Kempe Engineering Pty Ltd v Emerging Acquisitions LLC - [2018] WADC 59

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   KEMPE ENGINEERING PTY LTD -v- EMERGING ACQUISITIONS LLC [2018] WADC 59
CORAM:   DEPUTY REGISTRAR HARMAN
HEARD:   9 MARCH 2018
DELIVERED          :   16 MAY 2018
FILE NO/S:   CIVO 172 of 2017
BETWEEN:   KEMPE ENGINEERING PTY LTD
Judgment Creditor
AND
EMERGING ACQUISITIONS LLC
Judgment Debtor
CLEANAWAY PTY LTD
Third Person

Catchwords:

Civil Judgments Enforcement Act 2004 - Application to allow objection to debt appropriation order - Application limited by scope of objection - Onus on applicant to establish objection

Legislation:

Civil Judgments Enforcement Act 2004

Result:

Objection not allowed

Representation:

Counsel:

Judgment Creditor	:	Mr C Williams
Judgment Debtor	:	No appearance
Third Person	:	Mr JD Quan-Sing

Solicitors:

Judgment Creditor	:	Solomon Brothers
Judgment Debtor	:	Not applicable
Third Person	:	Allens

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

Nil

DEPUTY REGISTRAR HARMAN:

On 31 October 2017 judgment was registered in favour of Kempe Engineering Pty Ltd against Emerging Acquisitions LLC for $216,573.02.
On 16 November 2017 by its application under the Civil Judgments Enforcement Act 2004 (the Act) the judgment creditor obtained a debt appropriation order addressed to Cleanaway Pty Ltd as follows:
1.Pay to the judgment creditor the debt or amount standing to the credit of the judgment debtor of $216,817.02 due from you to the judgment debtor or so much of it as may be sufficient to satisfy $216,573.02, being the unpaid amount of the judgment debt after deducting such amount (if any) as may be notified in the writing to you by the judgment creditor or the registrar as having been paid or credited to the judgment creditor on account of that unpaid amount otherwise than under the order.
2.You are to make payment to the judgment creditor within 7 days after the day of service of this order on you,
OR
Within 7 days after the day or days on which the appropriated debt becomes due and payable to the judgment debtor.
3.You are entitled to retain expenses for obeying the order of $10.00 for the first payment and $5.00 for any subsequent payment from the available debt before paying the balance of it to the judgment creditor.
According to s 51(1) of the Act the order took effect upon service on Cleanaway.
Section 54 is as follows:
(1)A third person who is served with a debt appropriation order may object to the order on one or more of these grounds ‑
(a)that a person other than the judgment debtor and the judgment creditor owns or has a claim on or interest in the appropriated debt;
(b)that the appropriated debt does not and will not exist;
(c)that the third person has an unsatisfied monetary judgment against the judgment creditor or the judgment debtor.
(2)The objection must —
(a)be in writing; and
(b)state the grounds on which it is made and the facts that support the grounds; and
(c)be lodged at the court within 7 days after the day on which the third person is served with the debt appropriation order.
(3)The court must serve a copy of the objection on —
(a)the judgment creditor; and
...
On 24 November 2017 Cleanaway lodged a Notice of Objection by Third Person to Debt Appropriation Order in the following terms:
We object to the making of the debt appropriation order made in this Court on the 16 November 2017.
The [ground] for the objection [is] as follows:
That the appropriated debt does not and will not exist.
The following facts or circumstances are in support of this objection:
1.Cleanaway Pty Ltd refers to the Design, Supply, Install and Commissioning Contract with the Judgment Debtor which is relied upon by the Judgment Creditor and which was annexed to the affidavit of Murray Jackson affirmed on 2 November 2017 and marked 'MJ 1'.
2.There are currently various disputes between Cleanaway and the Judgment Debtor in relation to the Contract.
3.To the extent that there is any alleged amount owing from Cleanaway to the Judgment Debtor under the Contract (which is not presently admitted), Cleanaway says that it has various claims against the Judgment Debtor under the contract in relation to which its rights of set off, arising, inter alia, by reason of clause 37.6 of the Contract, apply.
4.On this basis, there is no 'available debt' for the purposes of section 49(1) of the Civil Judgments Enforcement Act 2004 (WA). Cleanaway relies on the principles set out in Auswide Heavy Haulage Pty Ltd v Hollow Point Logistics Pty Ltd [2015] WADC 98.
5.As a final point, Cleanaway notes that the debt appropriation order served on Cleanaway on 17 November 2017 did not precisely identify the 'available debt' which is sought to be appropriated by the judgment creditor as is required.
Section 55 provides as follows:
(1)A judgment creditor who is served with an objection under section 54(3) may allow the objection.
(2)If the judgment creditor does not allow the objection within 7 days after the date of it, any of —
(a)the third person; or
(b)the judgment debtor; or
(c)any other person whom the third person claims owns or has a claim on or interest in the appropriated debt,
may apply to the court for an order that the objection be allowed.
(3)…
(4)At the hearing of the application, the court may allow or reject the objection.
On 23 January 2018 Cleanaway lodged its application for an order that the objection be allowed. On the hearing of the application the evidence before the court is as follows:
1.Annexure MJ 1 to the affidavit of Murray Jackson of 2 November 2017;
2.Affidavit of David James Williamson of 9 February 2018;
3.Affidavit of Marco Lenzo of 9 February 2018;
4.Affidavit of Murray Jackson of 16 February 2018;
5.Affidavit of David James Williamson of 27 February 2018; and
6.Subject to leave, the affidavit of David James Williamson of 8 March 2018.
The judgment debtor did not appear at the hearing.
The first question presented for consideration was as to the admissibility of part of the affidavit of David James Williamson sworn 8 March 2018. I deferred consideration of the issue and will address it later in these reasons.
The next issues for consideration go to process, particularly the sufficiency of the debt appropriation order and the extent of the onus on the judgment creditor.
The sufficiency of the order is the subject of par 5 of the support provided for the ground of objection. Cleanaway submitted that it does not identify the appropriated debt.
Section 50(1)(d) of the Act provides as follows:
A debt appropriation order is to … identify the available debt to which the order applies.
The identifying features of the debt are that it is an amount payable by Cleanaway to the judgment debtor and that the amount payable by Cleanaway is equal to or exceeds $216,817.02. In my opinion that detail is sufficient for the purposes of s 50(1)(d). Be that as it may, in the context provided at the hearing of the application, a finding to the contrary would not be determinative of the application.
As Cleanaway has applied for allowance of its objection the locus of the onus of persuasion is obvious. Cleanaway submitted that because under the former garnishee procedure, after service of an order nisi, a judgment creditor had been required to make out its case for attachment of a debt; and because in enacting the current code the legislature had been silent on the question where the onus would lie in an application arising from a contested objection, it should be taken that the onus is on the judgment creditor. In effect that it is for the judgment creditor to establish at least its case for the debt appropriation order if not the contrary of the ground of objection.
Section 7 of the Act is as follows:
(1)The writs, warrants and orders that, immediately before the commencement of this Act, could be issued or made at common law or in equity or under a written law ... are abolished.
(2)The rules at common law or in equity applicable to or in relation to a writ, warrant or order that is abolished by subsection (1) and that is substantially similar to an order that may be made under this Act, apply to or in relation to the order that may be made under this Act so far as they are consistent with this Act.
The garnishee regime was established by s 126 of the Supreme Court Act 1935 and O 49 and Form 53 of the Supreme Court Rules 1971 (WA).
Section 126(1) was as follows:
(1)Debts, legal or equitable, owing or accruing from any third person within the jurisdiction of the Court to a defendant against whom any person has obtained a judgment or order for the recovery or payment of money may, subject to Rules of Court, by order of the Court or a Judge, be attached to answer the judgment or order together with the cost of the proceedings:
…
(3)An order may be made under subsection (1) upon the ex parte application of any person who has obtained a judgment or order, for the recovery or payment of money, either before or after any oral examination of the debtor liable under such judgment or order, and upon affidavit by himself or his solicitor stating that judgment has been recovered or the order made and that it is still unsatisfied, and to what amount, and that any other person (hereinafter called the garnishee) is indebted to such debtor and is within the jurisdiction of the Court; and by the same or any subsequent order it may be ordered that the garnishee shall appear before the Court or a Judge or any officer of the Court as the Court or Judge shall appoint, to show cause why he should not pay to the person who has obtained such judgment or order the debt due from him to such debtor, or so much thereof as may be sufficient to satisfy the judgment or order, together with the costs of the garnishee proceedings.
Order 49 r 2 of the Rules of the Supreme Court was as follows:
An order nisi under section 126(3) of the Act ordering a garnishee to appear to show cause shall be in Form No. 53 …
Form 53, under the heading 'Garnishee Order Nisi' provided in its preamble for the specification of the evidence upon which the order was founded and continues:
It is ordered that all debts owing or accruing due from the abovenamed garnishee to the abovenamed judgment debtor be attached to answer a judgment recovered against the said judgment debtor by the abovenamed judgment creditor … for the sum of $...
And it is further ordered that the said garnishee attend [in Chambers] … on an application by the said judgment creditor, that the said garnishee do pay the said judgment creditor the debt due from him to the said judgment debtor, or so much thereof as may be sufficient to satisfy the judgment together with the costs of the garnishee proceedings.
Those provisions constituted a code for attachment of debt. It is significant that after service of the order nisi it was necessary for the judgment creditor to move for an order absolute: the judgment creditor remained the applicant.
Under the Act, upon service of a debt appropriation order the process commenced by a judgment creditor is concluded. An application for an order allowing an objection puts a particular case or cases for determination. Such an application is distinct from the process that preceded it. Although allowance of the objection would disturb the status and effect of the debt appropriation order there is no reason to consider that the making or hearing of such an application would put in issue the findings that justified the order.
Upon the hearing of an application for allowance of an objection the extent of the onus on the judgment creditor is to ensure there is support for any submission that it cares to make.
The next issue raised for consideration is whether the scope of the application is limited by the terms upon which the objection was put. Again, so stated, the answer is obvious.
The order of 5 February 2018 provides as follows:
1.…
2.The Third Person file and serve affidavit evidence and submissions in support of its application by 4.00 pm WST on 9 February 2018.
3.The Judgment Creditor file and serve affidavit evidence and submissions in response by 4.00 pm WST on 16 February 2018.
4.The Third Person file and serve any affidavit evidence and submissions in reply by 4.00 pm WST on 20 February 2018.
…
Cleanaway submitted that as the order was not expressed to limit the evidence and submissions it had facilitated enlargement of the scope of the application to the extent of the evidence and submissions that had been filed.
The scope of objection is limited by s 54(1). The particular objection put is expressed in terms of s 54(1)(b). It is supported by facts and circumstances specified in five paragraphs. Properly considered the order of 5 February 2018 established a framework for the orderly hearing and disposal of the issues presented by the application. Regardless the extent of the evidence the scope of the application is limited by the terms of the objection upon which it draws.
The evidence put by Cleanaway reveals that the judgment debtor has rendered four invoices and what is designated by the judgment debtor as a final payment claim. According to the objection, disposition of the application neither calls for nor depends upon any determination in relation to either any of those invoices or the claim.
By the objection Cleanaway contends that it has claims against the judgment debtor for which it has contractual entitlements to set off. As a matter of logic it must be taken as implicit that the operation of those contractual entitlements would extinguish any entitlement of the judgment debtor generated by the invoices and the final payment claim.
According to the evidence of Williamson the invoices and the claim arise from the engagement of the judgement debtor in the provision of services under the contract referred to at par 1 of support for the ground of objection. He provides some evidence of the history that bears upon the unspecified disputes to which reference is made in par 2 of the facts and circumstances that support of the ground of objection.
By par 3 of support for the objection Cleanaway puts the proposition that it has various claims against the judgment debtor. It is open to consider that such claims would draw upon those disputes. Be that as it may I am satisfied that Cleanaway considers that it could establish claims for liquidated damages; for loss arising from the operation of the glass processing line; and for repair of that processing line. The amount of each of those claims has not been quantified however Williamson draws together what I take to be an indicative figure of $950,000.00. He leaves scope to allow for the prospect that there may also be other unidentified issues under the contract. Whether any such issue would be likely to develop into a dispute or claim against the judgment debtor would be speculation.
Together the amounts invoiced by the judgment debtor and its final payment claim total $2,190,274.79. It follows that after making allowance in full for the value of the claims outlined and to the extent indicated by Williamson there would remain a significant surplus of available debt in the hands of Cleanaway; a surplus many times more than the amount specified in the debt appropriation order.
In addition to the amounts specified in the invoices and the final payment claim I am satisfied that by operation of any contractual provision for set off, Cleanaway would also have recourse to the amount secured for its benefit under the contract. According to the specification of times for payment claims provided at Part C of the contract and the amount of $1,051,150.71 claimed by tax invoice no 192744 designated by Williamson as being with respect to satisfaction of the pass acceptance test, there is reason to consider that the value of that resource is in the same order as the value of that invoice.
In the context that I have outlined there no support for the contention put in par 4 of the objection: that because of the operation of set off in favour of Cleanaway there is no available debt. That said, the ground of objection is that the appropriated debt does not exist. The availability of a debt was an issue for consideration in the application made by the judgment creditor.
The final contention put by Cleanaway is that it is open to consider that disposition of an application under s 55 calls for the exercise of discretion. I accept that the jurisdiction to determine such an application has been provided to a court however there is no reason to consider that the court should do other than assess whether or not an applicant has made out is case.
In the event that it is considered that I am wrong on that point I am satisfied that there is ample scope for payment to be made without putting into jeopardy the scope for set off of any claim or claims by Cleanaway against to the judgment debtor. The case put by the application is devoid of merit.
There remains the question of admissibility of the evidence at par 7 of Williamson's affidavit of 8 March 2018. The contest around that issue engaged the proposition that it allowed for the perception that the invoices of the judgment debtor do not satisfy the contractual provision that relates to progress payments. It follows from my assessment of the scope of the application that the proposition would have no bearing upon the issue to be determined.
Had I viewed the process differently and had considered that the evidence in the application would in effect stand as additional facts and circumstances in support of the ground of objection; having spent some time considering the sufficiency of the evidence I have no doubt that the results both in relation to the contested evidence and the application would have been the same.
As for the invoice specified at par 37 of Williamson's first affidavit, he purports to give evidence of its content however that evidence would be considered only if he established a satisfactory reason for his failure to produce the document. No such case was presented.
At par 38 he contends that the judgment debtor is not entitled to payment of the invoice because it failed to achieve the performance tests.
In the event that the evidence of the content of the invoice was considered, its utility for the purposes of par 38 is compromised by the fact that in a context where the remuneration of the judgment debtor is expressed to be partially dependent upon its ability to pass the performance tests, there is no evidence that the results specified at par 26 establish that the judgment debtor had failed the performance tests and there is no basis upon which to evaluate the effect or meaning of the qualification. Conceivably it is no more than a conclusion reached upon unspecified facts.
The performance testing undertaken in August 2017 was of the contractual undertakings of the judgment debtor. At some unspecified time prior to 8 February 2018 the judgment debtor had rendered the relevant invoice for $1,051,150.71 on the basis that it had satisfied the pass acceptance test. By March 2018 the judgment debtor had not been paid. There is neither evidence of any relevant communication between the parties nor of any consequence of the results of the performance tests in circumstances that call at least for evidence that there has been neither any relevant communications nor any subsequent testing. That observation draws upon an appreciation that over the period between mid‑August and the date of the hearing it is reasonable to consider that parties who had agreed that damages for late delivery of the contractual undertakings of the judgment debtor would be measured at $10,000.00 per day would not allow circumstances that would patently be undesirable to each of them to so long endure.

In my opinion Cleanaway would fail to establish the case put at par 38 of Williamson's first affidavit.
By pars 7 and 8 of his last affidavit Williamson puts a different case for non‑payment of the same invoice. Consideration of that case would take me to the contest relating to par 7.
Although there is no evidence that the judgment debtor has made prior claims for periodic payment, I infer that over the period that the judgment debtor has been providing services pursuant to the contract, from time to time it has made such claims and has been paid. It is open to consider that the judgment debtor had rendered invoices to Cleanaway in the same manner as it did in the instance cited by Williamson at par 37 of his first affidavit. It is also open to consider that it was only after the judgment creditor filed its submissions that attention had ever been paid by Cleanaway to the contractual terms that relate to claims for periodic payment.
The affidavit containing the contentious material was filed the day prior to the hearing. At par 7 Williamson deposes that no progress claim the subject of the particular invoice had not been submitted to the supervisor; at par 8 to the fact that the superintendent had neither issued a progress certificate nor certified an amount owing.
In effect Williamson purports to give evidence of the lack of engagement by the superintendent for the purposes specified in cl 37 of the contract in a context where no superintendent has been identified; indeed there is no evidence that a superintendent has been appointed by Cleanaway.
I doubt that the application is within the scope of O 37 r 6 of the Rules of the Supreme Court. Be that as it may I am satisfied that the content of par 7 would not qualify as permissible hearsay. As the context in which that result emerges is one for which Cleanaway would require a grant of leave to rely upon the content of par 7, the appropriate result is that leave be refused.
Williamson has also failed to produce any of the invoices of the judgment debtor specified at par 39 of his first affidavit. At the date of that deposition it appears that the only reason that they have not been paid is the claimed set off. It is open to consider that that conclusion would be disturbed if the evidence at pars 7 and 8 of his last was admitted.
Even if the result of consideration of the content of par 7 had been different, I would have had difficulty with the case put at that point because on the evidence there is real doubt that the invoices have any connection with the contractual provision for periodic payment. Their combined value, the value of the invoice referred to at par 37 and the content of the schedule of times for payment claims provided at part C reveal that to amount to a progress claim prima facie they must be in the order of the value of the invoice to which par 37 refers. Their combined value is $35,064.70.
That analysis reveals that absent further evidence there would be no evidence to justify the case put by par 7 of Williamson's last affidavit that the invoices the subject of par 39 of his first would be subject to the regime established by cl 37 of the contract. As they are not distinguished at par 40 of Williamson's first affidavit, I am satisfied that they must have some connection with the contract. There is no evidence upon which to assess how they would be considered under the terms of the contract.
Although the content of par 8 of Williamson's last affidavit was not contested, in my opinion it too is unfounded hearsay. Be that as it may, its acceptance into evidence would not assist Cleanaway, as in my opinion there is an insufficient case to support the proposition that the invoices relate to progress claims.
As for the final payment claim, it is the subject of evidence of 27 February 2018 that the judgment debtor was not entitled to issue the claim. The claim attached to that affidavit is dated 16 February 2018. It specifies that the date when the judgment debtor can claim as being that date. The only other evidence in support of the case of Cleanaway is that the superintendent has not certified that there are moneys owing with respect to that claim. In my opinion it is insufficient to establish the proposition that it puts for the reason that I have previously stated.
In any event I am satisfied that there is otherwise more than sufficient debt and other recourse in the hands of Cleanaway to not prejudice any entitlement to set off the claims it has outlined.
The final issue raised by Cleanaway is that prior to an assessment of the final amount due under the contract to the judgment debtor all payments are on account. That proposition does not speak to whether any prior time money is not payable to the judgment debtor.
For the reasons that I first outlined the objection is not allowed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
JC
REGISTRAR'S ASSOCIATE
15 MAY 2018