Niroda Holdings Pty Ltd v Road Contractors Pty Ltd
[2018] WASC 10
•16 JANUARY 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: NIRODA HOLDINGS PTY LTD -v- ROAD CONTRACTORS PTY LTD [2018] WASC 10
CORAM: ACTING MASTER STRK
HEARD: 21 JUNE 2017
DELIVERED : 16 JANUARY 2018
FILE NO/S: COR 31 of 2017
BETWEEN: NIRODA HOLDINGS PTY LTD
Plaintiff
AND
ROAD CONTRACTORS PTY LTD
Defendant
Catchwords:
Corporations law - Application to set aside statutory demand - Genuine dispute - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 459G, s 459H, s 459J
Result:
Statutory demand set aside
Category: B
Representation:
Counsel:
Plaintiff: Mr L F G Swanson
Defendant: Mr A P Rumsley
Solicitors:
Plaintiff: Hotchkin Hanly Lawyers
Defendant: Western Legal
Case(s) referred to in judgment(s):
Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5
Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37
Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85
Laing O'Rourke Australia Construction Pty Ltd v Samsung C&T Corporation [2016] WASCA 130; (2016) 50 WAR 399
Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290
Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; (2009) 24 VR 510
Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294
ACTING MASTER STRK: This is an application by the plaintiff to set aside a statutory demand issued by the defendant dated 2 February 2017. The application was brought within 21 days.
The plaintiff is a company that carries on the business of land development. The defendant is a company that carries on the business of civil construction services.[1]
[1] Affidavit of Robert Casella sworn 23 February 2017 [3], [6].
The plaintiff's application was supported by two affidavits. The first affidavit was sworn on 23 February 2017 by Robert Casella, sole director and company secretary of the plaintiff (the Casella affidavit). The second affidavit was sworn by Colin Ryk Kleyweg on 28 March 2017, managing director and principal civil engineer of KC Traffic and Transport Pty Ltd (KCTT) (the Kleyweg affidavit).
The plaintiff also relies upon submissions filed on 27 April 2017 and its responsive submissions filed on 16 June 2017.
A copy of the statutory demand appears as attachment RC17 of the Casella affidavit. The statutory demand refers to the amount of $181,319.72, being the total sum of debts described in the schedule to the statutory demand, particularised as follows:[2]
Claim $170,085.32
Interest from 1 March 2016 to 2 February 2017 $11,234.40
Daily Interest until payment of the sum claimed $38.08
Total $181,319.72
[2] The total sum of the debts described in the schedule to the statutory demand is in fact $181,357.80, and not $181,319.72.
By the statutory demand, the defendant says that it is owed the amount of $170,085.32 pursuant to a contract numbered [KC00319.013], executed by the plaintiff and dated 26 November 2015, together with interest at the Business Reference Rate of 6.70% + 1%, from 1 March 2016 until payment of the debt.
The statutory demand was accompanied by an affidavit as is required by s 459G(3)(a) of the Corporations Act 2001 (Cth). The affidavit was sworn on 2 February 2017 by Rohan Howard, the sole director of the defendant (Howard affidavit).[3]
[3] The Howard affidavit forms part of attachment RC17 of the Casella affidavit.
The plaintiff's position
The plaintiff denies that it is indebted to the defendant in the amount claimed in the statutory demand.[4]
[4] See plaintiff's outline of submissions filed 27 April 2017.
First, the plaintiff says that there is a genuine dispute between it and the defendant about the existence of the debt which the demand relates pursuant to s 459H(1)(a) of the Corporations Act. The plaintiff says that the genuine dispute arises as the defendant relies on the survival of a deeming provision under a terminated contract, which the plaintiff says falls away after termination of the contract between the parties.
Secondly, the plaintiff says that there is a genuine dispute as to the amount of the debt which the demand relates pursuant to s 459H(1)(a) of the Corporations Act. The plaintiff says that the Superintendent appointed under the relevant contract did assess the final payment claim submitted by the defendant in an amount less than the amount claimed by the defendant in the statutory demand.
Thirdly, the plaintiff says that it has an offsetting claim pursuant to s 459H(1)(b) of the Corporations Act.
The defendant's position
In opposition to the plaintiff's application, the defendant relies on its outline of submissions filed 12 June 2017.
At the time of filing its submissions, the defendant indicated that it did not seek to rely upon any responsive affidavits in opposition to the plaintiff's application. The Howard affidavit accompanied the statutory demand and was already before the court as part of RC17 of the Casella affidavit.
Upon receipt of the plaintiff's responsive submissions filed on 16 June 2017, an affidavit was sworn on 19 June 2017 by David George Powell, a law clerk employed by the defendant's solicitors (Powell affidavit). By oversight on the part of the defendant's solicitors, the Powell affidavit was not filed. At the hearing on 21 June 2017, the defendant sought leave to rely on the affidavit of David George Powell in response to a submission made in the plaintiff's responsive submissions. The defendant sought to introduce the Powell affidavit to ensure that the court was not misled when considering the question of whether the plaintiff has an offsetting claim pursuant to s 459H(1)(b) of the Corporations Act.
After hearing counsel for the plaintiff and the defendant, I did not rule on the question of leave. I indicated that if anything ultimately turned on the Powell affidavit, I would determine the question of leave and the objection, and make clear my decision in these reasons. The Powell affidavit was not ultimately relevant to the determination of the application.
Genuine dispute
The first substantive question to be determined is whether the court is satisfied that there is a genuine dispute between the plaintiff and the defendant about the existence or amount of a debt to which the demand relates. In this application the plaintiff bears the onus of establishing that it has a genuine dispute.
There are many cases which discuss what the phrase 'genuine dispute' actually means. In this case, there appeared to be no conflict as between the parties as to the principles to be applied in determining whether a statutory demand should be set aside on the basis of the existence of a genuine dispute.
As to the applicable principles, I refer the judgment of his Honour the Chief Justice in Createc Pty Ltd v Design Signs Pty Ltd.[5] For present purposes, I note that the plaintiff must establish a plausible contention which requires investigation. The plaintiff must establish that the disputed issue of fact or law is bona fide and truly exists in fact, and the grounds alleging the existence of the dispute are real and not spurious, hypothetical, illusory or misconceived. As observed by the Chief Justice in Createc, 'it is also well established that the only function of the court is to determine whether there is a genuine dispute - the court is not expected to undertake an extended inquiry nor attempt to weigh the merits of the dispute'.[6]
[5] Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85 [43] ‑ [46] (Martin CJ).
[6] Createc Pty Ltd v Design Signs Pty Ltd [46], citing Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290.
The plaintiff says that a genuine dispute arises as to the existence and amount of the debt which the demand relates.[7] The defendant outlines problems with the plaintiff's position. The parties' positions are summarised as follows.
[7] The explanation of the plaintiff's basis for asserting the existence of a genuine dispute is substantively taken from the plaintiff's submissions filed on 27 April 2017 [14] ‑ [ 27].
(a)The plaintiff engaged the defendant to perform civil works and earthworks at various development projects in Como, Baldivis and North Dandalup in Western Australia during 2015 and 2016.
(b)The defendant claims that the debt the subject of the statutory demand is due and payable and arises pursuant to an agreement dated 26 November 2015 (North Dandalup Contract), and the operation of cl 42.1 of the Australian Standard General Conditions of Contract (AS 2124-1992) (Conditions of Contract), which was incorporated into the North Dandalup Contract.[8]
[8] In the statutory demand, the North Dandalup Contract is referred to as contract numbered [KC00319.013] dated 26 November 2015.
(c)The plaintiff and the defendant also entered into a contract for the provision of civil works and earthworks at a development in Baldivis, Western Australia (Baldivis Contract) in or about January 2015.
(d)Between November 2015 and January 2016, the defendant performed works for the plaintiff pursuant to the North Dandalup Contract. The rights and obligations of the parties relating to progress payments that operated while the North Dandalup Contract was on-foot were governed by the operation of cl 42.1 of the Conditions of Contract.
(e)On or about 31 January 2016, the parties mutually terminated the North Dandalup Contract. The plaintiff says that the termination was due to the defendant's performance.
(f)On 2 February 2016, after the North Dandalup Contract was mutually terminated by the parties, the defendant submitted its final claim for payment for works up to 31 January 2016.
(g)The Superintendent under the North Dandalup Contract and the Baldivis Contract was KCTT.
(h)Clause 42.1 of the North Dandalup Contract, as amended, states:[9]
[9] Clause 42.1 of the North Dandalup Contract is reproduced at [6] of the Howard affidavit; which forms part of RC17 of the Casella affidavit, page 210.
Subject to the provisions of the Contract, within 28 days after the receipt by the Superintendent of a claim for payment or within 14 days of issue by the Superintendent of the Superintendent's payment certificate, whichever is the earlier, the Principal shall pay to the Contractor or the Contractor shall pay to the Principal, as the case may be an amount of not less than the amount shown in the Certificate as due to the Contractor or to the Principal as the case may be, or if no payment certificate has been issued, the Principal shall pay the amount of the Contractor's claim.
(i)The defendant asserts that cl 42.1 of the North Dandalup Contract survives termination of the North Dandalup Contract, and relies upon the purported failure by the Superintendent to issue a payment certificate as the source of the debt the subject of the statutory demand. The defendant says that the operation of the deeming provision within cl 42.1, in circumstances where no payment certificate was issued, results in a debt 'due and payable' by the plaintiff to the defendant in the amount of its 2 February 2016 payment claim.
(j)The plaintiff asserts that the clear purpose of cl 42.1 is for progress payments, to ensure that payment is made while work is on-going. However, the parties elected to mutually terminate the North Dandalup Contract. As there was no clear intention or agreement to the contrary, the operation of the payment claim regime under cl 42.1 cannot and did not survive termination, and cannot now be relied upon by the defendant to support a statutory demand alleging that a debt is due and payable.
(k)The plaintiff further says that there is no evidence that the parties expressly agreed what sum, if any, would properly be due to the defendant, and, in particular, how any claim for payment ought to be processed as at the date of termination. As the agreement for payment of a fixed sum as consideration for a fixed scope of work fell away by reason of the termination, the plaintiff says it follows that:
(i)the amount due, if any, from the plaintiff to the defendant would be the value of the works completed to the date of termination, less all payments made prior to that date, by way of a quantum meruit; and
(ii)if the Superintendent had any role in provisionally assessing what sum, if any, was payable, that obligation was subject to an implied term that he do so within a reasonable time, and subject to the express obligation under the Contract to do so in good faith.[10]
(l)The defendant in its submissions filed 27 April 2017 says that there are two problems which are fatal to the plaintiff's asserted position. First, the plaintiff relies on a decision of the Court of Appeal in Laing O'Rourke Australia Construction Pty Ltd v Samsung C&T Corporation,[11] which dealt with a payment clause which would expressly apply after termination and a payment clause which operated during the contract, with only parts expressed to survive termination.[12] The defendant says that, in contrast, the North Dandalup Contract did not have a similar post termination payment provision and as such the decision can be distinguished. Secondly, the defendant says that the plaintiff agreed with the letter of the Superintendent that claims up to 1 February 2016 would be assessed and paid.[13] The defendant says that after terminating the North Dandalup Contract from 1 February 2016, the plaintiff agreed with the Superintendent that 'all works completed up to the 1st of February 2016 will be assessed and a final certificate will be issued for payment and shall be agreed as the final payment'.[14] The defendant says that if there was any question as to whether cl 42.1 continued to apply after 1 February 2016, the Superintendent's letter, co‑signed by Mr Casella, confirms that it did continue to apply.
(m)The plaintiff, by its responsive submissions filed 16 June 2017, asserts that the defendant has misdescribed the evidence, and identifies what it says is the misdescribed evidence, and the proper application of legal principles.[15] The plaintiff also says that if the defendant seeks to rely on cl 42 on the basis that it survives termination, it must establish by evidence that a progress certificate was due from the Superintendent, because any liability for payment on the part of the plaintiff is expressed to be 'subject to the provisions of the Contract', but in this case, fails to establish the same.[16]
[10] Plaintiff's submissions filed on 27 April 2017 [27]. The plaintiff cited in support of its contention at (a) Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; (2009) 24 VR 510 [12] (Maxwell P, Kellam JA & Whelan AJA).
[11] Laing O'Rourke Australia Construction Pty Ltd v Samsung C&T Corporation [2016] WASCA 130; (2016) 50 WAR 399.
[12] Laing O'Rourke Australia Construction Pty Ltd v Samsung C&T Corporation [20] ‑ [21] (Martin CJ, McLure P & Newnes JA agreeing).
[13] Defendant's outline of submissions [12].
[14] Defendant's outline of submissions [13], citing the Casella affidavit at page 180.
[15] Plaintiff's responsive submissions [16] ‑ [23].
[16] Plaintiff's responsive submissions [11] ‑ [14].
I have given careful consideration to the submissions made on behalf of the parties. I find that there is a genuine dispute as to the proper construction of the North Dandalup Contract, and the operation of cl 42.1 after termination. That is, there is a plausible contention that requires investigation. I am not satisfied that the grounds for alleging a genuine dispute are wholly misconceived, nor are they spurious, hypothetical, or illusory. On the materials before me, I am satisfied that there is a claim that may have some substance.[17] As was the case in Createc Pty Ltd v Design Signs Pty Ltd, the submissions made on behalf of the defendant in this case are not so much directed to the existence of a dispute, but to its suggested resolution.[18]
[17] Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5 [12] (Murphy JA), citing Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37, 39 (Lockhart J).
[18] Createc Pty Ltd v Design Signs Pty Ltd [52] (Martin CJ).
Once such a dispute is raised, it is not necessary for the plaintiff to satisfy the court as to where the merits of the dispute lie.[19]
[19] Central City Pty Ltd v Montevento Holdings Pty Ltd [9] (Murphy JA), citing Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294 [30].
The court will not attempt to weigh or examine the merits of any dispute.[20]
[20] Central City Pty Ltd v Montevento Holdings Pty Ltd [9], citing Createc Pty Ltd v Design Signs Pty Ltd [46]; Mibor Investments Pty Ltd v Commonwealth Bank of Australia (295).
Having reached this conclusion, it is not necessary for me to deal with the question of whether the plaintiff has, for the purpose of s 459H(1)(b), established a genuine offsetting claim.
The statutory demand will be set aside. I will hear the parties as to the form of orders and as to costs.
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