J Hutchinson Pty Ltd v Contractors Inc Pty Ltd
[1995] FCA 645
•23 AUGUST 1995
CATCHWORDS
CORPORATIONS LAW - Application to set aside statutory demand under s.459G of the Corporations Law - whether a "genuine dispute" between the company and the respondent about existence or amount of a debt to which demand related - substantiated amount of the demand less than statutory minimum.
Corporations Law ss.459G, 459H
Chase Manhattan Bank Australia Ltd. v. OSCTY Pty. Ltd. (1995) 17 ACSR 128 - Foll.
J Hutchinson Pty Ltd v. Contractors Incorporated Pty Ltd
No. QG3010 of 1995
Cooper J., Brisbane, 23 August 1995
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
No. QG3010 of 1995
BETWEEN:
J HUTCHINSON PTY LTD
ACN 009 778 330
Applicant
AND:
CONTRACTORS INCORPORATED PTY LTD
ACN 010 908 059
Respondent
JUDGE MAKING ORDER: Cooper J.
WHERE MADE: Brisbane
DATE OF ORDER: 23 August 1995
MINUTES OF ORDER
THE COURT ORDERS THAT:
The statutory demand of Contractors Incorporated Pty. Limited dated 23 June 1995 in the sum of $54,280.89 against J. Hutchinson Pty. Ltd. be set aside.
The respondent pay the applicant's costs of and incidental to the application to be taxed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
No. QG3010 of 1995
BETWEEN:
J HUTCHINSON PTY LTD
ACN 009 778 330
Applicant
AND:
CONTRACTORS INCORPORATED PTY LTD
ACN 010 908 059
Respondent
CORAM: Cooper J.
PLACE: Brisbane
DATE: 23 August 1995
REASONS FOR JUDGMENT
Background and Claims
On or about 23 June 1995 Contractors Incorporated Pty. Ltd. trading as "Classic Plaster" (the respondent) served a creditor's statutory demand for payment of a debt pursuant to s.459E of the Corporations Law ("the Law") on J. Hutchinson Pty Ltd (the applicant). Although the proceedings were filed in the Supreme Court of Queensland, the applicant filed an application under s.459G of the Law to set aside the statutory demand.
The applicant and the respondent were parties to subcontracts for plaster work on residential developments known as "Diamond Sands" and "Sandringham". The
demand relates to monies alleged to be due under those subcontracts for work and labour and goods supplied.The "Diamond Sands" contract is a written schedule of rates contract dated 8 August 1994.
The work on the "Sandringham" project was originally being undertaken by another contractor. However it was taken over by the respondent under an oral agreement between the parties. The respondent alleges that it was an oral agreement to complete the subcontract works as a labour only subcontract at an agreed rate per hour. The applicant contends that the parties agreed that the oral contract would also include the relevant subcontract terms of the "Diamond Sands" contract which was then operating as between the parties.
The applicant seeks that the statutory demand be set aside under s.459G of the Law.
The relevant test for the purposes of s.459H of the Law has recently been re-stated by Lindgren J in Chase Manhattan Bank Australia Ltd. v. OSCTY Pty. Ltd. (1995) 17 ACSR 128 at 135-136 where his Honour conveniently collects a number of cases dealing with the matter :-
"The references in s 459H to the court's being `satisfied' that there is a `genuine' dispute, and `satisfied' that the company has a `genuine' claim against the person who served the demand on it, have been the subject of judicial consideration: see, for example, Mibor Investments Pty Ltd v. Commonwealth Bank of Australia (1993) 11 ACSR 362; [1994] 2 VR 290 (Vic/Hayne J) at 366-67; Re Morris Catering (Australia) Pty Ltd (1993)
11 ACSR 601 (Qld/Thomas J) at 605-606; Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 120 ALR 173; 12 ACSR 341 (FCA/Beazley J) (Scanhill) at 356-57; Kalamunda Meat Wholesalers Pty Ltd v Reg Russell & Sons Pty Ltd (1994) 51 FCR 446; 13 ACSR 525 (FCA/Hill J) at 526-27; Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 (FCA/Lockhart J); Hamilhall Pty Ltd (in liq) v A T Phillips Pty Ltd (1994) 15 ACSR 247 (FCA/Branson J); Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA (1994) 15 ACSR 347 (FCA/Lindgren J) (Rohalo). Their meanings have been illuminated by analogies found in applications for injunctions to restrain the commencement, advertisement or prosecution winding up of proceedings pre-dating the enactment of s 459G (Scanhill), and in the opposing of a notional application by the person who served the statutory demand for summary judgment against the company for the debt the subject of the demand (Rohalo). Consistently with these cases, I ask whether Oscty has satisfied me that there is a `serious question to be tried' or an `issue deserving a hearing' as to whether it has a claim against Chase."
It is not necessary to review the authorities to which his Honour refers. Consistent with the approach taken by Lindgren J, I apply the tests whether there is a serious question to be tried as to whether the respondent has a debt due in the amount claimed and whether the applicant has a serious off-setting claim which is deserving of a hearing.
The applicant has filed affidavit material to establish that save for the sum of $989.44 which is agreed is owing, the balance of the sum of $54,280.69 is the subject of a genuine dispute between the applicant and the respondent and that the applicant has an off-setting claim (s.459H(1)). In support of the application, the applicant relied principally on the affidavit material of David Newman, its project officer. Mr Newman was cross-examined on his two affidavits. The applicant further relied upon an affidavit of Alistair Savage of the applicant's solicitors. Mr Savage was not cross-examined.
The material relied upon by the respondent was contained in an affidavit of David Burgess, a director of the respondent.
The respondent contends that no genuine dispute has been shown in respect of the following items, the subject of the statutory demand :-
The "Diamond Sands" subcontract :-(a)Retention $ 5,238.64
(b)Unpaid Schedule of Rates items $19,759.70
(c)Back-charge for repainting work $ 7,680.00
(d)Items not in dispute $ 989.44
$33,667.78
The "Sandringham" subcontract :-
(a)Retention $ 2,176.50
TOTAL ON BOTH SUBCONTRACTS $35,844.28
The Retention Claims
The respondent submits that the terms of the written contract, having regard to certain written insertions and additions to the schedule thereto, limit the retention amount to a maximum sum of $8,750.00. The applicant contends that on their proper construction the words and figures indicate no more than a pre-estimate under a schedule of rates contract and that the actual retention is to be calculated as has occurred by reference to the actual, as opposed to the estimated or assumed, subcontract price. The respondent further contends that the "Sandringham" project, being an oral contract, did not include any provision for retention at all. The applicant in response contends that the incorporation of the applicable contract term of the written "Diamond Sands" contract had the effect of incorporating the relevant retention provisions into the "Sandringham"
subcontract.
Whatever the merits of the respective constructions contended for, all parties agreed that there was a meeting held on 20 July 1995 and it appears to have been a without prejudice attempt to resolve the matter. The applicants allege that the issue of retention money was resolved.
As to that meeting, Mr Newman deposed :-
"20. On 20 July 1995 at a meeting attended by myself, Paul Laird, Russell Dripps and Alistair Savage the Applicant made an agreement with Mr Burgess, on behalf of the Respondent, that the Respondent would provide to the Applicant a bank guarantee in the sum of $14,000.00 in exchange for the discharge of the retention moneys now held by the Applicant in respect of both the Diamond Sands and Sandringham contract. That agreement was made in the offices of Phillips Fox, Solicitors, on that day in the course of the meeting required under the contract to attempt to resolve the dispute. To date, despite no explanation being proffered, the bank guarantee has not been proffered. I was not aware from 20 July, until I read the Affidavit of Mr Burgess, that the Respondent contended that any of the retention moneys mentioned in the statutory demand were, in fact being pursued."
Mr Savage deposed :-
"10. On 20 July 1995, representatives on behalf of the Applicant and the Respondent met pursuant to clause 13 of the Contract as referred to in the Affidavit of David Newman sworn on 10 August 1995.
11. I attended that meeting on 20 July 1995 and was handed a document by the Respondent entitled `Summary of Unpaid Works'. Now shown to me and marked `AES1' is a true and correct copy of that document.
12. I refer to `AES1' and to the matter marked `Retention'. It is my clear understanding that the issue of the amount of the Retention was conceded by the Respondent at that meeting and the Applicant and the Respondent agreed that the amount of $14,000.00 would be paid to the Respondent in exchange for a bank guarantee. To date, I have not received a bank guarantee from the Respondent and, after conducting enquiries with
the Applicant, advise and verily believe that the Applicant has not been provided with a guarantee. The Applicant has therefore not paid the sum of $14,000.00 to the Respondent."
It was put to Mr Newman in cross-examination that at the end of the meeting on 20 July 1995 an offer was made by the applicant of "$20,000.00 all up" to settle the matter. Mr Newman agreed that such an offer was made and to date had not been responded to by the respondent. It was submitted by the respondent that whatever agreement there may have been in relation to the retention it was subsumed in the offer of $20,000.00 and the offer not having been accepted the agreement as to retention was not binding. It is impossible on the material before me to say whether the offer of $20,000.00 all up related to the retention and all other claims then being made which totalled $141,732.51 or simply to the balance (other than retention) of $127,743.88.
In my view, particularly as Mr Savage was not cross-examined and it was not sought to identify what the subject matter of the offer was, there is a genuine dispute as to whether the issue of retention has been compromised as alleged so that the sum of $14,000.00 is now payable against a bank guarantee in lieu of retention.
The Unpaid Schedule of Rates Items
It was put to Mr Newman that in April 1995 at a meeting at which he attended he conceded that the parties were only $600.00 apart on the schedule of rates items. It was further put that the respondent's then claim was approximately $22,000.00 whereafter payment of some $3,000.00 odd leaves the present claim of $19,759.70. Mr Newman did not agree.
The material shows that the sum calculated at 31 March 1995 by the applicant under the schedule of rates was $531,325.54 (Exhibit "JH3"). As I understand Mr Newman, the respondent's claim under the schedule of rates as at 31 March 1995 and as discussed at the meeting of 4 April 1995 was within $600.00 of the applicant's measurement in Exhibit "JH3" (see letter of 9 May 1995 to the respondent; Exhibit "JH8"). The respondent's measurement and claim of $551,067.44, according to Mr Newman, was first advanced on 13 June 1995 and communicated to Paul Laird of the applicant by fax dated 21 June 1995. The fax contained a schedule of rates measurement and where the claim was higher than the applicant's measurement, the claim was marked with a cross. Of the 104 items on the schedule only 16 did not involve an additional claim. By fax of 22 June 1995 the applicant objected that the items in the spreadsheet had been previously agreed. Importantly the following fax was sent by the respondent on 23 June 1995 :-
"In reply to your facsimile of June 22nd, we reget [sic] to advise that not all the variances between our Progress Claim of March 15 and the quantities measured by Hutchinson or briefly discussed with Mr David Newman on Tuesday, March 28th, 1995, were covered in detail. Only those items described on David's facsimiles of March 29, 30 and 31st were investigated by Hutchinson and our reply facsimile of April 4th related only to those items. Listed below are the [sic] some of the items not yet discussed, measured or agreed upon :
FURRING CHANNEL Units 13, 14, 18, 19, 25-29, 31-34, 42-43, 48-49, 50-52, 57-58, 60.
FYRECHEKUnit 31.
10mm CEILINGS Units 5-8, 10-11, 65, 70-71, 77, 82.
6mm WALLS Units 30, 71-72, 75-76, 88-93.
2x13mm CEILINGS Units 27-34, 43, 51-59, 66-69, 71-76, 78-81.
CORNICEUnits 5, 9, 60, 65, 70-72, 75-77, 82.
Further to our previous requests, could you please forward an updated copy of Hutchinsons `Diamond Sands - Classic Plaster Schedule of Rates' showing all of the agreed quanity [sic] amendments as detailed in our facsimile of April 4th, as the Hutchinson Schedule dated 31-Mar-95 has not been updated. We also request a copy of any other summarisation of the Newman/Ryan investigation that is not listed above."
In the light of the fax of 23 June 1995 it cannot credibly be argued that there is no dispute as to what was agreed at the meeting of 4 April 1995. The respondent by the fax of 23 June is contending that there are additional matters "not yet discussed measured or agreed upon".
Backcharge for Painting
The applicant contends that the respondent without instruction performed plaster patching work over areas which had been finally painted thereby necessitating repainting of the areas. The applicant says that by its actions the respondent caused the applicant to suffer loss and damage in the cost of the repainting of $7,680.00. This sum, the applicant says, it is entitled to set-off against any monies owing to the respondent the amount being an off-setting claim within the meaning of s.459H of the Law.
The respondent does not dispute that the extra painting was necessary, nor that it cost $7,680.00. Nor does it contend that the patching was done pursuant to any contractual instruction or direction. The response of the respondent in the correspondence has been to ask the applicant to specify the contractual or legal basis entitling the applicant to back charge the amount. From the bar table it was suggested that the work was necessary because of the conduct of electricians. However there is no material to suggest that there was any requirement or necessity for the respondent to plaster over
finished paintwork.I am satisfied that the applicant has an off-setting claim of $7,680.00 for the purposes of s.459H(2) of the Law.
Conclusions
In accordance with s.459H(5) of the Law, because I am satisfied that there is a genuine dispute between the parties as to :-
(a)retention monies; and
(b)schedule of rates items
the admitted amount for the purpose of s.459H(2) under these heads is nil.
Insofar as there is no dispute in relation to items totalling $989.44 that will form part of the admitted amount. The back-charging of the cost of repainting is the setting-off of $7,680.00 against money which is otherwise due. Therefore the total of the admitted amount is $8,669.44.
Therefore the substantiated amount of the demand within s.459H(2) is $989.44 [$8,669.44 - $7,680.00] which is less than the statutory minimum of $2,000.00. Accordingly the demand must be set aside (s.459H(3)).
The respondent was given ample opportunity to withdraw the demand before the application was lodged. It must therefore pay the costs of the application.
THE COURT ORDERS THAT:
The statutory demand of Contractors Incorporated Pty. Limited dated 23 June 1995 in the sum of $54,280.89 against J. Hutchinson Pty. Ltd. be set aside.
The respondent pay the applicant's costs of and incidental to the application to be taxed.
I certify that this and the preceding nine (9) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper.
Date:23 August 1995
Associate
Counsel for the Applicant: Mr P. Freeburn
Solicitors for the Applicant: Phillips Fox
Counsel for the Respondent: Mr D.R.M. Murphy
Solicitors for the Applicant: Bain Gasteen
Date of Hearing: 21 August 1995
Place of Hearing: Brisbane
Date of Judgment: 23 August 1995
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