Offshore and Ocean Engineering v Greenwich Contractors
[2012] NSWSC 889
•26 July 2012
Supreme Court
New South Wales
Medium Neutral Citation: Offshore and Ocean Engineering v Greenwich Contractors [2012] NSWSC 889 Hearing dates: 26/07/2012 Decision date: 26 July 2012 Jurisdiction: Equity Division - Corporations List Before: McDougall J Decision: Vary demand; extend time for compliance
Catchwords: [CORPORATIONS] - statutory demand - application to set aside - whether Graywinter principles apply to preclude reliance on grounds not expressly or by inference identified in supporting affidavit - whether genuine dispute as to existence of debt. Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452
In the matter of Homeward Bound Export Cherry Project Pty Ltd [2012]
Process Machinery Australia Pty Ltd v ACN 057 262 590 Pty Ltd [2002] NSWSC 45
Tokich Holdings Limited v Sheraton Constructions (NSW) Pty Ltd (in Liquidation) 185 FLR 130Category: Principal judgment Parties: Offshore and Ocean Engineering Pty Ltd (Plaintiff)
Greenwich Contractors Pty Ltd (Defendant)Representation: Counsel:
A G Martin (Plaintiff)
S T O'Brien (Defendant)
Solicitors:
MBP (Plaintiff)
Bransgroves Lawyers (Defendant)
File Number(s): 2012/151873
Judgment - ex tempore (revised 26 july 2012)
HIS HONOUR: On about 20 April 2012, the defendant (Greenwich) served on the plaintiff (Offshore) a statutory demand, bearing that date, claiming in total $208,870.59. By originating process filed on 11 May 2012, Offshore moves for orders under ss 459H or 459J of the Corporations Act 2001 (Cth) setting aside that statutory demand.
The demand
The debt claimed by the demand was particularised in the schedule as being owed for fabrication, labour and materials supplied by reference to some five invoices:
(1)Invoice 2282, dated 14 December 2012, was said to have a balance outstanding of $13,224.70.
(2)Invoice 2284, dated 21 December 2012, was said to be owing in full: $20,322.61.
(3)Invoice 2330, dated 22 February 2012, was said to be owing in full: $128,526.53.
(4)Invoice 2331, dated 22 February 2012, was said to be owing in full: $34,650.
(5)Invoice 2351, dated 30 March 2012, was said to be owing in full: $12,146.75.
The grounds of dispute
In an affidavit accompanying the originating process, Mr Alsop, the
director of Offshore, set out the grounds of dispute as to each of those invoices in para 3. As to the first three invoices (2282, 2284 and 2230) Mr Allsop asserted:
There is no verification of working times and materials and this is not reconcilable with the plaintiff's records. No verification documentation has been supplied.
As to invoice 2331 (which, it appears is common ground, related to the repair or remanufacture (depending on one's point of view) of a crane boom), Mr Alsop said that Greenwich did not provide:
documentation verifying that the crane was remanufactured to ABS class certification nor provided with appropriate class documentation. Although documentation was to be submitted, this in fact never occurred.
As to the fifth invoice, 2351, Mr Alsop said that it had never been rendered to Offshore.
The applicable principles
The principles relating to applications under ss 459H and J, or their statutory predecessors, have been stated so many times that it seems to me to be unnecessary to do more than state the bare minimum necessary to enable my reasons to be understood. A convenient statement of the principles may be found in the decision of Black J in In The Matter of Homeward Bound Export Cherry Project Pty Ltd [2012] NSWSC 764 at [4] to [7].
The threshold that the recipient of the demand must satisfy is not strict. Nonetheless, something more than mere assertion is required. The court is required to be satisfied that there is a dispute that is not plainly vexatious or frivolous, or that there is a claim (either as to the existence of the debt or as to some offsetting claim) that may have some substance.
Where the court is satisfied that the threshold has been met it is appropriate to grant relief. That is because there is no ability, on the hearing of applications under the sections in question, for the court to investigate and pronounce upon the merits of the dispute that is shown to the requisite level of satisfaction to exist.
I start with the last two invoices on which reliance is placed (2331 and 2351).
Invoices 2331 and 2351
As I have said, it is common ground that invoice 2331 relates to work done on a crane boom. Offshore says, through Mr Alsop, that the boom was remanufactured. It says, further, that where a crane or a substantial part of it is remanufactured, what results from that work must be certified according to some standard. It says that the appropriate certification was not provided.
Greenwich wishes to say (although its evidence on the point was lamentable, to the extent that it was admissible) that there is no such requirement. In any event, as I understand it, Greenwich says that the crane boom was not relevantly remanufactured, in such a way as to engage whatever certification process may be necessary, but merely that substantial repairs were carried out.
On the face of the material, I am satisfied that there is a plausible contention requiring investigation which is not spurious, hypothetical or illusory. I am satisfied that there is a genuine dispute as to this invoice.
The suggested "defence" in relation to invoice 2351 is that it was never delivered to Offshore. In circumstances where (so far as the evidence shows) the parties appear to have proceeded on the basis that work done from time to time would be invoiced, and that payment would be made on or within some appropriate time after receipt of the invoice, the proposition that the invoice had not been given to Offshore at the time the statutory demand was served likewise, in my view, raises, beyond the level of mere assertion, an argument as to why the invoice was not payable at the time the demand was served.
Thus, as to those two invoices, I am satisfied that there is a genuine dispute.
Invoices 2282, 2284 and 2330
I return to invoices 2282, 2284 and 2330.
The "Graywinter" argument
Before dealing with those invoices individually (to the extent that it is necessary to do so) I should note that there was a "Graywinter" argument as to much of the evidence for Offshore in relation to those invoices. (See Graywinter Properties Pty Ltd v Gas and Fuel Corporation Superannuation Fund (1996) 70 FCR 452.)
I have set out above the grounds asserted by Mr Alsop, in his affidavit accompanying or in support of the originating process, for disputing the amounts claimed.
In a further affidavit sworn 18 June 2012, Mr Alsop asserted (at para 8) that he had had a meeting with representatives of Greenwich in relation to which a maximum budget for the proposed works was agreed at $220,000. According to Mr Alsop, any amounts beyond that were to be the subject of agreement before the work should be undertaken. He says that this too was agreed.
In a further affidavit, filed in court by leave at the hearing, Mr Alsop sought, among other things, to refer to what he said was a contemporaneous note made by him of the conversation referred to in para 8 of his earlier affidavit.
Objection was taken to the relevant paragraphs of the two affidavits and I rejected them. I said that I would give reasons, and I now do so.
Again, the "Graywinter" principle has been dealt with so many times that it does not seem to me to be necessary to do more than state the outcome of the cases, as I understand them. In Homeward Bound, Black J (at [16]) stated the result as being that the only grounds of opposition which may be relied on in an application to set aside a statutory demand are those identified in the affidavits supporting the application, and those which may necessarily or reasonably be drawn from documents relied on in those affidavits.
Other cases refer to the grounds being those that, either expressly or by necessary or reasonably available inference, are made out in the affidavits supporting the application: See Process Machinery Australia Pty Ltd v ACN 057 262 590 Pty Ltd [2002] NSWSC 45 at [22] and Tokich Holdings Limited v Sheraton Constructions (NSW) Pty Ltd (in Liquidation) (2005) 185 FLR 130 at [51] to [56], where the relevant principles and authorities are reviewed.
In this case, on a fair reading, the affidavit in support of the application stated, in relation to the three invoices with which I am presently concerned, that the working times had not been verified and "this" (which might be taken to be either the working times, or the amounts claimed, or both) was or were "not reconcilable with the plaintiff's records".
It does not seem to me that by any process of implication, necessary, reasonable or otherwise, this could be read as asserting that there was an underlying argument that a budget had been agreed, and that the claims that were asserted by the invoices in question exceeded the budget and had not been the subject of agreement.
In this context, it is necessary to bear in mind that in para 21 of his second affidavit, of 18 June 2012, Mr Alsop said that he received the invoices in question on 22 February 2012, and that either at or about that time he undertook a detailed review. He also said in para 18 that the invoices were "grossly inflated", "did not record with sufficient detail and particularity the scope of the works performed" and "were not ... authorised and verified with signatures ... as required by the agreement between the parties".
It is clear that Mr Alsop turned his mind to "the agreement between the parties" in February 2012, for the purpose of satisfying himself that the invoices were not payable. At that time, on his evidence, Offshore had paid close to $240,000 to Greenwich for various works: an amount in line with, although exceeding by about $20,000, the suggested review limit. The invoices the subject of the demand total in round terms $209,000. It is beyond comprehension that if Mr Alsop had turned his mind to the contract, and its terms, when he received the invoices in question, he would not have realised those matters.
I simply do not agree that a defence, on the basis that the works were unauthorised because they exceeded the agreed reviewed limit and were not the subject of express permission, can be taken to be flagged in any, let alone any reasonable, way by an assertion that the invoices were not reconcilable with such records as Offshore held. It is plain that by the time Mr Alsop came to swear his affidavit in support of the originating process, he had carried out the review, and must have been aware of the matters of arithmetic to which I have referred. Thus, there was no need for the proposition (that the works were unauthorised) to be one that was available by necessary inference, or even reasonable inference, from what was said. It was a proposition that Mr Alsop was able to state particularly and specifically if he thought it had substance (compare, for example, the argument in relation to the crane boom invoice number 2331).
For those reasons, I ruled that the evidence in question was excluded by application of the Graywinter principle as I have stated it.
No dispute is shown
However, Mr Martin of counsel, who appeared for Offshore, submitted nonetheless that the evidence showed a real dispute, to the requisite level, in relation to those three invoices. He referred to paras 25 to 27 of Mr Alsop's affidavit of 18 June 2012 (those paragraphs, it appears, being intended to be read in conjunction with paras 20 to 24 of the third affidavit, sworn 25 July 2012).
In relation to invoice 2282, para 25 of the affidavit of 18 June 2012 says that it is "completely disputed" on the basis that "the total claim for offsite labour seemed [sic] excessive when compared against the works that were actually produced". It stated, further, that not all dockets (I think, work dockets) in support of the invoice had been produced.
In relation to invoice 2284, para 26 of the affidavit says that it appears "to be a rewrite of dockets associated with cancelled invoice #2272 with an associated exaggeration and uplifting of costs and times claimed". It notes, further, that four of the supporting dockets "were not verified by [Offshore] personnel".
In relation to invoice 2330, para 27 refers to "substantive delay...in issuing" that invoice and asserts that this delay "raises concerns over the accuracy of amounts claimed". It then turns to the various supporting dockets. As to one, it says that there is "no particularisation". As to another six, it notes simply that they relate to "unspecified workshop service".
In terms of the threshold test, as I have stated it, the paragraphs in question seem to me to be nothing more than assertion. The claim that an invoice "is completely disputed" does no more than assert emphatically that there is a disagreement. It does not assign any basis for that disagreement. The basis given, namely that the claim seems excessive, is an assertion totally unilluminated by reference to any fact or reasoning.
Likewise, in relation to invoice 2284, the so-called reasons are no more than pejorative and unsubstantiated claims, which do no more than assert exaggeration and uplifting of costs. There is no indication of how this might identify any dispute that could be investigated. There is no indication of what appropriate costs and times might be, or of why the labour claim is excessive compared to a reasonable allowance (and the same may be said in relation to para 25, dealing with invoice 2282).
The significance of this deficiency is emphasised when one takes into account para 5 of the same affidavit in which Mr Alsop refers to his 30 years' experience relating to commercial marine salvage and his "comprehensive industry knowledge of marine equipment and engineering equipment." That experience and knowledge is said, in the same paragraph, to enable him to "make observations about the scope of works being completed, the materials being consumed and [to] provide an estimate of time, expected time [sic] to complete such works".
No doubt, the reader of the affidavit might have thought, having considered para 5, that Mr Alsop would offer some informed critique of the times and costs claimed. That is precisely what is not done in paras 25 and 26. Nor is it done in para 27, to which I now turn.
The opening salvo in relation to invoice 2330 is that delay in issuing it gives rise to concerns over the accuracy of the claim. However, those concerns are not exemplified, or illustrated, by any commentary as to what one might have thought (or an informed person in Mr Alsop's position might have thought) was a reasonable claim for the work comprised in that invoice.
Likewise, the reference to "no particularisation" and the repeated references to "unspecified workshop service" go absolutely nowhere in raising the grounds of opposition beyond assertion.
For those reasons I conclude that the evidence does not make out any genuine dispute in relation to the three invoices in question.
Conclusion
If one turns to the statutory demand, the effect of the conclusions that I have reached is that there is a genuine dispute in relation to invoices 2331 and 2351, the total value of which is $46,796.75. Again, on those conclusions, there is no genuine dispute as to the first three invoices, 2282, 2284 and 2330, the total value of which is $162,073.84.
In those circumstances, applying s 459H of the Corporations Act, it seems to me that there is a "substantiated amount of the demand" in the sum of $162,073.84. Since that substantiated amount is not less than the statutory minimum, the demand is not to be set aside. Further, the court's power under sub-s (4) is enlivened. The appropriate course is to vary the demand accordingly and to declare the demand to have had effect, as so varied, from the date of service.
As I understand it, it is then open to the court, on application, to extend the time for compliance with the demand for, for example, 21 days from today's date.
I will hear counsel on the form of orders to be made and on the question of costs.
[Counsel addressed]
In my view the defendant has had substantial success and the extent to which the plaintiff has succeeded does not justify in departing from the usual rule as to costs.
[Parties to bring in draft orders]
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Decision last updated: 03 August 2012
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