FEDERAL COURT OF AUSTRALIA

GSK Facility Maintenance Group Pty Ltd v Conair Installations Pty Ltd, in the matter of GSK Facility Maintenance Group Pty Ltd [2017] FCA 1242

ORDERS

THE COURT ORDERS THAT:

1.    The respondent’s “Creditor’s Statutory Demand for Payment of Debt” dated 28 June 2017 served upon the applicant on 6 July 2017 is set aside.

2.    The respondent pay the applicant’s costs of and incidental to the application.

3.    Pursuant to s 23 and s 37P of the Federal Court of Australia Act 1976 (Cth), rule 1.32 and rule 1.36 of the Federal Court Rules 2011, these orders and the reasons for judgment in support of these orders are made and published from Chambers.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GREENWOOD J:

1    These proceedings are concerned with an application under s 459G of the Corporations Act 2001 (Cth) (the “Act”) by GSK Facility Maintenance Group Pty Ltd (“GSK”) for an order setting aside a statutory demand dated 28 June 2017 served upon the company on 6 July 2017 by the respondent, Conair Installations Pty Ltd (“Conair”).

2    Although the relevant provisions of the Act are well known it is worth noting that an application is made in accordance with s 459G only if, within the relevant time, an affidavit supporting the application is filed with the Court and a copy of the application together with a copy of the supporting affidavit is served on Conair: s 459G(3). In this case, the application was supported by an affidavit of Mr Grant Steven Kirk affirmed on 26 July 2017 and filed on 27 July 2017. Mr Kirk is the sole director of GSK. He holds four of the issued shares in the company and the other four issued shares are held by Ms Amber Michelle Gane.

3    The affidavit of Mr Kirk filed on 27 July 2017 is in many respects very imprecise and unhelpful in addressing the question of a genuine dispute in any precise way except to say that the affidavit has six annexures which attach a range of documents at pages 11 to 91 of the affidavit. There is no serious attempt to address in the affidavit the particular matters to be drawn from the annexures. That exercise has been left to the Court. Counsel for GSK who appeared on the application made reference to aspects of the annexures to demonstrate the content of what is contended to be a genuine dispute.

4    Mr Kirk has also affirmed another affidavit on 3 August 2017 filed on that day. GSK relies upon that affidavit and also relies upon a further affidavit of Mr Kirk affirmed on 18 August 2017 and filed on that day. GSK relies upon other affidavits. It is not necessary to mention all of them although it should be noted that one of the affidavits is an affidavit of Mr Greg Ernest Slayter affirmed on 18 August 2017 and filed on that day. Mr Slayter is the site foreman at a project described as the Regis Chelmer Aged Care Facility project. I will return to Mr Slayter’s affidavit later in these reasons.

5    GSK by its application under s 459G seeks orders pursuant to ss 459H(1), 459J(a) or 459J(b) of the Act that the statutory demand be set aside. In addition, GSK seeks an order that, in the event an order is made varying the statutory demand under s 459H of the Act, a declaration be made that the statutory demand has effect from the date of the hearing of the application. GSK also seeks an order that Conair pay the costs of and incidental to the application to be assessed on an indemnity basis.

6    The statutory demand is dated 28 June 2017 and, as mentioned, it was served on 6 July 2017. By the demand, Conair says that GSK owes it an amount of $66,100.00 which is made up of a series of invoices as follows:

7    In Mr Kirk’s first affidavit and in exchanges between GSK and Conair there are references to the name “Aquarius Refrigeration & Air Conditioning”. Purchase orders issued by GSK have that name endorsed upon them but they also record that that name is a trading name of GSK. I will refer to GSK in these reasons.

8    In Mr Kirk’s first affidavit he says these things. From on or about October to November 2016, GSK was awarded a contract by Cockram Constructions as project manager for the supply of goods and services relating to the supply of commercial air conditioning for the Regis Chelmer Aged Care Facility, in Chelmer, in Brisbane. On or about November 2016, GSK commenced dealings with Conair for the supply of goods and services relating to the hanging of the air conditioning and duct work to GSK for on-sale or supply to customers of GSK. At GSK-3, Mr Kirk attaches a quote (2916) from Conair to GSK dated 7 November 2016; another quote (2917) from Conair to GSK dated 17 November 2016; a letter from Conair to GSK dated 17 November 2016 submitting a price to complete particular quoted work ($25,000); and a purchase order dated 30 November 2016. The purchase order provides for the installation of ground floor items in accordance with “2917” in an amount of $25,000 and the installation of items above ground floor for remaining items in an amount of $176,832 constituting an amount of $201,832 plus GST of $20,183.20 providing a grand total of $222,015.20.

9    Mr Kirk says in his first affidavit that between December 2016 and July 2017 in relation to the dealings with Conair which began on or about November 2016, Conair issued 20 invoices to GSK and those invoices include the eight invoices the subject of the statutory demand.

10    At para 19 of his first affidavit, Mr Kirk says that he believes that there is a genuine dispute between GSK and Conair about the existence and amount of the alleged debt. At para 20, Mr Kirk attaches as GSK-6 eight categories of documents which are said to speak to the genuine dispute.

11    At para 21 of Mr Kirk’s first affidavit, he addresses the dispute GSK has in respect of each of the eight invoices the subject of the statutory demand. I will return to each of those paragraphs later in these reasons. Before doing so, it is necessary to observe some other things that Mr Kirk said in his second affidavit of 3 August 2017.

12    In Mr Kirk’s affidavit of 3 August 2017, he refers to what he describes as the “First Agreement” which is the agreement of November 2016 earlier described. From paras 26 to 33 of the affidavit of 3 August 2017, he describes what he calls the “Second Agreement”. As to that agreement, he says that during the First Agreement, GSK engaged Conair on an ad hoc basis to do work not covered in the scope of works under the First Agreement. He says that the invoices referred to in the statutory demand were issued for work conducted outside the scope of works contemplated by the First Agreement. He says that it was “verbally agreed” between GSK and Conair that Conair would undertake the additional work under the Second Agreement at the direction of GSK between the hours of “approximately 6.30am to 2.30pm at a rate of $77 per hour (inc GST)”. He says that the disputed invoices (aside from Invoice 142) are the invoices which were rendered in accordance with the Second Agreement. He says that Invoice 142 relates to the final invoice rendered under the First Agreement to make up the total amount left to be paid under the purchase order dated 30 November 2016.

13    Mr Kirk then, at para 31, refers back to his first affidavit of 26 July 2017 and says that the disputed invoices “relate to labour charges that have been invoiced, but not worked” and work that was conducted that was outside of the scope of the Second Agreement. At para 33, he says that Invoices 121 and 132 relate to works undertaken by Conair that did not form part of either the First Agreement or the Second Agreement and that such works were not agreed between GSK and Conair and were not authorised or approved by Conair. Thus, those two invoices are disputed entirely.

14    At para 32 of Mr Kirk’s 3 August 2017 affidavit, he refers to a spreadsheet (GSK-3) which he says shows a breakdown of the actual hours worked concerning Invoices 119, 120, 123, 137 and 135. He says that the spreadsheet shows the amount that should have been invoiced in accordance with what he says were the terms of the Second Agreement.

15    Mr Shayne Michael Wheat is the sole director of Conair. In his affidavit of 3 August 2017, he responds to a number of contentions advanced by Mr Kirk. However, in his affidavit he says that as a result of conversations he had with Mr Kirk, GSK and Conair agreed that the hourly rate for works completed by Conair would be $70.00 plus GST (which is consistent with Mr Kirk’s proposition that the “verbal agreement” he reached was for an hourly rate including GST of $77.00). However, Mr Wheat says that the arrangement was that the first two hours of work on a Saturday would be charged at time and a half ($105.00 plus GST) and any time over and above the first two hours would be charged at double time ($140 plus GST).

16    As can be seen, there is thus a dispute between the parties about the oral terms and especially the central term of precisely what the labour charges would be. Having regard to the orthodoxy of the way in which labour charges are calculated, it seems highly unlikely that work done on a Saturday would be charged at the same rate as the Monday to Friday work rate. In any event, that matter is in issue.

17    Returning to Mr Kirk’s first affidavit, as to Invoice 119 (I will simply refer to the last three digits in each case), Mr Kirk says at para 21(a) that an amount of $5,180.00 was paid and that the balance amount of $518.00 is not payable. Although there were exchanges between GSK and Conair about this invoice, the end result is that GSK now accepts that an amount of $518 is payable to Conair: T, p 14, lns 25-28.

18    As to Invoice 120, Mr Kirk says at para 21(b) that Conair had invoiced GSK for labour between the hours of 6.30am and 2.30pm. GSK says that the relevant individuals finished work each day at 2.00pm and then packed up their equipment from 2.00pm to 2.30pm and left the site at 2.30pm. Mr Kirk says that GSK will not pay for labour during the time Conair’s relevant individuals were “packing up” as this is not understood as the provision of labour. In effect, he says that the employees stopped work at 2.00pm. Mr Kirk says that GSK asked Conair to amend the invoice to reflect the actual time worked to 2.00pm rather than 2.30pm. I mentioned earlier that Mr Kirk’s affidavit is imprecise. I say that because the affidavit ought to have then gone on to calculate the amount by which the invoice, according to Mr Kirk’s evidence, ought to have been reduced. The formula would be a reduction based on 30 minutes per day multiplied by the relevant hourly rate. That calculation would be the measure of the disputed amount leaving the balance undisputed at least as to the calculation. But for that difference, Mr Kirk seems to be saying that the invoice is otherwise properly calculated. However, that step is not undertaken in the first affidavit. It is undertaken in the second affidavit, no doubt, because somebody advised Mr Kirk that his first affidavit was entirely unsatisfactory as a calculation of the measure of the dispute. In the spreadsheet, Mr Kirk says that Invoice 120 ought to be $7,277.00. It should be noted that the spreadsheet is almost impossible to read and the amount of $7,277.00 in the spreadsheet is not entirely clear but there is no doubt that if the calculation is (as Mr Kirk says it should be) 14 days multiplied by $520.00 per day, the number in the spreadsheet ought to be $7,280.00. According to Mr Kirk, Invoice 120 is made up of 14 days of work which is said to have occurred between 6.30am and 2.00pm, rather than 2.30pm, which results in what would be a correct daily charge of $520.00. $520.00 multiplied by 14 results in $7,280.00 and not a figure of $7,277.00. There must be something wrong with the spreadsheet.

19    Moreover, on 8 June 2017 at 7.11pm, Mr Kirk sent an email to Conair in which he analysed the outstanding invoices which were the subject of agitation by Conair. In that email, Mr Kirk said that Invoice 120 was to be changed to an amount of $8,400.00 including GST and that once changed, payment of the invoice would be paid.

20    Mr Kirk’s email (SMW-3 to the affidavit of Mr Wheat) is a much more reliable statement of the amount Mr Kirk accepts as being payable under Invoice 120. That was the position adopted by GSK at the hearing: T, p 16, lns 21-26; lns 36-39.

21    As to Invoice 121, Mr Kirk says at para 21(c) (as he said at para 33 of the affidavit of 3 August 2017), that this invoice is entirely disputed because it is said to relate to work completed on Saturday, 4 March 2017, concerning work that Conair is said not to have completed during the contracted hours in accordance with the November 2016 agreement. Thus, the entire amount of $3,630.00 is disputed.

22    As to Invoice 123, Mr Kirk says at para 21(d) of the first affidavit that the same vice affected the calculation of the labour charges because the relevant individuals stopped work at 2.00pm rather than 2.30pm and GSK says it is not going to pay for a half an hour each day not worked. Thus, one imagines that Invoice 123 on Mr Kirk’s version of it ought to be reduced by an amount calculated by reference to a half an hour each day for the relevant days by the relevant rate. Mr Kirk says that Invoice 123 also concerns labour charges for days not worked. GSK paid an amount of $8,008.00 (including GST). It says that that is all that is owed. The balance of the invoice is $5,544.00, on that footing. Conair says that the balance is due and payable. Nevertheless, I accept that there is a dispute as to $5,544.00 on that invoice, the balance having been paid.

23    As to Invoice 132, Mr Kirk says at para 21(e) that GSK disputes the invoice entirely as GSK did not authorise or approve a change to the scope of works which is the subject of the invoice. Thus, the entire amount of $2,772.00 is in dispute.

24    As to Invoices 135 and 137, Mr Kirk says at paras 21(f) and 21(g) that each invoice suffers from the same vice mentioned earlier to the effect that the invoices are incorrect because the relevant employees ceased work at 2.00pm rather than 2.30pm and GSK will not pay for labour charges for an extra half an hour. Invoice 135 is for an amount of $13,370.00 plus GST of $1,337.00 constituting $14,707.00. Mr Kirk, in the spreadsheet, says that the correct amount for Invoice 135 ought to be $10,915.00 including GST and that Invoice 137 ought also to be $10,915.00 including GST.

25    Conair disputes the calculations contained in the spreadsheet. At para 84 of Mr Wheat’s affidavit, he sets out the precise calculation giving rise to the invoice. The point of departure between Mr Wheat and Mr Kirk can be seen in Mr Wheat’s calculations which are based upon a number of hours at $70.00 per hour, a number of hours at $105.00 per hour and a number of hours at $140.00 per hour. Mr Kirk says that the calculations all ought to be at the rate of $70.00 per hour. This application is not the forum in which that dispute can be resolved. For present purposes, it is enough to note that the following amounts are undisputed by GSK.

26    That means that of the amount the subject of the demand ($66,100.00), $30,748.00 is uncontested which leaves $35,352.00 as the amount of the contested claim. As to the question of whether the relevant workers ceased work at 2.00pm or not and whether they did so every day, Mr Slayter says that as the site foreman (as a subcontractor to GSK) at the Regis Chelmer Aged Care Facility he had a range of responsibilities (set out at para 3(e) to (m)) and while onsite he observed that Conair’s workers would often take lunch breaks for 45 minutes and they packed up their tools at 2.00pm notwithstanding that they were contracted to work until 2.30pm. Mr Slayter says that during the project he spoke to Mr Wheat and asked him to attend the site to assist with rectifying issues Mr Slayter was having with Conair’s workers. Mr Slayter says that Mr Wheat rarely attended the site.

27    However, Mr Kirk says that GSK has other off-setting claims. In Mr Kirk’s first affidavit, he essentially says nothing about this topic at all except to say this. Invoice 142 being a claim related to the remainder of the job is disputed as a number of rectification works have been undertaken to rectify Conair’s contended faulty workmanship and in that regard, notices over time had issued to Conair to carry out rectification works. Mr Kirk says that the extent of the “back charges” is unknown and will not be known until the rectification work is complete and thus, GSK cannot calculate the amount of any off-setting claim.

28    In Mr Kirk’s affidavit of 3 August 2017, he explains the nature of the claims GSK seeks to make against Conair. They fall into two categories. The first concerns rectification work and the second concerns the cost incurred by GSK in completing work it says Conair was supposed to perform under the First Agreement. The completion work addresses the topic of a contended failure to install air conditioning grills at the Regis Chelmer Aged Care Facility. The total number of air conditioning grills involved is 848.

29    As to the claim relating to the grills, Mr Kirk says that the grills were separated into a range of sizes and shapes according to the room to which they were to be fitted. He says that Conair failed to complete the installations in accordance with the scope of works under the First Agreement. He says that GSK found it necessary to engage Globe Group Labour Service Pty Ltd (“Globe”) to carry out the unfinished grill installation work. He says that Globe have assigned four labourers to do the work each day for 7.6 hours per day. He says that Globe began the installation work on 26 June 2017 and the job was to be completed by the end of August 2017. Completing the work is said to have involved 48 days of labour hire at the rate of $408.50 per day per labourer resulting in an anticipated completion cost payable to Globe of $78,432.00. He says that GSK has already paid Globe $22,081.95 and that its total estimated cost of doing the completion work will be the full amount of $78,432.00.

30    I will return to the matter of the grills later in these reasons.

31    As to the rectification work, Mr Kirk says that Conair incorrectly positioned Fan Core Units (“FCU”) in 120 bedrooms. He says that GSK has engaged Globe to carry out adjustments which include adjusting the height, level and position of each FCU in the ceiling space of 120 bedrooms. The Globe cost is $53.75 per labour hour. Each installation will take approximately two hours of labour work and thus 120 installations at two hours per installation at $53.75 amounts to a rectification cost of $12,900.00.

32    Apart from the FCUs, GSK says that Conair incorrectly fitted 22 Cushion Head Boxes (“CHB”) and that in order to correctly fit each CHB it will be necessary to cut through the ceiling (Task 1), replace the cushion head (Task 2), fix the ceiling (Task 3) and paint the ceiling (Task 4). The cost of the work concerning Tasks 1 and 2 is said to amount to $4,730.00.

33    Mr Kirk filed a further affidavit dated 18 August 2017 in which he refers to the final invoices received from Globe. He says at para 3 that Globe’s final invoices total $77,247.14 and that those invoices relate to installation of the grills, rectification work to the FCUs and rectification work to the CHBs. Since the latter two items amount to $12,900.00 plus $4,730.00 ($17,630.00), the grill installation work has cost $59,617.14.

34    Apart from Tasks 1 and 2 concerning the CHBs, Tasks 3 and 4 involve replacing the ceiling which will involve engaging a person to do the gyprock work and engaging a painter to paint the ceiling. In Mr Kirk’s affidavit of 18 August 2017, he says that he has received oral estimates to complete Tasks 3 and 4 of $11,000.00.

35    Mr Kirk also says in his affidavit of 18 August 2017 that GSK has incurred costs of approximately $18,480.00 in hiring a site foreman to supervise installation and rectification work.

36    Thus, Mr Kirk says that GSK will incur a further amount of $29,480.00. Thus, Mr Kirk says that the total costs GSK will incur in undertaking the grill installation work, the FCU and CHB work, the Tasks 3 and 4 work and hiring a supervisor, amount to $106,727.14.

37    The odd thing about the application is that Mr Kirk, in his affidavit of 26 July 2017, where he lays out GSK’s basis for a genuine dispute, fails to address, other than in very loose terms, the precise basis for a claim for rectification work and completion work. Ordinarily, the failure to identify those matters with any degree of precision at all would be fatal to making out a so-called “genuine dispute” reliant upon an off-setting claim based upon the need to undertake so-called rectification work and/or completion work. However, the annexures to Mr Kirk’s first affidavit contain a sequence of exchanges concerning both topics. Apart from disputes in relation to the invoices, GSK, by letter dated 16 June 2017 addressed to Mr Wheat, said that the FCU in all bedrooms had been installed too close to the gyprock throughout the job site and each FCU would need to be re-hung “in some way to not affect the grill fit off”. Apparently, each FCU has to be installed in a way which enables the grill to be fitted so that it has the relevant relationship with the surrounding gyprock. In that letter, Mr Kirk also said this: “Please provide labour to do so Monday morning 19th June 2017, failing to do so we will engage an external party to undertake the work required and subsequently charge this to Conair Installations as a back charge. We have provided a picture attached for your reference.” That letter pre-dates the issue of the statutory demand on 28 June 2017 and, obviously enough, pre-dates service of the demand.

38    This topic of the relationship between the FCUs, duct work and the “position edge” of the gyprock is also the subject of Mr Wheat’s email of 19 June 2017 at 7.04am to Mr Kirk; and Mr Kirk’s email to Mr Wheat of 19 June 2017 at 4.06pm; and Mr Kirk’s email to Mr Wheat of 20 June 2017 at 11.32am. There is also a discussion in the emails about the issue concerning the grills, whether the grills were onsite or not and the general range of complaints Mr Wheat makes about Mr Kirk’s failure to have grills delivered to site and other such matters. It is not necessary to set out the content of all of those matters. It is clear that before the service of the demand there was a dispute between the parties about this topic. The issue of the FCUs is the subject of Mr Kirk’s further letter to Mr Wheat dated 29 June 2017. As to the rectification claim, clearly enough, Mr Kirk was agitating with Mr Wheat the difficulties associated with the FCUs in all bedrooms. In that letter, he says that GSK has retained an external party to undertake the relevant work. That proved to be Globe.

39    Accordingly, I am satisfied that there is, in the papers, a dispute by which GSK agitates the need to have rectification work done and takes issue with completion work relating to the grills. I am thus satisfied that the dispute is genuinely raised because the content and seeds of the dispute can be seen in the exchanges pre-dating the demand. This application is not the forum for the resolution of those matters. For present purposes, I am satisfied that although there is an uncontested amount payable by GSK to Conair of $30,748.00, GSK has a claim at least (whether ultimately shown to be good or bad) to the contended costs associated with undertaking rectification work and completion work. I do not accept that the contended cross-claim properly comprehends, at least on the evidence available at the moment, the costs of a site foreman at $18,480.00. It is not clear from this material whether the costs of a site foreman represent a “but for” cost related to the rectification and completion work.

40    The other aspect of the matter concerns the documents relied upon by Mr Kirk in his affidavit of 18 August 2017 at GSK-1. Those documents are said to be a true copy of all invoices received from the Globe Group for the relevant work. Conair says that an examination of the documents at GSK-1 reveal a number of anomalies. Conair says that when the invoices are examined together with the supporting worksheets it can be seen that some of the worksheets refer to work done at the Chelmer site but other worksheets suggest an entirely different site. The anomalous invoices and related worksheets are these:

41    The total of these invoices related to worksheets/sites which appear to have nothing to do with the Chelmer site amounts to $21,019.66. Counsel for GSK says that these site names (apart from the blank ones) written in the worksheets might relate to wings or parts of the Regis Chelmer Aged Care Facility. It seems odd that many of the worksheets describe the site as Chelmer or Regis Chelmer whereas these other worksheets have an entirely different name.

42    Assuming for the moment that the invoices relating to worksheets which appear not to relate to Chelmer are excluded, the measure of the cross-claim would then be $106,727.14 less the project supervisor costs of $18,480.00 less the anomalous invoices of $21,019.66 in which event the measure of the cross-claim would be $67,227.48. The uncontested or admitted amount of the statutory claim is $30,748.00 and thus the contended cross-claim exceeds the amount of the uncontested claim by $36,479.48.

43    It may be that in a proper forum, GSK will establish that each of the anomalous invoices properly relate to the Chelmer site. It may be that in a resolution of the contested or controversial matters, Conair will establish the merits of its position and resist the claims. Nevertheless, all of those matters are matters to be decided in another forum. The only questions are whether GSK has established a basis for a genuine dispute concerning the statutory claims; whether it has a genuine dispute as to an off-setting cross-claim; and the relativity between the uncontested part of the statutory claim and the contended cross-claim or off-set.

44    Having regard to the findings at [41] of these reasons, the statutory demand is to be set aside on the footing that I am satisfied that there is a genuine dispute in relation to matters the subject of a cross-claim or off-set which exceeds the uncontested part of the statutory demand. The controversy concerning those matters needs to be determined other than within the forum of this application.

45    Conair must pay the costs of and incidental to the application.

Associate:

Dated:    19 October 2017