WA Glass Pty Ltd v Auto Control Systems Pty Ltd
[2021] WASCA 162
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: WA GLASS PTY LTD -v- AUTO CONTROL SYSTEMS PTY LTD [2021] WASCA 162
CORAM: MURPHY JA
MITCHELL JA
HEARD: 6 SEPTEMBER 2021
DELIVERED : 6 SEPTEMBER 2021
PUBLISHED : 7 SEPTEMBER 2021
FILE NO/S: CACV 74 of 2021
BETWEEN: WA GLASS PTY LTD
Appellant
AND
AUTO CONTROL SYSTEMS PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: MASTER SANDERSON
Citation: WA GLASS PTY LTD -v- AUTO CONTROL SYSTEMS PTY LTD [2021] WASC 187
File Number : COR 42 of 2021
Catchwords:
Appeal - Practice and procedure - Appeal from refusal of an application to set aside a statutory demand - Whether extension of time to comply with statutory demand should be granted pending determination of the appeal
Legislation:
Corporations Act 2001 (Cth), s 459F(2)(a)
Result:
Application granted subject to payment into court
Category: B
Representation:
Counsel:
| Appellant | : | D H Solomon |
| Respondent | : | J P Cook |
Solicitors:
| Appellant | : | Solomon Brothers |
| Respondent | : | Mendelawitz Morton Commercial Lawyers |
Case(s) referred to in decision(s):
Complete Hire & Sales Pty Ltd v Terra Firma Constructions Pty Ltd [2018] WASCA 88
Complete Hire & Sales Pty Ltd v Terra Firma Constructions Pty Ltd [No 2] [2018] WASCA 111
Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308
Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743
Re Tesrol Holdings Pty Ltd (2013) 97 ACSR 9
Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd [2017] SASC 187
REASONS OF THE COURT:
The appellant (WA Glass) appeals against orders made by Master Sanderson on 18 August 2021, dismissing WA Glass' application to set aside a statutory demand issued by the respondent (ACS). The master had previously delivered written reasons for dismissing the application on 11 June 2021.[1] The master's orders had the effect of extending the time for compliance with the statutory demand to 8 September 2021. WA Glass applied for an extension of the time for complying with the statutory demand pending the final determination of this appeal.
[1] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [2021] WASC 187 (Primary decision).
At the conclusion of the hearing on 6 September 2021, we made the following orders:
(1)Subject to compliance with order 2 of these orders, the time for the appellant to comply with the respondent's statutory demand dated 12 February 2021 is extended to 7 days after the final determination of this appeal or other earlier order.
(2)By 4 pm on 16 September 2021, the appellant is to pay the sum of $248,391.91 into court as security for compliance with the statutory demand if the appeal is dismissed.
(3)Order 1 is discharged if the appellant does not comply with order 2 of these orders.
(4)The parties have liberty to apply to vary or discharge these orders on 72 hours' notice to the other party.
(5)The costs of the appellant's application in an appeal filed 25 August 2021 be in the cause of the appeal.
These are our reasons for making those orders.
Factual background
Between approximately December 2019 and 6 November 2020, WA Glass engaged ACS to perform electrical works at its Bassendean glass recycling plant. During this time, ACS performed various electrical work. Some of the work was performed pursuant to written quotes prepared by ACS and accepted by WA Glass. Other work was performed pursuant to ad hoc requests by WA Glass.[2]
[2] Primary decision [12].
ACS said:[3]
(a)it offered a discounted rate on its usual rates for electricians;
(b) it informed WA Glass it would charge a 20% margin on the cost to it of all materials supplied to the site;
(c) WA Glass was provided with and signed a credit application which contained ACS's terms and conditions and this was accepted WA Glass; and
(d)WA Glass was provided with ACS's weekend and overtime rates.
[3] Primary decision [13].
Written quotes in respect of the invoices the subject of the statutory demand were prepared by ACS and signed by WA Glass as follows:[4]
(a) a quote for the provision of temporary three phase power supply works; and
(b) a quote for the supply and installation of a CDS plant motor control centre including associated electrical works.
[4] Primary decision [14].
As for the ad hoc requests for work and payment for those works, in addition to the rates and charges that apply generally to the works, WA Glass was provided with ACS's applicable labour rates that would apply to weekend and overtime work. This was particularly relevant in relation to invoice 28069 and invoice 28340.[5]
[5] Primary decision [15].
ACS said there were numerous occasions where invoices it issued were not paid by the time stipulated on the invoice. WA Glass informed ACS that it did not have sufficient cashflow to pay the invoices.[6]
[6] Primary decision [16].
ACS's standard terms and conditions relevantly provided as follows:[7]
(a) the terms and conditions would form part of any offer from ACS to provide goods and services: cl 1.2;
(b) any verbal instruction to proceed with the supply of goods or services would be governed on the basis of the terms and conditions: cl 2.4;
(c) unless otherwise stated, payment of invoices was to be made within 30 days of the end of the month from the date of the invoice: cl 11.1;
(d) where the entire cost of any offer was greater than $20,000, ACS was entitled, at its discretion, to require part-payments of the total amount prior to the completion of any project: cl 11.2; and
(e) subject to certain exceptions, ACS would not be liable under contract, tort or otherwise, for any damage or loss arising out of the contract or the supply of goods or services including any consequential loss: cl 13.1.
[7] Primary decision [18].
ACS's position was that these terms and conditions applied to all of the invoices the subject of the demand. WA Glass did not dispute that was the case.[8]
[8] Primary decision [19].
On 12 February 2021, ACS issued a statutory demand to WA Glass, relevantly in the following terms:[9]
[9] Primary decision [10].
SCHEDULE
Description of the debt:
Outstanding amounts due and owing by the Company to the Creditor for the following outstanding invoices that remain due and payable.
Invoice Number
Invoice Amount
Amount Outstanding
No 29039
$27.50
$27.50
No 28976
$27.50
$27.50
No 28885
$110.00
$110.00
No 28464
$7,059.31
$7,059.31
No 28340
$86,274.78
$86,274.78
No 28312
$28,490.00
$28,490.00
No 28071
$56,980.00
$56,980.00
No 28069
$38,187.00
$38,187.00
No 27872
$3,880.70
$3,880.70
No 27840
$8,114.22
$8,114.22
No 27804
$28,490.00
$19,240.90
TOTAL OUTSTANDING AMOUNT
$248,391.81
Master's approach
In essence, the master said WA Glass' claim to set aside the statutory demand under the Corporations Act 2001 (Cth) (Act) involved two aspects. First, that there was a genuine dispute about the debt claimed in many, but not all, of the invoices. Secondly, WA Glass said it had an offsetting claim greater than the amount of the debt.[10]
[10] Primary decision [11].
The master characterised WA Glass' argument as follows:[11]
Turning then to [WA Glass'] arguments, what is really said is that [WA Glass] does not have sufficient detail in relation to the invoices to ascertain whether or not the amounts claimed are owing.
Paragraphs 10 - 19, 24, 26 and 27 of Mr Harkins' first affidavit and pars 21, 24, 39, 51 - 54, 56 and 57 set this out in some detail. By way of example, par 16 of Mr Harkins' first affidavit reads as follows:
In terms of Invoice 28464, I have required details of who was on site and at what times. I also believe that this invoice was for work performed which I believe was subsequently interfered with by Brett Smith when he attended site without our authority, resulting in costs to [WA Glass] to make good and lost production, which was in excess of this invoice total in any event.
[11] Primary decision [20], [21].
The master found that WA Glass' complaint was 'that the invoices do not allow [WA Glass] to assess whether or not the work was done'.[12] Therefore, the master said that this complaint could have no relevance to six of the invoices where ACS had quoted and WA Glass had accepted that quote. The master said it could only relate to the remaining five invoices the subject of the statutory demand.[13]
[12] Primary decision [22].
[13] Primary decision [22].
The master said that ACS submitted in response that a distinction should be drawn between a company being dissatisfied with the basis of the creditor's claim and the existence of a genuine dispute. The master noted ACS's submission that:[14]
It may well be the creditor is genuinely dissatisfied and is acting in good faith. But that is not enough. There must be at least a plausible and genuine claim the debt is not due on some identified basis which warrants further investigation. If the basis for seeking to set aside the demand rests solely on the company's wish to verify the amount of the debt, the court cannot be satisfied that a dispute truly exists. Reliance was placed by the defendant on the decision of Black J in [Re Tesrol Holdings Pty Ltd (2013) 97 ACSR 9] and [Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd [2017] SASC 187] per Doyle J at [45].
[14] Primary decision [22].
The master accepted ACS's submissions and said:[15]
The law in this area, which to some may seem surprising, is well settled. The key point is this. An applicant to set aside the demand must show how pursuant to the contractual relationship between the parties a debt is not due and owing. There may or may not be within the contract a right for the creditor to call for an account. Such a term might be implied into the contract. If the creditor was able to establish a breach of that term and was able to establish it was arguable upon breach no payment was due, there might well be a genuine dispute which would justify the demand being set aside. But that was not the case here. It was not the basis upon which [WA Glass] put its case. [WA Glass] relied solely on an alleged inability to ascertain whether or not [ACS] had properly charged it for those invoices not the subject of a quote. On that basis, it has not established there is a genuine dispute.
[15] Primary decision [23].
The master was also not satisfied that there was an offsetting claim equal to or greater than the debt.[16] The master said:[17]
[The second Harkins affidavit] does not contain sufficient detail to allow any assessment to be made of the claim. For instance, in relation to the $11,000 referred to in par 58(c), there is no attempt to explain how costs for additional quality control would be ascertained. It is not clear indeed what is meant by the sub-paragraph. No explanation of how and why the costs might be incurred is provided. There is simply a lack of a factual basis upon which the figure of $174,000 rests. As was accepted by counsel for [ACS], it is not necessary for a plaintiff to provide detailed evidence that could amount to a pleading or even particulars of a pleading. But there must be some basis to allow the court to assess the veracity of the figures put forward. The affidavit material relied upon by the plaintiff does not achieve that end.
[16] Primary decision [28].
[17] Primary decision [27].
The master therefore dismissed WA Glass' application to set aside the statutory demand. He made an order extending the time for WA Glass to comply with the statutory demand to 21 days from the making of the orders on 18 August 2021 (ie to 8 September 2021).
The extension application
On 25 August 2021, WA Glass filed an appeal notice and an application to extend time for compliance with the statutory demand.
The application was supported by an affidavit sworn by Peter Harkins, a director of WA Glass, on the same day. Mr Harkins deposed that WA Glass has not paid the amount of the statutory demand because of his concerns that ACS is not solvent and WA Glass would be at risk of not recovering its payment and any costs if it were successful in the appeal.[18]
[18] Affidavit of Peter William Harkins sworn 25 August 2021 [6].
Mr Harkins outlined the concerns as follows:
The basis for my concern is a conversation that I had with Ms Tania Rich.
In December 2020, I was informed by Ms Rich and believe that Ms Rich was the Accountant/Financial controller of [ACS]. On 3 December 2020, I spoke to Ms Rich on the telephone. ...
During the telephone discussion …, I said to Ms Rich words to the effect 'I don't understand why ACS is arguing about this. Does ACS have cash problems?' and she replied in words to the effect of 'ACS has big problems'.
Mr Harkins also deposed relevantly his belief that WA Glass is solvent:
[T]he appellant is, to the best of my knowledge, information and belief, solvent. Based on the matters in paras [12] - [15] below, l believe that the appellant remains solvent.
In my affidavit sworn 9 March 2021 in the original proceedings ('my First Affidavit') at paragraphs [28]-[30] I depose to my belief that [WA Glass] was at that time solvent. Attachment H to my First Affidavit is a letter dated 9 December 2020 from Graham Tull, Chartered Accountant, [WA Glass'] accountant, expressing the opinion that the appellant was at that time solvent. Attached and marked 'PWH-3' is a copy of that letter.
Attached hereto and marked 'PWH-4' is a copy of a bank statement for a savings bank account held by [WA Glass] which records that the appellant holds sufficient funds to pay the full amount claimed in the Statutory Demand.
The appellant also operates a trading account which receives payments between $50,000 and $100,000 every week under a contract. The monthly turnover of the appellant is over $500,000.
[WA Glass] is prepared to pay into Court, as a condition of the extension of time to comply with the Statutory Demand sought in the Interim Application, $74,391.91, to be held as security for payment of the amount claimed in the Statutory Demand pending the final hearing and determination of this appeal. That amount is the total amount claimed in the Statutory Demand, being $248,391.91, minus the amount of the appellant's offsetting claim, being $174,000.
Mr Harkins deposed in conclusion:
The amount (if any) owed by [WA Glass] to [ACS] pursuant to a number of invoices issued by the respondent and which were the subject of the claims in the Statutory Demand (but in respect of which [WA Glass] has never been provided with requested information justifying the amounts claimed in the invoices) still remains in dispute (and that dispute will be ventilated in, and after, this appeal. The offer of payment into Court as a condition of the order sought by the Interim Application is not, and not intended to be, an admission that any part of that disputed amount is owing by [WA Glass] to [ACS].
ACS did not file any affidavits in opposition to the extension application.
Grounds of appeal and submissions
On 2 September 2021, WA Glass filed its appellant's case in the appeal. It relies on four grounds of appeal alleging that the master erred:
(1)in accepting that the applicable principle is enunciated in Tesrol and Reschke, as:
those cases merely establish an exception to the rule that an unanswered request for information genuinely required to determine whether an amount claimed is payable gives rise to a genuine dispute 'about the existence or amount of a debt' under s.459H(1)(a) of the [Act], the exception being that a request which is merely to access information which might reveal something which may give rise to a dispute is not genuinely required for the purposes of the rule.
(2)in finding that there was no evidence to establish a genuine dispute that arose as a result of an unanswered request for information genuinely required to determine whether an amount claimed is payable based on the evidence adduced by WA Glass in its affidavits.
(3)in finding that there was no offsetting claim.
(4)in not holding that the amount of the genuine dispute and the offsetting claim exceeded the amount claimed in the statutory demand, so that the statutory demand was required to be set aside or alternatively varied.
Submissions on grounds 1 and 2
In support of ground 1, WA Glass' written submissions refer to cases said to establish a 'settled rule' that an unanswered request for information genuinely required to determine whether an amount claimed is payable gives rise to a genuine dispute 'about the existence or amount of a debt' under s 459H(1)(a) of the Act.[19]
[19] Appellant's submissions, par 5 - 7.
As to ground 2, WA Glass submits that the invoices 28464 ($7,059.31), 28340 ($86,274.78), 28069 ($38,187.00), 27872 ($3,880.70) and 27840 ($8,114.22) are disputed. WA Glass contends that it was an implied term of the contract that its obligation to make payment is conditional upon ACS providing invoices and detailed accounts to justify and substantiate expenditure, if so required.[20] WA Glass says that its director, Mr Harkins, made requests for details of who was on site and at what times concerning amounts claimed in the disputed invoices, and has not received a response. The appellant contends that ACS' refusal to provide the information gives rise to a genuine dispute.[21]
[20] Appellant's submissions, par 8 - 13.
[21] Appellant's submissions, par 14 - 19.
In opposition to grounds 1 and 2, ACS contends that the authorities relied on by WA Glass do not establish the 'settled rule' for which WA Glass contends. ACS contends that the master correctly concluded that the high-water mark of WA Glass' case was that its director was not satisfied that there were no grounds for dispute, in the absence of further information. ACS submits that WA Glass has failed to adduce evidence that it made any bona fide request for anything further before the invoices had fallen well overdue for payment. It says that WA Glass has no right to inspect further business records ACS holds, and WA Glass' liability does not depend on inspection of further records. ACS contends that the work itself has already been inspected and accepted, and the invoices in question give 'minute detail, as to labour time and as to materials' to which WA Glass has raised no dispute.
Submissions on ground 3
As to ground 3, WA Glass submits that the general principles in relation to offsetting claims were set out in this court's decision in Complete Hire & Sales Pty Ltd v Terra Firma Constructions Pty Ltd [No 2].[22] WA Glass submits that the claim for costs associated with ACS' delay was sufficiently established by the supporting affidavits. It contends that the claim was sufficiently quantified as the evidence quantified the claim in money amounts and states how the amounts are calculated, thereby enabling the court to determine the amount of the offsetting claim as required by s. 459H(2) of the Act.[23]
[22] Complete Hire & Sales Pty Ltd v Terra Firma Constructions Pty Ltd [No 2] [2018] WASCA 111 [15] - [18].
[23] Appellant's submissions, par 20 - 22.
ACS submits that the applicable general principle is reflected in the following passage of Palmer J's reasons in Macleay Nominees Pty Ltd v Belle Property East Pty Ltd:[24]
In a claim for unliquidated damages for economic loss, the Court will not be able to determine whether the amount claimed is claimed in good faith unless the plaintiff adduces some evidence to show the basis upon which the loss is said to arise and how that loss is calculated. If such evidence is entirely lacking, the Court cannot find that there is a genuine offsetting claim for the purposes of s.459H(1) and (2).
[24] Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 [18].
ACS submits that Mr Harkins has not even attempted to show a basis for the numbers which he has stated, so that the court has no way to assess those assertions. ACS says that the parts of Mr Harkins' affidavits relied upon by WA Glass fall demonstrably short of meeting the minimum threshold necessary for any court to assess the genuineness of the claims. ACS says that the master's conclusion on the offsetting claim argument was inescapable.
Submissions on ground 4
As to ground 4, the WA Glass says that the total of the disputed invoices is $143,516.01 and the amount of the offsetting claim in $174,000. WA Glass says that, if its position on both the genuine dispute and the offsetting claim had been accepted, the master was bound by s.459H(3) of Act to set aside the statutory demand.[25] Alternatively, WA Glass contends that:[26]
(1)If its position as to the genuine dispute is rejected but its position as to an offsetting claim is accepted, the statutory demand should be varied under s 459H(4) of the Act to $74,391.91 (being the $248,391.91 claimed in the statutory demand less the offsetting claim of $174,000).
(2)If its position as to the genuine dispute is accepted but its position as to the offsetting claim is rejected, the statutory demand should be varied under s 459H(4) of the Act to $104,875.90 (being the $248,391.91 claimed in the statutory demand less the $143,516.01 in disputed invoices).
[25] Appellant's submissions, par 24.
[26] Appellant's submissions, par 25 - 26.
ACS does not dispute the above calculations but says that ground 4 depends on the success of earlier grounds which should fail.
Disposition of extension application
This court has power, in an appeal against a refusal to set aside a statutory demand, to make an order under s 459F(2)(a)(i) extending the time for compliance with the statutory demand in order to preserve the subject matter of the appeal and prevent the appeal from being rendered nugatory.[27]
[27] Complete Hire & Sales Pty Ltd v Terra Firma Constructions Pty Ltd [2018] WASCA 88 [9].
It is common ground between the parties that the principles to be applied in the exercise of that power are akin to those which apply on an application for a stay of enforcement of a judgment debt which is subject to appeal.[28]
[28] As to which see Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308 [9].
There is also no dispute that, in the present case, an extension of the time for complying with the statutory demand is required to avoid the appeal being rendered nugatory. ACS expressly accepts in its written submissions that 'for the [a]ppeal to be meaningful, the time for compliance with the [s]tatutory [d]emand would need to be extended'.[29]
[29] Respondent's written submissions, par 16.
Having regard to the submissions advanced by both parties, we were satisfied, at this preliminary stage, that the appeal is arguable in the relevant sense. That is not to say that the appeal will necessarily succeed. However, proper assessment of the merits of the grounds of appeal requires a closer examination of the authorities and evidence relied on by the parties than is appropriate at this stage of proceedings.
Both parties also accept that payment into court should be a condition of the grant of any extension. That is appropriate in this case, when each party refers to some grounds for concern that the other party may not be solvent, and neither party has adduced clear evidence as to its solvency.
The appellant contends that its ground as to the offsetting claim is so strong that it is not appropriate to require payment of the whole amount of the statutory demand into court. It contends that the amount of the offsetting claim should be excised from the total amount. By contrast, the respondent contends that the ground is clearly without merit having regard to what it said is the sparsity of the evidence relied on to establish the alleged offsetting claim.
At this preliminary stage we are not satisfied that the ground concerning the offsetting claim is so clearly correct as to make it unjust to require the payment of the whole amount of the statutory demand into court. In our view, in all the circumstances, it is appropriate to order the payment of the whole of the amount of the statutory demand into court as a condition of the grant of an extension. That will preserve each parties' position, in circumstances where WA Glass has indicated its willingness and ability to make the payment into court if required.
With this condition, we were satisfied that the balance of convenience favoured the grant of an extension of time in which to comply with the statutory demand.
For these reasons, we made the orders referred to at [2] above.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MT
Associate to the Honourable Justice Mitchell
7 SEPTEMBER 2021
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