Amax Engineering (Contract Labour) Pty Ltd v Gunns Kilndried Timber Industries Limited

[1989] TASSC 117

Serial No B39/1989
List “B”

COURT:  SUPREME COURT OF TASMANIA

CITATION:Amax Engineering (Contract Labour) Pty Ltd v Gunns Kilndried Timber Industries Limited [1989] TASSC 117; B39/1989

PARTIES:  AMAX ENGINEERING (CONTRACT LABOUR) PTY LTD
  v
  GUNNS KILNDRIED TIMBER INDUSTRIES LIMITED

FILE NO:  LDR 232/1989
DELIVERED ON:                29 September 1989
JUDGMENT OF:                 The Master

Judgment Number:  B39/1989
Number of paragraphs:  26

Serial No B39/1989
File No LDR 232/1989

AMAX ENGINEERING (CONTRACT LABOUR) PTY LTD
v GUNNS KILNDRIED TIMBER INDUSTRIES LIMITED

REASONS FOR JUDGMENT  THE MASTER

29 September 1989

1. The plaintiff has filed an application for summary judgment against the defendant pursuant to O15 of the Rules of the Supreme Court. The plaintiff in its statement of claim claims the sum of $17,571.31, being the sum due and payable under a contract made on or about 10 March 1988 between the parties and certified under progress certificates issued in accordance with the terms of the contract.

1. The contract in question was for the supply by the plaintiff to the defendant of certain structural steel work in connection with the Science Block of the Launceston College at Margaret Street, Launceston (hereinafter called "the College Contract"). The original contract price of the said work was $157,895.00.

1. An affidavit, sworn by Steve Kontaratos, a director of the plaintiff company, was tendered in support of the application.

1. Two affidavits, one by David Doyle, a consulting engineer in the employ of the defendant, and one by Kevin George Smith, an estimator in the employ of the defendant, were tendered in opposition to the application for summary judgment.

1. Several objections were taken by counsel for the plaintiff, Mr McElwaine, in relation to Mr Doyle's affidavit, but, as a result of the conclusion reached by me, I need not deal further with those objections.

1. The defendant, it its servants' affidavits, does not dispute the validity of the amount claimed under the progress certificates for the College Contract nor does it attempt to claim that the plaintiff was in breach of the terms of that contract.

1. In the absence of any opposing material the plaintiff was entitled to payment upon issue of the progress certificates. (See John Grant & Sons Ltd v The Trocadero Building & Investment Company Ltd (1937) 60 CLR 1.)

1. The defendant seeks to introduce into the present action a defence by way of set–off which it alleges arose from another agreement made between the parties. Mr Doyle in his affidavit deposes that in November 1988 the plaintiff and the defendant entered into a sub–contract, which was partly in writing and partly oral, whereunder the plaintiff agreed to supply and erect a fabricated steel cutting shoe at the Margaret Street Pump Station at Launceston (hereinafter called "the Pump Station Subcontract"). Mr Doyle alleges in his affidavit that the plaintiff was in breach of a term of the Pump Station Subcontract which provided that the plaintiff would complete the work in a specified time, and that the plaintiff's failure to do so resulted in damage being suffered by the defendant as a result of the plaintiff's delay. The defendant claims damages totalling $38,567.61 together with a further sum of $467.50 and seeks to set–off these sums against the plaintiff's claim under the College Contract. (See paras15 and 16).

1. Further, Mr Doyle deposes that the total monies owing under the Pump Station Subcontract totalling $51,520 were paid to the plaintiff on 25 January 1989.

1. In paras19 and 20 of his affidavit, Mr Doyle, who was the project manager on the Pump Station Subcontract, deposes that the sum of $51,520 was not authorised by him to be paid to the plaintiff and was paid in error. Mr Doyle's affidavit also discloses that the last payment made by the defendant to the plaintiff under the College Contract was made in June 1989. (See para21).

1. The progress certificates annexed to Mr Kontaratos' affidavit in respect of the sum of $17,571.31 claimed by the plaintiff under the College Contract were issued on 6 February 1989, 21 February 1989 and 17 March 1989. The Pump Station Subcontract was completed on 21 January 1989.

1. Bearing in mind these dates, Mr Doyle has not condescended to particulars of his belief that the sum of $51,520 was paid in error. (Para20). There is an obligation upon a defendant to do so. In Fancourt  v Mercantile Credits Limited (1980–82) 154 CLR 87 at p98, the High Court said:

"The question of the payment of the deposits to a dealer is, upon the material, left in the air. The appellants, of course, place on affidavit their belief that they have a good defence to the respondent's claim but the particularity of that defence in relation to the payment of any deposits is confined to a denial of any payment of deposits to the respondent. Under O18, r3, the appellants are obliged, if they are to show cause by affidavit why summary judgment should not be entered against them, to state the sources and grounds of their belief. They must, as was said by Lord Blackbury in Wallingford v Mutual Society (1880) 5 App Cas 685, at p704, 'condescend upon particulars' and the affidavits filed on behalf of the appellants do not go the whole distance in establishing a defence based upon failure of the respondent to obtain from the appellants the deposits required by s25(1) of the Hire Purchase Act. Indeed, by what they do not say they raise at least a suspicion that the deposits may have been obtained by a dealer, thus satisfying the requirements of s25(1). If their own affidavits were all the material upon which the appellants were able to rely, there may have been a real question whether they should have been given leave to defend."

1. The central issue between the parties upon this application is whether the defendant should be allowed to set–off against the plaintiff's claim in the College Contract its claim which is for unliquidated damages, under the Pump Station Subcontract, or at least, if not so entitled, to have the execution of the judgment by the plaintiff under the College Contract stayed until the defendant's claim under the Pump Station Subcontract is determined.

1. Crawford J considered the issue of set–offs in Zeekap (No 47) Pty Ltd v Anitam Pty Ltd and Foster, Serial No 26/1989. His Honour dealt exhaustively with the development of the law and equity in relation to set–offs, both in England and Australia, before and after the Supreme Court Judicature Act 1873 was enacted. His Honour, after considering the authorities, concluded that a party may set–off an unliquidated claim where the equity of the case requires it. At pp14 and 15 of his judgment his Honour said:

"Insofar as it might be suggested that the question of the court is simply what would be fair or just, or unfair and unjust, I do not agree. I accept that an accurate statement of the law is contained in the cited passage from Spry (supra). I also adopt what was said by Woodward J in D Galambos & Son Pty Ltd v McIntyre (supra) at p26, that where there are involved claims for money due under a contract and for damages for breach of the same contract, the equity of the case will depend upon how closely the respective claims are related, particularly as to time and subject–matter. Further the general conduct of the respective parties will be relevant when considering whether to grant this equitable relief."

1. Gowans J expressed the same view in Edward Ward & Co v McDougall (1972) VR 433 at p439, when he said:

"The solution of the problem must be found in the test of the nexus which must exist between the opposing claims and in a determination of the question whether in the circumstances the defendants show an equity of the necessary kind in respect of the whole or of part of their indebtedness to the plaintiff."

1. Mr Quinn of counsel for the defendant submitted that the nexus between one party's claim and a defendant's set–off is not necessarily restricted to the same contract. He referred to Henriksens Rederi As v THZ Rolimpex the Brede (1974) 1 QB 233 and Hanak v Green (1958) 2 QB 9. In Henriksens' case (supra) Lord Denning, when considering the scope of equitable set–off, said at p248:

"It is available whenever the cross–claim arises out of the same transaction as the claim; or out of a transaction that is closely related to the claim."

1. In that case the plaintiff claimed a liquidated sum for freight carried under a charter party and the defendant attempted to set–off a claim for goods not delivered or which were damaged under the charter party. The Court of Appeal held that there was a sufficient relationship between the claim and the set–off to enable them to be determined in the one action, but for the provision of a limitation provision under the Hague Rules.

1. In Hanak v Green (supra) the plaintiff sued under a building contract for breach by the defendant in failing to complete or properly complete certain items of work on the plaintiff's house. The defendant claimed by way of set–off, on a quantum meruit basis for extra work done outside the contract on the plaintiff's house, the refusal by the plaintiff to admit the defendant's workman to the site, and for trespass to the defendant's tools. The Court of Appeal held that the claim and set–off were so closely related that both should be determined in the one action.

1. At p29, Lord Sellers said:

"Some counterclaims might be quite incompatible with a plaintiff's claim, in no way connected with it and wholly unsuitable to be used as a set–off, but the present class of action involving building or repairs, extras and incidental work so often leads to cross–claims for bad or unfinished work, delay or other breaches of contract that a set–off would normally prove just and convenient, and in practice, I should have thought, has often been applied, as indeed it was in the referee's report. It would serve to reduce litigation and its consequent costs. I would not be astute to restrict the right but rather to develop it and discourage litigation when no or little monetary benefit ensues on balance. It cannot, as I see it, make any difference which side commences proceedings in which cross–claims arise. If there is a set–off at all each claim goes against the other and either extinguishes it or reduces it."

1. In British Anzani (Felixstow) Ltd v International Marine Management (UK) Ltd [1979] 3 WLR 451, Forbes J held that there was a sufficient nexus between the plaintiff's claim for rent of premises to the defendant pursuant to an agreement made between the parties and the defendant's claim for defective flooring work performed under a separate agreement, but in relation to the same premises, to allow the defendant to set–off his claim against the plaintiff's claim for rent. But in Eagle Star Nominees Ltd v Merril [1982] VR 557, Tadgell J held that a purported set–off for an alleged breach of contract by a plaintiff to effect insurance cover over a dwelling purchased by the defendant under a contract of sale was not sufficiently related to the plaintiff's claim against the defendant for his failure to pay the purchase money so as to allow the defendant to claim a set–off in the action. As the Full Court said in Indrisie v General Credits Ltd [1985] VR 251, there must, in order to rely on an equitable set–off, be such a nexus between the plaintiff's claim and the cross–claim that the cross–claim can be said to impeach the plaintiff's claim.

1. It is, in my view, clear on the material before me upon this application that there is no nexus between the plaintiff's claim under the College Contract and the defendant's purported set–off under the Pump Station Subcontract. They were entirely distinct and separate agreements which were performed at different times and places.

1. Each case must turn on its own facts. The fact that the plaintiff has done subcontract work for the defendant upon six major projects since 1984, as deposed to by Mr Doyle in para17 of his affidavit, does not advance or strengthen any claim to a set–off under the two contracts now in issue. It was not suggested that the parties, as is often the custom of merchants, conducted their transactions on a running account.

1. In addition to there being no factual nexus between the claim and the set–off, it would not be just and convenient to allow the defendant to defend in this action. There is no dispute to the plaintiff's entitlement to the liquidated sum claimed. The defendant has had the opportunity to seek rectification or such other remedy as it saw fit under the Pump Station Subcontract, but, apparently, on the material before me, has been content to remain dormant until this summary judgment application was instituted. Nor is there any material before me which persuades me to exercise my discretion to order that the execution of a judgment, as sought by the defendant, be stayed pursuant to O15, r3(2).

1. I am mindful in reaching these conclusions that summary judgment ought to be ordered only in the plainest of cases. As Cosgrove J said in Stephens v Huett Serial No 36/1983 at p2:

"The rules relating to summary judgment are extraordinary. That is to say they provide for the determination of disputes between parties in a manner other than the ordinary procedure, which is by trial. The rules therefore apply only in cases in which the ordinary procedure ought to be circumvented."

1. Where questions of law or mixed fact and law arise and raise difficulty in being determined summarily, it is usually appropriate for leave to defend being granted. (See Theseus Exploration NL v Foyster (1972) 126 CLR 507 and Sunbird Plaza Pty Ltd v Boketo Pty Ltd [1983] Qd R 248.

1. As a result, I order that there be summary judgment for the plaintiff against the defendant in the sum of $17,571.31, together with costs to be taxed. The application by the defendant for a stay of execution of the judgment is refused.