C & E Pty Ltd v Corrigan [2006] QCA 47 [2006] 2 Qd R 399

SUPREME COURT OF QUEENSLAND CITATION: C & E P/L v Corrigan [2006] QCA 47 PARTIES: C & E PTY LTD ACN 086 482 840 (applicant/appellant) v ANDREW CORRIGAN (respondent/respondent) FILE NO/S: Appeal No 6198 of 2005 SC No 4985 of 2005 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 3 March 2006 DELIVERED AT: Brisbane HEARING DATE: 17 February 2006 JUDGES: Williams and Keane JJA and Muir J Separate reasons for judgment of each member of the Court, each concurring as to the orders made ORDER: 1. Appeal dismissed 2. Appellant to pay the respondent's costs of the appeal to be assessed on the standard basis CATCHWORDS: CORPORATIONS - WINDING UP - WINDING UP BY COURT - GROUNDS FOR WINDING UP - INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE A DEMAND - OFFSETTING CLAIMS - where respondent made statutory demand on the appellant on the basis of indebtedness arising out of a costs order against the appellant - where appellant sought to set aside demand - where appellant claimed it had cause of action against respondent for breach of duty leading to damages but had not yet commenced proceedings - where appellant argued that Queensland Building Services Authority Act 1991 (Qld) imposed duty of care on respondent - whether the appellant's claims can be characterised as genuine claims CORPORATIONS - WINDING UP - WINDING UP BY COURT - GROUNDS FOR WINDING UP - INSOLVENCY - STATUTORY DEMAND - APPLICATION TO SET ASIDE A DEMAND - EXTENSION OF TIME AND GENERALLY - where appellant's application to set aside statutory demand was -- 1 of 8 -- 2 served after 4 pm on the 21st day after the service of the statutory demand - where r 103 of the Uniform Civil Procedure Rules 1999 (Qld) deems service after 4 pm to have taken place on the next day - whether r 103 of the UCPR should be understood as purporting to affect the time limit for service provided by s 459G(3) of the Corporations Act 2001 (Cth) Corporations Act 2001 (Cth), s 459G, s 459H Queensland Building Services Authority Act 1991 (Qld), s 31, s 43 Uniform Civil Procedure Rules 1999 (Qld), r 103 David Grant & Co Pty Ltd v Westpac Banking Corporation (1994) 12 ACLC 895, applied David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265, applied Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd [2003] QSC 98; [2004] 1 Qd R 140, considered Salomon v Salomon & Co Ltd [1897] AC 22 Valleyfield Pty Ltd v Primac Ltd & Anor [2003] QCA 339; Appeal No 3605 of 2002, 8 August 2003, considered COUNSEL: R M Kelly for the appellant P W Hackett for the respondent SOLICITORS: MacDonnells for the appellant Crouch & Lyndon for the respondent [1] WILLIAMS JA: I have had the advantage of reading the reasons for judgment of Keane JA and there is nothing I wish to add thereto. I agree with the orders proposed. [2] KEANE JA: On 25 July 2005, the learned primary judge dismissed the application by C & E Pty Ltd ("C & E") to set aside the respondent's statutory demand. His Honour made this order on the footing that C & E could show, neither a legal basis for an offsetting claim within the meaning of s 459H of the Corporations Act 2001 (Cth) ("the Act"), nor the amount of that offsetting claim as required by s 459H. On this appeal, C & E seeks to challenge these conclusions. [3] Some brief reference to the history of the dispute between the parties is necessary to appreciate C & E's argument in relation to its asserted offsetting claim. Background [4] The respondent was the sole director of CMC Brisbane Pty Ltd ("CMC") which entered into an agreement dated 21 September 2001 with the appellant for the construction of 10 houses at Yeronga for a price of $4.04 million plus GST. CMC was a "licensed contractor" within the meaning of the Queensland Building Services Authority Act 1991 (Qld) ("the QBSA Act"). The respondent was the nominated supervisor of CMC in respect of the building work to be performed by CMC for C & E pursuant to s 31 of the QBSA Act. [5] Pursuant to the building agreement, Cottee Parker Architects ("CPA") were engaged as the project superintendent. Practical completion of the works was achieved on 22 -- 2 of 8 -- 3 February 2003. On 13 October 2003, CMC went into voluntary administration and, on 6 November 2003, C & E terminated the building contract. [6] On 28 November 2003, CMC entered into a Deed of Company Arrangement. C & E made an unsuccessful attempt to set aside that deed, as a result of which an order for costs was made against C & E in favour of the respondent. Those costs were assessed on 10 May 2005 in the sum of $11,503.50. A statutory demand was made by the respondent upon C & E on the strength of C & E's indebtedness for these costs. [7] C & E contends that the respondent owed C & E a duty of care co-extensive with the statutory duty imposed upon the respondent by s 43(2) of the QBSA Act or a breach of the statutory duty imposed by that provision. It contends that the respondent breached that duty as a result of which the appellant suffered losses estimated to be of the order of $400,000. C & E has not yet brought proceedings with a view to establishing and enforcing this claim against the respondent. [8] C & E did not serve its application to set aside the statutory demand until after 4.00 pm on the 21st day after the statutory demand had been served. The appellant's argument [9] At the outset, it may be noted that the appellant contends that the respondent has admitted in an affidavit sworn on 20 July 2005 that he owed the appellant the duty for which the appellant contends. Putting to one side the difficulty of treating the statement of a layman as a binding admission as to a matter of law, in sober truth the respondent's affidavit makes no concession of the kind asserted by the appellant. Reference to the affidavit shows that the respondent said: "I confirm that I was CMC's nominee for the purpose of the Act and had the responsibility of supervising the project on CMC's behalf". On any fair reading, all that the respondent was conceding was that he was acting on CMC's behalf. The only acknowledgement of a duty owed by the respondent which is implicit in this statement is of the duty which he owed to CMC as its agent. [10] Next C & E seeks to argue that a duty of care arose on the respondent's part in favour of C & E because of the vulnerability of C & E to loss if the respondent failed to carry out his supervisory functions with reasonable care and skill. This contention is confronted by the difficulty posed by the existence of an elaborate contractual charter of the rights of C & E in relation to the construction. It is this charter of rights which determines the extent of C & E's "vulnerability" to loss on the project by reason of the acts or omissions of CMC. The material relied upon by C & E does not afford an arguable basis for its offsetting claim based on a duty of care at common law. On the evidence before this Court, the respondent no more owed a duty of care to C & E to keep it safe from financial loss on the project than the directors of a multinational corporation owe a duty of care to its customers to keep them safe from economic harm as a result of the contracts they might make with that company.1 C & E bargained and paid for the benefit of its contractual rights against CMC, a legal entity quite distinct from the respondent. It did not bargain, or pay, for the respondent's guarantee of CMC's performance or his separate promise to use his endeavours to ensure that C & E's interest in the due completion of the project was protected. 1 Cf Salomon v Salomon & Co Ltd [1897] AC 22. -- 3 of 8 -- 4 [11] The attempt by C & E to support its argument by reference to the decision of this Court in Valleyfield Pty Ltd v Primac Ltd & Anor2 is quite misplaced. In that case, the existence of a duty in the designer of an irrigation system for a farm was held to arise in circumstances where the plaintiff's contract with the party engaged to install the system left the plaintiff to rely entirely on the designer with whom it had no contract in relation to the quality of the system.3 [12] Further, putting to one side the fact that C & E had engaged CPA to superintend the construction of the project, there is also the difficulty that the respondent was duty- bound to act in the interests of CMC, whose interests were in tension with those of C & E. No authority supports the broad view that "the imperial march of negligence"4 has reached the point of generally imposing conflicts of duty upon directors of companies so that they are duty bound by the common law to compromise their equitable obligations. It may be possible that such a duty could be imposed by reason of the special facts of some particular cases but, on the material before the learned primary judge and this Court, this is not such a case. [13] In support of its submission in this regard, C & E relied upon the provisions of s 31 of the QBSA which requires that it is a condition of the entitlement of a company to a contractor's licence that the company's nominated supervisor is licensed as required by s 31(2) of the QBSA. It was argued that the effect of s 31 was to render the nominated supervisor personally liable for the financial consequences of the contractor's default. The language of s 31 of the QBSA, and indeed the other provisions of the QBSA, contains no hint of an intention on the part of the legislature to effect a further statutory inroad into the limited liability of those who carry on trade behind the corporate veil or to impose personal liabilities on a company's nominated supervisor. The contention advanced by C & E in this regard is, in my respectful opinion, unsustainable as a matter of law. [14] In the alternative, C & E asserts a claim based upon its contention that s 43(2) of the QBSA Act creates a private right of action in C & E. In this regard, s 43 of the QBSA Act provides relevantly as follows: "(2) A licensed contractor, and for a licensed contractor that is a company, the company and the company’s nominee are obliged to ensure adequate supervision of all building work carried out under the licence and accordingly the systems in place for supervision … … (5) If building work is not supervised as required by this section the licensed contractor commits an offence and, if the licensed contractor is a company, the company’s nominee also commits an offence ..." [15] While the attachment of a penal sanction to a breach of s 43(2) of the QBSA Act might not of itself be sufficient to quell an implication of a legislative intention to create a private right of action in a person adversely affected by a breach of s 43(2),5 there are a number of other considerations which, in my respectful opinion, 2 [2003] QCA 339. 3 [2003] QCA 339 at [60]. 4 Cf Astley & Ors v Austrust Limited (1999) 197 CLR 1 at 23 [48]. 5 Cf Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 424 - 425; Heil v Suncoast Fitness [2000] 2 Qd R 23 at 28; but see Schiliro v Peppercorn ChildCare Centres Pty Ltd (No 2) [2001] 1 Qd R 518 at 525 - 526 [19] - [23]. -- 4 of 8 -- 5 have that effect. First, there is the difficulty of defining the category of persons to whom the statutory duty is owed if the reference point for the category is directed simply to those persons who are likely to suffer financial loss by reason of a breach of that duty. Does the suggested duty enure only for the benefit of the other party to the building contract, or does it extend to a mortgagee of the land on which the construction takes place? A mortgagee of the land on which the project is being constructed will often have at least as strong an interest in the financial project as the mortgagor. The mortgagee may have lent most of the finance for the project and the mortgagor may have no other assets. Does the duty extend to the unsecured creditors of the other party to the contract? Why should they be entitled to less protection in the eyes of the law than a secured creditor? Does the statutory right of action extend even to the creditors of the contractor itself? These creditors may be adversely affected if the project is not profitable. The QBSA Act does not provide an answer to these questions. That is not, in my view, a deficiency in the drafting of the statute. It is simply a reflection of the absence of any intention on the part of the legislature to create the statutory right of action for which C & E contends. [16] Secondly, the QBSA Act creates, by Pt 5, a statutory insurance scheme which affords compensation for defective building work. The protection afforded by the scheme is limited to residential construction work. To the extent that it is apt to afford consumers a means of recovery for defective work in addition to that available from the contractor, the presence in the QBSA Act of these provisions creating a scheme to afford a limited form of protection against the financial consequences of deficient performance by contractors tends strongly against the existence of private rights of action created sub silentio by the legislation. [17] In any event, and of crucial importance in this case, C & E is not able to show that the, as yet unquantified, losses which it claims to have suffered were arguably caused by a want of reasonable skill and diligence on the respondent's part in relation to the supervision of the project. Other reasons may account for the failure of performance on the part of CMC which are entirely consistent with diligent supervision by the respondent. The most obvious possibility is a want of the necessary capital. [18] This aspect of C & E's case is no more than assertion and speculation. C & E relies, in this regard, upon an affidavit of Mr E C Helmold, an architect who inspected the project works in May 2003. According to Mr Helmold, there were defects in CMC's performance of the works, but he does not assert that the defects were caused by a want of diligent supervision on the respondent's part. Apart from Mr Helmold's affidavit, C & E relies upon the statement by Mr Seirlis, the director of C & E to this effect: "As a result of the defects the applicant has suffered considerable loss and damage for which it believes Mr Corrigan bears responsibility pursuant to section 43 of the Act as supervisor of the performance of building works by CMC." This assertion by Mr Seirlis is bereft of any particulars. It is impossible to discern from Mr Seirlis' affidavit any basis on which he could purport to "swear the issue" in this way. -- 5 of 8 -- 6 [19] While the bar set by s 459G of the Corporations Act is not set very high,6 it is necessary to be able to show that there is a "genuine" claim as opposed to a claim which is "spurious" or "misconceived". The claims made by C & E are not able to be characterised as genuine claims. Rather, they are properly characterised as spurious or misconceived. They do not meet the requirements of s 459G. The learned primary judge was right to dismiss the application on this basis. The notice of contention [20] The respondent contends that C & E's application should have been dismissed because it was deemed by r 103 of the UCPR to have been served on the 22nd day after the respondent had served his statutory demand upon C & E. It was not necessary for the learned primary judge to uphold this contention because he disposed of C & E's application on the footing that there was no basis for the offsetting claim asserted by C & E. [21] In light of this Court's affirmation of the decision below, the only practical significance which might attach to the resolution of this contention is that it would found a claim by the respondent for indemnity costs in relation to the appeal. In this regard, it is said that the late service of the application to set aside the statutory demand was drawn to the attention of C & E's legal advisers, and that, in these circumstances, their persistence with the application and thereafter the appeal was vexatious. [22] Pursuant to s 459G of the Act, C & E's application to set aside the statutory demand was required to be served within 21 days of the service of the respondent's statutory demand. It appears that, because of a lengthy registry queue, C & E's application was not served until 4.30 pm on the 21st day. [23] The respondent relies upon r 103 of the Uniform Civil Procedure Rules 1999 (Qld) ("the UCPR") which provides that: "If a document is served on a person after 4.00 p.m., the document is taken to have been served on the next day." [24] On one view of r 103, it may be understood as referring only to documents the service of which is authorised or required by the UCPR itself or where the time for service is fixed by the UCPR itself. The application to set aside a statutory demand is not such a document. The authority for the application to set aside a statutory demand is s 459G of the Act. [25] In this regard, in David Grant & Co Pty Ltd v Westpac Banking Corporation,7 Hayne J said: "It was submitted on behalf of the appellants that the period of 21 days spoken of in s 459G was to be calculated in the manner fixed by Ch V of the Rules of Court and thus, by operation of r 3.01 of Ch V should be made according to the application of r 3.05(2) of Ch I of the Rules. That rule provides: 'In calculating the time fixed by these rules or by any order fixing, extending or abridging time any document which is served after 4 pm or on any day the office of the 6 JJMMR Pty Ltd v LG International Corp [2003] QCA 519 at [3] - [4]. 7 (1994) 12 ACLC 895. -- 6 of 8 -- 7 court is closed shall be taken to have been served on the next day the office is open.' It is to be noted that the rule speaks of calculating 'the time fixed by these rules or by any order fixing, extending or abridging time'. The time now in question is not fixed by Rule of Court or by Order but is fixed by statute. Thus in its terms, r 3.05(2) has no application to the present matter. Further, it would seem to me that it is s 105 of the Corporations Law which governs how the period fixed by the statute is to be calculated. Applying that provision, it is clear that the present applications were made one day too late." [26] It is not said that the application of present concern was out of time if s 105 of the Act is applied to calculate time fixed by s 459G in this case. The respondent argues, however, that these observations by Hayne J are not applicable here because r 103 of the UCPR is not expressly qualified in its operation by reference to times fixed by the rules or order of the court. While it is true that this express qualification does not appear, it is, as I have said, open to read the operation of these provisions of the UCPR as confined by their context. In this regard, there is no inkling of an intention in the UCPR to make general provision for the exigencies of service of any document of which service is authorised by any legislation of the State, much less of the Commonwealth. [27] The respondent also relies upon the decision of Helman J in Parklands Blue Metal Pty Ltd v Kowari Motors Pty Ltd8 where his Honour applied r 103 to hold that service after 4.00 pm on the 21st day was deemed to be service on the 22nd day after the service of the statutory demand. It does not appear that the question whether the time allowed for service by s 459G of the Act was not abridged by r 103 of the UCPR was argued before his Honour, and his Honour did not refer to the observations of Hayne J to which I have referred. [28] It was established by the High Court's decision in David Grant & Co Pty Ltd v Westpac Banking Corporation9 that the time allowed by s 459G(3) of the Act for the service of an application to set aside a statutory demand cannot be extended by reliance upon procedural provisions similar to those contained in the UCPR. In my view, by a parity of reasoning, the time allowed by s 459G(3) cannot be cut down by such procedural provisions. To construe r 103 of the UCPR to operate in that way would be to abridge by eight hours the time allowed for an application by s 459G (3). Construed in this way, r 103 of the UCPR would detract from the right to apply to set aside a statutory demand conferred by the Act. It is unlikely that the Commonwealth Parliament contemplated that the rights conferred by s 459G could be cut down in this way. The construction of r 103 for which the respondent contends would thus give rise to difficulties by reason of the terms of s 109 of the Commonwealth Constitution. [29] In my view, r 103 of the UCPR should not be understood as purporting to affect the time for service provided by s 459G(3) of the Act. 8 [2003] QSC 098; [2004] 1 Qd R 140. 9 (1995) 184 CLR 265. -- 7 of 8 -- 8 Conclusion and orders [30] For these reasons, I would reject the respondent's contention and hold that the application was served upon the respondent within the time provided by s 459G(3) of the Act. [31] The appeal should be dismissed. The appellant should pay the respondent's costs of the appeal to be assessed on the standard basis. [32] MUIR J: I have read and agree with the reasons of Keane JA and the orders he proposes. -- 8 of 8 --