Northbuild Construction PNG Ltd v All Power Services Ltd [2016] PGSC 95; SC1863 (15 December 2016)

SC1863

PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 117 OF 2016

NORTHBUILD CONSTRUCTION PNG LIMITED
Appellant

ALL POWER SERVICES LIMITED
Respondent

Waigani: Sawong J, Collier J, Geita J
2016: 12^th, 15^th December

COMPANY LAW - application to set aside creditor's statutory demand – section 338 Companies Act 1997 – "substantial dispute as to whether or not the debt is owing or is due" – judicial discretion – whether primary Judge had regard to evidence of the appellant that there was a substantial dispute

Cases Cited:
Papua New Guinea Cases

Akap v Korakali [2012] SC 1179
Bean v Bean [1980] PNGLR 307
Curtain Bros(PNG) Ltd v UPNG (2005) SC788
In re Bemobile Ltd [2011] N4712
Kore v State (2011) SC1136
Moran Development Corporation Ltd v Akida Investments Ltd [2003] N2458
Pacific Rim Constructors – Singapore PTE Ltd v Huala Hire & Construction Ltd [2012] N4710
PNG Balsa Company Ltd v New Britain Balsa CompanyLtd [2004] N2520
The State v Akoita (2009) SC1016

Overseas Cases

House v R (1936) 55 CLR 499
Silverpoint International Limited v Wedding Earthmovers Ltd [2007] NZHC 1769

Counsel

I Molloy, for the Appellant
PA Lowing, for the Respondent

15^th December, 2016

1. BY THE COURT: This is an appeal against a decision of a Judge of the National Court in proceeding OS No. 371 of 2016 delivered on 11 August 2016. In that decision his Honour dismissed an application by the appellant (“Northbuild”) pursuant to section 338 of the Companies Act 1997 to set aside a creditor's statutory demand issued against it by the respondent (“All Power”) in the amount of K462,170.15.

Background

2. At material times Northbuild was the head contractor for the Morobe Haus Renovation in Lae. All Power was a sub-contractor engaged by Northbuild to carry out electrical work for this project under a subcontract dated 27 November 2014. The creditor’s statutory demand issued by All Power dated 11 May 2016 related primarily, but not exclusively, to monies All Power claimed were payable to it by Northbuild pursuant to that subcontract. Details of amounts owing as set out in the statutory demand were as follows:

Description of debt(s)	Original	Paid	Amount of debt(s)
General electrical works : 26/1/15 Invoice Budgeted works and Approved Valuations relating to Contract P02 Morobe Haus: 20/4/15 Invoice 00005760 25/5/15 Invoice 00005947 25/5/16 Invoice 00005948 22/6/15 Invoice 00006167 22/6/15 Invoice 00006168 25/7/15 Invoice 00006377 02/9/15 Invoice 00006676 23/9/15 Invoice 00006801	1,936.00 35,995.96 764,641.44 6,815.68 424,869.73 7,762.55 6,474.79 1,006.45 117,108.40	607,906.42 261,128.36 35,406.07	1,936.00 35,995.96 156,735.02 6,815.68 163.741.37 7,762.55 6,474.79 1,006.45 81,702.23

Total amount of debt(s) owing 462,170.15

3. From submissions put to us at the hearing of this appeal we understand that the primary evidence before the primary Judge was:

• an affidavit of Mr Paul Boddington, the managing director of Northbuild, sworn 23 June 2016 and
• an affidavit of Mr Mathew Sims, the director and shareholder of All Power, sworn 27 July 2016, replying to Mr Boddington’s affidavit.
  

Decision of the primary Judge

4. Counsel in the appeal submitted that the matter was fully argued before the primary Judge. The decision of his Honour was delivered ex tempore. His Honour noted the principal contentions of Northbuild that All Power’s statutory demand should be set aside for the following reasons:

(a) Northbuild had a substantial dispute as to the debt claimed in the statutory demand, and
(b) Northbuild had a setoff and counter claim against All Power for breach of contract and pre and post contractual negligent misrepresentation and omissions.

5. His Honour referred to section 338 of the Companies Act, noting that it was similar to sections 290 (1) and (4) of the New Zealand Companies Act 1993 and citing the New Zealand decision of Silverpoint International Limited v Wedding Earthmovers Ltd [2007] NZHC 1769. Further, his Honour referred to the Papua New Guinean decisions PNG Balsa Company Ltd v New Britain Balsa Company Ltd [2004] N2520, In re Bemobile Ltd [2011] N4712, Moran Development Corporation Ltd v Akida Investments Ltd [2003] N2458 and Pacific Rim Constructors - Singapore PTE Ltd v Huala Hire & Construction Ltd [2012] N4710. His Honour then summarised principles emerging from these cases referable to when the Court should set aside a statutory demand under section 338 as follows:

(1) The applicant must establish that there is a fairly arguable basis or substantial dispute as to the amount claimed in the statutory demand
(2) The evidence in support of an application must demonstrate there was arguably a genuine and substantial dispute which goes towards supporting the claim that the debt is [sic] in dispute is indeed disputed
(3) Mere assertions that there exists a debt or debts (owing by the creditor to the debtor) are not sufficient to set aside a statutory demand
(4) Where proof has been given that there exists a substantial dispute, the statutory demand must be set aside.

6. Materially his Honour continued:

In this instance the statutory demand is for K462,170.15. It consists of first, a claim for work performed in December 2015 for a project concerning the new Bank of South Pacific building in Lae. It is in the sum of K101,936.00 [sic]. The remainder of the claims in the statutory demand are in relation to the subcontract entered into by the parties for the provision of electrical services for the Morobe House renovation in Lae. NCPL is the head contractor and APSL is the subcontractor.

As to the claim for the work performed at the BSP building, the managing director of NCPL, Mr Paul Bordington [sic] deposes that it has nothing to do with the plaintiff NCPL. Further, in an email annexed to his affidavit dated 12 August 2015, he states ; “Invoice 5240 for works carried over Christmas has no supporting backup and could not have been requested by NB as all staff were on leave. I suggest you take the invoice up with BSP.”

In the affidavit of Mathew Sims, however, a director of APSL, he deposes that Mr Scott Hemsley, NCPL’s project manager engaged APSL to perform the work as the electrical company that had been subcontracted had pulled out. Further, what he described as a hand-written note made in a meeting between Mr Hemsley and APSL’s representative, Mr Jeff Hodges is annexed. It allegedly outlines the tasks needed to be performed in the absence of NCPL’s staff.

I am not satisfied that NCPL has demonstrated through quotes and through material evidence that it has a substantial dispute in regard to that claim. It has merely asserted that as its employees were on leave, it is not liable, which is not sufficient.

As to the remainder of the claims for debts in the statutory demand, it is not disputed that they relate to the subcontract entered into between the parties for the provision of electrical services for the Morobe House renovation in Lae by APSL.

Mr Bordington [sic] in his affidavit deposes as to the disputes that NCPL has with what is claimed. He also deposes as to the dispute resolution procedure set out in annexure A32 of the subcontract and that APSL has only partially complied with the dispute resolution procedure. And in his view, APSL is not entitled to bring any claim to a court or to issue a creditor’s statutory demand at this stage of the dispute.

As to Mr Bordington’s [sic] view, I note that annexure A32 includes the word “may”. This perhaps casts doubt on whether Mr Bordington’s [sic] view is correct. In any event, Mr Bordington [sic] is of the view that the dispute resolution procedure must be used as it is evident from his affidavit and copies of correspondence annexed thereto. Given this, if Mr Bordington [sic], the managing director of NCPL believes that NCPL has a dispute or difference with the claims of APSL in the statutory demand and in respect of which there has been numerous correspondence, one would expect that the dispute resolution procedure set out in annexure A32 would have been utilised. Specifically, that notice would have been given pursuant to annexure A32 (a)(2).

Counsel for APSL submitted that no notices at all had been given by NCPL and counsel for NCPL did not dispute this, or draw the court’s attention to any such notices or give any reason why the dispute resolution procedure under the subcontract was not utilized by NCPL.

In the absence of such, as no notices have been given by NCPL under annexure A32 (a)(2) of disputes or differences, and given that NCPL’s managing director is of the view that the dispute resolution procedure should be used where there is a dispute concerning the subcontract, this court can safely conclude, notwithstanding the affidavit of Mr Bordington [sic], that NCPL does not have a dispute or difference with the claims of APSL, otherwise, notices would have been given of such disputes or differences under annexure A32 (a)(2) of the subcontract.

Given this, it is not necessary to consider the other submissions of counsel on this aspect. Consequently, I am satisfied that NCPL has not made out its case that it has a substantial dispute or disputes with the claims of APSL in APSL’s statutory demand.

7. His Honour considered Northbuild’s claimed setoff and counter claim in the sum of K1,285,171.90. His Honour was not satisfied that there was sufficient material before him to allow him to form the view that Northbuild had a valid set off counter claim.
In conclusion his Honour dismissed Northbuild’s application with costs.

Grounds of appeal

8. Northbuild appealed against the decision of his Honour on the following grounds:

1. ...
2. ...
3. Grounds
   The grounds of appeal are as follows
   • 3.1. His Honour, the Judge at first instance (the Primary Judge) erred in fact and law in finding that there was no substantial dispute on the amount demanded by the Respondent in its Creditor’s Statutory Demand dated 11 May 2016, served on the Appellant on 24 May 2016 (the Statutory Demand), relating to the Subcontract for the MorobeHaus Renovation in Law dated 27 November 2014 No P02.600.600.01 (the Subcontract), when
     • 3.1.1. There was sufficient evidence to grant the application to set aside the Statutory Demand under Section 338 (4) (a) and (b) of the Companies Act 1997;
     • 3.1.2. His Honour, the Primary Judge, erred in fact and law in failing to consider at all, or properly consider, the evidence particularised under paragraph 3.1.3 of this Notice of Appeal, substantially disputing the total amount claimed by the Respondent in the Statutory Demand
     • 3.1.3. The evidence of the Appellant in the Affidavit of Paul Joseph Boddington worn and filed on 23 June 2016 clearly demonstrated a number of substantial disputes on the amounts claimed under various invoices relied on in the Statutory Demand, particularly as evidenced in the following paragraphs:
       • (a) 70 (a) to (f): There were substantial errors in considering the evidence and calculating the amounts indicated in the various invoices relied on in the Statutory Demand, including:
         1. That the Respondent failed to include all payments made by the Appellant under the Subcontract by an amount of K948,653.19, an amount greater than the claim in the Statutory Demand;
         2. The Respondent made claims for payment in Invoice 5247 dated 26 January 2015 relating to electrical work on the Bank of South Pacific project which was not related to the Subcontract or the dispute, not authorised by the Appellant on any evidence, and which was not claimable in the amount of K1,936.00; and
         2. His Honour, the Primary Judge, erred in accepting a handwritten note allegedly by Mr Hodges for the Respondent as evidence of authorisation of work by the Appellant for Invoice 5247, when this is not signed or endorsed by the Appellant, not a record of the Appellant, and not approved in accordance with the provisions of any contract or agreement.
     2. 71 to 86: There should be a substantial reduction by variation of K340,143.18 on the Offshore Purchasing facilitated by the Appellant in relation to Lighting under Clause 22 of Annexure B of the Subcontract which was misrepresented by the Respondent and not accounted for in its invoices;
     100. [not pressed] ;
     4. 89 to 92: There was no deduction for the variation to the Subcontract for Electrical Cabling in the amount of K115,169.29;
     5. 93 to 100: There was no deduction with respect to work done and work not completed on the Appellant’s office in the amount of K13,534.87;
     6. 101 to 104: There was a substantial dispute with respect to payment of retentions of K57,870.00 which would only have been due and payable on the expiry of final completion at the conclusion of the Defects Liability Maintenance period September 2016, a date which had not yet occurred;
     7. 105 to 110: The Subcontract provided the mechanism for resolving disputes, and the Respondent had raised substantial disputes through this process, through correspondence, and through answering the Notices of Dispute raised by the Respondent, the subject of the Statutory Demand. The parties had made attempts to resolve the disputes and the Respondent failed to complete this process through formal medication prior to issuing a Statutory Demand
   • 3.2. [not pressed]
   • 3.3. His Honour, the Primary judge erred in law and in fact in ruling that the Appellant had not utilised the dispute resolution procedure in Annexure A – 32 of the Subcontract, when this provision allows either party to give notice of a dispute, and this was done by the Respondent by a Notice of Dispute dated 4 July 2015 and a Notice of Dispute dated 31 July 2015, relating to the matters contained in the Statutory Demand, and the parties attended two dispute conferences dated 10 August 2015 and 27 November 2015.
   • 3.4. His Honour, the Primary judge erred in law in ruling that he did not need to consider other submissions of Counsel on the matters of substantial dispute, as set out in paragraph 3.1.3 of this Notice of Appeal.
   • 3.5. His Honour, the Primary Judge erred in law and fact in finding that there was no counterclaim, set-off or cross-demand pursuant to section 338 (4) (b) of the Companies Act 1997, when the evidence of the Appellant as referred to in 3.1.3 of this Notice of Appeal and in paragraph 114 of the Affidavit of Paul Joseph Boddington sworn and filed on 32 June 2016 calculated and confirms that the Appellant had a counter-claim in the sum of K1, 285,171.90 against the Respondent.
   • 3.6. His Honour, the Primary Judge erred in law and in fact in failing to consider the evidence in paragraphs 115 to 119 of the Affidavit of Paul Joseph Boddington sworn and filed on 23 June 2016, confirming the Appellant’s solvency and its ability to pay its debts as it become due in the ordinary course of business.
     

9. Northbuild sought the following orders in lieu of his Honour’s decision:

• The appeal be allowed
• The Orders of the Primary Judge in proceedings OS No. 371 of 2016 be set aside
• Pursuant to section 338 of the Companies Act 1997, an order that the Creditor’s Statutory Demand for Payment of Debt (Form 42) of the Defendant dated 11 May 2016 demanding payment of K462,170.15, and served on the Plaintiff on 24 May 2016, be set aside.
• The Respondent shall pay the costs of the Appellant in this Appeal.
• Such further or other orders as the Court deems necessary.
  

10. In his submissions at the hearing of the appeal, Counsel for Northbuild addressed the grounds of appeal before the Court under the following headings:

(1) Generally, the primary Judge failed to have regard to the evidence of Mr Boddington that Northbuild substantially disputed the existence of debts claimed by All Power (grounds 3.1.1 and 3.1.2)
(2) The primary Judge failed to have regard to evidence that Northbuild had made six payments to All Power (ground 3.13 (a)(i))
(3) The primary Judge failed to have regard to evidence that the alleged debt of K1,936 owing from Northbuild to All Power had nothing to do with Northbuild (ground 3.13 (a)(ii))
(4) The primary Judge failed to have regard to evidence of variation to the sub-contract following off-shore purchases made by Northbuild at the request of All Power (ground 3.13 (b))
(5) The primary Judge failed to have regard to evidence of variation to the sub-contract in respect of Northbuild’s request to All Power to provide electrical work for the fit out of Northbuild’s office in the project building (ground 3.13 (d))
(6) The primary Judge failed to have regard to evidence that additional work undertaken by All Power had been overvalued (ground 3.13 (e))
(7) The primary Judge failed to have regard to evidence that All Power had claimed retention money which was not yet due (ground 3.13 (f))
(8) The primary Judge failed to have regard to the actual dispute between the parties in finding that the appellant had failed to engage the dispute resolution procedure in clause 32 of the general conditions of subcontract.

Relevant legislation

11. Section 338 of the Companies Act 1997 provides as follows:

338. COURT MAY SET ASIDE STATUTORY DEMAND.

(1) The Court may, on the application of the company, set aside a statutory demand.

(2) The application shall be made, and served on the creditor, within one month of the date of service of the demand.

(3) No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the Court may extend the time for compliance with the statutory demand.

(4) The Court may grant an application to set aside a statutory demand where it is satisfied that–

(a) there is a substantial dispute whether or not the debt is owing or is due; or

(b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or

(c) the demand ought to be set aside on other grounds.

(5) A demand shall not be set aside by reason only of a defect or irregularity unless the Court considers that substantial injustice would be caused if it were not set aside.

(6) In Subsection (5), “defect” includes an immaterial misstatement of the amount due to the creditor and an immaterial misdescription of the debt referred to in the demand.

(7) An order under this section may be made subject to conditions.

12. A statutory demand made by a creditor pursuant to section 337 of the Companies Act must be in respect of a debt that is due and not less than the prescribed amount (section 337 (2)(a)). The prescribed amount is K1,000.00 (regulation 16 of the Companies Regulation 1998).

Consideration

13. The power conferred on the Court to set aside a creditor’s statutory demand pursuant to section 338 is discretionary. The discretion of the Court conferred by section 338 is constrained by the terms of section 338 (4), and more generally by therequirement that the discretion be exercised judicially. Principles applicable to appellate review of an exercise of judicial discretion were set out by Dixon, Evatt and McTiernan JJ in the High Court of Australia in House v R (1936) 55 CLR 499 at 504-5 in the following terms:

The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

14. These principles have been adopted by this Court in such cases asBean v Bean[1980] PNGLR 307, Curtain Bros (PNG) Ltd v UPNG (2005) SC788, The State v Akoita (2009) SC1016, Akap v Korakali [2012] SC1179, and Kore v State (2011) SC1136.

15. Having regard to his Honour’s judgment we are satisfied that the exercise of judicial discretion by his Honour did miscarry, and that the appeal should be allowed.

16. First. the case was argued before his Honour primarily on the basis that Northbuild asserted a "substantial dispute" in respect of the debts claimed by All Power in its creditor’s statutory demand. Section 338 (4)(a) does not require the Court to assess whether there is a substantial dispute as to the amount claimed in the statutory demand. It requires the Court to assess whether, on the facts of the particular case before the Court, there is a substantial dispute as to whether or not the debt is owing or is due. So, for example:

• An allegation by the alleged debtor that the amount claimed by the creditor in the statutory demand is incorrect may constitute a “substantial dispute” as to whether the debt is owing if the parties disagree as to the amount and the difference between them is significant.
• Conversely, a dispute between the parties as to the amount owing where the difference in the amount they each claim is minor may mean that the dispute as to the existence of the debt is not “substantial”.
• A difference in the positions of the parties so far as concerns the timing of payment of a debt may constitute a substantial dispute between them as to whether the debt is owing or due (for example, a claim by the creditor that the debt is due immediately compared with an allegation of the debtor that the debt is due twelve months hence).
• A claim by an alleged debtor that no debt at all exists clearly would also be a “substantial dispute” irrespective of the amount claimed (provided, of course, that it exceeds the prescribed amount of K1,000.00).
  

17. Second, and more specifically in the circumstances of this case, an assessment by the Court that there is a substantial dispute between the parties as to whether or not the debt claimed in the statutory demand is owing or due, requires careful examination of submissions and evidence of the parties.
The affidavit of Mr Boddington of 23 June 2016 was twenty-nine pages in length, with more than 80 annexures spread over some two hundred pages. In his affidavit Mr Boddington disputed the claimed debt of All Power in that, relevantly, he deposed as follows:

(1) (At paragraph 70 (e)(vi)) Northbuild denied All Power’s assertion in its statutory demand that All Power had received only three payments from payments from Northbuild, when Northbuild had paid eight progress claims plus one certified invoice for repayment of monies paid for contractual dispute variation IV24. Mr Boddington annexed as “PJB 67D” a summary of EFT payments made by Northbuild to All Power totalling K1,853,094.04. Mr Boddington deposed that the total payments stated by All Power were K904,440.85.
(2) (At paragraph 70(d)(i)) All Power’s claim for works carried out on another project at the BSP bank invoiced in the amount of K1,936 on 23 January 2015 had nothing to do with Northbuild. Northbuild informed All Power of its position in respect of this claimed amount by email on 22 August 2015 (annexure “PJB 67C”)
(3) (At paragraphs 71-86) In summary : Northbuild, at the request of the defendant, ordered, transported, imported and paid for offshore purchases in light fittings from December 2014 through to March 2015, and the parties agreed that Northbuild should issue a provisional variation for reimbursement until the parties were able to complete the detailed reconciliation. A further provisional variation took place. Mr Boddington deposed that the only legal method to finalise the offshore purchases of lighting was to change the subcontract value by variation to the subcontract. Extensive negotiations took place between the parties. As a result there was a total reduction in the subcontract price to be adjusted as a variation in favour of the appellant of K340,143.19 (annexure “PJB 30”). The respondent denied the entitlement of the appellant to claim the substitution of the lights purchase variation to the subcontract, and the issue became a point of substantial dispute between the parties.
(4) (At paragraphs 89-92) In summary : it became apparent to Northbuild that All Power had reused a substantial amount of used cabling already on site, but All Power had continued to claim for the cost of new cabling without variation of the contract. Further, All Power had put forward inflated prices for the material cost of new cabling, but sourced new cabling at cheaper rates. Mr Boddington annexed a copy of an internal measure and calculation carried out by Northbuild’s electrician to quantify and value the variation deduction. Mr Boddington also deposed that the amount in dispute of K115,169.29 for cabling needed to be deducted from the subcontract sum and the statutory demand.
(5) (At paragraphs 93-100) In summary : Northbuild requested All Power to provide electrical work for the fit out of Northbuild’s office in the project building. All Power quoted the work on 13 March 2015 at K25,187.13, and Northbuild accepted this quote. Work commenced and on 1 July 2015 Northbuild paid 50% for the work performed on this variation. On 25 July 2015 All Power provided Northbuild with a second quotation for the increased scope of work and enquired which quote Northbuild wished to proceed with. Northbuild informed All Power that it wished to proceed with the first quotation. On 6 August 2015 Northbuild finalised its review of the works carried out by All Power and raised a second variation by a deduction of K840.00. The parties are in dispute about that deduction, as to whether the work was completed in accordance with the subcontract, and whether All Power completed all of the work. Mr Boddington deposes that the amount in dispute is K13,534.87.
(6) (At paragraphs 101-104) In summary : there were two retentions under the subcontract as security for the performance of the work, each to a value of 2.5% of the subcontract value. The amount for each retention was 2 x K57,870.00. The first retention was paid to All Power on substantial completion. All Power made a claim for the second retention but was not entitled to it because the subcontract had not reached final completion. Mr Boddington deposes that the second retention amount of K257,870 should be deducted from amount claimed by All Power.
(7) (At paragraphs 105-113) In summary: disputes under the subcontract between the parties were governed by the dispute resolution procedure set out in clause 32 of the subcontract. All Power only partially complied with the procedure and is not entitled to bring any claim to Court at this stage of the dispute. Further, All Power failed to provide Northbuild with sufficient information proving payment for materials and costs off the work as required by clause 20 (d) of the subcontract. The parties attended a dispute conference in an attempt to settle their disputes on 10 August 2015, which attempt failed.

18. In his affidavit, Mr Sims replied to Mr Boddington’s evidence. Materially:

(1) The evidence in paragraph 70 (e)(vi) of Mr Boddington’s affidavit was not disputed by Mr Sims.
(2) The evidence in paragraph 70 (d)(i) of Mr Boddington’s affidavit in respect of the amount of K1,936 claimed by All Power was disputed by Mr Sims. In his affidavit at paragraph 5 Mr Sims deposed :

The first item of debt on the Statutory Demand in the amount of K1,936 relates to general electrical work supplied by the defendant to the plaintiff in December 2015 for the new Bank South Pacific Bank building in Lae, Morobe Province. The defendant was engaged by the plaintiff to do general electrical work towards the end of this project as the electrical company sub-contracted for it had pulled out. A hand written note was made in a meeting between the plaintiff’s project manager Mr Scott Elmslie and the defendant’s representative Geoff Hodges on the morning he left for Christmas leave outlining tasks he needed done in the absence of the Northbuild staff.

Annexed hereto and marked as Annexure “B” is a copy of the hand written note taken during the meeting between Mr Scott Elmslie and Geoff Hodges.

(3) In respect of the evidence at paragraphs 71-86 of Mr Boddington’s affidavit, Mr Sims deposed at paragraph 29 of his affidavit, inter alia, that the parties agreed on the total amount of K544,335.10 that was to be deducted from the K3.2 million for off shore purchases. There continued to be discussions between the parties over alleged short payment of the respondent’s invoices, and mediation was attempted.
(4) The evidence in paragraphs 89-92of Mr Boddington’s affidavit was not disputed by Mr Sims.
(5) The evidence in paragraphs 93-100of Mr Boddington’s affidavit was not disputed by Mr Sims
(6) The evidence in paragraphs 101-104of Mr Boddington’s affidavit was not disputed by Mr Sims
(7) In respect of the evidence at paragraphs 105-113 of Mr Boddington’s affidavit, Mr Sims deposed at paragraph 29 :

... As discussions between the parties themselves could not lead to a resolution, the defendant requested for the plaintiff to provide it’s [sic] solicitor’s account details so a deposit could be made for the mediator, Tony O’Gorman to be engaged to mediate this matter as per Annexure A – 32 (c) and (d) of the Sub Contract. The plaintiff, however, failed to provide these details and so mediation could not take place.

19. Prima facie, it appears that there were disputes between the parties in respect of both the existence of and the amount of the debtsallegedly owing by Northbuild to All Power. It also appears that those disputes were substantial in both their number and in respect of the monetary amounts involved.
The question for this Court is whether his Honour erred in the exercise of his discretion in concluding that there was no substantial dispute as to whether or not the debts claimed by All Power were owing or due.

20. We consider that his Honour did so err. It is apparent from the terms of the primary judgment that his Honour did not have regard to the extensive evidence of Mr Boddington supporting a finding that there was a substantial dispute between the parties as to the existence of the debts claimed by All Power. In particular we note the following.

First, his Honour did not refer in his judgment to evidence in paragraphs 70 (e)(vi), 71-86, 89-92, 93-100 and 101-104 of Mr Boddington’s affidavit pointing to the existence of substantial disputes in respect of the debts claimed by All Power. While it is not critical that a primary Judge examine in minute detail everyitem of evidence before the court, the absence of discussion by the Judge of evidence important to the case of a plaintiff suggests that the Judge has not had regard to it. As a general proposition a decision of the Court in such circumstances adverse to a plaintiff involves a denial of natural justice to that plaintiff.

Second, while his Honour examined the respondent’s claim of K1,936(although we note the apparent typographical error in the primary judgment referring incorrectly to the amount of K101,936.00) and the competing submissions of the parties in respect of this claim:

• We have difficulty following his Honour’s comment that Northbuild should have demonstrated “through quotes” and material evidence that there was a substantial dispute in respect of this alleged debt. Logically – if Northbuild claimed that it had nothing to do with the invoice representing this debt, there would be no quotes or other relevant contractual documentation between the parties.
• It appears that his Honour did not have regard to existing material evidence of Northbuild before the Court which indicated that Northbuild had a substantial dispute with All Power in relation to this claim – namely annexure “PJB 67C” to Mr Boddington’s affidavit.
• We note that the document upon which All Power relied in respect of this claim, namely Annexure “B” to Mr Sims’ affidavit, was a rough hand drawing with no references to Northbuild or Northbuild property. In the absence of cross-examination of Mr Sims in the proceedings before the primary Judge it is unclear how his Honour accepted, without further query, the claimed provenance of that document.
  

Third, his Honour’s finding that the Court could safely conclude the absence of any substantial dispute by Northbuild in respect of the debts claimed by All Power (because Northbuild had not given notice of such disputes or differences under Annexure A 32 (a)(ii) of the subcontract) is prima facie inconsistent with the terms of clause 31 of the subcontract, which requires the subcontractor to notify the builder of any claims. We note clause 31 provides:

NOTIFICATION OF CLAIMS

(a) Notwithstanding any other provision of this Subcontract, the Builder will not be liable upon any Claim (other than a claim for a progress payment under clause 20) by the Subcontractor in respect of any matter arising out of or in connection with this Subcontract, the subject matter of this Subcontract or otherwise, including but not limited to, variations and claims for any form of loss or damages, unless:

• (i) A notice of claim, together with full particulars thereof is lodged in writing with the Builder not later than the time specified in this Subcontract, or if no time is stated, 10 Business Days after the date the Subcontractor becomes aware or should have become aware of the occurrence of the events or circumstances on which the Claim is based; and
• (ii) The notice outlines the legal basis of the Claim and full details of the likely quantum.

(b) If the Subcontractor does not give the builder the notice in accordance with clause 31(a), the Subcontractor shall not be entitled to the Claim and the Builder will be released for all time from the Claim.
(c) Within 10 Business Days of receipt of a notice of claim under clause 31 (a) the Builder shall assess the notice of claim and notify the Subcontractor in writing of the decision on the claim.
(d) Unless the Subcontractor within a further 10 Business Days of such notification gives a notice of dispute under clause 32 which includes such a decision, the decision will be final and binding on the parties and will not be subject to review.

21. It may be that on a proper interpretation of the subcontract, clause 31 does not assist Northbuild. On its face however clause 31 appears to be relevant, particularly in respect of the provisions of clause 31 (d) which link clause 31 to clause 32 of the subcontract. In any event, his Honour did not consider this issue, which was material to Northbuild’s claim of the existence of a substantial dispute in relation to All Power’s claims.

22. In our view these findings show that his Honour erred in the exercise of his discretion under section 338 of the Companies Act, and are sufficient to dispose of this appeal. We do not consider it necessary to consider whether Northbuild was solvent at material times (and therefore whether his Honour could have ordered the statutory demand set aside “on other grounds” within the meaning of section 338 (4)(c)), or whether Northbuild had a valid counter claim or set-off to the debts set out in All Power’s creditor’s statutory demand.
Finally in the circumstances it is appropriate that costs should follow the event.

THE COURT ORDERS THAT:

1. The appeal is allowed.
2. The Orders of the primary Judge in proceedings OS No. 371 of 2016 be set aside.
3. Pursuant to section 338 of the Companies Act 1997, the Creditor’s Statutory Demand for Payment of Debt (Form 42) of the respondent dated 11 May 2016 demanding payment of K462,170.15, and served on the appellant on 24 May 2016, is set aside.
4. The respondent shall pay the costs of the appellant in this appeal, to be taxed if not agreed.

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O’Briens: Lawyer for the Appellant
Leahy Lewin Lowing Sullivan Lawyers: Lawyer for the Respondent