Judgment
1By Amended Originating Process filed on 26 July 2012, the Plaintiff, Infratel Networks Pty Limited ("Infratel") seeks orders under ss 459G, 459H(1)(a)-459H(1)(b) and/or 459J of the Corporations Act 2001 (Cth) that a creditor's statutory demand dated 16 February 2012 ("Demand") served by the Defendant, Gundry's Telco & Rigging Pty Limited ("Gundry's") be set aside.
2The Originating Process and a supporting affidavit of Infratel's solicitor, Mr Michael O'Neill, sworn 8 March 2012 were filed on 8 March 2012 and served on that date. It was common ground between the parties that the application to set aside the Demand was brought within the time specified in s 459G(2) of the Corporations Act. Infratel also relied on further affidavits of its managing director, Mr Grant Woodall, sworn 5 April 2012 and 17 May 2012. There is a dispute, which I will address below, as to whether a number of the matters raised in those affidavits were open to Infratel as a basis to set aside the Demand having regard to the principle in Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452; 21 ACSR 581.
3Gundry's relied on affidavits of Ms Deearne Gundry's sworn 24 April 2012, Mr Gilbert Requimen sworn 23 April 2012 and Ms Jolie Prophet sworn 24 April 2012. The affidavits of Mr Requimen and Ms Prophet addressed an issue whether employees of Gundry's had taken photographs of work undertaken on relevant sites so as to document that work. That issue ultimately had little significance in the case and it is not necessary to address it. There would have been difficulty in giving significant weight to the evidence of Mr Requimen and Ms Prophet, where several paragraphs of their respective affidavits were in identical form: Macquarie Developments Pty Ltd v Forrester [2005] NSWSC 674 at [89]-[91]; Rosebanner Pty Ltd v EnergyAustralia [2009] NSWSC 43 at [324], [326]; Celermajer Holdings Pty Ltd v Kopas [2011] NSWSC 40 at [183]-[189].
4The background facts to the proceedings are largely uncontroversial. In about May 2011, Infratel contracted with Ericsson Australia Pty Limited ("Ericsson") to provide certain site upgrades for a project ("Telstra Project") for Telstra Corporation Limited. The contract between Ericsson and Infratel was not tendered in evidence in this application. In about June 2011, Infratel entered into a contract with Nokia Siemens Networks Australia Pty Ltd ("Nokia") to perform certain works in relation to the Optus NU 900 Project ("Optus Project"). The contract between Nokia and Infratel was also not in evidence in the application. On 29 June 2011, Infratel entered into a contract with Gundry's ("Infratel Contract") by which Gundry's was to provide rigging works (Woodall 5.4.2012, Ex GW1). Infratel characterises this contract as a "subcontract" and points to its relationship with the Telstra Project and the Optus Project.
5The Infratel Contract provided, relevantly, that:
- Services provided by Gundry's would be to the standard specified in any specifications provided by Infratel, or if not specified, a standard consistent with the standard that would be applied by an appropriately qualified professional person for work, services or deliverables of a similar nature (cl 4.2(b)). The relevant specifications were also not in evidence in the application.
- Services to be provided by Gundry's would be performed "in an effective, efficient, careful, skilful and safe manner, by or under the supervision of properly trained and briefed, and appropriately experienced and skilled personnel" (cl 4.3(a)(i)).
- Gundry's, in providing services, would "operate in an efficient and business-like manner, exercising the degree of skill, diligence, prudence and foresight which would reasonably and ordinarily be expected from a skilled and experienced contractor in the same or similar circumstances, with reference to (without limitation) best standards and practice" (cl 5.1(a)).
6Clause 11 contained an indemnity as to certain matters and clause 13.11 contained a right of set-off. Clause 14.1 provided that, if all or any part of the work undertaken by Gundry's as part of the services to be provided be found to be defective, Gundry's would remedy such defect including any consequential effects of the defect at its own expense. If Gundry failed to remedy a defect, or where urgent rectification was required to maintain the operation of the client's network, Infratel could arrange for the defect to be remedied by another party in which event the cost of doing so would be a debt due by Gundry's to Infratel.
7Gundry's issued several invoices to Infratel dated between 3 September 2011 and 28 November 2011; one of those invoices has been paid in part and the others have not been paid. The total outstanding is $201,136.67. There was no dispute between the parties as to the accuracy of those invoices, subject to issues arising as to the quality of work undertaken by Gundry's.
8Ericsson issued a number of "non-conformance reports" ("NCRs") which Infratel contends related to the sites at which work was undertaken by Gundry's and to the work undertaken by Gundry's on those sites. Infratel relied on a schedule summarising the NCRs issued by Ericsson (Ex GW1 pp 40-41) which was prepared for the purposes of these proceedings. The relevant NCRs were not tendered; there was no evidence before me as to the scope of the works that Gundry's was required to undertake on the particular sites, the works in fact done by Gundry's on those sites, or whether other persons also undertook work on those sites.
9Infratel also contended that there were a number of defects in works undertaken by Gundry's on sites for the Optus Project, which were not in accordance with Optus standards. Infratel again relied on a schedule of defects which it had prepared in respect of the Optus Project (Ex GW1 p 42) which was also prepared for the purposes of the proceedings. There was again no evidence of the Optus standards, no evidence as to the scope of the works to be undertaken by Gundry's on the sites for the Optus Project, the works in fact done by Gundry's on those sites or whether other persons also undertook works on those sites. Infratel contended that Nokia had refused to give final sign-off to Infratel on the Optus Project sites. No documents identifying the basis of that refusal were in evidence.
10Infratel contends (and Mr Woodall gave evidence, in conclusory form) that "in consequence of" the NCRs being issued by Ericsson in respect of the Telstra Project sites and Nokia failing to give final sign-off in respect of the Optus Project sites, neither Ericsson nor Nokia have paid Infratel for the works completed at those sites. No documents recording that refusal or the basis of it were in evidence.
11Infratel also contends that it was required to conduct rectification work in respect of the NCRs issued by Ericsson for the Telstra Project sites at its own expense and to rectify the defects caused by Gundry's on the Optus Project sites at its own expense. That contention is inconsistent with clause 14.1 of the Infratel Contract, to which I have referred above, which imposed an obligation on Gundry's to rectify those defects. It appears that Infratel did not invoke the contractual mechanism to require Gundry's to do that rectification work. (I note, in this respect, that there is an email in which Gundry's offers to fix cable trays and lids at one site at Infratel's expense and contends that it is not liable for those matters on the basis its employees were not provided with a scope of works or the "consumerables" for that site).
Application of the Graywinter principle
12Gundry's takes a preliminary point that the matters necessary to establish a genuine dispute as to the claimed debt are not sufficiently raised in the affidavit of Mr O'Neill, which was the only affidavit served within the 21 day period specified in s 459G of the Corporations Act, to meet the requirement that it supported the application to set aside the statutory demand: Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund above. Gundry's contends that Mr O'Neill's affidavit fails to identify the relevant work or defects or the content of the concepts of "Telstra standards, Optus standards and industry standard practices" and does not identify why the relevant works did not comply with those standards.
13In Graywinter above, Sundberg J observed at 587 that:
"In order to be a 'supporting affidavit', an affidavit must say something that promotes the company's case ... [T]he affidavit need not detail, in admissible form, all the evidence that supports the contention of a genuine dispute ... [T]he affidavit must ... disclose facts showing there is a genuine dispute between the parties. A mere assertion that there is a genuine dispute is not enough. Nor is a bare claim that the debt is disputed sufficient."
The initial affidavit need not expressly articulate the ground on which the application to set aside the statutory demand is made, provided that ground is raised by necessary or reasonably available inference: POS Media Online Ltd v B Family Pty Ltd [2003] NSWSC 147; (2003) 21 ACLC 533; Hansmar Investments Pty Ltd v Perpetual Trustee Company Ltd [2007] NSWSC 103; (2007) 61 ACSR 321; Saferack Pty Ltd v Marketing Heads Australia Pty Ltd [2007] NSWSC 1143; (2007) 25 ACLC 1392; Hopetoun Kembla Investments Pty Ltd v JPR Legal Pty Ltd [2011] NSWSC 1343; (2011) 286 ALR 768 at [37]. In NA Investment Holdings Pty Ltd v Perpetual Nominees Ltd [2010] NSWCA 210; (2010) 79 ACSR 544, Lindgren AJA noted that it is not necessary that the party seeking to set aside a statutory demand draw attention to the particular issue on which reliance will be placed. In Hopetoun Kembla Investments Pty Ltd v JPR Legal Pty Ltd, Ward J identified the question as whether the relevant areas of controversy are sufficiently identified in the supporting affidavit filed within the 21 day period to raise, whether expressly or by a necessary or reasonably available inference, the grounds of challenge to the statutory demand and noted (at [70]) that "mere assertions" were insufficient to constitute a "supporting" affidavit: see also Re Homeward Bound Export Cherry Project Pty Ltd [2012] NSWSC 764 at [14]-[16].
14So far as the work in respect of the Telstra Project is concerned, Mr O'Neill's affidavit identified the fact that Infratel engaged Gundry's to "perform certain services to assist" Infratel to perform the Ericsson contract; Gundry's was to perform work on "some, but not all" Telstra sites; and that Infratel "claims that Gundry's failed to complete the Works in accordance with the [contract] in that the Works were not completed in accordance with Telstra standards, Optus standards and industry standard practices. Mr O'Neill's affidavit also states that Ericsson and Optus had issued lists of defects at the sites (although Infratel accepted, in submissions, that Optus' process did not involve, strictly, the issue of lists of defects). Mr O'Neill's affidavit refers to rectification works in respect of the Telstra Project but not in respect of the Optus Project. In my view, this is sufficient to identify the nature of the dispute, in that it at least identifies the nature of the asserted failure, namely the non-compliance with the specified standards, and Infratel was therefore able to rely on additional evidence in respect of those matters.
Whether a genuine dispute is established
15There was no substantial dispute between the parties as to the principles to be applied in determining whether a genuine dispute or an offsetting claim was established. The substance of the dispute between them related to the application of those principles in the relevant facts.
16Section 459H(1)(a) of the Corporations Act provides that a statutory demand may be set aside when the Court is satisfied that there is a genuine dispute about the evidence or amount to which that demand relates. The test for a "genuine dispute" used in s 459H of the Corporations Act has been variously formulated as that the dispute is not "plainly vexatious or frivolous" or "may have some substance" or involves "a plausible contention requiring investigation" and is similar to that which would apply in an application for an interlocutory injunction or a summary judgment: Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290; (1993) 11 ACSR 362; Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787.
17In Eyota Pty Ltd v Hanave Pty Ltd above, quoted with approval in Edge Technology Pty Ltd v Lite-On Technology Corporation [2000] NSWSC 471; (2000) 34 ACSR 301 per Santow J at [28], McLelland CJ in Eq noted that the fact that a genuine dispute was established where there is a "plausible contention requiring investigation":
"...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'."
18 In Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37 at 39, Lockhart J observed that:
"The notion of a 'genuine dispute' ... suggests to me that the court must be satisfied that there is a dispute that is not plainly vexatious or frivolous. It must be satisfied that there is a claim that may have some substance. On the other hand the court must be careful, because if all an applicant has to do is to assert both a claim and some basis for it, without more, it would mean in almost every case that the court would set aside statutory demands where application is made to that effect. Plainly that is not what the legislature intended by introducing this new regime."
19Infratel relied on the decision in Edge Technology Pty Ltd v Lite-On Technology Corporation above, where Santow J considered a case where a party sought to set aside a statutory demand for unpaid purchase money on the basis of a claim for damages for breach of warranty brought by a separate action. Santow J there referred to the observation of Lockhart J in Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd to which I have referred above. His Honour also noted at [45] that:
"The threshold presented by the test to set aside a statutory demand does not however require of the plaintiff a rigorous and in-depth examination of the evidence relating to the plaintiff's dispute or offsetting claim."
20In Panel Tech Industries (Australia) Pty Ltd v Australian Skyreach Equipment Pty Ltd (No 2) [2003] NSWSC 896 at [17], Barrett J noted that the test for a genuine dispute involved a "plausible contention requiring investigation" which was "real and not spurious, hypothetical, illusory or misconceived" and a "perception of genuineness (or lack of it)". His Honour also noted that the tests for a genuine dispute, applied in the context of a summary procedure where it is not expected that the Court will embark on any extended enquiry, mean that the task faced by a company challenging a statutory demand on the "genuine dispute" ground is by no means at all a difficult or demanding one, and that the company will fail in that test only if it is found, upon the hearing of its application, that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted.
21In Central City Pty Ltd v Montevento Holdings Pty Ltd [2011] WASCA 5 at [9], Murphy JA (with whom Buss JA agreed) observed that:
"The expression 'genuine dispute' within the meaning of s 459H(1)(a) of the [Corporations] Act, connotes a plausible contention requiring investigation: Createc Pty Ltd v Design Signs Pty Ltd [2009] WASCA 85 at [44]. The demand will be set aside if there is a bona fide disputed issue of fact or law, which is not based on spurious, hypothetical, illusory or misconceived grounds: Createc v Design Signs; Asian Century Holdings Inc v Fleuris Pty Ltd [2000] WASCA 59 at [35]. Once such a dispute is raised, it is not necessary for a company to satisfy the court as to where the merits of the dispute lie: Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294 at [30]. The court will not attempt to weigh or examine the merits of any dispute: Createc v Design Signs; Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 at 295."
22The decision of the Court of Appeal of the Supreme Court of Western Australia in Central City Pty Ltd v Montevento Holdings Pty Ltd was in turn followed in Beauty Health Group Ltd v Sholl [2011] NSWSC 77 at [4] and in V & M Davidovic Pty Limited v Professional Services Group [2012] NSWSC 134. In Re 2 Roslyn Street Pty Ltd [2011] NSWSC 512 at [70], Ward J noted that:
"A genuine dispute is therefore one which is bona fide and truly exists in fact and is not spurious, hypothetical, illusory or misconceived. It exists where there is a plausible contention which places the debt in dispute and which requires further investigation."
23Infratel contends that:
"The standard to which Gundry's was required to perform its work at the Sites under the Infratel subcontract, and whether or not that work was subject to Telstra standards or Optus standards or other industry standards, is clearly a genuine claim by Infratel, in that it is bona fide and not spurious, hypothetical, illusory or misconceived. It is one which constitutes a genuine dispute."
Infratel also contends that it is clear from correspondence which it tenders (Ex GW1 pp 45-67) that there had been a dispute in relation to the quality of the services provided by Gundry's under the Infratel Contract including allegations of defective workmanship since 7 October 2011. There are references to defective workmanship in that correspondence, although there are also acknowledgements of the debt owing and several indications that Infratel is working to be in a position to pay it. In any event, the "genuine dispute" required to be established in order to set aside the Demand under s 459H(1)(a) of the Corporations Act (as distinct from establishing an offsetting claim under s 459H(1)(b) of the Corporations Act) is not a dispute as to the quality of the work done, but a genuine dispute as to the claimed debt.
24Whether such a dispute exists depends upon the construction of the Infratel contract and the Court will ordinarily determine such a question in an application to set aside a statutory demand where the factual matrix for the determination is present and there has been sufficient time for the parties to make proper submissions as to the question: Delnorth Pty Ltd v State Bank of New South Wales (1995) 17 ACSR 379 at 384; Re Seduce Group Australia Pty Ltd [2011] NSWSC 290 at [27]ff. The manner in which commercial contracts should be interpreted is well-established by the case law. Such a contract must be read in a way that will result in a sensible and businesslike meaning, and the meaning of a particular term is to be determined by what the reasonable person in the position of the parties would have understood it to mean: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22].
25Clause 13 of the Infratel Contract, read with the payment terms in Annexure 1, imposes an obligation to pay the value of the Services (as defined) on Infratel, calculated at an agreed rate multiplied by the relevant quantities of the Services provided, less reasonable costs incurred by Infratel in remedying any default by Gundry's of its obligations under the Contract. However, clause 14 (and special condition 1) provides for Infratel to direct Gundry's to remedy the defects at Gundry's cost and only authorises Infratel to undertake that work in specified circumstances. That construction of the contract is consistent with the objective intention of the parties and gives it a sensible and businesslike meaning, since it is hardly likely that a subcontractor would agree to allow a head contractor an unqualified right to repair perceived defects and charge for that work at its usual rates, without at least being allowed an opportunity to assess and repair such defects itself. Infratel has not established that it invoked the remediation mechanism under the Infratel Contract so as to allow a deduction from the amount payable to Gundry's under that contract, as distinct from a potential claim in damages against Gundry's which might give rise to an offsetting claim under s 459H(1)(b) of the Corporations Act. In my view, a genuine dispute as to the debt has not been established.
Whether an offsetting claim is established
26Infratel also seeks to set aside the Demand on the basis that it has an offsetting claim under s 459H(1)(b) of the Corporations Act. An "offsetting claim" for the purposes of s 459H(1)(b) of the Corporations Act is the amount of a claim, or claims, that the company has against the person who served the statutory demand by way of counter claim, set-off or cross demand, whether or not that amount arises out of the same transaction or circumstances as the debt to which the demand relates: s 459H(5). If the Court is satisfied that the company has an offsetting claim, then the Court is required to calculate the "substantiated amount" of the demand by deducting any offsetting claim from the admitted amount of the debt: s 459H(2).
27A company can establish an "offsetting claim" if there is a "serious question to be tried" or "an issue deserving of a hearing" as to whether the company has such a claim against the creditor and that claim is made in good faith and is arguable and not frivolous or vexatious: Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451; 12 ACSR 341 at 356-7. In Toorallie v Black [2001] NSWSC 1088 at [15], Barrett J noted that:
"[T]he court must look sufficiently closely at the asserted claim to assess its general viability in the light of the evidence."
The amount of an offsetting claim is the amount claimed by a party in good faith, so long as that claim as so quantified is not fictitious or merely colourable: Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 14 ACLR 490 at 493. That amount of any offsetting claim must be determined at the time the proceeding to set aside the statutory demand is heard: Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 80 FCR 296; 16 ACLC 12 at 30.
28Gundry's again takes a preliminary point that the matters relating to the offsetting claim are not sufficiently raised in Mr O'Neill's affidavit for the purposes of the Graywinter principle. Gundry's contends that the loss alleged to arise from the Telstra Project is the cost of performing unidentified rectification work in an unidentified amount, which, Gundry's contends, does not meet the Graywinter requirements for an offsetting claim asserting an unliquidated sum. Gundry's also contends that, in relation to the works on the Optus Project, no loss is alleged to arise from the relevant matters. On the other hand, Infratel contends that paragraph 14 of Mr O'Neill's affidavit sworn 8 March 2012 sufficiently identifies a plausible and coherent basis for asserting a claim to a sum which can be seen to be greater than the amount of the debt the subject of the statutory demand, using the formulation in Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560 at [19]. That paragraph states that:
"Infratel has been forced to rectify the NCR's at its own cost and expense to enable the Sites to be completed and funds released by Ericsson."
The difficulty with that contention is that Mr O'Neill's affidavit says nothing as to the amount of the cost and expense incurred in allowing the sites to be completed, so as to allow any determination as to whether that amount is greater than the amount of the debt, nor does it contain even a conclusory statement that that amount is greater than the amount of the debt.
29There is authority that an offsetting claim will be sufficiently raised by an affidavit filed within the 21 day period required by s 459G of the Corporations Act where that affidavit states that the amount of that claim is greater than the amount of the debt, even if it does not provide further indication of the quantum of that claim, and this will be sufficient to allow further evidence to be led outside the 21 day period to supplement the evidence contained in the initial affidavit: Zenaust Imports Pty Ltd v Alembic Chemicals Works Co Ltd (1998) 28 ACSR 465; Endeavour Film Management Pty Ltd v Fox Studios Australia Pty Ltd [2003] NSWSC 1056 at [10]-[11]. In Broke Hills Estate Pty Ltd v Oakvale Wines Pty Ltd, Gzell J noted that an initial affidavit which stated that the company had suffered loss due to defective wine and had an offsetting claim but said nothing about the quantum of that claim or whether it exceeded the debt and did not satisfy the requirement in s 459H(2), which "requires evidence to be put on within the statutory 21 day period enabling the Court to make a determination of the offsetting claim" and required that some evidence of quantum must be contained in the affidavit to enable the Court to take that course. His Honour there noted that the initial affidavit would be insufficient "if it does not contain material from which a Court ... can make an estimate of the amount of an offsetting claim", and, while that did not require the party to provide a final proof of those matters, it did require:
"sufficient material indicating the nature of the off-setting claim and the way in which it is calculated to enable the statutory exercise under Corporations Act 2001 (Cth), s 459H(2) to be carried out by the Court."
30In Kerslake Superannuation Pty Ltd v C & L Building Pty Ltd [2010] NSWSC 424 at [10], Barrett J observed that:
"This raises a question about the extent to which it is necessary, in accordance with the Graywinter principle, for the quantum of an offsetting claim to be established by the affidavit filed and served within the 21-day period. I have been taken to a statement in one decided case (Broke Hills Estate Pty Ltd v Oakvale Wines Pty Ltd [above] at [28]) that may be thought to suggest that a precise quantification is needed at that point. In my view, that is not the position. A plaintiff who seeks to set up an offsetting claim no doubt has the primary aim of obtaining an order under s 459H(3) but must also be regarded as pursuing a secondary objective of securing exercise of the s 459H(4) discretion. In order to be a supporting affidavit within s 459G, the affidavit must raise grounds. In an offsetting claim case, all that is needed in the initial affidavit is some indication that the offsetting claim is of a magnitude that can sensibly be compared with the amount of the statutory demand. There is room for some measure of uncertainty, but the uncertainty will, of course, work to the detriment of the party seeking to establish the offsetting claim."
31In 185L6 Pty Ltd v Strata Corporation 07176 Inc [2011] SASC 164 at [25], Blue J noted that the effect of these decisions was that:
"Where the deponent of the original supporting affidavit deposed to quantum exceeding the debt, it was held to be sufficient, and where he did not, it was held to be insufficient, to permit the court to receive a subsequent affidavit on quantum."
This approach is consistent with the requirement for a supporting affidavit within 21 days under s 459G of the Corporations Act and with the policy identified by Graywinter and I would follow the approach adopted in these decisions.
32In the present case, Mr O'Neill's affidavit neither contained a general statement that the quantum of any offsetting claim exceeded the debt nor did it provide any basis for calculation of the amount of the offsetting claim. In my view, that affidavit does not satisfy the standard contemplated by Kerslake, Broke Hills or 185L6 Pty Ltd v Strata Corporation 07176 Inc, since it does not allow any assessment of the magnitude of the offsetting claim. On this basis, I do not consider that an offsetting claim can now be advanced by reason of the Graywinter principle.
33There is second difficulty with the alleged offsetting claim arising under the Graywinter principle. Mr O'Neill's affidavit identified the fact that Infratel had undertaken rectification works pursuant to the NCRs at its own cost and expense to enable the sites to be completed and funds to be released by Ericsson in respect of the Telstra Project. Mr O'Neill's affidavit did not identify any offsetting claim in respect of rectification works in respect of the Optus Project, which was not sufficiently raised under the Graywinter principle. The amount of the offsetting claim is now quantified in Mr Woodall's affidavit dated 5 April 2012 (paragraphs 8-16) and 17 May 2012 (paragraphs 6-13) as $230,963.96, which is said to be the cost to Infratel of undertaking the rectification work in respect of both the Telstra Project and the Optus Project. That quantification does not separately identify costs referable to the Telstra Project and the Optus Project so as to allow the amount of any offsetting claim relating only to the Telstra Project to be determined.
34Gundry's also advances several criticisms of the quantification of the offsetting claim advanced by Infratel in Mr Woodall's affidavit dated 17 may 2012, as comprising labour cost of rectification of sites of $65,228; overnight allowance for out of town sites of $900; plant cost on sites of $39,835.96 and "loss of revenue due to Infratel personnel rectifying sites" of $125,000. I should address those criticisms in case an appellate court were to take a different view as to the application of the Graywinter principle from the view which I have reached.
35Gundry's contends, and I accept, that Infratel's claim for labour costs and loss of revenue in Infratel's quantification of its offsetting claim involves double counting, since the recovery of costs that Infratel claims against Gundry's, if received, would necessarily be revenue of Infratel's business and would offset the claimed loss of revenue. Infratel also argues that the labour costs claimed by Infratel appear to be calculated at a charge-out (or profit cost) rate rather than as the cost to Infratel. I do not consider that this proposition assists Gundry's; to the extent that costs would be recoverable at a lesser rate, then the offset otherwise available against Infratel's claim for lost revenue would be reduced.
36Gundry's also contends that the claim for loss of other work is not established even to the standard required in an application of this kind as Infratel does not seek to prove that it had any other job available to it which was lost. Gundry's contends, and I would have accepted, that it is not sufficient for Infratel to merely assert that it expects its employees to earn $1,000 per employee per day without providing at least some evidence that would indicate that there is some basis in experience for that expectation in order to establish an offsetting claim for loss of revenue.
Whether there is some other reason to set aside the Demand
37Section s 459J(1)(a) of the Corporations Act provides that a statutory demand may be set aside when the Court is satisfied that, because of a defect in the statutory demand, substantial injustice will be caused unless the statutory demand is set aside, and s 459J(1)(b) of the Corporations Act allows a statutory demand to be set aside on the basis that there is some other reason why it should be set aside.
38I do not understand Infratel to assert there is a defect in the Demand and I understand it contends that the Demand should be set aside under s 459J(1)(b) of the Corporations Act. The Court's power to set aside a statutory demand under that section exists to maintain the integrity of the process provided under Pt 5.4 of the Corporations Act and is to be used to counter an attempted subversion of the statutory scheme, but is not exercised by reference to subjective notions of fairness: Portrait Express (Sales) Pty Ltd v Kodak (Australasia) Pty Ltd (1996) 20 ACSR 746; Meehan v Glazier Holdings Pty Ltd [2005] NSWCA 24; (2005) 53 ACSR 229; CP York Holdings Pty Ltd v Food Improvers Pty Ltd [2009] NSWSC 409. A statutory demand may be set aside under that section where it involves conduct which is unconscionable or an abuse of process: Arcade Badge Embroidery Co Pty Ltd v Deputy Commissioner of Taxation [2005] ACTCA 3; (2005) 157 ACTR 22.
39Infratel relies on the dispute resolution clause under clause 28 of the Infratel Contract to seek to establish some other reason to set aside the Demand under s 459J of the Corporations Act. Clause 28.1 deals with giving of notice of a dispute and clause 28.3 provides that litigation cannot be commenced within 90 days after that notice was given. I do not consider that a "dispute" arises merely because a party requires payment of an invoiced amount so as to trigger the application of the dispute resolution clause. Infratel did not give itself notice of a dispute under clause 28.1 of the Infratel Contract until 5 March 2012, after the Demand had already been served. I also do not consider that service of the Demand would breach clause 28.3 of the Infratel Contract because the service of the Demand does not amount to the commencement of litigation: Reinsurance Australia Corp v Odyssey Re (Bermuda) Ltd [2000] NSWSC 1118; (2000) 36 ASCR 348; SMEC International Pty Ltd v CEMS Engineering Inc [2001] NSWSC 459; (2001) 38 ACSR 595 at [34]-[36]. It is not necessary for me to go further to determine whether s 459J of the Corporations Act could have applied, had Gundry's issued the Demand after Infratel had issued a notice of a dispute in relation to the standard of Gundry's work in respect of the relevant sites, since, as I have noted above, Infratel did not issue such a notice until after the Demand was issued.
40Infratel also submits that:
"... It is unconscionable for a sub-contractor, where it is aware of quality of performance issues and aware that the principal had not paid Infratel, to demand payment for its work from the contractor when the contractor has not been paid by the principal in respect of work, because that work had been found by the principal to be defective."
In my view, that claim was sufficiently raised, for the purposes of the Graywinter principle, by Mr O'Neill's affidavit filed within the 21 day period, by available implication, which identified the contention as to performance issues and the fact that Infratel had not been paid by Ericsson. However, I do not consider that it is unconscionable, in any relevant sense, for Gundry's to require payment in accordance with the terms of the Infratel Contract, and the parties had not contracted on a basis which made Gundry's right to payment conditional upon Infratel having been paid by its principal. I have pointed out above that Infratel's contractual right so far as there were any defects in Gundry's work was to require Gundry's to remedy any defective work. The premise of the contention that the principal has not paid by reason of defective work undertaken by Gundry's, as distinct from defects in other work on the relevant sites or defects on other sites or other reasons was also not established.
Orders and costs
41In these circumstances, the appropriate order is that Infratel's Originating Process filed on 16 July 2012 be dismissed. In the ordinary course, costs would follow the event. However, I will hear the parties as to costs.