Heron Park Pty Ltd v Bob Garner Excavations Pty Ltd
[2008] VSC 248
•9 July 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
No. 9590 of 2007
IN THE MATTER OF: HERON PARK PTY LTD (ACN 050 133 894)
| HERON PARK PTY LTD | Plaintiff |
| v | |
| BOB GARNER EXCAVATIONS PTY LTD | Defendant |
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JUDGE: | ROBSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 May 2008 | |
DATE OF JUDGMENT: | 9 July 2008 | |
CASE MAY BE CITED AS: | Re Heron Park Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 248 | |
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CORPORATIONS – Application to set aside creditor’s statutory demand claiming debts for excavating work on a subdivision property development – Whether contract for work was with the plaintiff, the owner of the land, rather than the works contractor – Whether letter from owner admitting liability for the debts necessarily constituted admission that the owner was the contracting party – Whether the plaintiff had established a genuine dispute – Appeal from order of the Master dismissing application to set aside statutory notice – Appeal allowed – Statutory notice to set aside under s 459H - Sections 459G and H of the Corporations Act (Cth).
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TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Eng Mee Yong v Letchumanan [1980] AC 331
South Australia v Wall (1980) 24 SASR 189
Mibor Investments [1994] 2 VR 290; (1993) 11 ACSR 362; (1993) 11 ACLC 1062
Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601
Spencer Constructions Pty Ltd v GAM Aldridge Pty Ltd (1997) 76 FCR 452
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J L Evans | Comlaw |
| For the Defendant | Mr M Galvin | Barretts Lawyers |
TABLE OF CONTENTS
INTRODUCTION AND SUMMARY............................................................................................ 1
THE AFFIDAVITS............................................................................................................................. 1
THE EVIDENCE................................................................................................................................. 2
THE MASTER’S FINDINGS........................................................................................................... 9
RELEVANT LEGAL PRINCIPLES............................................................................................... 10
THE PARTIES’ ARGUMENTS..................................................................................................... 14
HIS HONOUR:
INTRODUCTION AND SUMMARY
I have before me an appeal against the order of a Master made 26 February 2008 dismissing an application by Heron Park Pty Ltd (“Heron”) to set aside a statutory demand made by Bob Garner Excavations Pty Ltd (“Bob Garner”). The statutory demand is dated 1 November 2007 and alleges that Heron owes Bob Garner the amount of $59,097.90.[1] The affidavit accompanying the statutory demand was sworn by Robert Garner, a director of Bob Garner.[2] Mr Garner deposes that he is the sole director of Bob Garner and that Heron owes Bob Garner $59,097.90 for excavation works carried out in 2007 pursuant to an agreement between Bob Garner and Heron with respect to a project at East Street, Kilmore, Victoria. Bob Garner said the debt is a balance comprised of amounts claimed in invoices totalling $69,097.90 less $10,000 which has been paid. For the reasons expressed below I am satisfied that there is a genuine dispute between Heron and Bob Garner about the existence of the alleged agreement between Bob Garner and Heron pursuant to which the excavation works were carried out. I allow the appeal and order that the statutory demand of 1 November 2007 be set aside.
[1]Exhibit DR1
[2]Exhibit DR1
THE AFFIDAVITS
The application to set aside the statutory demand was supported by the following affidavits:
Affidavit of Daryl Reynolds sworn 19 November 2007 (“Mr Reynolds’ first affidavit”);
Affidavit of Daryl Reynolds sworn 19 February 2008 (“Mr Reynolds’ second affidavit”).
In opposition to the application, Heron relied upon the following affidavits:
Affidavit of Robert John Garner sworn 27 January 2008 (“Mr Garner’s first affidavit”);
Affidavit of Robert John Garner sworn 19 February 2008 (Mr Garner’s second affidavit”);
Affidavit of John Ferguson Barrett sworn 12 December 2007 (“Mr Barrett’s affidavit”).
THE EVIDENCE
The events in issue involve three people: Robert Garner (“Mr Garner”), Daryl Reynolds (“Mr Reynolds”) and Norm Thompson (“Mr Thompson”).
Mr Garner is the sole director of Bob Garner, which carries on business as an excavator. Mr Reynolds is a director of Heron and has been a director since 3 October 1990.[3] Mr Thompson is a director of Glowell Pty Ltd (“Glowell”).
[3]Exhibit JFB2
The alleged debt was incurred in respect of excavation works carried out at a subdivision project at East Street, Kilmore, Victoria. The owners and developers of the land being subdivided were Heron as to fourteen of eighteen equal undivided shares, Daryl Reynolds Pty Ltd as to one share, Cartledge Consulting Pty Ltd as to two shares and Daryl Heath Campbell and Anne Elizabeth Campbell as to the remaining two shares.[4] The subdivision works were being carried out by Glowell under the supervision and control of Mr Thompson.
[4]Exhibit JFB 1
Mr Garner deposes that on or about 23 April 2007, Mr Thompson telephoned Mr Garner and asked him to attend the Kilmore site.[5] Mr Thompson told Mr Garner that the land was in the course of being subdivided and Mr Garner was asked to quote on an hourly rate for the use of his excavator with labour and the like. Mr Garner deposes that during these discussions Mr Thompson did not indicate to him that he was the owner of the property. It appears Mr Garner was aware that Mr Thompson was not one of the owners but was the works contractor as, although Mr Thompson did not mention the name of the development company, he did state that “one of the developers” was a Rodney Clapp. Rodney Clapp is a director of Heron.[6]
[5]Mr Garner’s first affidavit [3]
[6]Mr Garner’s first affidavit [3]
Mr Garner deposes that he commenced work on 1 May 2007. He says that his company’s first invoice for $7,060 plus $706 GST was raised on 7 May 2007. He says that at the direction of Mr Thompson, the invoice was addressed to Glowell. Mr Garner says that he handed this invoice to Mr Thompson and it was subsequently paid by a cheque drawn on the account of Heron with the National Australia Bank at Moonee Ponds. Subsequently, Mr Garner corrected the reference to the National Australia Bank and said the account was with Westpac Banking Corporation at Moonee Ponds.[7] Nothing turns on this mistake.
[7]Mr Garner’s second affidavit
Mr Garner says that a second invoice was raised on 11 May 2007, again to Glowell Pty Ltd, for $5,992.80. Mr Garner says that this was paid on 24 May 2007 and again by cheque drawn on the account of Heron with Westpac.[8]
[8]Mr Garner’s first affidavit [4]
Mr Garner says a third invoice for $5,131.50 was raised on 18 March 2007 [this date is clearly incorrect], again addressed to Glowell, and as with the first two invoices was handed to Mr Thompson. Mr Garner says that $5,000 of this invoice was paid on 15 June 2007, again by Heron, leaving a shortfall of $131.50.[9] Mr Garner deposes that further invoices numbered 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14 were issued from and on 23 May 2007 to 6 August 2007, and these totalled $90,866.20.[10] These were all addressed to Glowell and presumably handed or delivered to Mr Thompson.
[9]Mr Garner’s first affidavit [4]
[10]Mr Garner’s first affidavit [4]
Mr Garner deposes that Bob Garner received six separate payments on account of these invoices. The first payment was for $7,666 drawn on the cheque account of Heron. He says that likewise a second cheque for $5,992.80 and a third cheque for $5,000 was drawn on the account of Heron. The fourth cheque for $3,000 was drawn on the account of Glowell, whereas the fifth cheque for $10,000 and sixth cheque for $20,000 were drawn on the account of Heron. He says that the total payments to date (27 January 2008) were $51,752.80, leaving a shortfall of $39,107.40.[11]
[11]Mr Garner’s first affidavit [5]
As a result of the outstanding fees due to Bob Garner, Bob Garner ceased work at the site. On the basis of the current outstanding debt being approximately $40,000 and the two payments of $30,000 made after 21 August 2007, I assume the debt at that stage was approximately $70,000. Fees were also due to another subcontractor, Julius Plant Hire. A meeting was called at the site, presumably to address the outstanding fees and Bob Garner ceasing work, between Mr Reynolds, Mr Thompson, Mr Garner and Mr Ken Beck representing Julius Plant Hire. There are two versions of this meeting. For the purposes of this application only I will accept the version of Mr Reynolds where it conflicts with that of Mr Garner.
Mr Reynolds says that on 20 August 2007 he attended the site at East Street, Kilmore.[12] This was the first time he had met Bob Garner or anybody from Julius Plant Hire. He was not aware that this meeting was for the purpose of discussing outstanding accounts. He had not had any conversations with either Mr Garner or his company or Julius Plant Hire prior to this date. Mr Reynolds had no idea of the outstanding amounts owed to them by Glowell and felt somewhat embarrassed and ambushed.
[12]Mr Reynolds’ second affidavit [7] – [8]
At that meeting, neither Mr Thompson nor Mr Garner or the representative of Julius Plant Hire made him aware of how much was outstanding. He did not do much of the talking at that meeting. The conversations were really between Mr Thompson and Mr Garner in his presence. Mr Garner did not talk about exact amounts outstanding. He said words to the effect that he had concerns about his accounts which were outstanding and had not been paid. Ken Beck from Julius Plant Hire said that he was not terribly concerned about Mr Thompson’s outstanding accounts, but said to Mr Reynolds that Mr Garner was short of cash and needed to be paid something. To the best of his recollection, an amount was not discussed at the meeting.
Mr Thompson said that he was being held up and not able to get Mr Garner to complete work which he had agreed to do for him. Mr Reynolds asked Mr Garner if he would return to complete the work for Mr Thompson if he received some money from Mr Thompson. Mr Garner said that he would.
Mr Reynolds told Mr Garner and Mr Beck from Julius Plant Hire that Mr Thompson would be paid for the work he was doing as soon as settlements of the blocks that had been sold could be effected and that the faster the work was done, the faster Mr Thompson would be paid. He told the persons present at the meeting that Bob Garner was significantly over budget on the development and that he, Mr Reynolds, was keen to have the project completed promptly. Mr Garner then gave Mr Reynolds an address in Keilor where he was working the next day and Mr Reynolds agreed to meet him there with a cheque. Mr Reynolds does not recollect stating an amount that he would pay on behalf of Mr Thompson’s company. He wrote a cheque from his personal account for $10,000 to cover some of Mr Thompson’s accounts and met Mr Garner the following day at the site.
Mr Reynolds says that at the meeting, as a further assurance, Mr Garner asked Mr Reynolds for a letter to say that Mr Thompson had contracted with Bob Garner. Mr Reynolds said he had no difficulty in doing so. Mr Beck from Julius Plant Hire told Mr Reynolds specifically that he did not have a problem extending further credit to Mr Thompson, but asked Mr Reynolds if he could phone his business partner to explain the situation with the land settlements. Mr Reynolds did this from his car on his way back to Melbourne following the meeting on 20 August 2007.
Upon his return to Melbourne, Mr Reynolds wrote a letter[13] as requested by Mr Garner and addressed it to Heron dated 21 August 2007.
[13]Exhibit RJG2 to Mr Garner’s first affidavit.
Mr Garner’s version differs somewhat to that of Mr Reynolds’. Mr Garner says that on 18 August 2007, he attended a meeting onsite at Kilmore with Mr Thompson and Mr Reynolds. He said that Mr Ken Beck representing Julius Plant Hire, another creditor, also attended. He says that Mr Reynolds introduced himself to Mr Garner as the main director of Heron, which was the developer of the land. Mr Garner says he expressed his grave concern at the non-payment of invoices and he demanded payment of $30,000 on account of all outstanding invoices together with a letter from Heron agreeing to be liable for all payments of invoices.[14] As indicated above, Mr Reynolds denies any sum was mentioned. He also says the letter was to confirm Bob Garner had contracted with Mr Thompson, rather than with Heron.
[14]Mr Garner’s first affidavit [6]
Mr Garner says that on 22 August 2007, Mr Reynolds arrived on his jobsite at Kilmore and handed him a cheque for $10,000 drawn on the account of Heron, together with a letter accepting full responsibility and liability to pay all outstanding invoices. Mr Reynolds says Mr Garner gave him an address in Keilor (not Kilmore) where he met Mr Garner. The letter is under the letterhead of Heron Park Pty Ltd, 26 Union Road, Ascot Vale, Victoria, 3032 and is signed by Daryl Reynolds, director. The letter says as follows:
Dear Bob
Re: East Street Kilmore
Thank you for the work you have done at our project in Kilmore through Norm Thompson.
We appreciate your patience and confirm that we are responsible for the debts which Norm is incurring on our behalf. We anticipate settlement on the first two properties by the end of September or earlier if the plan of subdivision is registered prior to that date.
We will do everything possible to settle the bulk of our account as soon as possible however we can confirm that all accounts will definitely be paid as soon as the first settlement takes place.
Thanks again
Yours faithfully
Heron Park Pty Ltd[15]
[15]Mr Garner’s first affidavit [7], Exhibit RJG2
On 22 August 2007, Mr Garner instructed his solicitor to make a formal demand for the recovery of moneys owing to Bob Garner by Heron. As a consequence a letter of demand was sent to Heron dated 24 August 2007.[16]
[16]Mr Garner’s first affidavit [8]
On 23 August 2007, John Ferguson Barrett (“Mr Barrett”), solicitor for Mr Garner and Bob Garner, telephoned Mr Reynolds and introduced himself as the solicitor acting for Mr Garner and Bob Garner. Mr Barrett deposes that Mr Reynolds acknowledged that Bob Garner had carried out the work on the development site at Kilmore and acknowledged that:
We are responsible for the debts which Norm (Thompson) is incurring on our behalf.
Mr Barrett deposes that Mr Reynolds further stated that the shareholders in Heron were primarily superannuation funds and this, in turn, created limitations on the company’s ability to borrow funds, and this is why the accounts of contractors, including Bob Garner, had not been paid.[17]
[17]Mr Barrett’s second affidavit [5]
As mentioned above, by letter dated 24 August 2007, Mr Barrett wrote to Mr Reynolds at Heron, inter alia, noting Mr Reynolds’ acknowledgement that “We are responsible for the debts which Norm (Thompson) is incurring on our behalf”.[18] He informed Mr Reynolds that no further work would be carried out at the site until such time as satisfactory arrangements were in place (including payment of another $30,000).
[18]Exhibit JFB3
By letter dated 28 August 2007, Mr Barrett again wrote to Mr Reynolds of Heron making formal demand of Heron for payment of $59,155.35.[19]
[19]Exhibit JFB4
By letter dated 31 August 2007, Mr Reynolds on behalf of Heron wrote to Mr Barrett responding to Mr Barrett’s letters of 24 and 28 August. Mr Reynolds said that he was unable to reconcile the statements and tax invoices enclosed with the letters, as he did not have sufficient information and parts of the fax documents were unreadable. He asked for clear copies of all invoices to Glowell, statements, delivery dockets and any other pertinent documents on all outstanding accounts for Julius Plant Hire and Bob Garner to enable him to reconcile the outstanding amount.[20]
[20]Exhibit JFB5
By letter dated 3 September 2007, Mr Barrett responded to Mr Reynolds’ letter of 31 August 2007 and enclosed the originals of his letters of 24 and 28 August with copies of outstanding invoices from Bob Garner and Julius Plant Hire.[21]
[21]Exhibit JFB6
On 4 September 2007, Mr Reynolds on behalf of Heron wrote to Mr Barrett acknowledging receipt of Mr Barrett’s letter of 3 September enclosing readable copies of some statements from Julius Plant Hire and Bob Garner. Mr Reynolds said in his letter as follows:
This is insufficient information to enable us to reconcile any outstanding accounts your clients have with Glowell Pty Ltd for the work they have carried out and as mentioned in our previous letter we require copies of all invoices, delivery dockets et cetera to assist us completing this. We require proof that these invoices are valid charges. We also have no proof of your client’s trading terms and conditions with Glowell or any agreement they have made.[22]
[22]Exhibit JFB7
As mentioned above, on 1 November 2007, the statutory demand was issued with the accompanying affidavit of Mr Garner.[23]
[23]Exhibit DR1
On 22 November 2007, the originating process seeking to set aside the notice of statutory demand was issued. On 11 December 2007, Bob Garner received a letter from Glowell enclosing a cheque for $20,000 payable to Bob Garner drawn on the account of Heron, reducing the sum outstanding to $39,107.40.[24]
[24]Mr Garner’s first affidavit [9]
Mr Reynolds deposes that Heron does not owe Bob Garner any moneys for excavation work. He says that Heron did not, and no-one on behalf of Heron entered into any agreement with Bob Garner. He deposes that Heron did not request Bob Garner to perform any excavation works. He further deposes that Bob Garner, upon not being paid by Glowell, created invoices and reissued them to Heron, expecting Heron to pay Bob Garner. He says this was never agreed to or accepted.[25]
[25]Mr Reynolds’ first affidavit [3]
Mr Reynolds deposes that neither he nor any person on behalf of Heron had dealings with Mr Garner which gave rise to the debt claimed.[26] Mr Reynolds sets out in exhibits to his affidavit the correspondence between Heron’s and Bob Garner’s solicitors concerning the purported debt between 14 September 2007 and 17 September 2007.[27] Mr Reynolds says the correspondence clearly discloses that Heron at no time accepted the purported debt owed to Bob Garner.
[26]Mr Reynolds’ first affidavit [5]
[27]Exhibits DR3, DR4, DR5, DR6 and DR7
THE MASTER’S FINDINGS
The Master found that the letter of 21 August 2007 contained admissions by Heron which were not ambiguous in the factual context in which they were made. The Master said as follows:
The Plaintiff forwarded a letter to the Defendant stating ‘”We appreciate your patience and confirm that we are responsible for the debts upon which Norm (Mr Thompson) is incurring on our behalf.” The Defendant’s solicitor has also sworn that he telephoned the director of the Plaintiff and introduced himself as the solicitor for the Defendant and the Plaintiff’s director acknowledged that “We are responsible for the debts which Norm (Thompson) is incurring on our behalf.”’
The Plaintiff has not responded to that affidavit. The admissions made by the Plaintiff are not ambiguous in the factual context in which they are made.
The onus is on the Plaintiff to demonstrate a genuine dispute. Evidence was given that the cheques were drawn in favour of the Defendant at the request of Mr Thompson. No affidavit was obtained by the Plaintiff from Mr Thompson to confirm this.
The letter which contains the admissions is said by the Plaintiff to have been written after a meeting on 20 August 2007, at which a director of the Defendant was asked if he could return to complete the work which he had agreed to. The Plaintiff’s director swore that he was keen to have the project completed. This meeting does not explain the unambiguous letter written to the Defendant.
The Plaintiff’s director has sworn that the Plaintiff had no agents and could not see how the Defendant’s director had dealings with the purported agent of the Plaintiff which gave raise to the debt. That statement is contradicted by a letter forwarded by the director and the admission made to the Plaintiff’s solicitor.
Under r 77.05(7) of Chapter 1 of the Supreme Court Rules the appeal is by re-hearing de novo of the application to the Master. Nevertheless, I have taken into account the reasons of the Master.
RELEVANT LEGAL PRINCIPLES
Section 459G of the Corporations Act provides:
(1) A company may apply to the Court for an order setting aside a statutory demand served on the company.
(2) An application may only be made within 21 days after the demand is so served.
(3) An application is made in accordance with this section only if, within those 21 days:
(a) an affidavit supporting the application is filed with the Court; and
(b) a copy of the application, and a copy of the supporting affidavit, are served on the person who served the demand on the company.
Section 459H of the Corporations Act provides:
(1) This section applies where, on an application under section 459G, the Court is satisfied of either or both of the following:
(a) that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b) that the company has an offsetting claim.
(2) The Court must calculate the substantiated amount of the demand in accordance with the formula:
Admitted total – Offsetting total
where:
admitted total means:
(a) the admitted amount of the debt; or
(b) the total of the respective admitted amounts of the debts; as the case requires, to which the demand relates.
offsetting total means:
(a) if the Court is satisfied that the company has only one offsetting claim – the amount of that claim; or
(b) if the Court is satisfied that the company has 2 or more offsetting claim – the total of the amounts of those claims; or
(c) otherwise – a nil amount.
(3) If the substantiated amount is less than the statutory minimum, the Court must, by order, set aside the demand.
(4) If the substantiated amount is at least as great as the statutory minimum, the Court may make an order:
(a) varying the demand as specified in the order; and
(b) declaring the demand to have had effect, as so varied, as from when the demand was served on the company.
(5) In this section:
admitted amount, in relation to a debt, means:
(a) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the existence of the debt – a nil amount; or
(b) if the Court is satisfied that there is a genuine dispute between the company and the respondent about the amount of the debt – so much of that amount as the Court is satisfied is not the subject of such a dispute; or
(c) otherwise – the amount of the debt.
offsetting claim means a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates).
respondent means the person who served the demand on the company.
(6) This section has effect subject to section 459J.
In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd[28] Dodds-Streeton JA (with whom Neave and Kellam JJA concurred) said:[29]
The Court, in the context of an application to set aside a statutory demand, must determine whether there is a genuine dispute about the existence or amount of the debt or whether the company has a genuine off-setting claim.
No in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction. Moreover, the determination of the ‘ultimate question’ of the existence of the debt should not be compromised.
[28][2008] VSCA 70
[29]Ibid [56] – [57]
Dodds-Streeton JA further said[30]:
As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something ‘between mere assertion and the proof that would be necessary in a court of law’ may suffice. A selective focus on a part of the formulation in South Australia v Wall[31], divorced from its overall context, may obscure the flexibility of judicial approach appropriate in the present context if it suggests that the company must formally or comprehensively evidence the basis of its dispute or off-setting claim. The legislation requires something less.
[30]Ibid [71]
[31](1980) 24 SASR 189
Mr Evans who appeared as counsel for Heron placed reliance on Eyota Pty Ltd v Hanave Pty Ltd[32] where McClelland CJ of the Supreme Court of New South Wales said:
[32](1994) 12 ACSR 785 at 787-788
It is, however, necessary to consider the meaning of the expression “genuine dispute” where it occurs in s 450H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the “serious question to be tried” criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit “however equivocal, lacking precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be” not having “sufficient prima facie plausibility to merit further investigation as to [its] truth” (cf Eng Mee Yong v Letchumanan [1980] AC 331 at 341), or “a patently feeble legal argument or an assertion of facts unsupported by evidence”: cf South Australia v Wall (1980) 24 SASR 189 at 194.
But if it does mean that, except in such an extreme case, a court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Div 3 of Pt 5.4 of the Corporations Law, and to the terms of Div 3:
These matters, taken in combination, suggest that at least in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute.
In Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 at 605 Thomas J said:
There is little doubt that Div 3 … prescribes a formula that requires the court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the court will examine the merits or settle the dispute. The specified limits of the court’s examination are the ascertainment of whether there is a “genuine dispute” and whether there is a “genuine claim”.
It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it), the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.
The essential task is relatively simple – to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).
I respectfully agree with those statements.
In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd[33], Dodds-Streeton JA (with whom Neave and Kellam JJA concurred) cited this passage with apparent approval[34] and noted it was also cited by the Full Federal Court in Spencer Constructions Pty Ltd v GAM Aldridge Pty Ltd[35]:
[33][2008] VSCA 70
[34]Ibid [64]
[35](1997) 76 FCR 452
The observations of McClelland CJ are also particularly relevant in assessing the weight to be given to the conflicting evidence of Mr Reynolds and Mr Garner in this case.
THE PARTIES’ ARGUMENTS
Heron claims there is a genuine dispute whether Heron is the contracting party with Bob Garner. Heron submits that evidence prior to the letter of 21 August confirms or at least supports this dispute. Heron points out that until 21 August 2007, Bob Garner looked to Glowell/Thompson for payment. Heron submits that Bob Garner relies entirely on the letter of 21 August 2007 to establish that there is no genuine dispute that Heron was the contracting party. Heron emphasises that Bob Garner relies on the letter as an admission of that fact but does not rely on the letter as establishing a separate contractual obligation to pay the outstanding fees.
Mr Evans of counsel for Heron summarised the evidence which he said created a genuine dispute as follows. Mr Evans submits that the letter of 21 August 2007 needs to be read in the context in which it was written.[36] He referred to the relationships between the parties where Heron was the main developer of the subdivision and Mr Thompson (through Glowell) was carrying out the subdivision works. Prior to 20 August 2007, all dealings involving Bob Garner and the project were with Mr Thompson of Glowell and not with any other person. He emphasised Mr Thompson is not and has never been a director of Heron. At Mr Thompson’s request, all of the invoices for the works which were performed by Bob Garner were addressed to Glowell, the company carrying out the subdivision works, and not to Heron. A payment of $3,000 for part payment of one of the invoices issued to Glowell was made by Glowell, not by Heron. Mr Evans asks: why would Glowell make a payment if Heron was the contracting party? Heron also relies on the fact that on or about 11 December, Glowell paid $20,000 with a cheque drawn on Heron.
[36]Transcript 16 line 21-23
Until the letter of 21 August, the evidence suggests that Glowell (or Thompson) was the contracting party. The only evidence pointing to Heron was its part ownership; of the land and that it made most of the payments on the invoices addressed to Glowell. The fact that it made the payments is consistent with it being the owner/developer but not necessarily the contracting party with Bob Garner. Mr Evans submitted that the payment by Glowell is of great significance as it had no apparent interest in the land.
Mr Evans referred to the uncontradicted affidavit of Mr Reynolds of 19 February 2008 about the meeting of 20 August 2007. I have set out that evidence above. According to Mr Reynolds, there was nothing said to indicate that Heron had contracted with Bob Garner. On the contrary, the discussion focused on Mr Thompson’s inability to pay and Bob Garner not completing the work.
At the meeting, Mr Garner complained about outstanding accounts rendered to Glowell. Mr Thompson says he was being held up as Mr Garner had ceased work. Mr Garner agreed to resume work if he received some money from Mr Thompson. Mr Reynolds told Mr Garner that Norm Thompson would be paid for the work he was doing as soon as they (the developers) could effect settlement of the blocks and that the faster the work was done, the faster Mr Thompson would be paid. In that context, Mr Garner asked for a letter from Mr Reynolds to say that Mr Thompson had contracted with Bob Garner.
The letter of 21 August 2007 states that “we (Heron) are responsible for the debts which Norm is incurring on our (Heron’s) behalf”. Mr Evans submits that admission is ambiguous. He draws a distinction between an admission that Heron is responsible for debts incurred by Mr Thompson and an admission that Heron was the party with whom Bob Garner contracted in April 2007. Heron submits the letter does not necessarily involve an admission the contract of April 2007 is with Heron. Rather, the letter confirms who is ultimately footing the bill.
Heron submits the reference to “our account” in the third paragraph does not necessarily relate to an account between Heron and Garner arising out of a contract entered into in April 2007. Heron submits that in any event it does not necessarily admit the contract of April 2007 was between Heron and Bob Garner.
Mr Evans also submits that the letter could be referring to future debts, rather than existing debts owed to Bob Garner. I reject that submission.
Mr Evans relies on Eyota Pty Ltd v Hanave Pty Ltd[37] and the passage cited above. Adopting the words of McClelland CJ, Mr Evans submits there is a plausible contention which requires further investigation as to the identity of these contracting parties. Mr Evans submits that the letter must do more than acknowledge an acceptance of liability. It needs to be sufficiently clear and powerful admission as to the identity of the contracting party back in April with Bob Garner. Mr Evans emphasised that Bob Garner’s case, that there is no genuine dispute, relies wholly on the letter.
[37](1994) 12 ACSR 785 at 787
Mr Galvin, counsel for Bob Garner, relies on the fact that the letter referred to work already done. It does not relate to work to be done in the future. I accept that submission. He says the words “through Norm Thompson” in the first paragraph are not consistent with any other notion than an agency between Mr Thompson and Heron. Mr Galvin submits that there is only one reasonable interpretation open concerning the letter and that is, through Mr Thompson, Heron had engaged Bob Garner to do work which it had not been paid for and it was acknowledging its liability. He placed emphasis on Heron confirming that it was responsible for the debts “which Norm is incurring on our behalf.”
Mr Galvin may be right in his argument that the contract was with Heron. As the authorities establish, my function is not to determine the merits or resolve the dispute. My function is to ascertain whether the plaintiff has raised a genuine dispute to Bob Garner’s claim that Heron contracted with Bob Garner in April 2007 to carry out the excavating work. As Dodds-Streeton JA said in TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd[38]
The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion and sufficient factual particularity to exclude the merely fanciful or futile.[39]
[38][2008] VSCA 70
[39][2008] VSCA 70 [71]
In my opinion, Heron has identified a genuine dispute with Bob Garner in relation to the debt. Until the letter of 21 August, Mr Garner believed it was contracting with Glowell or Thompson. Mr Garner asked Mr Reynolds as representative of the owner to write a letter confirming the contract was between Bob Garner and Mr Thompson.
Bob Garner alleges that, contrary to its prior belief, it received a letter in which Heron admitted it was the contracting party with Bob Garner. Until that letter was written, the evidence strongly suggested Heron was not the contracting party. Although the letter may be construed as Heron accepting liability for the moneys owed to Garner, it does not necessarily admit that in April when the contract was made, Heron was the contracting party. The affidavit in support of the statutory notice relies on excavation works carried out pursuant to an agreement between Heron and Garner. No reliance is placed on the letter constituting an agreement between Heron and Bob Garner. The letter is only relied on as an admission of the existence of a prior contract.
The dispute is supported by objective evidence. It is prima facie plausible. Usually, a subcontractor’s contract is with the head contractor rather than the owner. The defence is not fanciful or futile. It is not a spurious defence, bluster or mere assertion.
I, therefore, allow the appeal and set aside the order of the Master of 26 February 2008, and order that the statutory demand of 1 November 2007 served on Heron Park Pty Ltd be set aside. I order that the defendant pay the plaintiff’s costs, including any reserved costs, of and incidental to the proceedings.
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