County Securities Pty Ltd v Challenger Group Holdings Ltd

Applicable principles

1. Section 459H(5) defines the term "offsetting claim" as a genuine claim that the company has against the respondent (being the creditor who issued the statutory demand) by way of counterclaim, set-off, or cross-demand, even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates.
2. In Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd, Bell P (as the Chief Justice then was) addressed what is required in order to demonstrate the existence of a genuine offsetting claim: [1] "61. … it is desirable to say something as to the meaning of the word 'genuine' in the context of the definition of 'offsetting claim' in s 459H(5) of the Corporations Act and how it has been interpreted in the case law. ... 62. In Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation (2006) 94 SASR 269; [2006] SASC 91 at [46]-[49] per Debelle J (with whom Besanko and Layton JJ agreed) said: '[46] The meaning of the expression 'offsetting claim', like the meaning of 'genuine dispute' has been illuminated by analogies found in applications for injunctions to restrain the commencement, advertisement and prosecution of winding-up proceedings pre-dating the enactment of s 459G and in the opposing of a notional application by the person who has served the statutory demand for summary judgment against the company for the debt the subject of the demand: Chase Manhattan at 136. Thus, when deciding whether an offsetting claim exists, the test is whether the court is satisfied that there is a serious question to be tried that the person on whom the demand has been served has an offsetting claim: Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] FCA 618; (1993) 12 ACSR 341 at 357, or that the claim is not frivolous or vexatious: Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37, or that it is not fictitious or merely colourable: Edge Technology Pty Ltd v Lite-on Technology Corporation [2000] NSWSC 471; (2000) 156 FLR 181 at 184-5, citing Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 13 ACSR 787. [47] The test whether an offsetting claim exists is the same as for a genuine dispute, that is to say, the claim must be bona fide and truly exist in fact and that the grounds for alleging the existence of the dispute are real and not spurious, hypothetical, illusory or misconceived. The issue is whether the offsetting claim is bona fide, real and not spurious: Edge Technology per Santow J at [25]. [48] I do not think that the test identified by Santow J imposes a more onerous task on the party disputing the statutory demand than the serious question test. The expression 'good faith' means arguable on the basis of facts asserted with a sufficient particularity to enable the court to determine that the claim is not fanciful: Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 per Palmer J. McPherson JA expressed the same concept in these terms in JJMMR Pty Ltd v LG International Corporation [2003] QCA 519 at [18]: Anyone can make a claim to a right of setoff against a creditor. What the definition in s 459H(5) requires, however, is that it be 'genuine'. The same word in s 459H(1) has already elicited so many synonyms and shades of meaning that it will not help to add more. Its antithesis is to be seen in the word 'artificial'. The claim to set off against the debt demanded must not have been manufactured or got up simply for the purpose of defeating the demand made against the company. It must have an existence that is objectively demonstrable independently of the exigencies of the demand that evoked it. The observations of Palmer J and McPherson JA were applied by Chesterman J in Cooloola Dairies Pty Ltd v National Foods Milk Ltd [2004] QSC 308; [2005] 1 Qd R 12.' 63. In addition to these valuable observations, reference should be made to the judgment of McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 where his Honour, having characterised the test for whether or not there was a 'genuine claim' in terms of whether there was 'a plausible contention which requires investigation', went on to say: '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'. (cf Eng Mee Yong v Letchunanan [1980] AC 331 at 341), or 'a patently feeble legal argument or an assertion of facts unsupported by evidence': cf South Australia v Wall (1980) 24 SASR 189 at 194.' 64. The Victorian Court of Appeal has spoken of 'prima facie plausibility' in this context: TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; 66 ACSR 67 at [71]; see also Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 at [48]-[49]. 65. Most recently, in In the matter of Citadel Financial Corporation Pty Ltd [2019] NSWSC 65 at [30], White JA said: 'In judging the sufficiency of the evidence to give rise to an offsetting claim, the question is not whether the evidence is sufficient to establish the offsetting claim or its amount, but whether it is sufficient to establish that the offsetting claim is genuine and its genuine level (Re Morris Catering (Australia) Pty Ltd(1993) 11 ACSR 601 at 605; Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 at [48] and [49]). It is sufficient if there be a plausible contention requiring investigation (Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd at [70]). The offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion and not be merely fanciful or futile (TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd [2008] VSCA 70; (2008) 66 ACSR 67 at [71] cited with approval in Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd at [52]-[53])."
3. Bell P had earlier observed that: [2] "8. The establishment of an offsetting claim for the purposes of s 459H does not, of course, constitute a finding that the claim is a good one, or that it has been made out. It represents nothing more than a finding that there is a serious question as to the existence of an offsetting claim or an issue deserving of a hearing as to whether the company has such a claim against the creditor and that a 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 at 460, 467 per Beazley J (as her Honour then was); In the matter of Oztec Pty Ltd [2012] NSWSC 1234 at [22] per Black J…"
4. White JA and Sackville AJA agreed with Bell P. [3]

Evidence

1. At the hearing on 6 June 2023, Civil Transport relied on an affidavit of Mr Libdy sworn 5 April 2023. Mr Libdy is the General Manager of Civil Transport. As will be seen below, Mr Libdy's evidence included his account of certain conversations with Ms Mirna Zailaa, who is the director of Civil Transport and who is also married to Mr Libdy. Ms Zailaa did not give evidence.
2. ResourceCo relied on affidavits sworn on 3 May 2023 by its Chief Executive Officer, Mr Steven Harrison, its Chief Financial Officer, Mr Paul Wallin, its Accounts Receivable Manager, Ms Brenda Chambers, and its Business Development Manager, Mr Abdel Tahseldar.
3. In reply, Civil Transport read a further affidavit sworn by Mr Libdy on 17 May 2023.
4. The evidence relevant to the alleged offsetting claim may be summarised as follows.
5. Landmark Group Construction Australia Pty Ltd (Landmark) was the principal contractor on the Kogarah site.
6. On 9 May 2022, Landmark entered into a subcontract with Civil Tec Group Pty Ltd (Civil Tec) for excavation, piling, anchoring, shotcrete, and trimming works at the Kogarah site (the Landmark subcontract). Civil Tec provides excavation and earth work services to the construction industry.
7. Pursuant to clause 34.7 of the Landmark subcontract, Civil Tec was liable to Landmark for liquidated damages of $5,000.00 per day in the event that the works under subcontract did not reach practical completion by the specified date for completion.
8. Mr Libdy is a director of Civil Tec, in addition to being the General Manager of Civil Transport. In his affidavit sworn on 5 April 2023, Mr Libdy gave evidence that he made arrangements on behalf of Civil Tec to engage Civil Transport to remove spoil from the Kogarah site. Mr Libdy deposed that: "The agreement between Civil Tec Group and Civil Transport was a verbal agreement that was formed on or about 3 June 2022. In this regard, I had a conversation with Mirna with words to the following effect: Kevin: Hi Mirna, Civil Tec Group has just received a job in Kogarah from Landmark. Would you be able to remove the site spoil as we excavate? Mirna: Yes, no problem. I will invoice you for each load. Kevin: That is fine. I will let you know when the trucks are needed. This is an important job for us. Also, if things don't go to plan, then Landmark will charge us liquidated damages of $5,000.00 per day. I will need to pass this cost on to Civil Transport if there are any issues. Mirna: Okay, that is fine."
9. Mr Libdy has also given evidence that he was the person who arranged on behalf of Civil Transport for trucks to attend the Kogarah site to remove and dispose of "site spoil", and that he made enquiries for that purpose with various subcontractors for haulage and tip services. In his affidavit sworn on 5 April 2023, Mr Libdy deposed that he had a conversation to the following effect with Mr Tahseldar on or about 4 August 2022 about Civil Transport's requirements for the Kogarah site: "Kevin: Thanks for coming. Abdel: Tell me what you need and I'll do you a good deal. Kevin: I need trucks and trailers for this site and the Collaroy site. For both sites, I would be happy to pay $13.00 per tonne for the sandstone and $480.00 per load for clay. Are you happy with this? Abdel: Yes, no problem we can do that. Kevin: I will also need 8 to 10 truck and trailers per day. Abdel: Yes, no problem we can do that for you. I will send you a quotation when I get back to my computer. Kevin: Ok thanks, send that through when you can. I will give you the number for the site manager and you can coordinate the trucks with him for the required days. Abdel: Ok."
10. According to Mr Tahseldar's evidence, neither he nor Mr Libdy mentioned a number of trucks per day in their conversation on 4 August 2022. Rather, Mr Tahseldar simply offered to provide a quotation for the Kogarah site and asked about the type of material to be removed from the site. Mr Libdy told him that it was clay and sandstone.
11. On 5 August 2022, Mr Tahseldar sent a quotation to Mr Libdy by email for haulage and disposal of sandstone at the rate of $620.00 per load and clay at the rate of $14.00 per tonne. The quotation stated that "quote acceptance is subject to ResourceCo T&Cs".
12. It was common ground at the hearing before me that the "ResourceCo T&Cs" referred to in ResourceCo's quotation are terms and conditions that Civil Transport and ResourceCo had agreed would apply to each contract for disposal of material in April 2019, when ResourceCo had agreed to provide services to Civil Transport on credit.
13. Clauses 3 and 4 of the terms and conditions relevantly provided: "3.1 The Contract will be formed, incorporating these Terms and Conditions and those set out in the Application, on acceptance (written, verbal or on delivery of Material, Product or Waste) of the Contract Particulars by the Customer. 3.2 The Customer agrees that no subsequent terms and conditions will apply in substitution of these Terms and Conditions or in any way override or amend these Terms and Conditions unless each Director of Resourceco signs a document agreeing to the same, such document specifying that the change is subject to this clause 3.2. … 4.1 Subject to these Terms and Conditions and any Contract Particulars, Resourceco will: 4.1.1 accept Material for Disposal that meets the Specifications: … 4.1.3 provide the Transport."
14. Clause 20 of the terms and conditions applied to sites from which ResourceCo collected material, or to which it delivered material, for Civil Transport. Clause 20 relevantly provided: "20.2 The Customer must provide on-site supervisors and manage the Site and the provision of the Transport ('Supervisors'). If required by legislation, the Customer must provide Resourceco with site specific induction. 20.3 The Customer must ensure that all of its Supervisors are appropriately trained and experienced to manage and control the Site and to direct the Transport being provided by Resourceco. … 20.5 The Transport is provided under the control, supervision and direction of the Customer. Resourceco is not obliged to follow any unreasonable or unlawful direction of the Customer, or any direction which may pose a risk to property or persons being used in connection with the Transport. 20.6 Unless otherwise specified, the Customer is responsible for directing Resourceco at the Site, and for the safe loading and unloading of the Material."
15. Clause 23 of the terms and conditions relevantly provided: "23.1 Any period or date for completion of the Transport stated by Resourceco is intended as an estimate only and is not a contractual commitment. Resourceco will use reasonable endeavours to meet any estimated dates for completion of the Transport. Resourceco is not liable for any delay in completing the Transport."
16. Neither the quotation, nor ResourceCo's terms and conditions referred to in the quotation, specified a number of trucks to be provided by ResourceCo for removal and disposal of clay and sandstone from the Kogarah site.
17. According to the evidence of both Mr Libdy and Mr Tahseldar, they had further conversations between 5 August and 13 August 2022 concerning the rates. Those conversations resulted in some changes to the rates. It is not relevant to address their evidence concerning the substance of the changes discussed or agreed.
18. According to Mr Tahseldar's evidence, there was a very high demand for haulage and transportation services during the period from mid-late 2022, and it was very difficult to keep up with demand for trucks for transportation services to the construction sector during that time.
19. According to Mr Libdy's evidence, ResourceCo began providing services to Civil Transport at the Kogarah site on 15 August 2022, and Mr Tahseldar "organised for the trucks to be dispatched to the Kogarah Site … as required".
20. Mr Libdy and Mr Tahseldar have each given evidence of various communications they had about changes to ResourceCo's rates for the Kogarah site from time to time. Mr Libdy has also given evidence about a discussion that he says he had with Mr Tahseldar about ResourceCo charging on a per-load basis in circumstances where Mr Libdy maintained that he had seen ResourceCo trucks leaving the Kogarah site carrying less than full loads of material. As ResourceCo accepts that there is a genuine dispute about the applicable rates, it is not necessary to refer to the details of those discussions. [4] The invoices that ResourceCo issued to Civil Transport in respect of the Kogarah site record various different rates that were charged at different times.
21. Mr Tahseldar has given evidence that, during August, September, and November 2022, "there was always pressure on to provide a higher number of trucks from Kevin to Kogarah". Mr Tahseldar has deposed that he had a conversation with Mr Libdy in about mid-August 2022 to the following effect: "Kevin said: Can we book additional trucks. I need 15 trucks for Tuesday/ Wednesday/Thursday/Friday and I need them for the next two weeks Abdel said: I spoke to Nick [site supervisor] yesterday who cannot fill the current trucks being sent as there is not enough material being generated for removal. Kevin said: Go to site and talk to the boys, we need to push them. Abdel said: Please talk to your boys on site as we cannot afford having trucks waiting on site to be loaded more than 15 minutes."
22. In his affidavit sworn on 17 May 2023, Mr Libdy gave a different version of his conversation with Mr Tahseldar in mid-August 2022, which Mr Libdy says occurred "after sending him numerous text messages about the Plaintiff's requirements for additional trucks". According to Mr Libdy's evidence, the conversation was to the following effect: "Kevin: We need more trucks on site. Not enough have been provided mate. We need about 15 to 16 trucks, maybe more. Abdel: We cannot provide that many trucks. We do not have that many available. Kevin: That is not good enough. The terms of the agreement with your office are always changing. First the rates and now not enough trucks are being provided. Can you please try and see what you can do? Abdel: The trucks have been waiting and this is costing us too much. Kevin: That is not correct. I have been on site almost all of the time. The trucks have been arriving late and the trucks provided are not the size that we requested. Abdel: Your boys on site have caused delays. Please talk to them. Kevin: That's not true mate."
23. Civil Transport has not adduced any evidence of the "numerous text messages" that Mr Libdy refers to having sent to Mr Tahseldar prior to mid-August 2022. It is difficult to reconcile this evidence with the fact that ResourceCo did not begin providing services to the Kogarah site until 15 August 2022.
24. Mr Tahseldar has given evidence that he and Mr Libdy had a further conversation to the following effect on or about 23 August 2022: "Kevin said: Please book in 15 trucks. Abdel said: I spoke to Nick and Adam on site and they cannot handle more than 8 trucks per day. I will work it out with them as they are on site and across truck movement."
25. Mr Libdy gave the following different account of that conversation in his affidavit sworn on 17 May 2023: "Kevin: Can you arrange for the booking of about 15 trucks or perhaps more. Abdel: We can't handle more than 8 trucks per day. Sorry mate but we can't provide any more. Kevin: Abdel, please see what you can do. This is not enough, and we are going to incur large costs as a result because of the delays at the site. You are costing me a fortune. You said you would provide a minimum of 10 trucks"
26. On 6 September 2022, Landmark issued "Notice of Delay #NOD-4" to Civil Tec in relation to the Kogarah Site. I infer that Landmark had issued three notices of delay to Civil Tec prior to this date. The notice described the problem in the following terms: "After reviewing the last 3 weeks look ahead program and mitigation program, we haven't gained anything back from the original delay. Instead we are losing more days and we can't even maintain 3 weeks look ahead program in many instances. Lack of manpower & resources and lack of planning & control onsite have attributed to this delay significantly. At this point, we are supposed to be overlapping activities everyday. Still no activity is overlapping. There is no point of keep preparing mitigation program every week when every activity date is slipping. And now even mitigation program is not working anymore to finish the work under contractual duration (Attached). And if we consider original contract program, we are officially 29 days behind after taking EOT into account."
27. As referred to above, ResourceCo had commenced providing transport and waste disposal services to Civil Transport at the Kogarah site on 15 August 2022, only 21 days prior to Landmark's issue of Notice of Delay #NOD-4 stating the project was 29 days behind after taking into account extensions of time.
28. Mr Tahseldar has given evidence that he had a conversation with Mr Libdy to the following effect on or about 8 September 2022: "Kevin said: Are there 15 trucks for tomorrow? Abdel said: Nope there are not enough trucks available for tomorrow. There is currently a huge demand for trucks in the market, so unless you pay higher than normal rates you don't get them. Kevin: I can't afford having this we need to move material; we need more trucks asap, send them from other jobs."
29. Mr Tahseldar has given evidence that he had a further conversation with Mr Libdy to the following effect on 16 September 2022: "Kevin said: How many trucks for tomorrow? Abdel said: 12 trucks, that's the best I can provide for tomorrow, plus your site cannot keep up with more trucks, that's the feedback I'm getting from Nick."
30. Mr Tahseldar has given evidence that he had a further conversation with Mr Libdy to the following effect on 19 September 2022: "Kevin said: If you can't service the job I will go to market and get more trucks myself. Abdel said: Kevin, please go ahead and do whatever is in the best interest for your business, we are doing our best to get as many trucks as possible. Kevin said: Don't worry about Nick, send more trucks."
31. Mr Libdy does not dispute Mr Tahseldar's account of those conversations on 8, 16, and 19 September 2022.
32. Ms Chambers has given evidence that she became involved in following up on Civil Transport to pay ResourceCo's outstanding invoices from about early October 2022.
33. On 11 October 2022, Ms Chambers sent an email to admin@civiltransport.com.au advising that ResourceCo's August 2022 invoices were overdue and asking when payment would be made.
34. Mr Tahseldar has given evidence to the effect that Civil Transport paid the August 2022 invoices during the last week of October 2022.
35. On 1 November 2022, Ms Chambers sent an email to admin@civiltransport.com.au advising that the September 2022 invoices were due for payment, and that Civil Transport's account with ResourceCo had exceeded its credit limit. The email requested that Civil Transport advise when payment would be made.
36. In his affidavit sworn on 5 April 2023, Mr Libdy gave evidence that he and Mr Tahseldar had a conversation to the following effect about the Kogarah site on or about 1 November 2022: "Abdel: Hi Kevin, just want to let you know that I can't get any truck and trailers to you. Kevin: What do you mean you can't get any trucks? Abdel: I have none. I have 10-wheeler carts and disposal. I can send these. Just for tomorrow to get me out of a bind. After that I will have truck and trailers for you. Kevin: Mate, this is not good enough. This is going to cause me delay. The 10-wheelers are significantly smaller. What rate are you proposing? Abdel: I'll send you an email with the rate. Kevin: Ok."
37. Mr Libdy and Mr Tahseldar exchanged text messages on 2 November 2022 in which Mr Libdy requested ten trucks for the Kogarah site on 3 November 2022. Mr Tahseldar replied "Nope" but indicated that he could provide 10-wheelers to remove and dispose of the clay. In this exchange of messages, Mr Libdy complained that "We are in series [sic-serious] trouble on both sites" and asked Mr Tahseldar to call him because "I'm stressing hard".
38. On the morning of 4 November 2022, Mr Libdy sent a message to Mr Tahseldar stating: "Send trucks to Collaroy are they going to Mosman". This was followed immediately by a further message from Mr Libdy stating: "We just be told LD's will apply they came and saw only 2 ten wheelers??????" It is not clear whether the second message relates to the Kogarah site.
39. On 8 November 2022, Mr Libdy sent a message to Mr Tahseldar stating "Not enough trucks at Kogarah getting smashed by client". Mr Tahseldar replied: "Sorted".
40. On 8 November 2022, Ms Chambers sent a further follow up email concerning payment of ResourceCo's September invoices. On this occasion, Ms Chambers sent the email to admin@civiltransport.com.au and to Mr Libdy's Civil Tec email address. The email stated: "The account is overdue and is required to be paid. Have tried calling a few times and it just goes to voice message. The account is over the credit limit as well and we are required to keep your account with in both terms and limit. To avoid the account being placed on stop credit to send us your payment advise soonest."
41. Ms Jessica Dendal, an Office Administrator for Civil Tec who appears to have communicated with Ms Chambers on behalf of Civil Transport, replied to Ms Chambers by email later that day, stating: "Thank you for your call and email. As discussed, I have been advised payment of the below invoices will be paid end of Nov 22. If anything changes or update to be made, I will advise you direct. Any concerns please let me know and I will relay to the right people."
42. Ms Chambers replied: "Thank you for coming back to us regarding the below. As per our T's & C's on the credit application form (attached a blank copy), RMS payment terms are 30 days EOM. Totally understand that anything invoiced after the 25th of each month will fall into the new months' pay. The invoices for the 7th, 14th and 21st Sept, is before the 25th of the month and therefore, was due for payment on or before the 30/10/2022. If they are only being paid at the end of November, that make the payment 60 days. Payment terms are 30 days. Kindly can you forward the payment of $72885.06."
43. Ms Dendal replied on the morning of 9 November 2022: "Thank you for your email. I will notify the right people and get back to you."
44. On the afternoon of 9 November 2022, Ms Chambers sent a further email reiterating that Civil Transport's account was now over its limit and requesting advice about the timing of payment for four specific invoices that ResourceCo had issued to Civil Transport during the period 7 to 21 September 2022. On the morning of 10 November 2022, Ms Dendal replied that she was "just getting advised and will return response soonest". Ms Dendal sent a further email to Ms Chambers later that morning stating that the four specific invoices would be paid "next week in full", adding that "this has been confirmed". However, it appears from an email that Ms Chambers sent to Mr Libdy on 15 November 2022 that payment of those four specific invoices was delayed. Ms Chambers' email refers to a telephone call in which Mr Libdy had advised her that those invoices (totalling $72,885.06) would be paid at the same time as the next month's payment (totalling $44,510.40).
45. On 29 November 2022, Ms Chambers sent a further email to Mr Libdy, stating: "As per our conversation today. $42k to be paid today/for tomorrow. The job will be approved to run for tomorrow. The balance for $74K is to be paid on the 1 Dec 2022. Any new jobs will be pending until the full payment has been received. I advised the account is over the credit terms and limit. If no payment is received the account will be placed on full credit stop, until the account has been paid"
46. On 1 December 2022, Ms Chambers sent an email to Mr Libdy and Ms Dendal advising that ResourceCo had placed Civil Transport's account on stop credit, as no payment had been received.
47. Mr Tahseldar and Mr Libdy had a telephone conversation on or about 2 December 2022 concerning ResourceCo's outstanding invoices.
48. According to Mr Tahseldar's evidence, the conversation was to the following effect: "Abdel said: What's the reason you have not been paying your invoices? They are well overdue now. Kevin said: I am having a dispute with the Developer over some concreting issues with the Project, and I am not getting paid. I will pay you as soon as I get paid."
49. Mr Libdy gave the following different account of the conversation in his affidavit sworn on 17 May 2023: "Abdel: Hi Kevin, I am told that you have not been making payment of your invoices. Kevin: The delays caused by you guys by supplying insufficient trucks has caused me to receive additional charges from the developer. Once they pay me what I am owed I will conduct a reconciliation and get back to you regarding payment of your account. I should not be liable for these extra charges due to your delay. How many times do I need to tell you."
50. Mr Libdy and Mr Wallin had a telephone conversation on or about 6 December 2022.
51. Mr Wallin has given evidence that their conversation was to the following effect: "Kevin: You have placed my account on stop credit, but I need your support to finish the job and provide cartage and disposal services. Paul: ResourceCo has not been paid and we have had to put the account on stop credit Kevin: We only have about $50,000.00 worth of cartage to go to round out the stage of works which will allow me to submit an invoice to the customer. I will have ResourceCo's account settled in full by the week commencing 19 December 2022. Paul: Okay Kevin, I will take the account off stop credit in good faith on the basis that the account will be paid in full by 22 December 2022."
52. In his affidavit sworn on 17 May 2023, Mr Libdy gave a different account of the conversation: "Kevin: I cannot finish the Job because you have stopped the account. Why has this happened? Paul: ResourceCo hasn't received any payments from you. Payment must be made to proceed with the account. You have gone past the $400,000.00 limit. Kevin: There is no way I have gone past the limit. The limit is $400,000.00 per month. I am nowhere near that amount for this month. You need to double check your accounts because that can't be right. Paul: No, that is not correct. It is $400,000.00 for the year. Kevin: No way mate. That wasn't the deal. This needs to be sorted out. The agreement keeps changing on your end. The rates are changing and now the credit line amount has been reduced. I am finishing the stage of works with Landmark and will hopefully get paid soon but the charges incurred by me have increased due to your delays. Not enough trucks were provided, and they have issued back charges against me. Paul: When can we expect payment? Kevin: We are still doing the works for Landmark and have about $40,000.00 to $50,000.00 worth of works to go. Once done I will provide an invoice and hopefully get paid soon. I was hoping to get paid earlier but not enough trucks were provided. I might be able to arrange for some payment to be made in mid to late December. Paul: You need to keep us updated. Payment is overdue and you have not kept us updated. Kevin: We are being asked to pay for charges that we did not agree to. I need to talk with accounts and perhaps some payment can be made to continue the relationship, but it will not be for the full amount as I have suffered loss from your delays. Paul: Ok, please keep me updated. Kevin: No problem, I have been in touch with Abdel regarding the rate changes and extraction delays. You can speak to him as well."
53. On 6 December 2022, Ms Chambers sent an email to Mr Libdy and Ms Dendal following up on the account, including an amount of $74,720.29 said to be overdue, and requesting advice about when payment would be made. Ms Dendal replied on 9 December 2022, questioning one of the rates that had been applied in the calculation of the charges, and Ms Chambers responded indicating that the rate was correct.
54. ResourceCo ceased providing haulage and disposal services to Civil Transport at the Kogarah site on 13 December 2022.
55. During the period from 15 December 2022, and 19 January 2022, there were emails between Ms Chambers, Mr Libdy, and Ms Dendal, in which Ms Chambers repeatedly sought information about when Civil Transport would pay outstanding invoices and Ms Dendal repeatedly promised an "update".
56. Mr Wallin has given evidence that he had a further conversation with Mr Libdy on 19 December 2022, during which Mr Wallin asked whether ResourceCo's account would be settled in full that day and Mr Libdy replied that it would be "paid in full" by 22 December 2022. In his affidavit in reply sworn on 17 May 2023, Mr Libdy deposed that he could not recall the details of the conversation, but denied that he told Mr Wallin that the account would be paid in full.
57. On 23 December 2022, Landmark issued "Notice of Delay #NOD-22" to Civil Tec in relation to delays said to have occurred on 22 and 23 December 2022 "due to no resources to carry out the works on any part of the site".
58. On 23 December 2022, Mr Robert Kokanovic, General Manager - Construction for Landmark sent an email to Mr Libdy at his Civil Tec email address stating: "Kevin, As per our detailed site meeting on wed 21st Dec 2022, LMG had again raised its concerns over the program slipping a further 20+ days behind the revised date that Civil Tech had already confirm that the works we to be completed by the 21st of Dec 2022. This latest DELAY has increased your LD's liability to 72 days beyond the original contract program. As discussed with you and your team, it was agreed that the following would be actioned between the 21st of Dec and to work through the shutdown period except the public holidays to ensure that all the works on Regent st and Victoria st are completed by the 21st of Jan 2023. 37T - loading bulk from Victoria st Basement 35T - Hammering on Regent st Basement 30T - Hammering on Regent st and moving bulk to Victoria st, then hammering rock in Victoria st basement 23T - Trimming walls and detailed footing/ pads on Regent st Basement, then moving onto trimming in Victoria st Basement. 22T - moving excess bulk and stockpiling in Victoria st Basement 14T - Saw cutting detail in Regent st Basement 14T - Feeding bulk up to the 37T in Victoria st Basement Approx. 5000m3 bulk to hammer and excavate in the Victoria st Basement ( URGENT CRITICAL WORKS - to be completed by no later than the 21st of Jan 2023 ) 300m2 of multiple area shotcrete works to be completed of a 5-day duration. 9 x defective pile to be rectified ASAP in conjunction with the trimming works prior to any shotcrete taking place. The above scope has been committed by Civil tech to work through and our LMG team members have made commitments to be on site and available to assist and manage your Civil tech Team, I would expect the same commitment from yourself Kevin. Arash and I will be monitoring the cameras daily to ensure that the above items are happening, and the machines are working continuously. As mentioned, we are trying to assist you and your team from any further DELAYS and compounding costs that are multiplying daily as per our agreed contractual terms and conditions. So please ensure that you and your team and any subcontractors you need are on site and working as per our discussions to ensure that Civil Tech is completed all its works by the 21st of Jan 2023."
59. On 5 January 2023, Landmark issued "Notice of Delay #NOD-23" to Civil Tec in relation to delays said to have occurred on 3, 4, and 5 January 2023 due to "[n]o machinery working on any works with in Victoria Street side of site. Civil Tec unable to provide resources to carryout works".
60. On 5 January 2023, Landmark also issued "Notice of Delay #NOD-24" to Civil Tec in relation to delays said to have occurred on 3 and 4 January 2023 due to "insufficient recourse to Regent Street side of works to continue with Bulk excavation or Bench along SW1, bulk excavation of Bench along SW3, trimming of walls SW3 down to Basement B3 to fore fill Civil Tec detail programme as issued 2022".
61. On 7 January 2023, Landmark issued "Notice of Delay #NOD-25" to Civil Tec in relation to delays said to have occurred on 6 January 2023 due to "no excavation, no trimming, no work at all, due to not enough recourses on site to operate machinery to areas".
62. On 13 January 2023, Mr Libdy sent Mr Wallin a text message, which stated that "payment WILL be made at the end of month and balance at end of February". Mr Wallin replied, expressing disappointment that "you haven't honoured our agreement. You committed to paying the balance in full the week commencing 19/12/2022. You have paid nil without any communication to me." Mr Wallin requested that Mr Libdy submit a payment plan proposal for his consideration.
63. On 16 January 2023, Ms Chambers sent a text message to Mr Libdy, stating: "Paul has asked me to follow up on the account. Please send an email of amount being paid in January and a confirmed date."
64. Mr Libdy did not reply to Ms Chambers' message until 10 February 2023.
65. On 30 January 2023, Mr Wallin sent Mr Libdy a text message requesting confirmation of "the payment amount we will receive from you tomorrow as discussed." There is no evidence of any response to that message from Mr Libdy. I assume that Mr Wallin's message was referring to Mr Libdy's earlier statement that "payment WILL be made at the end of month and balance at end of February". Mr Libdy has not given any evidence in relation to that message which he sent to Mr Wallin on 13 January 2023.
66. There was a further telephone conversation between Mr Wallin and Mr Libdy on 31 January 2023.
67. Mr Wallin has given evidence that their conversation was to the following effect: "Paul: ResourceCo has still not been paid, when will you pay? Kevin: I can pay $50,000.00 by 03 February and will pay a further $100,00.00 by 10 February, with the balance in full by the end of February 2023."
68. In his affidavit sworn on 17 May 2023, Mr Libdy gave a different account of the conversation: "Paul: Hi Kevin, you still haven't paid us. Please provide another update on payment. Kevin: Hi Paul, I have been discussing with my accounts team. I am expecting to receive a payment between $50,000.00 and $100,000.00 very soon in regard to another job. I expect to get a payment to you guys soon and will keep you updated about the balance. I have already raised the issues about the rates and that you guys have not followed the agreement at all. We agreed to a maximum number of trucks and this wasn't provided. Anyway, I will keep you updated. Landmark have issued back charges against us due to your delay. Paul: I will follow up again soon."
69. On 31 January 2023, Mr Kokanovic sent an email to Mr Libdy at his Civil Tec email address stating (emphasis in original): "As per my site inspection on Monday 30th Jan, it was evident that Civil Tech have missed their completion targets yet again and have further delayed the project. I was concerned on the amount of plant on site that was not being utilised due to breakdowns. The saw cutting wheel was also damaged and worn out which was ineffective for the project requirements. The safety breeches and repetitive disregard to safety is a major concern and Civil Tech needs to take all WHSE matters seriously. The excavated pits were over excavated which now need more concrete and steel as per the structural engineers' instructions in today's site inspection. ( remember that our engineer is the certified design practitioner and need to sign off on the works completed) regardless of any independent engineer reviews. The engineer has also given LMG a site instruction on exposing the piles to check them for suitable integrity, as far too many have now been identified as inadequate and in need of rectification, this has placed further pressure and delays on LMG and our reputation with our Structural Engineer moving forward. The below email on the 23rd December 2022 represents your commitments made to deliver the project without fail and to your revised date of the 21st Jan 2023 after several previous failed attempts. As we step into Feb 2023 Civil Tech are still working on the Regent st basement, which is impacting our steel fixers and formworks, we have our financiers' asking questions on what is going on with the Civil works contractor as its becoming glaringly obvious now. LMG have on several occasions now offered to assist with resources, materials, supplementary plant, form workers, steel fixers, reduced scope etc, however Civil Tech have refused to accept any assistance. The Victoria st Basement still has a considerable amount of works to complete and based on the current performance from Civil Tech, it looks like completing in late Feb - early March 2023 based on our detailed analysis recorded from our daily productivity reports."
70. In his affidavit sworn on 5 April 2023, Mr Libdy deposed that he showed the email to Ms Zailaa and had a conversation with her to the following effect: [5] "Kevin: Mirna, I need Civil Transport to cover the liquidated damages Landmark are charging. Mirna: But the delays were from ResourceCo. Kevin: I know, but they will need to pay you in respect of these damages. Then you will need to pay me so I can pay Landmark."
71. Ms Zailaa did not give evidence.
72. On 1 February 2023, Landmark issued a show cause notice to Civil Tec under the Landmark Subcontract. The notice stated: "The Main Contractor, by this notice to show cause given under clause 39.2 of the Subcontract, hereby notifies the Subcontractor that the Subcontractor has committed a breach of the Subcontract in that the Subcontractor has i) failed to comply with multiple directions of the Main Contractor's representative pursuant to subclause 29.3, as detailed in clause 39.2(a) of the Subcontract (the Breaches). ii) substantially departed from a construction program without reasonable cause or the Main Contractor' Representative's approval, as detailed in clause 39.2(c) of the Subcontract (the Breaches) The details of the Breaches are as follows: 1. The Subcontractor agreed to meet the construction program and failed each and every time meeting the Target & Subcontract program, attached are 29 delay notices have been provided to Civil Tec (Refer Annexure AA); 2. The Subcontractor has failed to complete the tasks as per construction program. The Subcontractor has been presented with mitigation program to recover the delays; However, the Subcontractor has failed to meet the target dates numerous times which has been outlined in 29 notices of delay (Refer Annexure AA). Subcontractor has accumulated substantial amount of delays and Subcontractor is responsible for liquidated damages and delay damages and any other associated cost as per the contract terms. 3. The Subcontractor was contracted to maintain the quality assurance, but the quality of your work is inadequate, attached are the reports issued by the Structural Engineers and Main Contractor for defective works; (Refer Annexure AB & AC). 4. The Subcontractor has consistently failed to Maintain a safe work environment and clear access way for Civil Tec & Landmark Group Construction's Staff & Workers. Several Safety Breach notices have been issued (Refer Annexure AB) 5. The Subcontractor has failed to provide sufficient resource and plants to maintain the progress of the works; (Refer Annexure AD) The Main Contractor requires the Subcontractor to show cause in writing why the Main Contractor should not exercise the right in clause 39.4 of the Subcontract, either to take out of the hands of the Subcontractor the whole or part of the work remaining to be completed under the Subcontract and suspend payment until it becomes due and payable pursuant to subclause 39.6 of the Subcontract, or to terminate the Subcontract."
73. The annexures referred to in the show cause notice were not tendered in evidence in these proceedings.
74. On 2 February 2023, Landmark issued "Notice of Delay #NOD-30" to Civil Tec in relation to delays said to have occurred on 31 January and 1 February 2023 due to "[n]o shotcrete preparation to SW1, SW2 & SW3, No excavation of subgrade and No benching to SW1, SW2 & SW3".
75. On 3 February 2023, Mr Wallin sent a text message to Mr Libdy requesting confirmation that Civil Transport would be "paying $50k today as per our conversation". Mr Libdy did not reply for several days.
76. On 6 February 2023, Landmark issued a payment schedule in response to a payment claim made by Civil Tec on 25 January 2023. The payment schedule allowed $157,800.00 in respect of work for which Civil Tec had claimed $400,722.00, and deducted from this allowance liquidated damages for 105 days of delay at the rate of $5,000.00 per day, with the result that nothing was payable in respect of the claim.
77. On 7 February 2023, Mr Libdy replied to Mr Wallin's message of 3 February 2023,: "Not ignoring I will call back later today". Mr Wallin responded: "Yes please, talk soon." Mr Libdy did not call.
78. On 8 February 2023, Mr Muhammed Ahmed, a Project Engineer for Civil Tec, sent an email to Landmark representatives responding to the show cause notice. Mr Ahmed's email, which was copied to Mr Libdy's Civil Tec email address, stated: "We are writing this in response to your show cause notice sent on 01/02/2023. We strongly disagree with your statement and show cause notice. There were several reasonable causes which extended the duration of the construction program and scope creep which further affected the project not only monetary but also in terms of duration. Furthermore, we encountered ground conditions which were inconsistent with the Geotechnical report provided to us at the time of the tender which further affected not only the quality of some works but greatly affected the duration of WUS. During the course of the execution of the WUS, we were forced to provide Landmark (LMG) with a 3-week construction program and then forced to change it to an unrealistic program despite of all the scope creep, and works not captured in the initial construction program. For example. Crane base piling and detail excavation for crane base pads, LMG using civil tec group machine and operator for installation of bracings which further affecting the construction program, LMG treating the ground on level 33 (next door) with CT machine and operator, duration of sewer diversion not as per the program and WUS affected. Despite the reasons stated above, we were to handover Regent street part of the job as per discussed in the last meeting and finishing of Victoria street accordingly in the similar manner and we strongly believe that there were enough resources on site to handover the job not to mention that we had planned for floating out some plants due to unneeded machinery/plants on site for the remainder of the WUS."
79. The term "WUS" is defined in the Landmark Subcontract as meaning work under subcontract.
80. On 10 February 2023, Mr Libdy replied to the text message sent by Ms Chambers on 16 January 2023, stating: "I'm not ignoring working hard on collecting funds to settle will touch base Monday with update"
81. On 10 February 2023, Landmark gave notice to Civil Tec terminating the Landmark Subcontract. The notice included Landmark's reply to Civil Tec's response to the show cause notice, refuting the various statements made by Civil Tec about the causes of the delay to the Kogarah project. Landmark's reply included: 1. that the ground condition was consistent with the geotechnical report; 2. that Civil Tec had failed to adopt any mitigation strategies for delay encountered in the early stages of the project and had failed to implement mitigation strategies proposed by Landmark; 3. that Civil Tec had delayed in restoring the condition of the neighbouring property, which had been disturbed by Civil Tec's benching for piling and capping beam construction; 4. that Civil Tec had continuously failed to maintain adequate supervision, safe work environment, and source material to carry out the work on time; and 5. that Civil Tec had damaged the Sydney Water main sewer line due to its failure to follow Dial Before You Dig plans.
82. At this stage, Mr Libdy still owed Mr Wallin the call that he had promised on Tuesday, 7 February 2023. Mr Wallin sent Mr Libdy a further text message on Friday, 10 February 2023 stating: "Hi Kevin, you told me you'd call back on Tuesday. I'm still waiting … You also committed to paying $50k last week then another $100k today. You have not honoured either. What's going on?"
83. Mr Wallin has given evidence that he had a telephone conversation with Mr Libdy on or about Monday, 13 February 2023 to the following effect: "Paul: You promised to pay $50,000.00 on 3 February 2023, and then a further $100,000.00 by 10 February 2023, with the balance in full by the end of February. ResourceCo has received nothing. Kevin: I am owed circa $900,000.00 from the client. The client has verbally agreed $300,000.00. If I can get the client up to $600,000.00 I will accept this and pay ResourceCo in full and we can all move on. Paul: Why don't you take the $300,000.00, pay this to ResourceCo immediately and negotiate on the disputed amount. Kevin: The client does not want to proceed like this."
84. Mr Libdy disputes Mr Wallin's account of their conversation on 13 February 2023. In his affidavit sworn on 17 May 2023, Mr Libdy deposed that the conversation was to the following effect: "Kevin: Hi Paul, have you followed up the problem in relation to the rates and lack of trucks. The terms of the agreement were not followed. Paul: Hi Kevin, payment has not been received on our end. You made a promise to pay $50,000.00 in early February and would get back to us in relation to the balance owing. Kevin: No, I didn't, that is not right I told you that I am expecting to receive around that sum from one of my client's. The whole amount is not payable. You have breached the agreement and it has caused me so much stress and cost us a fortune with Landmark. The account needs to be reconciled. I will have a chat with Abdel and wait for him to get back to me. Paul: The money that comes in from Landmark should represent the funds owing to ResourceCo. Kevin: I am now uncertain about the exact amount owing. I have discussed it with accounts, and we are now receiving so many charges from Landmark. ResourceCo should be liable for this, and I need to sort out what I am going to do."
85. On 17 February 2023, ResourceCo wrote to Civil Transport stating (emphasis in original): "Despite our previous correspondence your account remains unpaid and is now severely beyond our agreed payment terms. As per your discussion with Abdel Tahseldar on 16th February, It is agreed that the full payment of $454,645.39 will be settled by the 24/02/2023. Failure to comply will result in this account being listed with our credit reporting agency CreditorWatch. If listed, the default will be visible on your credit file for five years. This default may adversely affect your ability to gain credit from other suppliers in the future. We will also commence legal action to recover the funds and costs incurred will be passed onto you."
86. Mr Wallin has given evidence that he had a further telephone conversation with Mr Libdy on or about Monday, 20 February 2023 to the following effect: "Paul: Kevin, ResourceCo has not received any payment. Kevin: I am still in dispute with the client, I am claiming circa $890,000.00, and they have offered about $350,000.00. I will now accept $500,000.00 and pay ResourceCo in full."
87. Mr Libdy has given evidence in his affidavit sworn on 17 May 2023 that he could not recall the details of this conversation, but he denied telling Mr Wallin that he would "pay ResourceCo in full". Mr Libdy deposed that: "At that stage, I was reconciling the costs that the Plaintiff had incurred with Landmark because of the failure by the Defendant to supply sufficient trucks."
88. Mr Harrison has given evidence that he had a conversation with Mr Libdy to the following effect on 21 February 2023: "Steve: Kevin, what is going on with our payment. Kevin: My client is stuffing me around. I can't pay you until I get paid. Steve: We can't wait for you customer. We need to get paid. We have to report to the Board on this. Kevin: You'll definitely get fully paid. I am happy to give you a collateral to give you some comfort around this. Steve: Okay, that would be good. Keep your communication lines open so that when Paul Wallin calls you answer even if you have the news he doesn't want to hear."
89. In his affidavit sworn on 17 May 2023, Mr Libdy gave the following different account of that conversation: "Steve: Hi Kevin, I am just calling to confirm when we might expect payment. Nothing has been received and I need to let the Board know what is happening. Kevin: I cannot pay yet Steve. My client hasn't paid me the $890,000.00 that I am owed. I am waiting on them and will keep you updated. Payment has not been made by them because of delays at the work sites because you guys did not provide the trucks as agreed. Steve: We can't wait for your client. You need to make payment now. When can we expect payment. Kevin: I will be in touch. We are conducting a reconciliation. Not enough trucks were supplied, and the rates have largely varied by your office from the agreement. I would not have agreed to engage ResourceCo if I knew this would happen. Steve: Let's keep communicating. That is not what Paul Wallin has explained, but we need payment soon. Kevin: Ok mate, my office will be in touch."
90. There was a further telephone conversation between Mr Wallin and Mr Libdy on 28 February 2023.
91. According to Mr Wallin's evidence, that conversation was to the following effect: "Paul: Kevin, your empty promises to pay are wearing very thin. You need to show a commitment to paying the outstanding balance by making some payments towards the debt. Kevin: I will pay $10,000.00 by Friday 3 and email you a more detailed payment proposal."
92. Mr Libdy gave a different account of the conversation in his affidavit sworn on 17 May 2023. According to Mr Libdy, the conversation on or about 28 February 2023 was to the following effect: "Paul: Hi Kevin, you need to stop promising payment and then not complying. Can any amount be paid at all to show that you are going to comply? Kevin: I might be able to make a payment of $10,000.00 very soon but I cannot agree to anything in finality because we are still calculating the loss that we have incurred due to your breaches of the agreement. Some form of payment will be paid soon to show our commitment to resolving this. I am still waiting for Abdel to let me know what's happening. I will not be paying the full rates as discussed previously."
93. Mr Wallin has given evidence that ResourceCo did not receive the payment of $10,000.00. Nor did ResourceCo receive any repayment proposal from Mr Libdy.
94. On 3 March 2023, Ms Dendal sent an email from a Civil Transport email address to Mr Wallin. The email, which was copied to Mr Libdy at his Civil Transport email address, stated: "Civil Transport has incurred a loss and a dispute has arisen for our works at Kogarah which is the source of our delays in payments towards Resourceco. Landmark claims onsite defects to structural design of piles. Civil Transport maintains that it was built and constructed as per contractual drawings provided by Landmark. Due to this we are in negotiations at this time to settle dispute for funds owed to Civil Transport. Currently ongoing discussion are occurring, and it is believed this will continue over the next 14 business days, as both parties are gathering documentation to support their argument. We are confident in a resolution; however, we ask for your continued support through this process. In the meantime. Civil Transport is looking at cashflow to obtain funds to finalise account with Resourceco, Civil Transport does not take this lightly and are doing the utmost possible to have this complete. Unfortunately, we could not foresee this issue arising and we wish to keep an open line of communication to resolve this."
95. Mr Wallin replied to Ms Dendal by email later that same day, stating: "We appreciate your company position and we have been extremely patient and supportive throughout your dispute resolution process over the past 3 months. As I discussed with Kevin on Tuesday 28th Feb, we need to see commitment to paying your outstanding balance. Can you please propose a payment plan for my consideration to settle your account, starting with an immediate payment of $10,000 today as agreed with Kevin."
96. On 6 March 2023, Ms Chambers of ResourceCo sent an email to Mr Libdy and Ms Dendal following up on Mr Wallin's email of 3 March 2023, and stating: "As of today, RMS still have not received the $10,000.00 payment, as agreed between Kevin and Paul. Due to no funds received, a payment default will be lodge with credit watch today. The outstanding account will be handed over to our legal team to commence legal proceedings."
97. On 7 March 2023, Ms Dendal sent an email from a Civil Transport email address to Ms Chambers. Ms Dendal referred to ResourceCo's invoice that had been issued to Civil Transport in the amount of $454,645.00, which had been due for payment in December 2022. Ms Dendal stated that she had been "asked to reach out on behalf of Civil Transport", and continued: "Due to this being put on creditor watch this has further delayed our process of refinancing to finalise this debt. We ask that this be removed due to causing us further difficulty in gaining funds and making payment/s to resource, this may cause no payment to be made now or in the near future - it has caused much duress."
98. ResourceCo issued the statutory demand on 14 March 2023.
99. Mr Wallin has given evidence that Mr Libdy telephoned him shortly after the statutory demand was served and they had a conversation to the following effect: "Kevin: Why have you gone legal on me? Paul: We had no alternative Kevin due to all your failed promises to pay. We have been very patient with you and your business, but unless we see payment to honour your promises, you leave us with no choice. Kevin: I understand."
100. Mr Libdy gave a different account of the conversation in his affidavit sworn on 17 May 2023. According to Mr Libdy, the conversation on was to the following effect: "Kevin: I have received a demand. I do not understand. Why has this been issued when I have told you about my dispute. Paul: You have continuously failed to make payment. We need payment and we were advised it was the most appropriate action. Kevin: The amount you are claiming is not owing. How many times do I need to tell you guys that that charges need to be fixed and the costs incurred by Landmark need to be accounted for. The trucks were late and not big enough to do the job. You also didn't supply enough trucks. I will seek advice about what to do because the Landmark charges were incurred as a result of this. You have done the wrong thing by me. Paul: Payment must be made, or we will proceed with action if necessary. There is no alternative."
101. On 4 April 2023, Mr Libdy sent Mr Wallin a text message stating: "Paul I'm not ignoring you I'm in a battle with the developer and his stringing me along I'm working hard to get my self in a position to start making monthly payments but haven't got anything concrete I'm currently in with solicitors discussing your matter as we speak"
102. Mr Wallin replied: "Ok great. We want to work with you to navigate your way out of this. Keep the communication open and we need to see action/cash commitment to backup what you're saying."
103. In his affidavit sworn on 5 April 2023, Mr Libdy deposed: "In providing the services, ResourceCo caused delays on the Kogarah and Collaroy Sites. The delays were mainly experienced at the Kogarah Site whereby ResourceCo delayed in providing suitable trucks for the works and at times provided 10-wheeler carts and disposal. These trucks were significantly smaller than the truck and trailer meaning less spoil could be removed from the sites which resulted in delays. It was always a term of the agreement that truck and trailers will be provided and not 10-wheeler cars and disposal. This is further discussed in my affidavit below."
104. Whilst Mr Tahseldar has given evidence that "there was always pressure" from Mr Libdy during August, September, and November 2022 "to provide a higher number of trucks" to the Kogarah site, he has deposed that: "… at no time has Kevin Libdy or any representative from Libdy ever raised with me, verbally or otherwise, that the alleged delays from ResourceCo in providing the number or type of trucks for the Transport Services was a reason for the issues/dispute with the customer, or the reason for non-payment of the outstanding invoices. Indeed, if this were the case, Libdy could have engaged other suppliers to source the requisite number / type of trucks required."
105. Mr Libdy replied to this aspect of Mr Tahseldar's evidence in his 17 May 2023 affidavit by reiterating that he had contacted Mr Tahseldar on many occasions by text message and by telephone call requesting additional trucks, and that Mr Tahseldar had not complied with his requests.
106. Mr Wallin has given evidence that Mr Libdy did not say anything to him prior to the commencement of these proceedings suggesting that ResourceCo had in any way caused the dispute between Civil Tec and Landmark.
107. Ms Chambers has given evidence that, in all of her dealings with Civil Transport following up payment of ResourceCo's invoices, neither Mr Libdy nor any representative of Civil Transport stated or suggested that ResourceCo had caused delays to the Kogarah project. The emails and text messages referred to above do not record any such statement or suggestion. [6] Mr Libdy's response to Ms Chambers' evidence in his affidavit sworn on 17 May 2023 is that he was of the view that Ms Chambers and ResourceCo's accounts team "should not be contacted in relation to anything else other than statements, invoices and rate disputes, or similar matters relating to payments. I therefore did not make ongoing contact with her in relation to the provision of trucks as Mr Tahseldar was the account manager and main contact."

Consideration and determination

1. I have considered all of the parties' written and oral submissions.
2. The offsetting claim on which Civil Transport relies in its application to set aside the statutory demand is a claim for damages for alleged breach by ResourceCo of an alleged contractual obligation to supply Civil Transport with a minimum of between eight and ten trucks per day for the removal and disposal of soil excavated from the Kogarah site.
3. Civil Transport claims to have suffered loss as a result of that alleged breach on the basis that: 1. ResourceCo's alleged failure to supply between eight and ten trucks per day, and its alleged conduct in failing to load all of its trucks collecting waste from the Kogarah site to their full capacity, caused delay to Civil Tec's completion of the works under the Landmark Subcontract; 2. Landmark has made a claim against Civil Tec under the Landmark Subcontract for liquidated damages in the total amount $525,000.00, being $5,000.00 per day for 105 days; 3. Civil Tec has "passed" those liquidated damages "downstream" to Civil Transport; and 4. Civil Transport has in turn passed those liquidated damages "down" to ResourceCo.
4. In order to determine whether that is a genuine offsetting claim in the sense explained at [10] above, it is necessary to consider in the first instance whether Civil Transport has a plausible contention that its contract with ResourceCo included a term requiring ResourceCo to provide a minimum of between eight and ten trucks to collect and dispose of site spoil from the Kogarah site each day.
5. Counsel for Civil Transport failed to articulate with clarity what Civil Transport contends the contractual arrangements were, describing them as "a little bit confusing and complicated". Counsel ultimately submitted that, during the conversation between Mr Libdy and Mr Tahseldar on 4 August 2022, Mr Libdy's statement that "I will also need 8 to 10 truck and trailers per day" was an offer to engage ResourceCo on terms that it would provide a minimum of eight to ten trucks per day, which Mr Tahseldar accepted on behalf of ResourceCo by stating "Yes, no problem we can do that for you". It was submitted that the parties entered into a contract at that time, irrespective of the fact that the rates were yet to be the subject of a quotation. It was submitted that the quotation was "separate" and "fits side by side with the agreement that was reached on 4 August 2022 in relation to the number of trucks".
6. Senior counsel for ResourceCo submitted that Civil Transport and ResourceCo entered into a written agreement on the terms of ResourceCo's terms and conditions when ResourceCo issued the quotation on 5 August 2022, and that the written agreement superseded all previous discussions, including any conversation about the number of trucks. Senior counsel accepted that the contract may have been later varied by discussions between the parties concerning rates. However, it was submitted that the written contract had overridden the parties' prior discussions on 4 and 5 August 2022, referring to Equuscorp Pty Ltd v HGT Investments Pty Ltd. [7] That submission failed to grapple with the reality that there was no evidence of any written acceptance by Civil Transport of ResourceCo's quotation for the provision of services incorporating its terms and conditions. It appears from the evidence presently before the Court that Civil Transport's acceptance of the quotation was communicated by one or more subsequent conversations between Mr Libdy and Mr Tahseldar, or by Civil Transport accepting ResourceCo's services by permitting its trucks to attend at the Kogarah site and by paying ResourceCo's invoices, or by the combined effect of those conversations and that conduct.
7. In my opinion, both parties' submissions about the manner in which the contract was formed and its terms ignore the substance of the evidence that they have adduced. That evidence points strongly to the contract between Civil Transport and ResourceCo having been one that was partly in writing, partly oral, and partly to be inferred from conduct, and raises a plausible contention that the conversations between Mr Libdy and Mr Tahseldar on 4 and 5 August 2022 formed part of that contract. The conduct of the parties after the contract was entered into will be relevant to determining the terms of the contract, and any variations of the contract, should it become necessary to determine those matters in subsequent proceedings. [8] However, for present purposes the relevant question is whether there is a plausible contention that the terms of the contract included an obligation for ResourceCo to provide a minimum of eight to ten trucks and trailers per day for the Kogarah site, as Civil Transport contends.
8. Mr Libdy's evidence concerning his conversation with Mr Tahseldar on 4 August 2022, referred to at [21] above, is the only evidence in support of Civil Transport's contention that the contract included a term requiring ResourceCo to provide a minimum of eight to ten trucks and trailers per day for the Kogarah site. In my opinion, that evidence does not disclose a plausible contention that the contract included such a term. On Mr Libdy's own evidence, the words that he used - "I will also need 8 to 10 truck and trailers per day" - did not stipulate that the number of trucks was the minimum number to be provided, rather than an estimate of the range that Civil Transport was likely to require on any given day. Mr Libdy's instruction to Mr Tahseldar to contact the Kogarah site manager to "coordinate the trucks with him for the required days" confirms the fluidity of Civil Transport's requirements at the site, both as to the days on which trucks would or would not be required, and as to the number of trucks required each day and the arrangements for their arrival at, and movements on, the site.
9. The evidence that Mr Libdy repeatedly requested or pressured ResourceCo to provide more trucks for the Kogarah site does not cast Mr Libdy's evidence of the conversation on 4 August 2022 in a different light. [9] The evidence of those requests or pressure merely indicates that ResourceCo did not supply the number of trucks that Mr Libdy sought on various days during August, September, and November 2022. Subject to two qualifications, that evidence is irrelevant to Civil Transport's contention that ResourceCo had a contractual obligation to supply between eight and ten trucks and trailers per day. The qualifications are that Mr Libdy's account of his conversation with Mr Tahseldar in mid-August 2022 includes Mr Libdy asserting to Mr Tahseldar that ResourceCo was "changing" the terms of the agreement by declining to provide 15 or 16 trucks, and Mr Libdy's account of his conversation with Mr Tahseldar on 23 August 2022 includes Mr Libdy asserting that Mr Tahseldar had said that ResourceCo would provide a minimum of ten trucks. [10] The inconsistency of those assertions with one another, and the inconsistency of both assertions with Mr Libdy's evidence of his conversation with Mr Tahseldar on 4 August 2022, is a further reason why Civil Transport has failed to establish a plausible contention that the terms of its contract with ResourceCo included an obligation for ResourceCo to provide a minimum of eight to ten trucks and trailers per day for the Kogarah site.
10. Civil Transport's offsetting claim is not genuine in the sense explained at [10] above. There is no plausible contention as to the existence of the contractual obligation said to have been breached by ResourceCo. The notion that Mr Libdy's estimate of eight to ten trucks and trailers per day stipulated the minimum number of trucks that ResourceCo was contractually obliged to provide is a spurious contention that Civil Transport has manufactured in response to the pressure of the statutory demand as part of its attempt to construct its alleged offsetting claim.
11. There is a further reason why I would have held that Civil Transport does not have a genuine offsetting claim, even if I had been persuaded that its contentions concerning ResourceCo's breaches of the alleged minimum trucks obligation were plausible. That is because Civil Transport's contentions that those alleged breaches caused the delays in respect of which Landmark has claimed liquidated damages against Civil Tec are supported only by bare assertions made in Mr Libdy's first affidavit sworn on 5 April 2023, [11] and further bare assertions that he claims to have made in conversations with ResourceCo representatives. Those assertions are irreconcilably inconsistent with contemporaneous documents.
12. The relevant contemporaneous documents fall broadly into two categories.
13. The first category comprises the notices of delay issued by Landmark to Civil Tec under the Landmark Subcontract, [12] email correspondence passing between Landmark and Civil Tec concerning delays to the work on the Kogarah site, [13] the show cause notice issued by Landmark to Civil Tec, [14] Civil Tec's response to that show cause notice [15] and Landmark's reply to Civil Tec's response. [16] The causes of delay identified in those notices and in that correspondence do not appear on the face of the documents to be related to the rate at which site spoil was removed from the Kogarah site. For example, Landmark has attributed delays to Civil Tec's failure to provide the resources necessary to operate the machinery for excavation and trimming work on site, plant and equipment damage and breakdowns, and defective work undertaken by Civil Tec, including piles which were found to have inadequate structural integrity. Civil Transport adduced no evidence whatsoever of any direct or indirect connection between the number of trucks provided by ResourceCo from time to time for the removal of material from the Kogarah site on the one hand, and delays caused by some or all of the kinds of factors referred to in the notices and correspondence on the other hand. Moreover, the selected notices of delay issued by Landmark that Civil Transport tendered in evidence either relate to delays that must have occurred substantially before ResourceCo started providing services to the Kogarah site, [17] or delays that Landmark attributes to problems that occurred after ResourceCo ceased providing services on 13 December 2022. [18]
14. Mr Libdy's assertions, viewed in the context of the first category of contemporaneous documents referred to above, do not raise a plausible argument requiring further investigation of an alleged connection between the delays that underpin Landmark's liquidated damages claim against Civil Tec on the one hand, and the number of trucks that ResourceCo provided to remove site spoil from the Kogarah site on the other hand. A plausible argument that such a connection exists is fundamental to Civil Transport's contentions that it has a genuine offsetting claim against ResourceCo for damages in the order of $525,000.00 for alleged breach of contract.
15. The second category of contemporaneous documents referred to at [131] above is the contemporaneous correspondence between ResourceCo and Civil Transport concerning Civil Transport's failure to pay ResourceCo's invoices. Subject to one possible exception, those emails and text messages contain no hint of any suggestion that ResourceCo has caused loss to Civil Transport, or even put Civil Transport at risk of loss, by failing to supply a greater number of trucks to the Kogarah site. The possible exception concerns the messages that Mr Libdy sent to Mr Tahseldar during the period from 2 to 8 November 2022, in which Mr Libdy complained that he was "stressing hard" because "we" were in "serious trouble", and Mr Libdy conveyed to Mr Tahseldar that "We just be told LD's will apply they came and saw only 2 ten wheelers???" and complained that he was "getting smashed by client". [19] Understood in the context of the first category of contemporaneous documents referred to above, these short messages do not raise a plausible contention that there is some connection between the number of trucks being supplied by ResourceCo to the Kogarah site and the delay that subsequently became the subject of Landmark's liquidated damages claim against Civil Tec. I reject the submission to the contrary made on behalf of Civil Transport. As explained above, the work on the Kogarah site had suffered from delay - with the resulting prospect of liquidated damages being applied under the Landmark Subcontract - since before ResourceCo started providing services to the site. Mr Libdy's campaign for more trucks deployed his assertions implicit in these messages - that ResourceCo had caused or contributed to the prospect of liquidated damages, or the "serious trouble", or "getting smashed". However, those assertions are irreconcilably inconsistent with the absence of any similar complaint in any of the communications that Mr Libdy and his staff sent to ResourceCo seeking to explain or excuse Civil Transport's failure to pay ResourceCo's invoices. I refer in particular to the communications set out at [106]-[109] and [113] above, all of which occurred at least one month after Landmark had made its liquidated damages claim against Civil Tec on 6 February 2023 and several weeks after Landmark had terminated the Landmark Subcontract on 10 February 2023. Mr Libdy's evidence referred to at [119] above does not explain this inconsistency. The notion that Civil Transport would have been seeking to borrow money in order to pay invoices issued by ResourceCo, if Civil Transport had any basis for a genuine claim that ResourceCo had caused Civil Tec to incur liquidated damages to Landmark which Civil Tec may seek to pass on to Civil Transport, only needs to be stated to be rejected.
16. The observations and conclusions at [130]-[134] above apply with equal force to Civil Transport's contention that ResourceCo's trucks were not fully loaded at the Kogarah site, and that this caused delay to the works under the Landmark Subcontract which in turn caused Landmark to claim liquidated damages against Civil Tec.
17. Counsel for Civil Transport sought to overcome the absence of any evidence of a plausible contention of some causal nexus between ResourceCo's alleged breaches of contract and the liquidated damages claimed by Landmark, by submitting that the liquidated damages have been "certified", and that: "At present [Civil Transport] has just had that [referring to the liquidated damages claim] passed down to them. They have been told that that is their problem because of the delays in respect of the removal of spoils. … accordingly, from there, it has been passed down to [ResourceCo], because the assertion is that the delays in respect of the removal of spoils has impacted the other works. The start of it is to get rid of all the spoils and it is flow on effect from there."
18. I reject that submission for the following reasons.
19. First, there is no evidence that liquidated damages have been "certified", or, as counsel for Civil Transport later put it, "certified upstream".
20. Second, for the reasons I have already explained above, there is no evidence supporting the submission that "[t]he start of it is to get rid of all the spoils and it is flow on effect from there." Nor is there any evidence supporting a subsequent submission made by the counsel for Civil Transport to similar effect - that "delays are cumulative and impact other issues". According to Mr Libdy's evidence, he was frequently present on the Kogarah site. It would have been open to Civil Transport to adduce evidence from Mr Libdy, or alternatively from other Civil Transport or Civil Tec personnel familiar with the work on the Kogarah site, describing in general terms whether (and, if so, how) the daily number of trucks supplied by ResourceCo for the removal of site spoil from the Kogarah site impacted on the progress of the Landmark Subcontract works on that site. Civil Transport did not adduce that evidence. Deficiencies in the evidence cannot be overcome by counsel for Civil Transport giving evidence from the Bar table.
21. Third, the submission that Civil Transport has "been told" that the liquidated damages claim is "their problem because of the delays in respect of the removal of spoils" does not advance Civil Transport's contention that it has a genuine offsetting claim against ResourceCo. Civil Tec's scope of work under the Landmark Subcontract was much broader that the haulage and disposal services that it engaged Civil Transport to provide, and that Civil Transport in turn engaged ResourceCo to provide, for the Kogarah site. Counsel for Civil Transport described the haulage and disposal work undertaken by ResourceCo and Civil Transport as a "small portion" of Civil Tec's work for Landmark. Civil Tec's response to the show cause notice issued by Landmark denied that Civil Tec bore responsibility for the delays, which are now the subject of Landmark's claim for liquidated damages. In those circumstances, the mere fact that Civil Tec has asserted that its related company Civil Transport is liable to Civil Tec in respect of those same liquidated damages does not establish that Civil Tec has a genuine claim against Civil Transport, let alone that Civil Transport has a genuine claim against ResourceCo.
22. For all of the reasons explained above, the evidence adduced in these proceedings fails to establish a genuine offsetting claim by Civil Transport against ResourceCo.
23. Even if I had determined that the evidence adduced by Civil Transport established a plausible contention about an alleged breach of contract by ResourceCo failing to provide a specified minimum number of trucks to the Kogarah site, causing delay to the work and exposing Civil Transport to liability to Civil Tec, I would have held that Civil Transport had failed to establish that $525,000.00 was the genuine level of the offsetting claim. In light of the evidence referred to at [132] above, and the absence of any evidence from Mr Libdy explaining (rather than merely asserting) a causal connection between ResourceCo's alleged breaches and all or any of the delays that gave rise to Landmark's liquidated damages claim against Civil Tec, the notion that Civil Transport has a genuine offsetting claim against ResourceCo at a level equivalent to the amount of Landmark's claim is spurious.
24. That is not to say that Civil Transport was required to prove in these proceedings that alleged breaches of contract by ResourceCo caused a specified number of days' delay to the Landmark Subcontract works which accounted for a specified amount of the liquidated damages claimed by Landmark. I accept the submissions made by counsel for Civil Transport that this was not required. However, Civil Transport was required to demonstrate that there is a real basis for the quantum of $525,000.00 that it asserts, and that this is not fictitious or fanciful. [20] I reject Civil Transport's submissions to the effect that it was not required to do anything to establish the genuine level of its asserted offsetting claim because the claim relates to liquidated damages that have been certified and "passed down". I repeat my observations at [136]-[140] above.
25. I also reject Civil Transport's submission that it would be prejudiced by having to articulate its contention about the extent of ResourceCo's responsibility and liability for delay because Civil Transport is facing a liquidated damages "upstream". The task of adducing evidence to establish a genuine claim by Civil Transport against ResourceCo, and the genuine level of that claim, at the same time as Civil Tec denies liability to Landmark (which would entitle Civil Transport to deny liability to Civil Tec) may be a delicate one, but it is possible. The delicacy of the undertaking does not justify this Court accepting Civil Transport's mere assertions concerning the elements of the alleged offsetting claim and setting aside the statutory demand on that basis. I reject Civil Transport's submission that these issues concerning the genuine level of its alleged offsetting claim are matters going to the merits of the claim and its quantum which would be determined on a final hearing, which should be disregarded for the purpose of determining Civil Transport's application to set aside the statutory demand.
26. I acknowledge Civil Transport's alternative submission that the level of the offsetting claim was $235,000.00, on the basis that it had adduced evidence of Landmark's notices of delay issued to Civil Tec in respect of only 47 days rather than the 105 days in respect of which Landmark has claimed the total sum of $525,000.00 as liquidated damages. As I have already explained, neither the contemporaneous communications between Landmark and Civil Tec about delay to the Landmark Subcontract works nor Mr Libdy's evidence identify any plausible connection between the delays identified by Landmark's notices and Civil Transport's complaints about the number of trucks provided by ResourceCo for the Kogarah site. It follows that Civil Transport's formulation of its alternative estimate of the level of its alleged offsetting claim is untethered to the substance of the offsetting claim that it sought to propound against ResourceCo in response to the statutory demand.
27. For all of those reasons, Civil Transport has not established any genuine offsetting claim - at the level of $525,000.00 or at any other level - against ResourceCo. The evidence summarised above, considered as a whole, points overwhelmingly to the conclusion that the claim has been recently manufactured for the purpose of defeating the statutory demand, and I so find.
28. For all of those reasons, I am satisfied that there is a genuine dispute about the amount of the debt to which the statutory demand relates, but I am not satisfied that Civil Transport has a genuine offsetting claim against ResourceCo.
29. Accordingly, the orders of the Court are as follows: 1. Pursuant to s 459H of the Corporations Act 2001 (Cth): 1. order that the statutory demand issued by the defendant to the plaintiff on 14 March 2023 in relation to a claimed debt of $454,645.39 be varied by reducing the amount of the debt to $379,263.56; and 2. declare the demand to have had effect, as so varied, from the date of service of the demand on the plaintiff. 1. Order that the proceedings are otherwise dismissed.
30. The parties indicated that they wish to be heard in relation to costs.

Endnotes

1. (2019) 99 NSWLR 397; (2019) 136 ACSR 563; [2019] NSWCA 60 at [61]-[65].
2. Ibid at [8].
3. Ibid at [93]-[96] (White JA) and [98]-[100] (Sackville AJA).
4. See [8] above.
5. The conversation was admitted into evidence subject to an order under s 136 of the Evidence Act 1995 (NSW) limiting its use to evidence of the conversation and not evidence of the truth of any fact asserted in the conversation.
6. See at [44]-[45], [47], [52]-[58], [65]-[67], [75]-[76], [92], [97] and [106]-[109] above.
7. (2004) 218 CLR 471; (2004) 79 ALJR 206; (2004) 211 ALR 101; (2004) 57 ATR 556; [2004] HCA 55 at [33]-[34] (Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ).
8. See County Securities Pty Ltd v Challenger Group Holdings Ltd [2008] NSWCA 193 at [7]-[27] (Spigelman CJ, Beazley JA agreeing).
9. See [33]-[42] and [48]-[51] above.
10. See [33]-[37] above.
11. See [115] above.
12. See [38], [69], [71]-[73] and [86] above.
13. See [70] and [81] above.
14. See [84]-[85] above.
15. See [90] above.
16. See [93] above.
17. See [38]-[39] above.
18. See [69], [71]-[73], [81] and [86] above.
19. See [49]-[51] above.
20. Crontec Automotive Tooling Pty Ltd v Allsteel [2006] NSWSC 555 at [34] (Austin J); In the matter of Citadel Financial Corporation Pty Ltd [2019] NSWSC 65 at [30] (White J), cited with approval in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; (2019) 136 ACSR 563; [2019] NSWCA 60 at [65] (Bell P, White JA and Sackville AJA agreeing). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 June 2023