Kellogg Brown & Root Pty Ltd v Doric Contractors Pty Ltd

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JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   KELLOGG BROWN & ROOT PTY LTD -v- DORIC CONTRACTORS PTY LTD [2014] WASC 206

CORAM:   ACTING MASTER GETHING

HEARD:   1 MAY 2014

DELIVERED          :   10 JUNE 2014

FILE NO/S:   COR 48 of 2014

BETWEEN:   KELLOGG BROWN & ROOT PTY LTD (ACN 007 660 317)

Plaintiff

AND

DORIC CONTRACTORS PTY LTD (ACN 080 922 498)
Defendant

Catchwords:

Corporations Law - Statutory demand - Application to set aside demand pursuant to s 459H(1)(a) (genuine dispute) and s 459J(1)(b) (some other reason) - Abuse of process - Parallel judicial review proceedings

Building and construction - Construction Contracts Act 2004 (WA) - Attempt to enforce a determination using the statutory demand process - Failure to seek leave to enforce pursuant to Construction Contracts Act s 43(2)

Legislation:

Construction Contracts Act 2004 (WA), s 43
Corporations Act 2001 (Cth), s 459H, s 459J

Result:

Respondent restrained from enforcing the statutory demand on the ground of an abuse of process

Category:    A

Representation:

Counsel:

Plaintiff:     Mr J R Ludlow

Defendant:     Mr J M Healy

Solicitors:

Plaintiff:     HWL Ebsworth Lawyers

Defendant:     Encore Legal Pty Ltd

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

Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation [2005] ACTCA 3; (2005) 157 ACTR 22

Cape Range Electrical Contractors Pty Ltd v Austral Construction Pty Ltd [2012] WASC 304

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

Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85

David Grant & Co Pty Ltd v Westpac Banking Corp [1995] HCA 43; (1995) 184 CLR 265

Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473

Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91

Diploma Construction (WA) v KPA Architects Pty Ltd [2013] WASC 407

DPD Pty Ltd v McHenry [2012] WASC 140

Drewniak v Air Rubber Pty Ltd [2002] SASC 319

Durkan v Sandbank Holdings Pty Ltd [2008] WASCA 249

Eumina Investments Pty Ltd v Westpac Banking Corp (1998) 84 FCR 454

Fitness First Australia Pty Ltd v Dubow [2011] NSWSC 531

Food Channel Network Pty Ltd v Television Food Network GP [2010] FCA 403

Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1

Georgiou Building Pty Ltd v Perrinepod Pty Ltd [2012] WASC 72

K & J Burns Electrical Pty Ltd v GRD Group (NT) Pty Ltd [2011] NTCA 1

Kezarne Pty Ltd v Sydney Asbestos Removal Services Pty Ltd (1998) 29 ACSR 11

Kisimul Holdings Pty Ltd v Clear Position Pty Ltd [2014] NSWSC 338

Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229

Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290

Michael Ebbott t/as South Coast Scaffolding and Rigging Services v Hire Access Pty Ltd [2012] WADC 66

Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140

Peekhurst Pty Ltd v Wallace [2007] QSC 159

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Details
Case
[2014] WASC 206
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, Kellogg Brown & Root Pty Ltd filed an application against Doric Contractors Pty Ltd, seeking to set aside a statutory demand issued by Doric. The statutory demand was based on a debt arising from determinations made under the Construction Contracts Act 2004 (WA). Kellogg argued that Doric failed to obtain the necessary leave to enforce the determinations as judgments, as required by section 43(2) of the Construction Contracts Act. Consequently, Kellogg sought to set aside the statutory demand on the grounds that it was defective and constituted an abuse of process. Doric, on the other hand, maintained that no such leave was required to issue a statutory demand based on a debt arising from a determination under the Construction Contracts Act.

The court was required to decide several key issues. Firstly, whether a determination under the Construction Contracts Act could be enforced by way of a statutory demand without first obtaining leave from the court. Secondly, whether there was a genuine dispute over the existence of the debt as Kellogg argued the claims giving rise to the determinations had no merit. Thirdly, whether there was a genuine dispute over the validity of the determinations. Fourthly, whether there was some other reason to set aside the statutory demand. Fifthly, whether Doric was abusing the statutory demand process, and finally, what orders should be made in light of the findings.

The court held that a determination under the Construction Contracts Act does not create a debt that is immediately due and payable, and therefore, leave from the court is required to enforce such a debt as a judgment. The court found that Doric's failure to obtain leave constituted a defect in the statutory demand process. The court also found that there was no genuine dispute over the existence of the debt or its validity. However, the court determined that Doric had abused the statutory demand process by issuing the demand without obtaining the necessary leave, which constituted a substantial injustice to Kellogg. Consequently, the statutory demand was set aside, and Doric was restrained from relying on the statutory demand process.

The court ordered that the statutory demand be set aside and that Doric be restrained from taking any further steps to enforce it. Additionally, the court awarded costs to Kellogg for the application.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The present application involves the interaction of the statutory demand regime and the regime for the payment of contractors in the CCA. By CCA s 39(1), a 'party that is liable to pay an amount under a determination must do so on or before the date specified in the determination'. However, the debt is not immediately enforceable. Rather, by CCA s 43, the leave of the Court is required:Determinations may be enforced as judgments(1)In this section -court of competent jurisdiction, in relation to a determination, means a court with jurisdiction to deal with a claim for the recovery of a debt of the same amount as the amount that is payable under the determination.(2)A determination may, with the leave of a court of competent jurisdiction, be enforced in the same manner as a judgment or order of the court to the same effect, and if such leave is given, judgment may be entered in terms of the determination. It is common ground that Doric did not obtain the leave of a court pursuant to CCA s 43(2) to enforce the Determinations the subject of the Statutory Demand. On the basis of what was argued before me, six issues arise for determination:•Can a determination under the CCA be enforced by way of statutory demand without the party issuing the demand first being granted leave to enforce the determination under CCA s 43(2)?•Is there a 'genuine dispute' pursuant to CA s 459H(1)(a) as to the existence of the debt because of Kellogg's contention that the claims giving rise to the Determinations creating the debt have no merit?•Is there a 'genuine dispute' as to the existence of the debt because of Kellogg's contention that the Determinations creating the debt are invalid?•Is there 'some other reason' to set aside the statutory demand pursuant to CA s 459J(1)(b)?•Should Doric be restrained from relying on the statutory demand process on the ground that it is abusing this process?•What final orders are appropriate? Kellogg asserts that Doric was required to obtain the leave of the Court pursuant to CCA s 43(2) before issuing a statutory demand. It says that the consequence of Doric's failure to do so is that the statutory demand should be set aside as being defective as Kellogg will suffer substantial injustice unless this occurs: CA s 459J(1)(a). It also relies on the failure to obtain leave as constituting part of the basis for the Court to conclude that Doric has abused the statutory demand process. Doric submits that no leave is required. In essence, its submission is that a determination under the CCA creates a debt that is immediately due and payable, which, like any other debt which is immediately due and payable, may be the subject of a statutory demand without first being made the subject of a judgment of the court. The course of obtaining leave pursuant to CCA s 43(2) was undertaken by the party who issued the statutory demand the subject of the recent decision of the Court of Appeal in Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91. Given the extent of the overlap of the issues with the present case, it is appropriate for me to review that decision in some detail.

Ratio Decidendi

Legal Principle Established

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