Spencer Constructions Pty Ltd (ACN 062 431 556) v G & M Aldridge Pty Ltd (ACN 006 793 737)

[1996] FCA 1180

CATCHWORDS

CORPORATIONS LAW - Application to set aside statutory demand - no evidence to support claim of genuine dispute as to debt etc - alternative claim of defect in demand on basis that affidavit supporting not in proper form in that it complied with the forms prescribed under Victorian Supreme Court Rules instead of NSW - similar claims made on appropriate address for service of creditor - debtor’s business included construction interstate - whether substantial injustice arising from defect.

Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA (1994) 15 ACSR 347
Scandon Pty Ltd v Dome Supplies Pty Ltd (1995) 13 ACLC 1 256
T J Precision Engineering Pty Ltd v Crane Copper & Aluminium Pty Ltd [1968] 3 NSWR 360
Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660

SPENCER CONSTRUCTIONS PTY LTD v G & M ALDRIDGE PTY LTD
No VG 3421 of 1996

FINN J
MELBOURNE
12 DECEMBER 1996

IN THE FEDERAL COURT OF AUSTRALIA   )
  )
VICTORIA DISTRICT REGISTRY     )
  )    No. VG 3421 of 1996
GENERAL DIVISION                  )

BETWEEN:SPENCER CONSTRUCTIONS PTY LTD

(ACN 062 431 556)

Applicant

AND: G & M ALDRIDGE PTY LTD
  (ACN 006 793 737)
Respondent

COURT:FINN J

PLACE:MELBOURNE

DATE:     12 DECEMBER 1996

MINUTES OF ORDERS

THE COURT ORDERS THAT:

application be dismissed with costs, including reserve costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA   )
  )
VICTORIA DISTRICT REGISTRY     )
  )    No. VG 3421 of 1996
GENERAL DIVISION                  )

BETWEEN:SPENCER CONSTRUCTIONS PTY LTD

(ACN 062 431 556)

Applicant

AND: G & M ALDRIDGE PTY LTD
  (ACN 006 793 737)
Respondent

COURT:FINN J

PLACE:MELBOURNE

DATE:     12 DECEMBER 1996

REASONS FOR JUDGMENT

I previously have made orders in this proceeding dismissing the application with costs, including reserve costs. The application, brought by Spencer Constructions Pty Ltd (“Spencer”) under s459G of the Corporations Law, sought to set aside a statutory demand served on it by G & M Aldridge Pty Ltd (“Aldridge”). The grounds of the application as enlarged upon before me were -

(i)there was a genuine dispute as to the existence of the debt founding the demand - the contention being
that the circumstances necessary to make the debt due and payable had not occurred;

(ii)there was, alternatively, a genuine dispute as to the existence of the debt in that there had been a waiver of it or election not to sue for it;

(iii)there was, alternatively, a genuine dispute as to the amount of the debt if due and payable - it being alleged that only half of the amount claimed could be owing in the circumstances;  and

(iv)there were defects in the statutory demand which, severally, would justify its being set aside under s459J, these being -

(a)that the affidavit accompanying the demand was in the form prescribed by the Rules of the Supreme Court of Victoria rather than, as required, in the form prescribed by the Rules of the Supreme Court of New South Wales;  and

(b)that the demand itself did not, as required by the Form 509H of the Corporations Law, specify a
New South Wales address for service, that given being a Victorian one.

Before considering each of these briefly in turn, I should provide some background information.  I preface what I have to say by noting that I will for convenience refer to the applicant throughout as Spencer notwithstanding that it only acquired this name subsequent to the events to be mentioned.

On 2 March 1994 Spencer entered into a head contract as builder with Vynotas Pty Ltd (“Vynotas”) in respect of a residential development to be undertaken in East Melbourne.  Earlier in that year Aldridge is alleged to have entered into a sub-contract with Spencer in relation to a portion of the work contracted for under the head contract.  I say alleged contract because the terms of that contract are in dispute - if indeed contract there was.

Aldridge performed the work Spencer asked of it.  Its claim in these proceedings is for $12,303.00 which represents retention money held under its alleged contract with Spencer. It is not disputed that such has been retained, it representing approximately 10 per cent of the sub-contract
price.  What is disputed is whether it is now due and payable or is payable in the amount claimed.

The circumstances which have caused this dispute to arise relate in part to events after 7 December 1994 when Vynotas dismissed Spencer from the project and appointed Total Project Control Pty Ltd (“Total”) to take it over and bring it to completion.

S459H and a “Genuine Dispute”

There has been no dispute before me as to the principles applicable to an application such as this and, in particular, as to the meaning to be given the expression “genuine dispute”.  For present purposes I am content to adopt the explanation of that expression given by McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 - the more so because the qualifications his Honour there notes are particularly appropriate to this application:

“In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the “serious question to be tried” criterion which arises on an application for an interlocutory injunction or 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 precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be’ not having ‘sufficient prima facie plausibility to merit further investigation as to [its] truth’ (cf Eng Mee Yong v Letchumanan [1980] AC 331 at 341), or ‘a patently feeble legal argument or an assertion of facts unsupported by evidence’: cf South Australia v Wall (1980) 24 SASR 189 at 194.”

It is likewise appropriate to refer to the judgment of Lindgren J in Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA (1994) 15 ACSR 347 both for its convenient collection of authorities on s459H and for its observation (at 353) that:

“[t]he provisions [of s459H(1) and (5)] assume that the dispute and offsetting claim have an ‘objective’ existence the genuineness of which is capable of being assessed.  The word ‘genuine’ is included [in ‘genuine dispute’] to sound a note of warning that the propounding of spurious disputes and claims is to be expected but must be excluded from consideration.”

As I will indicate below, I have concluded that while disputes are alleged here they fail to meet the threshold of genuineness adverted to by Lindgren J.  They constitute no more than bare assertions which are, in the main, inconsistent with the terms of the very contract propounded by Spencer.

The Grounds of the Application

(i)  The Debt is not Due and Payable

Spencer’s case is that it was a term of its contract with Aldridge that unless and until it received the retention money Vynotas withheld from it in respect of the sub-contract work performed by Aldridge, it was under no obligation under the sub-contract to pay the same to Aldridge.  I will refer to this term as the “conditional term”.

The difficulty confronting Spencer in this is that there is not any evidence before me which even suggests that the alleged sub-contract between the parties contained such a clause.

There are, in fact, two separate contracts propounded by the parties respectively.  The first, which is advanced by Spencer as the contract, is an unsigned document which, on its own case, Spencer says was later varied.  Aldridge alleges it rejected this contract and sent an alternate version to Spencer.  This, though signed by Aldridge, was not
signed by Spencer which disclaims it as the operative contract.

For present purposes I am prepared to assume in the applicant’s favour that the contract propounded by it is arguably the one governing the relationship of the parties.  Three clauses of that contract are relevant to the argument put by Spencer.  None, I would note at the outset, embodies the conditional term alleged by Spencer.

The terms are:

“SCHEDULES
. . .

5.RETENTION:   BANK GUARANTEE - 2 NO. AT $6,074 EACH

RELEASE (a)  Completion: 1 NO. GUARANTEE AT 6 MONTHS AFTER COMPLETION OF THIS CONTRACT

(b)End Defects Liability:  6 MONTHS AFTER ABOVE. 

If nothing stated then as Condition 3(b)

. . .

PERFORMANCE

2.(a)  The Subcontractor will perform and complete the works described above to the full extent of the requirements of Plans, Specifications and Head Contract Conditions in an expert and workmanlike manner.  The minimum standards (where
none are otherwise given) will be the relevant Australian Standards.

. . .

INSTRUCTIONS/VARIATIONS

. . .

4.(b)  The Subcontractor will not be entitled to any variation unless:

1)He has notified the Builder of Intention to Claim in Writing within 7 days of the instruction.

2)and, except as may be exercised by the Builder under Clause 4(a), and Variation claimed is payable to the Builder under the Conditions of the Head Contract.  In such cases, the Subcontractor becomes entitled to payment subsequent to payment to the Builder, and to the approved value.”

As I understood it, Spencer’s case is that clause 2(a) has the effect of making the sub-contract subject to the head contract and hence to an alleged condition in it making the liability to pay subcontractors’ retention money dependant upon the prior payment of such money to Spencer by Vynotas.

The sub-clause, of course, says no such thing.  It refers solely to the standard to be expected in the performance and completion of the works contracted for.

Clause 4(b)(2) is relied upon as providing an auxiliary argument of some form marking the alleged interdependence of the head contract and the sub-contract.  Because of its discrete character and subject matter I do not regard it as providing any arguable support for the conditional term alleged by Spencer.

I would, simply for the above reasons, conclude that there is nothing in the contract itself which could provide any plausible basis for alleging that the retention moneys were held subject to the conditional term claimed.

What, though, is conclusive against the applicants’ assertion is clause 5 of the Schedules.  That clause envisages that the retention would take the form of two bank guarantees of $6,074.00 provided by Aldridge.  It is conceded this did not occur - although a subsequent letter of Spencer assumed it did.  Rather moneys were retained by Spencer when progress claims were made.  It is alleged that this “variation” itself had the effect of incorporating the conditional term into the applicant’s contract.  There is no evidentiary basis suggested for this allegation.  More importantly though the contract in its unvaried form - and this was the form Aldridge was asked to accept - provided on
its face for a “retention regime” which was wholly inconsistent with the alleged conditional term as also with the construction I was asked to place on clause 2(a).

There being no plausible basis for the assertion that the alleged conditional term was a part of the contract propounded by the applicant, I reject that ground as one giving rise to a genuine dispute.

(ii) That the Debt was “Waived”

The claim here is that on Vynotas’ dismissing Spencer from the project, Vynotas or Total undertook the responsibility for paying the retention money and that Aldridge accepted this state of affairs.

There is no evidence before me to suggest that Vynotas or Total assumed any legal obligation enforceable by Aldridge to make payment of the retention money to Aldridge. On the contrary.  The applicant is unable to set up any enforceable assignment of its contract to Vynotas:  cf Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at 668; or any novation of the contract involving
Aldridge, Vynotas and itself:  T J Precision Engineering Pty Ltd v Crane Copper & Aluminium Pty Ltd [1968] 3 NSWR 360.

The best Spencer can point to is a letter of Aldridge to Total of 16 December 1994 asking for payment of the retention money and for a sum of $2000 in respect of contract work.  But that letter was written four days after Spencer wrote to Aldridge asserting that Vynotas had “now accepted the obligation to pay all sub-contractors ... engaged for the project. ... [A]ll future claims made by you ... should be forwarded to ... [Total]”.

On the scant material relied upon by Spencer, I would have to say that the allegation that Aldridge in any way abandoned, or acted so as to preclude itself from denying that it abandoned, its contractual right against Spencer does not have ‘sufficient prima facie plausibility to merit further investigation as to [its] truth’:  Eyota Pty Ltd v Hanave Pty Ltd, above, at 787. 

At most, all that the material suggests is that Aldridge was prepared to attempt to get paid from whosoever would pay whether or not that party was legally obliged so to do.  Its receipt of $2000 apparently from Vynotas or Total for
contract work performed before Spencer’s dismissal from the project suggests no more than this.  This payment was received on 17 February 1995 as an apparent response to the 16 December 1994 letter referred to above.  Vynotas and its associates have, from the time of the letter of the 16th, denied any liability to pay Aldridge the outstanding retention moneys.

There is not the material here upon which I could reasonably reach the conclusion that a genuine dispute could be said to exist as to waiver/election by Spencer.  I reject this ground of the application.

1. Dispute as to the Quantum of the Debt

The applicant’s case is that there is a genuine dispute as to whether half of the moneys retained are presently payable and that because under clause 3(b) of the sub-contract those moneys only became payable at the completion of the defects liability period of the head contract.  One of the applicant’s witnesses has sworn it to be his belief that that period has not expired.

Clause 3(b) is in the following terms:

“Retentions will be released:  (a) 50% 6 mths after Practical Completion of this Contract.  (b) the remainder on completion of Defects Liability, unless noted otherwise in the Schedule.”

The short answer to the applicant’s contention is that the ‘Schedule does note otherwise’.  I have previously set out the terms of clause 5 of the Schedule.  I have no evidence before me at all to suggest that there has been any variation of the “release” provisions of that clause which would produce the effect contended for by Spencer.  Consistent with the clause’s timing, the moneys retained would have been due and payable at the time of the statutory demand.

There is no basis here on which to found a genuine dispute.

(iv) Defects

The defects in the statutory demand, as I have already noted, are:

(i)that the accompanying affidavit is not in accordance with O71 r36AB(5) of the Federal Court Rules in that it is in the form prescribed by the
Victorian Rules of the Supreme Court rather than that prescribed by the Rules in New South Wales, the registered office of Spencer being in the latter State;  and

(ii)that the demand itself having been served in New South Wales, had a Victorian and not a New South Wales address for service noted on it contrary to the requirement of Form 509H of the Corporations Law.

It has not seriously been contended that the applicant has suffered inconvenience or prejudice because of these defects or that there will be any injustice at all - let alone substantial injustice - if the defects were to be disregarded and the demand allowed to stand.

The applicant relies, though, upon the provisions of s459J(1) of the Corporations Law. It, and the subsection following it, provide:

“(1)On an application under section 459G, the Court may by order set aside the demand if it is satisfied that:

(a)because of a defect in the demand, substantial injustice will be caused unless the demand is set aside;  or

(b)there is some other reason why the demand should be set aside.

(2)Except as provided in subsection (1), the Court must not set aside a statutory demand merely because of a defect.”

As I understood the applicant’s case it is that I should under subsection (1)(b) set aside the demand because it is proper for the Court to censure “significant and substantial departure[s] from the prescribed procedure”.  Reliance was placed upon a decision of a Victorian Master in Scandon Pty Ltd v Dome Supplies Pty Ltd (1995) 13 ACLC 1,256 where the subsection was used to set aside a demand because of failure to specify an address for service within the jurisdiction in which service was effected.

While acknowledging this decision, I do not regard the defects in the present case and the circumstances of them as warranting an exercise of discretion under s459J(1)(b). This matter is one which has a distinct federal character both in the location of the registered offices of the companies and in the court selected for the resolution of the parties’ dispute. Whatever may be the difficulties which defects of the type here may cause in proceedings brought in a State
court, I do not consider they should be treated as being of significance in this Court unless (a) they produce substantial injustice;  or (b) they are of such character as to warrant the clear disapprobation of the Court.  Neither in the present case have either of these qualities.

Accordingly these several grounds of challenge to the demand are rejected.

In the event, as I noted at the outset my order was that the application be dismissed with costs including reserved costs.

I certify that this and the preceding 15 pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.

Associate:

Dated:21 January 1997

Counsel for the applicant     :    P Marzella

Solicitors for the applicant   :    Kell Moore

Counsel for the respondent :    P Bornstein

Solicitors for the respondent  :    Tress Cocks & Maddox

Date of hearing              :    12 December 1996

Date of judgment             :    12 December 1996