Dalefield Pty Ltd v Pro-Civil Pty Ltd [2000] QSC 424

[1] DOUGLAS J: This is an application pursuant to s 459G of the Corporations Law to set aside a statutory demand for $43,720.30 served by the respondent on the applicant on 24 July 2000.

Contract adopting AS 2124/92 entered for concrete roadworks.

Contract works completed and on 12 months maintenance.

Superintendent lists rectification works required for practical completion effective 28.09.

Superintendent letter to respondent dealing with minor outstanding items of works and reminding it it remains responsible for defects during maintenance period and of retention amount of $18,373 to cover this.

Superintendent letter advising principal that the rectification works required in its letter of 6.12 had been completed.

Respondent issues notice of dispute under clause 47.2 arising out of refusal to pay balance contract sum, nett of retention and interest in an attempt to bring matter to a conclusion.

Applicant's response to the dispute notice, listing objections to items in payment notices 3, 4, 5, 6, 7 and 8 and contesting the soundness of concrete pads.

Superintendent replies to applicant's response and makes his determination that the progress certificates represent the true value of the work, that they were carried out satisfactorily. Suggesting that the principal still disagrees on payment, they would convene a meeting ASAP.

Superintendent's determination of the dispute and response that despite minor defects, the contractor is due all contract sum less retention until completion of the defects liability period plus interest .

Statutory demand issued $43,720 and interest $3,607.82.

(a) Applicant's solicitors write to superintendent, dissatisfied with his decision of 10.7 and refers the matter to conference under clause 37.

(b) Respondent's solicitors are sent engineer's report by applicant, referring to notwithstanding the superintendent's decision the removal.

Superintendent letter to applicant's solicitors, insufficient time yet to review engineer's report, advise on what sections are required to be removed and what is the proposal to pay the builder.

Service of statutory demand by post to company registered office.

Statutory demand served at applicant's director's address.

[3] It is contended by the applicant that there is a genuine dispute in relation to the debt claimed by the respondent. In such an application it is the court's function to ascertain whether there is a genuine dispute, and whether there is a genuine claim and "a plausible contention requiring investigation": see Eota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785. It is clear that it is not enough merely to assert the existence of a dispute, and prove that the parties are in dispute, if the basis of the applicant's dispute with the debt has no substance in fact or law.

[4] Lockhart J in Chadwick Industries (South Coast) Pty Ltd v Condensing Vapourisers Pty Ltd (1994) 13 ACSR 37, at 39 set out the test as follows:

"Certainly the court will not examine the merits of the dispute other than to see if there is in fact a genuine dispute. The notion of a genuine dispute in this context suggests to me that the court must be satisfied that there is a dispute that is not plainly vexatious or frivolous. It must be satisfied that there is a claim that may have some substance. On the other hand, the court must be careful, because if all an applicant has to do is to assert both a claim and some basis of it, without more, it would mean in almost every case that the court would set aside statutory demands where application is made to that effect. Plainly that is not what the legislature intended by introducing this new regime."

[5] The statutory demand in this case results from a claim certified pursuant to cl 42 of the contract between the parties, such contract being entered into using AS2124-92. Clause 42.1 provides that the contractor shall deliver to the superintendent progress claims for payment supported by evidence of the amount due to the contractor including the value of the work carried out by the contractor to that time. Within 14 days of receipt of the claim for payment, the superintendent is to issue to the principal and to the contractor a payment certificate stating the amount of the payment which, in the superintendent's opinion, is to be made by the principal. Pursuant to the clause the principal is obliged to pay an amount not less than that shown in the certificate within 14 days of its issue.

[6] Once a certificate is issued, there is no legal entitlement to deduct from any amount certified as due for payment any amount which is claimed to be payable to the contractor, including unliquidated damages or even liquidated damages arising under the contract: see Merritt Cairns Constructions Pty Ltd v Wulguru Heights Pty Ltd [1995] QCA 273; [1995] 2 QdR 521 at 523, 525-526 (CA) and R_e Concrete Constructions Group Pty Ltd_ [1997] 1 QdR 6 at 8 and 12 (CA).

[7] At the time of the hearing before me there had been no final certification under cl 42.8 because the works were still under maintenance. Had that occurred, there would have been adjustment by the superintendent to take account of what, in his opinion, was finally due by the parties to each other, including amounts due for any alleged breach of contract. Nothing on the evidence reveals an entitlement on the applicant's part to refuse to pay progress certificates now.

[8] However the applicant relies upon cl 47.2 of the contract. As indicated by the chronology, the respondent gave notice of a dispute on 20 March 2000. The notice in response, which was given by the applicant on 14 April 2000, took issue with various extras claimed and put in issue the quality of the concreting works undertaken by the respondent. On 10 July the superintendent made a determination to the effect that he had found that the respondent was entitled to payment of $43,720.30 plus interest in accordance with the contract. Being dissatisfied with that determination, the applicant, relying upon a report from consulting civil engineers, notified the superintendent of that dissatisfaction on 13 July 2000. At the time of the hearing before me the further process of negotiation contemplated by the contract had not been undertaken and the superintendent was seeking to convene a meeting.

[9] It seems to me, however, that cl 42.1 of the contract operates notwithstanding the issuance by either party of a dispute under cl 47. Clause 42.1 provides:

"A payment made pursuant to this clause shall not prejudice the right of either party to dispute under clause 47 whether the amount so paid is the amount properly due and payable and on determination (whether under clause 47 or as otherwise agreed) of the amount so properly due and payable, the principal or contractor, as the case may be, shall be liable to pay the difference between the amount of such payment and the amount so properly due and payable".

[10] In my view nothing in cl 47 operates to stay or otherwise limit the contractor's entitlement to the payment of progress certificates under cl 42. In any event, assuming the work is defective, the works at the time of the hearing were still under maintenance in respect of which the respondent has ongoing liabilities to remedy defects. There is also the monies held by way of retention ($18,373).

[11] I am unable to conclude therefore that there is a genuine dispute as to the debt claimed.

[12] In the event, I refuse the application to set aside the statutory demand.

[13] I order that the application be dismissed with costs to be assessed on the ordinary basis.