Adams v Northern Plumbing (NQ) Pty Ltd [2010] FMCA 224 (29 March 2010)

Last Updated: 3 May 2011

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ADAMS v NORTHERN PLUMBING (NQ) PTY LTD

[2010] FMCA 224

BANKRUPTCY – Setting aside the bankruptcy notice – Building and Construction Industry Payments Act filed in the District Court – whether a sealed adjudication certificate is a judgment in form – whether an adjudication certificate constitutes a final judgment.

Bankruptcy Act 1966 (Cth) Building and Construction Industry Payments Act 2009 (Qld) Corporations Act 2001 (Cth)

Cavanah & Anor v Advance Earthmoving & Haulage Pty Ltd [2008] FMCA 427 Commonwealth Bank of Australia v Horvath [1999] FCA 143; [1999] 161 ALR 441 J Hutchinson Pty Ltd v Galform Pty Ltd & Ors [2008] QSC 205 Mango Boulevard Pty Ltd v Spencer & Ors [2009] QSC 389 Peekhurst Pty Ltd v Wallace & Anor [2007] QSC 159 Re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1978 – 1980) 30 ALR 435 Re Todd, Ex Parte Pike (1924) 24 SR (NSW) 537 Reed Construction (Qld) Pty Ltd v Dellsun Pty Ltd [2009] QSC 263 Worchild v Drink Nightclub (Qld) Pty Ltd [2005] FCAFC 240; [2005] 224 ALR 339 Zen Ridgeway Pty Ltd v Adams Unrpt. QSC No 1377 of 2009 (3 April 09) de Jersey CJ

Applicant:

JOHN ADAMS

Respondent:

NORTHERN PLUMBING (NQ) PTY LTD

File Number:

BRG 180 of 2010

Judgment of:

Burnett FM

Hearing date:

17 March 2010

Date of Last Submission:

17 March 2010

Delivered at:

Brisbane

Delivered on:

29 March 2010

REPRESENTATION

Solicitors for the Applicant:

Mills Oakley

Solicitors for the Respondent:

Boulton Cleary & Kern

ORDERS

(1) Application dismissed.
(2) Unless application is made by either party within seven (7) days of today’s date order that the applicant pay the respondent’s cost of and incidental to this application to be assessed on the standard basis.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE

BRG 180 of 2010

JOHN ADAMS

Applicant

And

NORTHERN PLUMBING (NQ) PTY LTD

Respondent

REASONS FOR JUDGMENT

Introduction

1. In this application John Adams (the applicant) seeks orders pursuant to section 33, 40 and 41 of the Bankruptcy Act (the Act) for orders to set aside a bankruptcy notice QN159/2009 dated 22 December 2009 and served upon him by Northern Plumbing (NQ) Pty Ltd (Northern Plumbing). The basis for the bankruptcy notice was a certificate issued by an adjudicator pursuant to the Building and Construction Industry Payments Act 2009 (Qld) (BCIPA) which certificate was subsequently filed in the District Court of Townsville pursuant to the provisions of section 31 BCIPA.
2. Four grounds were advanced in support of the application:
   1. The sealed adjudication certificate is not a judgment in form and accordingly its attachment to the bankruptcy notice does not satisfy the requirements of section 41(2) of the Act;
   2. The adjudication certificate does not constitute a “final judgment” for the purpose of section 40(1)(g) of the Act;
   100. The applicant has a set off, cross claim or cross demand equal to or exceeding the sum payable under the final order;
   4. No amount is owing by the applicant to the respondent but rather any sum owed is owed by the entity PC Justice ATF John and Leonie Adams Family Trust.

Background Facts

3. Following an adjudication pursuant to the BCIPA the adjudicator assessed a sum of $80,911.76 as the adjudicated amount in favour of Northern Plumbing as claimant against the applicant together with interest and costs.
4. On 9 July 2009 the authorised nominating authority (ANA) issued an adjudication certificate in the adjudication. The parties identified in the adjudication certificate were “Northern Plumbing (Nq) Pty Ltd” as “claimant (Plaintiff)” and “John Adams T/As Adams Prestige Constructions” as “respondent (Defendant)”.
5. In the adjudication the adjudicator addressed the matters in issue concerning non-payment of the progress claim without regard to the underlying identities of the parties the subject of the claim. That matter was not in issue because the payment schedule itself did not identify it as an issue.[1]
6. It is evident from the material that the claimant in the adjudication was identified as “Northern Plumbing (NQ) Pty Ltd” and the respondent “John Adams” trading as “Adams Prestige Constructions”. In his adjudication response the respondent identified himself in the following terms:
   • “I am the respondent, and at all relevant times was trading as Adams Prestige Construction.”

The reference to “I” was a reference to the deponent John Adams.

7. The issue of identity arose in this case because of the description of the respondent as “Adams Prestige Construction Pty Ltd” in the letter forwarded by the claimant dated 3 September 2008 covering the application.[2] The covering letter itself was not the application for the purpose of section 21 BCIPA. In the ANA’s reply of 8 September 2008 to the Northern Plumbing’s correspondence enclosing the Notification of Acceptance of an Adjudication Application[3] the ANA correctly identified the respondent as “John Adams T/As Adams Prestige Constructions” as he was described in the application. It is fair to assume that the respondent never saw the claimant’s letter of 3 September 2008 so he would have been unaware of this inconsistency at the time he was served with the adjudication application. The notice of acceptance forwarded to both parties was dated 8 September 2008, five days after the claimant filed its application dated 3 September 2008.
8. The material delivered in the adjudication response clearly contained an admission by John Adams that he was in fact the respondent. If he had been seeking to advance an argument that he was not in fact a contracting party and that it was in fact “PC Justice Pty Ltd ATF John and Leonie Adams” as is now contended or some other entity he was duty bound to raise it in his payment schedule. It could only be considered by the adjudicator if raised in that document; section 18, section 24 and section 25 BCIPA.
9. The first adjudication decision subsequently issued identifying the respondent as “Adams Prestige Constructions Pty Ltd”. In his affidavit Daniel Ross Sampson, solicitor, then acting for Northern Plumbing swore that having discovered the anomaly in the respondent’s description he immediately wrote to the ANA to identify the difficulty. In part his letter noted:
   • “Enclosed for easy reference is a copy of your fax to our client 3 October 2008. The respondent is therein described as “Adams Prestige Construction Pty Ltd”. We consider this to be, with respect to the adjudicator, a clerical mistake and/or an error arising from an accidental slip or omission. No corporate entity by the name of “Adams Prestige Construction Pty Ltd” exists.”
10. The letter proceeded to request the ANA cause the adjudicator to correct the error pursuant to his powers under section 28 BCIPA. Other material was enclosed in support of that application.
11. Following that correspondence the ANA informed the adjudicator of the anomaly and the adjudicator in turn corrected the error. Under cover of fax dated 23 June 2009 an amended adjudication decision was forwarded by the ANA to Northern Plumbing correcting the error.[4]
12. On 9 July 2009 an adjudication certificate was received by Northern Plumbing’s solicitor from the ANA. It identified the respondent as “John Adams T/As Adams Prestige Constructions”. The certificate was for a sum of $95,889.99 including interest and costs.
13. On 20 July 2009 Mr Sampson on behalf of the Northern Plumbing caused the adjudication certificate together with a supporting affidavit of Mr Gniatkiewicz to be filed in the Townsville District Registry pursuant to section 31(2) of the BCIPA. No formal minute of judgment issued from the registry. Mr Sampson was clearly intrigued by this and accordingly phoned the registry on 21 July 2009 and had a conversation with the District Court Registrar, Ms Robyn Wegner. He queried why a minute of judgment had not been issued by the registry. He was informed by Ms Wegner and believed that there was no need for a minute of judgment because the adjudication certificate itself is filed and once filed it then becomes the judgment.
14. A copy of the filed adjudication certificate, that is, a copy of the adjudication certificate bearing the seal of the District Court Townsville, was subsequently attached to the bankruptcy notice issued on 22 December 2009. It is that bankruptcy notice which the applicant now seeks to have set aside.

Form of Judgment

15. On 20 July 2009 Northern Plumbing’s solicitors caused the adjudication certificate together with a supporting affidavit to be filed in the Townsville District Court Registry pursuant to section 31 of the BCIPA. No minute of judgment issued. However Northern Plumbing’s solicitors were given a sealed copy of the adjudication certificate. A copy of this was attached to the bankruptcy notice.
16. Section 41(2) of the Act requires that a bankruptcy notice must be in accordance with the form prescribed by the regulation. Regulation 4.02 prescribes Form 1 as the form of bankruptcy notice required to issue pursuant to section 41(2). Paragraph 2 of Form 1 provides, inter alia, “a copy of the judgment or order relied upon by the creditor is attached”. It is well settled that strict compliance with the regulation is required and that a failure to annex a copy of the judgment or order on which the bankruptcy notice is founded is an incurable and fundamental defect in the notice. See Commonwealth Bank of Australia v Horvath[5]; Worchild v Drink Nightclub (Qld) Pty Ltd[6].
17. The question here is whether or not the sealed adjudication certificate is a “judgment or order”. The applicant contends it is not relying on observations in Mango Boulevard Pty Ltd v Spencer & Ors[7].
18. I accept the wording of section 31(1) BCIPA is clear and unambiguous. It provides:
    • “31(1) An adjudication certificate may be filed as a judgment for a debt, and may be enforced, in a court of competent jurisdiction.”
19. The provisions of section 31(1) are specific to the circumstances of awards made pursuant to the BCIPA. They should prevail over the more general provisions provided for in the UCPR particularly where those provisions are not inconsistent with and in fact appear complimentary to the regime provided in section 31(1).
20. UPCR 661 being the provision that was considered in Mango Boulevard Pty Ltd v Spencer & Ors has no application in the BCIPA context because the relevant order, the adjudication certificate, is not an order “of a court”. UCPR 661 supports the common appreciation of a judgment being a minute or formal instrument because of its requirement that an order of a court “is filed in the court if a document embodying the order...is drawn up, settled and signed by the registrar”.
21. It is the absence of such a document that the applicant relies upon in support of its complaint.
22. However section 31 BCIPA concerns adjudication awards not court orders. That section merely provides that the adjudication certificate may be filed as a judgment for a debt and then enforced in a court of competent jurisdiction. It follows that the act of filing the adjudication certificate is the critical act. It cannot be filed unless supported by an affidavit of the kind referred to in s.31(2) BCIPA.
23. UCPR 967 provides that a document may be filed by delivering it personally at the registry. That is what occurred here. UCPR 968 then proceeds to provide that in respect of a document filed personally such a document is filed when the registrar records the document and stamps the seal of the court on it. The adjudication certificate in this case was stamped with the court seal. Given Mr Sampson’s evidence concerning both the filing of the adjudication certificate and its supporting affidavit and his discussion with the registrar of the court I proceed on the premise that the registry otherwise recorded the filing as required by UCPR 968. Generally UCPR 978 provides the court seal must be stamped on each document issued by the court. Again that matter appears on the face of the adjudication certificate.
24. In my view the adjudication certificate became a judgment of the District Court Townsville upon its filing on 20 July 2009. There was no requirement for the registrar to issue a separate minute or instrument of judgment and the sealed adjudication certificate in form constitutes the judgment or order upon which the bankruptcy notice was founded. The adjudication certificate was attached to the bankruptcy notice as required. It follows in my view that the bankruptcy notice is both valid and efficacious.

Final Judgment

25. Although the question of whether or not a judgment obtained pursuant to section 31 of the BCIPA constitutes a final judgment or order in the context of both corporate and personal insolvency was previously decided in both the Supreme Court of Queensland[8] and this Court[9], the applicant contends that the position no longer prevails since the judgment of Chief Justice de Jersey in Zen Ridgway Pty Ltd v Adams[10].
26. It was submitted on behalf of the applicant that the effect of the Chief Justice’s decision was to rule that a judgment entered pursuant to s.31 BCIPA was not a final judgment for the purposes of section 40(1)(g) of the Act.
27. Respectfully I do not agree.
28. Zen Ridgeway concerned an application to set aside a statutory demand pursuant to section 459H Corporations Act. The demand was addressed to the company and referred to the company’s debt to the creditor. The particulars of the debt referred to an adjudicated amount issued pursuant to the BCIPA and said to have been filed as a judgment debt in the District Court. In that instance the judgment entered in the District Court named different parties to those noted in the adjudicator’s certificate although its basis was said to be the adjudication certificate. The statutory demand was then issued on 16 January (but did not attach the first erroneous judgment but instead the adjudication certificate). A short time later the judgment was amended to bring it in line with the adjudication certificate. After detailing the history His Honour continued:
    • “But because the statutory demand in question did not refer to a judgment involving the instant parties and those subject to the adjudication certificate it is not possible to regard the statutory demand as asserting a debt which is a judgment debt.”
29. The applicant particularly relies upon the highlighted words. For the applicant it was contended that what His Honour was saying was that there must be in existence some judgment instrument before there could be said to be a “final judgment” and that the filing of an adjudication certificate and affidavit as required by section 31 BCIPA did not satisfy that requirement.
30. In my view the applicant’s reliance upon the highlighted words is selective and out of context.
31. First on a plain reading of the relevant passage of His Honour’s reasons, the reference to “a judgment” was not intended to stand alone. His Honour’s reference to “a judgment” was the subject of the sentence with the predicate being, “involving the instant parties...”.
32. In my view His Honour’s observations cannot be reasonably construed in the manner advanced by the applicant.
33. My construction of His Honour’s sentence is assisted by the context. That is in part informed by the debate which occurred before him. From the transcript of proceedings it is clear that there was an error in the identification of the parties in the original minute of judgment issued by the court. That judgment was not before me although it was clearly before His Honour and marked exhibit 1. The apparent difficulty with the statutory demand was that it identified, as parties, entities who were different from the entities identified in the original minute of judgment. The original minute of judgment was corrected and an amended judgment issued. However the damage was done. As His Honour observed:
    • “...The statutory demand in question did not refer to a judgment involving the instant parties...”
34. That is to say that the statutory demand identified different parties to those identified in the adjudication certificate and who were parties to the proceedings before His Honour.
35. That matter appears to have been further addressed in His Honour’s judgment by his later observation:
    • “The point is this statutory demand must be read as not based on any relevant judgment”.
36. In that instance the relevant judgment was the amended judgment and to that end was not the judgment identified in the statutory demand.
37. It follows that in Zen Ridgeway the case was determined on the basis of the identity of various parties at material stages leading up to and following the issue of the statutory demand and did not bring into question the correctness of the decisions of either J. Hutchinson Pty Ltd & Ors or Cavanah v Advance Earthmoving and Haulage Pty Ltd.
38. In this case there is no question as to the identity of the parties following on the issue of the corrected adjudication certificate and given that the judgment itself is premised upon the corrected adjudication certificate there is in existence a “final judgment” against the applicant as required by section 40(1)(g) of the Act.

Set Off

39. The applicant seeks to claim a set off or cross demand. Much of the debate revolved about the question of res judicata and whether or not the adjudication decision gives rise to a res judicata. However in my view the debate, while interesting, is of no specific assistance in this case. The issue of res judicata and set off discussed in the authorities cited by the applicant in argument had been agitated in the context of applications to set aside statutory demands forwarded under section 459E Corporations Act[11]. The context of those applications is subtly but significantly different to the bankruptcy context.
40. I shall address section 40(1)(g) shortly. However in general terms the Bankruptcy Act provides a two stage process. First an act of bankruptcy must be established. It is the act of bankruptcy that entitles the creditor to petition for a sequestration pursuant to section 52. Section 52(2) permits the court to dismiss the petition even if there has been an act of bankruptcy if solvency or other sufficient cause is demonstrated.
41. Section 40(1) generally provides for circumstances that give rise to an act of bankruptcy. It is the commission of the act of bankruptcy that enlivens the right to petition. The merits of any cross claim are tested at that later point. Although when considered in detail the differences between corporate and personal insolvency are patent in this very general sense there are close parallels between them.
42. In the context of the Corporations Act the decisions referred to examine the position that prevails when a statutory demand is made pursuant to section 459E. That provision permits a person to serve a demand on a company in respect of a “debt... that is due and payable”. However section 40(1)(g) is expressed to be in the context of a “... creditor who has obtained against the debtor a final judgment”.
43. The judgments in the Supreme Court proceedings referred to in argument had a common theme, the status of BCIPA judgments and the question of whether or not that gave rise to a res judicata or themselves denied a right of set off. The most recent authority referred to incorporating an analysis of both Queensland and New South Wales cases on this point was the decision of Martin J in Reed Construction (Qld) Pty Ltd v Dellsun Pty Ltd[12]. While it is plain that some of the earlier Queensland authorities referred to did not consider decisions on this point arising under the New South Wales legislation there was significant commonality and thought in respect of these issues albeit it differently expressed. However I do not think it is necessary for me to examine and discuss those matters. Suffice to say the position here is sufficiently addressed by the observation of Martin J at [46] where his Honour stated:

“...The terms of BCIPA cannot be used to constrain the operation of a Commonwealth statute such as the Corporations Act. It is sufficient, for the purposes of this decision, to hold that s 100(1)(c), by providing that nothing in part 3 of BCIPA affects any right that a party to a construction contract may have apart from the Act in relation to anything done or omitted to be done under the contract, is sufficient to allow (if it is otherwise needed) a party to raise a genuine dispute or an offsetting claim under s 459G of the Corporations Act.”

44. The Bankruptcy Act is also a Commonwealth Act. Accordingly just as a debtor may be permitted to raise a genuine dispute or offsetting claim under s 459G corporations Act so too may a debtor be permitted to raise such a matter under the Bankruptcy Act free of any impediment raised by a judgment made under BCIPA. However that matter may only be raised in the limited context provided. That is, in the case of an application to set aside the bankruptcy notice issued pursuant to s 40(1) (g), only if the debtor can satisfy the court that he has “...a counter claim, set-off or cross demand equal to or exceeding the amount of the judgment debt ...being a counter claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained.”
45. Section 40(1)(g) is expressed in entirely different terms to sections 459E and 459H. Unlike section 459E, section 40(1)(g) provides a much narrower construct for setting aside the bankruptcy notice than applies to setting aside a statutory demand. It is because of the much wider construct of the provisions of section 459E and its interaction with section 459H that at that stage of the winding up process there may be enquiry at that early time into the question of “genuine dispute” or “off setting claims”.
46. Those matters are only relevant in the bankruptcy context if the non compliant applicant “has a counter claim, set off or cross demand equal to or exceeding the amount of the judgment debt ... being a counter claim, set off or cross demand that he ... could not have set up in the ... proceeding in which the judgment or order was obtained.”
47. Accepting that section 40(1)(g) provides for a much narrower scope for review of the merits of any debt at the time of formal demand by bankruptcy notice, then unless the circumstances fall within the prescription provided in s40(1)(g), matters of merit are left to be considered at the petition stage where a debtor’s rights are recognised and if appropriate protected with the debtor bearing the onus of demonstrated solvency or other sufficient cause. That includes a right of set off or cross demand in response to the creditor’s application. This scheme provides a similar outcome to the scheme provided for under the scheme contained in Pt 5.4 of the Corporations Act although the procedural details are distinctly different.
48. It follows in my view that the authorities referred to by the applicant concerning the operation of the Corporations Act do not assist in the context of this application. At this point in time the matter to be examined is whether or not the counterclaim, set off or cross demand could not have been set up in the proceeding. That is the BCIPA application. The matters now sought to be agitated by the applicant including the identity of the respondent and quantum are matters which were either not raised in the payment schedule and accordingly were unable to be adjudicated upon; section 24(4) BCIPA, or matters upon which the adjudication was determined against the respondent. They could have been raised in the BCIPA proceeding. Clearly the applicant’s rights to prosecute those matters at a later time are preserved by s100 BCIPA and those matters may be agitated at a later time in the context of a creditor’s application pursuant to section 52. However this is not the time for those matters to be debated.
49. In any event the applicant by his own material acknowledged indebtedness to the creditor in the sum of $374. Even if he did have a counter-claim, set-off or cross demand it would not have been sufficient in those circumstances to meet the judgment.

Identity of Applicant

50. The applicant maintains that no amount is owing by it to the respondent but rather any sum owed is owed by the entity PC Justice Pty Ltd ATF John and Leonie Adams Family Trust. As I have noted earlier this matter was not raised in the payment schedule and accordingly could not be raised in the adjudication response and in turn considered by the adjudicator. It was clearly a matter which could have been set up in a cross demand in the proceeding but which the applicant failed to do. A very broad approach is applied to the term cross demand. As Lockhart J in Re Brink; Ex parte Commercial Banking Company of Sydney Ltd observed in citing with approval the remarks of Maughan AJ in Re Todd, Ex Parte Pike:
    • “The other term “cross demand” however, is not a technical term and must in my opinion refer to claims other than those which would be comprised in the two expressions “counter claim” and “set off”.[13]”
51. A defence denying contractual liability on the basis of identity would ordinarily be coupled with a third party claim in the subject proceeding against the entity asserted to be liable. Such a circumstance clearly gives rise to a cross demand.

A lesser sum is owed

52. The applicant maintains he owes Northern Plumbing a lesser sum than that in the adjudication certificate. I have earlier noted that he will not be estopped from asserting claims of this kind at a later time if an application is brought for sequestration. The matters were clearly raised in the adjudication proceeding and thus do not qualify for consideration under s.40(1)(g). I reject the applicant’s contentions in respect of this matter.

Conclusion

53. The applicant seeks to set aside the bankruptcy notice. He advanced four grounds. Those grounds and my findings are:
    1. The applicant contended the bankruptcy notice was defective because the filed adjudication certificate was not a “final judgment or order” in form. I am satisfied an adjudication certificate once filed in a court of competent jurisdiction satisfies the form for a judgment.
    2. The applicant contended the adjudication certificate was not in fact a “final judgment or order” in fact. I consider a BCIPA adjudication decision filed in a court of competent jurisdiction does give rise to a final judgment or order in fact.
    100. The applicant contends he had a set off or cross demand. While the applicant is not estopped from advancing a claim of set off or cross demand in response to a sequestration application it is not available to the applicant in response to an application to set aside a bankruptcy notice in circumstances where, as in this case, the set off or cross demand was one that he could have set up in the proceeding in which the judgment was obtained.
    4. The applicant also contends he owes the respondent a lesser sum. As with point (c) the applicant is not estopped from advancing this matter upon the hearing of a sequestration application. This matter was the subject of the adjudication decision and may not be enlivened at this stage as it does not satisfy the requirements of section 40(1)(g).
54. In the circumstances the application is dismissed.
55. Unless application is made by either party within seven (7) days of today’s date order that the applicant pay the respondent’s cost of and incidental to this application to be assessed on the standard basis.

I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Burnett FM

Date: 29 March 2010

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[1] Affidavit of John Adams Annexure JA Page 201-202.
[2] Affidavit of Gavin Gniatkiewicz filed 16 March 2010 Ex GG1 (p2)
[3] Affidavit of Gavin Gniatkiewicz filed 16 March 2010 Ex GG1 (p3)
[4] Affidavit if Daniel Ross Sampson filed 16 March 2010 Ex DR52 (p3)
[5] [1999] FCA 143; [1999] 161 ALR 441 at 442-4
[6] [2005] FCAFC 240; [2005] 224 ALR 339 at [8]
[7] [2009] QSC 389 at [32]
[8] J Hutchinson Pty Ltd v Galform Pty Ltd [2008] QSC 205
[9] Cavanah & Anor v Advance Earthmoving & Haulage Pty Ltd [2008] FMCA 427
[10] QSC No. 1377 of 2009 (3 April 2009) per; de Jersey CJ
[11] J. Hutchinson Pty ltd v Galform Pty Ltd [2008] QSC 205; Peakhurst Pty Ltd v Wallace [2007] QSC 159; and, Reed Construction (QLD) Pty Ltd v Dellsun Pty Ltd [2009] QSC 263
[12] [2009] QSC 263
[13] Re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1978 – 1980) 30 ALR 435 at 436