Supreme Court New South Wales Medium Neutral Citation: In the matter of Acciona Infrastructure Australia Pty Limited [2019] NSWSC 1156 Hearing dates: 30 August 2019 Decision date: 30 August 2019 Jurisdiction: Equity - Corporations List Before: Rees J Decision: 1. Pursuant to section 459H of the Corporations Act 2001 (Cth), set aside the statutory demand served by the defendant on the plaintiff on 20 May 2019. 2. Order the defendant to pay the plaintiff's costs of the proceedings. Catchwords: CORPORATIONS — Winding up — Statutory demand — Application to set aside statutory demand on the basis of genuine dispute — Where dispute as to construction of crane hire agreement — Meaning of night works "stand down rates" — Issuer of demand sought to rely on pre-contractual negotiations, post-contractual conduct and industry practice — Inappropriate to determine construction on s 459G application — Demand set aside. Legislation Cited: Corporations Act 2001 (Cth), ss 459G, 459H Cases Cited: Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 Creata (Aust) Pty Limited v Faull (2017) 125 ACSR 212; [2017] NSWCA 300 Drillsearch Energy Limited v Carling Capital Partners Pty Ltd [2009] NSWSC 1192 Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 Grandview Australia Pty Ltd v Budget Demolitions Pty Ltd [2019] NSWCA 60 In the matter of Halal Meats Pty Ltd [2015] NSWSC 2041 In the matter of Linton Developments (Qld) Pty Limited [2017] NSWSC 336 In the matter of Litigation Insurance Pty Limited [2017] NSWSC 334 In the matter of Universal Property Group Pty Limited [2019] NSWSC 796 Category: Principal judgment Parties: Acciona Infrastructure Australia Pty Limited (Plaintiff) Borger Crane Hire & Rigging Services Pty Limited (Defendant) Representation: Counsel: Mr E Ball (Plaintiff) Mr G Carolan (Defendant) Solicitors: Vincent Young (Plaintiff) McArdle Legal (Defendant) File Number(s): 2019/178636 EX TEMPORE Judgment 1. HER HONOUR: This is an application under section 459G of the Corporations Act 2001 (Cth) to set aside a statutory demand in the amount of $288,109.25 on the basis that there is a genuine dispute as to the existence or the amount of the debt. Facts 1. The plaintiff (Acciona) is the head contractor on the Sydney Light Rail construction works and the defendant (Borger Cranes) supplies cranes and labour for that project. The parties entered into a Supply Agreement (Services) (Wet Plant Hire) in November 2015 which entitled Borger Cranes to charge for works in accordance with Schedule 3, including for the following item: Night works require stand down rates for crane crews cost is $400/person/day. The contract does not otherwise refer to or expand upon this item. 1. The meaning of the words for this item in Schedule 3 is the focus of this application. Acciona says the words mean that Borger Cranes is only entitled to the payment if it undertakes night works and is required to "stand down" those night works such that the works do not continue the following night; but if the night works are not "stood down", that is, the work continues the following night, then Borger Cranes is not entitled to payment of this amount. Borger Cranes contends that it is entitled to the stand down rate whether or not work continues on the next night, that is, it is entitled to that fee every night works are undertaken. Borger Cranes has been charging the night works rate in that manner in the four years since the contract was entered into, although apparently not always consistently. 2. In March 2019, Borger Cranes issued invoice no. 174714 for the hire of cranes in February and March 2019. It is that invoice which is the subject of the statutory demand. The invoice includes some $30,000 referrable to the disputed night works stand down rate. On 10 May 2019, Acciona sent an email to the defendant saying that they believed Borger Cranes had overcharged for the stand down rate and setting out the basis for their argument: The basis of our understanding are the following: • Stand Down is broadly used in Australian Construction to compensate for shift cancellation due to inclement weather or for example in the event of an evacuation due to health and safety or other. In other words we're speaking about Shift interruption and termination. • Our interpretation of your rate is compensation for Shift interruption. • We reject Borger Crane's interpretation of this item as it being compensation for "the day without work after a night shift". Any such costs should have been included in the hourly rate considering this is a do and charge account. • We also note that this rate would only be applicable to crane crews and therefore, there is no question about it being charged for the hire of franas / hiabs, in any event, which is the case on many of the dockets. • Borger Crane's have systematically charge this item, even where it was not applicable based on its own interpretation – which we reject – it being charged to Acciona where night continuous shift were ongoing for the workers as shown on dockets. Further, Acciona advised that it had reviewed the charging of the stand down rate over the preceding four years, and sought repayment of some $388,000, relying on a broad right of set-off contained in the contract. It is this right of set-off that leads Acciona to submit that the debt in the demand is not owed at all, rather than characterising the $388,000 as an offsetting claim. 1. There followed five emails exchanging conflicting views on the interpretation of the contract, a meeting between representatives of Acciona and Borger Cranes, a further two emails presenting detailed arguments in support of their differing interpretations. Acciona's final email was lengthy and went into considerable detail in support of its interpretation. It is apparent from these communications that the parties disagreed strenuously on how the contract should be construed and supported their views by lengthy argument. Each referred to the common usage of the term 'stand down' rates in the construction industry as supporting their respective positions. Borger Cranes relied on pre-contractual negotiations and post-contractual conduct said to be consistent with its interpretation of the contract. 2. These communications were concluded by a letter of demand from Borger Cranes' solicitor, stating: We note the recent dispute between the parties regarding the 'stand down' payment. … There is no legal basis on which past payments of stand down payment can be recovered given that it is clearly provided for in the Contract. The letter of demand confirmed the existence of this dispute which I do not accept was a recent concoction. It is apparent from reviewing each of the emails that the issue raised by Acciona, whilst very 'late in the piece' in the history of the contract between them, emanated from a genuinely held view that the contract did not entitle Borger Cranes to charge the stand down rate every night that works were undertaken. Acciona genuinely considered it was entitled to a refund of moneys which had been wrongly paid. 1. Although the contract contained a dispute clause which required the parties to serve a notice of dispute, confer and submit to "executive negotiation", on 20 May 2019 Borger Cranes issued a statutory demand and on 7 June 2019, Acciona filed an originating process to set it aside. Acciona read an affidavit of Alfonso Garcia, finance manager, who set out the history of the dispute. Borger Cranes read an affidavit of Shawn Borger, who set out his understanding of what the contract meant, his understanding of the meaning of the words used in the building industry, pre-contractual negotiations including the tender submitted by Borger Cranes and post-contractual conduct said to be consistent with his understanding of what the contract meant. Genuine Dispute 1. The question for this Court is to determine whether there is "a genuine dispute" within the meaning of section 459H of the Corporations Act. In Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601; [2013] NSWCA 344 at [31], the Court of Appeal approved McLelland CJ in Eq's consideration of a "genuine dispute" in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 as involving a plausible contention requiring investigation, raising much the same sort of considerations as the "serious question to be tried" criterion that applies in the case of an interlocutory injunction. As McLelland CJ in Eq stated at 787: This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit "however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be" not having "sufficient prima facie plausibility to merit further investigation as to [its] truth", or "a patently feeble legal argument or an assertion of facts unsupported by evidence". 1. Where the dispute is as to the meaning of a contract then, as I summarised the authorities in In the matter of Universal Property Group Pty Limited [2019] NSWSC 796 at [15]: Thus, on an application to set aside a statutory demand where the asserted "genuine dispute" is as to the meaning of a contract, determination of the meaning of a contract may be appropriate if a "patently feeble legal argument" is put forward. However, as Barrett AJA cautioned in Creata (Aust) Pty Limited v Faull (2017) 125 ACSR 212; [2017] NSWCA 300 at [26]: But where the question of construction has any element of rational controversy to it, the Court must exercise particular restraint. His Honour, with whom Gleeson and White JJA agreed, adopted the statement of principle by Gleeson JA in In the matter of Litigation Insurance Pty Limited [2017] NSWSC 334 at [31]: The important points to be derived from the authorities are as follows. First, the court dealing with a s 459G application is not compelled to determine questions of construction of documents. Second, s 459G proceedings are not ordinarily the occasion for the court to construe a contract where there are competing views about its meaning. Third, cases in which it will be appropriate for the court to entertain a construction argument on a s 459G application are likely to be few in number. Fourth, the court's state of mind concerning the existence of a genuine dispute may range from a clear conviction that the debt does not exist to an opinion that the genuine dispute hurdle has only just been cleared. See also Gleeson JA in In the matter of Linton Developments (Qld) Pty Limited [2017] NSWSC 336 at [32]. 1. Thus, where there are clearly arguable alternatives as to the meaning of a term and related questions of construction, this of itself gives rise to a genuine dispute within section 459H(1)(a) and no attempt should be made to determine the question in an application to set aside a statutory demand: Drillsearch Energy Limited v Carling Capital Partners Pty Ltd [2009] NSWSC 1192 at [47] per Barrett J. More recently in Grandview Australia Pty Ltd v Budget Demolitions Pty Ltd [2019] NSWCA 60, White JA held at [90] (emphasis added): It is usually inappropriate on an application to set aside a statutory demand that the court attempt to decide competing contentions as to contractual interpretation, partly because to do so might embarrass a judge before whom that issue arises and fundamentally because if the disputed question of contractual interpretation is arguable there will be a genuine dispute as to the existence of the debt, albeit one that does not depend upon a disputed matter of fact. But where the legal argument propounded in support of a particular argument is "patently feeble" (Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 (McLelland CJ in Eq), or where it is "as plain as a pikestaff" that it has no basis (Spacorp Australia Pty Ltd v Myer Stores Ltd [2001] VSCA 89; 19 ACLC 1270 at [41]) then there will be no genuine dispute (Creata (Aust) Pty Ltd v Faull [2017] NSWCA 300; 125 ACSR 212 at [26]-[29]. 1. In this case, the question is whether the contract is so straightforward in its meaning and Acciona's contention so feeble that the statutory demand should stand. I do not consider that the item in Schedule 3 of the contract, on its face, clearly supports the contractual construction contended for by either Acciona or Borger Cranes. As was apparent from the communications between the parties before the statutory demand was issued, the affidavits read on this application and the submissions made today, the parties called in aid extrinsic material to support their respective constructions. In so relying, Borger Cranes effectively admits that the contract is not clear on its face. The Court should rarely, if ever, be drawn into considering parol or extrinsic evidence such as evidence of pre-contractual negotiations, the meaning of terms commonly used in particular industries, or evidence of post-contractual conduct when considering a dispute as to the meaning of a contract on an application to set aside a statutory demand. Suffice to say that it appears that the construction for which Acciona contends is not a "patently feeble legal argument" but involves a plausible contention requiring investigation, and is genuine in nature. 2. As frustrating as that may be for Borger Cranes, it is important to note that the creditor's statutory demand regime under part 5.4 of the Corporations Act does not exist to collect debts that are the subject of dispute or debts where significant offsetting claims are known to exist. The provisions in part 5.4 are intended to create a summary procedure to give rise to a presumption of insolvency rather than to collect debts: In the matter of Halal Meats Pty Ltd [2015] NSWSC 2041 per Black J at [23]. The construction of the contract for which Borger Cranes contends may ultimately be accepted in another Court, but it is not the task of this Court on an application to set aside a statutory demand. Orders 1. In those circumstances, I make the following orders: 1. Pursuant to section 459H of the Corporations Act 2001 (Cth), set aside the statutory demand served by the defendant on the plaintiff on 20 May 2019. 2. Order the defendant to pay the plaintiff's costs of the proceedings. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 September 2019