In the matter of Acciona Infrastructure Australia Pty Limited

1. [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. [2]

   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:

2. [3]

   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.

3. [4]

   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:

4. [5]

   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.

5. [6]

   These communications were concluded by a letter of demand from Borger Cranes’ solicitor, stating:

6. [7]

   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. [8]

   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:

2. [9]

   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]:

3. [10]

   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):

4. [11]

   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.

5. [12]

   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.

6. [13]

   In those circumstances, I make the following orders:

   1. (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. (2)

      Order the defendant to pay the plaintiff’s costs of the proceedings.