Easy Stay Mining Accommodation Pty Ltd v Grounded Construction Group Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Easy Stay Mining Accommodation Pty Ltd v Grounded Construction Group Pty Ltd [2018] FCA 519

File number: WAD 377 of 2017
Judge: COLVIN J
Date of judgment: 18 April 2018
Catchwords: CORPORATIONS - Application to set aside statutory demand - whether genuine dispute as to the existence of debt for remuneration for construction work under contract - character of determination by adjudicator under Construction Contracts Act 2004 (WA) - pending application for judicial review - whether 'some other reason' for setting aside the statutory demand
Legislation:

Construction Contracts Act 2004 (WA) ss 30, 38, 39(1), 40, 43, 45(1), 45(4)

Corporations Act 2001 (Cth) ss 459G(3), 459H, 459J, 459L

Cases cited:

Cartwright Hill Pty Ltd v Stargames Corporation Pty Ltd [2003] NSWSC 703

Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5

Citation Resources Ltd v IBT Holdings Pty Ltd [2016] FCA 1265

Durkan v Sandbank Holdings Pty Ltd [2008] WASCA 249

Easy Stay Mining Accommodation Pty Ltd v Faigen [2017] WASC 266

Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419

Expressway Spares Pty Ltd v CTK Engineering Pty Ltd [2000] NSWSC 1200

Kellogg Brown & Root Pty Ltd v Doric Contractors Pty Ltd [2014] WASC 206

MNWA Pty Ltd v Deputy Commissioner of Taxation [2016] FCAFC 154; (2016) 250 FCR 381

Samsung C&T Corporation v Duro Felguera Australia Pty Ltd [2018] WASCA 27
Date of hearing: 11 April 2018
Registry: Western Australia
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 44
Counsel for the Applicant: Mr JP Doyle
Solicitor for the Applicant: Doyles Construction Lawyers
Counsel for the Respondent: Mr JJ Leslie
Solicitor for the Respondent: Zafra Legal

ORDERS

WAD 377 of 2017
BETWEEN:

EASY STAY MINING ACCOMODATION PTY LTD (ACN 616 663 640)

Applicant
AND:

GROUNDED CONSTRUCTION GROUP PTY LTD (ACN 166 112 429)

Respondent

JUDGE:

COLVIN J

DATE OF ORDER:

18 APRIL 2018

THE COURT ORDERS THAT:

1.The statutory demand dated 30 June 2017 served on the applicant by the respondent be set aside.

2.The respondent pay the applicant's costs excluding the costs of the affidavit of Ms Caroline Mallon dated 10 April 2018 and any other costs relating to the issue of the need to prove the statutory demand, such costs to be assessed if not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

COLVIN J:

  1. In 2017, Grounded Construction Group Pty Ltd (GCG) undertook work on the construction of a mining camp at Mount Morgans near Laverton in Western Australia.  The work was undertaken for Easy Stay Mining Accommodation Pty Ltd.  Easy Stay had a contract with Dacian Gold to construct the camp.  Work by GCG commenced in February 2017.

  2. In June 2017, GCG left the site where the mining camp was being constructed after being requested by Easy Stay to leave.  Some 17 invoices were issued by GCG…

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Details
Case
[2018] FCA 519
Decision Date

CaseChat Overview and Summary

Easy Stay Mining Accommodation Pty Ltd filed an application against Grounded Construction Group Pty Ltd seeking to set aside a statutory demand made under s 459D of the Corporations Act 2001 (Cth). The dispute centred on the validity of a statutory demand for payment of an alleged debt for remuneration for construction work under a contract. The matter was heard in the Federal Circuit Court of Australia, where the court needed to determine if there was a genuine dispute about the existence of the debt and if there were any other reasons to set aside the statutory demand.

The court examined whether the statutory demand could be set aside due to a genuine dispute over the existence of the debt, which hinged on the terms of the contract and the adjudicator's determination under the Construction Contracts Act 2004 (WA). Additionally, the court considered if the statutory demand should be set aside for some other reason, given that Grounded Construction Group Pty Ltd intended to invoke the adjudication procedure under the Construction Contracts Act 2004 (WA) for a significant portion of the claim. The court found that the statutory demand might be set aside on the basis of an abuse of process, as it was issued when Grounded Construction Group Pty Ltd intended to use the adjudication procedure.

The Federal Circuit Court of Australia concluded that the statutory demand should be set aside. The court ruled that Easy Stay Mining Accommodation Pty Ltd, having been successful in its application, was entitled to its costs, except for the costs related to the late filing of the statutory demand and the proof of the statutory demand, which should have been addressed in the initial affidavit. The court's orders included setting aside the statutory demand and requiring Grounded Construction Group Pty Ltd to pay Easy Stay Mining Accommodation Pty Ltd's costs, excluding certain specified costs.

Orders

Orders of the court

1. The statutory demand dated 30 June 2017 served on the applicant by the respondent be set aside.

2. The respondent pay the applicant's costs excluding the costs of the affidavit of Ms Caroline Mallon dated 10 April 2018 and any other costs relating to the issue of the need to prove the statutory demand, such costs to be assessed if not agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

Finally, a party seeking to set aside a statutory demand is not entitled to rely on any ground which was not raised in the affidavit filed within the 21 day limit for such an application specified in s 459G(3): Energy Equity Corporation Ltd v Sinedie Pty Ltd [2001] WASCA 419 at [29] and MNWA Pty Ltd v Deputy Commissioner of Taxation [2016] FCAFC 154; (2016) 250 FCR 381 at [93]-[97].AFFIDAVIT EVIDENCE Easy Stay filed an affidavit of Mr Stephen Laverick in support of the application. Mr Laverick is a director of Easy Stay. He deposed to the terms of a conversation that Mr Laverick said he had in February 2017 with a director of GCG, Mr Paul Natoli, concerning work at the mining camp as follows:Natoli met with me at the Worsley Village, which is two hours sought of Perth to discuss his request for more work including at Mt Morgan. We had a discussion to the following effect:Natoli:'I have no work on at the moment, can you keep us going?'Me:'Work is tight in the industry as you know. We may be able to help but there is no money in the job and the management by you of resources and costs would have to be very tight to bring the project in at bare minimum cost.'Natoli:'We have built camps before and we have plenty of good men that can operate with top efficiency and reduce costs.'Me:'The rates have to be at cost and I must approve of any commercial arrangements and I will approve the invoices and the work. You can progress matters with my staff but I will be the only person authorized to commit the company.'(by this I made clear that the works and costs would be subject to close personal scrutiny to ensure that the costs were tightly controlled and I would be the only person to enter into any arrangement committing the company and would approve any payment. This reflected my standard approach to contracting and I had insisted on this arrangement with Dacian.)Natoli:'ok, I understand, I have built camps before and have a crack team working for me.'Me:'We will agree a percentage around 10%, what will that cover? It will need to cover your time, your accounts team and your head office costs.'Natoli:'Ok.'(I ignore the words in parenthesis which are a comment about a matter which is in issue on this application rather than evidence). Mr Laverick's affidavit also set out matters said to give rise to issues as to the reasonableness of the cost being charged to Easy Stay and the benefit that has been delivered to Easy Stay being matters relevant to a claim in quantum meruit. Mr Natoli provided an affidavit in response. In the affidavit he said nothing about the conversation deposed to by Mr Laverick. He deposed that on 22 February 2017, Easy Stay and GCG entered into a construction contract for the construction of the mining camp for Dacian Gold at Mount Morgans and produced a document that he described as 'a copy of the signed schedule of rates contract' (Document). The Document was dated 22 February 2017. It was headed 'Construction Schedule of Rates'. It was in the form of a letter addressed to Mr Aaron Liang and described as 'Proposal For: ESMACC' (the expression ESMACC appears to be an abbreviation for Easy Stay Mining Accommodation Pty Ltd). The Document commenced:Grounded Construction Group are pleased to submit our budget submission for your consideration. Our proposal is based on specifications as provided by ESMACC for the installation of Dacian Gold village. Please see below for our costs breakdown and inclusion/exclusion list for your review and acceptance.

Decision

Reasons for decision

In the above circumstances, it is not necessary to consider whether, on the facts I have found, the statutory demand might be set aside on the further basis that it was an abuse of process to issue the demand at a time when it was evident that GCG intended to invoke the adjudication procedure under the CCA in respect of a major part of the claim the subject of the statutory demand.CONCLUSION AND ORDERS For the above reasons, there should be an order that the statutory demand dated 30 June 2017 served on Easy Stay by GCG be set aside. Subject to one matter, Easy Stay, having been successful, is entitled to its costs. I have mentioned the late affidavit filed by Easy Stay providing the statutory demand and other matters. The proof of the statutory demand should have been addressed in the affidavit filed in support of the application. I will exclude those costs from the costs order.

Ratio Decidendi

Legal Principle Established

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