1. There are three remaining respondents to this proceeding who are closely inter-related. The following summary is prepared by reference to the Points of Claim and MKB's submissions in support of its application for a freezing order against the fourth respondent which was withdrawn at the hearing of that application on 15 October 2012.

Trustee of a Trust of which Mondland is the sole beneficiary.

Mondland Pty Ltd ('Mondland') (third respondent)

- Sole beneficiary of a trust operated by Warrigal Road (and another trust operated by 420 Balcombe Road Pty Ltd which is no longer relevant in this proceeding).

- As beneficiary of the trading trust of which Warrigal Road is Trustee, Mondland is liable to indemnify Warrigal Road for any debts incurred in trading as trustee.

- The entitlement to an indemnity from Mondland is Warrigal Road's only asset.

Warrigal Road and Mondland share a common principal place of business.

1. On 8 May 2009, Joseph Loebenstein of Loebenstein Insolvency was appointed by the directors of MKB as an administrator of the company.
2. On 12 May 2009 Mondland wrote to Joseph Loebenstein Insolvency (the first administrator of MKB) enclosing Informal Proof of Debt Forms for 420 Balcombe Road Pty Ltd and Warrigal Road.
3. On 20 May 2009 new administrators were appointed to MKB ('the Administrators').
4. On 27 May 2009 Warrigal Road lodged a Proof of Debt for the Purposes of Voting at Meeting of Creditors with Administrators- the amount of debt claimed by Warrigal Road was completed as $100,000.
5. On 21 July 2009 a deed of company arrangement was executed ('the DOCA'), and the Administrators were appointed as joint and several administrators to administer the deed. (On 13 December 2010 the Administrators gave notice that the DOCA was at an end).
6. On 20 September 2010 Taky Kaplan completed a Formal Proof of Debt or Claim (General Form) on behalf of Warrigal Road, for $50,000 with the notation This amount represents 50% of the original debt agreed to be reduced 28/9/10 without prejudice to expedite settlement.
7. In his affidavit sworn on 20 December 2012, Warrigal Road's solicitor, Brett Lodding, has deposed to a conversation between Mr Kaplan and Mr Chung from the Administrators' office that:

I am instructed by Mr Kaplan and believe that during this same period [13 to 28 September 2010] he had a conversation with Khan Chung on CJL Partners in which Mr Chung said in substance, due to the very small dividend to be paid to unsecured creditors, and the amount of work required for the Deed Administrators to review and approve the claims, the Deed Administrators would accept $50,000 on the Warrigal Claim without further review for the purposes of resolving all claims between the parties in the administration and for the payment of a dividend. (sic)

1. After lunch on the day of the hearing, Mr Forrest sought leave, on behalf of MKB, to call Mr Chung to give evidence about the conversation referred to in Mr Lodding's affidavit. The granting of leave was opposed by Mr Styring of Counsel who appeared on behalf of Warrigal Road.
2. Mr David Lofthouse, one of the former administrators appointed for MKB, deposed in his affidavit to a commercial settlement having been reached with Warrigal Road such that it reduced its claim by 50%. Mr Lofthouse attended the hearing for the purpose of cross examination and gave evidence that the day to day operation of the administrators' files for MKB had been assigned to Mr Khanh Chung, who had prepared material for his approval. He confirmed he had not specifically discussed the issue about the so-called commercial settlement with Mr Chung before swearing his affidavit.
3. In circumstances where the application for leave was opposed by Warrigal Road, and where I had made directions on 29 November 2012 for the filing by MKB of any affidavit material in reply to those filed by Warrigal Road in support of its strike out application, I declined leave for it to call Mr Chung.
4. As I mentioned to the parties during this hearing, I consider the evidence of Mr Lodding to be of little probative value. Whilst under s98 of the VCAT Act, the tribunal is not bound by the rules of evidence, Mr Lodding's statements in his affidavit about the alleged conversation are hearsay. Without the benefit of hearing from both parties to the conversation I am unable to make any findings of fact as to any agreement which may have been reached during that conversation. However, for the reasons which follow, any agreement reached is irrelevant to the determination of whether the s75 application should be allowed.
5. MKB relies on Acrfab Pty Ltd v Boral Ltd[6] which I accept is authority for the right of a company, after it comes out of administration, being able to recover any nett amount owing to it by a creditor (after a set-off of the creditor's claims against any claims the company may have against the creditor). It was submitted on behalf of MKB that this allowed it to pursue its claim for payment of what was identified in the Administrators' report to Creditors as Work in Progress in respect of which the Administrators had commented in their first report to creditors dated 2 June 2009:

Warrigal Road Pty Ltd - Advice received indicates that this project was completed in June 2007. Approximately $255,349 remains recorded in WIP as a claim that has yet to be invoiced. Given the time that has elapsed and the significant quantum of WIP that has not been invoiced, significant uncertainty exists as to the collectability of this receivable.

and in the Supplementary Report to Creditors dated 24 June 2009:

...However, it must be noted that due to the aging of theWIP, and that no recovery action had been taken prior to our appointment, it could be assumed that significant difficulties may be experienced in attempting to realise any outstanding amounts that may be due to the company in this regard.

We have also been provided with details of a claim from Warrigal Road Pty Ltd ("Warrigal Road") in the amount of $100,000. Warrigal Road claims that the company breached the terms of the building contract by failing to provide documentation for work performed, variations, materials, costs and expenses. Furthermore, Warrigal Road claims that a payment in the amount of $100,000 was paid in the absence of substantiation by the company. Warrigal Road is claiming the reimbursement of this payment. The company's directors dispute Warrigal Road's claim. We have not been provided with any documentation to provide any comment on the validity of this claim.

In light of the above, and given the general lack of information about the merits of the company's claims for outstanding WIP/debtors together with the lack of detail pertaining to contingent claims submitted, it would appear unlikely that any recoveries will be achieved for the benefit of creditors.

1. MKB relies on the terms of the DOCA to support its contention that it is entitled to pursue its claims against Warrigal Road. First, because it is not stated in the DOCA that it operates to extinguish any excess amount owed to MKB after the set-off, and further that the conversation between Kaplan and Mr Chung is relevant in determining MKB's entitlement to recover that excess. However, in my view, this is to ignore the operation of s553C of the Corporations Act.
2. Section 553C provides:

(1) Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company:

(a) an account is to be taken of what is due from the one party to the other in respect of those mutual dealings; and

(b) the sum due from the one party is to be set off against any sum due from the other party; and

(c) only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may be.

(2) A person is not entitled under this section to claim the benefit of a set-off if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent.

1. It is uncontroversial, that although s553C(1) specifically refers to companies being wound up, by virtue of s444G of the Corporations Act the DOCA binds the administrators, MKB, its officers and members. Under ss444D(1) and s444A(4)(i), it binds the creditors in relation to claims arising on or before the day specified in the Deed. The Appointment Date under the DOCA was 20 May 2009. Further, by virtue of s444A(5) of the Corporations Act 2001 the DOCA is taken to include all of Schedule 8A of the Corporations Regulations 2001, with the exception of clauses 2 and 10.
2. In G.M. & A. M. Pearce and Co Pty Ltd v R.G.M. Australia Pty Ltd [1998] 4 VR 888 ("Pearce") the Court of Appeal accepted that s553C essentially reproduced s86 of the Bankruptcy Act 1996, and should be interpreted in the same way. In Gye v McIntyre[7] the High Court explained the set-off provision in s86:

It has often been pointed out that the object of set-off in bankruptcy is, in the words of Parke B. in Forster v. Wilson [1843] EngR 1141; (1843) 12 M and W 191, at p 204 [1843] EngR 1141; (152 ER 1165, at p 1171), "to do substantial justice between the parties, where a debt is really due from the bankrupt to the debtor to his estate". Where there are genuine mutual debts, credits or other dealings, it would be unjust if the trustee in bankruptcy could insist upon having one hundred cents in the dollar upon the whole of the debt owed to the bankrupt but at the same time insist that the bankrupt's debtor must be satisfied with a dividend of some few cents in the dollar on the whole of the debt owed by the bankrupt to him. It was to prevent such injustice that the "mutual credits" and "mutual debts", and later "mutual dealings", provisions were introduced into bankruptcy legislation (see, e.g., In re Daintrey; Ex parte Mant (1900) 1 QB 546, at pp 572-573; Day and Dent Constructions Pty. Ltd. v. North Australian Properties Pty. Ltd. [1982] HCA 20; (1982) 150 CLR 85, at p 95). To the extent necessary to achieve that legislative purpose of "substantial justice" to the parties, it is established by authority that a provision such as s.86 of the Act should be given "the widest possible scope" (see, e.g., per Mason J., Day and Dent Constructions, at p 108, quoting Lord Esher M.R. in Eberle's Hotels and Restaurant Company v. Jonas (1887) 18 QBD 459, at p 465).

Section 86 [of the Bankruptcy Act] is a statutory directive which operates as at the time the bankruptcy takes effect, producing a balance upon the basis of which the bankruptcy administration can proceed and which alone can be claimed in the bankruptcy or recovered by the trustee; and that section is self-executing in the sense that its operation is automatic and not dependent upon the option of either party. Finally his Honour acknowledged that the object of s86 was, as the High Court had said, to do substantial justice between the parties where a debt is really due from the bankrupt to the debtor to his estate.[8]

1. In my view the principles set out in Arcfab would apply if there was a balance owing to MKB after the set-off pursuant to s553C. As explained by Lord Hoffman in Stein v Blake[9] this set-off is automatic, not discretionary.

the taking of an account really means no more than the calculation of the balance due in accordance with the principles of insolvency law...without any step having been taken by either of the parties.

The original choses in action ceases to exist and is replaced by a claim to a net balance.[10]

1. The Administrators declared a First and Final Dividend to Unsecured Creditors of 0.549 cents in the dollar. Warrigal Road's Proof of Debt was admitted in or about October 2010 and it was paid $274.29 calculated at the dividend rate. In circumstances where, after the automatic set-off and accounting required by s553C resulted in a payment to Warrigal Road, there is no 'balance' owing to MKB.
2. Accordingly, I am satisfied that any claim MKB might have had has been extinguished by the DOCA and its proceeding, insofar as it relates to claims against Warrigal Road, is clearly misconceived and lacking in substance.
3. The tribunal has previously determined that the effect of the operation of s553C was to extinguish any claims MKB might have against an unsecured creditor at the date of the DOCA[11], a decision which MKB did not seek leave to appeal. Mr Forrest submitted at the hearing of this application, that MKB had made a commercial decision not to appeal that decision, as any excess owed to it was minimal and an appeal would be costly.
4. I am satisfied that in the circumstances of this proceeding it is appropriate that the proceeding as between MKB and Warrigal Road be dismissed.

Claim against the second respondent for breach of guarantee

1. MKB also claims against the second respondent, Taky Kaplan, pursuant to the Deed of Guarantee and Indemnity annexed to the building contract, and executed by him. It was conceded by Mr Forrest that if MKB's claims against 36Warrigal Road were dismissed or struck out, that they should also be dismissed or struck out against Mr Kaplan, as a guarantor's obligations are co-extensive with that of the principal - MKB. Accordingly, the proceeding as between MKB and Mr Kaplan insofar as it relates to a claim for breach of the guarantee will be dismissed.

Claim against the second respondent as constructive trustee for MK Builders

1. In paragraph 20 of the Amended Points of Claim ('AmPOC') MKB recites the arrangements between it and Warrigal Road, including that they had entered into a building contract and a JV agreement pursuant to which MKB was entitled to a share of the profits. It is alleged that under the terms of the building contract as amended by the JV agreement MKB was entitled to a share of the profits; alternatively, it was entitled to a share of the profits under the JV agreement; that Warrigal Road owed a fiduciary duty to MKB, that the failure by Warrigal Road to distribute profits from the sale of the townhouses to MKB was a breach of the building contract as amended by the JV agreement, or the JV agreement and a breach of the fiduciary duties owed by Warrigal Road to MKB.
2. In paragraph 21, MKB alleges that Mr Kaplan, in his capacity as director of Warrigal Road authorised the distribution of the proceeds of sale by Warrigal Road to Mondland or to persons for and on behalf of Mondland. In paragraph 22 it alleges:

In the circumstances, Kaplan is liable to the Applicant as a constructive trustee for the payment of all profits from the sale of the four townhouses constructed by the Applicant in accordance with the building contract as amended by the Joint Venture Agreement; alternatively the Joint Venture Agreement.

Claim against the third respondent as constructive trustee

1. In paragraph 24 of the AmPOC MKB alleges that the third respondent, Mondland, knew about the arrangements between MKB and Warrigal Road under the terms of the building contract and the JV agreement, which are once again set out.
2. In paragraph 25 MKB alleges that Mondland received the distribution by Warrigal Road of the proceeds of sale of the four townhouses in circumstances where it knew of the arrangements between MKB and Warrigal Road as set out in paragraph 24. In paragraph 26 MKB alleges that Mondland is accordingly liable to it

as a constructive trustee for the payment of all profits from the sale of the four townhouses constructed by the Applicant pursuant to the building contract in accordance with the building contract as amended by the Joint Venture Agreement; alternatively the Joint Venture Agreement.

1. Whilst the respondents contend the claims against the Kaplan and Mondland should be struck out under s75, they also contend they should be struck out for want of jurisdiction, which for the reasons which follow, I accept. It is therefore unnecessary to consider whether the AmPOC disclose a cause of action against Kaplan and Mondland and should be struck out under s75.
2. Mr Styring submitted that the tribunal does not have jurisdiction to consider the claims against Kaplan and Mondland because the tribunal does not have an equitable jurisdiction and therefore cannot consider claims which concern the law of trusts which is a matter of equity. He notes in his written submissions that whilst a fiduciary obligation may flow from contract; breach of trust or fiduciary duty arises in equity.
3. Mr Forrest referred me to s60 of the VCAT Act, the comments by Byrne J in Greenhill Homes Pty Ltd v Domestic Building Tribunal & Ors [1998] VSC 34 where his Honour said at [13] :

...What is required in order to attract jurisdiction is that the subject matter of the claim has the appropriate nexus with the building contract or with the building work.

and to the comments of DP Macnamara (as he then was) in Anderson v Economo[12] where he said at [32]:

There is in my view, therefore, every reason to give Section 60, whose words are very wide, the same wide construction which Byrne J accorded to the repealed Section 56 of the 1995 Act (Domestic Building Contracts Act).

(1) The Tribunal may order that a person be joined as a party to a proceeding if the Tribunal considers that-

(a) the person ought to be bound by, or have the benefit of, an order of the Tribunal in the proceeding; or

(b) the person's interests are affected by the proceeding; or

(c) for any other reason it is desirable that the person be joined as a party.

(2) The Tribunal may make an order under sub-section (1) on its own initiative or on the application of any person.

1. Mr Forrest submitted that there is sufficient nexus between MKB's claims against Kaplan and Mondland and the building contract or the building work. However, although under the JV agreement MKB and Warrigal Road agreed to amend various terms of the building contract, any nexus in relation to its claims against Kaplan and Mondland arise in relation to the JV agreement. Although under clause 13 of the JV agreement MKB and Mondland agree:

Where there is discrepancy, ambiguity or conflict between the Building Contract and this Agreement then this Building Contract will take precedence.

This document sets out the agreement between the Owner and the Builder to establish a Joint Venture for the purposes of achieving the minimum building cost and as a consequence of that sharing the profit flowing from the sale of the project. This Agreement is supplementary to and discrete from the Building Contract. [underlining added]

1. The claims against Kaplan and Mondland seemingly arise in relation to the failure of Warrigal Road to distribute the profits in accordance with clause 14 of the JV agreement, and as such I cannot be satisfied there is an appropriate nexus between the building contract/dispute and these claims, particularly where I have dismissed the proceeding as between MKB and Warrigal Road.
2. In circumstances where there is no longer a domestic building dispute before this tribunal, I am not satisfied that there is jurisdiction under an enabling enactment for the remaining claims to be heard and determined in this tribunal. It cannot be said that any of MKB's claims against either Kaplan or Mondland arise under or in relation to a domestic building dispute as neither were party to the domestic building contract or to the JV agreement.
3. As I said in Hoang Tran Investments Pty Ltd v 2M'S Constructions Pty Ltd[13] at [12]

The Tribunal is a creature of statute as confirmed by Balmford J in Australian International Insurance Limited v Graham & Ors [2005] VSC 183 where at paragraph 27 she said:

The Tribunal does not have the inherent powers of the Supreme Court of a State. The Tribunal is the creature of statute and has only those powers expressly conferred upon it by the VCAT Act or an enabling enactment. The comment by Byrne J in Greenhill Homes Pty Ltd v Domestic Building Tribunal, adopted by Hollingworth J in Vero Insurance v Witherow that the Tribunal is intended to be a "one stop shop" is not authority for the proposition that the Tribunal has an inherent power...

1. MKB's claims against Kaplan and Mondland cannot be categorised as a domestic building dispute as defined in s54 of the Domestic Building Contracts Act 1995. They are not a dispute between an owner and a builder, or a builder and another builder, or a builder and a sub-contractor in relation to a domestic building contract, or the carrying out of building work.
2. These claims do not arise under the VCAT Act or any enabling enactment and, as noted above, the tribunal is a creature of statute and does not have inherent jurisdiction (although I accept it may have some implied ancillary powers). Accordingly, paragraphs 20-29 of the AmPOC must be struck out.

Claim against the third respondent that it has been unjustly enriched

1. In paragraph 30 MKB alleges against Mondland, in the alternative, that:

...Mondland has been unjustly enriched by the receipt of profits from the sale of the four townhouses constructed by the Applicant in accordance with the building contract as amended by the Joint Venture Agreement; alternatively, the Joint Venture Agreement to the detriment of the Applicant.

Mondland has been enriched to the extent that the receipt of profits from the sale of the four townhouses constructed by the Applicant has deprived the Applicant of its entitlements under the Joint Venture Agreement.

In paragraph 31 MKB alleges that it has therefore suffered loss and damage.

1. Mr Styring's submitted that unjust enrichment is not a legal principle according to its terms and, that paragraphs 30 and 31 should therefore be struck out as not disclosing a cause of action.
2. Mr Styring referred me to Farah Constructions Pty Ltd v Say-Dee Pty Ltd[14] where the High Court in discussing the concept of unjust enrichment said:

Unjust enrichment is not a "definitive legal principle according to its own terms"[15]. If it were not so, as Gummow J pointed out in Roxborough v Rothmans of Pall Mall Australia Ltd[16]:

"[S]ubstance and dynamism may be restricted by dogma. In turn, the dogma will tend to generate new fictions in order to retain support for its thesis. It also may distort well settled principles in other fields, including those respecting equitable doctrines and remedies, so that they answer the newly mandated order of things. Then various theories will compete, each to deny the others. There is support in Australasian legal scholarship for considerable scepticism respecting any all-embracing theory in this field, with the treatment of the disparate as no more than species of the one newly discovered genus."

This prediction about the consequences of unjust enrichment for the distortion of equitable doctrines is illustrated by the Court of Appeal's approach in this case. The areas in which the concept of unjust enrichment applies are specific and usually long-established. Recipient liability for breach of trust or fiduciary duty has not been one of them.

1. The difficulty with paragraphs 30 and 31 is that MKB simply makes a bald assertion that Mondland has been unjustly enriched as a result of which it alleges it has suffered loss and damage. However, it does not set out the basis upon which it asserts any right to recover any monies paid to Mondland from Mondland. Accordingly, paragraphs 30 and 31 must be struck out.

1. As I have determined that the paragraphs 20-29 should be struck out for want of jurisdiction, and paragraphs 30 and 31 should be struck out because they do not disclose a cause of action, I consider it appropriate that the proceeding as between MKB and Kaplan (other than in relation to the claim under the guarantee which I have determined should be dismissed) and Mondland be struck out.
2. I will reserve the question of costs with liberty to apply.

[1] [2012] VCAT 1442

[2] [2010] VCAT 1582.

[3] (1998) 14 VAR 243.

[4] [1998] 1 VR 102.

[5] Pizer's Annotated VCAT Act (4th Ed) 2012 published by JNL Nominees Pty Ltd at 274-275.

[6] [2002] NSWSC 1188

[7] ([1991] HCA 60; 1991) 171 CLR 609 at 618-9

[9] [1995] UKHL 11; [1996] AC 243 at 253

[11] MK Builders Pty Ltd v CGU Insurance Ltd & Anor [2012] VCAT 590

[12] [2000] VCAT 434

[13] [2005] VCAT 2366

[14] [2007] HCA 22 at [151]; (2007) 230 CLR 89

[15] David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at 378-379 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ.

[16] [2001] HCA 68; (2001) 208 CLR 516 at 545 [74].