The Builder & Construction Group International Pty Ltd v Datalec Services Pty Ltd

Supreme Court of NSW|2009-09-23|Before: White J

CITATION : The Builder & Construction Group International Pty Ltd v Datalec Services Pty Ltd [2009] NSWSC 1136

DECISION : 1. Order that the originating process be dismissed; 2. Order that the plaintiff pay the defendant's costs on the ordinary basis.

Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 CASES CITED : Karimbla Construction Services Pty Ltd v Alliance Group Building Services Pty Ltd [2003] NSWSC 617 Reinsurance Australia Corp Ltd v Odyssey Re (Bermuda) Ltd [2000] NSWSC 1118; (2001) 19 ACLC 401

TEXTS CITED : Finnane, Newton and Wood, Equity Practice and Precedents, (2008)

PARTIES : Plaintiff: The Builder & Construction Group International Pty Ltd Defendant: Datalec Services Pty Ltd

COUNSEL : Plaintiff: A McMinn (sol'r) Defendant: D Bernie

SOLICITORS : Plaintiff: RBHM Commercial Lawyers Defendant: Bayside Solicitors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

3095/09 The Builder & Construction Group International Pty Ltd v Datalec Services Pty Ltd JUDGMENT 1 HIS HONOUR: This is an application under s 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand. The statutory demand is dated 14 May 2009. In it the defendant claimed that the plaintiff owed it $49,720 in relation to unpaid electrical contracting services supplied by the defendant to the plaintiff at the plaintiff's request. 2 The affidavit supporting the application to set aside the demand, which was filed and served within the 21-day period prescribed by s 459G, showed that the claimed debt arises from the performance by the defendant as an electrical subcontractor of electrical contracting works at a site in George Street Sydney, pursuant to a subcontract with an initial value of $77,260. The debt the subject of the statutory demand is also the subject of an invoice numbered 2543 which describes it as follows: " Progress claim 1 1. Supply and install lighting and all power wiring as per quotation ... at the above premises $45,200.00 GST: $ 4,520.00 Total Inc GST: $49,720.00 "

3 That tax invoice also included the statement "Late payment interest charges at 12 percent from 1 November 2008 to 31 March 2009 $2,451.95." 4 In its submissions the plaintiff contends that there is no contractual basis for that interest charge. Whether that is so or not is irrelevant, because the debt which is the subject of the statutory demand does not include a charge for interest for late payment. Nor does the supporting affidavit include as a ground for setting aside the statutory demand a ground that the invoice on which the statutory demand is based includes a claim for interest for late payment. 5 The affidavit in support of the statutory demand asserts that there is a dispute between the plaintiff and the defendant in relation to alleged variations to the contract sum. The supporting affidavit includes correspondence in which the plaintiff approves of some, and does not agree to other, claimed variations to the contract sum. The plaintiff contends that in accordance with the variations it approved the contract sum was revised to $83,090. 6 All of this is by the way, because the statutory demand does not relate to a debt arising from a disputed variation. In the supporting affidavit the director of the plaintiff, Mr Anthony Whaling, says that: " The company accepts that a portion of the sum listed in paragraph 10 above [that is, the total contract sum for the works] remains unpaid. However, the sum is considerably smaller than the amount claimed in the statutory demand [and] has yet to be determined through negotiations. This amount has remained unpaid due to the following issues: (a) The Company is entitled to withhold 2.5% retention of the contract price. (b) There has been no meaningful correspondence from the Creditor in relation to resolving the Dispute. While the company has provided a schedule setting out agreed and rejected variations and providing reasons, the Creditor has continued to claim the disputed amount without attempting to justify the disputed variations or respond to the issues raised by the Company. c) The Company is considering an offsetting claim against The Creditor. In an attempt to circumvent the dispute, the Creditor approached clients of the Company, with whom the Creditor had no contractual relationship, and demanded payment. This improper conduct has led to considerable loss [of] reputation and a loss of business for the company, as it damaged the Company's relationship with important clients. " 7 None of the grounds advanced in this paragraph raises a genuine dispute as to the existence or amount of the debt the subject of the statutory demand. As to the matter in paragraph (a), Mr Whaling attached to his affidavit a copy of the contract. Part of clause 5 headed "Retention" includes the following: " Retention shall be held for the amount as scheduled in this agreement, half of which be shall be released upon Practical Completion. ... The balance of retention shall be released 30 days after the defects liability period has ended. "

8 The only reference otherwise in the contract to an "amount as scheduled" is an annexure to the contract which under the heading Retention Terms states that: " (a) The percentage of the value of works completed to be retained by the Company until Practical Compl. shall be 0.0% until % [blank] of the Contract Sum and any deductions which may be required to be made under the Subcontract is retained. (b) The percentage of value of Works completed to be retained by the Company after Practical Completion and until the end of the Defects Liability Period shall be [blank] % "

9 These provisions give no right to the plaintiff to retain any part of the claimed debt. 10 The defendant's evidence shows that on 23 September 2008 the plaintiff approved payment of invoice 2543. The plaintiff sent by email to the defendant a copy of the invoice with an authorisation stamp from the plaintiff with a notation on the invoice as being marked "Approved". There is no evidence that the plaintiff disputed that the work the subject of the invoice had been done, or that there was any dispute in relation to that particular invoice, as distinct from a dispute in relation to other aspects of that project or other projects. 11 Paragraph 23(b) of Mr Whaling's affidavit, which I have quoted above, does not raise a ground for disputing the debt the subject of the statutory demand, whatever dispute there might be in relation to the acceptance and rejection of the defendant's claims for variations. 12 So far as paragraph 23(c) is concerned, there has been no attempt to identify what cause of action the plaintiff might have against the defendant from the defendant's having allegedly approached the plaintiff's clients. Nor was there any attempt to quantify such a claim. I am not satisfied that the plaintiff has a genuine claim for damages by reason of the alleged approaches to its clients. There is no evidence of any damage having been suffered as a result of the alleged approaches. It would not be possible to ascribe more than a nominal value as the substantiated amount of an offsetting claim, even if I were satisfied that the plaintiff had a genuine claim for damages (Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743 at [17] and [18]; and Karimbla Construction Services Pty Ltd v Alliance Group Building Services Pty Ltd [2003] NSWSC 617 at [28]). 13 It was also submitted for the plaintiff that the statutory demand should be set aside because the defendant had failed to comply with clause 24 of the contract between the parties, which it was said required any dispute arising under the contract to be referred to arbitration. Clause 24 provides: " Any dispute that may arise hereunder or in any way in connection with the Works and whether before or after the completion or determination hereof shall be submitted at the instance of either party to the Institute of Arbitrators of the State or Territory in which the works are carried out or in the event of his unwillingness to act of his nominee. Either party may give to the other a notice in writing of such dispute and in serving this notice of dispute the party giving the notice shall provide evidence that he has deposited with the Institute of Arbitrators of the State or Territory in which the works are curried [sic] out the sum of Five Hundred Dollars ($500.00) by way of security for costs and expenses of arbitration proceedings. This sum shall be applied in accordance with the directions of the arbitrator. " 14 There is nothing in clause 24 that prevents a debt owed to the defendant from being due and payable and recoverable by action in the absence of an arbitration. There is no evidence that the plaintiff took any step to refer the alleged dispute to arbitration. Moreover, the evidence does not show that there is a dispute in relation to the defendant's claim to be entitled to be paid the sum demanded in invoice 2543, which is the subject of the statutory demand. 15 It is therefore unnecessary to express any view on the opinion expressed by the learned authors of Finnane, Newton and Wood, Equity Practice and Precedents, (2008) at [24.25] that "Many contracts have dispute resolution procedures which, if they are not followed before a party resorts to a statutory demand, may result in the demand being set aside." Support for that proposition is not to be found in the judgment of Macready M (as his Honour then was) in Reinsurance Australia Corp Ltd v Odyssey Re (Bermuda) Ltd [2000] NSWSC 1118; (2001) 19 ACLC 401 at [55]). 16 I doubt that this ground was raised in the supporting affidavit. Mr Whaling made no reference to the provision for arbitration, and I doubt that the ground would be raised by reasonable inference by the annexing of the contract which included the arbitration clause in question. But, assuming that it is open to the plaintiff to rely upon this ground, the existence of the arbitration clause does not raise a genuine dispute as to the debt, nor, in the circumstances of this case, could it be "some other reason why the demand should be set aside" pursuant to s 459J(1)(b). 17 For these reasons, I order that the originating process be dismissed.

[The parties' legal representatives addressed on costs.] 18 I order that the plaintiff pay the defendant's costs. I refuse to make an order that costs be paid on the indemnity basis. Costs will be on the ordinary basis.

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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