Wylie & Skene Pty Ltd v DALEFIELD Holdings Pty Ltd - [2000] WASC 26

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: WYLIE & SKENE PTY LTD -v- DALEFIELD HOLDINGS PTY LTD [2000] WASC 26

CORAM: MASTER SANDERSON

HEARD: 3 FEBRUARY 2000

DELIVERED : 11 FEBRUARY 2000

FILE NO/S: COR 337 of 1999

MATTER :Section 459G of the Corporations Law
and
WYLIE & SKENE PTY LTD (ACN 008 785 662)

BETWEEN: WYLIE & SKENE PTY LTD (ACN 008 785 662)
Applicant
AND
DALEFIELD HOLDINGS PTY LTD (ACN 071 989 467)
Respondent

Catchwords:

Corporations law - Application to set aside statutory demand - Turns on its own facts

Legislation:

Corporations Law, s 459G

Result:

Statutory demand set aside

Representation:

Counsel:

Applicant: Mr M M Mony de Kerloy
Respondent: Mr M G Clay

Solicitors:

Applicant: Mony de Kerloy
Respondent: Martin De Haas

Case(s) referred to in judgment(s):

Birch Investments Pty Ltd v Kiap Khee Lim, unreported; SCt of WA; Library No 7396; 12 July 1988
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACLC 669
John Holland Constructions and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 12 ACLC 716

Case(s) also cited:

Eng Mee Yong v Letchumanian s/o Velayutham [1980] AC 331
Joseph Terry Pty Ltd v T & G Fire & General Insurance Co Ltd [1973] VR 458
Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362
Phillips v Mineral Resources Development Pty Ltd [1983] 2 Qd R 138
Polaroid Australia v Minicomp Pty Ltd (1998) 16 ACLC 529
Re Bond Corporation Holdings Ltd (1990) 8 ACLC 153
Re J L Young Manufacturing Co Ltd [1900] 2 Ch 753
Re Lympne Investments Ltd [1972] 2 All ER 385
Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA (1995) 13 ACLC 94
South East Water Ltd v Kitoria Pty Ltd (1996) 14 ACLC 1328
Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 15 ACLC 1001

MASTER SANDERSON: This is an application to set aside a statutory demand. The application is brought under the provisions of s 459G of the Corporations Law and falls to be determined under s 459H. The applicant claims, first, that there is a genuine dispute as to whether the debt, the subject of the demand, is owing by the applicant to the respondent. In the alternative, the applicant says that the substantiated amount of the demand is less than the statutory minimum and therefore the demand should be set aside.
At the commencement of the hearing the respondent raised a number of objections to two affidavits of Peter Wylie ("Wylie"), one sworn 19 November 1999 and the other sworn 17 January 2000. In relation to the first of these affidavits I struck out the last three lines of par 6 after the word "deadline", the last two lines of par 9 after the word "parties" and the first sentence of par 25(c). I reserved my decision with respect to par 25(a). The respondent's objections to the remaining parts of par 6, par 9 and par 25(c) were rejected along with complaints with respect to par 15, par 17 and par 21(1). In relation to those paragraphs where I did not uphold the respondent's objection, it was generally the case that the respondent said the evidence given was not the best evidence and therefore inadmissible. Paragraph 15 provides an example. It is in the following terms:
"I am informed by Harry Smith (an estimator employed by the Applicant) and Mr Lawson and verily believe, that at a meeting held at the Applicant's offices at 16 Douro Place, West Perth on 30 November 1998 attended by Mr Smith and Mr Lawson and Roy Leonhardt and Antony Upfield of the Respondent, the issue of the Respondent not having supplied screens to the value of approximately $56,000 was raised by Mr Smith and Mr Lawson and they provided annexure 'PW7' to Mr Leonardt and Mr Upfield in this regard. Mr Leonhardt and Mr Upfield were asked to provide their comments on Mr Lawson's calculations in annexure 'PW7' but have never done so."
The material in that paragraph is clearly hearsay. What is more, the applicant filed an affidavit of Harold James Smith sworn 19 November 1999 which gives an account of the meeting held on 30 November 1998. In the circumstances, the respondent says that the evidence of Mr Smith is before the court and the evidence given by Wylie is unnecessary. What is more it is not the best evidence of what took place at the meeting and the respondent submits that where it is available this is the evidence which should be put before the court. In support of this proposition the respondent relies on the decision of Master White (as he then was) in Birch Investments Pty Ltd v Kiap Khee Lim, unreported; SCt of WA; Library No 7396; 12 July 1988. Dealing with an application brought under O 14 for summary judgment and the evidence tendered in opposition to the application, the learned Master said (at 6):
"It is, in my opinion, most undesirable that Rule 4(2) should be relied upon in a case, such as the present, where direct primary evidence is available and is in fact tendered in the form of the affidavit sworn by the very person who is the source from whom the defendant has derived the hearsay evidence set out in his affidavit. Notwithstanding what the defendant says was told to him by Mr Ben C Lim, the latter, in his affidavit, does not give direct evidence of all the matters deposed to by the defendant.
Where primary evidence is available, it should be placed before the Court. It follows that, ordinarily, the affidavit should be deposed to by a person who can speak of his own knowledge about the facts."
In my view, this case needs to be treated with some caution. The Master was speaking of a position where two affidavits were filed - one by a person having actual knowledge and one by a person who was recounting hearsay evidence. The person who had actual knowledge omitted certain matters from his affidavit which were contained in the affidavit based on hearsay. The learned Master saw that as undesirable and properly so. But that is not the position here. It is questionable whether par 15 is necessary in light of the evidence given by Mr Smith. But it does not contradict or go further than the evidence given by Mr Smith. That being the case, it is in my view admissible and should be permitted to stand.
In relation to the affidavit of Wylie sworn 17 January 2000, objection was taken to pars 5, 10, 11, 12, 13, 27, 32, 42, 45, 46, 49, 50, 53 and 67. Rather than deal with each of the objections made by the respondent, counsel for the applicant indicated that he was prepared to concede each of these paragraphs. On that basis, all of the paragraphs were struck out.
That then leaves for determination the question of par 25(a) of Wylie's affidavit of 19 November 1999. As the application unfolded it became apparent that this paragraph was of some significance. Nonetheless, the question of whether the paragraph is admissible is to be determined under the rules of evidence governing applications of this nature. The paragraph itself reads as follows:
"25.The Applicant has a substantial counterclaim against the Respondent being for costs incurred by the Applicant due to the Respondent's failure to comply with the terms of the Parties Contract. Details of the Applicant's counterclaim are as follows:
(a)Rectification (Re‑Fixing) Works on Screens:
During the course of the Parties Contract, the Respondent failed to supply all the cyclone screens necessary to complete the installation on a house by house basis. Some screens were made by the Respondent to an incorrect size, some were missing from house lots, some were out of sq uare or damaged. As a consequence some houses had screens missing and could not be completed. In order to complete these houses with new screens the Applicant had to employ teams of sub‑contract fixing carpenters to re‑fix individual screens during the latter stages of the Parties Contract at an additional cost. Such cost would have been avoided if the screens were completed by the Respondent correctly in the first place. It was no part of the Parties Contract for the Respondent to actually fit the screens. That work was separately contracted and extra costs were incurred when problems with the supplied screens occurred. These costs have been calculated as follows:
… "
There then follows a series of figures which are described as "Labour Costs for Re‑Fixing Screens". The respondent complains that Wylie gives no basis for the statements that he makes in par 25(a). In my view, the complaint is well‑founded. Wylie is a director of the applicant and he had day‑to‑day contact with the matters the subject of this application. But that alone is not enough. Paragraph 25(a) contains a series of bald statements which contain no indication of the origin of his information and belief. For instance, he says that some screens were made to an incorrect size. He does not say how many screens or whether he saw them himself. If he did not see them himself who did see them? What system of reporting was in place so that the number of incorrect screens could be ascertained? There is no detail at all. In my view, par 25(a) cannot stand and it will be struck from Wylie's affidavit of 19 November 1999.
Subsequent to the argument as to the admissibility of certain parts of the applicant's evidence and prior to submissions on the matters in issue, counsel for the respondent applied for leave to cross‑examine Wylie on his affidavits. I rejected the application and indicated to the parties that I would give reasons at a later date. These are those reasons. In my view, it would be a rare case indeed where cross‑examination of deponents to affidavits filed in support of, or in opposition to, an application such as this would be permitted. A statutory demand will be set aside if there is a genuine dispute as to the debt the subject of the demand. Applications such as this are not a mini trial of issues in dispute between the parties. Conflicts of evidence on the affidavits cannot be resolved in the context of s 459G applications. To attempt to do so and to allow cross‑examination for that purpose would be counter productive and at odds with the clear intent of the section. It may, perhaps, be the case that in certain limited circumstances cross‑examination would be permitted. But the situation would be rare and unusual and this is not one of those cases. For these reasons I rejected the respondent's application.
Turning then to the application itself, there was no dispute between the parties as to the principles to be applied in determining whether or not there was a genuine dispute. For present purposes, it will be sufficient if I adopt the test set out by McLelland CJ in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACLC 669. His Honour said (at 671):
"In my opinion that expression ('genuine dispute') connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit 'however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be' not having 'sufficient prima facie plausibility to merit further investigation as to [its] truth', or 'patently feeble legal argument, or an assertion of facts unsupported by evidence'."
As will become apparent when I detail the facts, this case involves what might be called a construction contract. The contract itself involved a very considerable amount of money. Although there is no reason in principle why an application which involves a construction contract should be treated differently from any other application, it is often the case that construction contracts are many facetted and involve highly technical disputes of fact. In John Holland Construction and Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 12 ACLC 716 Young J, of the New South Wales Supreme Court, recognised the particular problems associated with construction contracts and said (at 719):
"It may be that it is far more appropriate in the instant sort of case for the court to just take a broad brush approach. Thus the court might just say that because this is not a debt collecting court, where there is a construction case of this nature, the demand should be set aside under section 459J(1)(b) whenever it can be seen from the correspondence that there are honestly held views on either side which have brought a dispute between the parties. Thus, the matter can be dealt with in the ordinary way in which construction disputes are dealt with without the time and expense that is involved in running this sort of litigation ahead of that dispute. If I were to do that in the instant case, I would come to the same result."
The applicant did not seek to rely on the provisions of s 459J(1)(b) of the Corporations Law. Nonetheless, it is to be borne in mind that construction contracts do have their own particular difficulties and a consideration of the correspondence passing between the parties may suggest that any dispute is properly resolved in another forum and not under the provisions of the Corporations Law.
The facts in this case were the subject of extensive submissions, particularly by counsel for the respondent. However, the position that emerges can be quite simply stated. On 19 May 1998 Hamersley Iron Pty Ltd ("Hamersley") wrote to the applicant inviting them to tender for the replacement of cyclone screens for houses owned by Hamersley in Dampier and Karratha in the north west of the State. Annexed to that letter was a form of tender, a form of agreement, specifications and drawings as listed in the specifications. The applicant then invited the respondent to tender for the manufacture of the cyclone screens which would be fitted by the applicant. This invitation to tender was contained in a letter sent by the applicant to the respondent which is undated but appears as Annexure "PW2" to the affidavit of Wylie sworn 19 November 1999. It is clear that the contract was for the supply only of cyclone screens. The tender was to include all fixing screws and bolts ready for installation. Further, the respondent was to: "Estimate total for transport ie total number semi trailer loads. Trailers are 2400w x 12m long x 2.4 high. As a volume weight is not applicable."
The construction period was to be advised so that there was no date set in the invitation to tender for the provision of the screens. The contract was said to be subject to the head contract conditions. The contract was expressed to be a fixed price contract.
The respondent provided its quote in writing on 12 June 1998. The quote appears as Annexure "PW3" to Wylie's affidavit of 19 November 1999. The quote is expressed to be: "Supply Only - Deliver Metro Area Inclusive Packing". The full contract price was $1,719,781. By purchase order dated 2 July 1998 the applicant accepted the respondent's quote (Annexure "PW4"). The purchase order contained the following special instructions: "Pack suitable for freight to the North West".
Insofar as the agreement between the parties is in writing, the documents to which I have referred appear to be the only ones relevant. For reasons which will become apparent, I need not reach a final conclusion on the precise contractual position between the parties and I have not done so. However, neither party suggested that documents other than those I have mentioned evidence the contractual arrangement between the applicant and the respondent.
It is apparent from the outset the work did not go as planned. The main problem which arose had to do with the varying sizes of windows to which the screens were to be fitted. The specifications provided by Hamersley anticipated a standard size window for each particular house design. In fact, the windows proved to be anything but standard and measurement of each individual window was necessary. That, of course, occasioned variation in the size of screens manufactured by the respondent. There was also a change in the way that the screens were fitted. These factors are said by the applicant to have given rise to a variation in the amount to be paid by the applicant to the respondent. How the variation arose is unclear. There was no written variation to the contract. Moreover, the contract was a fixed price contract and the price for provision of all of the screens required by the contract was an amount of $1,719,781.
In the affidavit accompanying the statutory demand the respondent says that it has been paid $1,659,762.60 (see par 5 of the affidavit of Antony William Upfield, sworn 29 October 1999 - Annexure "P2" to the affidavit of Wylie, sworn 1 December 1999). On this basis it is said that a sum of $60,018.40 remained outstanding. In an affidavit of Antony William Upfield, sworn 15 December 1999, the deponent says that a reconciliation of the figures has shown that the amount outstanding under the Contract was $57,051.40: see par 17.5. Paragraph 17.6 then reads as follows:
"17.6However, our review of the account for the purpose of answering Mr Wylie's affidavit also revealed that $17,615 for the supply of screens for 9 houses expressly excluded from the tender and our quote was inadvertently invoiced as part of Contract HE 1425. This error was only identified during the reconciliation of the accounts. That amount is of course separately recoverable."
Having reviewed all the evidence on this question I am left in some doubt as to what amount precisely the plaintiff says is outstanding. As I understand par 17.6, the respondent says that a sum of just under $40,000 is owed pursuant to the contract and a further sum of $17,615 is owed pursuant either to a variation of the contract or for work done which is additional to the contract. The position is uncertain. Perhaps the best that can be said is that, taking the evidence of both the applicant and the respondent together, there is no dispute that a sum of $39,436.40 is owing under the contract.
As against this, the applicant says that the scope of the work undertaken by the respondent was less than anticipated in the contract. The way this has been calculated is that the respondent has worked out the total area of screens that were to be provided pursuant to the contract. It has then worked out the total area of screens which it says were in fact provided. The difference is said to be that the respondent provided 720m² less of screens than was anticipated in the contract. Based on the contract price it is calculated the average rate per square metre, it has made certain allowances and as a result it says that the plaintiff's entitlement under the contract is the contract sum less $60,372.
It has to be said that there is no justification in any of the evidence for the applicant to make a deduction on this basis from the contract price. But it also has to be said that to simply look at the contract documents, say that the contract was a fixed price contract and conclude that the respondent is entitled to the difference between what it has been paid and the contract price, is to ignore the realities of the way the contract was performed. It is clear that when the contract was entered into the parties anticipated that the screens produced would be of a fairly standard size. It is true that Hamersley's contract documents anticipated the measurements for the screens being checked but it was not anticipated that screens would have to be produced for a wide variety of sizes. That much is apparent from the contract documentation. Once the contract was under way the difficulties with non‑standard sizes became apparent. That appears to have altered the way the parties related to one another. Quite what the contractual relationship between the applicant and the respondent might have been by the time the contract was concluded is, I think, very much open to question. Nothing was committed to writing and there is nothing in the evidence which shows that there were detailed discussions between the parties as to variations to the contract or collateral contracts in relation to specific matters. That being the case, I think it can be said that there is a genuine dispute between the parties as to the amount, if any, owing by the applicant to the respondent.

The respondent's claim in the statutory demand covers not only the amount it is alleged is still owing under the contract but two additional sums. The first is the sum of $46,987.77 which is described in the schedule to the statutory demand as being the reasonable remuneration for work and materials supplied by the creditor at the request of the company outside the scope and specifications of the contract.
The details of this variation and the way in which it is calculated are set out in par 8 and par 9 to the affidavit of Upfield which accompanied the statutory demand and which is to be found as Annexure "P2" to the affidavit of Wylie sworn 1 December 1999. Nowhere in the evidence is it set out in any detail by the respondent how it has calculated the extra material that has been supplied and how the price of that material has been settled upon. It is also not clear whether the respondent is claiming payment for the extra materials, pursuant to a variation of the contract or pursuant to some additional contract. In either case it is not clear when the arrangement was reached between the parties, by whom and the terms of the agreement. Further, the applicant says that the area of screens actually provided by the respondent pursuant to the contract was less than anticipated. If that is the case it is at least arguable that the additional fitting and fixtures supplied by the respondent should be set off against the material it was not required to provide under the contract. I am satisfied that there is a genuine dispute as to whether the applicant is obliged to pay for extra materials, as alleged.
Finally, there is a claim for costs of $18,140 incurred by the creditor because of variations to the contract required by the company in the method of transportation from that stipulated in the contract.
The contract anticipated that the respondent would deliver the screens packaged to the applicant's premises in the metropolitan area. It was then intended that the applicant would load the screens flat onto a semi‑trailer for transport to the North West. Because of pressures of time it was found that this was not a viable option. What actually happened was that the applicant delivered sea containers to the respondent's premises. The respondent then packed the containers with the screens in an upright position. The containers were sealed and transported to the North West. The respondent claims that, as it undertook the packaging work above and beyond what was anticipated in the contract, it is entitled to be paid for its services.
Once again, it is not entirely clear on what basis the extra packing was undertaken. The evidence does not directly address the issue. In the course of his submissions counsel for the respondent said that the claim might be made in quantum meruit. Certainly the evidence does not suggest any contractual basis for such a claim. There is no evidence as to how the figure of $18,140 is calculated.
The applicant does not directly address the respondent's entitlement to additional payment in its evidence. But there is certainly no admission that the extra charge claim is owing. Given the uncertainty as to the basis of the respondent's entitlement and given that there is no basis for the calculation contained in the evidence, I am satisfied on balance that there is a genuine dispute as to this part of the respondent's claim.
In summary then, I am satisfied that with respect to the whole of the amount contained in the statutory demand there is a genuine dispute between the parties. I need not consider the applicant's off setting claim. I will set aside the statutory demand. I will hear the parties as to the precise form of the orders.