Candetti Constructions Pty Ltd v M & I Samaras (No 1) Pty Ltd & Ors
[2011] SASC 165
•4 October 2011
SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master)
CANDETTI CONSTRUCTIONS PTY LTD v M & I SAMARAS (NO 1) PTY LTD & ORS
[2011] SASC 165
Judgment of The Honourable Justice Blue
4 October 2011
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - SUPPORTING AFFIDAVIT - REQUIREMENTS FOR
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE DEMAND - GENUINE DISPUTE AS TO INDEBTEDNESS - OFFSETTING AND OTHER LIKE CLAIMS - GENERALLY
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE DEMAND - GENUINE DISPUTE AS TO INDEBTEDNESS - ASSESSING GENUINENESS - GENERALLY
CORPORATIONS - WINDING UP - WINDING UP IN INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE DEMAND - FOR DEFECT OR SOME OTHER REASON
Appeal against decision of a Master refusing to set aside a statutory demand - demand for amount appellant had allegedly admitted it was liable to pay - the Master found there was no admission of liability - respondent argued that the amount demanded was independent of the admission and was for an undissected portion of a debt - whether, as a matter of construction, the respondent had demanded and whether, as a matter of law, s 459E permits demand for an undissected portion of a debt - whether the demand should be set aside pursuant to s 459J - whether delay may give rise to reduction of value in quantum meruit - whether appellant had proven relevant delay - whether appellant had a genuine off-setting claim as a consequence of delay.
Held: The statutory demand did not demand an undissected portion of the debt - in any event, s 459E does not permit a demand for an undissected portion - alternatively the demand should be set aside pursuant to s 459J - delay is capable of founding a basis for reduction of value in quantum meruit - appellant had not proven any such delay - the appellant had failed to prove any genuine off-setting claim - appeal allowed.
Corporations Act 2011 (Cth) s 459E, s 459G, s 459H, s 459J; Evidence Act 1929 (SA) s 67C; Corporations Rules 2003 (SA) r 5.2, referred to.
Bentham Management Pty Ltd v Union Finance Pty Ltd (2007) 247 LSJS 103; Crown House Engineering Ltd v Amec Projects Ltd (1989) 38 BLR 32, applied.
Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation (2005) 58 ATR 456; Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; British Steel Corporation v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504; Chippendale Printing Co Pty Ltd v Commissioner of Taxation (1995) 55 FCR 562; Condor Asset Management Ltd v Excelsior Eastern Ltd (2005) 56 ACSR 223; Construction Services Civil Pty Ltd v J & N Allen Enterprises Pty Ltd (1985) 1 BCL 363; David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265; Delta Beta Pty Ltd v Vissers (1996) 20 ACSR 583; Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 80 FCR 296; Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785; Federico's Restuarant Pty Ltd v Warwick Entertainment Centre Pty Ltd (1995) 18 ACSR 702; Fejo v Northern Territory (1998) 195 CLR 96; Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; Hardel Pty Ltd v Burrell & Family Pty Ltd (2009) 103 SASR 408; IFA Homeware Imports Pty Ltd v Shanghai Jerrys Candle Company Ltd [2003] FCA 533; John Shearer Ltd v GEHL Company (1995) 60 FCR 136; Kane Constructions Pty Ltd v Sopov (No 2) [2005] VSC 492; LSI Australia Pty Ltd v LSI Holdings Ltd (2007) 25 ACLC 1,602; Macleay Nominees v Belle Property East Pty Ltd [2001] NSWSC 743; Main Camp v Australian Rural (2002) 20 ACLC 726; Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd [2001] WASCA 360; Re Louisbridge Pty Ltd [1994] 2 Qd R 144; Re Sanders Constructions Pty Ltd and Eric Newhan (Wallerawang) Pty Ltd [1969] Qd R 29; Saferack Pty Ltd v Marketing Heads Australia Pty Ltd (2007) 214 FLR 393; SMEC International Pty Ltd v CEMS Engineering Inc (2001) 162 FLR 383; Sopov v Kane Constructions Pty Ltd (No 2) (2009) 24 VR 510; Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452; Thassis Sulphur and Copper Co v M’Elroy (1878) 3 App Cas 1040; Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 47 FCR 226; Turner Corporation (Wa) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294, considered.
CANDETTI CONSTRUCTIONS PTY LTD v M & I SAMARAS (NO 1) PTY LTD & ORS
[2011] SASC 165Appeal from a Master
BLUE J. The respondents, M & I Samaras (No 1) Pty Ltd and others (collectively “Samaras”), served upon the appellant, Candetti Constructions Pty Ltd (“Candetti”), a statutory demand for a total of $408,712.[1]
[1] All amounts set out herein are inclusive of GST and are rounded down to whole dollars.
Candetti applied to set aside the demand pursuant to s 459G of the Corporations Act 2001 (Cth) (“the Act”).
A Master refused the application to set aside the demand, but reduced it by $127,801 to a substantiated amount of $280,910.
Candetti appeals against that decision.
The Facts
In the set aside proceedings, the parties have disclosed only the tip of the iceberg in terms of the relevant dealings between them.
It is apparent that, if there were substantive proceedings between the parties, a comprehensive picture would necessarily be painted, involving facts and circumstances (and possibly issues and causes of action) which have not been disclosed on the set aside application.
Marion project
Candetti was engaged by an organ of the State to design and construct the State Aquatic Centre, the GP Health Care Centre and a Car Park at Marion (“the Marion project”).
Candetti in turn engaged[2] Samaras to fabricate the structural steel for the Marion project.
[2] By “engage”, I do not imply that there was a contract between the parties (as this is a live issue in the set aside proceedings), or that the “engagement” occurred at a specific point in time (as this is not apparent on the evidence).
On a date unknown, Candetti invited Samaras in some manner to tender to fabricate the structural steel for the Marion project on terms unknown. The invitation to tender is not in evidence.
On a date unknown, Samaras lodged with Candetti a tender in some form on terms unknown. The tender is not in evidence.
On 18 September 2009, Samaras sent to Candetti a letter attaching a revised schedule of rates (“the September rates schedule”) in connection with the tender and responding to an email dated 18 September 2009 (which is not in evidence).
On 5 January 2010, Samaras sent an email to Candetti attaching a Car Park target Guaranteed Maximum Price (“GMP”) submission. The email is in evidence, but not the submission.
On 6 January 2010, Candetti sent an email to Samaras stating that various exclusions and clarifications were required to the Final GMP, and instructing Samaras to procure the steel for the Car Park in the meantime.
Between some time in 2010 and late 2010 or early 2011, Samaras fabricated the structural steel for the project.
Samaras lodged progress claims for the fabrication of the structural steel for a total amount of $13,291,583. The progress claims are not in evidence, nor are any details (eg date, amount, scope of work) disclosed by the evidence.
Candetti has paid to Samaras a total of $11,833,648 in respect of the structural steel for the project.
Samaras claims that it is owed by Candetti the difference of $1,457,935 (“the Principal Amount”).
In December 2010, there was a meeting between Candetti and Samaras to attempt to negotiate a settlement of accounts relating to the project.
On 11 April 2011, there was a further meeting for the same purpose. At that meeting, a number of offers for an overall settlement of accounts were put (with a denial of liability), but no resolution was achieved.
Common Ground Project
In addition to the Marion project, Candetti was also involved (in an unspecified way) in a project known as Common Ground at Light Square, Adelaide.
Crane Hire Services
From about August 2010 to March 2011, Samaras provided crane hire services to Candetti at the Marion site. Samaras rendered 13 invoices to Candetti for crane hire services totalling $88,704.
It is not disclosed whether Samaras fabricated steel for, or had any other involvement in, the Common Ground project, other than supplying crane hire services.
From about September and November 2010, Samaras provided crane hire services to Candetti at the Light Square site. Samaras rendered 3 invoices to Candetti for crane hire services totalling $11,855.
Statutory Demand
On 3 May 2011, George Samaras executed a statutory demand (“the Demand”) and swore an Affidavit in Support of Statutory Demand (“the Supporting Affidavit”).
The Demand and Supporting Affidavit demanded a total of $408,712. This total was made up of:
1.16 separate debts for crane hire services totalling $100,560; and
2.a 17th amount for $308,151 in respect of steel fabrication services for the Marion project.
As to the last component, in paragraphs 5 to 8, Mr Samaras effectively stated that Samaras maintained it was owed $1,457,936 but that Candetti had admitted liability for $308,151 (“the Admitted Amount[3]”).
[3] I use the term “admitted” for convenience without connoting that in fact it was admitted by Candetti.
I set out portions of Mr Samaras’ affidavit relevant to the steel fabrication services as follows:
5.[Samaras] have … lodged progress claims with [Candetti] for the [Marion project] amounting to $13,291,583.80.
6.[Samaras] maintain this amount is owed to them.
7.[Candetti] has asserted its position to be that it is liable to pay … $12,141,800.
8.To date [Candetti] has only paid … $11,833,648.26.
10.[Samaras] are not aware of any basis that [Candetti] can dispute liability in the following amounts …
Steel Fabrication Services $12,141,800.00
Less $11,833,648.26____________
$308,151.74
____________
11.The debt of [$308,151.74] … is due and payable by [Candetti].
12.I believe that there is no genuine dispute about the existence or the amount of the Debt.
On 25 May, 2011, Candetti applied to set aside the Demand on various grounds. That application was supported by an affidavit of its sole director, Alexander Candetti, sworn on 25 May 2011. Therein Mr Candetti:
1.implied that Candetti had on 11 April 2011 made a without prejudice offer (with a denial of liability) to pay Samaras $308,151, but that this offer had not been accepted and was subsequently withdrawn;
2.asserted that the Principal Amount of $1,457,935 was disputed “in its entirety”;
3.deposed to facts which he asserted gave rise to a genuine dispute as to $971,059[4] of the Principal amount of $1,457,935;
4.deposed to facts which he asserted gave rise to a claim by Candetti for delay quantified at $593,759;
5.deposed to facts which he asserted gave rise to a genuine dispute as to $82,744 of the crane hire invoices totalling $100,560;
6.deposed to facts which he asserted gave rise to off-setting claims for $45,055 and $30,000.
[4] This involved a claim that Samaras had charged higher unit rates per tonne than the unit rates agreed and provided by Samaras in the September rates schedule.
On 21 June 2011, Mr Candetti swore a further affidavit addressing the topic of delay.
Legal Principles
As to the approach to be taken in assessing whether a court is satisfied that a company has an offsetting claim,[5] the following general principles have been established.
1.The question is analogous to that on an interlocutory injunction,[6] which the High Court has described as whether there is a serious question to be tried[7] or a prima facie case.[8]
2.The claim must be put forward in good faith.[9]
3.The grounds for the claim must be real and not spurious, frivolous, illusory, fanciful or misconceived.[10]
4.The claim must be sufficiently plausible to merit further investigation.[11]
[5] Or indeed whether there is a genuine dispute as to the existence or amount of the debt.
[6] Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 per McLelland CJ; Federico’s Restaurant Pty Ltd v Warwick Entertainment Centre Pty Ltd (1995) 18 ACSR 702 at 706 per Lehane J; Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294 at [27]-[28] per Owen J (Pidgeon and Wallwork JJ agreeing); Bentham Management Pty Ltd v Union Finance Pty Ltd (2007) 247 LSJS 103; [2007] SASC 42 at [14] per Debelle J (Doyle CJ and Perry J agreeing).
[7] See eg Fejo v Northern Territory (1998) 195 CLR 96 at [26] per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ.
[8] See eg Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622-623 per Kitto, Taylor, Menzies and Owen JJ; Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46 at [65]-[71] per Gummow and Hayne JJ (see also at [19] per Gleeson CJ and Crennan J).
[9] John Shearer Ltd v GEHL Company (1995) 60 FCR 136 at 143, 148 per von Doussa, Hill and Tamberlin JJ; Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 at [18] per Palmer J; Bentham Management Pty Ltd v Union Finance Pty Ltd (2007) 247 LSJS 103 at [14] per Debelle J (Doyle CJ and Perry J agreeing); Hardel Pty Ltd v Burrell and Family Pty Ltd (2009) 103 SASR 408; [2009] SASC 77 at [49] per Kourakis J (Nyland and David JJ agreeing).
[10] Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 464 per Northrop, Merkel and Goldberg JJ; Hardel Pty Ltd v Burrell and Family Pty Ltd (2009) 103 SASR 408 at [49] per Kourakis J (Nyland and David JJ agreeing).
[11] Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 per McClelland CJ; Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd (in liq) [2001] WASCA 360 at [18] per Wallwork J (Steytler J and Pidgeon AUJ agreeing); Hardel Pty Ltd v Burrell and Family Pty Ltd (2009) 103 SASR 408 at [49] per Kourakis J (Nyland and David JJ agreeing).
Steel Fabrication Services Debt
I first address the larger component of the Demand, being $308,151 in respect of steel fabrication services on the Marion project.
The reasoning of the Master
The reasoning of the Master under this head may be summarised as follows:
1.Candetti denied making any admission of liability as asserted in paragraph 7 of Mr Samaras’ affidavit and this denial was uncontested on the evidence. In any event, the communication in which the offer was made was subject to settlement privilege.[12] Accordingly, Candetti had sufficiently negated the demand for $308,151 insofar as it was supported by evidence of an admission.
2.However, Candetti had only negated $971,059 of the Principal Amount of $1,457,936 as being undisputed, this left an undisputed balance of $486,876.
3.As to whether this comprised a “debt”:
(a) both parties proceeded in the set aside application on the basis there was no contract between them and that Samaras’ claim was in quantum meruit;
(b) a claim on a quantum meruit can be a “debt” within the meaning of s 459E where it has been quantified by a proper process and is not measured merely by opinion or conjecture;
(c) by reason of Candetti not disputing the balance of $486,876 and identifying that the Samaras claim involved agreed tonnages, at least at rates which Candetti said had been agreed per the September rates schedule, that amount was quantified by a proper process sufficiently for it to constitute a debt.
4.As the undisputed debt in quantum meruit ($486,876) exceeded the amount of the Demand ($308,151), the sum of $308,151 was a debt within the meaning of s 459E and there was no genuine dispute in respect of it.
[12] Section 67C of the Evidence Act 1929 (SA).
The Undissected Portion Characterisation
On appeal, Samaras did not challenge the Master’s first conclusion that paragraph 7 of Mr Samaras’ affidavit did not and could not evidence an undisputed debt. This negated the claim for $308,151 in its capacity as the Admitted Amount.
However, Samaras argued before the Master and on appeal that paragraph 10 of Mr Samaras’ affidavit was independent of paragraph 7, and identified a debt of $308,151 quite independently of any admission of liability by Candetti.
Samaras argued that, while the principal debt on its case was $1,457,936, it was entitled to choose, and did choose, to demand an undissected portion only of it, namely $308,151 (“the Subsidiary Amount”). The coincidence of the subsidiary amount with the Admitted Amount had no logical effect on the characterisation of the amount demanded in paragraph 10. Nor, Samaras argued, did it need to disclose how it had made its selection of a portion only of the Principal Amount.
On Samaras’ case, the Principal Amount of $1,457,935 is and was a single indivisible debt, as opposed to a total of separate discrete debts.
Two questions arise upon Samaras’ contention.
1.As a matter of construction, do the Demand and the Supporting Affidavit, and in particular paragraph 10 of the affidavit, identify and demand an undissected portion of the Principal Amount independently of the Admitted Amount in paragraph 7?
2.As a matter of law, is Samaras able to demand such an undissected portion under s 459E?
Issue of construction
I turn first to the issue of construction of the Demand and Supporting Affidavit.
For the reasons which follow, I reject the construction advanced by Samaras.
I initially address some matters of fact and law which form the background to and context for the construction.
As to the Principal Amount of $1,457,935:
1.the Demand and Supporting Affidavit do not identify the nature of the claimed debt, and in particular do not identify whether it is a contractual debt, a quantum meruit debt or a debt arising as a result of some other cause of action;
2.Samaras conducted its case on the basis that this was a quantum meruit debt and not a contractual debt and Candetti was content to conduct its case on this issue on that basis also;
3.s 459E requires that, if a creditor wishes to issue a statutory demand in respect of multiple debts, it must set out the amount of each such debt;[13]
4.while the Supporting Affidavit referred to the Principal Amount being the subject of several progress claims, there was no evidence of the number or dollar amount of those progress claims, and the case was conducted on the basis that the gross amount (ie before payments) of $13,291,583 was a single debt for steel fabrication services, as opposed to the total of a number of discrete debts arising from or in respect of each separate progress claim;[14]
5.s 459E(1) requires that a debt the subject of a statutory demand be “due and payable” and sub-s (3) requires the affidavit to verify that the debt “is due and payable”[15]. The Supporting Affidavit did not state that the Principal Amount was due or payable, but merely that it was “owed”;
6.s 459E(3)(b) requires a supporting affidavit to comply with the rules, and in turn, rule 5.2 of, and form 7 to, the Corporations Rules 2003 (SA) require that the affidavit state that the deponent believes that there is no genuine dispute about the existence or the amount of the debt.[16] The Supporting Affidavit did not state that the Principal Amount was not the subject of a genuine dispute.
[13] Chippendale Printing Co Pty Ltd v Deputy Commissioner of Taxation (1995) 55 FCR 562 at 579 per Lindgren J; Condor Asset Management Ltd v Excelsior Eastern Ltd (2005) 56 ACSR 223; [2005] NSWSC 1139 at [21]-[23] per Barrett J; Delta Beta Pty Ltd v Vissers (1996) 20 ACSR 583 at 586 per Nicholson J.
[14] As to the nature of a progress claim, see Tharsis Sulphur and Copper Co v M’Elroy (1878) 3 App Cas 1040 at 1045 per Lord Cairns LC, 1049 per Lord Hatherley, 1054 per Lord Blackburn; Re Sanders Constructions Pty Ltd and Eric Newham (Wallerawang) Pty Ltd [1969] Qd R 29 at 39 per Hoare J (Stable J agreeing); Construction Services Civil Pty Ltd v J & N Allen Enterprises Pty Ltd (1985) 1 BCL 363 at 367 per White J. While a contract might provide for a progress claim to be a debt due and payable on the happening of defined circumstances, Samaras did not conduct its case on the basis that the debt was a debt arising on progress claims, and could not do so given the wording of the Demand and its approach to the case.
[15] See Main Camp v Australian Rural (2002) 20 ACLC 726; [2002] NSWSC 219 at [17] per Barrett J; Saferack Pty Ltd v Marketing Heads Australia Pty Ltd (2007) 214 FLR 393 at [39]-[41] per Barrett J.
[16] See IFA Homeware Imports Pty Ltd v Shanghai Jerrys Candle Co Ltd [2003] FCA 533 at [22]-[24] per Tamberlin J; Saferack Pty Ltd v Marketing Heads Australia Ltd (2007) 214 FLR 393; [2007] NSWSC 1143 at [42] per Barrett J.
As to the Subsidiary Amount of $308,151:
1.the Supporting Affidavit did not identify any specific component of the Principal Amount of $1,457,935 which comprised the debt of $308,151 referred to in paragraph 10, nor, if that amount were not the Admitted Amount referred to in paragraph 7, that the amount of $308,151 was merely an undissected portion of the Principal Amount of $1,457,935;
2.s 459E(3)(b) and rule 5.2 of and form 7 of the Corporations Rules 2003 (SA) require that the affidavit state the source of the deponent’s knowledge of the matters stated in relation to the debt. The Supporting Affidavit did not depose to any source of knowledge that the amount of $308,151 was not genuinely disputed other than by reason of its having been admitted as stated at paragraph 7;
3.by contrast to the Principal Amount of $1,457,935, the Supporting Affidavit did depose to the amount of $308,151 being due and payable and did depose that Mr Samaras believed that there was no genuine dispute about the existence or amount of $308,151 as a debt.
A demand is to be construed objectively, but construed against the background of the knowledge, and from the perspective, of the company receiving of the demand.[17] Though not made explicit by the authorities, it follows that the demand is to be construed at the time it is issued or served (as opposed to the time of the hearing of an application to set aside).
[17] See eg Main Camp v Australian Rural [2002] NSWSC 219 at [36] per Barrett J; Condor Asset Management Ltd v Excelsior Eastern Ltd (2005) 56 ACSR 223 at ]25]-[28], [35]-[36] per Barrett J.
Against that background, I construe the Demand and Supporting Affidavit.
1.Paragraph 7 of the affidavit identifies a liability of Candetti to pay an amount of $308,151 as being based upon the fact that Candetti had admitted that it was liable in that amount.
2.If paragraph 10 were asserting merely that there was and could be no genuine dispute about Candetti’s liability for an undissected portion of the claimed debt of $1,457,935 (ie $308,151 out of that debt), it could be expected that Mr Samaras would have:
(a) deposed to that fact;
(b) identified this basis of the debt as being different, and in the alternative, to the admission basis of the debt;
(c) deposed that the debt of $1,457,935 was due and payable (as an undissected portion of a debt can only be due and payable if the principal debt itself is due and payable);
(d) identified the source of his belief (as required by form 7) as to the debt being due and payable and not genuinely disputed by reference to a fact other than the admission.
3.The coincidence of the identical figure in paragraph 10, coupled with the absence of any indication in paragraph 10 or elsewhere that that figure is referrable to any other basis, leads to the irresistible conclusion that the basis of paragraph 10 is paragraph 7 and the admission of liability by Candetti referred to therein.
4.Paragraph 12 of the affidavit asserts a belief that there is no genuine dispute about the existence or amount of the “debt” of $308,151 whereas, on Samaras’ contention, that sum is not a debt in its own right but merely an undissected portion of a debt.
Accordingly, on its proper construction, the Demand in respect of the sum of $308,151 relies exclusively upon the admission of liability referred to in paragraph 7. Candetti necessarily established a genuine dispute about the existence of that debt when the Master found that there had been no such admission, or at least none that could be relied upon by Samaras.
For this reason, the Demand must be set aside insofar as it relates to the sum of $308,151.
Demand permissible for part of a debt?
In case I am wrong on the first issue, I turn to the second issue, being the construction of s 459E.
For reasons which follow, s 459E does not countenance a demand for an undissected portion of a debt.
This is not a situation in which a separately identified part of a debt is the subject of a demand, or where a “debt” is in reality a sum of two or more identified debts. In the latter case, the position is quite different. In the former case, the position may or may not be different: it is unnecessary to decide.
As to textual considerations:
1.s 459E(1)(a) provides that “a person may serve on a company a demand relating to … a single debt that the company owes to the person”;
2.s 459E(2)(e) requires that “the demand … must specify the debt and its amount”;
3.s 459E(2)(c) requires that “the demand must require the company to pay the amount of the debt”;
and hence s 459E does not refer to or explicitly contemplate a demand for an undissected portion of a debt as opposed to the debt itself.
As to purposive considerations:
1.if Samaras’ contention were correct, it would follow that, in every case in which such a demand were served, it would be incumbent upon the company to establish a genuine dispute about the existence of the entire debt, even though the demand (and the deposition that there was no genuine dispute) was confined to a partial amount of that debt;
2.if Samaras’ contention were correct, such a statutory demand would comprise a de facto demand for the higher amount even though the statutory prerequisites (demand for that amount, deposition that it is due and payable and deposition that there is no genuine dispute about it) had not been met;
3.the statutory demand procedure enacted by Part 5.4 Divisions 2 and 3 of the Act is intended to be simple, expedient and efficient.[18]
[18] David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 270-271 per Gummow J (Brennan CJ, Dawson, Gaudron and McHugh JJ agreeing).
Considering both the text and purpose of s459E, I conclude that s 459E does not permit a statutory demand for an undissected portion only of a debt.
I would therefore set aside the Demand pursuant to s 459H because, it not being open to Samaras to rely upon the alleged debt of $308,151 in its capacity as the Subsidiary Amount, Candetti demonstrated a genuine dispute about the alleged debt of $308,151 by negating it in its capacity as the Admitted Amount.
Reliance upon Section 459J
On appeal, Candetti contends that, if it is not set aside pursuant to s 459H, the Demand (insofar as it relates to the amount of $308,151) should be set aside pursuant to s 459J.
I address this contention in case I am wrong in my two previous conclusions.
Candetti relied upon s 459J to make two submissions and different considerations apply to each. First, it contended that, if Samaras is precluded by s 459E from issuing a statutory demand for an undissected portion of a debt (as I have held above), Candetti relies upon s 459J as an alternative source of power to s 459H to set aside the Demand.
Alternatively, if Samaras is not so precluded, Candetti relies upon s 459J on the basis that the Demand did not give fair notice that this was what Samaras was doing.
Availability of contention to Candetti
Samaras objects in limine on two inter-related grounds to Candetti relying upon s 459J:
1.the grounds of appeal do not encompass Candetti’s contention on appeal;
2.Candetti did not run such a case before the Master or adduce evidence in support of it and, if it had, Samaras may well have cross-examined Mr Candetti and/or adduced evidence relevant to the issue.
Candetti takes issue with these contentions, and also seeks leave to amend its notice of appeal to introduce a new ground of appeal 1.4 contending that the Master erred in fact and law in failing to set aside the Demand, “having regard to the requirements of s 459E and the application of s 459H and s 459J”.
To assess Samaras’ objection, it is necessary to identify how Candetti did invoke s 459J before the Master.
1.Mr Candetti exhibited a letter from Candetti’s solicitors complaining that the Demand did not attach the invoices “to provide information to our client as to the nature of the claims made against it”. I take this to encompass invoices in respect of the steel fabrication services, and not just the crane hire services.
2.In Candetti’s written outline, although the principal thrust was reliance upon s 459H, s 459J was quoted, and it was submitted that the failure to attach the relevant invoices had caused substantial injustice as “it has not provided Candetti with fair notice of the alleged debt and the case it has to meet”.
3.During oral submissions, Candetti complained repeatedly of the subsidiary debt approach taken by Samaras and the confusion caused by it without identifying whether the complaint was made under s 459H or s 459J.[19]
[19] Transcript page 3, lines 8-38; page 7, lines 27-8; lines 8; page 9 line 35 – 10 line 1; page 10 line 35 – 11 line 6.
Candetti’s first submission simply relies upon an alternative source of power to set aside the demand on the same grounds. As such, there is no reason to prevent it from adopting this argument on appeal.
In relation to the second submission, while it was not raised as clearly or comprehensively as on appeal, I am satisfied that Candetti sufficiently raised the argument before the Master so that it is not precluded from putting it on appeal. I also take into consideration that Candetti’s counsel was potentially confused to some degree about the case he was meeting in his submission to the Master.
In the circumstances, I grant leave to Candetti to amend its notice of appeal to introduce ground 1.4.
Consideration of contention
If I am correct that s 459E does not permit Samaras to demand an undissected portion of a debt, but I am wrong that this requires the Demand to be set aside pursuant to s 459H, I would set it aside pursuant to s 459J.
Further, even if I am wrong in my conclusion that s 459E does not permit Samaras to demand an undissected portion of a debt, I would nevertheless set aside the Demand pursuant to s 459J. This is because, even if the Demand on its proper construction validly demanded an undissected portion of the debt, this was not made explicit by the Demand and Supporting Affidavit. Indeed, it was only made explicit by Samaras’ submissions to the Master.
If it is permissible to demand an undissected portion of a debt, it is apparent that the company is likely to be prejudiced unless it is made explicit in the demand and/or supporting affidavit that this is what the creditor is doing. Otherwise the company will not fully appreciate the necessity of establishing a genuine dispute in relation to the entire debt (particularly given the time constraints as to filing a set aside application and supporting affidavit).
In the present case, I am satisfied that Candetti was prejudiced by the failure of Samaras to explicitly state in the Demand and Supporting Affidavit that it was relying on the subsidiary debt in the alternative to the admitted debt basis. I form that view for the following reasons.
1.In his first affidavit, Mr Candetti, at paragraphs 13 to 16, set out to negate a debt of $308,151, established a genuine dispute as to steel tonnage rates relevant to an amount of $971,059, and then concluded “Accordingly, Candetti has overpaid Samaras a sum in excess of $500K”. This is only explicable on the basis that Candetti believed it did not have to negate the sum of $1,457,936, but only $408,712, and hence Samaras would owe Candetti the difference which exceeded $500,000.
2.Because Mr Candetti stated at paragraph 28 that Candetti denied the claim of $1,457,936 “in its entirety”, I conclude that Mr Candetti believed he did not need to deploy other disputes (beyond the steel tonnages rate dispute) about the claim of $1,457,936 in order to establish a genuine dispute as to the debt the subject of the Demand.
Although Mr Candetti’s affidavit went on at paragraphs 20 to 23 to identify an off-setting claim for $593,759 due to alleged delays caused by Samaras, and, in the summary at paragraphs 29 to 31 of his affidavit, Mr Candetti listed the dispute involving $971,059 plus Candetti’s claim for delay damages of $593,759, this does not alter my conclusion.
3.While I accept Samaras’ submission that Candetti had to an extent laid the factual basis in Mr Candetti’s affidavit to address such a contention by Samaras, and that Candetti attempted to address it before the Master, in my view, it was still prejudiced by the contention not having been expressed in the Demand and Supporting Affidavit. It is one thing to permit a creditor to demand an undissected portion of a debt and thereby transfer the onus of negating the whole debt to the company. It is another to permit a creditor to do this without articulating it.
4.I am satisfied that, due to the failure by Samaras to articulate what it was doing, substantial injustice was caused to Candetti in that it did not set out comprehensively to negate the whole debt to the requisite degree.
I do not need to determine whether the failure by Samaras to articulate the nature of its demand in respect of the sum of $308,151 is a “defect in the demand” within the meaning of s 459J(1)(a)[20] because:
1.if it is, I am satisfied that “substantial injustice will be caused unless the Demand is set aside”;
2.if it is not, I am satisfied that there is “some other reason” within the meaning of s 459J(1)(b) why the Demand should be set aside and that substantive injustice will be caused[21] if it is not set aside.
[20] Ex hypothesi, I doubt it would be characterised as an “irregularity” or a “misdescription of a debt or other matter” within the meaning of s 9 of the Corporations Act but vagueness and ambiguity in describing the nature of the debt may fall within the overall concept of a “defect”: see LSI Australia Pty Ltd v LSI Holdings Ltd (2007) 25 ACLC 1,602; [2007] NSWSC 1406 at [50]-[54] per Austin J.
[21] See eg Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 80 FCR 296 at 300 per French, Kiefel and Sundberg JJ; Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation (2005) 58 ATR 456; [2005] ACTCA 3 at [26] per Crispin, Gray and Marshall JJ.
Accordingly, if I am wrong in concluding that the Demand ought to be set aside pursuant to s 459H, I would set it aside pursuant to s 459J.
Is the quantum meruit claim a “debt”?
Before the Master, Samaras argued that every quantum meruit claim is regarded under the general law as being a claim for a liquidated sum and hence for a debt, and that both the Principal Amount and the Subsidiary Amount were “debts” within the meaning of s 459E.[22]
[22] This is the subject of Samaras’ first alternative contention on appeal.
Candetti took issue with this proposition, but accepted that some quantum meruit claims were capable of being for a liquidated sum and hence a debt. It submitted that such claims only constitute debts where the amount has been quantified by a defined formula or process and is not measured merely by opinion or conjecture.
Samaras responded that the subsidiary debt had been quantified by Candetti’s calculation in exhibit AC8” to Mr Candetti’s affidavit. That calculation was arrived at by taking agreed tonnages multiplied by what Candetti says were the agreed prices per tonne as shown in the September rates schedule. Samaras argued that this constituted a quantification by a defined process or formula. Samaras argued that, as Mr Candetti had deposed to a genuine dispute in his affidavit in respect of $971,059 out of the Principal Amount of $1,457,936, this left a balance which was quantified by Candetti itself at $486,876.
The Master agreed with this response by Samaras.
On appeal, Candetti argued that:
1.the Master erred in relying upon exhibit “AC8”, because he mistakenly assumed that the table in that exhibit encompassed the entire Samaras claim of $13,291,583; whereas in fact it only encompassed $7,946,000 and nothing was said about the quantification of the balance of $5,345,583;
2.the Master’s conclusion that Candetti did not dispute the balance of $486,876 of the Principal Amount overlooked the statements in Mr Candetti’s affidavit that Candetti disputed the entirety of the Principal Amount.
If I am correct in my reasoning at paragraphs [33]-[69] above, it follows that Candetti’s submissions are redundant because Candetti will already have succeeded in relation to the steel fabrication services component of the Demand.
However, if that reasoning is incorrect, and the Demand legitimately demanded $308,151 as an undissected portion of the Principal Amount, Candetti fails on this issue, but for a reason different to that articulated by Samaras or the Master.
On the assumption I am presently making, Candetti was obliged to demonstrate a serious question to be tried as to why it did not owe at least $308,151 out of the Principal Amount of $1,457,936. The onus of proof lay on Candetti. To discharge that onus, it would have been incumbent upon Candetti to prove facts giving rise to a serious question to be tried that the parties had not agreed on a process or formula for quantifying the quantum meruit debt (or alternatively that they had so agreed, but that application of the formula gave rise to no (net) quantum meruit debt). It simply failed to discharge this onus.
Given that conclusion, it is unnecessary to decide whether all amounts due on a claim in quantum meruit constitute “debts” within the meaning of s 459E.
Reduction in Quantum Meruit due to Delay
Candetti argued that, if there was a quantum meruit debt for either $1,457,935 or $308,151, it had demonstrated a genuine dispute in the form of a reduction which ought to be made in the amount due to Samaras on account of Samaras’ delay in the erection of the steel.
The Master found that Candetti had failed to discharge its onus of proof. Specifically, the Master found that Candetti had not proved facts giving rise to a serious question to be tried:
1.that Samaras had committed to any time for supply of the steel;
2.if it had, when the steel was due (whether by reference to a reasonable time or to a defined timetable); or
3.that Samaras had failed to achieve supply within such a time.
Availability of delay on quantum meruit claim
Samaras’ fourth alternative contention is that delay by the supplier is not capable as a matter of law of giving rise to a reduction in the value of a quantum meruit claim. I reject this contention.
There is no reason in principle why the effect of delay by the supplier in the value of the services received by the principal can never, as a matter of law, be taken into account. Nor did Samaras cite authority which supports that proposition.
Samaras cited the decision of Robert Goff J in British Steel Corporation v Cleveland Bridge and Engineering Co Ltd[23] in support of its proposition. This decision addresses the inability of a principal to bring a cross-claim or claim a set-off for damages suffered by the principal due to delay. However, it does not address the effect of delay upon the value of a quantum meruit claim. The matter did not arise because the principal had agreed the value of the quantum meruit (subject only to its claim for contractual damages) and because Robert Goff J found as a fact that the supplier undertook no obligation to complete the work within a reasonable time.
[23] [1984] 1 All ER 504.
In Crown House Engineering Ltd v Amec Projects Ltd,[24] the Court of Appeal held that the issue of reduction in value for delay had not been decided by Robert Goff J in the British Steel case. The Court of Appeal considered that a claim for a reduction in value for delay was sufficiently arguable that it should not be struck out of the principal’s pleadings.
[24] (1989) 48 BLR 32.
In Kane Constructions Pty Ltd v Sopov (No 2),[25] Warren CJ accepted that the value of the quantum meruit claim could be increased by delays caused by the principal or circumstances beyond the control of the supplier, and further that costs of rectification for defective work could be deducted in assessing the value of the quantum meruit.
[25] [2005] VSC 492 at [37]-[43].
In Sopov v Kane Constructions Pty Ltd (No 2),[26] the Court of Appeal held that the additional quantum of the quantum meruit claim which had been increased due to delays was available to the contractor.
[26] (2009) 24 VR 510; [2009] VSCA 141 at [53]-[65] per Maxwell P, Kellam JA and Whelan AJA.
If the value of a quantum meruit can be increased due to delay for which the supplier is not responsible, it seems to be inconsistent to assert that the quantum can never be reduced on account of delays for which the supplier is responsible.
Samaras’ other alternative contentions
Samaras’ second alternative contention is that Candetti’s Application and Supporting Affidavit did not invoke the jurisdiction of the court to set aside the Demand on the ground of a genuine dispute as a result of delay.
Samaras relies upon a line of authority to the effect that, to be a “supporting affidavit”, the original affidavit must disclose material facts on which the applicant intends to rely to show a genuine dispute.[27] Samaras contends that the assertion of the delay claim at paragraphs 20 to 23 of Mr Candetti’s first affidavit does not meet the minimum requirements of s 459G.
[27] Re Louisbridge Pty Ltd [1994] 2 Qd R 144 at 145 per Ryan J; Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452 at 459 per Sundberg J; SMEC International Pty Ltd v CEMS Engineering Inc (2001) 162 FLR 383; [2001] NSWSC 459 at [16]-[21] per Austin J; Meadowfield Pty Ltd v Gold Coast Holdings Pty Ltd (in liq) [2001] WASCA 360 at [21]-[22] per Wallwork J (Steytler J and Pidgeon AUJ agreeing).
Strictly, it is not necessary for me to decide this question, because, taking into account both of Mr Candetti’s affidavits, I have concluded that Candetti did not discharge the onus of proof in relation to the delay claim.
Nevertheless, for the sake of completeness, I reject Samaras’ contention. It is well established that an affidavit filed outside the 21 day period may supplement and provide evidence in respect of a matter which has been raised as a genuine dispute in the original affidavit.[28]
[28] Graywinter Properties Pty Ltd v Gas and Fuel Corporations Superannuation Fund (1996) 70 FCR 452 at 460 per Sundberg J; Bentham Management Pty Ltd v Union Finance Pty Ltd (2007) 247 LSJS 103 at [24] per Debelle J (Doyle CJ and Perry J agreeing).
Samaras’ third alternative contention is that the fact that Candetti made payments to Samaras on 5 and 31 May 2011 of crane hire invoices totalling $75,126 is inconsistent with Candetti having a genuine dispute by reason of delay, and that accordingly the assertion of that dispute is not made bona fide. Samaras argues that, if Candetti had available a delay claim of $593,759 in addition to the dispute over $971,059, the net result would be that, on any view, Samaras owed money to Candetti and not vice versa.
Again, strictly it not necessary for me to decide this contention because I have held that Candetti has not demonstrated a genuine dispute by reason of delay.
Nevertheless, for the sake of completeness, I reject Samaras’ contention. On the evidence, the ten invoices which were paid by Candetti in May 2011 had been rendered in February and March 2011, and related to crane hire services and not to steel fabrication services.[29] The mere fact that Candetti chose to pay invoices for quite different services does not demonstrate that it could not believe it was owed money by Samaras on an overall accounting between the parties in relation to steel fabrication services.
Relevant Facts
[29] Albeit related to the Marion site.
The exhibits to Mr Candetti’s second affidavit disclose the following communications between the parties concerning proposed programs for the manufacture and erection of the steel:
1.on a date unknown (between invitation to tender and tender), Candetti provided to Samaras a handwritten program, which showed erection of steel between 20 January and 2 April 2010;
2.on 6 January 2010, Candetti requested Samaras to submit a detailed program for discussion and workshopping;
3.on 5 February 2010, Samaras sent a letter to Candetti proposing (subject to various issues to be resolved) target programs for two components of the project showing erection of steel between 27 April and 23 June 2010,
4.on 6 February 2010, Candetti sent an email to Samaras rejecting the target program, and calling for a meeting;
5.on 18 March 2010, Candetti sent an email to Samaras instructing it to procure the remaining steel for the project, and requesting Samaras to proceed with erection of the steel at the Aquatic Centre in accordance with a program set out in the email involving erection of steel for various components on dates ranging from 14 to 22 April 2010 to 21 June to 17 July 2010;
6.on 22 March 2010, Samaras sent an email to Candetti, acknowledging receipt of the email of 18 March, and listing various pre-conditions which would need to occur before Samaras could firm up on a program;
7.on 24 March 2010, Candetti provided to Samaras a comprehensive updated Construction Program for the manufacture and erection of the structural steel for the project involving erection of steel for various components ranging from 16 to 24 April 2010 to 21 June to 17 July 2010;
8.on 10 May 2010, Candetti and Samaras met to discuss achievable dates for the erection of the steel;
9.on the same date, Candetti issued a Master Program. The program is not in evidence, nor the communication of it from Candetti to Samaras;
10.on 11 May 2010, Candetti sent an email to Samaras confirming the meeting, and setting out a partial program for erection, which Candetti said was not in line with the Construction Program, was not endorsed by it and which ranged from 17 May to 12 June 2010 with many dates yet to be specified;
11.on 18 June 2010, Candetti sent an email to Samaras requesting that Samaras submit a program in line with the Master Program, and stating that Candetti could not accept the programs submitted to date.
Discharge of onus of proof
Whereas the onus of proof in substantive proceedings will lie upon the supplier, on an application to set aside a statutory demand, the onus of proof (to the requisite, lower, degree) lies upon the applicant (in this case the principal Candetti).
Mr Candetti’s two affidavits fail to identify or evidence any basis whatsoever to determine a reasonable time for the erection of the structural steel. As is apparent from paragraph [95] above, on such (limited) evidence as Candetti adduced, the parties put to each other various proposed programs, but never agreed on any of them and no reasonable time can be discerned from the evidence adduced.
Further, Mr Candetti’s affidavits fail to identify or adduce satisfactory evidence of what was a reasonable time for it to do so, or that Samaras failed to erect any structural steel by a particular time.
I agree with the Master’s reasons in this respect.
The meaning of “fabrication”
Candetti argues on appeal that the Demand was for “fabrication” of steel, whereas the work by Samaras encompassed manufacture, supply, erection and painting of steel. Candetti argues that it is not clear what component of the principal debt relates to “fabrication” as opposed to “manufacture” or “installation”.
There is no merit in this contention.
1.Mr Candetti’s affidavits treat “steel fabrication services” as the generic term for manufacture, supply, erection and painting.[30]
2.The contention was not raised in the correspondence between solicitors, in Mr Candetti’s affidavit, before the Master or in the Notice of Appeal.
3.In any event, the onus of proof would be upon Candetti to prove facts from which the conclusion could be made.
4.Further, Candetti should not be permitted to raise this point for the first time on appeal.
[30] Paragraphs 11, 20-21 and 29 of his first affidavit and paragraph 4 of his second affidavit.
Off-setting claim for Damages for Delay
Candetti argues that, in the alternative to delay reducing the value of Samaras’ quantum meruit, it has an off-setting claim for damages caused by delay by Samaras in breach of contract.
Leave to amend
Candetti did not raise this point in its Notice of Appeal. It seeks leave to amend the Notice of Appeal by introducing a new ground 3 which raises the point. This is opposed by Samaras.
I give leave to amend the Notice of Appeal because I am satisfied the point was argued before the Master and there is no prejudice to Samaras.
Assessment on merits
In Mr Candetti’s first affidavit, he stated that:
1.Candetti has a claim against Samaras for delays in the manufacture and erection of the steel within a reasonable timeframe;
2.in consequence of the delays, Candetti was delayed for four weeks;
3.Candetti was incurring costs of $148,839 per week throughout the project, and hence the damages suffered by Candetti by reason of the delays by Samaras were $593,759.
In his two affidavits, Mr Candetti did not assert or identify any contract between Candetti and Samaras relating to the structural steel. His affidavits proceed on the basis that the claim by Samaras against Candetti was in quantum meruit.
The Master proceeded on the assumption that it was arguable that Candetti had available some cause of action (perhaps not yet recognised) for damages suffered due to Samaras not supplying the steel within a reasonable time. On that assumption, he held that Candetti had failed to sufficiently discharge the onus of proof as to what that reasonable time was, or that Samaras had failed to supply the steel within such a time.
On this issue, I agree with the Master. Candetti failed to discharge the onus of proof of adducing evidence showing a serious question to be tried as to:
1.there being a contract between the parties;
2.there being a term of the contract that Samaras would supply the steel by a defined time or within a reasonable time;
3.defined steel ought to have been supplied by Samaras at a specific time;
4.Samaras failed to so supply the steel.
Off-setting Claim on Common Ground Project
In Mr Candetti’s first affidavit, he identified three of the crane hire invoices the subject of the Demand (totalling $11,855) as relating to the Common Ground project. He said that, on 17 March 2011, Candetti had requested Samaras
to provide details of certain credit variations for that project … Samaras have failed or refused to confirm the value of the credit variations for ‘Common Ground’ which are estimated to be approximately $30,000.
The Master rejected this as an off-setting claim because it was left up in the air how the credit variations arose on the Common Ground project or why they should be payable by Samaras to Candetti.
I agree with the Master. Mr Candetti’s affidavit fails to discharge Candetti’s onus of proof. It says nothing about the Common Ground project (other than that Samaras provided crane hire services to Candetti in relation to it). It says nothing about the nature of the claim for the credit variations, or even the cause of action. Candetti failed to demonstrate a serious question to be tried.
Crane Hire Debt
This leaves the smaller component of the Demand, being $100,500, in respect of crane hire services.
Neither party challenged the following conclusions by the Master:
1.subject to points 2, 3 and 4 below, there was no genuine dispute that Candetti owed $100,560 to Samaras for crane hire services;
2.$75,126 was paid by Candetti to Samaras in respect of the invoices for crane hire services, and by reason thereof there was a genuine dispute to that extent and to that amount;
3.there was a genuine dispute about two of the 16 invoices for crane hire services, totalling $7,618;
4.Candetti had an off-setting claim against Samaras for back charges totalling $45,055.
I have concluded that the Demand should have been set aside insofar as it claimed the sum of $308,151.
Insofar as the Demand claimed the sum of $100,500, the total of the two genuine disputes and one off-setting claim upheld by the Master referred to at paragraph [113] above is $129,801 and exceeds that amount.
Accordingly, the Demand must be set aside in its entirety.
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