A J Richardson Properties Pty Ltd v Segboer [2009] NSWSC 576

New South Wales Supreme Court

CITATION : A J Richardson Properties Pty Ltd v Segboer [2009] NSWSC 576

HEARING DATE(S) : 15 June 2009 JURISDICTION : Equity

JUDGMENT OF : Austin J

EX TEMPORE JUDGMENT DATE : 15 June 2009

DECISION : Defendant to pay plaintiff's costs of application on indemnity basis

CATCHWORDS : COSTS - indemnity costs - builder serves statutory demand for adjudicated progress claim knowing owner has much larger claim for overpayment that is the subject of common law proceedings in the Court - plaintiff applies to set aside the demand - defendant delays service of submitting appearance - demand then set aside without opposition

LEGISLATION CITED : Building and Construction Industry Security of Payment Act 1999 (NSW) Corporations Act 2001 (Cth), s 459G

CASES CITED : CGA Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd (2003) 47 ACSR 900

PARTIES : A J Richardson Properties Pty Ltd (Plaintiff) Anne Segboer and Robert Segboer trading as Segboer Constructions (Defendants)

FILE NUMBER(S) : SC 2519/09

COUNSEL : G Waugh (P)

SOLICITORS : Sagacious Legal Pty Ltd (P)

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

AUSTIN J

MONDAY 15 JUNE 2009

2519/09 A J RICHARDSON PROPERTIES PTY LTD V ANNE SEGBOER & ANOR TRADING AS SEGBOER CONSTRUCTIONS JUDGMENT (EX TEMPORE; REVISED ON 18 JUNE 2009) 1 HIS HONOUR: This case has arisen out of a building contract between the plaintiff as owner and the defendants as builder, and an adjudication in respect of a progress claim under that contract made under the Building and Construction Industry Security of Payment Act 1999(NSW). The defendants initiated an adjudication process under that Act in respect of the progress claim, and on 16 February 2009 the plaintiff lodged the "respondent's adjudication response" with the adjudicator. The matter was then dealt with by the adjudicator appointed under the Act. 2 The plaintiff's adjudication response contended that the plaintiff had made overpayments in an amount in excess of $10 million over the guaranteed maximum price of $16 million provided for in the contract. The adjudicator issued a determination on 25 February 2009. As to the plaintiff's submissions concerning the overpayment, the adjudicator found that the Act did not permit him to take account of the overpayment, for the purposes of his adjudication, as an offsetting claim, because it had not been referred to in the plaintiff's payment schedule in response to the progress claim. 3 In those circumstances, the administrator determined an adjudicated amount payable by the plaintiff to the defendants of $273,361.87, together with interest and costs. The defendants obtained an adjudication certificate and registered that certificate as a judgment debt in the District Court. 4 Meanwhile, the plaintiff obtained legal advice, on the basis of which it commenced proceedings against the defendants seeking to recover the overpayments in the Common Law Division of this Court. The proceedings were commenced on 19 March 2009. A statement of claim was served by facsimile and registered post to the defendants' solicitors on 2 April 2009. 5 The defendants prepared a statutory demand dated 3 April 2009, seeking recovery of the amount certified by the adjudicator, $273,361.87 plus interest and fees. That statutory demand was served on about 6 April 2009. At the time of service, the defendants were aware that the plaintiff claimed to have made very substantial overpayments, which it had sought to offset against the progress claim, and had been unable to achieve an offsetting for the purposes of the Act because of what might be described as a technicality, as identified by the adjudicator and explained above. 6 The plaintiff's claim was particularised in its adjudication response before the adjudicator, and was also particularised in the Common Law statement of claim that was served just before the statutory demand was served on the plaintiff. Therefore, at the point of service of the statutory demand the defendants were aware of the particulars of the plaintiff's claim. 7 After the service of the statutory demand, the defendants took no steps to withdraw it and so the plaintiff had no option but to bring proceedings by originating process under s459G to set aside the statutory demand. That was necessary to avoid a presumption of insolvency. The application to set aside the statutory demand commenced on 24 April 2009. 8 The defendants filed a submitting appearance on about 5 May 2009, submitting as to everything except an order for costs, but the notice of appearance was not served until 12 May. By that time the plaintiff had incurred most of the legal costs necessary to prepare the application for hearing. The Court made an order on 25 May setting aside the statutory demand, and now the plaintiff comes to Court for an order for indemnity costs of the proceedings against the defendants. 9 The principles to be applied by the Court on such an occasion were summarised by Barrett J in the CGA Information Systems and Management Consultants Pty Ltd v APRA Consulting Pty Ltd (2003) 47 ACSR 900. It seems to me that the principles apply in a case such as the present one, even though a submitting appearance has been filed. This is because the submitting appearance was not brought to the attention of the plaintiff until most of the costs of preparation for the hearing had been undertaken. 10 Barrett J found in the circumstances of the case before him that indemnity costs were appropriate because the party serving the statutory demand had persisted with its claim for the debt despite the lack of any cogent basis for it, and had refused to withdraw its demand even after being informed that the only possible claim it had was one for damages and not debt. 11 Here, by analogy, the circumstances are that the defendants were aware before the issue of a statutory demand for an amount of about $282,000 of an offsetting claim for overpayment on the contract for in excess of $10 million. They sought to take advantage of the certificate they had obtained through the adjudication under the Act to proceed by way of statutory demand, even though they were aware that the plaintiff's claim for the overpayment had become the subject of proceedings in this Court. 12 Courts have said time and again that the procedure for issuing a statutory demand is not to be used to claim payment of an amount which the claimant knows is not properly due and owing. The question whether the plaintiff has an offsetting claim for $10million has not been determined, but it is equally inappropriate to use the statutory demand procedure to anticipate the outcome of proper adjudication of a disputed claim. 13 In the circumstances, the defendants were wrong to use a statutory demand in a manner that would place pressure on the plaintiff to either withdraw its offsetting claim or make a payment it had reasonable grounds for believing it was not bound to make. I agree with the plaintiff's submission that in these circumstances indemnity costs should be ordered. 14 The application for indemnity costs was notified to counsel then appearing for the defendants, who in an email dated 11 June 2009 informed counsel for the plaintiff that he could inform the Court that the defendants neither consented to nor opposed the indemnity costs order that was sought. There has been no appearance for the defendants today. 15 I order that the plaintiff's costs of the proceeding be paid by the defendants on the indemnity basis. **********