New Energy Corporation Pty Ltd v Kiewit Australia Pty Ltd - [2017] WASC 319

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: NEW ENERGY CORPORATION PTY LTD -v- KIEWIT AUSTRALIA PTY LTD [2017] WASC 319

CORAM: MASTER SANDERSON

HEARD: 9 OCTOBER 2017

DELIVERED : 9 NOVEMBER 2017

FILE NO/S: COR 189 of 2017

BETWEEN: NEW ENERGY CORPORATION PTY LTD
Plaintiff
AND
KIEWIT AUSTRALIA PTY LTD
Defendant

Catchwords:

Corporation law - Application to set aside statutory demand - Turns on own facts

Legislation:

Nil

Result:

Demand set aside

Category: B

Representation:

Counsel:

Plaintiff: Mr M F Holler
Defendant: Mr P J Ward

Solicitors:

Plaintiff: Trinix Lawyers
Defendant: Jones Day

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

Nil

MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. The demand appears as attachment JGP2 to an affidavit of Jason Garrith Pugh sworn 3 August 2017. In the schedule under the heading 'Description of the debt', there appears the following:
Unpaid invoices for the provision of services pursuant to Services Agreement dated 15 April 2014 between New Energy Corporation Pty Ltd (the Company) and Kiewit Australia Pty Ltd (the Creditor) for the East Rockingham Waste to Energy FEED Project. The debt is for the outstanding invoice 'Payment Request - 08' dated 27 February 2015, which consists of the amounts required by the following invoices.
There follows a list of seven invoices said to be issued between 20 June 2014 and 18 November 2014. The total amount of the debt is $879,985.50. There is no dispute between the parties the statutory demand satisfies the requirements of the corporations law and the application to set it aside was brought within time.
The relevant facts can be summarised as follows. In early 2013, the plaintiff was seeking to construct waste to energy facilities in East Rockingham and Port Hedland. The aim was to process waste to generate electricity using proprietary gasification technology, the global rights to which were held by the plaintiff. The plaintiff required funding from financiers to construct the projects. To obtain that finance it had to have what is described as an 'EPC contract'. That is, an engineering procurement and construction contract. The plaintiff says contained within the EPC contract there had to be certain performance guarantees. These performance guarantees are described as a 'full wrap'. An EPC contract with a full wrap made the projects bankable.
The plaintiff called for expressions of interest. The defendant, among others, responded. The defendant was selected to conduct a presentation to the plaintiff. It is the plaintiff's case during the presentation the defendant produced a slide which highlighted as one of the key benefits to the plaintiff that the defendant would provide 'EPC wrap with performance guarantees'. Subsequent to the presentation, the parties entered into negotiations with a view to entering an early contractor involvement contract (ECI contract) to conduct the FEED study. This ECI contract was to be a precursor to the EPC contract. The ECI contract in attachment A under 'Scope of Services' said the EPC contract would provide 'performance guarantees'.
On 20 April 2015, the defendant completed the FEED study. With the FEED study and the ECI phase successfully completed, the plaintiff presented the defendant with a draft terms sheet for an EPC contract. This contract included the full wrap requirement which the plaintiff says was always to be included in the final EPC contract. At that point the defendant indicated it would not be providing the full wrap. The plaintiff says this was the first time the defendant had indicated the full wrap would not be provided. As a consequence, the plaintiff says it could not enter into the EPC contract and two years had been wasted in the process of selecting and engaging the defendant. The plaintiff says it could not afford another two years to restart the process from scratch and was forced to abandon the use of the proprietary technology in the projects. Furthermore, the East Rockingham project would not go ahead and the FEED report and associated documents which the plaintiff received under the ECI contract from the defendant were worthless. The plaintiff says it has paid the defendant $879,985.50 under the ECI contract and it will seek to recover that amount from the defendant.
In summary, the plaintiff says the defendant has engaged in misleading and deceptive conduct and as a consequence the plaintiff has a claim equal to, or greater than, the amount claimed in the statutory demand. On that basis it says the demand should be set aside. There was no dispute between the parties as to the test applicable in these circumstances. The plaintiff must establish there is a serious question to be tried or a plausible contention which requires examination. In my view, the plaintiff has met that low threshold. It is not altogether easy to follow the process and establish just how it is the plaintiff says the defendant represented that the full wrap would be provided. However, in the document entitled 'Request for EOI for an EPC Contractor', cl 6.1 with the subheading 'Overview' reads as follows:
New Energy Corporation seeks a contractor to take on the project on a 'full wrap' EPC basis. NEC's definition of 'full wrap' is that the contractor will be responsible for all design, supply, construction, project management and any associated risks including process risk to deliver the project to full operation as outlined herein. To ensure the project is setup to minimise the risk to both NEC and the selected contractor the contractor is expected to participate in an Early Contractor involvement stage whereby full visibility of contract scope and cost will provide the basis for final contract negotiations between the parties.
The parties did enter into a written ECI contract. That contract appears as attachment JGP7 to Mr Pugh's affidavit. It says nothing about the full wrap requirement. The ECI contract does contain an entire agreement clause (cl 20(g)) but it makes no mention of any guarantees in any form. It is, in my view, arguable the plaintiff entered into that contract based upon representations made by the defendant prior to the contract being signed. Accordingly, the demand should be set aside.
In reaching this conclusion I have given consideration to two affidavits filed on behalf of the defendant. They are the affidavits of Eliza Clare Collopy sworn 19 September 2017 and the affidavit of Sujit Roy Chowdhury sworn 20 September 2017. Both of these affidavits are really directed at the same points. It is clear that this issue of the alleged misleading and deceptive conduct was never raised by the plaintiff in discussions between the plaintiff and the defendant in relation to payment of the defendant's accounts. The defendant says the plaintiff's case is nothing more than concocted evidence designed to avoid paying what is in truth owing. The difficulty with that argument is the plaintiff has, through Mr Pugh, provided sworn evidence which for the purpose of this application must be accepted. Of course if the evidence was fanciful and could not on any reasonable basis be accepted then the application would be dismissed. But that is not the case here. I must accept the sworn evidence of Mr Pugh and on that basis I could not conclude, because the alleged misrepresentations were not raised in discussions between the parties, there is no substance to the plaintiff's claim.
There is a second matter and that has to do with the defendant's offer to provide back‑to‑back guarantees to the plaintiff. As I understand the thrust of Mr Chowdhury's evidence, back‑to‑back guarantees in all the circumstances would have been sufficient to satisfy the plaintiff's needs. This argument runs up against the same problem. The plaintiff says that what it required was the full wrap. Anything less was unsatisfactory. To suggest that the defendant has, in effect, provided a full wrap does not answer the plaintiff's claim.
There was a second argument put by counsel for the plaintiff. He submitted that as a dispute has arisen as to payment of invoices, it was incumbent upon the defendant to initiate the dispute resolution process found in cl 13 of the ECI contract. In my view, there was no substance to that argument. Payment is dealt with in cl 4 of the ECI contract. The defendant had followed the steps mandated by that clause and nothing had been done by the plaintiff to indicate there was a dispute. There was simply no basis for the defendant to take any steps under cl 13.
The statutory demand will be set aside. I will hear the parties as to the form of orders and as to costs.