Kerslake Superannuation Pty Ltd v C & L Building Pty Ltd

[2010] NSWSC 424

CITATION:	Kerslake Superannuation Pty Ltd v C & L Building Pty Ltd [2010] NSWSC 424
HEARING DATE(S):	06/05/10
JUDGMENT DATE :	6 May 2010
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	6 May 2010
DECISION:	(1) Order that the statutory demand dated 3 February 2010 served on the plaintiff by the defendant be varied by reducing the amount thereof to $8,214.18. (2) Declare that the statutory demand is to have had effect as so varied as from when the statutory demand was served on the plaintiff.
CATCHWORDS:	CORPORATIONS - winding up - winding up in insolvency - statutory demand - application for order setting aside - offsetting claim alleged - extent to which such claim must be quantified in supporting affidavit as distinct from any subsequent affidavit - where subsequent quantification less than amount of statutory demand
LEGISLATION CITED:	Building and Construction Industry Security of Payment Act 1999, s 25 Corporations Act 2001 (Cth), ss 459G, 459H(1)(b), 459H(3), 459H(4)
CATEGORY:	Principal judgment
CASES CITED:	Broke Hills Estate Pty Ltd v Oakvale Wines Pty Ltd [2005] NSWSC 638; (2005) 23 ACLC 1266 Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 21 ACSR 581
PARTIES:	Kerslake Superannuation Pty Ltd - Plaintiff C & L Building Pty Ltd - Defendant
FILE NUMBER(S):	SC 2010/050320
COUNSEL:	Mr J T Johnson - Plaintiff Mr D A Allen - Defendant
SOLICITORS:	O'Sullivan Saddington by their city agents Sally Nash & Co - Plaintiff Catalyst Legal - Defendant

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

THURSDAY 6 MAY 2010

2010/050320 KERSLAKE SUPERANNUATION PTY LTD v C & L BUILDING PTY LTD

JUDGMENT

1 The plaintiff applies under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant.

2 The debt to which the statutory demand relates is a judgment debt arising from a judgment entered in the District Court at Newcastle pursuant to s 25 of the Building and Construction Industry Security of Payment Act 1999 upon filing of an adjudication certificate. The judgment sum is $254,064.18.

3 In seeking to have the statutory demand set aside, the plaintiff relies on the ground in s 459H(1)(b). It says that it has an offsetting claim in the form of a genuine claim to sue the defendant for defective workmanship in and about the relevant building project at Tighes Hill.

4 In support of its contention that there has been faulty workmanship requiring rectification the defendant relies on certain reports and quotations to which I shall come.

5 First, however, there is a need to delineate the permitted scope within which the defendant may seek to establish its offsetting claim as allowed by the Graywinter principle (Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 21 ACSR 581). The constraint is, of course, defined by reference to the affidavit filed in support of the s 459G application; in this case, the affidavit of Wayne John Kerslake of 24 February 2010.

6 The structure of the statutory provisions is such that an applicant under s 459G is restricted to the grounds sufficiently delineated in the supporting affidavit. I am satisfied that, in this case, the affidavit identifies what is said to be a need for rectification work by reference to a report of Izzat Consulting Engineers. That report deals with a number of matters but they are all concerned with concreting related to pavements, wall panels, floor slabs, a building slab, a building column and a wall. Also forming part of the s 459G affidavit is material concerning replacement of a concrete driveway and a quotation for that work.

7 Absent from the s 459G affidavit is any reference to remedial work in relation to cabling and the circumstance that communication cabling is located in the same channels as electrical cabling in what is said to be a contravention of an Australian Standard. A claim and quotation in respect of work of that kind appears in a subsequent affidavit, but because it is not in the original affidavit of 24 February 2010, that aspect is ruled out by the Graywinter principle.

8 I must approach the offsetting claim aspect solely on the basis of the concreting defects alleged in the first affidavit.

9 There is amplification of that claim in the subsequent affidavits relied on by the defendants, including a quotation of A T B Morton which supersedes a smaller quotation in the original affidavit.

10 This raises a question about the extent to which it is necessary, in accordance with the Graywinter principle, for the quantum of an offsetting claim to be established by the affidavit filed and served within the 21-day period. I have been taken to a statement in one decided case (Broke Hills Estate Pty Ltd v Oakvale Wines Pty Ltd [2005] NSWSC 638; (2005) 23 ACLC 1266 at [28]) that may be thought to suggest that a precise quantification is needed at that point. In my view, that is not the position. A plaintiff who seeks to set up an offsetting claim no doubt has the primary aim of obtaining an order under s 459H(3) but must also be regarded as pursuing a secondary objective of securing exercise of the s 459H(4) discretion. In order to be a supporting affidavit within s 459G, the affidavit must raise grounds. In an offsetting claim case, all that is needed in the initial affidavit is some indication that the offsetting claim is of a magnitude that can sensibly be compared with the amount of the statutory demand. There is room for some measure of uncertainty, but the uncertainty will, of course, work to the detriment of the party seeking to establish the offsetting claim.

11 I am not persuaded that the quantification aspect must be dealt with in a way that rules out, on the Graywinter basis, the updated and more precise quantification material in the subsequent affidavits. I am satisfied that the offsetting claim ground and the basis on which it is put forward are sufficiently raised in the initial affidavit.

12 That being so, I have regard to the quotation for repair work in a later affidavit, being the quotation of 26 March 2010 from A T B Morton. All of the work described in the scope of works in that quotation is of the general description related to concreting defects thrown up by the affidavit filed in support of the s 459G application. The estimated cost of the work is $223,500 plus GST, that is to say a gross sum of $245,850.

13 I am satisfied that the offsetting claim is quantified sufficiently in that sum by that quotation.

14 As to the genuineness of the offsetting claim, there is in evidence a form of statement of claim which, as at 24 February 2010, the defendant proposed to file in the District Court. I have been informed that the statement of claim in that form has since, in fact, been filed at the District Court in Newcastle so that proceedings have been commenced with a view to pursuing and vindicating the perceived claim.

15 That circumstance, coupled with the pleading in the statement of claim, the expert report about the state of the concreting work and the quotation for the carrying out of the remedial work, persuades me that the claim is, in the relevant sense, a genuine claim.

16 The situation is therefore one in which the defendant has established an offsetting claim in the amount of $245,850.

17 The appropriate course is accordingly that prescribed by s 459H(4) of the Corporations Act. The court will vary the statutory demand by reducing it by $245,850 and by declaring it to have effect as so varied from the time when it was served.

18 The orders are as follows:

(1) Order that the statutory demand dated 3 February 2010 served on the plaintiff by the defendant be varied by reducing the amount thereof to $8,214.18.
(2) Declare that the statutory demand is to have had effect as so varied as from when the statutory demand was served on the plaintiff.

[Submissions on costs]

19 I have heard submissions on costs. The plaintiff says that because it has been successful in obtaining a substantial reduction in the amount of the statutory demand, the “event”, for costs purposes, is in its favour. The defendant says, by contrast, that it has been successful in maintaining its statutory demand as a basis for relying upon a presumption of insolvency in winding up proceedings; and that it has in that sense been successful even though the amount is significantly smaller than would otherwise have been the case.

20 There is merit in both these propositions. Each party has had a measure of success. The plaintiff has succeeded in obtaining a substantial reduction in the amount of the demand. The defendant has succeeded in keeping the demand alive for future use as may be thought fit. In those circumstances, the appropriate outcome is that each party should bear its own costs.

21 I therefore make no order as to costs to the intent that costs should rest where they fall.

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