Two Box Pty Ltd v Jadd Projects Pty Ltd
[2010] WASC 258
•24 SEPTEMBER 2010
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: TWO BOX PTY LTD -v- JADD PROJECTS PTY LTD [2010] WASC 258
CORAM: ACTING MASTER CHAPMAN
HEARD: 5 AUGUST 2010
DELIVERED : 24 SEPTEMBER 2010
FILE NO/S: COR 66 of 2010
BETWEEN: TWO BOX PTY LTD
Plaintiff
AND
JADD PROJECTS PTY LTD
Defendant
Catchwords:
Corporations - Application to set aside statutory demand - Genuine dispute
Legislation:
Nil
Result:
Statutory demand set aside
Category: B
Representation:
Counsel:
Plaintiff: Mr P G McGowan
Defendant: Mr M D Howard SC
Solicitors:
Plaintiff: Metaxas & Hager
Defendant: Hotchkin Hanly Lawyers
Case(s) referred to in judgment(s):
Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85
ACTING MASTER CHAPMAN:
Application
The plaintiff, by way of originating process filed on 7 May 2010, seeks that the statutory demand issued by the defendant dated 22 April 2010 be set aside as there is a genuine dispute about the debt.
Affidavits
At the outset counsel for the defendant took objection to parts of two affidavits of Mr Jean‑Mic Du Buisson Perrine (Mr Perrine) sworn on 7 May 2010 and 6 July 2010, respectively.
Mr Perrine's affidavit of 7 May 2010
Paragraph 29
When read in context I consider this is adequate.
Paragraph 31
In my view, when taken in context, the evidence there is an expectation additional work will be required which will add to the cost can be given. The figure of $76,700 is only an estimate and accordingly will be given the weight appropriate to an estimate.
Paragraphs 34 and 35
I think the paragraphs make it clear the final payment certificate has not been issued and consider if the words 'due under' were deleted from the last line it would be in an acceptable form.
Paragraph 42
I accept that it is not claimed a final assessment has been made but the deponent is the superintendent and had advised of his assessment based on the information to hand. I consider this is acceptable.
Mr Perrine's affidavit of 6 July 2010
Paragraph 5.4
The objection to this paragraph is that the draft final certificate is not annexed. Counsel for the plaintiff submits the document is actually annexure JMP18 of Mr Perrine's affidavit sworn on 7 May 2010. I must say that is not apparent and I would uphold the objection.
Paragraphs 10.2 and 10.3
I agree the Contract speaks for itself but do not see the need to strike out these paragraphs.
Paragraphs 12.7, 12.9 and 12.10
Given the context in which these paragraphs occur I would not strike them out.
Paragraph 23
I would strike out pars 23.2 and 23.3.
Background
The statutory demand is annexure JMP19 to the affidavit of Mr Perrine sworn on 14 July 2010. It is for a debt of $2 million and is said to be monies owing for unpaid building works pursuant to:
1.1an AS4000 building contract between the creditor and the debtor company dated 18 September 2006 ('the Contract');
1.2a deed of agreement between the creditor and the debtor company dated 15 December 2006 ('the Agreement');
1.3the creditor's progress claims no 21, 22 and 23, deemed to be progress certificates pursuant to clause 37.2 of the Contract ('the Certificates'); and
1.4a deed of guarantee between the creditor and the debtor company dated 11 December 2008 (particularly clause 2(b)(ii) thereof) ('the Deed').
The primary claim is made pursuant to cl 2(b)(ii) of the Deed, which reads:
An amount payable of up to $2m [less amounts paid under item 2(b)(i) if applicable], will be paid by February 28th 2009.
An alternate claim is for a debt under the building Contract. It is common ground that the plaintiff has not paid any of the $2 million to the defendant.
The building works relate to the refurbishment of existing buildings at 8 and 10 Victoria Avenue, Perth. Under the Contract liquidated damages are payable by the defendant to the plaintiff at the rate of $3,000 per day for the works at 8 Victoria Avenue in the event of practical completion not being achieved within 68 calendar weeks from the date of possession of the site. The defendant took possession of the site on 17 November 2006 so the due date for practical completion of 8 Victoria Avenue was 8 March 2008 subject to any extension of time granted under the Contract. Practical completion for 8 Victoria Avenue was granted on 21 October 2008 which was 226 days after the due date for practical completion, again subject to any extension of time granted.
The electrical meters required for 8 Victoria Avenue were not installed although practical completion was granted, as installation of the meters was deferred until the strata plan for 8 Victoria Avenue was registered. The titles for the strata lots at 8 Victoria Avenue were issued on 2 March 2010 and on or about 3 March 2010 Mr Perrine spoke to Mr Paul Serdar by telephone and asked him to have the defendant's electrical subcontractors install the required meters. Subsequently, Mr Perrine appointed Global Electrotech to undertake an inspection of electrical work at 8 Victoria Avenue to determine what was required in order to complete the work prior to installing the meters.
Global Electrotech has reported defective work, and that several aspects of the building failed to meet the minimum requirements for electrical installation to the Australian Standards. Some $44,550 has been expended so far for remedial work in this regard. It is said that much of the defective and non‑compliant work was not readily ascertainable on visual inspection as it was concealed in ceilings already fully finished or already fully sealed.
Areas of dispute
The Contract
On 21 August 2009 the solicitors for the plaintiff wrote to the solicitors for the defendant in the following terms:
I act for Twobox Pty Ltd which has provided to me your letter dated 17 August 2009.
To the extent that my client's letter to yours dated 8 August 2009 could be construed as an offer, it is hereby withdrawn.
Your client must submit its final claim under the contract dated 18 September 2006 for assessment by the superintendent.
When the superintendent has assessed that claim it will be possible to determine if there is a debt due by Twobox to your client and the amount thereof.
This was some eight months before the statutory demand issued. That course has not been followed. The obligation to submit such a claim is contained in cl 37.4 of the Contract, which in part reads:
Final Payment claim and certificate
Within 28 days after the expiry of the last defects liability period, the Contractor shall give the Superintendent a written final payment claim endorsed 'Final Payment Claim' being a progress claim together with all other claims whatsoever in connection with the subject matter of the Contract. (original emphasis)
The plaintiff contends that until the superintendent issues the final payment claim the defendant has no claim.
The plaintiff further contends the builder failed in its obligations to bring the work to a state of practical completion by the date provided for in the Contract and the failure to do so is a breach of the Contract. The liquidated damages provided for in the Contract is a means of pre‑agreeing what the exposure represents and does not require the plaintiff to adduce any evidence to establish the loss. It is submitted the defendant is already exposed as a consequence of the breach which is not dependent on the issue of the final payment claim.
The plaintiff therefore submits it is entitled to contend there is a genuine dispute as to the amount claimed or at least an off‑setting claim. I consider the contention put forward by the plaintiff is plausible and requires further investigation.
The Agreement
Paragraph 5.3 of the Agreement reads:
Nothing in this Deed shall be deemed to override the terms of the Contract and the Contract shall take precedence, save as to the 'Contract Sum' [illegible] will be as per this Deed.
Counsel for the plaintiff argues that the Agreement does not have the effect of changing the nature or effect of the Contract other than the Contract Sum.
The plaintiff contends the defendant is not entitled to $2 million under the Agreement. In the first place it is said the Agreement provides for a success fee of $350,000. The payment of that fee was conditional upon the defendant carrying out the works in accordance with the Contract. It is contended the defendant did not do so.
I consider the plaintiff's position to be plausible.
Progress certificates
Clause 38.1 and cl 38.2 of the Contract reads:
38.1Workers and subcontractors
The Contractor shall give in respect of a progress claim, documentary evidence of the payment of moneys due and payable to:
a)workers of the Contractor and of the subcontractors; and
b)subcontractors;
in respect of WUC the subject of that claim.
If the Contractor is unable to give such documentary evidence, the Contractor shall give other documentary evidence of the moneys so due and payable to workers and subcontractors.
Documentary evidence, except where the Contract otherwise provides, shall be to the Superintendent's satisfaction.
38.2Withholding payment
Subject to the next paragraph, the Principal may withhold moneys certified due and payable in respect of the progress claim until the Contractor complies with subclause 38.1.
The Principal shall not withhold payment of such moneys in excess of the moneys evidenced pursuant to subclause 38.1 as due and payable to workers and subcontractors (original emphasis).
On the evidence before me it is clear that some monies due and payable to subcontractors which relate to at least progress claims 21 and 22 remained outstanding. In those circumstances the plaintiff submits the right to withhold remains unqualified and as at the date of the statutory demand the defendant by reason of cl 38.1 and cl 38.2 was precluded from seeking payment of the amounts under the progress certificates. I consider that position is at least arguable.
The Deed
Recitals B, C and D of the Deed read:
BThose agreements are set out in the attached Appendix A 'the Agreement', in the form of a letter dated Monday, 20 October 2008 from Perrine Architecture (the architect) to JADD (the builder)
CPursuant to the Agreement, JADD has requested from Twobox a guarantee that funds due to JADD under the agreement 'the Payment' will be paid by Twobox.
DBy further letter dated 4th December 2008 setting out 'anticipated variation and other claims' totalling of $2,725,364, JADD requested confirmation of the anticipated variations and other amounts claimed in addition to the contract sum.
Clause 6.3(b) of the Deed reads:
This deed does not extinguish or alter the obligations or rights of each party under the building contract.
Paragraph 5 of the letter of 20 October 2008 reads:
In respect of the entire claims therefore by JADD, it is the expectation of Perrine Architecture as the superintendent, and of Jean‑mic Perrine as a Director of Twobox Pty Ltd, that the current general scope of variations sought by Jadd will be certified to the quantum sought by Jadd, subject to the above certification and review process noted in item 2 C (i and ii).
Paragraph 6 of the letter of 8 December 2008 reads:
The parties agreed that payments will be effected thus:
a.Where the project for Parc proceeds to Tranche 2 of the funding (implementation of the building stage), a payment of approximately $500,000 of anticipated variations and other claims would be made by Twobox to JADD early to mid January 09, in part payment of this agreement.
b.Payment of up to $2m of anticipated variations and other claims (less item 8a if applicable) in accordance with the provisions of the building contract and the deed (dated 10 December 2008 JADD/TWOBOX) attached.
c.Payment of the balance upon the completion of the Parc project or December 31st 2009, whichever is the latest.
Counsel for the plaintiff contends the defendant's case appears to be the Deed properly construed constitutes a compromise as between the builder and the principal of their respective rights and obligations under the Contract. He contends that cannot be for two reasons:
1.the wording of cl 6.3 of the Deed; and
2.the letters of 20 October 2008 and 8 December 2008 only deal with variations and even then the amounts referred to are only what is expected or anticipated.
Counsel for the defendant contends cl 6.3(b) has to be read in context. I accept that to be so. It is argued if the Deed is given effect it founds a claim for arguably more than $2 million.
Counsel for the plaintiff contends that there is no basis upon which the defendant can contend that the plaintiff owes the defendant $2 million or any other amount. Certainly on what is before me I consider the contentions put forward by the plaintiff is at least arguable.
It is further said in March 2010 the plaintiff discovered that the work had not been satisfactorily completed and claims the certificates for practical completion were issued because the defendant misled the plaintiff as to the works completed. The plaintiff contends that the exchanges in October to December 2008 occurred when the plaintiff believed that all work had been satisfactorily completed.
At par 33 of his affidavit of 7 May 2010, Mr Perrine deposes as follows:
As the superintendent under the Contract, I would not have issued a certificate of practical completion 21 October 2008 had I known of the extent of incomplete and defective electrical work, including those electrical defects enclosed within the works and that non‑compliant installations formed part of the electrical services for which the defendant had claimed practical completion.
It said the plaintiff has a claim for damages against the defendant for the cost to make good and an entitlement to liquidated damages which exceeds the claim. I consider this argument is plausible and requires further investigation.
Legal principles
In Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85 Martin CJ said [44]:
The verbal formulation of the test to be applied which appears to enjoy greatest judicial support is that of McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, where he described the expression 'genuine dispute' as connoting 'a plausible contention requiring investigation' and equated it to the criterion of 'serious question to be tried' which arises on an application for an interlocutory injunction: see Polaroid Australia Pty Ltd (533); Turner Corp (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294 [27] - [28] (Owen J); SMEC International Pty Ltd v CEMS Engineering Inc [2001] NSWSC 459; (2001) 38 ACSR 595 [22] (Austin J); and Drewniak v Air Rubber Pty Ltd [2002] SASC 319; (2002) 84 SASR 302 [12] (Debelle J).
With respect I agree.
Conclusion
For the reasons outlined above I consider there is a genuine dispute as to the amount claimed in the statutory demand and for that reason I would set it aside.
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