Custombuilt Homes Pty Ltd v Dowell - [2005] WASC 25

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: CUSTOMBUILT HOMES PTY LTD -v- DOWELL & ANOR [2005] WASC 25

CORAM: MASTER SANDERSON

HEARD: 18 FEBRUARY 2005

DELIVERED : 8 MARCH 2005

FILE NO/S: COR 375 of 2004

BETWEEN: CUSTOMBUILT HOMES PTY LTD (ACN 009 393 051)
Plaintiff
AND
ASHLEY KEVIN DOWELL
SHOANA LEANNE DOWELL
Defendants

Catchwords:

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

Legislation:

Corporations Act, s 459G, s 459H

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff: Mr M L Bennett
Defendants: Mr G M Abbott

Solicitors:

Plaintiff: Bennett & Co
Defendants: Biddulph & Turley

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

Custombuilt Homes Pty Ltd v Dowell & Anor [2003] WADC 121

Case(s) also cited:

Boles v Esanda Finance Corporation Ltd (1989) 18 NSWLR 666
Brewer v Brewer (1953) 88 CLR 1
Dowell v Custom Built Homes Pty Ltd [2004] WASCA 171
Edge Technology Pty Ltd v Lite-On Technology Corp (2000) 34 ACSR 301
Gibbs & Anor v Kinna [1999] 2 VR 19
Graywinter Properties Pty Ltd v Gas & Fuel Corp Superannuation Fund (1996) 21 ACSR 581
John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250
MacLeay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743
Minero Pty Ltd v Redero Pty Ltd (1998), unreported; NSCSC; BC9803546
O'Brien v Tanning Research Laboratories (1990) 169 CLR 322
Ogilvie v Adams [1981] VR 1041
Pezzano v Hoffman & Anor [1999] WASC 231
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
POS Media Online Ltd v VB Family Pty Ltd [2003] NSWSC 147
Process Machinery Aust Pty Ltd v ACN 057 260 590 Pty Ltd [2002] NSWSC 45
Triantafillidis v National Australia Bank Ltd & Anor (1995) V Conv R 54-536
Young v Queensland Trustees Ltd (1956) 99 CLR 560

MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. The demand appears as annexure "GG1" to the affidavit of Gary Green ("Mr Green"), sworn 17 November 2004 and filed in support of the application. The sum demanded is $19,217.38. The debt is described as being taxed costs allowed on a Supreme Court appeal. There is no dispute as to the existence or the amount of the debt. The plaintiff says that it has an offsetting claim greater than the amount of the debt and that demand ought be set aside under s 459H(1)(b) of the Corporations Act.
The facts giving rise to the demand can be summarised in this way. The applicant conducts the business of home building, renovations, extentions and small residential unit developments. Prior to 1 July 1996 the directors and shareholders of the plaintiff were Gary and Gloria Green. They each held 40,000 shares in the plaintiff. The first‑named defendant was a contractor who undertook certain work for the plaintiff. After some negotiation the defendants acquired an interest in, and became directors of, the plaintiff.
During 1999 the defendants decided to leave the business. Negotiations took place. These negotiations were directed at what needed to be done to bring about this separation. Unhappily, the negotiations did not settle all issues to the satisfaction of the parties. The present plaintiff issued proceedings in the District Court. The matter came on for trial before her Honour Judge French on 10 March 2003. On 30 May 2003 her Honour delivered judgment: Custombuilt Homes Pty Ltd v Dowell & Anor [2003] WADC 121. Her Honour summarises the dispute between the parties in the following way:
"2 … It was agreed that on the defendants leaving they would "take" and operate the business of Hills Siteworks including the earthmoving machinery and the Greens would retain the business of Custombuilt Homes operated through the plaintiff company. In addition, the defendants would relinquish any interest in a separate entity called Araluen Building Design Services Pty Ltd. This company had been established to operate a single project in relation to a housing estate in Araluen with Gary Green and the first defendant as the two shareholders and directors. These arrangements were put in place on or about 30 June 1999. The defendants resigned as directors and transferred their shares from the plaintiff and Araluen Building Design Services. The first defendant ceased to work at the plaintiff's premises and started to operate the business of Hills Siteworks independently. Machinery that required a motor vehicle licence was transferred into his name. A notice was compiled and sent to the plaintiff's clients advising of the separation in terms that reflected the arrangement that the Greens retained the home building business operated by the plaintiff with the Dowells independently operating the business conducted under the name of Hills Siteworks. Clients were directed to Gary Green for Custombuilt Homes matters and to Ashley Dowell for Hills Siteworks matters.
3The plaintiff claims that these arrangements were part of a contract entered into between the plaintiff and the defendants that included the above arrangements and also provided for a financial reckoning arrived at by balancing out respective financial responsibilities to the plaintiff and arising out of the defendants' decision to terminate the joint working relationship they had had with the Greens and go their separate ways. It is claimed that the defendants have breached that contract and moneys due and owing under the terms of that contract have not been paid.
4The defendants claim that there was not a concluded contract but a long period of negotiation between the parties as to the final balance that has not resulted in any agreement. There is no dispute that no moneys have been paid either by the defendants or by the plaintiff or the Greens at any stage."
It is important to note that in the District Court proceedings the present plaintiff's claim was formulated in a very direct fashion. It was said that a concluded agreement had been reached, that moneys were due and owing under that agreement and that they had not been paid. This fact - the direct nature of the plaintiff's claim in the District Court proceedings - is central to the resolution of this present application.
In the event, her Honour found that there was no agreement as pleaded by the plaintiffs. She did find that there was a collateral agreement pursuant to which the defendants owed the plaintiff $65,000. It is not relevant for present purposes to detail how her Honour reached that conclusion. It is to be noted that in the final paragraph of her judgment, her Honour said this:
"52 … The plaintiff has chosen to make its case solely on the alleged contract which I have found not to have been concluded between the parties with the exception of the purchase of the earthmoving equipment. The plaintiff could have sought alternative remedies, namely the repayment of the purchase price of the equipment and the amount of the outstanding loan account with the defendants irrespective of any contract between the parties. Although that may have elicited a defence by way of set-off or counterclaim it would have been a more straightforward way to proceed. There will be judgment for the plaintiff in the sum of $65,000."
From this decision the present defendants appealed. They argued that her Honour fell into error in concluding the plaintiff was entitled to judgment for $65,000 pursuant to the collateral contract. The present plaintiff cross‑appealed. It argued that her Honour fell into error in not concluding that there was any settled agreement between the parties. The present defendants' appeal succeeded. The Full Court ordered that the present plaintiff's claim be dismissed. The cross‑appeal was dismissed. The present plaintiff was ordered to pay the present defendants' costs of the appeal. That is how the amount the subject of the statutory demand arises.
I will deal more fully with the reasons of the Full Court and its implications below. However, it is convenient at this point to set out what the plaintiff says are the offsetting claims. This can be done by referring to par 7 of Mr Green's affidavit. It is in the following terms:
"7.The Applicant has 3 offsetting claims against the Respondents comprising:
7.1a claim for a full account of the benefits derived from certain items of plant and equipment taken by the Respondents from the Applicant to the value of $85,633 (including interest at the rate of 6% from 1 July 1999 to 14 October 2004):
7.2a claim for the balance of an outstanding loan between Mr Dowell and the Applicant totalling $34,193 (including interest at the taxation statutory benchmark rate from 1 July 1996 to 14 October 2004);
7.3a claim for the balance of outstanding loan advances made by the Applicant to the Respondents totalling $50,086 (including interest at the rate of 6% from 1 July 1999 to 14 October 2004)."
At the hearing of this application it was not disputed by the defendants that these amounts were owing by the defendants to the plaintiff. I should hasten to say that no concession was made on this point - counsel indicated that if a claim by the plaintiffs were to proceed elsewhere, it would be argued that debits and credits needed to be taken into account which would reduce or perhaps eliminate any indebtedness of the defendants to the plaintiff. It was counsel's submission that whatever the merits of the offsetting claims, no action was available to the plaintiff to enforce these claims. That, it was said, was the consequence of the way in which the plaintiff had proceeded in the District Court.
In particular, counsel for the defendants relied upon the judgment of EM Heenan J in the Full Court. After determining that the appeal should succeed and the judgment of the trial Judge should be set aside, his Honour continued (at par 107):
"107 Nevertheless, the rights of the parties cannot simply be left on the basis that the appeal is allowed and the judgment in favour of the respondent in the District Court is set aside. If that were to be the extent of the order granted by this Court it would mean that, the final judgment between these parties had determined that there was no legally enforceable obligation upon the appellants to pay to the respondent the value of the benefit obtained by acquiring the machinery and equipment, or for the other benefits which they had taken under the overall tripartite agreement alleged, not merely by the respondent, but by the appellants themselves in their own pleading. A judgment dismissing the respondent's claim against the appellants would also result in the extinguishment of any claim based in unjust enrichment which the respondent may have against the appellants for the value of the machinery or for the other benefits derived under the arrangement. This is because the judgment dismissing the respondent's claim would give rise to a res judicata which would be a bar not only to the further pursuit of the cause of action relied upon by the respondent in the District Court, but to any other causes of action which the respondent could have asserted in those proceedings - Henderson v Henderson (1843) 3 Hare 100 [67 ER 313]; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 and Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 per Deane, Toohey and Gaudron JJ at 508 - 509. Such a result would leave the appellants in possession of the machinery and equipment, and the ownership of the business of Hills Siteworks, without any legal obligation to pay for them - a quite unacceptable situation."
His Honour then went on to say that he would craft orders which allowed the present plaintiff to proceed in the District Court for claims that they may have against the present defendants consequent upon the dissolution of their business relationship. But no such orders were made. The other two members of the Court were of the view that the appropriate order was simply that the appeal be allowed, the judgment in the Court below be set aside and the present plaintiff's claim be dismissed. Wheeler J put the position as follows (at [56] ‑ [57]):
"56I should add that I have considered with care the draft reasons for decision of EM Heenan J. The orders proposed by his Honour appear to me to be a very attractive solution to the difficulty presented by this case. I do not take issue with any of the matters of law discussed by his Honour. However, I am unable to join in those orders because, in my view, the parties have made a deliberate decision to confine the issues in the trial and the appeal in such a way as to preclude the Court from dealing with those wider matters considered by his Honour.
57During the course of the trial, her Honour noted that "despite what the pleading is saying" an issue which kept arising was "what the appropriate entitlements ought to be either in terms of an agreement between the parties or in some kind of objective estimate" (AB p 299). Her Honour appreciated, in my respectful view correctly, that that issue did not represent the way in which the parties were seeking to run their case. Neither party took issue with her Honour's suggestion that that matter was, strictly, irrelevant."
In my view, it is an inevitable conclusion from the decision of the Full Court that it is not now open to the plaintiff to attempt to enforce any of the matters which it says are offsetting claims. On behalf of the plaintiff, it was submitted that such a conclusion was manifestly unjust and should not be countenanced. It seems to me to be, however, a natural consequence of the way in which the plaintiff's claim was run. It was further submitted that what was said by EM Heenan J in his judgment was obiter and it was open to the plaintiff to issue proceedings and deal with the res judicata issue in due course. With respect, it seems to me that the Full Court carefully considered the question and effectively shut out the plaintiff from agitating these claims. In my view, no other conclusion can be reached. Once what was said by EM Heenan J is put against what was said by Wheeler J, that is the end of the matter. Unfortunate though it may be, the plaintiff simply has nowhere to go.
For these reasons I am satisfied that the plaintiff does not have an offsetting claim and there is no basis upon which the statutory demand should be set aside. I would dismiss this application. The plaintiff ought pay the defendants' costs of the application, including the reserved costs.