Global Crushers & Spares Pty Ltd v Becker Vale Pty Limited

Judgment (11 paragraphs)

[1]

Judgment 1This is an application under section 459G of the Corporations Act 2001 (Cth) in which the plaintiff seeks to set aside a statutory demand dated 8 December 2010 in the sum of $1,501,137.95 served by the defendant on the plaintiff. The application is made pursuant to section 459H of the Corporations Act that there is a genuine dispute as to the nature and amount of the debt and that the plaintiff has an offsetting claim or claims which exceed the amount of the debt.

[2]

Background 2The parties' submissions helpfully set out the background to the litigation. I will adopt these submissions with some modification.

[3]

The parties 3The plaintiff is one of the major suppliers of crushing and screening equipment to the construction, quarrying and mining industry in Australia. Crushing equipment is used in large building projects to grind rock material. Screening equipment is used, in a similar way to a large 'sieve', to reduce the ground material to a particular size, depending on the purpose for which it is to be used. 4The plaintiff employs staff with considerable knowledge and experience in the design and construction of crushers and screens and has considerable experience and expertise in servicing, maintaining, rebuilding and repairing crushers and screens. Stuart Wieland is the Technical Director of the plaintiff. 5The defendant is a company that has expertise in electrical works to be used in the mining industry. It claims to employ fully trained specialists who can design, manufacture and provide maintenance for any specification or project requirement.

Genuine dispute 19It seems that the contractual arrangements of the parties were in two separate parts. The first was what has been described as a design contract in which the plaintiff provided the defendant with design instructions on 4 August 2009. Thereafter on three occasions in December further purchase orders were given for design work and these were paid for by the plaintiff. There was a further purchase order in December 2009 issued by the plaintiff for $44,226.44, which was not paid by the plaintiff, and that sum was included in the statutory demand. 20It should be appreciated that both the plaintiff and the defendant had substantial parts to play in the production of the crushing plant. By way of example, the contract which the plaintiff had with Hazell Brothers was for the sum of $4.7 million and the Becker Vale contract which the plaintiff entered into with the defendant was for the sum of $2.9 million and was focussed in general on providing the electrical installation and a number of other areas. 21Initially at the commencement of the matter there was some dispute as to whether the defendant's terms and conditions of trading were incorporated in the contract. However, in final submissions it was conceded that the contract was comprised of the documents specified in 12.13 of the plaintiff's submissions which were as follows: "12.13 It is common ground that on or about 16 October 2009 the plaintiff entered into a contract with the defendant comprising the following documents: (a) the Revision 2 Works Package Contract; (b) the Vale Quotation, (c) the 22 September Minutes; and () the Global Purchase Order." 22It is common ground that the plaintiff contracted with the defendant to provide design work and mechanical and electrical work so, for ease of reference, the plaintiff adopted the defendant's terminology for the purposes of their submissions. 23The plaintiff's written submissions summarised the contract it had with the defendant as requiring the defendant to: (a) undertake the electrical design, supply and installation of the crushing plant including starters, cabling, contactors, switches and software to run the start-up and shut-down sequencing of the plant, in order that the electrical installation was capable of being 'signed off' as fit for purpose by a suitably qualified and experienced person under the New South Wales Mining and Quarrying Regulations, and capable of running the crushing plant continuously for 24 hours a day 7 days a week, prior to commissioning; (b) supply all documentation required for the operation and commissioning of the crushing plant, including a user manual and safety certification; (c) design, manufacture and supply three screen support frames; (d) design manufacture and supply 1 dual cone structure (i.e. a frame to support 2 compression crushers); (e) design, manufacture and supply a trestle conveyor support frame; (f) design, manufacture and supply the main radial stacker conveyor (CV1), which performs the function of stockpiling crushed rock above the reclaim tunnel; (g) design, manufacture and supply a reclaim tunnel, for the purpose of moving rock material into the crushing plant, including the conveyor within the reclaim tunnel (CV2) (h) design, manufacture and supply three under screen chutes and three under screen conveyors; (i) design, manufacture and supply two rock boxes and one conveyor underneath the compression crusher; (j) design, manufacture and supply two motor control centres and one air-conditioned site office; (k) design, manufacture and supply walkways, handrails and stairs for the crushing plant; and (l) project manage the Works, so as to deliver a fully operational 'turn key' crushing and screening plant for handover to Hazell Brothers on 8 March 2010, which was subsequently amended to 14 March 2010 due to inclement weather and because it became apparent that the defendant was unable to meet the initial timeline, due to problems with the Works. 24Given that the defendant concedes that documents comprising the contract are as alleged by the plaintiff, the only remaining area of genuine dispute is whether there is any entitlement to progress payments under the contract. Plainly, under the contract there was no such provision. However, a number of progress claims were paid during the course of the contract until such time as the defendant fell behind in its performance of the contract. 25According to the plaintiff there is a genuine dispute because the entire contract that has never been completed, either on time or in accordance with its terms. It is thus said that there is no entitlement to any payment. The defendant submits that there has been substantial performance of the contract and therefore the plaintiff is restricted to an action for damages. 26It is necessary to consider the delays and failure to achieve the contractual requirements. 27The agreed due date for delivery in the contract was 15 March 2010. This was not achieved and by late April 2010 there had been continual delays in commissioning the plant because of electrical problems. These problems caused repeated tripping of the plant that led to the blockages when the plant backed up (known as 'buried'). There was no automatic start up and shut down function which was a necessary requirement and all the testing was done manually. 28On 29 April 2010 the defendant wrote a letter to the plaintiff saying they were unable to give a firm date for completion of the commission but hoped to have automatic mode operational by 30 April 2010. 29Apparently this did not happen because the problems continued and even in June 2010, the testing had to be carried out in manual mode as there was no automatic start up and shut down function. 30Production started in August 2010 but on 21 September 2010, Clive Cutler on behalf of Abbigroup (a member of the BWA), sent an email to James Kinross, on behalf of the plaintiff, in which he wrote: "I have been watching the performance of the Cotter crushing plant for the last 5 - 6 months or so. Frankly, from my point of view it is a disaster and I could not in all conscience recommend your company to anyone looking for a turnkey plant. I am disappointed. Plant availability is somewhere in the 50-55% mark at best. Mechanical and particularly electrical breakdowns are commonplace almost every shift....I have not come back to you on Gladstone (which Abigroup won) because I wanted to see for myself just how Cotter would turn out after 6 months or so. There is no way known at the moment I could entertain your company at Gladstone to provide a screening plant.....My comments above in no way reflect adversely on your ability and reputation as a supplier of OEM [Original Equipment Manufacturer] equipment ie screens, feeders, crushers etc.....I have copied in Geoffrey Hazell as you can see because he owns the plant and should be worried." 31Eventually the plant operated through to the end of the crushing programme and that was completed at the end of May 2011 with the required amount of rock crushed and delivered. The delays involved reflect themselves in the offsetting claims which will be dealt with later. 32The defendant referred the well-known decision of Hoenig v Isaacs (1952) 2 All ER 176. That case was a contract to decorate a flat for 750 pounds with the terms of payment being "net cash as the work proceeds and the balance on completion". The defendant owner paid 400 pounds, occupied the flat and refused to pay the balance. 33Lord Denning said at page 180 the following: "In determining this issue the first question is whether, on the true construction of the contract, entire performance was a condition precedent to payment. It was a lump sum contract, but that does not mean that entire performance was a condition precedent to payment. When a contract provides for a specific sum to be paid on completion of specified work, the courts lean against a construction of the contract which would deprive the contractor of any payment at all simply because there are some defects or omissions. The promise to complete the work is, therefore, construed as a term of the contract, but not as a condition. It is not every breach of that term which absolves the employer from his promise to pay the price, but only a breach which goes to the root of the contract, such as an abandonment of the work when it is only half done. Unless the breach does go to the root of the matter, the employer cannot resist payment of the price. He must pay it and bring a cross-claim for the defects and omissions, or, alternatively, set them up in diminution of the price. The measure is the amount which the work is worth less by reason of the defects and omissions, and is usually calculated by the cost of making them good: see Mondel v Steel ; H Dakin & Co Ltd v Lee , and the notes to Cutter v Powell in Smith's Leading Cases, 13th ed vol 2, pp 19-21. It is, of course, always open to the parties by express words to make entire performance a condition precedent. A familiar instance is when the contract provides for progress payments to be made as the work proceeds, but for retention money to be held until completion. Then entire performance is usually a condition precedent to payment of the retention money, but not, of course, to the progress payments. The contractor is entitled to payment pro rata as the work proceeds, less a deduction for retention money. But he is not entitled to the retention money until the work is entirely finished, without defects or omissions. In the present case the contract provided for "net cash, as the work proceeds; and balance on completion." If the balance could be regarded as retention money, then it might well be that the contractor ought to have done all the work correctly, without defects or omissions, in order to be entitled to the balance. But I do not think the balance should be regarded as retention money. Retention money is usually only ten per cent, or fifteen per cent, whereas this balance was more than fifty per cent I think this contract should be regarded as an ordinary lump sum contract. It was substantially performed. The contractor is entitled, therefore, to the contract price, less a deduction for the defects. Even if entire performance was a condition precedent, nevertheless the result would be the same, because I think the condition was waived. It is always open to a party to waive a condition which is inserted for his benefit. What amounts to a waiver depends on the circumstances. If this was an entire contract, then, when the plaintiff tendered the work to the defendant as being a fulfilment of the contract, the defendant could have refused to accept it until the defects were made good, in which case he would not have been liable for the balance of the price until they were made good. But he did not refuse to accept the work. On the contrary, he entered into possession of the flat and used the furniture as his own, including the defective items. That was a clear waiver of the condition precedent. Just as in a sale of goods the buyer who accepts the goods can no longer treat a breach of condition as giving a right to reject but only a right to damages, so also in a contract for work and labour an employer who takes the benefit of the work can no longer treat entire performance as a condition precedent, but only as a term giving rise to damages. The case becomes then an ordinary lump sum contract governed by the principles laid down in Mondel v Steel and H Dakin & Co Ltd v Lee. The employer must, therefore, pay the contract price subject to a deduction for defects or omissions." 34There was a useful discussion by his Honour Justice McDougall in Cordon Investments Pty Limited v Lesdor Properties Pty Limited 1073 [2010] NSWSC 1073 . That was a case where, because of the nature of the dispute, substantial performance may not have been relevant. His Honour went on to discuss the matter in these terms: "[163] Another way of putting what I have just said might be to say that the doctrine of substantial performance should have no application to an "entire contract": that is to say, a contract under which full and complete performance by one party of its obligations is necessary before that party is entitled to receive whatever is the agreed consideration for those obligations. That view commended itself to White J in ACN 002 804 702 (formerly Brooks Building) v McDonald [2009] NSWSC 610 at [102], [103]. However, cases such as Tan Hung Nguyen v Luxury Design Homes Pty Ltd [2004] NSWCA 178 appear to treat the doctrine of substantial performance as applicable to entire contracts. ... [167] An alternative, and perhaps related, explanation of the basis upon which the tender of less than complete performance of an entire contractual obligation may, nonetheless, earn the contractual reward is waiver. See, for example, Pollock CB in Graves v Legg (1854) 9 Exch 709 ; 156 ER 304. Indeed, this was the alternative ground on which Denning LJ based his conclusion in Hoenig. This is not the place to examine the slippery and multifaceted concept of waiver (as to which, see the decision of the High Court of Australia in Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570. It is sufficient to say that, in some cases, a party to a contract who is entitled to receive the benefit of entire performance of the other party's obligations before performing its own may be held to have waived that entitlement if it accepts, or takes the benefit of, substantial performance. I return to the concept of waiver at [171] below." 35His Honour went on to discuss the nature of the alleged substantial performance in that case and commented: "[169] Further, were it necessary to do so, I would accept Mr Hale's submission that Cordon did not substantially perform its obligations as to completion. The referee's finding, that the extent of defective, incomplete and non-conforming work was such that the works were not, or would not be, reasonably fit for occupation or use by an owner, makes this clear. Whatever is the test for "substantial completion", it must at least encompass that the works said to have been completed substantially are reasonably fit for their contemplated occupation and use." 36The contract was an entire contract, as it seems from the little documentation there was that it was simply expressed as a "lump sum pricing for $2,999,365 excluding GST". Subsequent meetings suggested that there would be retentions of 2.5 percent on commissioning and a further 2.5 percent eight weeks after successful commissioning. 37So far as substantial performance is concerned, there were expert reports available and the evidence made it clear that the installation by the defendant was sub-standard in many respects. 38The plaintiff accepted that there had been success achieved in the sense that by the end of the project all the rock was crushed, but suggested that this was because of its work in subsequently bringing the plant up to standard and rectifying faults said to be those of the defendant. 39In this regard, I note that there was one item of work that was not completed, namely, installation of the reclaim tunnel which should have been done by the defendant and which was in fact done by the plaintiff. The cost for this work is estimated at $174,573.10. The cost of actual rectification works which were also claimed in the offsetting claims are $61,221 and a claim for supplying further items that the defendant failed to supply pursuant to the contract amounting to $72,410. There was also a claim for cost of transporting items to site for rectification works on defective items of $6,700. The total costs of the rectification works are $140,331. In addition it seems that the head contractor Hazell Brothers did a substantial amount of rectification work and it has claimed that the amount due to it for this work is the sum of $700,000. 40In the context of the contract for $2,999,436 a rectification claim of $840,331 and an uncompleted works claim of $174,573.10 raises the question that there was no substantial performance. 41The determination of this question is not something which is appropriate for resolution in these proceedings. The question here is whether the claim that there was no substantial completion amounts to a genuine dispute on this aspect. If there is such a genuine dispute then the demand should be set aside. 42It would require an examination of whether the defects which were identified and which the plaintiff and Hazell Brothers subsequently rectified, were sufficiently serious to prevent the plant performing at an adequate rate without their rectification. 43Craig Struthers, the plaintiff's expert, who was called in to help rectify the problems in February, did a substantial amount of work, which included re-programming the plant. Mr Struthers himself commented, "I think the guys operating this plant need to be congratulated for putting up with a substandard system and get production through the plant." Plainly the plant was operating although with great difficulty by February. After the rectification, production continued through until the end of May 2011. 44Considering all these details it seems to me that there is at least a genuine dispute as to whether there was substantial performance of the contract and accordingly the demand should be set aside. 45So far as the principles are to be observed in terms of whether there is a genuine offsetting claim, these were usefully summarised by Brereton J in BBB Constructions Pty Ltd v Frankipile Australia Pty Ltd (2008) 68 ACSR 1 at [4] in these terms: "The test for determining whether there is a genuine offsetting claim is whether the court is satisfied that there is a serious question to be tried that a party has an offsetting claim ( Scanhill Pty Ltd v Century21 Australasia (1993) 47 FCR 451; 120 ALR 173 ; 12 ACSR 341) or that the claim is not frivolous or vexatious: Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37. In other words, the claim must be bona fide and a truly existing fact and not spurious, hypothetical, illusory or misconceived: Ozone Manufacturing Pty Ltd v DCT (2006) 94 SASR 269; [2006] SASC 91 at [46]. In Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 ( Macleay Nominees), Palmer J put it in the following terms (at [18]): '[18] In my opinion, a genuine offsetting claim for the purposes of [Corporations Act] s 459H(1) and (2) means a claim on a cause of action advanced in good faith, for an amount claimed in good faith. "Good faith" means arguable on the basis of facts asserted with sufficient particularity to enable the Court to determine that the claim is not fanciful. In a claim for unliquidated damages for economic loss, the Court will not be able to determine whether the amount claimed is claimed in good faith unless the plaintiff adduces some evidence to show the basis upon which the loss is said to arise and how that loss is calculated. If such evidence is entirely lacking, the Court cannot find that there is a genuine offsetting claim for the purposes of s 459H(1) and (2).'" 46For completeness I will now deal with the offsetting claims.

Offsetting claims 47In submissions the offsetting claims were summarised in these terms: "In summary, the plaintiff's offsetting claim against the defendant totals at least $4,058,377.11. This is comprised of the following amounts: 1.damages claim against the defendant resulting from the defendant's failure to complete its works on time, or at all, so as to provide a crushing plant that was 'fit for purpose' by 14 March 2010. This claim was quantified as at 5 April 2011 in a letter from Hazell Brothers to the plaintiff to be - at least $2,699,000 made up of: a.cost of electrical and systems works, which were taken out of the hands of the plaintiff and undertaken by Hazell Brothers - $160,000; b.additional labour costs incurred by Hazell Brothers as a consequence of attempting to rectify the plant and it's production output between July 2010 and February 2011 - $540,000; and c.cost to Hazell Brothers as a consequence of the inability of the plant to meet required output targets until February 2011, meaning that the forecast completion date for the project had been delayed to 29 May 2011 (some 10 weeks beyond the contracted date) - $1,999,000. This claim appears to include, and subsume, the following claims made by Hazell Brothers against the plaintiff prior to 5 April 2011, which form part of, and further corroborate, the plaintiff's offsetting claim against the defendant: i. claim for liquidated damages or damages at law arising out of the claim against the plaintiff by Hazell Brothers - $820,000 (subsumed by (c) above); ii. claim for costs incurred by Hazell Brothers, due to the late delivery of the crushing plant, and claimed against the plaintiff - $460,629 (subsumed by (a) and (c) above); and iii. claim for works, services and goods incurred by Hazell Brothers on behalf of the plaintiff in order to ensure the plant was operational - $270,776.77 (subsumed by (b) and (c) above). 2.claim against the defendant for the cost to the plaintiff of designing, importing and installing the reclaim tunnel, which should have been undertaken by the defendant - $174,573.10; 3.claim against the defendant for the cost of project management undertaken by the plaintiff as a consequence the defendant's failure to adequately project manage the works - $149,125; 4.claim against the defendant for cost to the plaintiff of rectification works carried out by the plaintiff on defective items supplied by the defendant - $61,221 (made up of the plaintiff's claim for $55,221 set out in the plaintiff's original supporting affidavit and plaintiff's claim for costs of fixing bracing incorrectly fitted by defendant in the amount of $6,000, identified in the plaintiff's supplementary affidavit); 5.claim against the defendant for the cost to the plaintiff of supplying items which the defendant failed to supply pursuant to its contract with the plaintiff - $72,410 (made up of the plaintiff's claim for $49,410 set out in the plaintiff's original supporting affidavit and the plaintiff's claim for costs in respect of installing 'by-pass contactors' and rectification of electrical works undertaken by Cinco Pty Limited in the amount of $23,000 identified in the plaintiff's supplementary affidavit); 6.claim against the defendant for the cost to the plaintiff of transporting items to site for rectification works on defective items supplied by the defendant - $6,700; 7.claim against the defendant for cost of accommodation for the defendant's staff in Canberra, paid for by the plaintiff, pursuant to invoices issued by the plaintiff to the defendant - $17,348.01 (being the total amount of the invoices issued by the plaintiff to the defendant in respect of accommodation costs, instead of $25.052.01 as set out in the plaintiff's original supporting affidavit); 8.claim against the defendant in relation to loss by the plaintiff of a chance of obtaining the pool of funds for completion of the Cotter Dam project without an injury on site - $125,000; 9.claim against the defendant in relation to loss by the plaintiff of a chance of obtaining the bonus opportunity for early completion on the Cotter Dam project - $15,000; 10.claim against the defendant in relation to the loss by the plaintiff of the Gladstone Port project with Abigroup as a consequence of the defendant's failure to comply with it's contractual obligations to the plaintiff on the Cotter Dam project - $400,000 11.claim against the defendant for additional costs incurred by the plaintiff in undertaking it's Gunn Lake project, and for liquidated damages incurred by the plaintiff on it's White Rock project, as a consequence of the defendant's delay on the Cotter Dam project - $338,000. Misleading and deceptive conduct by Becker Vale 12.Further, or in the alternative, the plaintiff has a claim for loss and damage suffered by the plaintiff as a consequence of the defendant's misleading and deceptive conduct, estimated to be in the same amount (i.e. $4,058,377.11)." 48The defendant suggests, quite properly, that any offsetting claims must be based on appropriate evidence and the amount supported by some reasoning. The defendant also submitted that some of the claims that are said to be offsetting claims must be crystallised and not contingent. This principle has been discussed in a number of cases. A recent discussion on the principle appears in the judgment of Santow J in Collier Nominees Pty Ltd v Consolidated Constructions Pty Ltd (New South Wales Supreme Court, 3 July 1998, unreported) where His Honour, had the following to say: Heerey J (Federal Court) stated in Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 24 ACSR 194 at 203 (affirmed by the Full Court of the Federal Court at (1997) 25 ACSR 675): '[O]ffsetting claim" means a genuine claim that the company has beneficially in its own right. Since Pt5.4 Div 3 is concerned with Proof of solvency, only those assets which would be available to meet a company's debts, that is to say property held beneficially, should be taken into account.' Further, at 204 his Honour states: "The amount of the offsetting claim, including accrued interest, has to be considered as at the time the court is determining the application under s459G. This follows from the ordinary language of the statute and the use of the present tense. S459H(1) speaks of the court being satisfied that there is a genuine dispute between the company and the creditor. Similarly the definition of 'offsetting claim' refers to a genuine claim that the company has against the creditor. Moreover, s459H(4) assumes that the court may vary the amount in the demand, which necessarily contemplates that the court may take into account variations in the debt which have occurred since the service of the demand, for example by payment on account. The Full Court in Shearer at [60] FCR [136 at] 143; [18] ACSR [780 at] 786, spoke of a cross demand which existed 'at the time the application to set aside the statutory demand is made'. The Full Court did not need to discuss the point, but I take it their reference to 'the time the application... is made' means the time the application is heard by the court, not some earlier time when the application was filed." It is thus necessary to determine whether the Plaintiff presently has - not will have - offsetting claims against the Defendant, including by way of the broader notion of cross-demand, notwithstanding the Defendant's submission that the parties have agreed to postpone all set-offs and counter-claims arising out of the contractual relationship until the procedures under cl46.2 of the Contract have been invoked. The clearest expression of what constitutes a presently existing offsetting claim for the purpose of s459H is to be found in the judgment of Master McLaughlin in Advance Ship Design Pty Ltd v D J Ryan t/a Davies Collison Cave (1995) 16 ACSR 129 at 135-6. There the learned Master states: "It seems to me that the true situation, and indeed the explanation of the problem which confronted Young J in Classic Ceramic Importers , is that the offsetting claim must be one which the Plaintiff presently has. The mere fact that the Plaintiff has filed process does not mean that the Plaintiff has a claim in that amount. The claim must be one which exists at the present time, and it must be one which, if the Plaintiff is able to prove the factual matters alleged in the pleading in the statement of claim filed in the Equity Division, would result in the Plaintiff being presently entitled to the damages claimed. Is there a presently accrued cause of action The primary question in the present case is thus whether the three alleged offsetting claims are in respect of a presently accrued cause of action. The term 'cause of action' is of ancient origin. In Cooke v Gill (1873) 8 LR CP 107, Brett J states at 116: "'cause of action' has been held from the earliest time to mean every fact which is material to be proved to entitle the Plaintiff to succeed - every fact which the Defendant would have a right to traverse." In Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234, Wilson J states at 245: "[The] concept of a "cause of action " would seem to be clear. It is simply the fact or combination of facts which give rise to a right to sue. In an action for negligence, it consists of the wrongful act or omission and the consequent damage..." Thus, an offsetting claim within the meaning of s459H refers to that combination of facts which entitles an action to be brought. It may be that under the contract the action itself is to be postponed to a future date. However that fact is immaterial in the determination of whether there is a presently existing cause of action and thus a presently existing offsetting claim within the meaning of the Law. I now turn to the substance of each of the three alleged offsetting claims." 49I will first deal with some of the claims which do not involve the last mentioned proposition. 50There is an offsetting claim for the cost to the plaintiff of designing, importing and installing the reclaim tunnel at a cost of $174,573.10. I am satisfied that there is an appropriate offsetting claim in respect of this work. The defendant wanted to supply a corrugated steel tunnel but the principal required a plate steel tunnel and this had to be provided by the plaintiff. There is appropriate evidence of quantification in this amount after allowing for the deduction of $216,470 off the defendant's contract price. I am satisfied that this is a genuine offsetting claim. 51There is a claim against the defendant for the cost of project management undertaken by the plaintiff as a consequence the defendant's failure to adequately project manage the works for $149,125. This relates to an absence from the site from 30 December 2009 of one of the defendant's project managers, Mr McConnell. The claim is supported by estimates of hours and costs to have some of the plaintiff's staff attend to the project management. In my view, this evidence is more than just mere assertion. I am satisfied that that this is a genuine offsetting claim. 52There is a claim against the defendant for the cost to the plaintiff of rectification works on defective items supplied by the defendant of $61,221. The evidence appropriately quantifies this claim and I am satisfied that this is a genuine offsetting claim. 53There is a claim against the defendant for the cost to the plaintiff of supplying items which the defendant failed to supply of $72,410. I am satisfied that this is a genuine offsetting claim and appropriately supported. 54There is a claim against the defendant for the cost to the plaintiff of transporting items to site for rectification works for $6,700. I am satisfied that this is a genuine offsetting claim. 55There is a claim against the defendant for cost of accommodation of $17,348.01 for the defendant's staff in Canberra which was paid by the plaintiff. The invoices support an offsetting claim. However there is no evidence that there was an agreement for this claim. This arises because of the rejection of what evidence was sought to be tendered. In these circumstances I do not allow this offsetting claim. 56There is a claim against the defendant in relation to loss by the plaintiff of a chance of obtaining a pool of funds of $125,000 which was dependent upon the Cotter Dam project being completed without an injury on site. It was not a binding agreement and there was a requirement in order to participate that a "lost time injury" had to occur. That refers to a fatality or work related injury that causes permanent injury or occupation illness that results in a loss of one or more complete shifts any time after the day or shift in which the injury or illness occurred. 57Unfortunately the evidence did not demonstrate any compliance with this requirement. This is not an appropriate offsetting claim. 58There was a claim against the defendant in relation to the loss by the plaintiff of a chance of obtaining the bonus opportunity for early completion on the Cotter Dam project of $15,000. There is nothing to indicate that this could have been contemplated by the defendant. Accordingly this claim is not allowed. 59There was a claim propounded against the defendant for the loss by the plaintiff of the Gladstone Port project with Abigroup as a consequence of the defendant's failure to comply with its contractual obligations to the plaintiff on the Cotter Dam project of $400,000. 60It is clear that the plaintiff did tender for work on the project and it was refused on the basis of its performance on the Cotter Dam project. I have set out earlier in this judgment the comments by the person from Abigroup giving the refusal. There is no evidence of how the amount is calculated and accordingly, I reject this offsetting claim. 61There is a claim for an offsetting claim against the defendant for additional costs incurred by the plaintiff in undertaking its Gunn Lake project and White Rock project due to its resources being redirected to the Cotter Dam project. It was said to be estimated at $338,000. Unfortunately the evidence was not admitted. 62There is a claim for delay in the Gunn Lake project and White Rock project of $249,600. Both these projects were ones in which the plaintiff was involved in early 2010. Because of delays on the Cotter Dam project, the plaintiff did not have the staff to allocate staff to these projects. On the Gunn Lake project $115,000 was estimated to be the cost for additional contractors which the plaintiff had to bring in to work on that project. In respect of the White Rock project there was a delay of two weeks in completion leading to a penalty of $134,600. 63Although it seems that the damages were as a result of the delays in the Cotter Dam project, the evidence as to this being the defendant's fault was rejected. Accordingly, I am not satisfied that there is a genuine offsetting claim. 64I return to the principal claim set out as the first offsetting claim above. As can be seen this is a proposed claim foreshadowed by Hazell Brothers against the plaintiff and is set out in a letter dated 5 April 2011 from Hazell Brothers to the plaintiff. At the conclusion of that letter Hazell Brothers said: "In due course when its loss has properly crystallised Hazell Brothers intends to claim against GCS all of its loss and damage that it is entitled to recover and to its fullest extent, however, this may be construed in accordance with the contract. " As can be seen from the above the damages and losses set out in this correspondence alone equates to $2,699,000. ...." 65The evidence showed that there has been no response to that letter of demand by the plaintiff. There is no evidence of any payment or compromise of the claim. The defendant makes two main points about these claims. (1) The question of remoteness. (2) That the claim itself has not crystallised because no proceedings have been brought against the plaintiff by Hazell Brothers. 66As to the first point it is clear that the contract between the plaintiff and the defendant was on the plaintiff's case, formed on 16 October 2009. It was not until 8 December 2009, several months later, that the plaintiff entered into a contract with Hazell Brothers. In these circumstances it is hard to see these damages were the probable result for breach of the defendant's contract with the plaintiff. 67On the second point it seems to me that the plaintiff has an existing cause of action against the defendant for delay in commissioning the plant and for defects in the plant as delivered which required rectification. Given that if the breaches are proved the plaintiff is entitled to recover nominal damages, there is no doubt that at the present time the plaintiff has an existing cause of action. The real question is what are the damages the plaintiff has presently suffered? 68The question of what damages the plaintiff has presently suffered has to be considered at the time of the hearing before me. If one looks at the present time the claim for delay costs one can see that the $2,699,000 is expressed in the letter of claim as a cost of delay to Hazell Brothers. However, it is also plain that an earlier claim for $820,000 which would no doubt be included in this claim is based upon a liability to pay liquidated damages under the contract between the plaintiff and Hazell Brothers. The damages are calculated at the rate of $10,000 per day and the delay was from 15 March 2010 to 4 June 2010. 69In the pre-contractual negotiations in March and June 2009, which involved meetings between the parties and included Hazell Brothers and representatives of the defendant, the plaintiff and the defendant were made aware that Hazell Brothers wanted liquidated damages in any contract with the plaintiff. To this extent there is an argument that the damage would not be too remote. 70The final delay alleged by Hazell Brothers was for ten weeks. On the terms of the contract this would give rise to a liability of $700,000. This is a contractual liability which the plaintiff presently has towards Hazell Brothers and accordingly there is at least an argument, subject to the question of causation, as to whether this is a genuine offsetting claim. It was submitted on a number of occasions that the plaintiff's case appeared to have proceeded upon an assumption that all the delays were caused by the defendant. There was little put forward by the defendant to suggest that that the plaintiff was in any way involved in the substantial delays. Accordingly, I think there is at least in respect of delays, a presently existing damages claim of some $700,000. 71The other claims were for works done and rectification costs, which are more problematic. There is no evidence that one can readily see that there is such a liability. Accordingly, I would only allow an offsetting claim of $700,000. 72The last claim is for misleading and deceptive conduct. 73The misleading and deceptive conduct claim is said to be based upon assertions made to the plaintiff as to the experience, ability and quality of the defendant's staff. These assertions were made prior to any contract and were said to have been relied upon when entering into the contract. 74Given the evidence in the case, there is some basis to suggest that these assertions were false. However, the amount of damages suffered would not exceed, in my view, the amounts which I have found so far in respect of the offsetting claims. 75The total of these offsetting claims that I have allowed is $1,164,029.10 and accordingly, the amount if it was necessary to rely on the offsetting claims, they would reduce the statutory demand to $337,108.80. 76I set aside the statutory demand dated 8 December 2010 served by the defendant on the plaintiff. 77I order the defendant to pay the plaintiff's costs of the proceedings pursuant to section 459N of the Corporations Act 2001 (Cth).

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Judgment (11 paragraphs)

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Cases Cited (12)