McDonald Earthmoving Equipment Pty Ltd v HM Hire Pty Ltd
[2023] QSC 148
•30 June 2023
SUPREME COURT OF QUEENSLAND
CITATION:
McDonald Earthmoving Equipment Pty Ltd v HM Hire Pty Ltd [2023] QSC 148
PARTIES:
McDonald Earthmoving Equipment Pty Ltd ACN 058 617 315
(applicant)v
HM Hire Pty Ltd ACN 131 017 813
(respondent)
FILE NO:
5662/23
DIVISION:
Trial Division
PROCEEDING:
Application
ORIGINATING COURT:
Supreme Court
DELIVERED ON:
30 June 2023
DELIVERED AT:
Brisbane
HEARING DATE:
27 June 2023
JUDGE:
Freeburn J
ORDER:
1. The application is allowed.
2. I will hear the parties on the form of orders and on the issue of costs.
CATCHWORDS:
CORPORATIONS – STATUTORY DEMAND – APPLICATION TO SET ASIDE DEMAND – GENUINE DISPUTE AS TO INDEBTEDNESS – where the applicant applies to set aside a creditor’s statutory demand – where the applicant’s case disputing the debt is not strong as the evidence is inconsistent – whether the applicant’s dispute as to the debt is prima facie a genuine dispute
Authorities
Crontec Automotive Tooling Pty Ltd v Allsteel Australia Pty Ltd [2006] NSWSC 55
Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq) [2015] VSC 530
Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601
Spencer Construction Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452
Thomasson Earthmoving Pty Ltd v Cyonara Snowfox Pty Ltd [2010] QSC 48
TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67; (2008) 26 ACLC 342COUNSEL:
Mr P Hastie KC (applicant)
Mr M de Waard (respondent)SOLICITORS:
HopgoodGanim Lawyers for the applicant
Kelly Legal for the respondentREASONS
This is an application by McDonald Earthmoving Equipment Pty Ltd for an order to set aside a creditor’s statutory demand. The respondent creditor is HM Hire Pty Ltd. The nub of the contest between the parties’ centres on whether there is a genuine dispute as to the debt.
Background
In about 2018 the applicant purchased a water truck. The truck was a 1997 model which required refurbishment. The applicant engaged the respondent to carry out that refurbishment work on the truck.
There are some unusual features about the arrangement between the applicant and the respondent. The respondent did not provide a quotation for the refurbishment works, nor was there a written contract, nor was there an agreed price for the refurbishment works, or even a description of the scope of work. Further, it appears that Mr McDonald, the applicant’s sole director, carried out and supervised some of the work. And, whilst the water truck was being worked on, the applicant ordered and paid for various parts required during the refurbishment. In his first affidavit, Mr McDonald lists 34 invoices totalling $20,832 said to comprise work or parts ordered by and incurred by the applicant during the period of the respondent’s refurbishment of the truck.
Mr McDonald’s Version
Mr McDonald’s first affidavit complains that the total of those 34 invoices, and his own labour, should have been part of the refurbishment works undertaken by the respondent “as it was within the scope of work that HM Hire should have undertaken.”[1] It is not clear why Mr McDonald says that the work and invoices were with the ‘scope of work’. There was, of course, no written scope of works and Mr McDonald does not even identify any specific discussion said to form the basis of the refurbishment.
[1]Affidavit of Graham McDonald filed 9 May 2023 at [24].
Mr McDonald also says that he provided a refrigerator to assist with the repairs and that refrigerator, estimated to be worth around $25,000, has not been returned.
And so, Mr McDonald contends that three amounts should be deducted from the respondent’s eventual claim of $112,000, namely the $20,832 for the 34 invoices, Mr McDonald’s own labour, and his estimate of the value of the refrigerator – $25,000.
In his first affidavit, Mr McDonald says that, in about August or September 2019, he collected the water truck from the respondent as he was advised by Mr Kemp that the refurbishment works had been completed. He says that on 20 September 2019 the respondent issued an invoice for $112,000. Mr McDonald says that he was “shocked to see the quantum of the amount of (the respondent’s) invoice.” He says that he immediately queried the invoice with Mr Kemp by requesting a breakdown of the invoice. There is no record of that immediate query. Presumably, at trial, the telephone records will establish whether there was a telephone call or not.[2]
[2]It is not clear whether Mr McDonald’s concern was expressed in a telephone call or not but the statement that it was immediately raised suggests a call.
Mr McDonald says that the first major problem that came to light occurred just after the truck left the respondent’s yard and went to Hall Creek mine for a job. This was said to be in or about September 2019. Mr McDonald says that there were issues in relation to the front wheel brake calliper and in relation to the main hydraulic pump. He said that resulted in the truck having to leave this job at Hall Creek mine and being transported back to the applicant’s yard for repair.
It is conceded that this account is wrong. Mr McDonald’s second affidavit corrects the chronology in his first affidavit. In Mr McDonald’s second affidavit he explains that he did not raise any issues with the work undertaken by the respondent until about May 2020 because it was not until April 2020 that the truck was taken to a job and the defects became apparent.
As errors go, this is quite a significant blunder. The error in the chronology involves seven months and an event that, one would think, would be notable – the return of the truck. Of course, the error may be an error in recollection, confusion about the dates given the time that has elapsed, or poor instructions to solicitors, something more deliberate.
Mr McDonald says that another major problem came to light in or about 12 months after the water truck was collected from the respondent. The problem occurred at Cracow mine at Theodore. He says that what occurred was a major brake problem known as a “bang failure”, which could have been prevented if the respondent had repaired the brake pads on the water truck. He says that, in his view, that would be one of the basic repairs that should have been undertaken and which he assumed had been undertaken. However, again, there is a problem with a lack of a scope of work or anything that might resemble a scope of work.
In his first affidavit, Mr McDonald lists 21 invoices totalling $28,071 which comprise work and costs incurred by the applicant after collection of the truck. Mr McDonald says these costs were incurred in order to remedy the defective refurbishment works undertaken by the respondent. Mr McDonald also lists work totalling $10,959 performed by the applicant and its own employees. Mr McDonald also claims $12,515 for the costs of repairs to the front and rear brakes and removal of a hydraulic pump.
Mr McDonald says that he had sought a detailed breakdown from Mr Kemp as to the nature of the work carried out by the respondent’s employees. He says that he has done that on a number of occasions. There are no records of any such requests. Mr McDonald complains that he has been charged for some parts that the applicant has already paid for. However, as will be explained, that allegation appears to have been withdrawn.
Mr McDonald alleges that the respondent has “grossly overcharged and/or improperly charged” the applicant. He says that, despite request, the respondent has failed to provide any explanation for its charges. The applicant denies that it owes the respondent the balance owing of $45,000 or any sum at all. He says that the applicant is owed money by the respondent for remedial works it has had to undertake and the lost profits it has incurred.
Mr McDonald says that he lost all of the text messages from his phone when his boat sunk on 8 November 2022.
Mr Kemp’s Version
Mr Kemp, the sole director of the respondent, has a different version. Mr Kemp says that in or about April 2019 there was a conversation between he and Mr McDonald whereby Mr McDonald asked him, or at least his company, to repair one front leaking brake and a leaking rear strut on the truck. He says that it was agreed that the work would be carried out by the respondent and charged on normal hourly rates. Mr Kemp contends that Mr McDonald then managed all of the repairs – which I gather expanded in scope. He says that it was Mr McDonald who would identify the next relevant repair job to be carried out on the truck. Mr Kemp says that the respondent’s employees would assist Mr McDonald in carrying out the repair work.
Mr McDonald’s most recent affidavit contests all that. However, one can see that the absence of any order form, or any other documentation of the work to be carried out, means that the contractual agreements are fertile ground for dispute.
Mr Kemp says that despite the fact that the respondent’s invoice was issued on or about 20 September 2019, Mr McDonald did not raise any issue with him regarding any concerns about the work on the truck until 22 May 2020. He says that up until that date, and even afterwards, Mr McDonald assured him that the invoice would be paid in full.
The respondent’s submissions list, in some detail, the part payments and the text messages sent by Mr Kemp to Mr McDonald chasing up payment. A part payment of $30,000 was made on 14 October 2019, and another of $10,000 on 24 October 2019. A part payment of $12,113 was then made on 29 October 2019 and another of $15,000 on 20 February 2020. That left a balance of $45,000.
Mr Kemp sent a series of blunt text messages to Mr McDonald chasing up payment. The messages were sent on 16 October 2019, 5 November 2019, 11 November 2019, 13 November 2019, 26 November 2019, 28 November 2019, 28 January 2020, 31 January 2019, 20 February 2020, 11 April 2020, and 14 April 2020. On receipt of the text messages Mr McDonald’s frequent response was to promise payment or to explain what he was doing to secure payment.
On 22 May 2020 there was a change to the tone of the texts. The respondent’s submissions neatly explain the text exchange in this way:
(a)the respondent sent a text message to the applicant’s director stating: “No money yet ??????”;
(b)the applicant sent a text message to the respondent’s director stating: “No, working on it, but you have bene talking out of school so this changes things, just thinking of my options, I know I am going to require a full itemized account that should have forwarded initially not that thing you sent me, so you should get cracking on that. Have you got my back up now you bet” (emphasis added);
(c)the respondent sent a text message to the applicant’s director stating “Listen clearly .don’t come your crap with me.is this the way you prolong paying.. this has gone over one-year …eather you pay! Or not .i won’t be going to lawyers or court…”;
(d)the applicant sent a text message to the respondent’s director stating “I will be paying never said that, never would do that”; (emphasis added)
(e)the applicant again confirmed he would pay when he said “Have my phone back after repairs from late last week, I thought I made it quite clear you will get your money in due course, I have other accounts I will be paying first , you spoke out of school so I don’t care if it takes a little longer, I would also appreciate the full breakdown of my account …”. (emphasis added)
If that were the extent of the evidence, the conclusion could easily be drawn that any defence of the respondent’s claim could be regarded as thin and shadowy and lacking any genuine dispute. Even with the provocation of ‘speaking out of school’ Mr McDonald still assured Mr Kemp that the invoice would be paid. Certainly, the claims relating to the $20,832 for the 34 invoices and the claim for the value of the refrigerator ($25,000) appear to have no basis.[3]
[3]None of the items were in fact charged by the respondent. The refrigerator is available to be collected.
Mr McDonald’s Further Evidence
Mr McDonald’s second affidavit, as I have explained, corrects the chronology in the first affidavit. That affidavit also explains that Mr McDonald only became aware of the problems with the repairs to the truck when the truck was used at the Hall Creek mine. He says that the items 15, 18, 19 and 20 in paragraph 39 of his first affidavit, totalling $18,600, are costs incurred with external parties in remedying the work undertaken by the respondent. My calculation is that those figures total only $13,960. Mr McDonald says that items 16 and 17 (totalling $668) were associated travel costs. The amount of $3,970 in item 21 was costs incurred in relation to the Cracow mine -which is said to have occurred 12 months after the truck was collected.
Mr McDonald’s affidavits record claims of a further $10,959 in travel and related expenses and re-work estimated at $12,515. Mr McDonald also speaks of lost profit without estimating that loss. Mr McDonald raises queries about the respondent’s charges and explains that he requested a breakdown of the respondent’s invoice. He says he believes the applicant has been grossly and improperly overcharged.
Procedural History
The interaction between the parties has been relatively sparse since mid-2020. On 19 April 2023 the respondent’s statutory demand was served. Curiously, it was dated 19 April 2022 and is supported by an affidavit by Mr Kemp of the same date. This application to set aside the statutory demand was filed on 9 May 2023.
The Principles
This application turns on whether the applicant has demonstrated a genuine dispute as to the respondent’s claim, or an offsetting claim.[4]
[4]The consideration of the claim and the offsetting claim are necessarily intertwined.
McMeekin J set out a useful statement of the relevant principles in Thomasson Earthmoving Pty Ltd v Cyonara Snowfox Pty Ltd:[5]
I take the test that I ought to apply as that enunciated by McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, where he described the expression “genuine dispute” as connoting “a plausible contention requiring investigation.” He equated the expression to the criterion of “serious question to be tried,” the familiar test applicable on an application for interlocutory injunction.
The onus of course is on the applicant to establish that the dispute is bona fide and truly exists in fact and that the grounds alleging the existence of the dispute are real and not “spurious, hypothetical, illusory or misconceived”: see Spencer Construction Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 464.
Mr Arnold, counsel who appeared for the applicant, drew my attention to the comments of Barrett J in Solarite Air Conditioning Pty Ltd v York International Australia Ltd [2002] NSWSC 411 at [23] where he commented that “the task faced by a company challenging a statutory demand on the ‘genuine dispute’ ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s 459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger.”
To like effect are the comments of Thomas J in Re Morris Catering (Aust) Pty Ltd (1993) 11 ACSR 601 at 605, where his Honour emphasised that it was not the task of the court to “examine the merits or settle the dispute” and that “beyond a perception of genuineness (or lack of it) the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed.” [emphasis added]
[5][2010] QSC 48 at [4]-[7].
The reasons of Dodds-Stretton JA in TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd[6] are to similar effect:
As the terms of s 459H of the Corporations Act and the authorities make clear, the company is required, in this context, only to establish a genuine dispute or off-setting claim. It is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a 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. As counsel for the appellant conceded however, it is not necessary for the company to advance, at this stage, a fully evidenced claim. Something ‘between mere assertion and the proof that would be necessary in a court of law’ may suffice. A selective focus on a part of the formulation in South Australia v Wall, divorced from its overall context, may obscure the flexibility of judicial approach appropriate in the present context if it suggests that the company must formally or comprehensively evidence the basis of its dispute or off-setting claim. The legislation requires something less. [emphasis added]
[6](2008) 66 ACSR 67; (2008) 26 ACLC 342 at [71].
The respondent draws a parallel between this case and Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq).[7] In that case there were, as there are here, promises to pay. Certainly, that case supports the proposition that the court must seriously question the genuineness of an alleged dispute where there has been an acknowledgement of the debt after the invoices the subject of the statutory demand were received.
[7][2015] VSC 530.
Principles Applied
However, the relevance of Malec Holdings diminishes once it is appreciated that the real dispute, or at least the more probative dispute raised by the applicant, is not limited to disputing the amount claimed by the respondent but rather prosecuting an offsetting for the performance of negligent work on the truck. The dispute raised is whether the repairs were performed properly or not.
It is true that the applicants’ case disputing the debt, and raising an offsetting claim, is not a promising one. There is the murky basis on which the parties contracted with each other.[8] Then, there is Mr McDonald’s involvement in the repair work. There are disputes as to whether Mr McDonald supervised the work and as to the extent of his involvement. And there are Mr McDonald’s promises to pay and his rather unreliable chronology.
[8]See earlier discussion.
All of those hurdles for the applicant must be acknowledged. But Mr McDonald swears to the need for repairs and that those repairs arose out of negligent work by the respondent. That sworn evidence cannot be lightly dismissed. As Thomas J noted in Re Morris Catering (Aust) Pty Ltd applications to set aside statutory demands are not the forum for examining the merits of the claim.[9] It is sufficient that Mr McDonald’s evidence cannot be characterised as spurious, hypothetical, illusory or misconceived.[10] At the least, further investigation is warranted.
[9]See the quote above.
[10]Nor can it be said that the dispute is a ‘merely spurious claim, bluster or assertion’: TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67; (2008) 26 ACLC 342 at [71].
There is some quantification and, at the least, a ‘plausible contention’ about the quantum of the applicant’s offsetting claim.[11]
[11]See Crontec Automotive Tooling Pty Ltd v Allsteel Australia Pty Ltd [2006] NSWSC 55 at [34].
The respondent contended that the chronology did not add up and that the imprecision in the applicant’s claims adds weight to the argument that the dispute is not genuine.[12] That argument illustrates the problem. The present exercise does not involve the weighing of the evidence, or a balancing exercise between the strengths of competing contentions. It involves an assessment as to whether there is an arguable case. In my view there is sufficient.
[12]Respondent’s submissions at [45].
For those reasons, the application will be allowed.
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