Supreme Court of WA|2000-12-21

Pearl Bay Corporation Pty Ltd v Lodur Pty Ltd [2000] WASC 315 (21 December 2000)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : PEARL BAY CORPORATION PTY LTD -v- LODUR PTY LTD [2000] WASC 315

BETWEEN : PEARL BAY CORPORATION PTY LTD (ACN 070 319 103)

Corporations Law - Application to set aside statutory demand - Whether "judgment debt" on which demand was heard - Whether "offsetting claim"

Corporations Law, s 459E(2), s 459E(3), s 459H(1)(b), s 459H(2), s 459H(5), s 459J(1)(b), s 459J(2)

Rules of the Supreme Court 1971, O 42 r 2, O 43 r 1

Barclays Australia (Finance) Ltd v Mike Gaffikin Marine Pty Ltd (1996) 21 ACSR 235

Casinos Austria International (Christmas Island) Pty Ltd v Christmas Island Resort Pty Ltd, unreported; SCt of WA; Library No 980727; 16 December 1998

Derrygarrif Investments Pty Ltd (1982) 1 ACLC 558

Eumina Investments Pty Ltd v Westpac Banking Corp [1998] FCA 824; (1998) 84 FCR 454

Guardian of West Ham v Church Wardens of Bethnal Green [1895] 1 QB 662

Jesseron Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 1) (1994) 13 ACSR 455

Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) ACLC 1062

PDR Pty Ltd v Cottesloe Constructions Pty Ltd [2000] WASCA 62

Perlake Pty Ltd v Finance and Mortgage Corporation (NSW) Pty Ltd (1997) 15 ACLR 76

Quatrovision Pty Ltd (in liq) [1982] 1 NSWLR 95

Scanhill Pty Ltd v Century 21 Australasia Pty Ltd [1993] FCA 618; [1994] 12 ACLC 111

Victor Tunevitsch Pty Ltd v Farrow Mortgage Services Pty Ltd [1994] TASSC 121; (1994) 12 ACLC 963

Wilden Pty Ltd v Greenco Pty Ltd (1995) 13 ACLC 1039

1 MASTER SANDERSON: This is the plaintiff's application to set aside a statutory demand. The application is brought on a number of different grounds involving s 459J and s 459H of the Corporations Law. There is no dispute as to the facts which can be briefly stated as follows.

2 Early in 2000 the plaintiff entered into a contract with the City of Kalgoorlie-Boulder for civil works to the Kalgoorlie-Boulder airport. Consequent upon that contract the plaintiff entered into a subcontract with the defendant for the supply of roadbase materials in the months of March, April and May 2000. At the time the contract was entered into the defendant required the plaintiff to enter into a credit account agreement. This agreement was concluded in August 1999. Clause 3.3 of that agreement is in the following terms (see affidavit of Stephen Harold Jones sworn 26 October 2000, page 75):

"The Applicant must pay for all Goods supplied on or before the Due Date notwithstanding the date on which any invoice or statement in respect of the Goods is received or any dispute in respect of the Goods."

3 The due date for payment of the invoices was the end of the month following the delivery of the invoice. The contract was performed from late in March until towards the end of May 2000. During the time of the performance of the contract the plaintiff raised complaints about the defendant's delay in the delivery of material. Further, the plaintiff complained about the quality of the roadbase delivered pursuant to the contract. The plaintiff says that as a consequence of the defendant's failure to properly perform the contract - ie because of delays and poor quality material - it has a claim against the defendant. I will deal more fully with the plaintiff's claim later in these reasons.

4 Relying upon cl 3.3 of the credit account agreement, the defendant issued proceedings in the District Court, claiming it was entitled to be paid in full for the material delivered to the plaintiff. After entry of an appearance the plaintiff (in that action) applied for summary judgment. The matter came on before his Honour Judge L A Jackson on 15 September 2000. On 6 October 2000 his Honour delivered written reasons granting judgment to the plaintiff (in that action) in the sum of $116,250, plus interest. The amount of the judgment was less than the amount claimed by the plaintiff as his Honour accepted that there was a bona fide dispute in relation to certain invoices. The precise reasons for these deductions from the plaintiff's claim are not presently of concern. It is enough to say that as to the amount of the judgment, his Honour found that the defendant (in that action) had no defence to the claim.

5 On the same day that his Honour handed down judgment the defendant in this action issued a statutory demand. The demand complies with s 459E(2) of the Corporations Law. Because the demand was based on what the defendant says is a judgment debt there was no affidavit accompanying the demand, as is required by s 459E(3) in cases where there is no judgment debt.

6 The first submission made by the plaintiff was that there was no "judgment debt" as that phrase is used in s 459E(3) unless and until there was a formal entry of judgment by the court. It was common ground that as at the date of the issue of the statutory demand, although his Honour had delivered reasons for judgment and had entered judgment for the defendant, there was no formal entry of judgment by the court. That is to say, there was no extracted judgment as anticipated by O 43 r 1 of the Rules of the Supreme Court. The plaintiff says that in these circumstances an accompanying affidavit was required and in the absence of such an affidavit, the demand was not a statutory demand within the meaning of s 459E. The defendant submitted that when his Honour delivered his reasons and entered judgment there was created "a judgment debt" within the terms of s 459E(3). It was further submitted that even if in the circumstances of this case an accompanying affidavit was required, this was a "mere defect" as that expression is used in s 459J(2). It was submitted that the plaintiff knew precisely the origin of the debt, no confusion had arisen and that as no substantial injustice had been caused, the demand ought not be set aside.

7 Not unexpectedly there is no definition in the Corporations Law of the expression "judgment debt". Nonetheless the point can be disposed of quite simply. Order 42 r 2 reads as follows:

"(1) A judgment or order of the Court takes effect from the day of its date.

(2) Such judgment or order shall be dated as of the day on which it is pronounced, given or made, unless the Court orders that it be dated as of some earlier or later day, in which case it shall be dated as of that other day."

8 In Holtby v Hodgson [1890] 24 QBD 103, Lord Esher MR, dealing with an early English equivalent of our Rules, said (at 107):

"... and the intention of the rule clearly is that, from the moment when the judge has pronounced judgment, and entry of the judgment has been made, the judgment is to take effect, not from the date of entry, but from the date of its being pronounced; it is an effective judgment from the day when it is pronounced by the judge in court."

9 It may well be the case that no execution on the judgment could take place until the judgment is drawn up under O 43. But that is of no consequence in the context of the Corporations Law. As at 6 October 2000, the date upon which his Honour handed down his reasons and pronounced judgment, there was in existence "a judgment debt". No accompanying affidavit was necessary to effect service of a valid statutory demand. This aspect of the plaintiff's claim must fail.

10 The second substantive aspect of the plaintiff's application related to what the plaintiff said was an offsetting claim. Under s 459H(1)(b) the court is empowered to set aside a statutory demand if it is satisfied that the plaintiff has an offsetting claim. It was submitted by the plaintiff that although it may not have been open to it to raise an offsetting claim in the summary judgment application because of the clear wording of cl 3.3, in separate proceedings such a claim could be raised. It was said that the fact of the judgment was no impediment to raising the offsetting claim in these proceedings. The defendant submitted first that given the judgment in its favour and the fact that the alleged counterclaim could not provide any impediment to the entry of judgment, it was not open to the plaintiff to raise any counterclaim in these proceedings. Further, it was submitted that even if such a claim could be raised the evidence in this case did not establish to the requisite degree that the plaintiff had an offsetting claim. In other words, the defendant said that there was no proper basis to calculate an "offsetting total" as that phrase is used in s 459H(2). It was submitted then that the amount in the statutory demand was the substantiated amount and there was no basis upon which the statutory demand could be set aside.

11 The phrase "offsetting claim" is defined in s 459H(5) as being:

"a genuine claim that the company has against the respondent by way of counterclaim, set-off or cross-demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates)."

12 Clearly the definition is intended to be broad and that is the way that it has been consistently interpreted: See for example Classic Ceramic Importers Pty Ltd v Ceramica Antiga SA (1994) 12 ACLC 334 per Young J at 339 - 340. Given the clear wording of the Statute, in my view it is open to the plaintiff in these proceedings to seek to set off any counterclaim it may have against the defendant, despite the fact that raising this counterclaim was not sufficient to prevent summary judgment being granted. These proceedings are of an altogether different nature to the proceedings in the District Court. In the District Court his Honour found that the defendant had a contractual entitlement to be paid by the plaintiff. Because of the nature of the contract, any counterclaim could not stand in the way of that payment. But that does not mean that the plaintiff is precluded from bringing a claim in relation to the contract against the defendant in separate proceedings. Analysed in that way it is clear that this potential counterclaim can quite properly be raised in this action.

13 The plaintiff filed an affidavit of Stephen Harold Jones, sworn 26 October 2000, in support of its application. Appearing as annexure "SHJ3" to that affidavit is the affidavit of Jones, sworn in opposition to the summary judgment application. Paragraphs 19 through to 33 set out the basis of the plaintiff's offsetting claim. (For the sake of completeness I should mention that the defendant's claim in the summary judgment application was for an amount of $144,713.87. In the course of the summary judgment application the plaintiff raised an issue which had to do with the specific gravity of the rock provided by the defendant. It is unnecessary for the purposes of this application to go into the details of that dispute. The learned Judge on the summary judgment application decided, in effect, that there was a genuine dispute on the quantity of rock supplied so that the judgment amount was reduced to $116,250. For the purposes of this application it is that amount which is properly to be regarded as the "admitted total" under s 459H(2)).

14 On the plaintiff's case the offsetting total is made up of a number of parts. First it is said that the plaintiff took 26 days to lay the crushed rock instead of 17. This resulted, so the plaintiff says, in a delay of nine days. As a consequence of this delay the plaintiff says that the asphalt contractor was not available until some 21 days later. That meant in total there was a delay of 30 days. The plaintiff says this delay is likely to give rise to a claim for liquidated damages. However, no claim has yet been made and the plaintiff is unable to say what the amount of the liquidated damages is likely to be. On that basis there is no figure which can be included in the offsetting total.

15 The plaintiff does say that as a result of the defendant's delay, it incurred what it terms "prolongation costs". These prolongation costs are said to amount to $700 per day. A schedule of these costs is to be found as annexure "SJH10" to the affidavit of Jones filed in the summary judgment proceeds (page 42 of the affidavit of Jones sworn 26 October). There is a singular lack of detail as to how the costs are calculated. For instance, the figure for "supervision and overheads" is $500 per day. There is no detail as to the nature of the supervision required or the overheads included in that figure. Jones does say that these amounts "are the actual costs incurred by the plaintiff in keeping hired equipment and paid labour on site for this additional period". However, this is nothing more than a bald assertion. While it is entirely possible that the plaintiff incurred some prolongation costs, I could not be satisfied on the evidence provided that there is adequate grounds to conclude that those costs amount to $700 per day. On that basis I am not satisfied that there is any amount which can properly be included in the offsetting total.

16 After the roadbase for the airport runway was laid, it was coated with asphalt which is described in Jones' affidavit as "prime seal". The prime seal covering failed and the plaintiff was advised by the firm who applied the prime seal that this was due to the high salt content of the crushed rock supplied by the defendant. This resulted in a direction to the plaintiff to remedy the failure of the prime seal. This was done by removing the then existing seal, resurveying the surface and resealing the surface. This remedial work caused the project to be delayed by six days. In addition, the plaintiff says it was then necessary to wait again for the asphalt contractor and this resulted in a further 16 days delay. The plaintiff says that the cost of the remedial works was $24,281.80. Of that amount the plaintiff says that the "direct costs" of the remedial action was $4781: (see par 29 of Jones' affidavit in opposition to the summary judgment application - page 17 of Jones' affidavit of 26 October 2000). Once again, the detail provided to justify these direct costs is minimal. For the reasons I expressed earlier I could not conclude that this aspect of the offsetting claim is made out. As to the remaining $19,500 said to be for the remedial works, no detail at all is given of this figure. Jones simply says that he has not received an invoice for the services. Once again I could not be satisfied that any amount is properly included in the offsetting total.

17 Finally, the plaintiff claims that $47,400 held by the principal by way of retention is "in jeopardy" because of difficulties with the runway allegedly occasioned by the defendant's delivery of rock with a high salt content. Jones says in his affidavit in opposition to the summary judgment application (par 30 at page 17 of the affidavit of 26 October 2000):

"... The $47,400 represents my estimate of the risk of failure of the works which I consider to be reasonable."

18 No further justification is given for the plaintiff's assessment that the retention money is at risk. Jones' assessment of the position is nothing more than speculation. In the circumstances I am not satisfied that any amount in this respect could be added to the offsetting total.

19 The result then is I am not satisfied that there is any amount properly to be regarded as included in an offsetting total when calculating the substantiated amount. I am not satisfied that there is any basis for setting aside the statutory demand under the provisions of s 459H(1)(b).

20 The plaintiff did raise two other matters which, it was said, would justify setting aside the statutory demand. First it was said that there was a genuine dispute in relation to the amount actually claimed in the statutory demand. The plaintiff pointed to the fact that it had appealed from the decision to grant summary judgment. This argument depended upon going behind the District Court judgment, something in the circumstance so of this case I would not be prepared to do. But even leaving that issue to one side, the plaintiff does not in fact raise matters which could give rise to a genuine dispute with respect to the amount claimed in the statutory demand. It is clear from all the evidence that the defendant has a contractual entitlement to be paid for the rock that it delivered. What the plaintiff may have is a counterclaim or a cross-claim for damages. The plaintiff's claim was relevant to the summary judgment application because as a general rule, summary judgment will not be granted in a situation where a defendant has a counterclaim. But that does not alter the fact that there is no genuine dispute with respect to the defendant's claim for payment under the contract.

21 Finally, it was said that the demand ought be set aside under s 459J(1)(b) because it was apparent from the way this matter had proceeded that the statutory demand procedure was being used for the purposes of debt collecting and not because there was any real belief on the part of the defendant that the plaintiff was insolvent. To be fair to counsel for the plaintiff, this submission was not pressed with any force. It is sufficient to dispose of this aspect of the application if I say that I am not satisfied that there is any basis at all on the evidence for the plaintiff's assertions.

22 There are two further matters which I should mention. Subsequent to the conclusion of submissions in relation to this matter but prior to the delivery of these reasons, counsel for the respondent forwarded to the court further written submissions which supplemented both the previous written submissions and the oral submissions. These further submissions were filed without leave. While I appreciate that it was the intention of counsel to clarify points raised during the oral argument, it is entirely inappropriate that further submissions should be filed without leave. There must be finality in an application such as this. Both parties were provided with ample time to provide written submissions and neither party was constrained in their oral submissions. That should be the end of the matter. On that basis I have given no consideration at all to the further written submissions delivered under cover of letter dated 13 December 2000.

23 Secondly, during the course of the hearing I was advised that an application was to be made in the District Court for a stay of execution. This application was to be made to the Judge who determined the summary judgment application. I asked the parties to advise me of the outcome of those proceedings. I have been advised that the application for a stay was dismissed. Consideration of the question of what affect a grant of a stay of execution might have on the statutory demand does not fall for consideration.

24 I would decline to set aside the statutory demand in this case. I will hear the parties as to the precise form of orders and as to costs.

Pearl Bay Corporation Pty Ltd v Lodur Pty Ltd [2000] WASC 315

At a glance

Court

Decision date

Catchwords

Source

Catchwords

Judgment (49 paragraphs)

Pearl Bay Corporation Pty Ltd v Lodur Pty Ltd [2000] WASC 315 (21 December 2000)

Parties

Cases Cited (1)