SP Builders Pty Ltd v Damian Rigoni t/as Dr Rendering
[2014] VSC 680
•26 September 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2014 3196
| SP BUILDERS PTY LTD (ACN 115 715 609) | Plaintiff |
| v | |
| DAMIAN RIGONI T/AS DR RENDERING (ACN 536 206 599) | Defendant |
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JUDGE: | Efthim AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 6 August 2014 |
DATE OF JUDGMENT: | 26 September 2014 |
CASE MAY BE CITED AS: | SP Builders Pty Ltd v Damian Rigoni t/as DR Rendering |
MEDIUM NEUTRAL CITATION: | [2014] VSC 680 |
CORPORATIONS – Whether to set aside statutory demand – Section 459G Corporations Act 2001 (Cth) – Payment claim under Building and Construction Industry Security of Payment Act 2002 (Vic) – Judgment debt – Whether a genuine dispute – Whether offsetting claim exists.
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T Shnookal QC | Thomson Geer |
| For the Defendant | Mr P Agardy | HWL Ebsworth Lawyers |
HIS HONOUR:
The plaintiff, SP Builders Pty Ltd (‘SP Builders’) applies under s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand that arose as a result of adjudication under the Building and Construction Industry Security of Payment Act 2002 (Vic). The amount claimed to be due and payable is $57,044.03 pursuant to the order of the Magistrates’ Court of Victoria made on 25 February 2014.
On or about 14 June 2013, the plaintiff entered into a contract with the defendant, pursuant to which the defendant agreed to carry out all rendering work in respect of the plaintiff’s project to construct new apartments at 390 High Street, Northcote, for a lump sum price of $117,032.
Work by the defendant appears to have been performed from late June through to the end of November 2013. The parties fell into dispute during the performance of the work. The plaintiff was primarily concerned that the defendant was not carrying out works according to contractual requirements, whereas the defendant was concerned about delays allegedly caused by the plaintiff, preventing the defendant from completing the work on time.
The plaintiff asserts that the defendant abandoned the works on 15 October 2013 and did not return to the project. The defendant, by email on 16 October 2013, stated that he was prevented from completing the scope of work due to incomplete works left by a tiler engaged on the project. On 28 October 2013, the plaintiff delivered a Show Cause Notice relating to the slow performance of works. The defendant delivered a Notice of Intention to Suspend on 12 November 2013 on the grounds that its access to carry out the works was impeded and for failure to pay two invoices. The defendant terminated the sub-contract on 28 November 2013.
On 3 December 2013, the defendant served on the plaintiff a payment claim under the Building and Construction Security of Payment Act 2002 (Vic) claiming payment for works that had been completed for the sum of $94,277.
On 24 January 2014, the adjudicator made a determination and on 25 February 2014, the defendant entered judgment in the Magistrates’ Court at Melbourne for $57,044.03 based on the adjudicator’s determination. A warrant was issued on 7 March 2014 to seize property and that warrant was returned unsatisfied on 10 April 2014. A statutory demand was then served on the plaintiff on 6 June 2014.
There was no application to set aside the adjudication, no application to restrain the defendant from entering judgment based on the determination, nor was there any application to set aside the order made by the Magistrates’ Court of Victoria on 25 February 2014.
The plaintiff now applies to set aside the statutory demand on the grounds that there is a genuine dispute regarding the existence of the alleged debt and that there is an offsetting claim regarding the existence of the debt.
It is not for me to enter into the merits of the dispute between the parties but only to ascertain if there is a genuine dispute. In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd,[1] Dodds‑Streeton J said:
The court, in the context of an application to set aside a statutory demand, must determine whether there is a genuine dispute about the existence or amount of the debt or whether the company has a genuine off-setting claim. No in-depth examination or determination of the merits of the alleged dispute is necessary, or indeed appropriate, as the application is akin to one for an interlocutory injunction. Moreover, the determination of the ‘ultimate question’ of the existence of the debt should not be compromised …
… As the terms of section 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 on 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.
[1](2008) 66 ACSR 67 [56], [71].
The standard to demonstrate is not onerous. In Powerhouse Australasia Pty Ltd v Viarc,[2] Dodds‑Streeton J in reference to McLelland J in Eyota v Hanav[3] repeated:
A genuine dispute connotes a plausible contention requiring investigation and raises much the same sort of considerations as a serious question to be tried prior to and arising on an application for the interlocutory injunction or extension, for the extension or removal of a caveat”. “This does not mean that the court must accept uncritically as giving rise to a genuine dispute every statement in an affidavit, however equivocal lacking in decision inconsistent with the undisputed contemporary documents or other statements by the same deponent or inherently and probable in itself” it may not be - “it may be not having sufficient prima facie plausibility to merit further investigation as to its truth or a patently feeble legal argument or assertion of the facts unsupported by evidence.
[2][2006] VSC 508, [41]-[42].
[3](1994) 12 ACSR 785.
The grounds for alleging a dispute or an off-setting claim must not be spurious, hypothetical, illusory or misconceived. In Eyota v Hanave,[4] McLelland J stated:
It is not a very exacting standard, on the one hand mere assertion of a dispute or off-setting claim, mere bluster or advancing grounds which are illusory or spurious or insufficiently particularized will not suffice. The court must not enter into the merits of the dispute, but it is not crossing the line in regards to its legitimate role on these applications to consider evidence which “bears on whether or not the asserted dispute or off-setting claim is genuine”. Indeed, that is its necessary function …
[4](1994) 12 ACSR 785 at 787.
Here the statutory demand is relying on a judgment debt. A judgment debt is normally not susceptible of being the subject of a genuine dispute.[5] The plaintiff submits, however, that the order made by the Magistrates’ Court pursuant to the Building and Construction Security of Payment Act 2002 (Vic) (“Victorian Building and Construction Act”) does not prevent the plaintiff from claiming that the debt is genuinely disputed.
[5]See Innovision Developments Pty Ltd v Martorella [2012] VSC 390 at [5], and Timberland Property Holdings Pty Ltd v Schindler Lifts Australia Pty Ltd [2011] NSWSC 466 at [10].
The Victorian Building and Construction Act has been modelled on the New South Wales legislation.[6] Section 47 of the Victorian Act, which relates to the effect of adjudication, determination and obtaining of a judgment, and s 32 of the New South Wales Act relating to the same subject matter, are practically identical.
[6]See Second Reading Speech of the Building and Construction Industry Security of Payment Bill, signed 21 March 2010.
The plaintiff relies on numerous decisions of the New South Wales Supreme Court to demonstrate that the statutory debt arising from the adjudication, upon which the statutory demand is based, does not prevent the plaintiff from claiming that the debt is disputed. It has referred to Max Cooper and Sons (Builders) Pty Ltd v M & E Booth & Sons Pty Ltd,[7] Demir Pty Ltd v Graf Plumbing Pty Ltd,[8] Greenaways Australia Pty Ltd v CBC Management Pty Ltd,[9] Aldoga Aluminium Pty Ltd v De Silva Starr Pty Ltd,[10] Brodyn Pty Ltd v Dasein Constructions Pty Ltd,[11] Plus 55 Village Management Pty Ltd v Parisi Homes Pty Ltd,[12] and Ettamogah Pub (Rouse Hill) Pty Ltd v Consolidated Constructions Pty Ltd (in liq).[13] It also relies on the Queensland decision of Reed Construction (Qld) Pty Ltd v Dellsun Pty Ltd.[14] All of those decisions, prior to the West Australian Court of Appeal decision of Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd.[15]
[7][2003] NSWSC 929.
[8][2004] NSWSC 553.
[9][2004] NSWSC 1186.
[10][2005] NSWSC 284.
[11][2004[ NSWSC 1230.
[12][2005] NSWSC 559.
[13][2006] NSWSC 1450.
[14][2009] QSC 263.
[15][2014} WASCA 91.
I am bound to follow the decision of the Court of Appeal but not bound to follow decision of a single judge of another court. The plaintiff submits that the decision of Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd should not be followed. Instead, the New South Wales and Queensland decisions should be followed for the following reasons:
-under the New South Wales and Victorian Acts the adjudicator is not to determine the rights of the parties. Under the Western Australian Act the adjudicator determines the contractual position of the parties.
-Sections 38 and 45 of the Western Australian Act, which provides for the result of the adjudication is markedly different from s 47 of the Victorian Act and the New South Wales equivalent, s 32.
-the Western Australian Act was intended to operate differently to the Victorian Act and New South Wales;
-the Victorian legislation which introduced intending to follow the New South Wales legislation and very closely follows it in respect to the provisions relevant to that issue.
In Diploma Constructions,[16] Pullin JA, with whom Newnes and Murphy JJA agreed, held that once judgment is given to enforce an adjudication determination, there cannot be a genuine dispute about the debt in the terms contemplated by the Corporations Act. The offsetting claim can only arise from transactions separate from those upon which the statutory demand is based.
[16][2014] WASCA 91.
Before the Court of Appeal, in that case, was a payment dispute within the meaning of the Construction Contracts Act 2004 (WA). An adjudicator made two determinations requiring the respondent to pay $504,545.29 to the appellant pursuant to s 43 of that Act. The respondent applied for leave of the District Court to enter judgment in respect of the two determinations, and judgment was entered. The respondent served a statutory demand pursuant to s 459E of the Corporations Act demanding payments of the debts due, and the appellant made an application under s 459G of the Corporations Act to set aside the demand. Master Sanderson dismissed the application and the appellant appealed.
Pullin J noted that the Western Australian Act had similarities to certain aspects of the legislation in New South Wales, Queensland, Victoria and the Northern Territory, and noted that each of the different State or Territory Acts in general terms provided for summary adjudication of disputed payment claims and allowed for registration of the determination or a certificate of determination as a judgment. The observation he made referred to the Western Australian Act.[17] As to the purpose of the Western Australian Act, his Honour said:
The broad purpose of the Act insofar as it relates to payment disputes is to ensure that, in construction contracts, progress claims are paid on time and that principals obliged to pay do not act as their own judge and jury and hold up payment on their own assertion that they have a defence warranting refusal to pay.
[17]Ibid, see [55].
In coming to his conclusion that there was no genuine dispute, Pullin J stated:
[62] The fact is that there is no dispute about the determinations or the judgment in this case. The determinations and the judgment do give rise to debts which are due and payable. The claim for a declaration that the two amounts referred to in the two determinations and the judgment are not ‘due and payable’ is spurious. It is an assertion without legal merit and contrary to the Act. It cannot succeed. The appellant in written submissions stated that:
[I]n respect to the New South Wales Security for Payments legislation an adjudication or even judgment arising from the registration of an adjudication certificate does not prevent the raising of a genuine dispute as to the debt, within the meaning of section 459H(1)(a) of the Act …
[63] The appellant then cites the following cases as authority for that proposition: Prime City Investments Pty Ltd v Paul Jones & Associates Pty Ltd [2013] NSWSC 2; Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2005] NSWCA 49 [35]; BBB Constructions; Project Venture Development No 11 Pty Ltd v TQM Design and Construct Pty Ltd [2009] 699; Aldoga [7].
[64] Prime City does not stand for that proposition. In that case, the contention was that the dispute about the debt gave rise to an offsetting claim, not about whether there was a genuine dispute about the determination debt. Falgat does not contain a paragraph [35] and nothing else within the judgment supports the statement which precedes the citing of that case. BBB Constructions was about whether there was an offsetting claim, as was Project Venture. Aldoga was not concerned with a situation where there had been an adjudicator’s determination. Further, as already stated, the view of Palmer J in Aldoga that ‘proceedings to wind up a company do not involve recovery’ is not, with respect, correct in light of the High Court’s reasoning in Broadbeach.
[65] The second part of the claim for a declaration is for a declaration that the two sums or the total of $529,968.73 ‘is to be repaid’ which is also spurious. A declaration that those amounts ‘be repaid’ could not be made unless the appellant had paid the amounts of the determinations or the amount of the judgment. They have not. In fact, if the appellant had made payment then there would have been no need for the service of the statutory demand and the appellant would instead have claimed restitution in the District Court proceedings. the right to claim restitution would not and does not arise until payment has been made. No genuine dispute has been shown to exist.
[66] The master did not err in applying the reasoning in Broadbeach and, in effect, determining that there was no genuine dispute about the debt justifying an order to set aside the demand.
As to Deputy Commission v Broadbeach Properties Pty Ltd,[18] his Honour analysed that decision as follows:[19]
[61] The High Court in Broadbeach rejected that reasoning for two reasons. One was the special character given to tax debts. That is a reason not applicable here. However, the other reason was that there was no requirement that the court ‘observe a fictional state of affairs’ because the source of the debt was to be located in the ‘statutory consequences given to an assessment’ in the Taxation Administration Act. Likewise in this case, the source of the debt is located in the statutory consequences given to a determination in the Act. The fact that the source of the debt is State legislation, whereas in the case of the tax debt the source of the debt was Commonwealth legislation, does not make any difference. There is no question of any conflict arising between the Act and the Corporations Act. The question is whether there is a debt. If there is a debt which is due and payable by reason of the State legislation, then there is no ‘fictional state of affairs’.
[18][2008] HCA 41.
[19]Ibid, at [61].
In Broadbeach, a statutory demand was served in relation to unpaid tax based on default assessments. An objection had been lodged against the assessment but had not been heard and determined at the time the Commissioner served the statutory demand. The High Court dismissed the application to set aside the statutory demand and in doing so, rejected the argument that the existence of an objection proceeding gave rise to a genuine dispute and confirmed that the tax debt may be recovered.
The defendant submits that the Court of Appeal in Diploma which followed Broadbeach, accepted that there was no genuine dispute about the determination of the judgment debt made under the Construction Contract Act 2004 (WA) and that the judgment gave rise to debts which were due and payable.
I am bound to follow the decision of the Court of Appeal unless it can be distinguished on the facts that are before me. In doing so, I would need to be of the view that the Victorian Act upon which the debt is based differs from the New South Wales Act. I note that s 47 of the Victorian Act and s 32 of the Western Australia Act are somewhat similar. The plaintiff submits that it is s 38 of the Western Australian Act, which leads to a distinguishable difference. That section provides:
An appointed adjudicator’s determination is binding on the parties to the construction contract under which the payment dispute concerned arose even though other proceedings relating to the payment dispute had commenced before an arbitrator or other person or a court or other body.
The plaintiff also submitted that the Western Australian Act was intended to operate differently from the Victorian and New South Wales Act. The Western Australian Act was enacted to draw on legislation already in force in the United Kingdom, New South Wales and Victoria but has been drafted to overcome a number of problems that had become apparent in those jurisdictions.[20]
[20]Hansard Second Reading Speech, Construction Contracts Bill 2004, Second Reading Speech p 1.
In my view, the differences referred to by the plaintiff are not enough for me to distinguish the decision of the Court of Appeal. The Court of Appeal relied on Broadbeach and applying those principles here, it is not appropriate to set aside a statutory demand. I should add that the defendant has done everything that it could possibly do. It has registered the judgment, obtained a warrant and endeavoured to execute. There is nothing further that could be done. The plaintiff could have appealed against adjudication or applied to stay the judgment but failed to do so. There can be no genuine dispute here.
In relation to the offsetting claim, I am again of the view that I must be bound by the Court of Appeal’s decision in Diploma Constructions Pty Ltd where Pullin J accepted that an offsetting claim can be established notwithstanding that the offsetting claim had to arise from separate transactions from those relating to the judgment debt. Pullin J said:
[68] There is no doubt that the recipient of a statutory notice may successfully apply to set aside a statutory demand based on an adjudicator’s determination or a consequent judgment if it has offsetting claims arising from transactions separate form those that give rise to a judgment debt based upon an adjudication under the Act: Demir Pty Ltd v Graf Plumbing Pty Ltd [2004] NSWSC 553 [17] (Campbell J).
…
[77] All of the cases referred to above under the last heading (save for Reed) were decided before Broadbeach. In my respectful opinion, Plus 55 and Ettamogah and the cases depending on them are plainly wrong and should not be followed insofar as they stand for the proposition that the person who owes a debt which is due and payable by reason of an adjudicator’s determination and subsequent judgment, can raise a genuine offsetting claim merely by contending that it is not ‘in truth, indebted for the amount’ determined as due and payable or that, despite the determination, the contractor was not ‘contractually entitled’ to the amount determined or certified to be due by the adjudicator.
The plaintiff submits that no such requirement exists under the Corporations Act, nor have any of the New South Wales authorities suggested that it is relevant to the New South Wales Act. It is, therefore, submitted that the Court should follow the New South Wales authorities and not impose the additional test of an offsetting claim such that it must stem from separate transactions. If I was to accept this submission, then I would be required to find that the Court of Appeal was plainly wrong and, on the facts before me, I am not prepared to do so.
The plaintiff also argues that because of the Excluded Amounts Provisions of the Victorian Act that prevent an adjudicator from considering claims for damages for breach of contract and time related costs, the offsetting claims made by the plaintiff are not matters that the adjudicator could consider and they were not considered by him. Therefore, it is said that they are separate from any aspect of the adjudicator’s determination and the amount claimed in the statutory demand in any event.
The defendant referred to the adjudication in order to demonstrate that these debts were not separate and giving rise to the determination of the judgment. The clauses referred to are as follows:
5.3 … The Claimant has validly terminated the contract and is entitled to issue a final payment claim for the work undertaken as the Claimant has completed the work that it intends to undertake under the contract.
5.7 The parties refer to delays in the construction work with each party asserting that the other was the cause of the delay. The Respondent submits that any delay that the Claimant encountered did not account for the delay in the completion of the contract work. The Claimant submits that the delays caused it to carry out additional work.
I accept that the work was not completed on the contract completion date. neither party has submitted evidence to substantiate that the other party delayed the work and neither has defined the extent of the alleged delay caused by the other party. I am not satisfied that the delay in the project has impacted on the value of the work carried out under the contract and consequently is not a matter that influences the determination made herein. I make no determination regarding the delay to the completion of the contract work.
5.8 The Respondent submits that it paid third parties to complete the Claimant’s work and is entitled to setoff the amount paid to the third parties. The Respondent identifies the amounts paid to the third parties in the adjudication response.
The Respondent is entitled to withhold an amount from the contract payment for any work not completed by the Claimant however the Respondent has not identified any provision in the contract or the Act that entitles it to withhold the amount paid to other parties to complete the Claimant’s work. Any amount withheld over and above the contract value of the work not completed by the Claimant would amount to a claim for damages.
Mr Paglia, director of the plaintiff, deposed that the plaintiff had an offsetting claim against the defendant for the increased costs, above the subcontracted price, which the plaintiff has incurred in paying others to complete the rendering works which were supposed to be completed by the defendant. The plaintiff also asserts liquidated damages as a result of the delay by the defendant in completing the rendering works within the time required as the subcontractor.
The defendant accepted as a matter of law that adjudicator did not have jurisdiction to deal with the liquidated damages point. However, based on the three clauses of adjudication, they submit that the adjudication was relevant to whether there has been an offsetting claim.
The subcontract refers to liquidated damages in relation to delay. It provides:
Clause No.
Item
Agreed Terms
Refer to Text Clause
1.14
Liquidated & Ascertained Damages
(a) under the Head Contract
(b) Builder’s
(c) Sub-Contractor’s
$ pro rata per calendar day
$ pro rata per calendar day
$ pro rata per calendar day
16
16
16
16. LATE COMPLETION
16.1 ENTITLEMENT TO DAMAGES
Damages against Builder
In any case of any delay entitling the Sub-Contractor to an extension of time under Clause 15.9, the Builder shall be liable to pay or allow to the Sub‑Contractors liquidated and ascertained damages at the rate specified in Clause 1.14(c).
In the event that no rate is specified in Clause 1.14(c), or if said rate is specified to be “nil”, “not applicable” or any similar expression, then the Sub‑Contractor will be entitled to damages (if any) established at Common Law.
Damages against Sub-Contractor
Whenever
·the Works of the Sub-Contract are not completed on or before the Date for Completion specified in the First Schedule (or by such later date as may result from extensions of time to which the Sub-Contractor is entitled pursuant to this Sub-Contract); and
·the failure to so complete is due to
*the Builder exercising its rights, under Clause 11, to take over the whole or part of the Works; or
*any other delay caused or countenanced by the Sub-Contractor,
then the Sub-Contractor shall be liable to pay or allow to the Builder liquidated and ascertained damages at the rate specified in Clause 1.14(b) or Clause 1.14(a).
In the event that no rate is specified in Clause 1.14(b) or 1.14(a), or if said rate is specified to be “nil”, “not applicable” or any similar expression, then the Builder will be entitled to such damages against the Sub-Contractor as it may establish at Common Law.
On my reading of these clauses, it is unclear how the liquidated damages would apply as there is no rate fixed. It appears to me that there was a timetable set in the contract for getting work done but that kept getting moved by mutual agreement. There is not enough material for the Court to determine that there is an offsetting claim, which could lead to a claim for liquidated damages. It is my view that there is sufficient ambiguity in the clauses of the subcontract and there is no evidence, in relation to quantification of the claim, that I can rely on. Furthermore, I note that there has been no claim filed and served by the plaintiff regarding liquidated damages and it had the opportunity to do so. If the offsetting claim was genuine, the plaintiff would have filed and served a claim.
The application to set aside the statutory demand dated 2 June 2014 is dismissed.
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