Kendray v Hassall and H&K Earthmoving P/L
[2001] NTSC 40
•31 May 2001
Kendray v Hassall & H&K Earthmoving P/L [2001] NTSC 40
PARTIES:ROBERT GEORGE KENDRAY and BRENDA JOYCE KENDRAY
v
HERBERT THOMAS HASSALL and JOAN PATRICIA HASSALL
and
H&K EARTHMOVING PTY LTD
(ACN 009 624 202)
TITLE OF COURT: SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION: APPEAL FROM MASTER exercising Territory jurisdiction
FILE NO:75 of 2000 (20009303)
DELIVERED: 31 May 2001
HEARING DATES: 22 February 2001
JUDGMENT OF: THOMAS J
CATCHWORDS:
APPEAL FROM THE MASTER
Appeal from decision of the Master – amendment to Supreme Court Rules 1987 (NT) – leave to appeal – set off as a defence
Supreme Court Rules 1987 (NT), r 77.05
Maxwell v Murphy (1957) 96 CLR 261; Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246; Suncode Pty Limited v Northern Territory of Australia [2000] NTSC 10; Fong Consultants Pty Ltd v ATI Management Pty Ltd (1992) 108 FLR 140, Heller Financial Services Ltd v Solczaniuk (1989) 99 FLR 304, cited
D Galamobs & Son Pty Ltd v McIntyre (1974) 5 ACTR 10; Murphy vZamonex Pty Ltd (1993) 31 NSWLR 439, applied
Rawson v Samuel (1841) 41 ER 451, discussed
Nationwide News v Bradshaw (1986) 41 NTR 1; Ex parte Bucknell (1936) 56 CLR 225; BBIC Plc v Burndy Corporation [1985] Ch 232, referred to.
REPRESENTATION:
Counsel:
Plaintiffs:J Reeves QC
1st & 2nd Defendants: M Grant
Solicitors:
Plaintiffs:Cridlands
1st & 2nd Defendants: Clayton Utz
Judgment category classification: C
Judgment ID Number: tho200106
Number of pages: 10
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWINKendray v Hassall & H&K Earthmoving P/L [2001] NTSC 40
No. 75 of 2000 (20009303)
BETWEEN:
ROBERT GEORGE KENDRAY and BRENDA JOYCE KENDRAY
Plaintiffs
AND:
HERBERT THOMAS HASSALL and JOAN PATRICIA HASSALL
First Defendants
H&K EARTHMOVING PTY LTD
(ACN 009 624 202)
Second Defendant
CORAM: THOMAS J
REASONS FOR JUDGMENT
(Delivered 31 May 2001)
This is an appeal by the first defendants from the judgment of Master Coulehan delivered on 2 February 2001 in which the Master dismissed an application by the first defendants to set aside judgment.
The orders sought in the Notice of Appeal are as follows:
“1.The default judgment entered by the plaintiffs against the first defendants on 8 June 2000 be set aside.
2.The defendants pay the plaintiffs’ costs of the proceeding (excluding the costs of this application) to be agreed or taxed.
3.The plaintiffs’ claim against the defendants be dismissed.
4.The plaintiffs pay the defendants’ cost of this application to be agreed or taxed.”
The preliminary issue raised in this matter was the nature of the appeal.
The defendants’ application was heard by the Master on 18 December 2000. At the date of the hearing of the defendants’ application leave was required to appeal to a judge from an interlocutory decision of the Master and that appeal is an appeal in the strict sense. See Supreme Court Rules 1987 (NT), Rule 77.05 as amended on 18 October 2000.
On 18 October 2000, Rule 77.05 was amended by Regulations No. 50 of 2000. From that date an appeal from an interlocutory decision of the Master is to be only by leave and is an appeal in the strict sense.
The amendment had come into effect before the hearing of the application before the Master on 18 December 2000 and the date the Master’s decision was handed down which was 2 February 2001.
The general principle is that an amendment operates prospectively if it affects vested rights and retrospectively if it is procedural in nature (Maxwell v Murphy (1957) 96 CLR 261).
A decision on an application to set aside a default judgment is an interlocutory decision Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246. Under the amended rules, Rule 77.05(1)(b) an appeal from such interlocutory decision by the Master can only proceed with leave of the court.
At the time of the hearing of the appeal, the plaintiffs submitted and were in agreement with the defendants that Rule 77.05 was amended as of 1 January 2001.
At the time of hearing the appeal from the Master, the plaintiffs submitted and were in agreement with the defendants that the defendants did not require leave to proceed with their appeal. There being no clear intent manifested by the amendment to the rules to abolish the appellants existing right – see Suncode Pty Limited v The Northern Territory of Australia [2000] NTSC 10 delivered 10 March 2000.
The parties were not in agreement as to whether the appeal itself should proceed as a hearing de novo or as an appeal in the strict sense. The appellant argued that this appeal should be a hearing de novo because the amendment to the rules operates prospectively and does not affect existing rights. The respondent submitted the manner of hearing is a matter of procedure and does operate retrospectively which means it is an appeal in the strict sense.
Both parties were in agreement at the time of hearing the appeal from the Master that for the purpose of this case there is no practical difference because there has been no material alteration to the facts and law between the time of the original hearing and the hearing of the appeal.
In subsequent correspondence following the completion of the hearing of the appeal, the plaintiffs and the defendants both agree that Rule 77.05 was amended on 18 October 2000 and not 1 January 2001 as had been submitted. Accordingly, leave is required to appeal from the decision of the Master. I note that pursuant to Rule 77.05 as amended this is an appeal in the strict sense.
On the issue of granting leave to appeal from the decision of the Master, both parties referred to Nationwide News Pty Ltd v Bradshaw (1986) 41 NTR 1. The defendants submit that leave should be granted if it appears prima facie that the decision below was wrong or if it appears that some injustice will arise from it. The defendants also referred to Ex parte Bucknell (1936) 56 CLR 225 at 225 – 226 which reflects the view expressed by the High Court that injustice is more likely to be shown where the order, though interlocutory in form, is in effect final. The defendants submit that in this matter the decision of the Master is in effect final.
For the purpose of this appeal I agree that leave to appeal is required pursuant to the amendment to Rule 77.05 which came into effect on 18 October 2000 (Regulations No. 50 of 2000).
I consider that in this matter the decision of the Master was in effect final as the defendant is precluded from arguing set off as a defence. The background to this matter is as follows:
The plaintiffs commenced proceedings against the defendants by writ dated 18 May 2000 claiming the defendants were in breach of the severance agreement between the plaintiffs and the defendants and seeking judgment in the sum of $500,000 plus interest, being balance of purchase price.
Copy of the severance agreement entered into on or about 12 April 1999 is Annexure D to the affidavit of Neville John Henwood sworn 15 June 2000. In accordance with this severance agreement the business and financial relationships between the plaintiffs of the one part and the first and second defendants of the other part were terminated.
The bulk of the amount claimed in the writ was paid. However, the first defendants claim a set off that arises from a provision in the “severance agreement” that the plaintiff vendors pay the company by way of gift, half of any sum paid by the company to Allbuilt Constructions Pty Ltd in respect of the Allbuilt Litigation.
The relevant provision is clause 7.1(b) which provides:
“7.1Subject to settlement the Vendor shall pay to the Company by way of gift:
. . . . .
(b)if the Company makes any payments to Allbuilt Construction Pty Ltd whether by settlement or pursuant to judgment, in respect of the Allbuilt Litigation – one half of that payment.”
On 8 June 2000, the plaintiffs obtained judgment against the first defendants in default of appearance. It is this judgment the first defendants sought to set aside before the Master.
The only amount in dispute before the Master was the sum of $17,500 plus interest. The first defendants claim a set off of $17,500 plus interest.
In the amended defence of the first defendants which claims a set off, it is stated:
“9.On or about 23 July 1999, the second defendant entered a deed of settlement with Allbuilt Construction Pty Ltd in settlement of the Allbuilt Litigation (as defined in the Severance Agreement).
Particulars
A Deed of Settlement between Allbuilt Construction Pty Ltd and the second defendant dated 23 July 1999.
10.In accordance with the Deed of Settlement, the second defendant paid the amount of $35,000.00 to Allbuilt Construction Pty Ltd between September and December 1999.
11.By reason of clause 7.1(b) of the Severance Agreement, the plaintiffs are indebted to the second defendant for the sum of $17,500.00, representing one half of the sum paid in settlement of the Allbuilt Litigation (as defined in the Severance Agreement).”
The argument for the first defendant is that as controllers of the second defendant they would benefit from monies paid to the second defendant company.
Mr Grant, counsel for the first defendants, submits that the first defendants have a good defence in respect of the $17,500.
For the purpose of these proceedings there is no distinction between set off and counterclaim – see Fong Consultants Pty Ltd v ATI Management Pty Ltd (1992) 108 FLR 140.
In his affidavit sworn 29 November 2000, Herbert Thomas Hassall sets out the background to this matter and deposes to the fact that the second defendant paid Allbuilt Constructions Pty Ltd the sum of $35,000.00 pursuant to a Deed of Settlement dated 23 July 1999. The first defendants are directors of the second defendant company and Mr Herbert Thomas Hassall was authorised to swear the affidavit on behalf of the defendants. Mr Hassall deposes to the fact that on behalf of the first and second defendant he paid all monies outstanding under the severance agreement except for the sum of $17,500 plus interest. The $17,500 represents one half of the payment made to Allbuilt Constructions Pty Ltd and pursuant to s 7.1(b) of the severance agreement, the second defendant is entitled as against the plaintiffs to one half of the payment of $35,000 which was paid on 6 September 1999.
In deciding what is an equitable set off I have applied the statement by Woodward J in D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10 at 18, in discussing the case of Rawson v Samuel (1841) 41 ER 451:
“It seems, from the language used by the Lord Chancellor and the cases he referred to, that he regarded the prerequisites of an equitable set-off to be: -
(i)clear cross-claims for debts or damages, which
(ii)were so closely related as to subject-matter that the claim sought to be set-off impeached the other in the sense that it made it positively unjust that there should be recovery without deduction.”
Counsel for the first defendant also referred to BICC Plc v Burndy Corporation [1985] Ch 232 per Dillion LJ at 247:
“. . . The third form of set off, often referred to as equitable set off, arose in cases in which a court of equity would have regarded the cross-claims as entitling the defendant to be protected in one way or another against the plaintiff’s claims; these were particularly cases where the cross-claim was related to the subject matter of the claim and there were factors which would have rendered it unjust in the eyes of equity that the claim should be enforced without regard to the cross-claim.”
In my opinion, the first defendants have shown they have an arguable defence which is a prerequisite to an application to set aside judgment (Heller Financial Services Ltd v Solczaniuk (1989) 99 FLR 304).
There is no requirement to demonstrate inequitable conduct on the part of the plaintiffs.
I consider in this matter the set off is so directly connected with the claim that it would be unjust to allow the plaintiff to recover without taking into account the defendants’ counter claim. Although there was no mutuality in the sense that the first defendants have no direct right to cross claim for moneys owed to the company, this is not an essential prerequisite and I apply the reasoning of Giles J in Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439 at 465:
“Mutuality in relation to set-off means that the claims must be between the same parties and in the same capacities (or rights, or interests). The claim by B against A in A’s can not be set-off against a claim by A against B in A’s capacity as trustee. It may be that generally there is not mutuality even in the case of a claim by B against A in A’s capacity as trustee and a claim by A against B in A’s capacity as trustee because beneficial ownership is the criterion rather than right to sue, although I would prefer to leave that open: see Derham, Set-Off (1987) at 136-137; Wood, English and International Set-Off (1989) at 1051, 1054-1055. But equitable principles admit of set-off even in the absence of mutuality, if the circumstances are otherwise such as to attract the intervention of a court of equity: see Ex parte Stephens (1805) 11 Ves Jun 24; 32 ER 996; Hamp v Jones (1840) 9 LJ Ch 258; West Street Properties Pty Ltd v Jamison [1974] 2 NSWLR 435; Bank of New Zealand v Harry Miller & Co Ltd (1992) 26 NSWLR 48; Derham (at 319); Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 3rd ed, 1992 par 2867 at 720-721. In the words of the last-mentioned authors, ‘lack of mutuality may, in some circumstances, furnish grounds for refusing to recognise that a claim amounts to an equitable set-off, but, since many equitable set-offs lack mutuality, its absence is not necessarily fatal’.
Equitable set-off is available where the defendant establishes an equitable ground for being protected from the plaintiff’s claim. That has been expressed in language to the effect that the defendant’s set-off goes to the root of or impeaches the title of the plaintiff’s claim, but also in language to the effect that the counter-claim is so directly connected with the claim that it would be unjust to allow the plaintiff to recover without taking into account the defendant’s counter-claim. . . .”
The plaintiff argues the Master was right in that the Master found the parties have dealt with this issue by agreement and expressly given the plaintiffs the right to elect to waive a payment or accept a set off of monies due to the defendant and the defendant to them.
Mr Reeves QC, counsel for the plaintiff, supports the finding made by the Master that there are cross claims but no circumstances to justify equitable intervention.
I consider in this matter there are circumstances which justify equitable intervention. I do not interpret clause 7.3 of the severance agreement to mean there is no right of set off.
I would grant leave to appeal. I would allow the appeal. I consider the set off does operate as an arguable defence.
At the request of counsel for the first defendants, I remit the matter to the Master for consequential orders.
The parties have leave to apply in respect of any further consequential orders required to be made in this Court.
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