JML Constructions Pty Limited v Raymond Terrace Refrigeration & Air Conditioning Pty Limited

Supreme Court of NSW|2000-02-18|Before: Santow J

CITATION : JML Constructions Pty Limited v Raymond Terrace Refrigeration & Air Conditioning Pty Limited [2000] NSWSC 29 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2447/99 HEARING DATE(S) : 25/10/1999, 03/11/1999 JUDGMENT DATE : 18 February 2000

PARTIES : JML Constructions Pty Limited (ACN 003 968 269) (Appellant/Plaintiff) Raymond Terrace Refrigeration & Air Conditioning Pty Limited (ACN 072 316 280) (Respondent/Defendant) JUDGMENT OF : Santow J

COUNSEL : J Smith (Appellant/Plaintiff) P Braham (Respondent/Defendant) SOLICITORS : Patey & Murphy (by their City Agents DH Dwyer Forbes & Yeo) (Appellant/Plaintiff) J J Woodward & Co (by their City Agents Parish Patience) (Respondent/Defendant) CATCHWORDS : CORPORATIONS - Winding up - Statutory demand - Offsetting claims genuinely disputed Principles applicable to appeals from Master in relation to s459G determinations. LEGISLATION CITED : Corporations Law s459G, s459H Supreme Court Act s75A Abalos v Australian Postal Commission (1990) 171 CLR 167 Do Carmo v Ford Excavations Pty Limited [1981] 1 NSWLR 409 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 CASES CITED : Golosky v Golosky (NSWCA, 5 October 1993, unreported) Singer v Berghouse (1994) 181 CLR 201 State Rail Authority of NSW v Earthline Constructions Pty Ltd (in Liq) (1999) 75 ALJR 306 Warren v Coombes (1979) 142 CLR 531 DECISION : Reduce statutory demand but not set it aside - appeal partially allowed.

IN THE SUPREME COURT OF NEW SOUTH WALES IN EQUITY

In the matter of the Corporations Law and JML Constructions Pty Limited JML Constructions Pty Limited (ACN 003 968 269) Appellant/Plaintiff

Raymond Terrace Refrigeration & Air Conditioning Pty Limited (ACN 072 316 280) Respondent/Defendant

The Central Issue 1 The Respondent issues a Statutory Demand. The Appellant fails before the Master in endeavouring to reduce it under the statutory formula to below "the statutory minimum" (s459H of the Corporations Law). The Appellant sought to do so, by establishing "offsetting claims". The Master concluded that there was a genuine dispute as to the availability of certain claimed offsets though allowing others; thus the corresponding amount of the Statutory Demand was not reduced by those rejected offsetting claims. Based on the principles applicable to judicial review of a Master, is there sufficient to warrant upsetting his determination and, if so, what determination should be substituted? All this arises in the context of the Respondent sub-contractor's Statutory Demand for air-conditioning work done, with the Appellant contractor claiming offsets for rectification and other work to complete the job. 2 This is an appeal from a decision of Acting Master Berecry on 16 September 1999 in relation to the Respondent's Statutory Demand arising from an air-conditioning contract between the Appellant builder and the Respondent sub-contractor. The Master ordered that the Statutory Demand dated 4 May 1999 for $53,158, served by the Respondent on the Appellant on 6 May 1999, be varied downwards pursuant to s459H(4)(a) of the Corporations Law. This is so that the demand has effect as a demand for $34,500.91 as from the time of its service (unless the Master's decision were to be altered by this appeal). In so doing, the Master accepted that all but two claims made by the Appellant for offset were offsetting claims about which there was no genuine dispute; they therefore were to be offset against the amount in the demand. The Master however rejected two of the items for offset asserted by the Appellant, being rectification costs claimed by the Appellant, as a result of the failure of the Respondent to fulfil its obligations under their agreement. These two items are amounts of $1,856.10 and an estimated $44,200. Each were, according to the Appellant, for further rectification work which the Respondent must now reimburse. The rejection of those two amounts by the Master constitutes the subject of this appeal. Had the latter amount been allowed for offset, it would have meant the Statutory Demand must be set aside, as the substantiated amount for purposes of s459H(3) would then be less than the statutory minimum.

Outline of the Issues on Appeal 3 The Appellant seeks an order that the decision of the Master dated 16 September 1999 be set aside (by making at least the offset of $44,200) or, in the alternative, that (without making any offsets) the decision of the Master be varied so that what s459H of the Corporations Law calls the "substantiated amount" of the demand be reduced to $15,103.11. By the Appellant's written submissions of 12 November 1999, this was later revised to $23,102.91. This was the result of deducting a retention amount of $12,470 but adding back a conceded double-counting of $8,000.80 (see para 45 below). 4 First, the Appellant argues that the Master erred in deciding that there were no offsetting claims for $1,856.10 and $44,200 (see 2 above); these two amounts are claimed in addition to the four amounts allowed as offsetting claims by the Master on 16 September 1999 and not now in dispute. 5 Second, the Appellant claims that the Master erred in calculating "the substantiated amount" of the Respondent's demand for purposes of s459H, claiming that he did so by reference to a debt other than the debt to which the demand related. This was by failing to deduct the retention amount of $12,470 from the amount of the Statutory Demand. 6 Thirdly, and in any case, the Appellant seeks an order pursuant to s459G of the Corporations Law that the Statutory Demand of the Respondent dated 4 May 1999 and served upon the Appellant on 6 May 1999 be set aside.

Factual Background 7 By letters dated 21 April 1997 and 23 May 1997 the Respondent air-conditioning sub-contractor was engaged by the Appellant builder to perform air conditioning work on a property known as the Menken Apartment, for a total sum of $500,000. The contract sum was subsequently renegotiated to $499,599. 8 The Appellant holds a bank guarantee given in respect of the Respondent in the amount of $12,500. A further $12,470 of the contract price is held by the Appellant as a cash retention. 9 The parties agree that the Respondent is owed the difference between the contract price (less the cash retention amount) and the amount it has been paid less the value of any defects and less the cost to complete the contract works. 10 The Respondent has performed a substantial portion of the work and has been paid $430,020 but has not completed the works. 11 In late 1998 or early 1999 the relationship between the two parties deteriorated and the Respondent left the site at which the development was being carried out. 12 The amount expended by the Appellant to complete unit 3/4 of the Menken Apartments was $17,948.04. 13 Furthermore, the Appellant has expended $7,637.85 in rectifying defects in the work carried out by the Respondent. 14 The cash retention is not owing to the Respondent. 15 A Statutory Demand dated 4 May 1999 was duly served on the Appellant on 6 May 1999. The parties do not dispute that the demand complied with the formal requirements of the Corporations Law. The Statutory Demand was for the amount of $53,158.00. 16 There is no dispute in respect of $3,168.00 of the debt being debt claimed in respect of work carried out and goods supplied in relation to another development project (The Cypress Lakes project). The balance, being $49,990, was claimed in respect of the work on the Menken Apartments. 17 The application to set aside the demand pursuant to s459H of the Corporations Law and an affidavit in support were filed on 24 May 1999. The parties agree that the application to set aside the demand was made within the time required by s459G of the Corporations Law. 18 The applicant sought an order setting aside the Statutory Demand on the grounds that there was a genuine dispute in relation to the existence of the debt claimed. 19 By letter dated 4 February 1999 [John O'Neill affidavit 23 May 1999 Annexure F] the Appellant indicated that there were problems with the works completed by the Respondent. It estimated at that time that the rectification would cost $20,000. It also claimed that the amount to complete the unit not completed by the Respondent would be $23,600. The rectification work actually cost $7,400.95 [John O'Neill Affidavit 26 August 1999 Annexure A]. As at 26 August 1999 the cost of works on the incomplete unit was $17,948.04 [John O'Neill affidavit 26 August 1999 Annexure A]. Acting Master Berecry found that there was a genuine dispute in relation to these amounts. The amounts of $7,400.95 and $17,947.04 are not now in contention in this appeal. 20 In July 1999 further problems arose with the work carried out by the Respondent which were rectified by the Appellant. The Appellant claims that the problems were rectified at the cost of $1,856.10 and $236.90. As to the $1,856.10, acting Master Berecry found that there was a (genuine) dispute; that is, as to whether it was spent by the Appellant in rectification of the Respondent's work. Accordingly he rejected it as an offset, but allowed the $236.90. 21 The Master held that the retention money was not owing to the Respondent and reduced the amount of the demand by $12,470 on that basis. This amount is not in dispute on the appeal. This is save as to whether it has been double-counted by the Appellant as a further deduction when it did not form part of the original demand. 22 Finally, an amount of $44,200 was estimated by John O'Neill on behalf of the Appellant to be the likely further cost incurred by the Appellant in completing the building project (the "Annexure G claim") [John O'Neill affidavit 26 August 1999 Annexure G]. The Master found there to be no genuine cross-claim in respect of this amount. That is in dispute on this appeal. 23 The Annexure G claim was revealed only in the third affidavit of John O'Neill, dated 26 August 1999. Earlier affidavits of Mr O'Neill did not make specific mention of the Annexure G claim. 24 In Mr O'Neill's first affidavit, on 23 May 1999, he (for the Appellant) claims a credit entitlement of $9,354 against the Respondent, representing "the current situation between the Plaintiff and Defendant in relation to the Menken Apartments…" arising out of overpayments by the Plaintiff to the Defendant [O'Neill affidavit 23 May 1999 para 12]. In paragraph 15, Mr O'Neill suggests that: "The final balance of account between the parties will not be able to be ascertained for approximately two months. The sum of $10,000.00 does not take into account the cost to the Plaintiff of the Defendant's delays, nor the cost or likely ongoing cost to the Plaintiff of rectifying consequential damage arising out of the Defendant's abovementioned actions. [emphasis mine] 25 The Master made an order under s459H(4) varying the amount of the Statutory Demand to $34,500.91.

Matters in Dispute 26 The principal factual matters in dispute in these proceedings are:

(a) The amount to be allowed in relation to defects, i.e. is there any genuine dispute that the Appellant expended a further $1,856.10 in rectifying defects in the work carried out by the Respondent; and

(b) The amount to be allowed to complete the work, ie. is there any genuine dispute that the Appellant is likely to spend a further $44,200 in order to complete the work which the Respondent was required to complete. 27 The relevant matters or questions of law are these:

(a) The scope of appellate review from the Master pursuant to s75A of the Supreme Court Act .

(b) Did the Master commit an appealable error in disregarding two contended offsetting claims.

(c) Did the Master commit an appealable error if he calculated the "substantiated amount" of the demand by reference to a debt other than the debt to which the demand related, and did he so calculate it.

(d) Should the Court within the proper scope of appellate review set aside the Statutory Demand, or alternatively reduce it to $15,103.11. 28 It is common ground that the test for determining whether there is an offsetting claim not the subject of genuine dispute is that stated by McLelland CJ in Eq in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 785: "It is, however, necessary to consider the meaning of the expression "genuine dispute" where it occurs in s450H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the "serious question to be tried" criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. 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 Letchumanan [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. But it does mean that, except in such an extreme case, a court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Div 3 of Pt 5.4 of the Corporations Law, and to the terms of Div 3: These matters, taken in combination, suggest that at least in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute."

Question One: Scope of Appellate Review from a Master 29 The Appeal is brought to this Court pursuant to s75A of the Supreme Court Act. 30 The Respondent submits that the appeal is to be governed by the principles that apply to an appeal to the Court of Appeal, as set out in Do Carmo v Ford Excavations Pty Limited [1981] 1 NSWLR 409 at 419-230: "It follows that on such an appeal, if no fresh evidence is called to warrant a departure from a master's primary findings of fact, those findings of fact are binding on the court hearing the appeal, unless those findings, or the inferences drawn from them, are so flawed as to attract the approach taken in Warren v Coombes …"

That approach as articulated in Warren v Coombes (1979) 142 CLR 531 at 552-3 are as follows: "……we can see no justification for holding that an appellate court, which, after having carefully considered the judgment of the trial judge, has decided that he was wrong in drawing inferences from established facts, should nevertheless uphold his erroneous decision. To perpetuate error which has been demonstrated would seem to us a complete denial of the purpose of the appellate process. The duty of the appellate court is to decide the case - the facts as well as the law - for itself. In so doing it must recognize the advantages enjoyed by the judge who conducted the trial. But if the judges of appeal consider that in the circumstances the trial judge was in no better position to decide the particular question than they are themselves, or if, after giving full weight to his decision, they consider that it was wrong, they must discharge their duty and give effect to their own judgment. Further there is, in our opinion, no reason in logic or policy to regard the question whether the facts found do or do not give rise to the inference that a party was negligent as one which should be treated as peculiarly within the province of the trial judge. On the contrary we should have thought that the trial judge can enjoy no significant advantage in deciding such a question."

Insofar as this appeal involves matters of discretion, there is the admonition in favour of appellate restraint enjoined by Kirby P (as he then was) in Golosky v Golosky (NSWCA, 5 October 1993, unreported) at 13, approved by the High Court in Singer v Berghouse (1994) 181 CLR 201 at 212: "Unless appellate courts show restraint in disturbing the evaluative determinations of primary decision makers they will inevitably invite appeals to a different evaluation which, objectively speaking, may be no better than the first. Second opinions in such cases would be brought at the cost of diminishing the finality of litigation in a troublesome area and, sometimes at least, with a burden of costs upon the estate which should not be encouraged."

Finally, while an application under s459G of the Corporations Law is in some respects equivalent to an interlocutory stage in the overall winding-up proceedings, it does have potentially final consequences, insofar as the challenge to the statutory demand succeeds. That means that appellate review is not subject to the constraint applicable to purely interlocutory proceedings. Nor are these matters merely of practice and procedure, where the trial court determination ordinarily prevails; Do Carmo v Ford Excavations Pty Ltd (supra) at 420-1. 31 The right to lead further evidence on appeal, it is submitted for the Respondents, is limited to "special grounds". "Special grounds" have not been advanced in the present case. It therefore submits that the Master's findings of fact, as to the existence and extent of a genuine dispute, ought not to be disturbed in the present case. However, the question still remains whether a different assessment of objective fact or inference should be drawn. In that task an appellate court retains the capacity to bring its own independent judgment to bear: State Rail Authority of NSW v Earthline Constructions Pty Ltd (in Liq) (1999) 75 ALJR 306 at 325-332 per Kirby J. This is more especially in circumstances where, as is to be expected in s459G proceedings, the trial judge in basing its inferences on findings of fact or assessment of objective fact, can have reached no final view on the credibility of witnesses or have any advantage, palpable or otherwise, from "the subtle influence of demeanour" (per McHugh J in Abalos v Australian Postal Commission (1990) 171 CLR 167 at 179). That evidence proceeded on written affidavit involving no apparent cross-examination. This indeed is to be expected in s459G proceedings that fall short of determining the merits of a dispute or resolving it, looking as they do only to genuineness of the dispute.

Question Two: The Offsetting Claims 32 It is not disputed that the entitlement of the Respondent is to the contract sum less the cost to complete the contract and less the cost of rectifying work done by the Respondent. I set out below from the Respondent's submissions of 10 November 1999 (paras 8 and 9) the method of calculation used by the Master compared to that suggested by the Appellant, as it most clearly explains the two approaches. The Appellant, with leave from me, given with some reluctance and at the price of cost orders insofar as the Notice of Appeal was amended, subsequently added to his submissions; in that respect he supplemented what appears to have been before the Master and indeed before me in oral argument; see 46-47 below. Quoting therefore from the Respondent's submissions: 8. In setting out the method of calculation used by the Master I have divided up the $17,948.04 figure into its constituent parts of $8000.80 and $9,947.24 in order to show how the demand amount fits into the calculations. The amount of $8000.80 is the allowance made by the respondent in framing the demand for the completion of the contract work. The second figure is the additional sum (to a total of $17,948.04) claimed for that aspect by the appellant. Otherwise the method of calculation used by the Master is displayed in the same form as was produced by the appellant in annexure A to O'Neill's affidavit of 26 August 1999.

ITEM Method used by Master Method suggested by Appellant

Contract sum $499,408.80
LESS retention ($12,470.00)
LESS unclaimed portion of contract sum ($8,000.80)
LESS amount paid ($430,020.00)
Cyprus Lakes $3,168.00
SUB-TOTAL: DEMAND SUM $52,086.00 (demand amount as it would have been on the figures adopted by the Master) $53,158.00 (actual demand figure)
LESS rectification cost ($7,400.95) ($7,400.95)
LESS cost to complete the contract work ($9,947.24) ($17,948.04 less $8,000.80 accounted for above) ($17,984.04)
LESS retention ___ ($12,470.00)
LESS other defects ($236.90) ($236.90)
AMOUNT OWING $34,500.91 $15,102.11

It can be seen from the above table that the method now contended for by the appellant differs in two material respects from that used by the Master: i. the whole of the $17,948.04 is deducted from the demand sum (line 8) without any allowance for the fact that some part of the cost to complete was deducted by the respondent before issuing the demand (line 3); and ii. the retention amount is deducted from the demand sum (line 9) notwithstanding the fact that it did not form part of the demand (line 2)."

33 The Master rejected two items asserted by the Appellant as being amounts that should be offset as against the amount of the Demand. 34 The Appellant challenges the Master's rejection of those two claims, disputing his finding that a genuine dispute existed between the parties with respect to those amounts. The Respondent submits that the amounts claimed for offset and rejected by the Master were "mere bluster or assertion" and therefore were properly rejected, based on the test in Eyota Pty Limited v Hanave Pty Limited (supra) at 787. I shall deal with the Master's determination of each claim in turn.

The $1,856.10 Claim 35 It will be recalled that the amount of $1,856.10 formed the first amount of two (the second $236.90) which the Appellant claimed that was spent by the Appellant in rectification of building problems that arose in July 1999 from work carried out by the Respondent. Only the latter was accepted as an offset by the Master, he concluding there was a genuine dispute about the former as an offset. 36 The Appellant claims that both of the claims relating to that rectification work were supported by documentary evidence including invoices by third party contractors about which there could be no genuine dispute. This evidence, it is argued, is substantially the same in respect of both amounts. It is therefore submitted by the Appellant that the evidence provides sufficient basis to negate any genuine dispute abut either offset and thus does establish a genuine dispute in respect of the corresponding amounts underlying the statutory demand. Therefore the Appellant argues for a deduction by way of offset for both items, not just $236.90..

Conclusion 37 I am as unimpressed as the Master by the attempt to bolster the $1,856.16 claim, by reference to that for $236.90. While both relate to the same block of units, the larger amount is more clearly related to rectification work (replacing a fan) than the multifarious items making up the $1,856.16 (Annexure D of Mr O'Neill's affidavit of 14 July 1999 where, for example the first item under 28 may arguably not be for rectification at all). Thus I would not interfere with the Master's decision on that item.

The Annexure G Claim - $44,200 38 It will be recalled that an amount of $44,200 was estimated by Mr John O'Neill for the Appellant, late in the day, to be the likely cost to be incurred by the Appellant for rectification; see his affidavit of 26 August 1999. The Master found that this estimate could not constitute a genuine offset claim as against the Statutory Demand. 39 The Appellant argues that the Master erred in respect of the $44,200 on the grounds that: "(a) it is not in dispute that the Respondent failed to fulfil all of its obligations under the agreement; (b) John O'Neill has extensive experience in the building trade and in particular, in costing subcontract building work [John O'Neill affidavit 14 July 1999 paragraphs 2 and 3, Annexure A]. His expertise to estimate the cost of subcontracting work is not in dispute; and (c) The amount of $44,200 is given as Mr O'Neill's estimate of the likely cost of completing the work [John O'Neill affidavit 14 July 1999 paragraph 24(b)]." [Appellant's outline of submissions 20 Oct 1999 para 9]

40 The amount of $44,200 was only claimed by the Appellant in Mr O'Neill's affidavit of 26 August 1999 sworn in reply after the commencement of proceedings - indeed only when the Appellant filed his evidence in reply. This was nearly six months after the Respondent ceased work at the Menken Apartments. No mention was made of that claim in Mr O'Neill's earlier affidavit of 23 May 1999 beyond foreshadowing further costs of "rectifying consequential damage" (see para 15). Indeed in Annexure F of that affidavit he earlier estimates rectification at a net balance owing of only $9,354. The Appellant nonetheless maintains that the lateness of the claim is insufficient, of itself, to give rise to any genuine dispute about the claim. It argues that the fact that the development has not been completed, that there continue to be problems associated with the work carried out by the Respondent and that there are other claims made by the Appellant that are genuine, leads unavoidably to the conclusion that the bona fide nature of this claim cannot be genuinely in dispute as an offsetting claim. 41 On the other hand, the Respondent argues that the Annexure G claim of $44,200.00 would not have been made had not Mr Taylor for the Respondent given evidence by affidavit that the undisputed debt on the Menken Apartments job was $42,101.01. It is suggested by the Respondent that the Annexure G claim was only made upon the Appellant realising that otherwise the demand would not be set aside [Respondent's outline of argument para 13] with the figure chosen being conveniently such as to negate the $42,101.01. 42 More to the point, the Respondent submits that Annexure G is unsatisfactory in substance. It is asserted that:

(a) Items (d), (f), (g), (h), and (l) simply represent double counting of items (including the value of the cash retention) already contained in previous aspects of the Appellant's claims. With respect to the cash retention it is said that the claim deducts the value of the cash retention from the amount owing to the defendant, and also makes a deduction for the full value of the alleged defects. It is submitted that the defendant (Respondent) is entitled to the full value of work performed less the cost of any defects. Thus it is asserted that the plaintiff can either keep the retention towards the cost of those defects or, alternatively, repay the retention and recoup the cost of rectification.

(b) The remaining items relate to an alleged failure to provide drawings and calculations where there was no obligation on the part of the Respondent to provide drawings and calculations. 43 The Respondent therefore submits that the Master was correct in rejecting the Appellant's claim to the $44,200 on the basis that it was genuinely disputed as an offsetting claim so could not be an offset. 44 I am satisfied that the Master was, on the material before him, entitled to conclude that the claimed offset was genuinely in dispute, essentially for the latter reasons put by the Respondent. That is so, whether or not the cash retention amount was double counted and whether or not it should have been deducted from the demand. Too many of the items are essentially assertions, with little or no specific back-up, beyond Mr O'Neill's say so. A contested hearing may ultimately vindicate the claim thus estimated, but as of now these items can be taken to be capable of genuine dispute.

Question Three: Calculating the Substantiated Amount of the Demand 45 The calculation of this amount has proved somewhat complicated, but thanks to the efforts of both counsel, ultimately clarified. I am satisfied, for the reasons set out in the Respondent's submissions (of 10 November 1999 paras 3 to 10) to conclude that the whole of the $17,948.004 was erroneously deducted from the demand sum by the Master. What should have been deducted was $9,947.24 (as the remaining $8,000.80 had already been deducted in arriving at the demand sum). The Appellant in the written submissions (of 12 November 1999, para 1) concedes this. 46 I also am satisfied that the calculation of the demand sum did not reflect the Master's determination that there should be deducted as an offset the amount of the retention sum (variously $11,397 or $12,470 but with the latter the figure finally used). I am also satisfied, for the reasons set out in the Appellant's written submissions of 12 November 1999 (paras 2 to 9) quoted below:

(a) that the Master was concededly correct in so concluding, but

(b) his calculation of the amount of the debt claimed (after deducting the offsets he allowed) at $34,500 failed to deduct the retention amount of $12,470, so that

(c) the demand ought to be varied as follows: $53,148 less each of $9,947.24 + $7,400.95 + $236.90 + $12,470 leaving the amount of $23,102.91 47 I quote the relevant portion of the Appellant's submissions of 12 November 1999 (reference should also be made to the Respondent's submissions in 32 above, where they are cross-referenced): 2. However, the amount of the retention ought to be deducted from the demand. Firstly, it was included in the demand. Secondly, the Master found that it ought to be deducted: judgment at page 8.9. 3. As to the first of these, the respondent's submissions that it was not included in the demand [paragraphs 9(ii); and 14] is not correct. The crucial figure to the understanding of this is the amount of $8,000.80 - see row 2 in the table at page 3 in the respondent's submissions. This is said to be the unclaimed portion of the contract sum. In order to understand the manner in which this figure is arrived at, regard must be had to annexures A and B to the affidavit of Alan Taylor sworn on 11 August 1999 … 4. Annexure A is a statement of account dated 27 November 1999 with an invoice for progress payment number 15 attached. That invoice is in the amount of $23,593. Returning to the statement of account, this figure now appears as $34,990 with the words " (incl retn not paid & to be released of $11,397-00) " after it. These words indicate correctly that $11,397-00 has been added to $23,593 to arrive at the claim for progress payment in the amount of $34,990. 5. Turning to Annexure B, the relationship between progress claim 15 and the demand is made clear. Progress number 16 is in the amount of $15,000. The sum of these two figures is $49,990. Add to this amount of the undisputed $3,168 and the amount of the demand is arrived at: $53,158. 6. More importantly, the figure of $8,000.80 is arrived at by deducting $15,000 and $34,990 from $57,990.80 (being the amount of the balance owing prior to the two final progress claims). What has happened is that the respondent has firstly deducted the retention sum from the amount owing (by adding it to the amount paid) and then added it back in by including it in progress claim number 15. In this way the retention amount found its way into the demand. 7. This conclusion is strengthened by the words of the annexures: incl retn not paid & to be released of $11,397-00 8. As the Master found, the retention was not to be released, and so it ought to be deducted from the demand. The amount of the retention according to the evidence is $12,470 (see annexure A to the third affidavit of John O'Neill - attached). There is no explanation for the lesser sum of $11,397. The difference between the demand amounts in the respondent's table at page 3 of its submissions is roughly the difference between the different retention amounts ($12,470 - $11,397 = $1073; $53,158 - $52,086 = $1072). 9. Leaving aside the amounts claimed in Annexure G (amounting to $44,200) and the amount of $1,856.10, the demand ought to be varied as follows: $53,158.00 (LESS) $ 9,947.24 $ 7,400.95 $ 236.90 $12,470.00 $23,102.91

Question Four: Setting Aside the Statutory Demand or reducing it 48 The end result from answering the earlier three questions is that:

(i) the two claimed offsets of $1,856.10 and $44,200 disallowed by the Master as genuinely in dispute were correctly so disallowed, but

(ii) the demand should be reduced to a substantiated amount of $23,102.91 (this resulting in part from material supplemented from that before the Master).

COSTS AND ORDERS 49 The principal issue has been the two claimed offsetting amounts and on that the Respondent has been successful. The subsidiary issue, both in terms of time and quantum, is the reduction to $23,102.91, where each side had some success. In all the circumstances, I would as I presently see matters, award costs to the Respondent, though the parties may address me on costs if they wish. 50 I direct the parties to submit orders giving effect to this judgment.

Last Modified: 01/03/2002 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.

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