Agusta Pty Ltd v Provident Capital Ltd

The affidavit evidence

1. Cooperbrown relied on a first and undated affidavit of its director, Mr Jason Cooper, which referred to the dealings between the parties and identified Cooperbrown's several grounds for setting aside the Demand. I will refer to that evidence in dealing with the basis on which Cooperbrown seeks to set aside the Demand below.
2. Finestyle in turn relied on the affidavit dated 28 June 2019 of its solicitor, Mr Golotta. Mr Golotta referred to his receipt of instructions from Finestyle and to correspondence with Cooperbrown's solicitors, and annexed the application he prepared to have the adjudication certificate registered as a judgment in the Fairfield Local Court. He observed ([9]-[10]) that: "The Judgement [sic] amount applied for, included the original amount of the Adjudicated Amount including interest and the unpaid share of the adjudication fee in the sum of $95,650.89 plus interest on the total Adjudicated Amount in the sum of $859.89 plus the filing fee payable to the Local Court in the sum of $188.00. Interest was calculated on the total Adjudicated Amount at the rate specified in the Adjudication Certificate from the 19th February 2019 being one day after the date of the Adjudication Certificate until the 31st March 2019 being the date that the application to register the Adjudication Certificate was made."
3. On its face, Mr Golotta's evidence indicated that Finestyle had included, in the judgment amount sought from the Local Court, a claim for interest on the amount of interest already included in the adjudication. Mr Katsinas, who appeared for Finestyle, contended to the contrary in oral submissions at the hearing. It is not necessary to resolve that question in order to determine this application. Mr Golotta also referred to notification that he received from the Fairfield Local Court Registry that the judgment had been entered and to a subsequent application made by Cooperbrown to the Fairfield Local Court to pay the judgment debt by instalments, which was refused by a Local Court Registrar.
4. The application for registration of the adjudication certificate also referred to the original amount of the "judgment/order" of $95,650.69; interest accrued since the "judgment order" was made of $859.89 and to a "Registration" fee of $188, for a total of $96,698.58. That application was supported by an affidavit titled "Affidavit of applicant when registering a costs assessment certificate", sworn by Mr Golotta, which referred to the fact that he was solicitor for Finestyle and was instructed "as to the circumstances set out in this application and in a position by reason of [his] capacity as solicitor for [Finestyle] to swear this Affidavit" and that "[n]one of the costs specified in the attached certificate or certificates have been paid" [emphasis added]. It is apparent that this affidavit did not address the situation where an adjudication was to be registered as a judgment and, as I will note below, did not comply with the requirements of s 25(2) of the SOPA in respect of such a registration.
5. Mr Golotta's affidavit in support of the application to register the adjudication as a judgment attached an adjudication certificate under s 24 of the SOPA which identified the adjudicated amount as $89,038.59; the interest amount (calculated on the adjudicated amount) as $1,244.10; the unpaid share of the adjudication fees as $5,368.00; and the total adjudicated amount as $95,650.69. That corresponds to the amount identified as the judgment amount in Finestyle's application for registration of the judgment, but does not include any amount for interest accrued which was also included in that application or for filing fees. Mr Golotta calculated that interest in a further schedule attached to that application.
6. Finestyle also relied on an affidavit dated 28 June 2019 of its director, Mr Lapa, which referred to the issue of four invoices by Finestyle to Cooperbrown prior to the Wall Contract, being invoices 127-128 and 134-135. I will refer to that affidavit in dealing with Cooperbrown's reliance on an offsetting claim below.
7. By a further affidavit dated 31 July 2019 in reply, Mr Cooper responded to the affidavits of Mr Lapa dated 28 June 2019 and Mr Golotta dated 28 June 2019. Mr Cooper addressed issues as to the conduct of the relevant works, made further conclusory statements to which no objection was taken, and took issue with a payment schedule included in Mr Lapa's affidavit. Mr Cooper also referred, again by way of conclusory statement, to variations which he contended were part of the scope of works, or not approved by Cooperbrown pursuant to the variation protocols set out at cl 18 of the Wall Contract. He also referred, again largely by way of bare assertion, to delays and defective works, and to a deduction schedule which also identified such claims.

Cooperbrown's contention that the Demand required verification by affidavit where it included interest and a filing fee

1. In written submissions, Mr Hume, who appeared for Cooperbrown, contended that the Demand was not supported by the affidavit required by s 459E(3) of the Act where the whole of the amount demanded was not the subject of a judgment under the SOPA and that that is an "other reason" why the Demand should be set aside for the purposes of s 459J(1)(b) of the Act. In his first affidavit, Mr Cooper observed that the amount claimed in the Demand included (as I noted above) amounts for interest of $859.89 and a filing fee of $188 and was not supported by a verifying affidavit. Mr Cooper also identified further contentions that s 24 of the SOPA did not authorise the inclusion of an amount for prospective filing fees in an adjudication certificate and that s 25 of the SOPA did not authorise the issue of a judgment which incorporated amounts other than those set out in the adjudication certificate.
2. Section 25 of the SOPA relevantly provides that: "Filing of adjudication certificate as judgment debt (1) An adjudication certificate may be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable accordingly. (2) An adjudication certificate cannot be filed under this section unless it is accompanied by an affidavit by the claimant stating that the whole or any part of the adjudicated amount has not been paid at the time the certificate is filed. (3) If the affidavit indicates that part of the adjudicated amount has been paid, the judgment is for the unpaid part of that amount only." …
3. Mr Hume submits, and I accept, that it is the adjudication certificate that may be filed under s 25(1) of the SOPA as a judgment for a debt and the judgment contemplated by that section does not include a filing fee in respect of the filing of that certificate. Mr Katsinas responds that the Demand is for the same amount as was entered for the "judgment debt" and the Demand does not claim additional interest or filing fees over and above the judgment debt. That is correct, but not, it seems to me, an answer to the difficulty that the "judgment debt" included an amount for interest that was calculated by Finestyle's solicitors and a filing fee, and both amounts extended beyond the amount of the adjudication certificate which could be included in that judgment under s 25 of the SOPA. That seems to me to deprive the "judgment debt" of the exception that would be otherwise available under s 459E(3) of the Act.
4. This has the necessary consequence that part of the amount claimed in the Demand is not properly characterised as a judgment debt, although it was included in the form of order issued by the Fairfield Local Court. The requirement for verification of a debt claimed in a creditor's statutory demand by affidavit, where it is not a judgment debt, is an important aspect of the regime established under Pt 5.4 of the Corporations Act: Wildtown Holdings Pty Ltd v Rural Traders Co Ltd [2002] WASCA 196; (2002) 172 FLR 35 at 39-40; Kisimul Holdings Pty Ltd v Clear Position Pty Ltd [2014] NSWCA 262.
5. In Anderson Formrite Pty Ltd v CASC Hire Pty Ltd [2005] FCA 1424; (2005) 147 FCR 379, Siopis J observed (at [62]-[63]) that: "The rationale for exempting a statutory demand for the very sum of a judgment, from the need for verification by an accompanying affidavit is apparent. The judgment speaks for itself as to the amount which is due and payable and, prima facie, also in relation to the absence of a genuine dispute. However, once the statutory demand is for a sum different from the sum in the judgment, the rationale for the exemption from the verification no longer applies because extraneous events or circumstances have intervened. There is then a need to identify the amount claimed by reference to the extraneous intervening events and circumstances. Further, these intervening events and circumstances are capable of giving rise to disputes as to the amount of an outstanding debt and, also, as to the continued existence of the debt. … In these circumstances, the same considerations which underlie the introduction of the legislative requirement for verification of statutory demands for amounts that were never the subject of a judgment, apply equally to demands for amounts different from the sum in respect of which a judgment was given. It follows, in my view, that a narrow construction should be given to the words 'judgment debt' in s 459E(3) of the Act so that the exemption is confined to demands for the very amount in respect of which judgment was obtained, and not for any different amount."
6. That decision was applied by Ward J (as her Honour then was) in Fitness First Fitness Pty Ltd v Dubow [2011] NSWSC 531; (2011) 84 ACSR 296 at [98], where she observed that: "The purpose of the requirement for a verifying affidavit is to enable the court to be satisfied that there is a solid basis for the claim as to the existence of the debt. The exemption for the requirement for such an affidavit in the case of judgment debts is to be understood in that light." Her Honour there set aside a creditor's statutory demand on the basis, inter alia, that it included a $78 fee as part of a debt schedule that was not part of the original judgment debt and was not verified by affidavit.
7. In Agusta Pty Ltd v Provident Capital Ltd [2011] NSWSC 807, Hammerschlag J also followed Anderson Formrite Pty Ltd above, although he expressed doubt (at [10] and [13]) as to the correctness of that judgment so far as it would entail the conclusion that the debt is not a judgment debt by reason only of the addition of the claim for interest under s 101 of the Civil Procedure Act 2005 (NSW), when read with Pt 36, r 36.8 of the Uniform Civil Procedure Rules 2005 (NSW). I also followed Anderson Formrite Pty Ltd above in Re GTH Equipment Pty Ltd [2017] NSWSC 1617 and indicated that I did not share his Honour's doubt as to that matter.
8. This issue was also addressed, in an analogous situation to this case, in Re SBC Construction Pty Ltd [2019] NSWSC 310 at [39], where White J observed that: "In the present case, when the statutory demand and supporting affidavit were served on SBC, Quick Smart did not have a judgment debt in the amount claimed in the statutory demand. On the filing of the five adjudication certificates, it was taken to have five judgments for the debts the subject of each adjudication certificate (Security of Payment Act, s 25(1)). The total of those debts was less than the amount claimed in the statutory demand because they did not include the filing fee of $184. On the principles explained in the authorities referred to above, and in particular, the decision of Ward J in Fitness First, because the debts stated in the adjudication certificates are taken to be judgment debts by reason of s 25 of the Security of Payment Act, but were not for the amount claimed in the statutory demand (by reason of including a debt for the filing fee), there was non-compliance with s 459E(3) by reason of the absence of verification."
9. It seems to me that the failure to verify the Demand in this case, where it included claims for additional interest and a filing fee, requires that the Demand be set aside under s 459J(1)(b) of the Corporations Act for the reasons noted in Anderson Formrite Pty Ltd above and the several cases that have applied that decision, including Re SBC Construction Pty Ltd above in this context. I am conscious that that may appear a harsh result, where the amounts of interest and the filing fee are a relatively small part of the debt claimed. However, as I noted in Re GTH Equipment Pty Ltd above at [31], that result: "… may be the necessary consequence of the fact that s 459J(1)(b) does not contemplate that a demand may be varied rather than set aside. The objects of Pt 5.4 of the Act and the interests of justice will often be better served by setting aside a creditor's statutory demand that claims a substantial unverified amount where the only alternative would be to allow that demand to stand and expose its recipient to a presumption of insolvency arising from an unverified claim. That approach will generally promote the important statutory requirement for verification of a debt that is not a judgment debt."
10. This is sufficient reason to set aside the Demand.

Cooperbrown's contention that a demand based on a "judgment" obtained under s 25 of the SOPA is not a "judgment debt" and requires verification by affidavit

1. Second, Mr Hume submitted that a "judgment" under the SOPA did not constitute a "judgment debt" and that is an "other reason" why the Demand should be set aside under s 459J of the Act. In his first affidavit, Mr Cooper similarly contended that a "judgment" obtained under s 25 of the SOPA was not issued in the exercise of judicial power; was not a judgment of the Court for all purposes; and did not give rise to a "judgment debt" for the purposes of s 459E(3) of the Act and that the debt to which the judgment related was required to be, and was not, verified by affidavit. It is not strictly necessary for me to decide this question, having regard to the conclusion which I have reached in respect of Cooperbrown's first ground for setting aside the Demand.
2. Mr Hume developed this argument, by reference to a matter which White J had raised, without deciding, in Re SBC Construction Pty Ltd above at [22], as follows: "SBC did not contend that the judgment entered in the District Court did not give rise to a "judgment debt" within the meaning of s 459E(3). Accordingly, it is unnecessary to address that question. There are many cases where statutory demands have been issued and upheld for judgment debts based on a filed certificate: either an adjudication certificate under the Security of Payment Act or its interstate equivalents, or a certificate issued by a costs assessor or a Review Panel for legal costs. In the latter class of case it has been held that although on the filing of the certificate it is to be taken as a judgment of the court in which it is final and is enforceable as such, the entry of judgment is a ministerial act and does not make it a judgment of the court (Frumar v The Owners - Strata Plan 36957 [2010] NSWCA 172 at [8], [38], [42] ("Frumar"); Zepinic v Chateau Constructions (Australia) Ltd (No. 2) [2013] NSWCA 227 at [76]-[[77]). The question whether a certificate of indebtedness issued not by a court but by a person acting quasi-judicially, that can be enforced as a judgment by being filed in a court's registry, is a judgment debt within the meaning of s 459E(3) does not arise, because it was not argued."
3. Mr Hume also referred to Frumar v The Owners of Strata Plan 36957 [2010] NSWCA 172, to which White J had referred, and to observations of McColl JA in Zepinic v Chateau Constructions (Australia) Ltd (No 2) [2013] NSWCA 227 at [76]-[77] to similar effect. Mr Hume submitted, first, that a "judgment" obtained under s 25(1) of the SOPA was not a "judgment debt" for the purposes of s 459E(3) of the Act. Had it been necessary to decide this question, I would have rejected this submission, for the reasons noted below in addressing the matters put by Mr Hume in support of the submission.
4. First, Mr Hume submitted that the object of the SOPA was to ensure cashflow in respect of subcontracts and that purpose was not a purpose of the statutory demand regime which was "not a debt collection mechanism". I proceed on the basis that an object of the SOPA is to support a subcontractor's cashflow in respect of a subcontract, but that seems to me to support the treatment of a judgment obtained under s 25(1) of the SOPA as a "judgment debt" for the purposes of s 459E(3) of the Act, to allow a subcontractor to establish the contractor's insolvency and prove in a liquidation where the debt arising under a contract is not paid. Mr Hume's second proposition that the statutory demand regime is not a "debt collection mechanism" is strictly correct, but the Courts have generally recognised the practical reality that a creditor's statutory demand is typically issued by a creditor which has an unpaid debt which it would ordinarily prefer was paid, although the effect of non-compliance with a demand is to give rise to a presumption of insolvency rather than directly bring about the payment of the debt. It seems to me that a company's non-payment of the debt arising under s 25(1) of the SOPA creates a proper inference of its inability to pay that debt.
5. Mr Hume also submitted that the object of s 25(1) of the SOPA was achieved by giving a judgment creditor access to enforcement mechanisms other than the statutory demand procedure. The fact that there are other means available to a creditor who has a judgment under s 25(1) of the SOPA does not suggest that the creditor's statutory demand regime should not also be available to the creditor. The Court, of course, retains a residual discretion whether to make a winding up order, if a presumption of insolvency arises and is not displaced, as is recognised by Campbell J in Demir Pty Ltd v Graf Plumbing Pty Ltd [2004] NSWSC 553 at [20], to which Mr Hume referred.
6. Mr Hume further submitted that the "judgment" arising under s 25(1) of the SOPA was not a judgment for all purposes and did not involve the exercise of judicial power after contested proceedings and that the phrase "judgment debt" in s 459E(3) is to be given a narrow construction. It seems to me that, while the judgment arising under s 25 of the SOPA is not a judgment for all purposes, it does give rise to a judgment debt for the purposes of s 459E(3) of the Act. In Re Douglas Aerospace Pty Ltd [2015] NSWSC 167; (2015) 294 FLR 186 at [91], Brereton J noted that: "… the judgment that arises upon filing an adjudication certificate determines that the judgment debt is indisputably due and payable, and remains so unless and until it is set aside. The fact that the judgment may be less conclusive than an ordinary judgment (because of the effect of s 32) does not affect this, because so long as it stands the debt exists. This accords with the legislative policy that adjudicated debts should be paid notwithstanding the pendency of any curial dispute as to whether they reflect the true legal rights of the parties, and that if it is ultimately found that they do not reflect those rights, can later be recovered by way of restitution."
7. The scope of the relevant provisions, including the filing of an adjudication certificate as a judgment under s 25 of the SOPA and its enforcement accordingly was also noted by the High Court in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4 at [3]-[17].
8. Even if a "judgment" arising under s 25(1) of the SOPA is not a judgment for all purposes, that does not have the consequence that it does not give rise to a "judgment debt" for the purposes of s 459E(3) of the Act. As I note below, s 25 of the SOPA provides a mechanism for verification of the debt arising from the adjudication certificate before that judgment is registered. It seems to me that Mr Hume's submission ultimately depends on the premise that the creditor's statutory demand regime is not an appropriate regime to deal with such debts, which I do not accept. Mr Hume's further submission that the phrase "judgment debt" is to be given a "narrow" construction does not advance matters, since it does not have the consequence that a debt which is properly treated as a judgment debt for the purposes of s 459E(3) of the Act should not be so treated.
9. For these reasons, I would not have accepted that the debt arising from a "judgment" under s 25 of the SOPA does not constitute a "judgment debt" for the purposes of s 459E(3) of the Act or that that is some "other reason" why the Demand should be set aside under s 459J of the Act. I am reinforced in that view because, as is implicit in White J's observations in Re SBC Construction Pty Ltd above, the approach for which Mr Hume contends would likely also undermine the use of the creditor's statutory demand regime in other similar contexts, including its common use in respect of judgments arising from the registration of costs certificates.

Cooperbrown's contention that the judgment that supported the Demand was irregularly obtained

1. In his first affidavit, Mr Cooper contended that the judgment that supported the Demand was "irregularly obtained" because it included amounts beyond those contained in the adjudication certificate and was required to be accompanied by an affidavit verifying that the whole of the adjudicated amount had not been paid at the time the certificate was filed, to which Mr Cooper had not then had access. No point was taken at the hearing that that evidence was not sufficient notice to raise complaints as to the content of the affidavit, when it was later put in evidence. Mr Hume similarly submitted that the "judgment" under the SOPA was irregularly obtained, by reason of the form of the affidavit of Mr Golotta in support of its issue, and that was an "other reason" why the Demand should be set aside under s 459J(1)(b) of the Act.
2. I have referred to the difficulties with Mr Golotta's affidavit in support of the registration of the adjudication certificate as a judgment above. Section 25(2) of the SOPA relevantly provides that an adjudication certificate cannot be filed as a judgment for a debt under s 25 "unless it is accompanied by an affidavit by the claimant stating that the whole or any part of the adjudicated amount has not been paid at the time the certificate is filed" [emphasis added]. Mr Hume submits, and I accept, that the judgment of the Local Court on which Finestyle relied for the Demand was not obtained in accordance with the requirements of s 25 of the SOPA, since the affidavit in support was sworn by Finestyle's solicitor rather than by an officer of Finestyle and did not state that none of the adjudicated amount had been paid.
3. It seems to me that the requirement as to the contents of the verifying affidavit under s 25 of the SOPA are important to the integrity of the process for registration of an adjudication certificate under that section, and non-compliance with those requirements raises a serious risk of the incorrect entry of judgments in respect of adjudications. That process has plainly failed here, where the affidavit in support of the registration of the judgment was not sworn by an officer of Finestyle and did not provide the necessary confirmation. It seems to me not to the point that, as Mr Katsinas submitted, that caused no direct prejudice to Cooperbrown, where it undermined the integrity of the process of registration of the adjudication certification as a judgment.
4. Mr Hume submits, and I accept, that s 459J(1)(b) of the Act has regard to the subject matter, scope and purpose of Pt 5.4 in the context of the Corporations Act, and there is, or may be, some other reason to set aside a demand where it would be inconsistent with the statutory scheme: Re Longjing Pty Ltd [2017] NSWSC 1534 at [24]. It seems to me that it would subvert the statutory scheme created by Pt 5.4 of the Act if a creditor's statutory demand were permitted to give effect to a presumption of insolvency if not complied with, where that demand was not verified by affidavit (because the debt was treated as a "judgment debt") and the judgment was obtained by an affidavit that did not comply with s 25 of the SOPA. For these reasons, the Demand should also be set aside on this basis.

Cooperbrown's asserted offsetting claim

1. Fourth, Cooperbrown contended that it had an offsetting claim for the purposes of s 459H(1)(b) of the Act. An offsetting claim, for the purposes of that section, is the amount of a claim or claims that a company has against the person who served a creditor's statutory demand by way of counter-claim, set-off or cross-demand, whether or not the amount arises out of the same transaction or transactions as the debt to which the demand relates. If the Court is satisfied that a 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. An offsetting claim is established if there exists 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: Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 605; Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] FCA 951; (1993) 12 ACSR 341 at 356-357; Beauty Health Group Ltd v Sholl [2011] NSWSC 77 at [23]. It was common ground between the parties that the SOPA does not prevent a defendant asserting a "true" offsetting claim, for example, a cross-claim for damages for negligence or breach of contract, or recovery by way of restitution of amounts already overpaid: Re Douglas Aerospace Pty Ltd above at [93].
2. In TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; (2008) 66 ACSR 67 at [71], Dodds-Streeton JA observed that a company which seeks to establish a genuine dispute or offsetting claim: "… is required to evidence the assertions relevant to the alleged dispute or off-setting claim only to the extent necessary for that primary task. The dispute or off-setting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion, and sufficient factual particularity to exclude the merely fanciful or futile. … [I]t is not necessary for the company to advance, at this stage, a fully evidenced claim. Something 'between mere assertion and the proof that would be necessary in a court of law' may suffice."
3. The Court of Appeal in turn explained the test for an offsetting claim in Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd [2013] NSWC 344 at [30] as follows: "It is settled law that s 459H requires the Court to be satisfied that there is a 'serious question to be tried': see Scanhill v Century 21 Australasia at 467, or 'an issue deserving of a hearing' as to whether the company has such a claim against the creditor: see Chase Manhattan Bank Australia Limited v Oscty Pty Limited [1995] FCA 1208; 17 ACSR 128 at [42] per Lindgren J; Eumina Investments Pty Ltd v Westpac Banking Corp [1998] FCA 824; 84 FCR 454 per Emmett J (as his Honour then was). The claim must be made in good faith: Macleay Nominees v Belle Property East Pty Ltd. In that case, Palmer J observed, at [18], that good faith, in this context, meant that the offsetting claim was arguable on the basis of facts that were asserted 'with sufficient particularity to enable the Court to determine that the claim is not fanciful'."
4. Mr Hume also referred to the Court of Appeal's observations as to the scope of the applicable principles in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd [2019] NSWCA 60 at [8] and [62]-[66] (per Bell P, with whom Sackville AJA agreed at [98]). Cooperbrown's claim as to overpayment
5. In his first affidavit, Mr Cooper gave evidence intended to support an offsetting claim under s 459H of the Corporations Act. His evidence was that the Determination assumed the amount paid by Cooperbrown to Finestyle was $281,818.63 inclusive of GST; the amount paid by Cooperbrown to Finestyle was in fact $338,413.16 inclusive of GST; the difference between those figures was $56,594.93 and the Determination determined an amount of $89,038.59 was payable to Finestyle inclusive of GST. Mr Cooper's evidence of the amount paid by Cooperbrown to Finestyle does not take account of other work undertaken by Finestyle for Cooperbrown, which appears to have been outside the scope of the adjudication.
6. Mr Lapa's evidence (Lapa 28.6.19 [10]-[11]) is that he accepts that Cooperbrown has paid an amount of $338,413.16 including GST to Finestyle, but he contends the total amount payable by Cooperbrown for the Wall Contract, planter quotation and variations was $437,990.33 and that Cooperbrown has only paid the sum of $338,413.16 towards invoices of $437,990.33 which were in issue in the adjudication. Mr Lapa's evidence (Lapa 28.6.19 [12]-[13]) is also that invoices 127-128, 134 and 152 were not included as part of the payment claim, and that is the reason why the amount paid as stated in the Determination is $281,818.63, excluding the amount of those invoices of $56,595.00. Mr Lapa's evidence (Lapa 28.6.19 [14]) is that, taking the total amount payable by Cooperbrown pursuant to the invoices to be $437,990.33 and deducting the total amount paid of $338,413.16, a balance is payable by Cooperbrown to Finestyle of $99,577.17. Mr Lapa also refers to several further adjustments in respect of the amount that was the subject of the adjudication and also referred to the circumstances of several variations that were in dispute in the adjudication.
7. On this basis, Cooperbrown sought to establish that it had an offsetting claim against the judgment debt for the "excess" amount of $56,594.93 inclusive of GST which it had already paid Finestyle, although that does take into account either the amounts payable but not the subject of the adjudication or the amount due under the Determination. I am unable to see how that evidence was capable of raising an offsetting claim, assuming the validity of the Determination. It is not apparent to me how Cooperbrown could derive a restitutionary or other claim by reason of having paid less than the amount that was determined to be due to Finestyle under the Determination. Cooperbrown's claim as to failure to follow variation procedure, defective works and delays
8. Mr Cooper also identified an offsetting claim that Finestyle did not follow the variation procedure in cl 18 of the Wall Contract in respect of certain variations. I note, for completeness, that the adjudicator declined to address that claim, where it was not included in the payment schedule originally served by Cooperbrown and Finestyle had not been afforded the opportunity to make submissions on that issue. Mr Cooper also identified claims for delays and defective works.
9. Mr Cooper gave evidence in his first affidavit, in respect of variations, in the form of a conclusory statement that: "In respect of each such variation, there was no direction by [Cooperbrown] and no approval in writing by [Cooperbrown]. The Contract does not entitle [Finestyle] to an amount in respect of variation works otherwise than where there has been compliance with clause 18.
10. Mr Cooper also referred to Cooperbrown's "evidence" on this topic in its adjudication response. It seems to me that the out of court statements made in that document were admissible to establish the nature of Cooperbrown's claims but likely would not provide an evidentiary basis for a finding that those claims have a genuine basis. It is of course readily possible to lead evidence of the absence of a direction and approval in admissible form, but the assertion of that matter by affidavit or in out of court statements after a dispute arises has little weight in that regard.
11. Mr Cooper also gave evidence in his first affidavit that: "Secondly, [Cooperbrown] has claims against [Finestyle] for defective work in amounts of $8,600, $6,000 and $2,800 (all ex GST) [f]or a total amount of $17,400 (ex GST) and $19,140 (inc GST). I refer to the Payment Schedule and Adjudication Response (and exhibited documents) where these issues are addressed."
12. Mr Cooper's second affidavit also referred to Cooperbrown's dispute of Finestyle's assessment of progress claim number 3, referring to the deductions applied by Cooperbrown "due to delays caused by [Finestyle] due to works he had carried out that needed to be rectified, or failure to comply with the project deadlines, causing delays to other trades at the Project Site". Mr Cooper also referred to a spreadsheet containing claims and defective works prepared by Cooperbrown.
13. By paragraph 35 of that affidavit, again by bare assertion, Mr Cooper also indicated that: "[Cooperbrown] maintains that Variations 4, 5, 7, and 8 were part of the scope of works pursuant to the Planter Contract. They were not variations approved by [Cooperbrown] pursuant to its variation protocols set out at clause 18 and Attachment D of the Wall Contract."
14. By paragraph 37 of that affidavit, Mr Cooper similarly makes a conclusory statement that variations 12 and 14 were part of the scope of works to be done by Finestyle and, by paragraph 39, he refers to deductions relating to delays "caused by [Finestyle]" said to arise from "defective works" that "needed to be rectified" or delays in the supply of its services.
15. There are difficulties with the form of much of Mr Cooper's evidence, which involves conclusory assertions that identify a claim but arguably provide little evidentiary basis to establish that it is seriously arguable. It seems to me that that position is not substantially advanced by reference to out of court statements in the adjudication, made after the dispute arose, which make the same assertions. It also does not assist Cooperbrown that, as Mr Hume pointed out, Mr Cooper had acknowledged in the adjudication response that, by signing it, he declared that its contents were true and correct. I will assume that Mr Cooper had that belief, but the adjudication response still does not rise beyond assertion of the relevant matters. In expressing that view, I have not neglected Mr Hume's reliance on an observation of Young J in John Holland Construction & Engineering Pty Ltd v Kilpatrick Green Pty Ltd (1994) 14 ACSR 250, quoted with apparent approval by Robb J in Re J Group Constructions Pty Ltd [2015] NSWSC 1607 at [87]-[89]. Young J there noted that the Court will ordinarily accept that there is a genuine dispute or offsetting claim where the contemporaneous correspondence between the parties to a construction contract shows such a dispute or claim. I do not understand either Young J's observation, or Robb J's reference to it, to involve any proposition that the bare assertion of an offsetting claim in contemporaneous correspondence is sufficient to establish that it is not fictitious or merely colourable, although I can readily accept that contemporaneous correspondence which identifies, for example, the factual circumstances that give rise to a claim for delay, or the observations that show a defect in the relevant works, will provide significant support for such a dispute.
16. It seems to me that Mr Cooper's evidence as to these matters would arguably not have risen above the level of a "mere assertion" referred to in TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd above, here combined with out of court statements of the same character. Whether Cooperbrown's offsetting claim is formulated as a claim for restitution, or, as Mr Hume suggested in oral submissions, as a claim for breach of contract arising from non-compliance with the procedure for approval of variations under cl 18 of the Wall Contract (and putting aside the question why it would be Finestyle rather than Cooperbrown or both that is treated as in breach of that clause), Mr Cooper's evidence would arguably not have been sufficient to support an offsetting claim as to these matters. However, it is not necessary to reach a final conclusion in that regard.

Whether Re Douglas Aerospace Pty Ltd above was wrongly decided

1. Fifth, Cooperbrown formally advanced a submission that the decision in Re Douglas Aerospace Pty Ltd above was wrongly decided. That decision is consistent with the approach adopted by the Court of Appeal of the Western Australian Supreme Court in Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91; it has been followed by other judges of this Court, including in Re J Group Constructions Pty Ltd above and Re Datlas-Rahme Construction Pty Ltd [2016] NSWSC 1833; and it was referred to with apparent approval by the Court of Appeal in Grandview Ausbuilder Pty Ltd above. To the extent that that "formal" submission is made, I reject it. It seems to me that the decision in Re Douglas Aerospace Pty Ltd above is correct and I would follow it for that reason, for consistency in decision-making in respect of the national corporations legislation and because it is supported by appellate authority.

Outcome and costs

1. For these reasons, the Demand must be set aside. My preliminary view is that this will be a proper case to order that Finestyle pay a proportion of Cooperbrown's costs of the application to set aside the Demand, where two of the arguments Cooperbrown advanced would likely have failed, and a third involved voluminous evidence and took up substantial hearing time and would arguably also have failed: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]; Re Employ (No 96) Pty Ltd (in liq) [2013] NSWSC 456 at [8]; Correa v Whittingham (No 2) [2013] NSWCA 471 at [35]. However, I will hear the parties as to the costs orders to be made in respect of the application.

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