REASONS FOR JUDGMENT
1 The defendant, Tomkins Commercial and Industrial Builders Pty Ltd (Tomkins), has served on the plaintiff, Spinks & Co Pty Ltd (Spinks), a statutory demand under s 459E of the Corporations Act 2001 (Cth) (the Corporations Act). By that demand, Tomkins requires Spinks to pay to it or secure or compound the amount of the demand, to its reasonable satisfaction, the sum of $264,963.50.
2 Spinks has applied within the required time under s 459G of the Corporations Act for an order setting aside that statutory demand. Spinks alleges, first, that there is, as to part of the claim the subject of the demand, a genuine dispute about the existence of that part of the debt to which the demand relates. Spinks further alleges that it has an offsetting claim. To the extent, if it all, to which the calculation of the substantiated amount applying the formula in s 459H(2) deals, nonetheless, the amount is neither disputed nor completely offset. Tomkins seeks, by way of relief, an order amending the statutory demand in that net amount.
3 Spinks also seeks, further or in the alternative to its claim that there is a dispute or offsetting claim, an order under s 459J of the Corporations Act that the demand be set aside on the basis that there is some other reason for that relief to be granted to it.
4 Some reference should be made to the general background of Spinks and Tomkins present litigation. Spinks is a developer and project manager in respect of residential and commercial property. Tomkins is a commercial construction contractor.
5 Spinks shares a common director with another company, Herbert St Project Pty Ltd (HSP). The common director is Mr Martin Alexander Spinks. Mr Spinks is the sole director and secretary of the plaintiff Spinks. He is also the sole director and secretary of HSP. Each of those companies is a corporate trustee. Spinks, on the one hand, is trustee of a trust known as the Spinks & Co Trust. HSP, on the other hand, is the trustee of a trust known as the Gladstone Property Trust. For present purposes, nothing turns on the status of either Spinks or HSP as corporate trustees.
6 HSP is the owner of certain land in central Queensland. It proposed to develop that land by way of the construction on it of a mixed use commercial building. HSP had the benefit of an agreement to lease with the State of Queensland, via the latter's Department of Works, for the leasing of that building as soon as the development of HSP's land in that way was completed.
7 In late 2011, Spinks entered into negotiations with Tomkins for the construction of a commercial building of three storeys on the land. In the result, Tomkins did not come to construct the building. Spinks terminated Tomkins' services and engaged another building contractor. Tomkins maintained that it was entitled to certain payments from Spinks. The question as to how much, if anything, Spinks was liable to pay Tomkins became the subject of proceedings before an adjudicator under the Building and Construction Industry Payments Act 2004 (Qld) (BCIP Act).
8 On 27 November 2012, an adjudicator under the BCIP Act determined that Spinks owed Tomkins the sum of $254,427. The adjudicator also determined that a sum of interest in the amount of $2,224.50 on that adjudicated total was owed by Spinks to Tomkins. The adjudicator further determined that an amount of adjudicator's expenses in the sum of $7,733 and an amount of fees or expenses in the amount of $550 was to be reimbursed by Spinks to Tomkins. In the result, this yielded a total adjudicated amount under the BCIP Act of $264,934.50. As the BCIP Act permits, that sum has been translated by Tomkins on the strength of the adjudication certificate into a judgment of the District Court. The amount, then, of the statutory demand is based upon the adjudicated and now judgment amount of $264,963.50.
9 There was once a time in this State when a view was taken of s 100 of the BCIP Act that it prevented there being a dispute for the purposes of s 459H of the Corporations Act in respect of an adjudicated amount. A better view, however, having regard to a line of New South Wales authorities concerning legislation cognate to the BCIP Act, is that this is not so. In other words, that the terms of that Act do not affect the operation of s 459H of the Corporations Act: see Reed Construction (Qld) Pty Ltd v Dellsun Pty Ltd [2010] 2 Qd R 481 (Reed Construction v Dellsun). Judgment in that case was delivered on 4 September 2009. Some six weeks beforehand, and having had the benefit of submissions drawing attention to that line of New South Wales authority, I reached a like conclusion to that of Martin J in Reed Construction v Dellsun in Tesoro MB Pty Ltd v Total Building Group Pty Ltd [2009] FCA 802. It was common ground between the parties that the position, so far as the adjudicated amount in this case was concerned, was as stated in Reed Construction v Dellsun.
10 An analysis of the adjudicator's reasons, as exhibited to Mr Spinks' affidavit filed on 21 December 2012, discloses that the total, exclusive of adjudicator's fees and other amounts, comprised, amongst other things, a claim known as Claim 3. That claim was in respect of an amount of $91,366. In his calculations as to the amount which Spinks owed Tomkins, the adjudicator, at paragraph 48, considered that a 10% margin on actual costs was not unreasonable. He, therefore, included that in his calculation of the amount by way of progress payment owed by Spinks to Tomkins.
11 A dissection of that calculation appears at paragraph 49 of the adjudicator's reasons. It is apparent from that that the 10% margin, or 10% loading as it is otherwise termed in the adjudicator's reasons, did not form part of Claim 3 itself, but rather was added on to that in the course of the adjudicator's calculations. It is conceded on behalf of Tomkins that there is, assuming I am otherwise satisfied that there is a foundation in the material, a dispute as to that "Claim 3" in the amount of $91,366. It is further conceded that it would necessarily follow in the event of my being satisfied that there is a genuine dispute as to that amount at least that the dispute also extends to that 10% loading. In other words, allowing for a 10% loading on the sum of $91,366, it would follow that the dispute at least went to an amount of $100,502.60.
12 In Re Morris Catering (Australia) Pty Ltd (1993) 11 ACSR 601 at 605, Thomas J observed as to the nature of the ask consigned to a court where it is alleged, for the purposes of s 459H(1) of the Corporations Act, that there is a genuine dispute:
The specified limits of the court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim".
It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or lack of it) the court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the amount between the parties is more likely to be one result than another.
The essential task … is to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).
13 There are many other statements to be found as to the nature of the task consigned to the court. One particularly stark description of the task is to be found in the joint judgment of Brooking and Charles JJ in Spacorp Australia Proprietary Limited v Myer Stores Limited [2001] VSCA 89 at [3] and [4]:
[3] The only question for us is whether the judge erred in determining that there was no genuine dispute. One can of course differ from the judge without deciding that the debt did not exist. A great range of states of mind on what we call the ultimate question - the existence of the debt - may accompany the view that there is a genuine dispute, ranging from a clear conviction that the debt does not exist to the opinion that the genuine dispute hurdle has only just been cleared.
[4] We think, if we may say so, that, except in a case in which it is as plain as a pikestaff that there is no debt (where bluntness may be in the interests of both sides), judges should, in general at all events, in dealing, whether at first instance or an appeal, with the question of genuine dispute, be at pains to perform the admittedly delicate task of disposing of that question without expressing a view on what we have called the ultimate question. For otherwise, on an application which resembles if it is not in law an interlocutory one, things may be said which embarrass the judge before whom the ultimate question comes.
14 In this case, having regard to the material before the adjudicator as exhibited to Mr Spinks' affidavits, I am satisfied, for the purposes of s 459H(1)(a), that there is, on the part of Spinks, a genuine dispute, as that term is to be understood, as to the sum which became termed Claim 3 before the adjudicator. In other words, I am satisfied that there is a genuine dispute, both as to that alleged liability of Spinks to Tomkins together with, necessarily, the 10% margin thereon allowed by the adjudicator. I base that satisfaction upon the description of the issue between the parties in respect of that sum in the adjudicator's reasons. What that means, then, is that of the amount the subject of the statutory demand, a balance of $164,460.90, is not disputed.
15 It may be that there is a slightly higher amount in respect of which there is a genuine dispute. That is because when one studies the adjudicator's reasons it is apparent that a higher amount was put in issue by Spinks before the adjudicator, that higher amount being $119,647. The adjudicator, though, at paragraphs 4 and following, engaged in a careful analysis of how that asserted total was reached, noting what he described as some anomalies in the calculation of it. Suffice it to say, though, I note that there was an assertion of a higher amount, the amount in respect of which I am satisfied that there is a genuine dispute, is the lesser sum of $91,366 together with the 10 % margin in addition to that.
16 By a process of mathematics, that yields a sum of $164,460.90 which is not the subject of a genuine dispute but which is, nonetheless, the subject of an alleged offsetting claim by Spinks in terms of s 459H(1)(b). The total amount of that alleged offsetting claim is $471,869.67. The composition of that offsetting claim is conveniently particularised at paragraph 93 of Mr Spinks' affidavit filed on 21 December 2012. It comprises the following:
(a) interest payments $112,916.67;
(b) lost rent $230,175;
(c) replacement design and construction consultant $73,150;
(d) replacement building supervisor $38,500;
(e) replacement geotechnical survey $17,128.
17 Of these amounts, the interest payments and lost rent items were not, in the end, pressed on behalf of Spinks as claims which satisfied the requirements of s 459H(1)(b). That, as I understood it, was, in effect, in recognition of a submission advanced on behalf of Tomkins upon an analysis of the material exhibited to Mr Spinks' affidavits. From that analysis it emerges that the interest payments' foundation lies in a finance facility as between HSP, not Spinks, and the National Australia Bank. Likewise, the foundation for the lost rent claim lies in an agreement for lease between HSP, not Spinks, and the State of Queensland. In these circumstances, it was understandable that there was no pressing of items (a) interest payments and (b) lost rent. The offsetting claim also must be a genuine one in the sense of being authentic or, as Heerey J put it in Andi-Co Australia Pty Ltd v Meyers [2004] FCA 1358 at [17] (Andi-Co Australia v Meyers case), the claim must be:
…real and authentic as opposed to false, illegitimate, phoney, counterfeit and false.
Reference might also be made usefully to observations made by Barrett J in Beauty Health Group Limited v Sholl [2011] NSWSC 77 at [23] for what is required to be shown by a plaintiff in order to satisfy the court that there is an offsetting claim.
18 I could not be satisfied in the face of the contractual relationships apparent in the plaintiff's material between HSP and, on the one hand, the National Australia Bank and, on the other, the State of Queensland that the alleged offsetting claims for interest payments and lost rent were in any way genuine.
19 That then leaves the items that are set out at item C, D and E. I do not approach consideration of these divorced from the way in which Mr Spinks himself has approached his description of the components of his offsetting claim. In other words, that Mr Spinks has included in his total two amounts, at least, which manifestly on the face of his own material, cannot form the foundation of a claim by his company, Spinks against Tomkins is, in my opinion, relevant to an assessment of the other components to the genuineness of the other components of the alleged offsetting claim. As to these, it is instructive to compare Mr Spinks' statements in his affidavit with documents that are annexed to his affidavit and, for that matter, documents which have not been annexed to his affidavit.
20 Mr Spinks deposes:
[87] Following the termination of Tomkins' services, Spinks has had to secure a replacement design and construction consultant on an urgent basis to:
(a) redraw development plans that comply with the Information Request received from GRC; and
(b) submit a Building Application.
Numerous attempts were made to engage the existing consultants, however those consultants would not be engaged by Spinks until Tomkins had cleared them to do so.
[88] On 31 October 2012 we received a fee proposal from Bloomer, on behalf of Property Development Engineers (PDE) for the amount of $66,500.00 plus GST, being PDE's costs for undertaking the urgent design and construction consultancy work.
[89] On 5 November 2012, Spinks confirmed approval to Bloomer to engage PDE. Annexed hereto and marked "MAS-42" is a true copy of the correspondence from HSP to Bloomer dated 5 November 2012.
[90] Spinks has also had to engage another design and construction contractor to manage the design phase of the project, as Tomkins has also been engaged as the design and construction contractor.
[91] On 20 December 2012 Spinks received a tax invoice from Bloomer, addressed to HSP, in the amount of $35,000.00 plus GST, being the charge for the alternative building supervisor. Annexed and marked "MAS-43" is a true copy of the tax invoice.
[92] Due to Tomkins not releasing the documents to Spinks, Spinks has also had to engage another consultant to undertake another geotechnical soil survey. Annexed hereto and marked "MAS-44" is a copy of a quotation from Cardno Roadtest dated 14 December 2012 in the sum of $15,571.51 (exclusive of GST).
21 When one examines annexures to the affidavit which relate to items C, D and E, one finds the following. Exhibit MAS42 at page 384 is a copy of a letter of 5 November 2012 from HSP by its project manager, Mr Lane, to a Mr Bloomer of Bloomer Constructions. The letter records an appointment of consultants and confirms "recent discussions". It is further stated in the letter:
We are happy for you engage property development engineers to undertake design work on the abovementioned project for the scope of the works as set out in the design phase and as per fee proposal in their offer dated 31 October 2012.
On the face of that letter, the engagement of Bloomer Constructions and the authority for it in turn to engage property development engineers is given by HSP not Spinks. It does not necessarily follow from this that Mr Spinks has given false evidence at paragraph 89 of his affidavit. It may be that there was some intermediary role played by the company, Spinks. It is neither necessary nor in any way appropriate to do other than note the possibility of that role. It is not appropriate to reach any concluded view. The point for the moment is that in the annexed letter to which I have referred there is no apparent basis for an assertion that there is, in respect of a replacement design and construction consultant, an engagement by Spinks as opposed to HSP of that consultant.
22 From this, it seems to me to follow that there is but a mere assertion that Spinks has a claim as against Tomkins in respect of the amount for this replacement design and construction consultant. A mere assertion is not sufficient to ground an offsetting claim having regard to the contents of the annexed letter.
23 When one turns from that to another annexure, a tax invoice directed by Bloomer Constructions to seemingly HSP (exhibit MAS43, page 386) a like conclusion commends itself. The tax invoice is eloquent in its absence of reference to the company, Spinks. As to the replacement geotechnical survey, the position is, if anything, more stark. The foundation in the annexed material for that would seem to be exhibit MAS44, page 388 and following. One sees there, though, a letter directed from Cardno Roadtest to Bloomer Constructions Queensland Proprietary Limited. In other words, Cardno Roadtest seems to be a subcontractor to Bloomer Constructions. The letter is noteworthy for the absence of reference to the company, Spinks.
24 So it is that, on analysis and as was submitted on behalf of Tomkins, the foundation for the alleged offsetting claim has about it qualities of the kind described by Heerey J in the Andi-Co Australia v Meyers case in the passage quoted. It follows from that that I am not satisfied that there is an offsetting claim of the kind comprising the components asserted in paragraph 93 of Mr Spinks' affidavit. Assertion is not sufficient for the purposes of s 459H(1)(b): see Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451.
25 I am obliged by s 459H(2) to calculate a substantiated amount of the demand in accordance with the formula there set out. The admitted total I calculate to be $164,460.90. I further calculate that there is no offsetting total, ie that there is a nil amount. Subject to any question as to whether the demand should nonetheless be set aside for some other reason pursuant to s 459J of the Corporations Act, Tomkins is entitled to an order which would require Spinks to pay an amended amount in the sum of $164,460.90.
26 As to whether there is "some other reason", there is, as yet, no application in the District Court for a stay of the judgment founded upon the adjudication. Such an application has nonetheless been foreshadowed. As to District Court litigation, I should also note that proceedings have been issued for the total of those amounts which comprise the so-called offsetting claim made up of the components mentioned. Whilst I have taken into account that District Court proceeding, it seems to me that there has not been, as is evident in the material exhibited to Mr Spinks' affidavits, a critical differentiation of the differing legal personalities as between the company Spinks and HSP.
27 What then though of the foreshadowed application for a stay? The stay would not itself in any way affect whether the sum the subject of the adjudication was owed. There can be circumstances where legislation grounding a debt the subject of a statutory demand itself makes provision for a stay in the event, for example, of an appeal. As Barrett J remarked in Scope Data Systems v BDO Nelson Parkhill (2003) 199 ALR 56 at [26]:
If parliament sees fit to provide that, where a certain type of appeal is initiated in respect of a judgment debt, the judgment creditor is not to be allowed to exercise ordinary judgment creditor remedies by proceeding to execute the judgment, it would, in my view, be inconsistent with the position parliament has striven to create if the judgment creditor could nonetheless proceed with impunity to initiate winding-up proceedings on the basis of the mere existence (even though technically not subject to "genuine dispute") of that judgment debt. Such a course would, in my view, be oppressive in the sense referred to by Austin J in Moutere and by Mullins J in Softex. The circumstances would therefore warrant an order under s 459J(1)(b) setting aside the statutory demand, even though the initiation of action towards winding up was not technically within the black letter operation of s 107 of the Justices Act: cf Australian Cherry Exports Ltd v Commonwealth Bank of Australia (1996) 39 NSWLR 337.
28 One of the cases to which his Honour makes reference, Re Softex Industries Pty Ltd (2001) 187 ALR 448, can no longer be regarded as good law so far as taxation liabilities are concerned, having regard to the subsequent judgment of the High Court in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473. Nonetheless I accept that if there were some provision either in the BCIP Act itself or in the practice of the District Court as found in the Uniform Civil Procedure Rules 1999 (Qld) whereby, for example, an appeal operated as a stay or whereby some challenge to the adjudicator's determination amounted to a stay that one may well find "another reason" in terms of s 459J. That is not though this case. Rather the position is that, not only is there no automatic stay, there is also not even at present an application. In those circumstances, and for reasons which I gave in Food Channel Network Pty Ltd v Television Food Network GP (2010) 185 FCR 1, I do not see this as a case where there is "some other reason" in terms of s 459J of the Corporations Act why the statutory demand should be set aside. If, of course, a stay is secured that does not preclude the Spinks, in the event Tomkins moves for winding up, from drawing the existence of that stay to the attention of the court hearing the winding up application for such consideration as the court may think fit in terms of whether or not to exercise a discretion to wind Spinks up.
29 It follows then that save for the allowing of an amendment of the amount the subject of the demand to $164,460.90 that I am not satisfied that there is a dispute as to the amount the subject of the demand. I will hear parties as to costs.