JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS

CITATION : UGL ENGINEERING PTY LTD -v- COMPLETE POWER SOLUTIONS PTY LTD [2014] WASC 211

CORAM : MASTER SANDERSON

HEARD : 28 MAY 2014

DELIVERED : 28 MAY 2014

PUBLISHED : 17 JUNE 2014

FILE NO/S : COR 51 of 2014

BETWEEN : UGL ENGINEERING PTY LTD (ACN 096 365 972)

Plaintiff

AND

COMPLETE POWER SOLUTIONS PTY LTD

(ACN 083 371 653)

Defendant

Catchwords:

Corporations law - Application to set aside statutory demand - Turns on own facts

Legislation:

Nil

Result:

Statutory demand set aside

Category: B

Representation:

Counsel:

Plaintiff : Mr M N Solomon SC

Defendant : Mr G M G McIntyre SC & Mr K C B Staffa

Solicitors:

Plaintiff : Jackson McDonald

Defendant : Legal Success Pty Ltd

Case(s) referred to in judgment(s):

Anderson Formrite Pty Ltd v Rapid Metal Developments (Australia) Pty Ltd [2002] WASC 232

Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91

1 MASTER SANDERSON : This was the plaintiff's application to set aside a statutory demand. At the conclusion of the hearing I indicated to the parties I would set aside the statutory demand and publish reasons in due course. These are those reasons. A copy of the statutory demand appears as attachment RR-1 to the affidavit of Rajesh Rampersad sworn 14 March 2014. The total amount of the statutory demand is $2,784,746.16. That amount is made up of two components. First there are a series of eight invoices issued between 27 June 2013 and 25 September 2013 totalling $805,141.43. The remaining amount is made up of 14 amounts which the defendant says are payable pursuant to the contractual arrangement between the parties.

2 The relevant facts are these.

3 The plaintiff is a leading provider of engineering, construction and maintenance services. The plaintiff was the head contractor on the Fortescue Metals Group Mainline and Solomon Spur Permanent Communications Project. The defendant is a company that performed works relating to the power systems on the Fortescue Metals Group Mainline and Solomon Spur Permanent Communications Project.

4 Although both parties accept there was a contractual arrangement between them it is by no means clear what the scope of that contract might be. Between November 2011 and November 2012 the plaintiff provided the defendant with a request for tender, scope of work and subsystem requirement specifications and a letter of intent. The defendant provided the plaintiff with four separate quotations. Each one was slightly different for reasons which are not presently relevant. The plaintiff did not communicate to the defendant its written acceptance of any of the quotes. The plaintiff did provide the defendant with a draft subcontract which was subject to extensive correspondence between the parties but was never executed. The plaintiff did provide the defendant with various purchase orders and purchase order variations which contained terms and conditions which the defendant agrees applied to some but not all of its suppliers.

5 At the conclusion of the submissions made by counsel for the plaintiff counsel for the defendant accepted that so far as it related to the second part of the debt the statutory demand ought be set aside. While any concession at any stage is to be welcomed it is difficult to see why this concession was made so late in the day. There was filed in relation to this application more than 800 pages comprising affidavits and supporting documentation. Wading through that volume of material was a time consuming task. Perhaps it was the quality of submissions made by counsel for the plaintiff which pushed the defendant's advisors over the line and drew the concession. But in my view the concession should have been and could have been made much earlier.

6 That then left the claim based upon the eight invoices. As I have indicated above it was common ground no formal written contract was agreed and signed by the parties. Although no quote was formally accepted the principal scope of works and associated prices were it seems those contained in the final quotation provided by the defendant and dated 24 July 2012. The provision of those works was governed by the terms and conditions in the plaintiff's standard 'purchase order'. The fourth quote was for a total of $9,743,733. The purchase orders provided by the plaintiff to the defendant totalled $9,756,918. The plaintiff has paid the defendant a total of $8,705,325. It is clear then the invoiced claims relate to items contained in the fourth quote and are governed by the terms and conditions of the purchase order.

7 The plaintiff denies it is indebted to the defendant for the invoiced claims because it contends it is entitled to set-off for claims in excess of $805,141.53. The set-offs relate to three areas. The first relates to a claim of a back charge or credit for certain civil works. The installation of the communications structures the subject of the contract required many components. In particular it required specialised transport to deliver the components to site and move the structures from the trucks onto their proper location. It also required ground trenching in order to install the earthing.

8 The plaintiff contends these components were part of the scope of the defendant's works under the fourth quote. The plaintiff points to cl 5.6 entitled 'Earthing' which forms part of a document entitled 'Scope of Work Mainline and Solomon Spur Permanent Communications' and which passed between the plaintiff and the defendant as part of their email communications.

9 The plaintiff says it was left to undertake parts of these items at a cost of $229,155.93. This is explained by Mr Rampersad in his first affidavit at pars 56 - 59 and in his second affidavit sworn 15 May 2014 at pars 20 - 25.

10 Both parties in their affidavit evidence make reference to the email exchange attached to Mr Rampersad's first affidavit at page 715. The plaintiff contends that the items purportedly excluded by the defendant in the fourth dot point of that email by reference to 'civils' did not include any of the items undertaken by the plaintiff and itemised at page 745 of Mr Rampersad's first affidavit.

11 It is unnecessary to go into any more detail in relation to this claim. It is clearly arguable. It is by no means easy to follow the email chain and the course of dealing between the parties. Doubtless there were some verbal communications which at a trial would flesh out the position. But for present purposes it is clear the plaintiff's claim is arguable and that it has a claim for an off-setting amount as alleged.

12 The second item in the plaintiff's off-setting claim is for concrete bases. Initially the communications structures were to be mounted on concrete footings and the scope of works contemplated 127 of these footings. During the course of the contract the plaintiff changed the scope by reducing the number of concrete footings to 50. The plaintiff simply decided to use a different fixing method. The defendant claimed that by the time the scope was changed they had already manufactured 80 of the 127 concrete footings and thus were entitled to charge the plaintiff for the 80 completed structures. It is common ground that 50 of the footings were delivered an installed. There is a dispute between the parties as to whether the plaintiff is liable to pay the defendant for the extra 30 bases.

13 The plaintiff wants to see some evidence the bases were produced. They also wish to know what efforts were made to sell the bases or use them elsewhere. This information has not been forthcoming from the defendant. Accordingly the plaintiff says there is a genuine dispute about the cost of these additional bases and this quantifies at $414,225.

14 The plaintiff's position on this issue must be accepted. If this were a civil action and the defendant was maintaining a contractual claim it would have to produce some evidence all of the bases for which it seeks payment were manufactured. It may also have to produce evidence as to its evidence to mitigate its loss. Here no such evidence has been produced. I am satisfied there is a genuine dispute as to this aspect of the claim.

15 Finally the plaintiff contends it has overpaid on one of the purchase orders. It claims it is entitled to a credit. It claims this either on the proper construction of the purchase order or on the basis of a restitutionary claim for monies paid in error.

16 The circumstances underlying the plaintiff's contention are set out in Mr Rampersad's second affidavit at pars 38 - 42. In summary the plaintiff says the price for supply of solar power system materials for the new, existing and upgraded sites ought to have included the footings and frames. This was on the basis of the fourth quote following an email exchange found in Mr Rampersad's second affidavit at attachment RR-32. In error the purchase order itemises the footings and frames in addition to rather than part of the order for power system materials.

17 The plaintiff says it has paid the defendant on the basis of the error and it has in effect double paid. That means it has overpaid two amounts totalling $495,218.

18 The plaintiff says cl 3.1 of the terms of the purchase order stipulate payment on the basis of the rates and quantities set out in the purchase order. It is submitted the relevant purchase order is properly construed against the unambiguous correspondence and agreement found in attachment RR-32. The plaintiff further submits on its proper construction the clause cannot permit double payment.

19 That position is clearly arguable. It is not a matter to be determined on an application such as this even though it really is a question of contractual interpretation. The proper interpretation of a clause may be influenced by the surrounding circumstances. That is a matter for another day. All that need be said is that the matter is arguable and the plaintiff has an off-setting claim (within the terms of the relevant legislation) in an amount of $495,218.

20 It is apparent then the plaintiff has either off-setting claims or there are genuine disputes which in total are more than the defendant's statutory demand. Accordingly I ordered the statutory demand be set aside.

21 In the past I have observed the statutory demand procedure is rarely suitable when complex building disputes are involved: see Anderson Formrite Pty Ltd v Rapid Metal Developments (Australia) Pty Ltd [2002] WASC 232 [23]. It is not difficult to see why that should be the case. Furthermore a party in the position of the defendant could have had resort to the Construction Contracts Act 2004 (WA). During the course of submissions I put to both counsel that statute was available in these circumstances. Neither could offer any reason why that would not be so. That Act provides a subcontractor with a quick and cost effective way of obtaining an adjudication. Furthermore once that adjudication is obtained it can ground a statutory demand if the adjudication is registered as a judgment. Once the adjudication is registered as a judgment a statutory demand based upon that judgment is not liable to be set aside on the basis of some underlying allegedly unresolved dispute: see Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91.

22 One final point should be made about the evidence in this matter. Counsel for the defendant criticised the plaintiff for putting so much material before the court. It certainly appeared to be the case when all the submissions were in and the battle lines were drawn between the parties there was some superfluous material in the affidavits. But a party in the position of the plaintiff faces a difficulty. The application to set aside the statutory demand must be made within 21 days of the service of the statutory demand and that time cannot be extended. Furthermore any issue which is not raised in the affidavit in support of the application to set aside the statutory demand cannot be raised in a further affidavit filed outside the 21 day period. Any cautious plaintiff in that position will file more rather than less material. No criticism can be levelled at the plaintiff for doing so. But it does illustrate a further difficulty which is bound to arise when the statutory demand procedure is used in complex construction cases.

23 The parties should supply written submissions on costs within seven days.