ANDARA HOMES PTY LTD v MATISH PTY LTD
ANDARA HOMES PTY LTD v MAGISTRATES COURT OF THE AUSTRALIAN
CAPITAL TERRITORY and MATISH PTY LTD
[2013] ACTSC 265 (20 December 2013)
BUILDING AND CONSTRUCTION – adjudication under the Building and Construction Industry (Security of Payment) Act 2009 (ACT) – order in the nature of certiorari sought – jurisdictional error – alleged that mandatory procedures set out in the Act were not complied with – Building and Construction Industry (Security of Payment) Act 2009 , s 22
CORPORATIONS – statutory demand – offsetting claim – whether genuine – demand set
aside – no issue of principle
Building and Construction Industry (Security of Payment) Act 2009 (ACT) ss 22, 23, 28 Corporations Act 2001 (Cth) s 459G
Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37
Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560
First Equilibrium Pty Ltd v Bluestone Property Services Pty Ltd (in liq) 95 ACSR 654
Graywinter Properties Proprietary Ltd v Gas and Fuel Corporation of Victoria (1996) 21 ACSR 581
Macleay Nominees Proprietary Ltd v Belle Property East Pty Ltd [2001] NSWSC 743
Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 12 ACSR 341
No. SC 368 of 2013
No. SC 404 of 2013
Judge: Master Mossop
Supreme Court of the ACT
Date: 20 December 2013
IN THE SUPREME COURT OF THE )
) No. SC 368 of 2013
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN: ANDARA HOMES PTY LTD
Plaintiff
AND: MATISH PTY LTD
Defendant
O R D E R
Judge: Master Mossop
Date: 20 December 2013
Place: Canberra
THE COURT ORDERS THAT:
1. The defendant’s statutory demand on the plaintiff dated 9 September 2013 is set aside.
2. The parties be heard in relation to costs.
IN THE SUPREME COURT OF THE )
) No. SC 404 of 2013
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN: ANDARA HOMES PTY LTD
Plaintiff
AND: MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY
First Defendant
AND: MATISH PTY LTD
Second Defendant
O R D E R
Judge: Master Mossop
Date: 20 December 2013
Place: Canberra
THE COURT ORDERS THAT:
1. The proceedings are dismissed.
2. The parties be heard in relation to costs.
1. Two sets of proceedings have been brought by Andara Homes Pty Ltd (Andara). The first (SC368 of 2013) is a proceeding pursuant to s 459G of the Corporations Act 2001 seeking to set aside a statutory demand served by Matish Pty Ltd (Matish). That statutory demand was based on a judgment of the ACT Magistrates Court which arose from the registration of an adjudication certificate under the Building and Construction Industry (Security of Payment) Act 2009 (SOP Act). The second proceeding (SC404 of 2013) is a judicial review application seeking an order in the nature of certiorari to quash the registration by the Magistrates Court of the adjudication certificate on the basis that the adjudication involved jurisdictional error.
2. In the certiorari proceedings, Andara claims that the procedures required by the SOP Act have not been complied with. In the statutory demand proceedings, Andara claims that it has an offsetting claim for the purposes of s 459H.
3. Even if Andara succeeds in the statutory demand proceedings it is still necessary to determine the certiorari proceedings because unless the determination of the adjudicator is quashed there will be other means, apart from the issue of a statutory demand, by which the adjudication can be enforced.
Background
4. In September 2012 Andara and Matish entered into an agreement whereby Matish was to perform concreting works for Andara. Matish was to invoice Andara each fortnight with invoices to be received by the end of the second and fourth Wednesday of each month. Payments were to be made within two weeks. A schedule of rates for that work was annexed to the agreement. For present purposes it does not matter whether there was a single retainer agreement or separate agreements in relation to each concreting job. I will describe it as though it was a single agreement.
5. Matish issued a number of invoices for concreting works pursuant to the agreement. They included invoices for work at Casey, Crace and Bonner. Relevant to the present case is an invoice dated 12 November 2012 for work in Casey in the Australian Capital Territory for a total of $9,436.13. That invoice was not identified as being a payment claim for the purposes of the SOP Act at that stage.
6. On 6 March 2013 Matish’s solicitors sent a letter enclosing that invoice and noting it to be a payment claim pursuant to the SOP Act. In these proceedings the parties accepted that the combination of the invoice and the letter identifying the invoice as a payment claim under the Act was effective to constitute a payment claim made on 6 March 2013.
7. Andara failed to provide a payment schedule in relation to the payment claim. Matish elected to apply for adjudication of the payment claim. Section 19(2) of the SOP Act required Matish to notify Andara of its intention to apply for adjudication. On 26 March 2013 it notified Andara of that intention.
8. On 3 April 2013 Matish received a payment schedule from Andara. That payment schedule included a section explaining the reasons for withholding payment and alleged that the payment claim failed to comply with s 15 of the SOP Act because the requirements of s 15 were included in the covering letter rather than in the tax invoice itself. The payment schedule also alleged that the claim for work at Bonner, which had also been made by Matish, was never served on Andara and as a consequence, denied that Matish was entitled to make a claim.
9. On 17 April 2013 Matish made an application for an adjudication under the SOP Act.
10. On 26 April 2013 Andara received notice of the plaintiff’s application for adjudication and acceptance by the adjudicator of the appointment. Andara received a copy of the actual application for adjudication either that day or shortly after. I will return to this issue below.
11. On 23 May 2013 the parties received notice that no decision had been made by the adjudicator. It is not clear why no decision had been made by the adjudicator at that stage. On 24 May 2013 Matish gave notice to the adjudicator of the withdrawal of its adjudication application.
12. On 28 May 2013 Matish made a second application for adjudication. Andara did not file an adjudication response.
13. On 5 July 2013 an adjudication decision was issued determining the adjudicated amount to be $9,436.13 and that Andara pay 100% of the adjudicator’s costs plus interest at the Court Procedures Rules rate from 26 March 2013.
14. On 16 August 2013 the adjudication certificate was registered in the ACT Magistrates Court.
15. On 9 September 2013 a creditor’s statutory demand for payment based on the adjudication certificate was issued by Matish against Andara in the sum of $11,023.37.
16. On 27 September 2013 Andara made its application pursuant to s 459G of the Corporations Act to have the statutory demand set aside.
17. On 18 October 2013 Andara filed its judicial review proceedings seeking prerogative relief in relation to the registration of the adjudication certificate.
18. On 21 November 2013 Andara commenced proceedings in the ACT Magistrates Court against Matish seeking $25,916 plus costs and interest for defective works on a number of sites in the ACT and New South Wales.
Judicial Review proceedings
19. For the purpose of these proceedings the critical period is that between 26 April 2013 and 5 July 2013. The plaintiff’s case was that the procedures required to be followed by the adjudicator under the SOP Act had not been complied with. In particular, matters had not occurred within the mandatory timeframes set down in s 28 of the Act. As a consequence, Andara submitted that the adjudicator lacked jurisdiction to make the decision that he did on 5 July 2013.
20. The defendant accepted that a failure to comply with the mandatory procedures set out in the SOP Act would constitute a jurisdictional error on the part of the adjudicator or would mean that the jurisdiction of the adjudicator to make the adjudication decision was not established. The difference between the parties was whether or not the mandatory procedures established by the SOP Act had in fact been complied with.
21. In order to understand the argument that was put by the plaintiff it is necessary to set out s 28 of the SOP Act which sets out the circumstances in which a claimant may make a new adjudication application:
(1) This section applies if—
(a) a claimant fails to receive an adjudicator’s notice of acceptance of an adjudication application within 4 business days after the application is made; or
(b) an adjudicator who accepts an adjudication application fails to decide the application within the time allowed by section 23 (3).
(2) The claimant may—
(a) withdraw the application, by notice in writing served on the adjudicator or authorised nominating authority to whom the application was made;
and
(b) make a new adjudication application under section 19.
(3) Despite section 19 (3) (c), (d) and (e), a new adjudication application may be made at any time within 5 business days after the day the claimant becomes entitled to withdraw the previous adjudication application under subsection (2).
(4) This part applies to a new application mentioned in this section as if the application were an application under section 19.
22. A claimant has an entitlement to withdraw an application for adjudication where one or other of the conditions in s 28(1) is met. However the claimant may only do so within five business days of becoming so entitled. If outside the five business day period then there is no exemption from the time requirements in s 19(3)(c) and (d) of the Act and hence it is likely that any further application would be outside the time limits required by those provisions.
23. In the present case the critical issue between the parties is whether or not Matish was entitled to make its second application for adjudication. Matish made that application on 28 May 2013. It was only entitled to do so if it withdrew its earlier application and then made its second application within the time permitted by s 28(3). That required it to have withdrawn its earlier application by notice in writing served on the adjudicator and have made a new application “within 5 business days after the day [that it became] entitled to withdraw the previous adjudication application” under s 28(2). In the present case s 28(2) permitted the withdrawal of the application when an adjudicator who accepted an adjudication application failed to decide the application within the time allowed by section 23(3): see s 28(1)(b).
24. Thus the critical starting point for the operation of s 28 was the end of the period in which the adjudicator was required to make a decision under section 23(3). That subsection requires the adjudicator to decide an adjudication application not later than 10 business days after the earlier of:
(i) the date on which the adjudicator receives the adjudication response;
and
(ii) the date on which the adjudication response is required to be given to the adjudicator under s 22.
25. In the present case, no adjudication response was given and hence the adjudication decision was required within 10 business days of the date on which the adjudication response was required to be given under s 22.
26. Section 22(1) provides:
A respondent may give a response to a claimant’s adjudication application (an adjudication response) at any time before the later of:
(a) 7 business days after the respondent receives a copy of the application; or
(b) 5 business days after receiving notice of the adjudicator’s acceptance of the application.
27. Thus, the start of the period during which a respondent may give an adjudication response is either the date upon which the respondent receives a copy of the application or the date upon which it receives notice of the adjudicator’s acceptance of the application.
28. In the present case, although the evidence was not particularly clear, the parties appeared to accept that the application and the notice of the adjudicator’s acceptance of the application were received by Andara on the same day. That approach was justified because if, as the documents suggest, the full copy of the adjudication application was received by Andara later than the day upon which it received notice of the adjudicator’s acceptance, then its position would be weakened since its argument for jurisdictional error depended upon earlier rather than later receipt of the application.
29. In those circumstances, the question was whether the period in which an adjudication response could be provided was five business days under s 22(1)(a) or seven business days under s 22(1)(b). Andara submitted that the legislation did not contemplate the receipt by a respondent to an adjudication application of a copy of the application and notice of the adjudicator’s acceptance of the application on the same day. It submitted that this represented a lacuna in the legislation and that the legislation was so strict that it should be considered penal in nature and interpreted in favour of a respondent to an adjudication application. It therefore submitted that the time period required by paragraph (b) of s 22 of five business days should be applied. The consequence of this would be, as I will demonstrate below, that the second adjudication application was not lodged within the time permitted by the Act and hence the adjudicator lacked jurisdiction to make the decision.
30. I do not accept that submission. Section 22(1) is perfectly clear. It makes it clear that a respondent has whichever of the periods in paragraph (a) or paragraph (b) gives it longer to put in its adjudication response. Where the copy of the application and notice of the adjudicator’s acceptance of the application are received at the same time then clearly the seven business day period gives it longer than the five business days period and hence the seven business day period is the applicable one. In my view there is no ambiguity in the provision and no question arises as to the application of any principles of strict construction which might apply if it was characterised as penal legislation. However, although counsel for Andara did not cite any authority in support of his submission, if the line of authorities such as Beckwith v The Queen (1976) 135 CLR 569 at 576, Waugh v Kippen (1986) 160 CLR 156 at 164 and Chew v The Queen (1992) 173 CLR 626 at 632 was sought to be invoked then, in my view, those authorities have no application in the context of the SOP Act. Further, even if there was some principle which could be deployed in favour of a respondent to such an application then such a principle would not, in the circumstances of this case, favour Andara. While in the present case the interests of Andara would be advanced by advocating a shorter period to be applicable under s 22(1) in order to push the second adjudication application outside the period permitted by s 28, outside the particular circumstances of this case, it would ordinarily be more favourable to a respondent to have more rather than less time in which it was entitled to put in an adjudication response. Therefore interpreting the provision in favour of a respondent to an application would lead to the same result that I have reached, based on the plain words of the section.
31. Applying the seven business day period under s 22(1), the chronology required by the SOP Act is as follows:
(a) Andara received notice of the application for adjudication and the acceptance of the application on 26 April 2013.
(b) Seven business days after this ends on 7 May 2013.
(c) The period in which the adjudicator was then required to make a decision was 10 business days after this, that is, 21 May 2013.
(d) The period during which, under s 28, Matish was entitled to give notice of the withdrawal of its application and make a new application was a period of five business days after 21 May 2013, that is a period ending on 28 May 2013.
(e) Matish withdrew its application on 24 May 2013.
(f) The second application was made on 28 May 2013 and it is therefore within the time permitted by the Act.
32. Had the five business day period been the applicable period under s 22(1) then that period would have expired on 3 May 2013. The period in which the adjudicator was required to make his decision would have expired on 17 May 2013 and the period during which the adjudication application could be withdrawn and a new application made would have ended on 24 May 2013.
33. As a consequence, the jurisdiction of the adjudicator was properly invoked on 28 May 2013 and hence the challenge to the registration of the adjudication certificate based on the adjudicator lacking jurisdiction must fail.
34. The argument in the case proceeded on the basis that the application for judicial review had been filed outside the 60 days required by rule 3557 of the Court Procedures Rules . That was based on the proposition that the adjudicator’s decision was made on 5 July 2013 and the application for judicial review was filed on 18 October 2013. However although the application for judicial review is confusingly drafted it appears to be actually targeted at the registration of the adjudication certificate. It is for that reason that the Magistrates Court has been named as a party to the proceedings rather than the adjudicator: see rule 3556. I am not at all confident that this is the correct approach having regard to the fact that the filing of an adjudication certificate under s 27 of the SOP Act does not involve any decision by the Magistrates Court. Having regard to the conclusion that I have reached, namely that the substance of the argument about the adjudicator’s decision put by Andara is without merit, this is not a suitable case in which to resolve these complexities. The appropriate order is simply that the proceedings are dismissed.
Statutory Demand Proceedings
35. In relation to the statutory demand proceedings, the principles to be applied are wellknown. In considering whether or not an offsetting claim has been shown to exist for the purposes of s 459H, a court should be satisfied that there is a serious question to be tried that the party does have an offsetting claim: Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 12 ACSR 341, or that the claim is not frivolous or vexatious: Chadwick Industries (South Coast) Pty Ltd v Condensing Vaporisers Pty Ltd (1994) 13 ACSR 37; Macleay Nominees Pty Ltd v Belle Property East Pty Ltd [2001] NSWSC 743. It is not necessary for a party asserting an offsetting claim to be able to particularise it to a fine degree: Elm Financial Services Pty Ltd v MacDougal [2004] NSWSC 560. The principles to be applied are usefully summarised in First Equilibrium Proprietary Ltd v Bluestone Property Services Proprietary Ltd (in liq) (2013) 95 ACSR 654 at [21].
36. Matish accepted, correctly, that the existence of an adjudication decision did not affect the entitlement of Andara to raise an offsetting claim as a basis for resisting the statutory demand: see Property Builders Pty Ltd v Carlamax Properties Pty Ltd (2011) 255 FLR 402 at [35] and the authorities referred to therein.
37. Matish did, however, contend that Andara was limited to those matters identified in the affidavit filed in support of its application, subject only to the elaboration in its later affidavits: Graywinter Properties Pty Ltd v Gas & Fuel Corporation of Victoria (1996) 21 ACSR 581.
38. Matish submitted that the Court should not be satisfied that there was a genuine offsetting claim. It relied on an affidavit affirmed by the director of Matish, Mr Galea. Mr Galea either disputed the existence of the defects or denied any notification by the plaintiff of the defects.
39. In the circumstances of this case, I am satisfied that there is a genuine offsetting claim made by Andara that is sufficient for the purposes of s 459H. That is a claim either pursuant to the express terms of the contract or contracts in relation to works that are said to be defective or alternatively a claim for damages arising out of a breach of those contracts. Clearly enough there are disputes both as to the terms of the contract or contracts, whether or not the work was in fact defective and whether Andara incurred the expenses that it alleges it did in order to rectify defects. There may also be issues having regard to the allegation that no notice was given of the defects as to whether the plaintiff has mitigated its losses. However the evidence is not such that I can say that the evidence in support of the offsetting claim is so insubstantial as to amount to a non-genuine claim. The claim is supported by evidence on affirmation given by Mr Anderson which is not, in the context of building works, inherently implausible or otherwise demonstrated to be without substance. In my view, it is clearly a matter whether the threshold required by the authorities has been passed.
40. Further, the core of the alleged offsetting claim, namely the cost of engaging other contractors to rectify the alleged defects is assessed in the affidavits of Mr Anderson at not less than $16,430. This amount substantially exceeds the amount of $11,023.37 claimed in the demand. As a consequence s 459H(3) requires that the demand be set aside.
Orders
41. Therefore, in proceedings SC 368 of 2013 the orders of the Court will be:
1. The defendant’s statutory demand on the plaintiff dated 9 September 2013 is set aside.
2. The parties be heard in relation to costs.
42. In proceedings SC 404 of 2013 the order of the Court will be:
1. The proceedings are dismissed.
2. The parties be heard in relation to costs.
I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Master Mossop.
Associate:
Date: 20 December 2013
Counsel for the plaintiff: R G Thomas
Solicitor for the plaintiff: Andara Homes
Counsel for the defendants: G J Blank
Solicitor for the defendants: Rod J Barnett & Associates
Date of hearing: 13 December 2013
Date of judgment: 20 December 2013