WA Glass Pty Ltd v Auto Control Systems Pty Ltd
[2021] WASC 187
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: WA GLASS PTY LTD -v- AUTO CONTROL SYSTEMS PTY LTD [2021] WASC 187
CORAM: MASTER SANDERSON
HEARD: 1 JUNE 2021
DELIVERED : 11 JUNE 2021
FILE NO/S: COR 42 of 2021
BETWEEN: WA GLASS PTY LTD
Plaintiff
AND
AUTO CONTROL SYSTEMS PTY LTD
Defendant
Catchwords:
Corporations law - Application to set aside statutory demand - Turns on own facts
Legislation:
Nil
Result:
Application dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr A M Prime |
| Defendant | : | Mr S D Majteles |
Solicitors:
| Plaintiff | : | Anthony Prime Legal Services |
| Defendant | : | Mendelawitz Morton Commercial Lawyers |
Case(s) referred to in decision(s):
Complete Hire & Sales Pty Ltd v Terratherma Constructions Pty Ltd (No 2) [2018] WASCA 111
Re Teserol Holdings Pty Ltd (2013) 97 ACSR 9
Reschke Pty Ltd v Di Giorgio Family Wines Pty Ltd [2017] SASC 187
MASTER SANDERSON:
This was the plaintiff's application to set aside a statutory demand. It was supported by two affidavits of Peter William Harkins, the first sworn 10 March 2021, the second sworn 3 May 2021 and an affidavit of Blake Stacey sworn 3 May 2021. In opposition to the application, the defendant relied on two affidavits of Michelle Kaye Watts. The first sworn 8 April 2021 and the second sworn 17 May 2021. The defendant also relied on an affidavit of Brett Smith affirmed 8 April 2021. The second affidavit of Ms Watts was filed without leave and late. Counsel for the defendant explained at the commencement of the hearing the affidavit clarified some of Ms Watts' earlier evidence and raised nothing new. On that basis, counsel for the plaintiff did not object to it being admitted into evidence.
At the commencement of the hearing, counsel for the defendant objected to certain paragraphs in both of Mr Harkins' affidavits and a paragraph in Mr Stacey's affidavit. These objections had not been flagged prior to the hearing. I dealt with these objections before hearing submissions and I will detail the objections below. But before doing so, I should make a comment in relation to objections taken to affidavits.
It is proper and appropriate for a party who objects to material found in an affidavit to raise those objections. That should first be done as part of the conferral process. If agreement can be reached in relation to all or some of the objections, so much the better. If agreement cannot be reached, then the party making the objection should set out which paragraphs are objected to and the basis of that objection. Conveniently, that can done as a schedule to written submissions. As an alternative, a separate document can be lodged prior to the hearing. That way, at the commencement of the hearing, the parties can, if necessary, supplement their objections by oral submissions and a ruling can be made in relation to each objection so that before the substance of the application is heard, the evidentiary position is clear. In some very rare cases, there may be a need to list the matter in chambers prior to the hearing to allow objections to be considered. If this procedure is followed, the time allocated for the hearing can be used in the main to consider the substantive application. Otherwise, time is taken with the objections and it may not be possible to conclude the hearing in the allotted time. In this case, even allowing for the objections, it was possible to finish within the time available - but only just.
Turning then to the objections themselves, they were largely directed to evidence which the defendant said was scandalous. As an example of the complaint made, par 16 of Mr Harkins' first affidavit is in the following terms:
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 the plaintiff to make good and lost production, which was in excess of this invoice total in any event.
Objection was taken to the second sentence of that paragraph. Clearly the objection was well founded. At the very least, it suggests trespass by Mr Smith onto the plaintiff's worksite. If such an allegation is to be made, background facts must be provided. Furthermore, part of the sentence is irrelevant; Mr Harkins' unsubstantiated opinion the plaintiff's suffered losses greater than the invoice is irrelevant. On that basis, I struck out the second sentence of par 16.
Also struck out were part of par 21.4 after the word 'particularly', the last sentence of par 23 and par 27. This last paragraph was struck out on the basis it was irrelevant.
In relation to Mr Harkins' second affidavit, I struck out part of par 18(12), the second sentence of par 23 and the fourth sentence of that paragraph. I also struck out the first sentence of par 29, parts of par 37, par 42 and par 43. Paragraph 43 was particularly egregious - it was defamatory and should never have been included in Mr Harkins' affidavit. I also struck out the last sentence of par 44 and par 46.
In relation to Mr Stacey's affidavit, I struck out the last sentence of par 11.
No objection was taken to any part of the affidavits relied upon by the defendant.
A copy of the statutory demand appears as attachment B to Mr Harkins' first affidavit. Appearing as a schedule to the demand is the following:
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
It is significant to note the demand is for eleven different debts for eleven different invoices. This fact assumed some significance, particularly given the way the defendant resisted the application. No complaint was made by the plaintiff about either the fact that the demand comprised a number of different invoices nor was any complaint made about the level of detail provided in the schedule. Essentially, the plaintiff's claim had two aspects. First, it was said there was a genuine dispute about the debt - that is to say about many - but not all - of the invoices. It was also said the plaintiff had an offsetting claim greater than the amount of the debt. Before going to the plaintiff's submissions, I should set out a summary of the relevant background facts.
The plaintiff engaged the defendant to perform electrical works in relation to a glass recycling plant located in Bassendean. The engagement lasted between approximately December 2019 and 6 November 2020. After the relationship ended, the defendant offered to continue to perform work so long as it was paid in advance for that work. During the time the defendant was engaged on the project, it performed various electrical work which is set out in some detail in the affidavit of Mr Smith and the affidavits of Mr Harkins. It is unnecessary to detail the work performed. However, it is important to note that some of the work was performed pursuant to written quotes prepared by the defendant and accepted by the plaintiff. Other work was performed pursuant to ad hoc requests from the plaintiff.
In respect of the works performed by the defendant, the defendant says:
(a)it offered a discounted rate on its usual rates for electricians;
(b)it informed the plaintiff it would charge a 20% margin on the cost to it of all materials supplied to the site;
(c)the plaintiff was provided with and signed a credit application which contained the defendant's terms and conditions and this was accepted by the plaintiff; and
(d)the plaintiff was provided with ACS's weekend and overtime rates.
Written quotes in respect of the invoices the subject of the statutory demand were prepared by the defendant and signed by the plaintiff as follows:
(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.
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, the plaintiff was provided with the defendant's applicable labour rates that would apply to weekend and overtime work. This is particularly relevant in relation to invoice 28069 and invoice 28340.
The defendant says during the period of its engagement, there were numerous occasions where invoices it issued were not paid within the time stipulated on the invoice. For a period in June and July 2020, the defendant ceased work on the project pending payment of outstanding invoices. The plaintiff informed the defendant it did not have sufficient cashflow to pay the invoices. These cashflow difficulties, clear on the face of various documents attached to the affidavits, were not denied by the plaintiff. That said, it is also not relevant to the outcome of this application.
Of the eleven invoices the subject of the demand, three invoices (invoice 27804, invoice 28071 and invoice 28312) relate to the CDS plant and associated electrical works and were the subject of a fixed quote. Three invoices (invoice 29039, invoice 28976 and invoice 28885) relate to the temporary three phase power supply works and were subject of a fixed quote. The remaining five invoices (invoices 27840, 27872, 28069, 28340 and 28464) relate to works performed sub‑consequent upon ad hoc requests. They were not the subject of a fixed quote.
The defendant's standard terms and conditions relevantly provide as follows:
(a)the terms and conditions would form part of any offer from the defendant 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, the defendant 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, the defendant 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.
It was the defendant's position these terms and conditions applied to all of the invoices the subject of the demand. The plaintiff did not dispute that was the case.
Turning then to the plaintiff's arguments, what is really said is that the plaintiff 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 the plaintiff to make good and lost production, which was in excess of this invoice total in any event.
To summarise then, the plaintiff is not saying there is a genuine dispute about whether the work was done. The complaint is that the invoices do not allow the plaintiff to assess whether or not the work was done. Of course this complaint can have no relevance to those invoices rendered for work where the defendant had quoted and the plaintiff had accepted that quote. So taken at its highest, the plaintiff can have no complaint in relation to six invoices - those being invoices 27804, 28071, 28312, 29039, 28976 and 28885. Any complaint must relate only to the remaining five invoices. In relation to those invoices, the defendant says a distinction is to be drawn between a company being dissatisfied with the basis of the creditor's claim and the existence of a genuine dispute. 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 Teserol Holdings Pty Ltd (2013) 97 ACSR 9 and Reschke Pty Ltd v Di Giorgio Family Wines Pty Ltd [2017] SASC 187 per Doyle J at [45].
The defendant's submissions must be accepted. 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 the plaintiff put its case. The plaintiff relied solely on an alleged inability to ascertain whether or not the defendant 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.
The relevant principles in assessing whether there is an offsetting claim were set out in some detail by the Court of Appeal in Complete Hire & Sales Pty Ltd v Terratherma Constructions Pty Ltd(No 2) [2018] WASCA 111. In par 40 of his written submissions, counsel for the defendant set out the relevant principles as follows:
40.The relevant principles relating to assessing whether an offsetting claim is genuine are summarised in Complete Hire as follows:
(a)the court does not attempt to resolve an offsetting claim or predict its outcome rather the court examines whether there is a genuine claim sufficiently quantified to rise to an offsetting amount;
(b)the court must identify the alleged claim, which must be bona fide and truly exist in fact and assess whether it is genuine;
(c)an offsetting claim is not confined to debts which are due and payable and a claim for an unliquidated sum may qualify. However, the counterclaim, set-off or cross demand must be an amount capable of being quantified in money terms. It is therefore necessary for the company seeking to set aside a statutory demand to take steps to quantify the claim;
(d)where the claim for unliquidated damages is for economic loss, the court will not be able to determine whether the amount claimed is claimed in good faith unless the company adduces some evidence to show the basis upon which the loss is said to arise and how the loss is calculated. Thus, an affidavit in support will be insufficient if it does not contain material from which a court can make an estimate of the amount of an offsetting claim;
(e)while precise quantification of a claim is not necessary and a company does not need to set out evidence supporting the claim in meticulous detail, the company must provide evidence of a plausible and coherent basis for quantifying the claim which it genuinely asserts; and
(f)the court may assign nominal value where damage is an element of the claim and there is no evidence of damage
The plaintiff's evidence in relation to the alleged offsetting claim is found in pars 21, 22 and 23 of Mr Harkins' first affidavit and pars 40, 41 and 58 of his second affidavit. (I should note the defendant takes issue with much of what is said by Mr Harkins in these paragraphs and by referring to the paragraphs and summarising what is contained therein, I am not necessarily suggesting the evidence should be received in it's entirely. But for the moment I am putting the plaintiff's position at its highest.) In only one of these paragraphs does Mr Harkins attempt to quantify his offsetting claim. By way of example, in par 22 of his first affidavit, Mr Harkins says:
I could estimate our costs of the delay caused by ACS, based on our current production throughputs relative to what we did in October, November and December. These costs are significant.
In par 58 of his second affidavit, Mr Harkins does attempt to offer some assessment of any offsetting claim. That paragraph reads as follows:
I estimate the cost to the Plaintiff due to the delays caused by the Defendant to be $174,000. This estimate is based upon the following estimates;
a)Penalties for sub standard product produced due to not being able to run the plant in full auto mode of $15,000;
b)Costs for additional labour due to not being able to run the plant in full auto mode of $8,000;
c)Costs for additional quality control required because of not being able to run in full auto mode of $11,000;
d)Extra labour required due to inefficient commissioning to compensate for electrical delay of $28,000;
e)Costs of reject product tipping and reprocessing due to quality issues of $34,000;
f)Cost of keeping specialists on site due to electrical delays of $18,000;
g)Costs of inefficient production for a prolonged period due to inability to deal with increasing glass volumes and find time for commissioning work that should have happened prior to October of $28,000; and
h)Disposal of excessive amounts of waste due to not having the plant commissioned on time of $32,000.
With respect, that 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 the defendant, 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.
In this matter I am not satisfied the plaintiff has established there is a genuine dispute in relation to the debt nor am I satisfied it has an offsetting claim equal to or greater than the debt. Accordingly, the application will be dismissed. The plaintiff ought pay the defendant's costs including the reserved costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AH
Secretary
11 JUNE 2021
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