Advanced Electrical Equipment Pty Ltd v Mammoth Contracting Pty Ltd
[2018] WADC 43
•4 APRIL 2018
[2018] WADC 43
| JURISDICTION | : | DISTRICT COURT OF WESTERN AUSTRALIA |
| CITATION | : | ADVANCED ELECTRICAL EQUIPMENT PTY LTD -v- MAMMOTH CONTRACTING PTY LTD [2018] WADC 43 |
| CORAM | : JUDGE BRADDOCK | ||
| HEARD | : 2 MARCH 2018 | ||
| DELIVERED | : 4 APRIL 2018 | ||
| FILE NO/S |
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| BETWEEN |
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AND
MAMMOTH CONTRACTING PTY LTD
Defendant
Catchwords:
Practice and procedure - Summary judgment - Alleged defective goods -
Equitable set-off
Legislation:
District Court Rules 2005 O 15 r 6
Rules of the Supreme Court 1971 O 14, O 14 r 1(1), O 20 r 17
Result:
Judgment for plaintiff
[2018] WADC 43
Representation:
Counsel:
| Plaintiff | : | Mr M G S Crowley |
Defendant : Mr J R Birman
Solicitors:
| Plaintiff | : Diana Velevski |
Defendant : Birman & Ride
Case(s) referred to in decision(s):
Gallo v Dawson (1990) 64 ALJR 458
Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62
Maersk Australia Pty Ltd and Rebelo Nominees Pty Ltd [2005] WADC 81
McDonnell and East Ltd v McGregor (1936) 56 CLR 50
Morgan v Pallister [2004] WASC 188
Palaniappan v Westpac Banking Corporation [2016] WASCA 72
W Pope & Co Pty Ltd v Edward Souery & Co Pty Ltd [1983] WAR 117
Webster v Lampard (1993) 177 CLR 598
Westwind Air Charter Pty Ltd v Hawker De Havilland Ltd (1990) 3 WAR 71
[2018] WADC 43
JUDGE BRADDOCK
JUDGE BRADDOCK:
In this is application the plaintiff, Advanced Electrical Equipment Pty Ltd, sought summary judgment against the defendant, Mammoth Contracting Pty Ltd. The judgment seeks the sum of $122,362.76, plus interest, said to be due and owing for the supply of goods provided by the plaintiff to the defendant, at the defendant's request, between April and August 2016. This application comes before the court by way of review of the decision of a registrar dismissing the plaintiff's application on 30 August 2017. Such an appeal is conducted as a hearing de novo, pursuant to O 15 r 6 of the District Court Rules 2005.
The plaintiff filed a writ on 31 January 2017. A statement of claim was served on 22 March 2017. The defendant entered an appearance on 17 February 2017. The application seeking summary judgment was filed on 21 April 2017, together with an affidavit in support. Thus, the application was filed more than 21 days after the filing of the appearance. Pursuant to O14 r 1(1) Rules of the Supreme Court 1971 (RSC), the plaintiff was required to seek and has sought leave to make the application. The defendant did not oppose the grant of leave to extend time.
The registrar granted the application for an extension of time. The plaintiff says that it does not wish to disturb that order. An explanation for the delay was given in the affidavit in support of the application. The plaintiff says that after the defendant served its memorandum of appearance, solicitors for the plaintiff determined to amend the writ, resulting in some delay in the preparation of the statement of claim and the application for summary judgment. The discretion to extend time is given for the purpose of enabling the court to do justice between the parties: Gallo v Dawson (1990) 64 ALJR 458, 459 (McHugh J). There is some explanation for the delay, the delay is not great, and there is no objection to the extension of time. In my view, it is appropriate that time be extended in order that the issues between the parties might be determined expeditiously.
The evidence
The plaintiff relies upon two affidavits sworn by Mr Brett Andrew Szewczuk dated 29 March 2017 and 15 August 2017 ('first Szewczuk affidavit' and 'second Szewczuk affidavit' respectively). The defendant filed two affidavits, one sworn by Mr Allen Bruce Caratti on 12 May 2017 and one sworn by Mr Joseph Anthony Rossi on 16 May 2017 ('the Caratti affidavit' and 'the Rossi affidavit' respectively).
[2018] WADC 43
JUDGE BRADDOCK
The plaintiff's claim is founded upon a contract to supply goods to the defendant. This contract is said to be partly written and partly constituted by conduct. Insofar as it is written, the plaintiff relies upon a document entitled 'terms and conditions to provide credit', signed by a director of the defendant and a document entitled 'application for a commercial credit account' also signed by the same director on 30 March 2016. After signing the 'credit application', the defendant ordered electrical goods from the plaintiff which the plaintiff supplied to the defendant. This is the conduct relied upon. Included in the goods to be supplied were 4,500 m of electrical cable designated WPCEC1102. The price of the goods was to be either as quoted or invoiced by the plaintiff to the defendant. The first Szewczuk affidavit annexes the relevant quotations, invoices and the credit term documents.
The written terms and conditions provide for payment for any goods supplied in 30 days from the end of the month and the time of payment was specified as being of the essence. The document does not specify the end of which 'month', but argument before the court proceeded on the basis that it was the end of the month in which the goods were invoiced. It is not necessary to decide this point but it would be the appropriate construction to give commercial efficacy to the agreement. The plaintiff claims that in about March 2016 the defendant made several verbal and written purchase orders to the plaintiff for the supply of goods. Between April and August 2016 the plaintiff supplied or caused to be supplied the goods requested by the defendant. Subsequently, on various dates, the plaintiff invoiced the defendant for the goods delivered. The defendant has not paid for any of the goods delivered. The total of the outstanding invoices is $122,362.76. The plaintiff claims that sum, together with interest at the rate of 18%, in accordance with the terms of the credit arrangement, cl f(i). The plaintiff also seeks indemnity costs, in accordance with a further term, cl f(ii), which provides that:
all expenses incurred by the supplier in recovering monies due inclusive of solicitors charges debt collectors fees and disbursements and any costs or charges in relation to security documents and any fees and this honour shall be added to the debt due and owing by the customer.
[2018] WADC 43
JUDGE BRADDOCK
In the Caratti affidavit, the defendant does not dispute any of the matters pleaded in the statement of claim. The defendant says that it has not paid the charges due because 'some of the WPCEC1102 electrical cable supplied by the defendant was defective'. The defendant refers to correspondence May 2016 between an employee of the defendant and a manager of the plaintiff, concerning two drums of cable supplied, which were allegedly damaged. Upon a final demand being served in the sum claimed, the defendant wrote to the plaintiff disputing the final demand on the grounds that 'a number of the drums had manufacturing defects. Testing shows 240 LV vaults on a number of circuits, mainly neutral to earth faults'.
The Rossi affidavit asserts that Mr Rossi was a licensed cable layer of 20 years' experience, who was contracted by the defendant to lay cable on or about 6 May 2016. He described the tasks he was to perform in laying WPCEC1102 electrical cable. He asserts that during installation he found two splits in the cable, which he removed, and reported to an employee of the defendant. It appears that he completed the job of laying the cable, because he says that once he had completed the backfilling, he conducted some 'random sheath testing' on the cable. He says testing showed faults. He says that he has quoted the defendant $153,450 to dig up the cable and replace it.
The plaintiff's argument
The plaintiff says that it has satisfied the requirements for judgment under O14 RSC. The first Szewczuk affidavit verifies the statement of claim and deposes to his belief that the defendant has no defence to the plaintiff's claim. The plaintiff also relied upon the Caratti affidavit in which the defendant does not dispute any of the matters pleaded in the plaintiff's statement of claim. The plaintiff argued that the defendant's claim is for a set-off and there is no defence to the claim in the writ. Therefore, the plaintiff claimed that there was an evidential burden upon the defendant as to why judgment should not be given against it.
The plaintiff argued that the defendant's cross claim cannot be set-off at law in Western Australia, that it is not a liquidated claim, and that it is a claim for damages for breach of warranty. Further, the plaintiff argued that there was no recognisable basis upon which the defendant can claim to be protected in equity from the plaintiff's claim, as the mere existence of a cross claim is not sufficient to establish set-off. The plaintiff argued that there is no wrongdoing on its part.
[2018] WADC 43
JUDGE BRADDOCK
Further, the plaintiff argued that the claim was for payment under a line of credit extended to the defendant under the agreement, not a contract for the supply of goods and distinct from any right to damages by way of cross-claim for breach of warranty arising between vendors and purchaser. The plaintiff argued that no damage has been shown to have resulted to the defendant, that the defendant had failed to supply the plaintiff with details requested to permit an evaluation of that claim and that, under the contract, the plaintiff retained title to the goods pending payment.
In answer to the defendant's affidavits, the plaintiff argued that the court should not accept a claim for set-off that is uncertain and vague, such as the material placed before the court in the Rossi affidavit. The submission was that Mr Rossi said no more than that he had observed the cable had two splits, but nevertheless laid all the cable and backfilled it. Mr Rossi claimed that he subsequently ran some tests showing unidentified faults on various circuits. The defendant had not identified which cable involved, despite a request to do so.
The plaintiff pointed to the fact there was no evidence that the cable had been removed, or that the cable had caused any difficulty, or that any loss had been suffered by the defendant as a result of the alleged faults. The cable was used in May 2016 to provide power to residential blocks then being subdivided.
The plaintiff argued that conduct of the parties was relevant, and that a cross claim may only be set-off against the principal claim under a contract where the equity in the case required it. The plaintiff pointed to the fact that there has been delay by the defendant, a failure to provide information when requested, and a failure to pay any of the other accounts raised.
The defendant's argument
The defendant argued that the plaintiff should have been aware of which cable it had supplied to the defendant, and asserted that if the losses were suffered as a result of the breach of contract then the defendant was entitled to compensation to remedy the loss. The defendant relied upon Mr Rossi's quotation as to the loss. The defendant accepted that a sufficient equity must be found, and that if established it does not matter whether the claim is one for liquidated or unliquidated damages. The defendant asserted that as a general rule unconditional leave to defend ought to be given where there is a counterclaim that could be raised as an equitable set-off.
[2018] WADC 43
JUDGE BRADDOCK
The defendant argued that the agreement was for the supply of goods with a 30 day payment period. It should not be construed as a credit or finance agreement separate from the underlying transaction. Contrary to the submission of counsel for the plaintiff, this was not an option granted to the defendant to pay or accept finance after 30 days at will, but an agreement to pay within that period or suffer a penalty in default.
Relevant law
The basic legal principles regarding summary judgment application are not disputed. The plaintiff carries the burden of persuading the court that the claim is a good one, that there is no defence to it, that leave should not be granted to defend, and that judgment should be given for the plaintiff. The defendant is required to satisfy an evidentiary burden in opposing the application. The power to order summary judgment should be exercised with great care and should not be exercised unless it is clear there is no real question to be tried: Morgan v Pallister [2004] WASC 188 [4] (Pullin J).
Where there are disputed facts, the matter cannot be determined on conflicting affidavit material. For the purposes of a summary judgment application, issues must be determined on the basis that the defendant's version of the facts would ultimately be accepted at trial, assuming that they are not inherently incredible: Webster v Lampard (1993) 177 CLR 598, 608.
A broad framework for considering set-off is provided by O 20 r 17 of the RSC, but that rule does not displace the rules relating to equitable set-offs: Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62, 69. Where an action is for the payment for goods delivered, a cross-claim for the supply of defective goods is generally unavailable at law: Westwind Air Charter Pty Ltd v Hawker De Havilland Ltd (1990) 3 WAR 71, 85 – 86. Common law was ameliorated by statute in England and Wales in the mid-18th century, which law applied in Western Australia from settlement. The statutes of set-off permitted mutual debts to be set-off, which required the sums claimed to be liquidated. These statutes have never been repealed in Western Australia. A counterclaim which is merely a cross-action, not being a set-off, does not provide a defence to a claim so as to prevent summary judgment: McDonnell and East Ltd v McGregor (1936) 56 CLR 50, 62.
[2018] WADC 43
JUDGE BRADDOCK
In equity, an unliquidated claim may be set-off against a liquidated claim: Westwind Air Charter Pty Ltd v Hawker De Havilland Ltd (84) (Murray J). It is recognised that where a injunction would issue restraining the plaintiff at law from proceeding until he had satisfied a claim, whether be it legal or equitable, an equitable defence would now arises in courts having both legal and equitable jurisdiction: W Pope & Co Pty Ltd v Edward Souery & Co Pty Ltd [1983] WAR 117, 120 (Olney J).
Analysis of present application
The second Szewczuk affidavit asserts that invoice 912532 raised the charge for cable delivered to the site where Mr Rossi was to work. In the statement of claim, at par 7, Table A, this invoice is shown dated 11 August 2016 and related to goods delivered on or about 10 August 2016. The 'dispute', as indicated by the Caratti affidavit and the Rossi affidavit, relates to cable delivered prior to 6 May 2016. But for the fact that Mr Szewczuk confirmed that an issue about cable was raised in May 2016, and that cable was contained in invoice 912532, the 'dispute' would have appeared unrelated to the pleaded invoices, delivered in August 2016. However, it is clear that an issue arose in May 2016 concerning cable for which payment is now claimed and that goods were undisputedly delivered between April and August 2016.
Mr Caratti's letter to the plaintiff dated 5 September 2016, and his further letter to the plaintiff's solicitors on the 21 November 2016 refer to the defects in two drums of cable. The Rossi affidavit asserts that Mr Rossi tested the cable. Otherwise, there is no evidence of anything done in relation to testing or digging up the cable. Mr Rossi refers to '4 drums of cable', and finding 'two splits' without further particulars. Mr Carratti exhibits a photograph of cable but this is of such poor quality as to be useless. In any event, a photo of a section of cable on its own would be meaningless.
Mr Caratti states 'a number of drums had manufacturing defects' in his November letter, and in his September letter, he states 'the problem is that the cable has been laid and the defects will show when tested'.
On the defendant's evidence, in September the cable had not been tested and there is no reference to it having been dug up. The Rossi affidavit deals only with the laying of the cable and does not depose to the current position at the time of swearing his affidavit in May 2017.
[2018] WADC 43
JUDGE BRADDOCK
Therefore, there is no evidence to establish that the defendant has suffered any loss as a result of laying the cable. Mr Rossi's assertion that he 'has quoted the defendant the sum $153,400' is evidence only of that fact. In any claim for damages, further evidence would be required.
The facts of this case are simpler than some of the scenarios in the reported cases. This is not a situation where there has been a long standing course of dealing and a running account between parties has resulted in payment in respect of goods or services about which a subsequent dispute arises: W Pope & Co Pty Ltd v Edward Souery & Co Pty Ltd. The credit arrangement between the parties does not in terms state that payment under the contract should be made in full without any form of set-off or counterclaim even if there was a dispute: Maersk Australia Pty Ltd and Rebelo Nominees Pty Ltd [2005] WADC 81. The plaintiff's allegation is simply that the defendant has failed to pay on the invoices rendered within 30 days of the end of month, has further failed to pay after demand was made, and thus all monies owing under the arrangement are due and payable, plus interest.
I have considered the argument advanced by counsel for the plaintiff that this was a contract for finance or a credit contract rather than a contract for the supply of goods. I reject that proposition for the following reasons:
1. the agreement is pleaded, in par 3 of the statement of claim, as an agreement 'whereby the plaintiff would supply goods to the defendant'; 2. at par 4, the price and terms of payment are pleaded, including 30 days from the end of the month in which the invoice is rendered, with interest, (inter alia); 3. the plaintiff pleaded the invoices and made demand and the claim is made on the basis of failure to pay; and 4. The matters in 1, 2 and 3 above are confirmed and undisputed on the affidavit material.
The defendant takes issue with the quality of a portion of the goods supplied, which has been identified as comprising part of a particular invoice and as a result admits it has refused to pay the plaintiff.
[2018] WADC 43
JUDGE BRADDOCK
There are three issues to be determined on this application:
1. Has the plaintiff satisfied the requirements for summary judgment under O 14 RSC? 2. Has the defendant satisfied the evidential burden to demonstrate that there is an issue which ought to be tried in relation to the plaintiff's claim? 3. Assuming that the matters raised by the defendant could be established at trial, is there a claim which could amount to an equitable set-off against the plaintiff's claim?
In relation to the first question, the answer in my view is a positive one and the opposite in relation to question two. The matters raised by the defendant amount at their highest to a cross-claim for damages for breach of warranty as to the quality of cable supplied.
Equitable set-off – The third issue
Somewhat similar issues arose in Westwind Air Charter, although that case concerned a summary judgment application by the defendants on their counterclaim for maintenance and repair work done on aircraft by the defendant for the plaintiffs. The plaintiffs sought to raise an equitable set-off against the defendant's claims based on the claims for unliquidated damages for various breaches of contract and negligence. In his reasons for judgment in Westwind Air Charter, Murray J referred to the decision of Olney J in Pope and in particular to the reference to ICF Spry, 'Equitable Remedies', 2nd ed, 1980. Murray J quoted the following passage from R A Meagher QC, W M C Gummow and J R F Lehane, 'Equity: Doctrines and Remedies', 2nd ed, 1983 as succinctly stating the law (at page 768):
As set-off is said to exist when a defendant, in answer to a plaintiff's claim, is able to plead successfully that a countervailing claim which he has against the plaintiff absolves him, wholly or partially, from liability to the plaintiff. It is to be distinguished from a counterclaim in that a counterclaim is never a defence to a plaintiff's claim but an entirely independent action brought by a defendant against a plaintiff though in the same proceedings. A counterclaim must be used offensively: it cannot be used defensively. But a set-off, like an estoppel, and in the same limited sense, is a shield not a sword.
[2018] WADC 43
JUDGE BRADDOCK
Murray J also referred to the following passage from the same text (page 85 of judgment):
One ingredient was necessary in equity but not required at law, ie that the set-off actually go to the root of, be essentially bound up with, 'impeach', the title of the plaintiff. No such requirement existed at law, but in equity it was indispensable. It was not sufficient that there be countervailing claims, nor that those claims were mutual, nor even that they arose out of the same transaction. The defendant, in order to make out an equitable set-off, had to establish that it possessed some equitable right to be protected from the plaintiff's claim.
Here, nothing done by the plaintiff in this action has in any way compromised the defendant's position in relation to either the contract or the cable or the effects of its alleged defects. The plaintiff has not, for example, caused delay by indicating it would make enquiries. The defendant has not pointed to anything which might raise an equity such as to make it unconscionable for the plaintiff to seek to recover its debt without giving credit for its claim. Hence there can be no set-off in equity.
The contract between the parties is nothing other than one for the supply of goods, with an agreement for payment within 30 days, in default of which certain charges would be due. The defendant has not raised any matter in defence of this claim. The defendant's claim is a counterclaim for damages for defective goods, which can be litigated independently should the defendant so choose.
Conclusion
By the first Szewczuk affidavit the plaintiff established its claim for judgment under O 14, but conceded that an argument had arisen about two drums of cable, which concession is reflected in his second affidavit. That concession is, however, wrong in law as to the plaintiff's entitlement to judgment in full, which he had already established.
I reject the proposition that the defendant has a right to an equitable set-off. Nothing in the evidence raises an equity in its favour. The Rossi affidavit raises an issue as to quality of the cable, but beyond that is insubstantial as to any actual loss.
[2018] WADC 43
JUDGE BRADDOCK
In my view, at its highest, the defendant's evidence foreshadows a counterclaim, alleging defective goods and consequential economic loss. It cannot give rise to an equitable set-off for the reasons stated in Palaniappan v Westpac Banking Corporation [2016] WASCA 72:
An equitable set-off is available where the party claiming the set-off can establish a recognised ground for being protected, to the relevant extent, from the other party's demand. The set-off must essentially be bound up with and go to the root of, challenge, call in question or impeach the title of the other party. The mere existence of a cross-claim or cross-demand is not sufficient to establish an equitable set-off. There must be a recognised ground for equitable intervention (beyond the mere existence of a cross-claim or cross-demand) so that the equity of the party claim the set-off impeaches the title of the other party to the legal demand which it is seek to enforce.
Accordingly, I conclude that there is no defence to the plaintiff's claim and no equitable set-off to support leave to defend. There will be judgment for the plaintiff in the sum of $122,362.76 plus interest.
I will hear counsel as to the precise form of the orders and costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
JM
ASSOCIATE TO JUDGE BRADDOCK
4 APRIL 2018
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