Maxstra Constructions Pty Ltd v Denon Aluminium and Glass Pty Ltd
[2012] VSC 150
•1 May 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
S CI 2012 01956
| MAXSTRA CONSTRUCTIONS PTY LTD (ACN 138 590 048) | Plaintiff |
| v | |
| DENON ALUMINIUM & GLASS PTY LTD (ACN 138 590 048) | Defendant |
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JUDGE: | GARDINER AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 April 2012 | |
DATE OF JUDGMENT: | 1 May 2012 | |
CASE MAY BE CITED AS: | Maxstra Constructions Pty Ltd v Denon Aluminium & Glass Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 150 | |
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CORPORATIONS – External Administration – Application to set aside statutory demand pursuant to section 459G of the Corporations Act 2001 – Whether plaintiff has offsetting claim for liquidated damages – Application dismissed
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N Andreou | Moores Legal |
| For the Defendant | Mr J Dunne (Solicitor) | John Dunne & Associates |
HIS HONOUR:
The plaintiff, (“Maxstra”) makes application to set aside a statutory demand dated 8 March 2012 which was served on it by the defendant (“Denon”) on 14 March 2012.
The demand claims that the sum of $10,554.07 is owing by Maxstra to Denon as the balance of an invoice dated 25 July 2011. It is regrettable that such a small claim is the subject of litigation, with all the attendant costs, in this Court. The invoice, a copy of which is attached to the demand, describes the debt as being in respect of the supply and installation of aluminium windows and doors at the Fairy Hills Preschool at Ivanhoe.
At the hearing of the application on 18 April 2012, Mr Dunne, who appeared on behalf of Denon, conceded that there should be certain deductions from the amount demanded which had the effect of reducing the demand to one for $10,016.34.
The application became one confined to the question of whether Maxstra had a genuine offsetting claim against Denon for liquidated damages were due to it by reason of Denon not complying with its obligations under the contract to supply the subject windows by the due date.
The approach to be taken in the consideration of applications under s 459G of the Act has been the subject of numerous authorities. McLelland CJ in Equity in Eyota Pty Ltd v Hanave Pty Ltd,[1] one of the earliest authorities considering the issue, stated:[2]
It is, however, necessary to consider the meaning of the expression ‘genuine dispute’ where it occurs in s 450H (sic). In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sorts of considerations as the ‘serious question to be tried’ criterion which arise 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 in 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 …’.
[1](1994) 12 ACSR 785.
[2](1994) 12 ACSR 785, 787 (citation omitted).
In the decision of the Full Court of the Federal Court of Australia in Spencer Constructions Pty Ltd v G&M Aldridge,[3] it was observed that: [4]
For a genuine dispute to exist, it must be ‘a bona fide and truly existing fact’, and the grounds for alleging its existence must be ‘real and not spurious, hypothetical or misconceived.’ The dispute should have 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.
[3](1997) 76 FCR 452 (“Spencer”).
[4]Spencer (1997) 76 FCR 452, 454.
In JJMMR Pty Ltd v LG International Corporation,[5] the Court of Appeal of the Supreme Court of Queensland described the task of the Court as being to decide whether there is a dispute or offsetting claim “such as would warrant subsequent adjudication”.
[5][2003] QCA 519.
In Yoogalu Pty Ltd v Intentia Australia Pty Ltd,[6] Barrett J observed:[7]
“[The Court’s] sole function is to determine whether or not the state of account between the parties is (as to the particular matters referred to in s 459H(1)) so clear cut and uncontroversial that non payment of the sum demanded by the defendant should, entirely of itself and without further enquiry, mean that the plaintiff must, in a subsequent winding up proceeding, be regarded as insolvent unless it can itself affirmatively prove its solvency.”
[6][2006] NSWSC 278 (“Yoogalu”).
[7]Yoogalu [2006] NSWSC 278, [32].
Maxstra relies on the following affidavits:
(a)Frank Nadinic sworn 3 April 2012;
(b)Frank Nadinic sworn 17 April 2012; and
(c)Dorothy Ngatai sworn 17 April 2012.
Denon relies on the affidavits of:
(a)Dean Heath sworn 16 April 2012; and
(b)John Heath sworn 16 April 2012.
The parties do not agree on the contractual basis by which the subject transaction proceeded. The application involved consideration of whether Maxstra has established to the relevant standard that there was a plausible contention requiring investigation that Denon was liable for payment of liquidated damages if the subject works were not completed by 27 July 2011.
Maxstra contends that the terms of the contract are set out in a 16 page document (“the Maxstra document”), a copy of which is exhibited to Mr Nadinic’s affidavit. It appears that Dean Heath has signed and dated that document on 21 July 2011 but it was not executed on behalf of Maxstra until 15 August 2011, which was after the windows and doors were supplied and installed. Maxstra submits that pursuant to clause 2.3 of the Maxstra document, the supply and installation of the windows was required to be completed by the completion date fixed in paragraph 5 of the schedule of that document, 27 July 2011.
Maxstra states that the works were completed on 3 August 2011, seven days after the date for completion stipulated in the Maxstra document. As such, it says, Denon is indebted to it for liquidated damages in the sum of $11,550 including GST pursuant to clause 3.4 of the Maxstra document. If Maxstra’s position is accepted as being established to the standard required, the offsetting claim exceeds the amount of the demand and it must be set aside.
In his affidavit filed on behalf of Denon, Dean Heath states that a quote was submitted by Denon on 23 March 2011 for the project. He was subsequently advised that Denon had been awarded the project. As a consequence, he contacted Maxstra to enquire whether he could submit a revised quotation. This was agreed to, and on 16 June 2011 he sent the revised quotation to Mr Andreatta at Maxstra.
That revised quotation contained quite elaborate terms and incorporated detailed technical specifications and drawings. It provided for a price of $29,361 exclusive of GST for the works and stated that “our offer remains valid for 30 days from the above date”.
On 21 June 2011, Mr Heath received a purchase order from Maxstra confirming acceptance of the quotation together with a draft of the Maxstra document. The purchase order did not stipulate that the arrangement was “subject to contract” that is, subject to the execution of a formal contract such that the parties were not to be bound until the exchange of signed copies of the draft form of contract which was attached.[8] Significantly, the purchase order specified the due date for completion of the installation as being 15 August 2011.
[8]See, generally, Nicholas Seddon, Cheshire + Fifoot’s Law of Contract, (9th Australian ed, 2008), [5.24].
Denon contends that the contract was formed upon communication to it of the purchase order. Denon then proceeded with the installation. The Maxstra document was not executed by Maxstra until after the completion of the installation.
On 25 July 2011, Denon raised an invoice for the balance due which at that point was $31,563.07.
Dean Heath exhibits a document headed up “Fairy Hills Preschool, 7 Thire Road, Ivanhoe, Construction Program” to his affidavit. That document appears to be a construction program of the type contemplated by clause 2.8 of the Maxstra document. It was provided to Denon by Maxstra and prescribes the timelines for the various stages of the project. The exhibit on the second page indicates that it was printed by Maxstra on 2 June 2011. It is not clear when it was provided to Denon by Maxstra but it is probable that it was before 16 June 2011 when the revised quotation was sent to Maxstra. Under item 75, which deals with the timeline for completion the installation of the external windows/doors and furniture the subject of this matter, it provides that such works were programmed to be carried out from early August to mid-August 2011.
Maxstra’s purchase order and the Construction Program document generated by it thus both indicate a completion date of mid‑August 2011. The works were completed by that date. If Denon’s position is accepted, Maxstra has no claim for liquidated damages.
Dean Heath’s affidavit deposes to a series of communications with Maxstra’s representatives, including Mr Nadinic, from August 2011 to January 2012 in which his father, John Heath, pursued payment of the outstanding invoice over a number of months. The Heaths depose that Maxstra’s representatives consistently responded that the company did not hold sufficient funds to make the payment required. Denon submits that the evidence of such exchanges implicitly confirms that the parties were ad idem that the works were required to be completed by the date mentioned on Maxstra’s acceptance of the quotation, that is 15 August 2011, for the price appearing on the purchase order. Mr Heath describes the following exchanges between Maxstra and Denon after completion of the works.
On 13 September 2011, John Heath spoke to a woman called Dot (apparently Dorothy Ngatai), the office manager at Maxstra who advised him that payment could not be made as Maxstra did not hold sufficient funds and that payment would be made early in the next month.
On 4 October 2011, Andrew Nadinic (who described himself as a director of Maxstra) told John Heath that he could not make the payment until he had reviewed the invoice with the project manager later that day.
On 6 October 2011, John Heath spoke to Ms Ngatai and was again told that Maxstra did not have sufficient funds to pay. He was then telephoned by Frank Nadinic who requested a meeting, which was agreed to and scheduled for 17 October 2011.
On 17 October 2011, Frank Nadinic attended at Denon’s premises and, following a brief discussion with John Heath, provided him with a cheque for $10,000 as the first payment of the total debt owed. This was ten weeks after the works had been completed. Mr Nadinic stated that he could not advise when further payments would be made by Maxstra but no issue was raised as to any alleged late completion or poor workmanship.
On 9 November 2011, Dean Heath requested John Heath to telephone Maxstra, seeking further payments. John Heath was told that a significant amount would be paid in the near future. A payment of $3,000 was received by cheque on 14 November 2011.
On 17 November 2011, John Heath telephoned Ms Ngatai and told her that the $3,000 payment, whilst received, was not substantial and asked when the matter could be finalised. She stated that a further payment would be made shortly. John Heath was advised that Frank Nadinic would be seeing him and Dean Heath in the near future and it was understood that a meeting had been arranged for 23 November when a further $5,000 was to be paid. Mr Nadinic did not attend the meeting arranged for 23 November 2011.
On 28 November 2011, John Heath telephoned Maxstra and spoke with a person called Guy and told him that unless payment was made in full of the balance then owing the matter would be placed in the hands of an external agency for collection. John Heath was asked to telephone the following day with respect to a possible payment.
On 29 November 2011, John Heath spoke again with Ms Ngatai who advised him that $8,000 would be paid by electronic funds transfer that day into the defendant’s account. That payment of $8,000 was made, leaving a balance owing of $10,554.07, the amount originally claimed in the demand.
In early December 2011, Frank Nadinic rang John Heath requesting that Denon defer any legal action that it was considering and said that Mr Nadinic “guaranteed” that the outstanding amount owing would be paid in full by Christmas 2011. Mr Heath deposes that there was no discussion whatsoever in relation to any dispute with respect to the balance being payable.
On 16 January 2012, Messrs Heath telephoned Ms Ngatai (presumably on loudspeaker) and left a message for her on her voice mail. A facsimile was sent requesting payment of the balance but there was no response. The statutory demand was served in March 2012.
Dean Heath states in his affidavit that it was not until Frank Nadinic swore his affidavit of 3 April 2012 in support of this application that Denon was informed that a claim for liquidated damages would be made. In response to that claim, John Heath contacted the proprietor of the project, Banyule City Council, and spoke to a Mr Malotsis who told him on 12 April 2012 that the works had been completed on time and to the satisfaction of Banyule City Council and that no liquidated damages claims had been made against Maxstra in relation to the works undertaken by Denon.
In response to Denon’s account of communications between the parties, Frank Nadinic states in his affidavit of 17 April 2012:
· Ms Ngatai is the office manager at Maxstra and is not authorised to provide financial opinions on the ability of Maxstra to pay debts or otherwise.
· On 17 October 2011 he paid $10,000 by way of part-payment of the invoiced amount.
· He had no knowledge of a meeting of a meeting arranged for 23 November when a further $5,000 was to be paid.
· Maxstra continued to make payments of the claimed amounts and made a further payment of $8,000 on 29 November 2011.
· He has no recollection of saying, in a conversation in early December 2011, that he requested John Heath to “defer any legal action it was considering” and “guaranteed that the outstanding amount owing to Denon would be paid in full by Christmas 2011.” He is able to recall however that it was during this conversation that he raised the issue with Mr Heath that Denon was late in completing the works and that liquidated damages would be claimed.
· In her affidavit, Ms Ngatai states that she has no recollection of the substance of the various conversations referred to by Dean Heath in his affidavit.
The effect of Ms Ngatai having no recollection of the matters referred to by Dean Heath in his affidavit (and confirmed by John Heath) as to promises for payment, coupled with the fact that Maxstra continued to make partial instalments of the amount outstanding, is inconsistent with Maxstra regarding itself as having of a claim for liquidated damages. It would have been aware of the facts giving rise to such an alleged claim by late July 2011. Lateness in completion of the installation, if it occurred, would have been a significant matter as far as Maxstra was concerned and one would expect Maxstra’s representatives to raise it early in the piece and take it into account particularly in any discussions relating to payment for the project. Instead it made a series of small rounded payments without any reservation being raised about the balance of the amount owing. Even on Maxstra’s own evidence, a complaint was not made until December 2011 concerning alleged lateness in completion of the works with a statement that a liquidated damages claim would be made. This is consistent with the position that Maxstra regarded the completion date as having been complied with by Denon, that is the later date which appears in the two documents to which I have referred, rather than the date appearing on the Maxstra document.
In my view, it seems clear that the parties contracted on the basis of the terms of Maxstra’s purchase order which contained all the necessary details in order for the works to be commenced and which specified the date for completion, 15 August 2011. Indeed, the works were completed before Maxstra executed the Maxstra document.
Maxstra bears the onus of establishing that it has a genuine offsetting claim. In order to do so, it must establish that it has an arguable basis for contending that the subject contract upon which the installation and supply of the goods concerned was the Maxstra document with the earlier completion date.
In my view, when one considers all the evidence, including the contemporaneous documentation, the series of instalment payments, the promises for payment chronicled by Messrs Heath (which could not be recollected but which are not effectively contradicted by Maxstra) and the lack of complaint that the works were completed outside the time limits provided for in the contract which Maxstra contends constitutes the contractual basis of the transaction, result in a conclusion that Maxstra has not established that it has a genuine offsetting claim.
If a party considers that it has an offsetting claim such as Maxstra states it has in this case, in my view it defies credibility that they would continue to make a series of instalment payments and not raise the existence of such a claim.
I am comforted in that conclusion by the fact that there has been no response to the evidence of Dean Heath in paragraph 20 of his affidavit that no claim has arisen against Maxstra at the suit of the proprietor of the project, Banyule City Council, for lateness in the project on Denon’s part or indeed at all.
The application should be dismissed with costs.
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