Covus Corporation Pty Ltd v Coastal Launch Services Pty Ltd
[2000] WASC 221
•8 SEPTEMBER 2000
COVUS CORPORATION PTY LTD -v- COASTAL LAUNCH SERVICES PTY LTD [2000] WASC 221
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2000] WASC 221 | |
| Case No: | COR:147/2000 | 25 JULY & 9 AUGUST 2000 | |
| Coram: | MASTER SANDERSON | 8/09/00 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed Applicant to pay respondent's costs of application and reserved costs | ||
| PDF Version |
| Parties: | COVUS CORPORATION PTY LTD (ACN 083 000 239) COASTAL LAUNCH SERVICES PTY LTD (ACN 080 694 686) |
Catchwords: | Corporations law Application to set aside a statutory demand Whether "genuine dispute as to existence or amount of debt" Test for offsetting claim and meaning of "offsetting total" |
Legislation: | Corporations Law of Western Australia, s 459G, s 459H |
Case References: | John Shearer Ltd v Gehl Co (1995) 18 ACSR 780 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 All ER 883 Asian Century Holdings Inc v Fleuris Pty Ltd [2000] WASCA 59 Australian Securities & Investment Commission v Yandal Gold Pty Ltd (1999) 32 ACSR 317 BP Refinery (Westernport) v Shire of Hastings (1977) 180 CLR 266 Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) ACSR 37 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981) 149 CLR 337 Edge Technology Pty Ltd v Lite-on Technology Corporation [2000] NSWSC 471; (2000) 34 ACSR 301 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 Integra Public Safety Pty Ltd v Tess Lawrence Minicomp Services Pty Ltd (1996) 19 ACSR 523 Jesseron Holdings Pty Ltd v Middle East Trading Consultants (No 2) Pty Ltd (1994) 13 ACSR 787 Jones v Dunkel (1959) 101 CLR 298 Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1992) 11 ACSR 362 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Paratoo Pty Ltd v Frizzell, unreported; SCt of WA; Library No 970612; 21 October 1997 Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd [1999] WASCA 217; (1999) 21 WAR 250 Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 147 ALR 444 The Commonwealth v Verwayen (1990) 170 CLR 394 Wallace v Baulkham Hills Smash Repairs Pty Ltd (No 2), unreported; SCt of NSW (Young J); 21 August 1995 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
and
COVUS CORPORATION PTY LTD (ACN 083 000 239)
BETWEEN : COVUS CORPORATION PTY LTD (ACN 083 000 239)
- Plaintiff
AND
COASTAL LAUNCH SERVICES PTY LTD (ACN 080 694 686)
Defendant
Catchwords:
Corporations law - Application to set aside a statutory demand - Whether "genuine dispute as to existence or amount of debt" - Test for offsetting claim and meaning of "offsetting total"
(Page 2)
Legislation:
Corporations Law of Western Australia, s 459G, s 459H
Result:
Application dismissed
Applicant to pay respondent's costs of application and reserved costs
Representation:
Counsel:
Plaintiff : Mr P Redding
Defendant : Mr J C Giles
Solicitors:
Plaintiff : Williams & Hughes
Defendant : Solomon Brothers
Case(s) referred to in judgment(s):
John Shearer Ltd v Gehl Co (1995) 18 ACSR 780
McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457
Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 All ER 883
Case(s) also cited:
Asian Century Holdings Inc v Fleuris Pty Ltd [2000] WASCA 59
Australian Securities & Investment Commission v Yandal Gold Pty Ltd (1999) 32 ACSR 317
BP Refinery (Westernport) v Shire of Hastings (1977) 180 CLR 266
Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) ACSR 37
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981) 149 CLR 337
Edge Technology Pty Ltd v Lite-on Technology Corporation [2000] NSWSC 471; (2000) 34 ACSR 301
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101
(Page 3)
Integra Public Safety Pty Ltd v Tess Lawrence Minicomp Services Pty Ltd (1996) 19 ACSR 523
Jesseron Holdings Pty Ltd v Middle East Trading Consultants (No 2) Pty Ltd (1994) 13 ACSR 787
Jones v Dunkel (1959) 101 CLR 298
Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1992) 11 ACSR 362
Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425
Paratoo Pty Ltd v Frizzell, unreported; SCt of WA; Library No 970612; 21 October 1997
Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd [1999] WASCA 217; (1999) 21 WAR 250
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 147 ALR 444
The Commonwealth v Verwayen (1990) 170 CLR 394
Wallace v Baulkham Hills Smash Repairs Pty Ltd (No 2), unreported; SCt of NSW (Young J); 21 August 1995
(Page 4)
1 MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. The statutory demand was served on 17 May 2000. It was supported by an affidavit of Peter David Wachmer sworn the same day. A copy of the statutory demand and Wachmer's affidavit appear as Annexure "JSF1" to an affidavit of James Stuart Forsyth sworn 7 June 2000 and filed in support of this application. The amount specified in the statutory demand is $60,376.
2 The relevant facts can be summarised in the following way. The applicant is engaged in the business of subsea services. It provides services for diving, robotic tooling, deep sea inspections and other marine work. It appears that most of the work undertaken by the applicant is for large oil and gas companies. In mid November 1999 the applicant submitted a tender for a rock bolting contract for Apache Energy at Varanus Island, just off the coast at Dampier. Earlier that same month, the applicant had been dealing with the respondent in relation to a drilling contract off the coast of Albany on the State's southern coast. As a consequence of these dealings and further discussions which took place between officers of the applicant and the respondent, the applicant became aware that the respondent had access to a barge and crane which might be suitable for the Apache Energy contract. The applicant says that one of its officers, a John Rossier, approached the respondent's officer, one Rob Forward, to discuss the suitability of the barge and crane for the Apache Energy contract. The applicant says that Rossier was advised by Forward that both the barge and the crane would be suitable. This assurance was repeated in one form or another in a number of subsequent discussions between Rossier and Forward when the details of the Apache Energy contract were discussed in more detail. Apart from these discussions, there was a series of facsimiles directed by the respondent to the applicant dealing mainly with the rates of hire for the barge and the crane. These facsimiles are to be found as Annexures "JSF4" and "5" to Forsyth's affidavit.
3 Eventually, the applicant won the Apache Energy contract. It did so on the basis that it would use the barge and crane supplied by the respondent. An agreement to hire the barge and crane was reached by the applicant and the respondent and is evidence by a document described as a "Purchase Order" dated 8 December 1999 and to be found as Annexure "PDW1" to Wachmer's affidavit.
4 It is the applicant's case that it was a term of the hire agreement, either express or implied, that the barge and crane would be reasonably fit for the purpose for which they were intended. The respondent says that
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- there was no such term in the hire agreement. Rather, it says, that under the Petroleum (Submerged Lands) Act 1982 it was incumbent upon the applicant to obtain from the Department of Transport ("DOT") the appropriate certification. The respondent supplied the necessary data to the applicant to allow application for certification to be made. Thereafter, it was up to the applicant to do all things necessary to ensure that the barge and the crane could be used as intended. The applicant says that it gave no warranties and made no representations as to the suitability of the barge and the crane. It was not in a position to do so. It points to the fact that the applicant consulted a naval architect as part of the DOT certification process. This, it says, is evidence that there was no contractual term as to suitability, as alleged by the applicant. In opposition to the application, the respondent filed an affidavit of Robert James Forward sworn 30 June 2000. This affidavit sets out the respondent's position in some detail.
5 It is alleged by the applicant that the barge and crane could not be used in the rock bolting operation. This claim is not disputed by the defendant. What is at issue between the parties is the nature of the contractual arrangement between them. The applicant says that, given that the barge and crane were not suitable for the purpose for which they were hired and that as it was a term of the contract that they would be suitable, the respondent is in breach. The respondent, for its part, says that there was no term as to suitability, that if the barge and crane were not suitable for the rock bolting operation that was entirely the applicant's fault. The respondent says that it is entitled to be paid the hire due under the contract and the amount claimed in the statutory demand is the amount incurred by the applicant pursuant to the contract. It is relevant to note that at no stage did the applicant allege that the respondent's failure to provide a barge and crane fit for the rock bolting operation amounted to a repudiation of the contract. In other words, the contract is now at an end, but it has come to an end not because of any actions of the parties, but because the subject matter of the contract has been exhausted.
6 Under s 459H(1) of the Corporations Law a statutory demand will be set aside if there is a genuine dispute as to the existence or amount of the debt to which the demand relates or if an applicant has an off-setting claim. In my view, there is no doubt in this case that there is a genuine dispute between the parties as to the terms of the contract for the hire of the barge and the crane. This dispute cannot be resolved on affidavit. It must await a full trial of the action. But reaching that conclusion does not dispose of the application. For the statutory demand to be set aside, the applicant must establish that there is a genuine dispute "about the
(Page 6)
- existence or amount of the debt", not just as to the terms of any contractual relationship between the parties. Therein lies the real problem raised by this case.
7 The contract between the applicant and the respondent has been fully executed. The respondent has supplied the crane and the barge and it says it is entitled to be paid the agreed rate of hire. The applicant says that the respondent is in breach of the contract. Accepting that to be the case, what then follows as a consequence? The answer is, the applicant has a claim for damages for breach of contract. But that is an off-setting claim under s 459H(1)(b) and does not raise a genuine dispute about the existence or amount of the debt to which the demand relates. When I put this to counsel for the applicant during the course of his submissions, he suggested that the applicant would have a claim for total failure of consideration. It is worthy of note that no such submission was put by counsel in his written submissions filed prior to the hearing of this summons. Nonetheless, this argument requires further attention.
8 The question of what amounts to a total failure of consideration was considered by the House of Lords in Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 All ER 883. Lord Goff put the position as follows (at 896):
"I start from the position that failure of consideration does not depend upon the question whether the promisee has or has not received anything under the contract like, for example, the property in the ships being built under contracts 1 and 2 in the present case. Indeed, if that were so, in cases in which the promisor undertakes to do work or render services which confer no direct benefit on the promisee, for example where he undertakes to paint the promisee's daughter's house, no consideration would ever be furnished for the promisee's payment. In truth, the test is not whether the promisee has received a specific benefit, but rather whether the promisor has performed any part of the contractual duties in respect of which the payment is due. The present case cannot, therefore, be approached by asking the simple question whether the property in the vessel or any part of it has passed to the buyers. That test would be apposite if the contract in question was a contract for the sale of goods (or indeed a contract for the sale of land) simpliciter, under which the consideration for the price would be the passing of the property in the goods (or land). However before that test can be regarded as appropriate, the anterior
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- question has to be asked: is the contract in question simply a contract for the sale of a ship? or is it rather a contract under which the design and construction of the vessel formed part of the yard's contractual duties, as well as the duty to transfer the finished object to the buyers? If it is the latter, the design and construction of the vessel form part of the consideration for which the price is to be paid, and the fact that the contract has been brought to an end before the property in the vessel or any other part of it has passed to the buyers does not prevent the yard from asserting that there has been no total failure of consideration in respect of an instalment of the price which has been paid before the contract was terminated, or that an instalment which has then accrued due could not, if paid, be recoverable on that ground."
9 This statement of principle is consistent with what was said by the High Court in the well-known case of McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457. Dixon J put the position as follows (at 476 - 477):
"When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected. When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made. But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined as far as it is executory only and the party in default is liable for damages for its breach."
10 As I have said above, this contract has been fully executed. But that does not affect the statement of principle as set out by Dixon J. The respondent is entitled to be paid the agreed rate of hire for the barge and the crane. The applicant does not dispute that the amount claimed is in
(Page 8)
- line with the terms of the agreement. Equally, if the applicant is able to establish the respondent has breached the terms of the hire agreement then the applicant will have a claim for damages. In a suit between the parties the applicant's damages claim may well exceed the respondent's claim for hire. But none of that amounts to the applicant being able to establish that the respondent is not entitled to payment for hire of the barge and crane because there has been a total failure of consideration.
11 That being the case, I am not satisfied that, on the evidence advanced by the applicant, it has established that there is a genuine dispute as to the existence or amount of the debt to which the demand relates.
12 That then leaves the question of whether the applicant has established that it has an offsetting claim equal to or greater than the amount claimed in the demand. Under s 459H(2) there is a formula for calculating what is termed the "substantiated amount" of any offsetting claim. This substantiated amount is calculated by deducting from the "admitted total" the "offsetting total". In this case it is clear that the admitted total is the amount specified in the statutory demand - $60,376. It is then a question of working out what, if anything, is the offsetting total.
13 The only evidence from the applicant in relation to this matter is to be found in par 4 of Forsyth's affidavit sworn 19 July 2000. The paragraph is in the following terms:
"4. Covus has suffered loss as a result of the transaction entered into with Coastal. I have produced a cost summary for the job to be performed at Varanus Island. The total costs incurred by Covus was $182,737.93 (including the amount the subject of the Defendant's Statutory Demand). Now produced and shown to me and marked with the letters 'JSF18' is a true copy of the said costs summary."
14 "JFS18" appears to be a running account which is described in the document as "Summary of Costs Incurred". It has a series of entries which are titled "Description" and which, presumably, relate to the nature of the cost incurred. For instance, item 1 is described as "Mob of QH1 Spread". There is no explanation as to what this entry might mean and how it relates to the costs incurred. The document then shows that there was a Unit Cost of $8,646, a "3rd Party total" of the same amount and in a further column headed "Covus Cost" there is no charge shown. The
(Page 9)
- figure of $182,737.93 referred to by Forsyth in his affidavit is a figure which is the total of the column headed "3rd Party total". Having attempted to decipher this document in the light of what is said by Forsyth in his affidavit, I am left unsure as to precisely how the figure claimed for damages is calculated and I could not be satisfied that the applicant has a claim for the amount specified by Forsyth. I say this in light of the fact that I accept, given the uncertain contractual position, that the applicant may have an offsetting claim. The difficulty is to calculate what that claim might be.
15 In John Shearer Ltd v Gehl Co (1995) 18 ACSR 780 the Full Court of the Federal Court (von Doussa, Hill and Tamberlin JJ) considered the circumstances in which a court could conclude an applicant had raised a genuine offsetting claim. Quoting from the headnote, their Honours concluded:
"Claims which assert damage in the most general of terms, where damages of the requisite amount are not self-evidence, are not 'genuine' and thus fall outside the category of off-setting claims."
16 In my view, the structure of s 459H is such that a party seeking to rely on the section must, by evidence, establish with some degree of precision what it says is the offsetting total. That is not to say that the evidence must go so far as would be necessary at trial to establish a party's claim for damages. To adopt that approach would be at odds with the summary nature of the statutory demand procedure. However, what the applicant must establish is that there is a genuine dispute or, put another way, a serious question to be tried, in relation to the amount claimed as the offsetting total. If the applicant does not meet this standard then there is nothing to deduct from the admitted total and the admitted total must equal the substantiated amount.
17 Nothing in s 459H(2) indicates what test is to be applied in calculating the offsetting total. The reference to "genuine dispute" is to be found in s 459H(1)(a). There is no obvious reason why this phrase should be transferred over to the expression "offsetting total". The requirement is the court be "satisfied" as to the offsetting claim. Given the nature of the process under s 459H and the fact that the court is not as part of that process to make any final determination of the rights and liabilities of the parties, it is reasonable to suppose that an applicant must do no more than show its claim in relation to the offsetting total is genuine or that there is a serious question to be tried.
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18 In the circumstances, I am not satisfied that there is either a genuine dispute as to the existence or the amount of the debt or an offsetting claim. I would therefore dismiss the application. The applicant should pay the respondent's costs of the application, including the reserved costs.
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