Scrohn Pty Ltd v Newearth Constructions Pty Ltd - [2015] VSC 254

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S CI 2015 1014

SCROHN PTY LTD (ACN 119 777 507)	Plaintiff
v
NEWEARTH CONSTRUCTIONS PTY LTD (ACN 005 358 190)	Defendant

---

JUDGE:	Daly AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	25 May 2015
DATE OF JUDGMENT:	12 June 2015
CASE MAY BE CITED AS:	Scrohn Pty Ltd v Newearth Constructions Pty Ltd
MEDIUM NEUTRAL CITATION:	[2015] VSC 254

---

CORPORATIONS ACT 2001 – Application to set aside statutory demand under section 459G – Whether genuine offsetting claim under section 459H – Statutory demand based upon judgment obtained pursuant to the Building and Construction Industry Security of Payments Act 2002 (Vic) – Whether judgment debtor is entitled to raise a cross-claim under the same construction contract to which the judgment debt relates – Diploma Constructions (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91 considered.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J McKay	Beck Legal
For the Defendant	Mr R Andrew	Donaldson Whiting & Grindal

HER HONOUR:

The applicant, Scrohn Pty Ltd (‘Scrohn’) is the developer of a commercial property in Kyneton. In April 2012, Scrohn engaged the respondent, Newearth Constructions Pty Ltd (‘Newearth’) to carry out construction works at the property in accordance with a contract dated April 2012 (‘Contract’). Disputes emerged between the parties regarding various matters. On 24 October 2014, Newearth obtained a judgment in its favour from the County Court of $110,000 plus interest (‘Judgment’), being the amount due as the balance of a progress claim pursuant to s 17(2)(a)(i) of the Building and Construction Industry Security of Payment Act 2002 (Vic) (‘Act’). Judge Anderson found that the progress certificate signed by the superintendent appointed under the Contract was a payment schedule within the meaning of s 17 of the Act. Judge Anderson rejected the submissions of Scrohn that the amounts claimed by Newearth were in respect of variations which were excluded from the operation of s 17 of the Act, and Scrohn’s contentions that it was entitled to suspend payments to Newearth by reason of the terms of clause 44 of the Contract.

Prior to the date of the Judgment, on 18 September 2014, Scrohn issued separate proceedings in the County Court seeking damages and other relief pursuant to the terms of the Contract in relation to the following claims:

(a) a claim for liquidated damages pursuant to clause 35.6 of the Contract by reason of the delay in achieving practical completion under the Contract; and

(b) a claim for reimbursement of payments made by Scrohn to Newearth in respect of excavation of rock at the property, the costs of which Scrohn asserts ought to be borne by Newearth under the terms of the Contract.

It is not apparent from the reasons for judgment of Judge Anderson on 24 October 2014 (‘Reasons’) whether he was aware of the issue of the County Court proceeding. Scrohn’s claims in the County Court proceeding were not raised as defences…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Keep reading for free

Create a free CaseChat account to read Scrohn Pty Ltd v Newearth Constructions Pty Ltd and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2015] VSC 254
Decision Date: 12 June 2015

CaseChat Overview and Summary

Scrohn Pty Ltd filed an application to set aside a statutory demand made by Newearth Constructions Pty Ltd under section 459G of the Corporations Act 2001. The demand was predicated on a judgment obtained by Newearth under the Building and Construction Industry Security of Payments Act 2002 (Vic), to which Scrohn was the judgment debtor. The primary issue before the court was whether Scrohn had a genuine offsetting claim under section 459H of the Corporations Act, which could be raised in opposition to the statutory demand. Specifically, the court needed to determine if Scrohn could assert a cross-claim under the same construction contract that formed the basis of the judgment debt, despite not having previously litigated that claim.

The court examined the principles set out in Diploma Constructions (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91, which held that a party to a construction contract could not raise a cross-claim in a statutory demand proceeding that was not previously litigated. The court considered whether Scrohn’s cross-claim met the criteria for being a genuine offsetting claim. The court noted that for a claim to be genuine, it must have a real prospect of success and must be relevant to the debt claimed in the statutory demand. After considering the evidence and submissions, the court concluded that Scrohn’s cross-claim did not satisfy these criteria as it was neither a genuine nor a relevant offsetting claim. The court further found that Scrohn had failed to establish that the cross-claim was not frivolous or vexatious.

The court dismissed Scrohn’s application to set aside the statutory demand, holding that Scrohn did not have a genuine offsetting claim. Consequently, the statutory demand remained enforceable, and Scrohn was required to pay the amount claimed by Newearth within the specified period.

Orders