Jem v St Hilliers [2007] NSWSC 245

New South Wales Supreme Court

CITATION : Jem v St Hilliers [2007] NSWSC 245

HEARING DATE(S) : 19/03/2007

JUDGMENT DATE : 29 March 2007

JURISDICTION : Equity Division

JUDGMENT OF : Associate Justice Macready at 1

DECISION : Paragraph 26

CATCHWORDS : Application to set aside statutory demands under s459G of the Corporations Act. Demands relate to adjudication under Building & Construction Industry Security of Payment Act 1999 (NSW). Consideration of offsetting claims based upon Superintendent's certificate issued under contract. - Demand set aside.

PARTIES : Jem Number Two Pty Ltd & Ors v St Hilliers Pty Ltd

FILE NUMBER(S) : SC 5340 of 2006

COUNSEL : Mr A. Vincent for plaintiffs Mr M. Aldridge SC for defendant

SOLICITORS : Salim Lawyers for plaintiffs Colin Biggers and Paisley for defendant

- 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

Associate Justice Macready

Thursday 29 March 2007

5340/2006 Jem Number Two Pty Ltd & Ors v St Hilliers Pty Ltd JUDGMENT 1 His Honour: These proceedings are to set aside three statutory demands served by the defendant on the plaintiffs on 27 September 2006 claiming a sum of $362,673.79. The demands relate to a certificate of judgment obtained in the District Court which followed upon the granting of a determination by an adjudicator under the Building and Construction Industry Security of Payment Act 1999 (NSW). The defendant was the contractor in respect of the construction of some units for the plaintiff companies. The plaintiffs' claim 2 The plaintiffs claimed that there were offsetting claims which exceeded the amount due under the judgment in respect of the following areas: "(a) the Plaintiffs have an offsetting claim for the sum certified by the Superintendent as owing to the Plaintiffs under the building contract on 13 June 2006 in the amount of $616,072.93; (b) the Plaintiffs have an offsetting claim for restitution for defective and incomplete works on the basis set out in the payment schedule and payment certificate issued on 13 June 2006 and the adjudication response dated 6 July 2006; (c) the Plaintiffs have an offsetting claim for the sum certified by the Superintendent as owing to the Plaintiffs under the building contract on 11 September 2006 in the amount of $628,426.76; (d) the Plaintiffs have an offsetting claim for restitution for defective and incomplete works on the basis set out in the payment schedule and payment certificate issued on 11 September 2006;" 3 The plaintiffs have also claimed that there was a genuine dispute but this claim was properly abandoned during the course of the argument before me. The defendant says that all claims are ones, which were not foreshadowed in the affidavit filed within the time limited for the making of the application. In respect of those claims based upon the material in the various payment schedules it submitted that such claims have not been supported by evidence in this case. Chronology 4 The defendant made a payment claim on the plaintiffs on the 26 May 2006 in the sum of $603,396.21. In its payment schedule of 13 June 2006 the plaintiff responded by saying that it owed nothing to the defendant and to do so it relied upon a certificate of the Superintendent that was also issued on 13 June 2006. In that certificate the Superintendent certified that the defendant owed the sum of $616,072.93 to the plaintiff. 5 On 23 August 2006 there was a determination by the adjudicator that the plaintiff owed the defendant the sum of $342,439.22. The defendant then registered that determination as a judgment in the District Court. 6 Thereafter another payment claim was made on 28 of August 2006 and on 11 September 2006 there was a further certificate of the Superintendent pursuant to the contract under which the defendant owed the plaintiff the sum of $628,426.76. In due course the same adjudicator determined on 9 November 2006 that the plaintiff owed the defendant $613,481.03. Were the claims foreshadowed in the affidavit filed within time? 7 The affidavit sworn 17 October 2006, after dealing with formal notice, contained the following: "6. On 11 October 2004, the Plaintiffs collectively trading as Jempac Waterfront ("Jempac") entered into a building contract with the Defendant ("St Hillers"). A copy of the Contract is annexed and marked "G". 7. Exhibited and marked "H" is a copy of the Payment Claim served by St Hillers dated 26 May 2006 for the sum of $603,396.21 (exclusive of GST). 8. Exhibited and marked "I" is a copy of the Payment Schedule served by Jempac and the Payment Certificate issued by the Superintendent dated 13 June 2006 in the sum of negative $560,066.30. 9. Exhibited and marked "J" is a copy of St Hillers' Adjudication Application dated 27 June 2006 (excluding a copy of the Payment Claim which is included as Exhibit H" 10. Exhibited and marked "K" is a copy of Jempac's Adjudication Response dated 6 July 2006 (excluding a copy of the Payment Schedule and Payment Certificate which are included as Exhibit "I"). 11. Exhibited and marked "L" is a copy of Adjudication Determination dated 22 August 2006. 12. Exhibited and marked "M" is a copy of a letter from our solicitors Salim Lawyers dated 30 October 2006 requesting withdrawal of the Statutory Demands. This letter identifies other off-setting claims Jempac has against St Hillers which are not part of the Adjudication the subject of the judgment. Dispute Resolution 13. The Plaintiffs have not issued, and the Plaintiffs have not received, from the Defendant a notice of dispute pursuant to clause 47.1 of the Contract or other notice of dispute in relation to the amount assessed in the in the (sic) Payment Certificate. 14. I respectfully request that this honourable Court make the orders sought in the Originating Process filed in these proceedings." 8 Paragraph 12 makes reference to a particular matter identified in a document in the four lever arch files of material which were exhibited to the affidavit. That letter was written by solicitors for the plaintiffs to the solicitors for the defendant. After formal matters and a reference to there being a genuine dispute and offsetting claim the letter of 30 October 2006 went on to say: "2. Your client is well aware that our clients dispute the amount claimed in the Statutory Demand. There have been numerous meetings and correspondence passing between the parties in relation to the amount claimed in the Statutory Demand. In that regard, we refer you to numerous correspondence from our clients (or sent on behalf of our clients by the Superintendent) setting out our clients' concerns and set-off claims including without limitation the correspondence referred to in the payment certificate dated 11 September 2006. 3. Under the payment certificate dated 11 September 2006 issued by the Superintendent, your client owes our clients the amount $628,426.76 (inclusive of GST). From the payment certificate and related correspondence, it is clear that our clients have substantial claims against your client for, inter alia, defective and incomplete works and Liquidated Damages as a result of your client failing to perform its obligations under the building Contract. 4. Our clients' rights and remedies are not limited to those set out in the payment certificate. We refer you to the provisions of the Contract including clauses 35.6 and 69. In addition to our clients' rights under the payment certificate, our clients are entitled to pursue their common law rights against your client which include (without limitation): (1) damages (in addition to our clients' claim for Liquidated Damages) suffered or incurred by our clients as a result of your client's late completion of the Works. Those damages include our clients' holding costs (which includes the inability to use the equity in the project), difficulties in settling 'off the plan' sales, loss of potential sales and the resulting loss of commercial opportunities to our clients; (2) damages for defective and non-complying works and for costs associated with the rectification of those works; and 5. Therefore our clients' off-setting claim is substantially in excess of the $363,673.79 being the amount your client has demanded. Our clients' claim is estimated to be in excess of $1 M for losses suffered by our clients as a result of your client's defective and incomplete works and delay in completing the Works. That estimate does not include all damages suffered including damages resulting from loss of potential sales. Our clients reserve their rights entirely including claiming all their loss and damage against your client." 9 The contract was exhibited to the affidavit, as were the relevant payment claims and the certificate issued by the Superintendent in June 2006. The Superintendent's certificate issued on 11 September 2006 was not included in the four volumes of material exhibited to the affidavit but was tendered before me subject to a claim for relevance in respect of the time of its service. In the plaintiffs' submission paragraph 12 of the affidavit and the correspondence to which it referred clearly set out an area of controversy and thus the certificate could be tendered in order to amplify the offsetting claim that was identified in the affidavit filed within time. 10 As I indicated in CCD Group Pty Ltd v Premier Drywall Pty Ltd [2006] NSWSC 1012 a recent discussion of the extensive case law in this area and its development is that of Austin J in POS Media Online v B Family Pty Ltd [2003] NSWSC 147. There His Honour said: "26 The principle asserted by the defendant is that the plaintiff cannot succeed on the 'no debt' ground, because that ground was not set out in Mr Patkin's affidavit of 9 December 2002, and cannot be characterised as an extension of the grounds set out in that affidavit.