand and, if so, what is the value of it? There must at the very least be a genuine off setting claim advanced in good faith for an amount claimed in good faith. There must be a claim arguable on the basis of facts asserted with sufficient particularity to enable the Court to determine that the claim is not fanciful[18]. In the bankruptcy jurisdiction, the Court must be satisfied that the demand is more than bona fide. It must have a reasonable probability of success[19]. A debtor must show that he has a prima facie case, even if unable to adduce the admissible evidence which would make out that case before the Court dealing with the case[20]. There are, in my view, three interrelated and sometimes overlapping matters of which the Court must be satisfied: first, that there is a prima facie case, even if the evidence is not adduced, which would be admissible on a final hearing; secondly, that the claimant has a fair chance of success; and thirdly, that the claim is genuine or bona fide[21]. The mere production of a statement of claim in an action alleging facts which, if true, might give rise to such a claim will be insufficient to satisfy the Court[22].
[18] see Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 1008
[19] see Bhagat v Global Custodians Ltd [2002] FCA 223 at [52]
[20] Gus v Johnstone (2000) 74 ALJR 884; 171 ALR 598
[21] Dekkan v Evans [2008] FCA 1004 at [52]
[22] Re Cox (1934) 7 ABC 98
In the present matter, Mr Bailey relies upon an application in the CTTT with an annexed pleading of his case and an affidavit asserting his counter-claim, set off or cross demand and his asserted inability to set them up as part of the adjudication process. That, in itself, is insufficient. Mr Bailey also relies upon the affidavit of Mr Worthington, who has prepared a report dated 25 February 2011. Mr Worthington expresses an opinion that the amounts charged by MCH for the work done were excessive. He was presented as an expert for that purpose.
His qualification to express that opinion is contestable given that he is an accredited pest inspector and a building inspector. Even if he is qualified to express an opinion, however, that merely goes to the merits of the adjudication, not to the merits of the asserted counter-claim, set off or cross demand. I have not been provided with an evidentiary basis to establish the bona fides of the claim sought to be advanced in the CTTT, let alone its prospects of success.I conclude that Mr Bailey has failed to establish that he has a counter-claim, set off or cross demand of equal or greater value than the judgment debt. That could not have been set up in the proceedings resulting in the judgment debt.
I will order that the application be dismissed with costs.
I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 24 June 2011
19
10