Vimblue Pty Ltd v Toweel trading as Carpenters Core Building

LEGISLATION CITED : Corporations Act 2001 (Cth), ss 459E(1), 459G, 459H(1)(a) Home Building Act 1989, ss 3(1), 6(1), 7(1), 10(1)

Australian Securities and Investments Commission v Edwards [2005] NSWSC 831; (2005) 220 ALR 148 Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452 Lee Gleeson Pty Ltd v Sterling Estates Pty Ltd (1991) 23 NSWLR 571 O'Connor v LEAW Pty Ltd (1997) 42 NSWLR 285 CASES CITED : Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 Re Ahearn; Ex parte Palmer (1906) 6 SR (NSW) 576 Rothwells Ltd v Nommack (No 100) Pty Ltd [1990] 2 Qd R 85 Spain v Union Steamship Co of New Zealand Ltd [1923] HCA 21; (1923) 32 CLR 138 Stephenson v Weir (1879) 4 LR Ir 369 The Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (No 2) (1996) 20 ACSR 170

PARTIES : Vimblue Pty Limited - Plaintiff Justin Paul Toweel trading as Carpenters Core Building

COUNSEL : Mr E T Finnane - Plaintiff Mr D A Allen - Defendant

SOLICITORS : Peter Dawson & Associates - Plaintiff Proctor & Associates - Defendant

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

2412/09 VIMBLUE PTY LTD v JUSTIN PAUL TOWELL trading as CARPENTERS CORE BUILDING

JUDGMENT 1 The plaintiff makes application under s 459G of the Corporations Act 2001 (Cth) for an order setting aside a statutory demand served on it by the defendant. 2 The debt or alleged debt to which the statutory demand relates is in the sum of $34,500 and is described as follows: "Description of the debt Amount of the debt Supply of Goods and Services to the property situated at 1/117 Gerrale Street, Cronulla owned by the Company $34,500.00 _________ Total Amount $34,500.00"

3 Because the affidavit supporting the application did not rise above mere assertion in relation to certain other grounds of challenge and did not state relevant facts (Graywinter Properties Pty Ltd v Gas & Fuel Corporation Superannuation Fund (1996) 70 FCR 452), I ruled that the application could be progressed on one ground only, namely, that there is a genuine dispute as to the existence or amount of the debt by reason of the circumstance that there was no written contract for the performance of the relevant work. 4 It is common ground that the work was "residential building work" as defined by s 3(1) of the Home Building Act 1989. It is also common ground that, by virtue of s 6(1) of that Act, s 7(1) applies. Section 7(1) is as follows: "A contract must be in writing and be dated and signed by or on behalf of each of the parties to it." 5 Section 10(1), so far as relevant, provides: "A person who contracts to do any residential building work, or any specialist work, and who so contracts: (a) . . . (b) under a contract to which the requirements of section 7 apply that is not in writing or that does not have sufficient description of the work to which it relates (not being a contract entered into in the circumstances described in section 6 (2)), (c) . . . is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work. However, the person is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person." 6 Mr Finnane of counsel submitted on behalf of the plaintiff that, because there was no written contract, the defendant is not entitled to sue for the sum said in the statutory demand to be a debt owing, due and payable. Mr Allen of counsel accepted on behalf of the defendant that the defendant cannot look to any contract as the source of a payment obligation but contends that the defendant is entitled to recover the stated sum upon a quantum meruit and that the plaintiff is therefore properly regarded as indebted to him in that sum. 7 Mr Allen submitted that s 10(1) of the Home Building Act does not preclude recovery upon a quantum meruit. He referred, in that connection, to the following passage in the judgment of Rolfe J in O'Connor v LEAW Pty Ltd (1997) 42 NSWLR 285 at 295 concerning an earlier but substantially identical version of s 10(1): "The prohibition is against the recovery of damages or the enforcement of any other remedy "in respect of a breach of the contract". The remedy to which reference is being made is a remedy additional to or alternative to the remedy of recovering damages. It is the ultimate legal or equitable sanction to which the builder is entitled "in respect of a breach of contract". Examples were given in Trimtor. Pavey decides that the remedy is not dependent on there being a breach of contract and, therefore, a claim based on quantum meruit is not a remedy "in respect of a breach of the contract". 8 His Honour's reference to Pavey was, of course, a reference to the decision of the High Court in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221. In that case, at CLR 257, Deane J referred to "an obligation to pay a reasonable remuneration or compensation for a benefit actually or constructively accepted". A quantum meruit is the right that is the obverse of that obligation.

9 In reaching his conclusion in O'Connor's case, Rolfe J adopted and applied the approach taken by Brownie J in Lee Gleeson Pty Ltd v Sterling Estates Pty Ltd (1991) 23 NSWLR 571. 10 I accept that a quantum meruit lies, despite s 10(1), for residential building work done otherwise than under a written contract. 11 That raises, in the present context, the question whether such a quantum meruit claim involves a "debt". Under s 459E(1) of the Corporations Act, only a "debt" that is owing, due and payable can be the subject of a statutory demand. Under s 459H(1)(a), a statutory demand may be challenged on the basis of a genuine dispute as to the existence or amount of the "debt" to which the demand relates. 12 Mr Allen submitted that, the right to a quantum meruit in the present case is a "debt". He referred to the decision of Santow J in The Roy Morgan Research Centre Pty Ltd v Wilson Market Research Pty Ltd (No 2) (1996) 20 ACSR 170 where it was held that a claim upon a common money count for work done gave rise to a liquidated demand or claim. That, however, is not the question. 13 A "debt", for present purposes, is "a liquidated sum in money presently due, owing and payable by one person, called the debtor, to another person, called the creditor". These are the words of McPherson J in Rothwells Ltd v Nommack (No 100) Pty Ltd [1990] 2 Qd R 85 at 86. That was a case concerning a statutory demand under earlier but analogous provisions. 14 It may be noted that McPherson J referred to a "liquidated sum", not a "liquidated demand". The nature of a "liquidated sum" was explained by Knox CJ and Starke J in Spain v Union Steamship Co of New Zealand Ltd [1923] HCA 21; (1923) 32 CLR 138 at 142 by quoting from the then current edition of Odgers on Pleading: "Whenever the amount to which the plaintiff is entitled . . . can be ascertained by calculation or fixed by any scale of charges or positive data it is . . . liquidated." 15 There was reference in Spain's case to Stephenson v Weir (1879) 4 LR Ir 369. It was held in that case that a common count claim for work done was a "liquidated demand". Palles CB said at 372: "[D]emands for work and labour on a quantum meruit, or for goods sold, although the price was not fixed by contract, are clearly 'liquidated demands'; . . . when the value of the work or the goods as the case may be, is ascertained, that value determines and therefore liquidates the claim." 16 This statement identifies the distinction between "liquidated claim" or "liquidated demand" and "liquidated sum". A process of valuation or assessment or the application of some standard of measurement is necessary to cause the latter to emerge from or be distilled from the former. 17 The process by which a claim is translated into a right to a liquidated sum was described by Cohen J in Re Ahearn; Ex parte Palmer (1906) 6 SR (NSW) 576, a case concerning an unliquidated claim. His Honour said at 577: "For failure to meet his contracts he was liable in damages, and, so long as it rested in damages, the liability was not a liquidated sum; before it could become so, it would have to be assessed either under the Stock Exchange rules, or by the ordinary tribunals, or by agreement between the parties, for the parties may meet and agree upon an amount which one shall be deemed to owe the other. There is no special virtue in having the amount assessed by a Court or a domestic tribunal, for an assessment between the parties is equally efficacious for the purpose of constituting the amount a liquidated sum."

18 The same reasoning applies to a liquidated claim upon a quantum meruit for work done. In the Irish case to which I have referred, Palles CB held that an action for debt is maintainable upon such a claim, adding at 373: "When it was said that an action of debt would lie only for a sum certain, it was sufficient that the sum should be capable of being ascertained by a jury by positive data , and not merely measured by opinion or conjecture. In the present case, for instance, when the value of the work was ascertained, the sum to be recovered became definite, and the case would not be like one of assault in which there were not any certain data to fix the amount of damages." 19 The words of particular importance in this passage are, "when the value of the work was ascertained, the sum to be recovered became definite". "Definite", in the context, is synonymous with "liquidated" 20 If a mechanic spends half an hour repairing my car and there is no agreement between us as to the amount he will charge and I will pay, his subsequent claim for $1 million may be regarded as a liquidated claim. But no liquidated sum is thereby owing, due and payable by me to him. His entitlement is to be paid a reasonable sum upon a quantum meruit. Until the value of the work is ascertained and in the absence of some process that fixes what is reasonable according to what Palles CB called "positive data", as distinct from "opinion or conjecture", the liquidated claim does not mature into an entitlement to a liquidated sum.

21 Mr Finnane referred to Australian Securities and Investments Commission v Edwards [2005] NSWSC 831; (2005) 220 ALR 148 as a case in which a quantum meruit entitlement for building work arose in circumstances where the parties themselves showed a mutual intention as to a process of quantification and actually adopted that process to determine the quantum to be paid. It was held in that case that the amounts due on a quantum meruit, having been quantified according to the agreed process, were debts. As the passage from Re Ahearn; Ex parte Palmer at paragraph [16] above indicates, the parties' agreement or their acceptance of some external measure may cause a liquidated sum to emerge.

22 Mr Finnane submitted that the present case is different. I accept that submission. There is nothing before me to suggest that the claimed $34,500 is, or has been calculated or determined to be, a reasonable reward for the work done. It is no more than the defendant's demand or claim, of the same nature as my hypothetical mechanic's demand or claim for $1 million for half an hour's work. There is no basis for any objective conclusion that $34,500 (or any other amount) must be paid by the plaintiff to satisfy its obligation to pay reasonable remuneration or compensation. Any conclusion that $34,500 was required to be paid would be based wholly on "opinion or conjecture", as distinct from "positive data", to adopt the language of Palles CB. In short, the liquidated demand or claim has not yet produced a liquidated sum. 23 The plaintiff's contention that there is a genuine dispute as to the existence or amount of the alleged debt described in the statutory demand must therefore be accepted. 24 The orders of the court are:

1. Order that the statutory demand in the sum of $34,500 served on the plaintiff by the defendant be set aside.

2. Order that the defendant pay the plaintiff's costs of the proceedings. **********

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