WA Glass Pty Ltd v Auto Control Systems Pty Ltd [No 2]
[2023] WASCA 85
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 [No 2] [2023] WASCA 85
CORAM: BUSS P
MITCHELL JA
VAUGHAN JA
HEARD: 11 AUGUST 2022
DELIVERED : 30 MAY 2023
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:
Corporations - Statutory demand - Application to set aside statutory demand on ground of genuine dispute and offsetting claim - 'Cost‑plus' building contract - Whether there is a 'settled rule' that an unanswered request for information gives rise to a genuine dispute - Whether there is a genuine dispute - Whether there is an offsetting claim - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 459C, s 459H, s 459S
Result:
Appeal dismissed
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):
Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410
CA & Associates Pty Ltd v Fini Group Pty Ltd [2020] WASCA 31
Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5
Complete Hire & Sales Pty Ltd v Terra Firma Constructions Pty Ltd [No 2] [2018] WASCA 111
Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85; (2009) 71 ACSR 602
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51; (2002) 26 WAR 306
Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743
Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] VicRp 61; [1994] 2 VR 290
Odyssey Re (Bermuda) v Reinsurance Australia [2001] NSWSC 266
PDR Pty Ltd v Cottesloe Constructions Pty Ltd [2000] WASCA 62
Re Tesrol Holdings Pty Ltd (2013) 97 ACSR 9
Reinsurance Australia Corporation v Odyssey [2000] NSWSC 1118; (2000) 36 ACSR 348
Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd [2017] SASC 187
Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA & Pharmagel SpA (1994) 15 ACSR 347
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452
WA Glass Pty Ltd v Auto Control Systems Pty Ltd [2021] WASC 187
WA Glass Pty Ltd v Auto Control Systems Pty Ltd [2021] WASCA 162
Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40
JUDGMENT OF THE COURT:
Overview
The appellant, WA Glass Pty Ltd (WAG), made an application for leave to appeal against an order of Master Sanderson dismissing an application to set aside a statutory demand dated 12 February 2021 issued by the respondent, Auto Control Systems Pty Ltd (ACS), claiming an amount of $248,391.81.
WAG raised two matters in seeking to set aside the statutory demand. First, WAG said that there was a genuine dispute about the existence or amount of the debt. Second, WAG said that it had an offsetting claim greater than the amount of the debt. The master gave written reasons for decision which rejected both aspects of the claim.[1]
[1] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [2021] WASC 187 (primary reasons).
Before this court, WAG posited a 'settled rule' that an unanswered request for information genuinely required to determine whether an amount claimed is payable necessarily gave rise to a genuine dispute about the existence or amount of a debt within s 459H(1)(a) of the Corporations Act 2001 (Cth). WAG said that the master was in error in not recognising and applying this 'settled rule'. WAG also said that the master erred in fact and in law in finding that there was no offsetting claim.
For the reasons that follow the appeal should be dismissed. There is no settled rule of law in terms of WAG's so-called 'settled rule'. Nor, applying the orthodox meaning of the term 'genuine dispute', does the evidence adduced by WAG establish that there was a genuine dispute about the existence or amount of the debt the subject of the statutory demand. Finally, as to the alleged offsetting claim, the master was correct, for the reasons that he gave, to find that WAG had not established its alleged offsetting claim.
Background facts
Between December 2019 and 6 November 2020 WAG engaged ACS to perform electrical works at WAG's Bassendean glass recycling plant. Some of the work was performed pursuant to written quotes prepared by ACS and accepted by WAG. Other work was performed pursuant to ad hoc requests by WAG.
Specifically, in respect of the invoices the subject of the statutory demand, written quotes were prepared by ACS and signed on behalf of WAG as follows:
1.A 25 March 2020 quote for the provision of temporary three‑phase power supply works (invoices 28885, 28976 and 29039 relate to these works - these invoices total a mere $165).
2.A 3 June 2020 quote for the supply and installation of a CDS plant motor control centre including associated electrical works (invoices 27804, 28071 and 28312 relate to these works - the outstanding amount in relation to these invoices totals $104,710.90).
Invoices 27840, 27872, 28069, 28340 and 28464 (which were also included in the statutory demand) related to works performed pursuant to ad hoc requests by WAG. ACS's unchallenged evidence was that these aspects of the works concerned: electrical works performed between 1 and 13 September 2020 after ad hoc requests (invoices 27840 and 27872 totalling $11,994.92); general electrical works performed between 14 September 2020 and 29 October 2020 (invoices 28069 and 28340 totalling $124,461.78); and labour and materials relating to the supply and installation of flood lighting between 1 and 6 November 2020 (invoice 28464 in the amount of $7,059.31).
A summary of the invoices, what each relates to, and where each is found in the evidence, is provided in annexure 'A' to these reasons.
ACS said that it offered a discounted rate on its usual rates for electricians. Also, ACS informed WAG that it would charge a 20% margin on the cost to ACS of all materials supplied to the site. Finally, WAG was provided with a credit application which contained ACS's terms and conditions. This was accepted by WAG. The non-quoted works the subject of the ad hoc requests were charged on a cost-plus basis at the rates as discussed between WAG's and ACS's representatives. There was, however, an exception in relation to overtime and weekend work. Weekend and overtime work was charged at rates set out in an attachment to a 25 September 2020 email.
ACS's standard terms and conditions provided as follows:
1.The terms and conditions would form part of any offer from ACS to provide goods and services (cl 1.2).
2.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).
3.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).
4.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).
5.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).
ACS's position - which was not disputed by WAG - was that these terms and conditions applied to all of the invoices the subject of the statutory demand.
Some of ACS's invoices went unpaid. Following correspondence demanding payment, by an email dated 24 November 2020, WAG requested the provision of 'timesheets and names for who was on site and when and what they were working on' in respect of invoices 27840, 27872 and 28069.[2] In subsequent correspondence on behalf of WAG the same details were sought for invoices 28464 and 28312.[3] WAG received no response to those requests.
[2] Affidavit of P W Harkins sworn 9 March 2021 attachment 'D' GAB 19.
[3] Affidavit of P W Harkins sworn 9 March 2021 attachment 'G' GAB 33.
Following correspondence between the parties, and a lawyer's demand for payment, ACS issued a statutory demand dated 12 February 2021 to WAG in respect of 11 invoices said to be outstanding. The statutory demand was served at WAG's registered office on 19 February 2021.
The schedule to the statutory demand identified the invoices the subject of the demand as follows:
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
The appellant applied to set aside the statutory demand by an originating process filed on 10 March 2021.
The application was supported by affidavits of Peter Harkins sworn 9 March 2021 and 3 May 2021 and an affidavit of Blake Stacey sworn 3 May 2021. In opposition the respondent relied on affidavits of Michelle Watts sworn 8 April 2021 and 17 May 2021 and an affidavit of Brett Smith affirmed 8 April 2021.
Parts of WAG's affidavits were struck out following the master upholding various evidentiary objections. That objectionable material was, however, included in the Green Appeal Book filed in this court. That should not have occurred. In compiling the appeal books the parties' legal representatives should have excluded the materials that were not received by the master.
In Mr Harkins' initial affidavit, he referred to WAG's requests for further information regarding the work claimed in the invoices in relation to the ad hoc works and the lack of any substantive response to those requests.[4] Mr Harkins then stated:
As such, I dispute liability in relation to the invoices the subject of the [ACS's] statutory demand. Whilst it may be the case that not all of the amounts claimed in the invoices are disputed, until [ACS] provides the information and timesheets which I have requested, I am unable to determine the extent to which each invoice is disputed and what amounts are not disputed in relation to the invoices.[5]
[4] Affidavit of P W Harkins sworn 9 March 2021 pars 8 - 14 GAB 6 - 7.
[5] Affidavit of P W Harkins sworn 9 March 2021 par 15 GAB 7.
Mr Harkins deposed to a belief, based on a quotation received from ACS, that the amount of labour and materials charged on the ad hoc works was likely to have included an amount that should have been included in the fixed price items ACS was supplying - this providing the reason for WAG's queries as to the amounts charged and the request for further information.[6]
[6] Affidavit of P W Harkins sworn 9 March 2021 pars 24, 26 GAB 9. Similar evidence was given in Mr Harkins' second affidavit: Affidavit of P W Harkins sworn 3 May 2021 pars 24, 39 GAB 43, 45.
WAG sought the further information in relation to invoices 27840, 27872, 28069, 28340 and 28464[7] (ie the invoices the subject of the ad hoc works). As will be seen, the unanswered requests for information were relied on by WAG in contending that there was a genuine dispute about the existence or amount of the debts in relation to the invoices the subject of the ad hoc works.
[7] Affidavit of P W Harkins sworn 9 March 2021 pars 16, 17, 19 GAB 7 - 8.
The affidavit also developed the basis for WAG's alleged offsetting claim. Relevantly:
1.Mr Harkins asserted that WAG had 'suffered considerable damage' due to ACS being late in delivering all of the electrical work. Examples were provided. Mr Harkins said that he could estimate the costs of the delay and asserted that the costs were significant.[8]
2.Mr Harkins asserted that WAG had 'suffered considerable cost' due to statements to third parties made by one of ACS's employees (Mr Smith) about WAG's financial position.[9]
[8] Affidavit of P W Harkins sworn 9 March 2021 pars 21 - 22 GAB 8 - 9.
[9] Affidavit of P W Harkins sworn 9 March 2021 par 23 GAB 9.
Mr Harkins' initial affidavit did not attempt to quantify the alleged damage and cost. However, Mr Harkins' second affidavit provided an estimate of the alleged delay damage (see [28] below). It remained the case that there was no quantification of the alleged loss or damage as a result of Mr Smith's alleged conduct.[10]
[10] See Affidavit of P W Harkins sworn 3 May 2021 par 59 GAB 49.
The master's decision
The master was not satisfied that WAG had established that there was a genuine dispute in relation to the debt claimed in the statutory demand. Nor was the master satisfied that WAG had an offsetting claim equal to or greater than the debt. Accordingly, the master dismissed the application to set aside the statutory demand.
So far as WAG claimed that the debts the subject of the statutory demand were genuinely disputed, the master characterised WAG's argument as being that WAG did not have sufficient detail in relation to the invoices to determine whether or not the amounts claimed were owing. The master said that '[t]he complaint is that the invoices do not allow [WAG] to assess whether or not the work was done'.[11] The master observed that this complaint could only apply to the five invoices for the ad hoc works - it had no relevance to the invoices rendered for the work where ACS had issued a quotation which had been accepted by WAG.[12]
[11] Primary reasons [22].
[12] Primary reasons [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:
It may well be [the company] 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 [ACS] 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].[13]
[13] Primary reasons [22].
The master accepted those submissions.[14] He stated:
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 [WAG] put its case. [WAG] 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]
[14] Primary reasons [23].
[15] Primary reasons [23].
These conclusions were challenged by grounds 1 and 2.
As to whether there was an offsetting claim, the master referred to this court's decision in Complete Hire & Sales Pty Ltd v Terra Firma Constructions Pty Ltd [No 2].[16] He noted the relevant evidentiary references to the offsetting claim in Mr Harkins' affidavits.[17] Insofar as the offsetting claim was quantified the master reproduced in full the relevant passage from Mr Harkins' second affidavit:
[16] Complete Hire & Sales Pty Ltd v Terra Firma Constructions Pty Ltd [No 2] [2018] WASCA 111.
[17] Primary reasons [25] (referring to Mr Harkins' affidavit sworn 9 March 2021 at pars 21, 22 and 23 and Mr Harkins' affidavit sworn 3 May 2021 at pars 40, 41 and 58 - see GAB 8 - 9, 45, 48).
I estimate the cost to [WAG] due to the delays caused by [ACS] 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.[18]
[18] Primary reasons [26].
The master said that this did not contain sufficient detail to allow any assessment to be made of the claim. There was a lack of factual basis for the $174,000 figure. The master said there must be some basis to allow the court to assess the veracity of the figures asserted by WAG. However, the affidavit material relied on by WAG did 'not achieve that end'.[19]
[19] Primary reasons [27].
This conclusion was challenged by ground 3.
Leave to appeal and grounds of appeal
WAG appealed against the master's decision to dismiss the application to set aside the statutory demand. Pending the hearing of the appeal, WAG sought an extension of time for compliance with the statutory demand. This court made an order extending the time for compliance with the statutory demand on the condition that WAG pay an amount into court as security for compliance with the statutory demand.[20] WAG paid the money into court in accordance with the condition.
[20] WA Glass Pty Ltd v Auto Control Systems Pty Ltd [2021] WASCA 162.
WAG relied on four grounds of appeal:
1.The learned Master erred in law … in accepting [ACS's] argument that the applicable principle is enunciated in Re Tesrol Holdings Pty Ltd and Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd, 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(l)(a) of the Corporations Act 2001 (CA), 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.The Master erred in fact and law … 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 [WAG] in its first and supplementary affidavits.
3.The Master erred in fact and in law … in finding that there was no offsetting claim.
4.The Master erred in fact and law … in not holding that the amount of the genuine dispute referred to in ground 2 above plus the amount of the offsetting claim referred to in ground 3 above exceeded the amount claimed in the statutory demand dated 12 February 2021 (the Statutory Demand), so that the Statutory Demand was required to be set aside under s 459H(3) of CA; or alternatively that the genuine dispute, alternatively the offsetting claim, was established, so that the Statutory Demand should be varied under s 459H(4) of CA.
Grounds 1 and 2 are concerned with whether there was a genuine dispute about the existence or amount of the debt claimed in the statutory demand. Ground 3 is concerned with whether WAG has an offsetting claim. Ground 4 relies on WAG being successful in one or both of grounds 2 and ground 3. In that respect ground 4 is entirely derivative on WAG establishing one or both of grounds 2 and 3.
WAG proceeded on the basis that the order dismissing the application to set aside the statutory demand was an interlocutory order.[21] It sought leave to appeal. ACS accepted that leave to appeal should be granted if WAG established good grounds for its appeal. Accordingly, there is no contest about whether leave to appeal is required or - if a ground of appeal is upheld - whether there should be leave to appeal. In the circumstances it is convenient to turn immediately to the merits of the appeal.
[21] Compare CA & Associates Pty Ltd v Fini Group Pty Ltd [2020] WASCA 31 [83], [106].
Grounds 1 and 2: the alleged genuine dispute
The parties' submissions
In support of ground 1, WAG referred 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 Corporations Act.[22]
[22] Appeal ts 9, 11, 14 - 17, 19 - 27. Appellant's submissions pars 5 - 7 WAB 10 - 12.
Ground 2 was said to be related to ground 1. But, although the two grounds were related, as presented in oral submissions counsel for WAG contended that ground 2 could succeed even if ground 1 failed.[23]
[23] Appeal ts 8 - 9.
As to ground 2, WAG submitted that invoices 28464 ($7,059.31), 28340 ($86,274.78), 28069 ($38,187.00), 27872 ($3,880.70) and 27840 ($8,114.22) were disputed. By its written submissions WAG contended that it was an implied term of the relevant contracts that its obligation to make payment was conditional upon ACS providing invoices and detailed accounts to justify and substantiate expenditure, if so required. WAG said that Mr Harkins, its director, made requests for details of who was on site and at what times concerning amounts claimed in the disputed invoices and had not received a response. WAG contended that ACS's refusal to provide the information gave rise to a genuine dispute.[24]
[24] Appellant's submissions pars 8 - 13 WAB 12 - 13.
In oral submissions, WAG's primary proposition in support of ground 2 was somewhat modified: counsel for WAG submitted that there did not need to be a contractual right to the information.[25] Indeed, at first effectively abandoning that part of WAG's written submissions, in oral submissions-in-chief counsel for WAG expressly stated that WAG did not assert any such implied term.[26] It was not until clarification was sought as to WAG's position in the course of ACS's oral address that counsel for WAG stated that he was still putting an argument that there was an implied term that liability to pay was conditional on provision of information, where requested.[27] This, however, was said to be not essential to ground 2.[28] Rather, WAG's proposition was that where a company requested information, on a bona fide basis, about the amount of an alleged debt - that information being genuinely required by the company to enable the company to satisfy itself as to the amount of the debt - and the request for information is not met, there will be a genuine dispute.[29]
[25] Appeal ts 10 - 11.
[26] Appeal ts 24.
[27] Appeal ts 40.
[28] Appeal ts 39, 40.
[29] Appeal ts 13, 25. See also Appeal ts 9, 11 - 12.
WAG submitted:
There is clearly a possibility that work could have been double-charged at the Bassendean site as there were fixed price quoted works being completed as well as variable work being completed at the same time. The refusal by [ACS] to permit [WAG] to inspect relevant material in the circumstances gives rise to a genuine dispute. The requests made by Mr Harkins and [WAG's] solicitor were not a fishing expedition to find out if an offsetting claim might exist, but were reasonable and genuine requests for relevant information in circumstances where there existed a real possibility that the work could have been double charged. Without access to the timesheets or records of labour, there was (and remains) real doubt surrounding the correct amount (if any) payable of the total claimed for the variable work.[30] (evidentiary references omitted)
[30] Appellant's submissions par 18 WAB 15. See also Appeal ts 3 - 8, 12 - 13.
In these circumstances, according to WAG, the so-called 'settled rule' applied.[31] There was, according to counsel for WAG, a plausible, coherent basis for WAG's request for information, and, in the absence of the provision of the information, there was a genuine dispute about the existence or amount of the debt.[32]
[31] Appeal ts 9. Appellant's submissions par 19 WAB 15.
[32] Appeal ts 17.
In opposition to grounds 1 and 2, ACS contended that the authorities relied on by WAG did not establish the 'settled rule' for which WAG contended.[33] ACS submitted further that:
1.The master applied the correct test as to whether there was a genuine dispute about the existence or amount of the debt.[34]
2.In the primary proceedings WAG did not advance a case based on an implied term of the type now contended for on appeal - something apparent from the master's reasons - and it was not open to WAG to raise that case on appeal.[35]
3.The master correctly concluded that the high-water mark of WAG's case was that Mr Harkins was not satisfied that there were no grounds for dispute, in the absence of further information.[36]
4.WAG had no right to inspect further business records and its liability did not depend on inspection of such further records. The work itself had already been inspected and accepted. The relevant invoices gave 'minute detail, as to labour time and as to materials' to which WAG had raised no dispute.[37]
5.Until being pressed for payment WAG did not question any of ACS's invoices and was only complimentary of ACS's work, making admissions as to WAG's lack of funds to pay its debts generally. There was, in ACS's submission, no 'genuine' dispute - the various grievances fitting the description of being merely constructed.[38]
Ground 1 - the alleged 'settled rule'
[33] Appeal ts 28, 35; Respondent's submissions pars 15 - 20, 22 - 32, 43 - 49, 56 - 66 WAB 28 - 34.
[34] Respondent's submissions pars 4 - 8, 21 WAB 26 - 27, 29.
[35] Appeal ts 41; Respondent's submissions pars 40 - 42 WAB 31.
[36] Respondent's submissions par 59 WAB 33.
[37] Respondent's submissions pars 67 - 68 WAB 34.
[38] Respondent's submissions pars 50 - 51, 53 - 55 WAB 32 - 33.
Under s 459H of the Corporations Act, where there is an application to set aside a statutory demand under s 459G, the court must calculate the substantiated amount of the demand if satisfied of one or both of the following:
(a)that there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates;
(b)that the company has an offsetting claim. (emphasis added)
Ground 1 postulated 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. The so-called 'settled rule' was said to be subject to an exception: a request which is merely to access information which might reveal something which may give rise to a dispute does not establish a genuine dispute. The master was said to have erroneously accepted and applied the exception rather than accepting and applying the 'settled rule'.
Whether there is such a 'settled rule', and whether the master erred in law by accepting and applying the exception rather than the 'settled rule', is at the heart of ground 1.
The starting point in examining WAG's contention by ground 1 is to acknowledge that the term 'genuine dispute' has an accepted meaning in the context of s 459H(1)(a) of the Corporations Act.
There are numerous cases which have discussed what is required to constitute a genuine dispute about the existence or amount of a debt. In CA & Associates Pty Ltd v Fini Group Pty Ltd Buss P and Vaughan JA summarised the effect of the authorities. Buss P and Vaughan JA stated that it is well-established that:
1.The court's function is to determine whether there is a genuine dispute; the court is not expected to undertake an extended inquiry or attempt to weigh the merits of the dispute. It is not part of the court's function to resolve the dispute.
2.It suffices if there is a 'plausible contention' requiring 'further investigation' - something that may be equated to the criterion of whether there is a 'serious question to be tried'.
3.However, the applicant must establish that: (a) the dispute is bona fide and truly exists in fact; and (b) the grounds alleging the existence of the dispute are real and not spurious, hypothetical, illusory or misconceived.[39] (citations omitted)
[39] CA & Associates Pty Ltd v Fini Group Pty Ltd [35] (referring to: Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785, 787; Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] VicRp 61; [1994] 2 VR 290, 295; Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452, 464; Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [2002] WASCA 51; (2002) 26 WAR 306 [22]; Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85; (2009) 71 ACSR 602 [4], [44] ‑ [46].
Buss P and Vaughan JA also referred with approval to the often‑cited words of McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd. Having said that the expression 'genuine dispute' connotes a plausible contention requiring investigation, thus raising much the same sort of considerations as 'serious question to be tried' criteria, his Honour stated:
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', or a patently feeble legal argument or an assertion of facts unsupported by evidence.[40] (citations omitted)
[40] Eyota Pty Ltd v Hanave Pty Ltd (787).
Eyota Pty Ltd v Hanave Pty Ltd is the ultimate source for the many authorities that have accepted that, for the purpose of s 459H(1)(a) of the Corporations Act, a genuine dispute is established where a company applying to set aside a statutory demand raises a plausible contention requiring investigation.
Thus there must be an evidential basis for the asserted dispute. Mere assertion is insufficient. So too a claim that is spurious or fanciful is insufficient. The dispute must have a sufficient objective existence and prima facie plausibility.
The requirement is to refer to something more than the mere 'raising' of a dispute or, in the context of an offsetting claim, the mere 'making' of a claim. The provisions assume that the dispute or offsetting claim have an 'objective' existence the genuineness of which is capable of being assessed. The word 'genuine' is included to sound a note of warning that the propounding of spurious disputes or claims is to be expected but must be excluded from consideration.[41]
[41] Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA & Pharmagel SpA (1994) 15 ACSR 347, 353 (referred to with approval in Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5 [13].
The existence of WAG's suggested 'settled rule', and the exception thereto, must be assessed in the context of the well-established construction of the term 'genuine dispute' in s 459H(1)(a) as it has been found and applied in the authorities. When that is done, we are not satisfied that there is a settled rule of law as to the meaning and application of the test of 'genuine dispute' in s 459H(1)(a) as propounded by WAG in its so-called 'settled rule'. WAG seeks to elevate to a settled rule of law what are instead the outcomes of applying the well-established construction of the statutory term 'genuine dispute' to specific factual situations in the authorities. That is confirmed by a brief consideration of the cases relied on by WAG.
WAG derived its posited 'settled rule' from John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd,[42] PDR Pty Ltd v Cottesloe Constructions Pty Ltd,[43] Financial Solutions Australasia Pty Ltd v Predella Pty Ltd, Reinsurance Australia Corporation v Odyssey[44] and Odyssey Re (Bermuda) v Reinsurance Australia.[45] WAG also sought to explain the cases relied on by ACS before the master - Re Tesrol Holdings Pty Ltd[46] and Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd[47] - as no more than an established exception to the 'settled rule'.
[42] John Holland Construction and Enginering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250, 253.
[43] PDR Pty Ltd v Cottesloe Constructions Pty Ltd [2000] WASCA 62, [8], [15] - [17].
[44] Reinsurance Australia Corporation v Odyssey [2000] NSWSC 1118; (2000) 36 ACSR 348 [46].
[45] Odyssey Re (Bermuda) v Reinsurance Australia [2001] NSWSC 266 [20].
[46] Re Tesrol Holdings Pty Ltd (2013) 97 ACSR 9.
[47] Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd [2017] SASC 187 [45].
Financial Solutions Australasia Pty Ltd v Predella Pty Ltd unambiguously picks up and applies the test of 'genuine dispute' formulated in Eyota Pty Ltd v Hanave Pty Ltd.[48] That is also the case with Odyssey Re (Bermuda) v Reinsurance Australia[49] (which was the decision on appeal from Reinsurance Australia Corporation v Odyssey). So too both Re Tesrol Holdings Pty Ltd[50] and Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd[51] enunciate the test for a 'genuine dispute' in a manner that is consistent with what is outlined at [46] - [48] above. These authorities do not, properly understood, support WAG's 'settled rule' as a distinct and separate settled rule of law in the application of the test of whether there is a genuine dispute; they do no more than apply the orthodox construction of the statutory provision.
[48] Financial Solutions Australasia Pty Ltd v Predella Pty Ltd [22].
[49] Odyssey Re (Bermuda) v Reinsurance Australia [20].
[50] Re Tesrol Holdings Pty Ltd [19] - [26].
[51] Reschke Pty Ltd v DiGiorgio Family Wines Pty Ltd [31] - [33].
Counsel for WAG relied in particular on John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd. Counsel read the following passage from Young J's reasons:
[In] a sizeable construction case, where the contemporaneous correspondence between the parties shows that there is a disputing of the figures, then one can say, without looking at the figures, or without looking at the evidence that backs up the figures, that there is a genuine dispute between the company and the respondent about the amount of the debt. A similar thing can be said about any offsetting claim.[52]
[52] John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (253).
That passage does not make out the suggested 'settled rule' advanced by WAG. It does no more than identify what will, in a particular kind of case, be an adequate evidentiary basis to establish a genuine dispute or an offsetting claim. Relevantly, the kind of case being referred to is different from the kind of case that is the subject of WAG's suggested 'settled rule'.
In any event, reading the reasons in John Holland as a whole, the case is consistent with the orthodox approach to the question of whether there is a genuine dispute about the existence or amount of the debt the subject of the statutory demand. Young J observed that what was required in all cases was something between mere assertion and the proof that would be required in a court of law. Young J stated, however, that there may be cases (indeed it may be 'the majority of cases') where the court will look not only to an assertion of a dispute but also to 'some sort of material short of proof which backs up the claim that is made that the amount is disputed'. Moreover, Young J stated that '[w]hat more than assertion is required is something that will differ from case to case'. Young J then referred to an earlier case in which his Honour said that it was ordinarily sufficient if the claim was not fictitious or merely colourable and was genuinely believed to exist.[53]
[53] John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (253).
John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd does not establish WAG's suggested 'settled rule'. The case is entirely consistent with the well-established construction of the term 'genuine dispute' in s 459H(1)(a) and the approach the courts have adopted in determining whether there is a genuine dispute.
PDR Pty Ltd v Cottesloe Constructions Pty Ltd takes the matter no further. It referred to and applied John Holland.[54]
[54] PDR Pty Ltd v Cottesloe Constructions Pty Ltd [8].
Separately, it should be acknowledged that PDR Pty Ltd v Cottesloe Constructions Pty Ltd has some factual similarities with the present case. In that case there was a cost-plus construction agreement. In applying to set aside a statutory demand the company (the principal under the contract) alleged that the builder's invoices, accounts and timesheets lacked detail; the company asserted that, despite having made requests for an explanation of the amount claimed, it was unable to determine to what extent, if at all, it was obliged to make any extra payment. The company took the position that it was entitled to dispute its obligation to pay until it was put in a position to be able to be so satisfied. The Full Court accepted, on the facts of the case, that there was a genuine dispute.[55] However, that was a case where it was accepted that a term would be implied that the payment obligation was conditional on the builder providing invoices and detailed accounts to justify and substantiate the expenditure, if so required.[56]
[55] PDR Pty Ltd v Cottesloe Constructions Pty Ltd [16] - [17].
[56] PDR Pty Ltd v Cottesloe Constructions Pty Ltd [15].
PDR Pty Ltd v Cottesloe Constructions Pty Ltd does not establish a settled rule of law as to the construction and application of the term 'genuine dispute' in s 459H(1)(a). It is no more than an example of the operation of the statutory provision on the specific facts in that case - a case where, importantly, the payment obligation was conditional. The Odyssey Re (Bermuda) v Reinsurance Australia litigation is likewise no more than an example of how a genuine dispute as to the existence of a debt was inferred where, in breach of agreement, the recipient of a statutory demand was denied access to information it requested, the purpose of the contractual right to access the information being to provide protection for the company in those circumstances.[57]
[57] See: PDR Pty Ltd v Cottesloe Constructions Pty Ltd [15]; Reinsurance Australia Corporation v Odyssey [25], [46] - [47]; Odyssey Re (Bermuda) v Reinsurance Australia [20].
Ground 1 is premised on there being a settled rule of law in terms of WAG's suggested 'settled rule'. WAG's contention in this respect suffers from the vice of seeking to elevate into a rule of law what is instead revealed as the application of the accepted and well-established meaning of the statutory test to a particular set of facts. The cases relied on by WAG do not state any rule of law in terms of the suggested 'settled rule'. To the contrary, most of the cases relied on by WAG expressly recognise and apply the orthodox construction and meaning of the term 'genuine dispute' in s 459H(1)(a). The remainder implicitly recognise and apply the orthodox construction and meaning of the term 'genuine dispute'. The cases relied on by WAG do not establish a general principle in terms of its suggested 'settled rule'. They are, instead, concerned with the specific application of the statutory test to the facts of the individual case.
Ground 1 fails.
While, for these reasons, we would dismiss ground 1, it is appropriate that we also record that, as well as not erring in law in the manner alleged in ground 1, the master correctly identified the orthodox principles that apply in determining whether there is a genuine dispute for the purpose of an application to set aside a statutory demand.
In oral submissions counsel for WAG took issue with the statement of principle enunciated by the master at [23] of the primary reasons:[58]
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.
[58] Appeal ts 18.
Read in isolation this criticism of the primary reasons was well made. The passage suggests that a company applying to set aside a statutory demand must establish its case on the merits of the dispute; and, moreover, must establish that there is no debt rather than an overstatement in the amount of the debt. In both respects that goes too far. As has been seen, it is well-established that, on an application to set aside a statutory demand that invokes s 459H(1)(a) of the Corporations Act, the only function of the court is to determine whether there is a genuine dispute. It is equally well-established that the applicant for an order setting aside a statutory demand need only establish that the dispute is bona fide and truly exists in fact; and that the grounds alleging the existence of the dispute are real and not spurious, hypothetical, illusory or misconceived.
We are, however, not persuaded that the master misapprehended the nature of the applicable legal test in so fundamental a fashion. Rather, as counsel for WAG correctly proffered in oral reply submissions,[59] the master's reasons ought not be subject to detailed line-by-line analysis but instead fall to be addressed as a matter of substance. When the primary reasons are read fairly as a whole, and there is due regard to how the master determined the application, it is evident that the passage complained of is no more than a momentary lapse in expression.
[59] Appeal ts 58.
The master had earlier identified, with respect correctly, that there must be at least a plausible and genuine claim that the debt is not due on some identified basis which warrants further investigation.[60] This was accepted by counsel for WAG as being a correct statement of principle.[61] This recitation of principle shows, in our view, that the master was not in error in his understanding of the legal burden undertaken by WAG in seeking to establish that there was a genuine dispute about the existence or amount of the debt - the passage as reproduced at [64] above must be understood in the context of what the master had stated previously.
[60] Primary reasons [22] - [23].
[61] Appeal ts 17.
Counsel for WAG also accepted[62] that the master correctly held that there was no genuine dispute where the basis for seeking to set aside the statutory demand rested solely on the company's wish to verify the amount of the debt.[63] WAG's point, however, was that its claim that there was a genuine dispute did not rest solely on its wish to verify the amount of the debt. To so characterise its case overlooked the totality of Mr Harkins' evidence as to the likely double-charging in relation to the ad hoc invoices. This, in WAG's submission meant that - on an objective basis - there was a proper basis for concluding that the amount sought by the invoices may not in fact be due and owing.
[62] Appeal ts 18.
[63] Primary reasons [22] - [23].
WAG's contention in this respect underpinned one aspect of the argument advanced in support of ground 2.[64]
Ground 2 - was there a genuine dispute?
[64] Appeal ts 18.
As clarified in the course of oral submissions, there were two aspects to ground 2. WAG contended that the master erred in fact and law in finding there was no genuine dispute in that:
1.The contracts for the ad hoc works incorporated an implied term such that WAG's obligation to make payment was conditional upon ACS providing invoices and detailed accounts to justify and substantiate the debt, if so required (which was the case). See [37] - [38] above.
2.In any event, even if there was no such implied term, there was still a genuine dispute. This relied on the argument summarised at [38] - [40] and [68] above.
Contention that genuine dispute based on alleged implied term
WAG conceded that the implied term point was not raised in the primary proceedings.[65] WAG also conceded that there was no evidence before the master of a genuine dispute being asserted on the basis of an implied term.[66] Accordingly, in contending, by ground 2, that there was a genuine dispute based on the alleged implied term, WAG sought to raise a new point on appeal. ACS submitted that WAG should not be allowed to advance its new point on appeal.
[65] Appeal ts 55.
[66] Appeal ts 55 - 56.
The principles that apply where a party seeks to advance a new point on appeal are well known. There is a recent summary of the applicable principles in this court's decision in Zerjavic v Chevron Australia Pty Ltd.[67] We adopt those principles but will not repeat them. It suffices, for present purposes, to reiterate that this court will not allow an appeal on a new point unless the new case is one where, in accordance with well-established principles, the new point may be entertained. The opportunity to assert a new case should only be granted where the interests of justice require it and where such a course can be taken without prejudice to the other party.
[67] Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40 [65] - [67].
We are not satisfied that WAG's new point based on the alleged implied term should be entertained on appeal. The following four matters militate in favour of ground 2 being dismissed so far as it seeks to contend that the master should have found there was a genuine dispute as to the existence or amount of the debt relying on the alleged implied term.
First, this is not a case where all the relevant facts have been established beyond controversy. Nor, in our view, can it be concluded that had WAG raised the implied term point before the master ACS would not have sought to adduce any further evidence. The contracts to perform the ad hoc works were informal. It follows that whether a term should be implied depends on whether the implication of the term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case.[68] It is relevant to have regard to both the express terms of the contract and the surrounding circumstances. A fuller examination of the facts surrounding the creation of the contracts might establish beyond argument that a term to the effect that payment was conditional on ACS providing more information to justify and substantiate its invoices, if so required by WAG, was not necessary for the reasonable or effective operation of the contracts.
[68] Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410, 422, 442.
Second, the new point sought to be advanced on appeal was a case that could and should have been raised before the master. WAG's apparent inadvertence in not doing so provides no basis to entertain the point on appeal. The public interest in finality in litigation is not something to which mere lip service is to be paid.
Third, the public interest in finality in litigation is particularly acute in relation to an application to set aside a statutory demand. An application to set aside a statutory demand is a summary procedure. The entertainment of new points on appeal following the determination of an application to set aside a statutory demand is antithetical to the summary nature of the procedure and the desirability that such litigation be disposed of in a timely way.
Fourth, there must be consideration of whether the interests of justice require that WAG should be given the opportunity to advance a new point on appeal. In this respect it is appropriate to consider the statutory framework applying to the statutory demand regime. In doing so it will be apparent that the legal consequences attending an appeal against a decision dismissing an application to set aside a statutory demand are different from those applying to most other appeals. This is not an appeal which will finally determine WAG and ACS's substantive rights in relation to the alleged debt.
A failure to comply with a statutory demand will result in a presumption of insolvency for, among other things, the purpose of an application that a company be wound up in insolvency.[69] In evaluating the interests of justice in the present context it is significant that the presumption is rebuttable.[70] To the extent that dismissal of the application to set aside the statutory demand has an adverse legal consequence for WAG that legal effect of the statutory demand may be defeated by proof that WAG is solvent. In seeking to set aside the statutory demand WAG asserted that it is solvent.[71] Ordinarily, in seeking to rebut the presumption, the company will not be able to oppose the application on a ground that it could have relied on for the purpose of an application to set aside the statutory demand.[72] But it is possible to do so with leave of the court (such leave requiring satisfaction that the ground is material to proving that the company is solvent).[73] So, if the implied term point now sought to be agitated for the first time on appeal is material to proving that WAG is solvent, WAG will be able to seek leave to raise the point in opposition to a winding up application.
[69] Corporations Act s 459C(2)(a).
[70] Corporations Act s 459C(3).
[71] Affidavit of P W Harkins sworn 9 March 2021 pars 28 - 30 GAB 10.
[72] Corporations Act s 459S(1).
[73] Corporations Act s 459S(2).
It is one thing to entertain a new case on appeal when the point may be determinative of the parties' substantive rights. It is quite another to do so in the present circumstances. The interests of justice do not require that WAG should have an opportunity to advance a new case on appeal when it may, in opposing any winding up application, seek to rebut any presumption of insolvency arising from a failure to comply with the statutory demand (including, with leave, by advancing the implied term point as formulated in the appeal).
For these four reasons, individually and collectively, WAG should not be allowed to run a new case based on its alleged implied term for the first time on appeal. An appeal cannot be allowed to become a reworking of the case to overcome any perceived deficiencies in approach made manifest by the litigant's failure before the primary court. That is particularly so in the case of an unsuccessful application to set aside a statutory demand.
The first aspect of ground 2 (ie the argument based on the alleged implied term) fails on the basis that it raises a new point which should not be entertained on appeal.
Contention that genuine dispute based on non-provision of further information as requested by WAG
Ground 2 went beyond WAG's argument based on the alleged implied term. There is no suggestion that the alternate aspect of ground 2 amounted to a new point on appeal. To the contrary, the alternate argument as described at [38] - [40] and [68] above was consistent with WAG's argument before the master.
The master characterised WAG's contention in support of there being a genuine dispute as an argument that there was insufficient detail in ACS's invoices for WAG to determine whether the amounts claimed were owing (see [24] above).
This, in our respectful view, mistook the substance of what was contended for in Mr Harkins' affidavits. The real point raised in support of there being a genuine dispute was correctly summarised in WAG's written submissions in the appeal as reproduced at [39] above. In circumstances where, believing it was likely that invoices for the ad hoc works contained a double-charged component because the invoices included work that was covered by the fixed price contracts, the question was whether there was a genuine dispute about the existence or amount of the debt insofar as WAG had requested and ACS had not provided further information regarding the work claimed in the invoices. It was not simply a case of WAG considering there was insufficient detail in ACS's invoices to determine whether the amounts claimed were owing. It was the failure, despite request, to provide the further information in circumstances where WAG perceived it to be likely that ACS had overcharged or doubled-charged.
Accordingly, the master was, in our respectful view, in error in determining whether there was a genuine dispute based solely on 'an alleged inability to ascertain whether or not [ACS] had properly charged' for the ad hoc works invoices.[74]
[74] Compare Primary reasons [23].
This error does not mean that ground 2 succeeds. The circumstance that the master mischaracterised the nature of WAG's contention, and therefore did not evaluate the claim to set aside the statutory demand on the basis as in fact advanced by WAG, does not mean that there is a genuine dispute. If this aspect of the appeal is to be upheld WAG must establish that there is a genuine dispute. This court must be satisfied that the existence of a genuine dispute should be inferred from the evidence and that the master erred in failing to draw that inference.
For the following reasons we are not satisfied that there is a genuine dispute between WAG and ACS about the existence or amount of the debt to which the statutory demand relates. Accordingly, we are not persuaded that the master erred in finding that there was no genuine dispute.
The relevant invoices were submitted for the ad hoc works. They totalled $143,516.01. In evaluating the claimed genuine dispute as to that component of the debt the subject of the statutory demand we start with Mr Harkins' evidence. Mr Harkins disputed liability in relation to the invoices.[75] However, in doing so Mr Harkins stated:
Whilst it may be the case that not all of the amounts claimed in the invoices are disputed, until the defendant provides the information and timesheets which I have requested, I am unable to determine the extent to which each invoice is disputed and what amounts are not disputed in relation to the invoices.[76] (emphasis added)
[75] Affidavit of P W Harkins sworn 9 March 2021 par 15 GAB 7.
[76] Affidavit of P W Harkins sworn 9 March 2021 par 15 GAB 7.
Accordingly, Mr Harkins was unable to say - and did not say - that the whole of the invoices were disputed. Nor did Mr Harkins state that it was unequivocally the case that the liability was disputed. Mr Harkins accepted that it 'may be' the case that not all the amounts are disputed. Mr Harkins was, however, unable to determine what was disputed and what was not.
In this respect, as counsel for WAG put it in oral argument, the dispute was about the amount of the debt rather than the existence of the debt.[77]
[77] Appeal ts 19.
Having noted that, although Mr Harkins disputed liability he accepted that it may not be that all the amounts claimed were disputed, it becomes necessary to examine the basis for the claimed dispute as to the amount of the debt. In this respect Mr Harkins stated:
[ACS's] quotations in the beginning of the project were checked by me against alternate suppliers in most cases, and were found to be competitive, however at the end of the project one of the quotations I received from [ACS] was double the amount that I was quoted by an alternate supplier. This leads me to believe that at some point [ACS] decided to significantly increase their prices as they knew it was difficult for [WAG] to engage a second electrical provider.
…
In the early stages of the project the work which was performed on an hourly basis, and the materials involved were quite discrete from the fixed price items that [ACS] had quoted. However once equipment was being connected and the control boards were on site the amount of labour and materials being charged to us is likely, I believe, to have included a large amount that should have been included in the fixed price items ACS were supplying. Hence my queries and request for further detail.[78] (emphasis added)
[78] Affidavit of P W Harkins sworn 9 March 2021 pars 24, 26 GAB 9.
There was similar evidence in Mr Harkins' second affidavit:
As with all billing for non fixed price items, I believe that a significant number of hours have been billed to these hourly charged invoices which should have been included in fixed price items such as the MCC.[79]
With regards the hours and material billed, as previously stated based on earlier work and quotations I did not consider that [ACS] was overcharging until receiving a quotation in early November 2020 which was double comparable prices based upon quotations received form [sic] other companies for the same work, and also earlier invoices were not for periods when [ACS] had quoted fixed price work and hourly paid work being conducted on site at the same time.[80]
[79] Affidavit of P W Harkins sworn 3 May 2021 par 24 GAB 43.
[80] Affidavit of P W Harkins sworn 3 May 2021 par 39 GAB 45.
Accordingly, Mr Harkins deposed to a belief that it was likely that there was overcharging in WAG's invoices (the 'overcharging' being characterised as 'double-charging' in WAG's submissions in the appeal). Mr Harkins believed that the invoices in respect of the ad hoc works wrongly included work that should have been provided for in the invoices for the fixed price works. However, this evidence must be read with Mr Harkins' earlier evidence in which he accepted that it may be the case that not all of the amounts claimed in the invoices are disputed. The acceptance that it may be the case that not all amounts were disputed is consistent with Mr Harkins' professed belief that overcharging was merely likely. Mr Harkins accepted the possibility that there may not have been overcharging and there may not in fact be a dispute as to the amount of the liability.
It is not enough that WAG, by Mr Harkins, honestly believed it likely that ACS's invoices for the ad hoc works included a component of overcharging or double-charging. In determining whether there is a 'genuine dispute' for the purpose of s 459H(1)(a) as to the amount of a debt there is a distinction between: (1) an idle wondering or concern, however honestly held on the part of the company, as to whether there has been some overcharging or double-charging; and (2) a genuine belief, having a proper foundation based on objective fact, that the whole of a claimed debt is not due and payable. A genuine dispute requires more than a mere lack of satisfaction on the part of the company that the debt as claimed is due and payable, even if that lack of satisfaction is honestly held. There must be a plausible contention requiring further investigation. The grounds alleging the existence of the dispute must be real and not spurious, hypothetical, illusory or misconceived.
Mr Harkins, on behalf of WAG, provided a single ground for his belief that it was 'likely' that the ACS ad hoc works invoices included a 'large amount' that should have been included in the fixed price works. Mr Harkins said that:
1.At the end of the project one of the quotations WAG received from ACS was double the amount WAG was quoted by an alternate supplier.
2.This led him to believe that at some point ACS decided to significantly increase its prices as it knew it was difficult for WAG to engage a second electrical provider.
Accordingly, WAG's contention that there was a genuine dispute due to likely overcharging or double-charging in ACS's invoices for the ad hoc works relied on the circumstance that ACS had submitted a quotation - at the end of the project - which was twice that submitted by another electrical contractor.
It does not rationally follow that ACS is likely to have overcharged or double-charged in the manner claimed by WAG simply because ACS submitted a single quotation that was double that submitted by an alternate supplier. ACS might have over-quoted; the alternate supplier may have under-quoted. ACS's greater familiarity with the project might have seen it provide a more conservative quotation. No doubt there are other possibilities. But the mere circumstance that ACS submitted a quotation twice that submitted by another electrical contractor is not rationally probative of whether ACS is likely to have overcharged or double-charged in its invoices for the ad hoc works. Any inference to that effect is simply unavailable. There is no logical or reasonable connection between the objective circumstance relied on by WAG (ie the competing quotations) and WAG's hypothesis that ACS is likely to have overcharged or double charged.
That is all the more so given the scant reference in the evidence to the nature of the two quotations. Nothing is said of the competing quotations beyond their timing and the fact that the quotation from ACS was double the amount quoted by the alternate supplier.
The 'genuine dispute' test is a relatively low threshold. But it requires more than mere assertion. The grounds alleging the existence of the dispute must be real. On the evidence WAG has postulated no more than a speculative possibility that the amount of the debt claimed in the statutory demand is overstated by reason of overcharging or double-charging. There is, in our view, no proper foundation on the materials adduced by WAG to draw an inference that ACS may have overcharged or double-charged in its invoices for the ad hoc works. Mr Harkins' evidence that he believes this to be likely is no more than a leap into the realm of speculation. The contention is grounded on no more than the circumstance that a single quotation from ACS at the end of the project was double the amount quoted by an alternate supplier. While this fact may create suspicion in the mind of Mr Harkins, and give rise to conjecture and assertion, it does not objectively sustain the conclusion that there is a plausible contention requiring further investigation as to whether ACS may have overcharged or double‑charged in respect of the ad hoc works invoices. The ground for asserting the belief as to overcharging or double-charging is spurious and misconceived. The contention itself lacks sufficient prima facie plausibility to merit further investigation.
WAG's evidence does not establish that there is a genuine dispute about the existence or amount of the debt. Properly understood, so far as Mr Harkins deposed to a belief that it was likely that ACS had overcharged WAG, those affidavits do not go beyond mere assertion. The contention advanced by WAG does not have a proper foundation in the evidence. Mr Harkins' evidence does not provide any objective evidential foundation to suppose that ACS overcharged or double‑charged in the manner as postulated on behalf of WAG.
The master did not address whether there was a genuine dispute by reference to the contention advanced in WAG's affidavits in support of the application to set aside the statutory demand. However, for the reasons we have given, there is not a genuine dispute in relation to the debt claimed in the statutory demand. Accordingly, the second aspect of ground 2 also fails. It follows that ground 2 must be dismissed.
Ground 3: the alleged offsetting claim
The parties' submissions
WAG submitted that a claim for costs associated with delay on the part of ACS was sufficiently established by the supporting affidavits. WAG contended that the claim was sufficiently quantified as the evidence quantified the claim in monetary amounts and stated how the amounts were calculated, thereby enabling the court to determine the amount of the offsetting claim as required by s 459H(2) of the Corporations Act.[81]
[81] Appeal ts 14. Appellant's submissions par 22 WAB 16.
ACS submitted 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:[82]
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).[83]
[82] Respondent's submissions par 74 WAB 35.
[83] Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 [18].
ACS submitted that Mr Harkins had not attempted to show a basis for the numbers which he had stated, so that the court had no way to assess those assertions. ACS said that the parts of Mr Harkins' affidavits relied upon by WAG fell short of meeting the minimum threshold necessary for any court to assess the genuineness of the claims. ACS said that the master's conclusion on the offsetting claim argument was correct.[84]
Consideration
[84] Appeal ts 51 - 54; Respondent's submissions pars 77 - 79 WAB 36.
The parties both referred to the principles stated by this court in Complete Hire & Sales Pty Ltd v Terra Firma Constructions Pty Ltd [No 2]. Relevantly:[85]
[85] Complete Hire & Sales Pty Ltd v Terra Firma Constructions Pty Ltd [No 2] [15] - [19].
1.An offsetting claim is not confined to debts which are due and payable.
2.A claim for an unliquidated sum may be an offsetting claim.
3.To be used as an offsetting total, the counterclaim, set-off or cross-demand must be for an amount capable of being quantified in money terms.
4.It is necessary for the person applying to set aside a statutory demand to take steps to quantify the counterclaim, set-off or cross claim.
5.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 company adduces some evidence to show the basis upon which the loss is said to arise and how that loss is calculated.
6.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.
7.A company seeking to set aside or reduce a statutory demand on the basis of an offsetting claim does not need to set out evidence supporting the claim in meticulous detail. It is enough that the company provides evidence of a plausible and coherent basis for quantifying the claim or showing that it exceeds the amount of the debt demanded. Precise quantification is unnecessary.
8.The court must keep in mind that the task which it is performing is the determination of the amount of a genuine dispute or claim, which must exist in fact, rather than resolving the dispute or offsetting claim or attempting to predict its outcome.
9.The court may assign a nominal value where damage is an element of the claim and there is no evidence of damage.
10.The court may also assign a nominal value to the offsetting total if it cannot estimate the amount of the offsetting claim.
WAG relied on the evidence reproduced at [28] above as providing sufficient quantification of WAG's offsetting claim. In our view, it does not. The evidence is insufficient having regard to the established principles referred to at [105.5] - [105.6] above. That deficiency in the evidence is determinative of ground 3.
We accept that Mr Harkins' second affidavit purports to provide a quantification of WAG's delay claim. The affidavit quantifies the claim in monetary amounts. Those monetary amounts are broken down into various identified heads of loss due to alleged delay. However, the affidavit evidence does not state how the amounts put forward by Mr Harkins are calculated. The affidavit does no more than state bald rounded figures without exposing the basis on which Mr Harkins arrived at the figures - or whether there was in fact any methodology by which Mr Harkins arrived at the figures he asserted. Nor does the affidavit provide material enabling the court to make an estimate of the amount of the offsetting claim. The absence of any explanation as to how the loss is calculated, and the basis on which the loss is said to arise, means that the court cannot meaningfully evaluate the asserted estimates.
The master was correct, for the reasons that he gave, to state that the quantification provided in Mr Harkins' second affidavit did not contain sufficient detail to allow any assessment to be made of the alleged delay claim.[86] The affidavit material did not provide any basis to enable the court to assess the veracity of the amounts. As the master said, pithily and correctly, '[t]here is simply a lack of a factual basis upon which the figure of $174,000 rests'.[87] The material relied on was manifestly insufficient for the court to conclude that the nominated amount of the offsetting claim was claimed by WAG in good faith.
[86] Primary reasons [27].
[87] Primary reasons [27].
Ground 3 fails.
Conclusion and orders
Grounds 1 - 3 fail. It follows that ground 4 fails. The appeal must be dismissed. We would, however, grant leave to appeal. It is in the interests of justice to do so insofar as the master mischaracterised WAG's essential contention in support of its claim that there was a genuine dispute about the existence or the amount of the debt.
Accordingly, we would make orders that:
1.The appellant has leave to appeal against the order made 18 August 2021 in Supreme Court of Western Australia action COR/42/2021.
2.The appeal is dismissed.
We would hear from the parties as to the costs of the appeal. We would also hear from the parties as to any orders concerning the money paid into court pursuant to the conditional order providing for an extension of time to comply with the statutory demand.
Annexure 'A': WAG Invoices
| Invoice Number | GAB page reference | Invoice Amount | Amount Outstanding | Category |
| 27804 | 167 | $28,490.00 | $19,240.90 | CDS plant motor control centre |
| 27840 | 177 | $8,114.22 | $8,114.22 | Ad hoc works |
| 27872 | 178 | $3,880.70 | $3,880.70 | Ad hoc works |
| 28069 | 163 - 166 | $38,187.00 | $38,187.00 | Ad hoc works - electrical works |
| 28071 | 168 | $56,980.00 | $56,980.00 | CDS plant motor control centre |
| 28312 | 169 | $28,490.00 | $28,490.00 | CDS plant motor control centre |
| 28340 | 158 - 162 | $86,274.78 | $86,274.78 | Ad hoc works - electrical works |
| 28464 | 155 | $7,059.31 | $7,059.31 | Ad hoc works - labour and materials |
| 28885 | 154 | $110.00 | $110.00 | Temporary 3-phase power supply works |
| 28976 | 153 | $27.50 | $27.50 | Temporary 3-phase power supply works |
| 29039 | 152 | $27.50 | $27.50 | Temporary 3-phase power supply works |
NOTE: The shaded rows identify the invoices the subject of written quotes prepared by ACS and signed on behalf of WAG.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MD
Associate to the Honourable Justice Vaughan
30 MAY 2023
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