Curnow Group Pty Ltd v High Mannor Pty Ltd - [2017] WASC 343

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: CURNOW GROUP PTY LTD -v- HIGH MANNOR PTY LTD [2017] WASC 343

CORAM: MASTER SANDERSON

HEARD: 16 NOVEMBER 2017

DELIVERED : 28 NOVEMBER 2017

FILE NO/S: COR 221 of 2017

BETWEEN: CURNOW GROUP PTY LTD
Plaintiff
AND
HIGH MANNOR PTY LTD
Defendant

Catchwords:

Corporations law - Application to set aside statutory demand - Turns on own facts

Legislation:

Construction Contracts Act 2004 (WA)
Corporations Act 2001 (Cth)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff: Mr C D Clifton
Defendant: Mr C S Williams

Solicitors:

Plaintiff: Your Legal HQ
Defendant: Solomon Brothers

Case(s) referred to in judgment(s):

Denet Pty Ltd v Global Marketing Group International Pty Ltd [2001] NSWSC 904
Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452
McDermott Projects Pty Ltd v Chadwell Pty Ltd [2002] 2 Qd R 363
Re Scahill & Co Pty Ltd [2016] NSWSC 566
Wildtown Holdings Pty Ltd v Rural Traders Co Ltd [2002] WASCA 196

MASTER SANDERSON: This was the plaintiff's application to set aside a statutory demand. At the commencement of the hearing the plaintiff sought leave to rely upon an affidavit of Cameron David Clifton sworn 8 November 2017. The purpose of the affidavit was to attach a complete copy of the demand. In support of the application to set aside the demand the plaintiff relied upon an affidavit of Rohan Wilathgamuwa Stephens sworn 13 September 2017. Appearing as attachment RWS 1 was, according to the index to the affidavit, a 'copy statutory demand and affidavit in support'. In fact the demand was incomplete. The second page which importantly contained the date of the demand was missing.
What the additional page of the demand made clear is that it was dated 22 August 2017. The affidavit in support of the demand was dated 21 August 2017 - that is to say it was sworn the day before the demand was issued. The defendant conceded that if the affidavit of Mr Clifton was admitted into evidence the result would be the demand would be set aside. That is the effect of the Full Court decision in Wildtown Holdings Pty Ltd v Rural Traders Co Ltd [2002] WASCA 196. The defendant submitted the affidavit of Mr Clifton should not be admitted because it raised a point which was not taken in the original affidavit. Counsel maintained this was an application of the so‑called 'Graywinter principle'. Counsel did concede that had the complete demand been attached to Mr Stephens' affidavit then the plaintiff would have been entitled to have the demand set aside even if in the body of the affidavit Mr Stephens had not referred to the date difference between the swearing of the affidavit and the date of the demand.
In Wildtown Holdings Templeman J (with whom Steytler & Miller JJ agreed) held that an affidavit executed two days before a statutory demand did not satisfy the requirements of s 459E(3) and provided some other reason for the demand being set aside. This decision has been followed by a number of first instance decisions. There is one dissenting view and that is the decision of Holmes J in McDermott Projects Pty Ltd v Chadwell Pty Ltd [2002] 2 Qd R 363. That decision has been the subject of adverse comment by a number of authors: see Assaf F, Statutory Demands and Winding Up in Insolvency (2nd ed) [7.54]. In any event there is no doubt Wildtown is binding in this jurisdiction. It was not submitted the fact there was only a days difference between the swearing of the affidavit and the date of the demand made any difference to the outcome.
The Graywinter principle is that an affidavit supporting the application to set aside the demand must disclose 'material facts' showing that there was a dispute between the parties and/or other reasons to set aside the demand and a ground not disclosed by the supporting affidavit cannot be relied upon by the applicant: see Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 70 FCR 452, 459. That decision has been followed on countless occasions both at first instance and on appeal. But generally it arises in circumstances where after filing the initial affidavit in support of the application the plaintiff becomes aware of other circumstances separate and distinct from matters raised in the original affidavit that might justify the demand being set aside. The position is somewhat different here. The defect was always apparent if a complete copy of the demand had been annexed to the founding affidavit.
An affidavit in support of an application to set aside a statutory demand should have annexed to it a copy of the statutory demand. After all a court cannot set aside something which has not been proved to exist. Neither the Corporations Act 2001 (Cth) nor the Corporations Rules specify what must be in the affidavit in support of the application. There have been a number of cases where the affidavit in support has not annexed a copy of the demand and that has not proved fatal to the application. For instance, in Denet Pty Ltd v Global Marketing Group International Pty Ltd [2001] NSWSC 904 the plaintiff company attempted to set aside a statutory demand on the basis that there was a genuine dispute about the existence or the amount of the debt and there was an offsetting claim against the defendant. In its affidavit in support of its application the plaintiff omitted to annex the statutory demand. The affidavit in support did however annex and refer to 'amended tax invoices the subject of the statutory demand'. McLaughlin M said the nature of the debt in question must be established to enable the court to see whether the debt is disputed. The learned master held that the description of the tax invoices as being 'the subject of the statutory demand' was sufficient. So it cannot be said that the failure to annex the complete demand is fatal to the plaintiff's case. To be fair to the defendant the matter was not put on that basis.
In support of his position counsel for the defendant relied upon the decision of Black J in Re Scahill & Co Pty Ltd [2016] NSWSC 566. His Honour put the position as follows:
Mr Sleight, who appears for Armacor, developed an attack upon Ms Mirziani’s initial affidavit in support of the application to set aside the Demand, by reference to Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund [1996] FCA 822; (1996) 70 FCR 452 at 459, where Sundberg J noted that the requirement of s 459G(3), that there be an affidavit supporting the application to set aside a statutory demand, required more that a mere assertion of a dispute or a statement that the debt was disputed, and required that an affidavit disclosed 'material facts' showing there was a genuine dispute between the parties. The balance of authority establishes that this requirement raises a fact-specific inquiry as to whether the affidavit in support of the application to set aside the demand in fact supports the application, and the initial affidavit will sufficiently raise a dispute if that ground is raised by a necessary or reasonably available inference, including from documents exhibited to that affidavit: Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143; (2007) 214 FLR 393; Hopetoun Kembla Investments Pty Ltd v JPR Legal Pty Ltd [2011] NSWSC 1343; (2011) 87 ACSR 1 at [36]; Infratel Networks Pty Ltd v Gundry’s Telco and Rigging Pty Ltd above at [27]ff [19].
The plaintiff here falls foul of the Graywinter principle. As I have indicated if a complete copy of the demand had been attached to Mr Stephens' affidavit, and no mention of the point had been made in the body of the affidavit, it would still have been open to the plaintiff in its submissions to point to the flaw in the demand. But by the plaintiff's omission of the relevant page of the demand the defendant was not put on notice as to the discrepancy between the dates. That being so, it is now too late to raise the point. Accordingly I would refuse leave to rely on Mr Clifton's affidavit.
The plaintiff maintained the demand should still be set aside on the basis it had an offsetting claim greater than or equal to the amount of the demand. The demand was for $220,000. In the affidavit accompanying the statutory demand the debt was said to have arisen in the following circumstances:
4.Pursuant to an Acknowledgement of Debt and Agreement to Repay Debt (Acknowledgement) dated 7 July 2017, between the Creditor and the Debtor Company, the Debtor Company covenanted and agreed that it:
(a)was, as a the Start Date (as defined in the Acknowledgment) indebted to the Creditor in the amount of $275,455.60, being the Principal Amount (as defined in the Acknowledgement); and
(b)would pay or repay the Principal Amount together with accrued but unpaid interest in instalments in the amounts and on the dates specified in the Acknowledgement.
I attach a copy of the Acknowledgement marked Annexure A.
5.The Debtor Company paid the first instalment (of $55,455.59) under the Acknowledgement on or about 7 July 2017, but has not made any further payments in the amounts and at the times specified in the Acknowledgement, or at all.
The relevant facts can be summarised as follows. On or about 21 April 2016 as a result of a successful tender submission the plaintiff was awarded a contract by the City of Mandurah for the construction of earthworks and landscaping works at the Mandurah Eastern Foreshore. The tender submitted by the plaintiff took into account costings for a part of the work by the defendant who was one of the plaintiff's contractors on the job. Those costings were provided to the plaintiff by the defendant in the course of the tender process. A dispute arose between the plaintiff and the defendant as to the $275,455.60 the defendant says it was owed under the subcontract. The matter went to adjudication and the adjudicator found in favour of the defendant.
It is clear from the correspondence annexed to the various affidavits the plaintiff was not in a position to pay the amount of the adjudication. After discussions between the parties the plaintiff and the defendant entered into what is described as Deed of Acknowledgement of Debt which was dated 7 July 2017. A copy of that Deed appears as attachment ISG 5 to the affidavit of Ian Shaun Gibbs affirmed 22 September 2017 and filed in opposition to the application. Under the heading 'Recitals' there appears the following:
The Debtor is indebted to the Creditor in, as at the Start Date, the amount of the Principal Sum and all costs and expenses payable under this document and on the terms and conditions in this document.
By cl 2 of the Deed the plaintiff acknowledges that it is indebted to the defendant in the amount specified. It is the defendant's contention that is the end of the matter. It was submitted the acknowledgement of the debt was an actual admission no counterclaim or setoff existed which could subsequently be made in relation to the subcontract. Effectively it was submitted any rights the plaintiff may have had merged in the agreement and the agreement represented the position between the parties.
It was the plaintiff's contention that it in fact had a setoff which existed independent of the Deed. It pointed to the fact that an adjudication under the Construction Contracts Act 2004 (WA) does not prevent a party who makes a claim and is unsuccessful pursuing the issue in the courts. It was submitted the Deed did nothing more than set out a repayment schedule and it dealt only with the amount of the adjudication. It was not determinative of the issues between the parties.
For present purposes I am prepared to accept the evidence of Mr Stephens shows the plaintiff had an arguable counterclaim against the defendant. I need not go through Mr Stephens' evidence in any detail. It was put to the adjudicator and was rejected. The adjudication appears as attachment IGS 1 to the affidavit of Mr Gibbs. That sets out the position of each of the parties and explains why the plaintiff's arguments were rejected. However, I accept counsel for the plaintiff's submission the fact of the adjudication is not finally determinative of the rights between the parties and cannot be regarded as shutting the plaintiff out for all purposes in maintaining a counterclaim or setoff.
Nonetheless I am satisfied the defendant's submissions in relation to the Deed ought be accepted. The Deed is very carefully drawn and sets out the respective positions of the parties. The plaintiff acknowledges an indebtedness. There are no rights reserved to the plaintiff to take action in relation to any counterclaim or setoff. It is simply required to pay the outstanding debt on certain terms and conditions. It cannot now resile from that position by arguing that there remains in existence some form of counterclaim.
There are two further points which can be made both of which undermine the plaintiff's position. First, by the Deed it agreed to make payment of an amount to the defendant. To now walk away from that agreement and say it does not mean what it says undermines the contract entered into by the parties. Second, what the Deed actually does is require the plaintiff to make payment of the amount the adjudicator appointed under the Construction Contracts Act determined was owing to the defendant. The requirement under the Construction Contract Act is that once a determination is made a party must make payment of the amount of the adjudication. Indeed, the adjudication can be entered as a judgment in a court of competent jurisdiction. Here, because of the impecuniosity of the plaintiff the defendant extended the plaintiff the opportunity to make repayment in instalments. The agreement forestalled the registration of the judgment which would have provided an unanswerable ground for winding up. To now suggest the plaintiff should have the statutory demand set aside on the basis it claimed penalises the defendant for granting the indulgence it did. That would be an improbable consequence of the arrangement entered into between the parties.
The plaintiff's application to set aside the statutory demand will be dismissed. The plaintiff should pay the costs of the application including the reserved costs.