Kheng Kok Chua v Archiworks Architects Pty Limited

[2009] NSWSC 411

CITATION:	Kheng Kok Chua v Archiworks Architects Pty Limited [2009] NSWSC 411
HEARING DATE(S):	04/05/09 and 06/05/09
JUDGMENT DATE :	21 May 2009
JUDGMENT OF:	McDougall J at 1
DECISION:	See paragraph [56] of the judgment.
CATCHWORDS:	ESTOPPEL – per rem judicatam – defence by way of set-off – judgment for plaintiffs on their claim – whether defendant estopped from maintaining cross claim - construction of offer of compromise. - ESTOPPEL – issue estoppel – whether plaintiff estopped from raising defence of payment based on original claim after judgment on that claim pursuant to accepted offer of compromise.
LEGISLATION CITED:	Civil Procedure Act 2005 Evidence Act 1995 Trade Practices Act 1974 Uniform Civil Procedure Rules
CATEGORY:	Principal judgment
CASES CITED:	Isaacs v The Ocean Accident and Guarantee Corporation Ltd (1958) SR (NSW) 69 Stehar Knitting Mills Pty Ltd v Southern Textile Converters Pty Ltd [1980] 2 NSWLR 514 Whitehouse Properties Pty Ltd v Bond Brewing (NSW) Ltd (1992) 28 NSWLR 17
PARTIES:	Kheng Kok Chua (First Plaintiff) Dorothy Chua (Second Plaintiff) Archiworks Architects Pty Limited (First Defendant) Minh Van Hoang (Second Defendant) Jennifer Hoang (Third Defendant)
FILE NUMBER(S):	SC 55026/07
COUNSEL:	I H Bailey SC / M W Sneddon (Plaintiffs / Cross-Defendants) M Ashhurst SC (Third Defendant / Cross-Claimant)
SOLICITORS:	McLaughlin & Riordan (Plaintiff) McCabe Terrill (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY & CONSTRUCTION LIST

McDOUGALL J

21 May 2009

55026/07 KHENG KOK CHUA v ARCHIWORKS ARCHITECTS PTY LIMITED

JUDGMENT

1 HIS HONOUR: The plaintiffs (Mr and Mrs Chua) retained the first defendant (Archiworks) to provide architectural and construction management services. Those retainers were effected by two separate contracts:

(1) Dated about 28 January 2004, in respect of architectural services and;
(2) Dated about 1 November 2004, in respect of construction management services.

2 Mr and Mrs Chua asserted that Archiworks breached both contracts, and provided its services negligently. Archiworks denied those allegations. That dispute has been resolved: by Mr and Mrs Chua’s acceptance of an offer of compromise made by Archiworks.

3 The parties assumed that the settlement (and entry of judgment pursuant to UCPR r20.27(3)) would leave alive a cross-claim by Archiworks, for recovery of fees said to be owing under the contract for provision of construction management services (for convenience, I will refer to this simply as “the contract”). Whether or not that is so, and, if it is, what defences to it may be available to Mr and Mrs Chua (in each case, taking into account the effect of the judgment entered pursuant to r 20.27) are the questions with which these reasons are concerned.

The issues

4 Regrettably, the parties were not able to agree on the issues for decision. I say “regrettably” because, as appeared in the course of the hearing, Archiworks’ claim was for an amount, before interest, of less than $52,000.00. Mr M A Ashhurst of Senior Counsel, for Archiworks, formulated the issues on the cross-claim as follows (I have made minor changes to the wording)

(1) Have Mr and Mrs Chua in their Response to Cross Claim raised the defence of payment?

(2) Are Mr and Mrs Chua estopped from relying on the alleged overpayments that are the subject of section F (paragraphs 29 to 31) of the Further Amended Statement of Claim as a defence to the Cross Claim?

(3) If the answer to question 1 is in the positive, and the answer in question 2 is in the negative, what is the amount of those overpayments and who bears the onus of proof on this issue?

(4) Has Archiworks complied with its obligations under cls 16(a) and (c) of the contract?

5 Mr I H Bailey of Senior Counsel, who appeared with Mr M W Sneddon of counsel for Mr and Mrs Chua, formulated the issues as follows (again, I have made minor changes to the wording):

Mr and Mrs Chua having resolved their claim, as articulated in further amended statement of claim filed on 27 March 2008, by the acceptance of an offer of compromise; so far as the cross-summons filed on 6 September 2007 is concerned, the real issues for adjudication between the parties distil to the following (again, I have made minor changes to the wording):

(1) whether Archiworks is entitled to damages in the order of $50,000 plus contractual interest arising from the Construction Management Agreement dated 1 November 2004?

(2) what is the total amount paid to Archiworks, or at its direction, in relation to work performed on Mr and Mrs Chua’s residence?

(3) whether Archiworks has proved on the balance of probabilities that the amounts paid to it, or at its direction, was less than:-

(a) the total costs of trade, works and supplies: and
(b) any sums due to Archiworks for fees under the agreement?

(4) So far as Archiworks is concerned, but not Mr and Mrs Chua; Archiworks contends that the compromise outlined in the opening para above creates an issue estoppel (or res judicata upon entry of judgment) with the consequence that the defences to the cross-summons (which does not seek any monies, either by way of restitution or set-off) are not maintainable.

6 In supplementary written submissions filed pursuant to my directions after the conclusion of the hearing, Mr Bailey stated the essential issue as follows (again, I have made minor changes to the wording):

Whether or not Archiwork’s cross-summons filed on 6 September 2007 is not maintainable consequent upon the combined effect of Mr and Mrs Chua’s acceptance of the defendants’ offer of compromise dated 27 April 2009, which was consequently by consent the subject of the order for entry of judgment made on 4 May 2009?

7 In an attempt to understand and resolve the real issues in dispute, I ordered pursuant to UCPR r 28.4 that there be determined separately from and before the determination of any other question in the proceedings issues 1 and 2 as stated by Mr Ashhurst and issue 3 in so far as it raised the issue of onus of proof.

Background

8 An appropriate factual foundation for the consideration of those questions was provided as follows:

(1) Mr Ashhurst tendered certain documents, including the offer of compromise (dated 27 April 2009) and the acceptance of it (29 April 2009), a copy of the contract and certain statements or other documents allegedly generated and delivered pursuant to the contract.

(2) On Mr Ashhurst’s application, and without objection from Mr Bailey, I directed the entry of judgment in accordance with the accepted offer of compromise, pursuant to UCPR r 20.27(3). Submissions proceeded on the conventional, or assumed, basis that this judgment had been entered. No doubt, by the time these reasons are published, that assumption will have been made good in fact.

9 As I have said, it was uncontroversial that, on Mr Ashhurst’s application, judgment could be entered for Mr and Mrs Chua in accordance with the accepted offer of compromise. There was a dispute as to whether the judgment should provide for costs. Mr Ashhurst referred to the circumstance that, when Mr and Mrs Chua had applied and been given leave to amend their claim, the costs of the amendment had been reserved. He submitted that, in the ordinary way, a costs order should be made allowing his clients their costs of and thrown away by reason of the amendment. That was not done, and, so far as the evidence reveals, no reference was made to those costs when the offer of compromise was served. The offer of compromise was expressed in terms of a payment of money amount “plus costs”; and the costs thereby encompassed were not in any way qualified.

10 Mr Bailey drew attention to UCPR r 42.7. That rule provides as follows:

[r 42.7] Interlocutory applications and reserved costs (cf SCR Part 52A, rule 16; DCR Part 39A, rule 22; LCR Part
31A, rule 17)

(1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including:
(a) costs that are reserved, and
(b) costs in respect of any such application or step in respect of which no order as to costs is made,
are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.
(2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings.

11 It follows from the rule that, no application having been made for the Court to make an order otherwise than in accordance with its terms, there is no occasion to qualify the costs that the defendants should pay pursuant to the accepted offer. For those reasons, when I directed the entry of judgment in favour of Mr and Mrs Chua, I did so on the basis that the defendants should pay their costs, and did not qualify or derogate from the costs so payable. It seemed to me that on the proper construction of the offer, it should be taken as having been made on the terms of r 42.7.

12 At the heel of the hunt (indeed, after oral submissions had been concluded) a further issue arose. In the course of submissions, I had inquired whether Mr and Mrs Chua had sought to set off, against Archiworks’ claim for fees, the amounts said by them to be owed pursuant to the contract (one of the claims they made was that they had overpaid Archiworks, and were entitled to recover the amount of the overpayment “on restitutionary principles” – see para 30(g) (where second appearing) of the further amended statement of claim (FASC) filed on 27 March 2008). I was told, I think correctly, that they had not. However, before I commenced to give reasons ex tempore, Mr Bailey sought to be further heard. He drew my attention to para 52 of Archiworks’ defence to the FASC. Although para 52 is less than clearly phrased, it was common ground between Mr Bailey and Mr Ashhurst that it sought to raise, as a defence by way of set-off, the claim for outstanding fees adumbrated by Archiworks’ cross-claim. Mr Bailey submitted that, judgment having been given for Mr and Mrs Chua on their claim, in circumstances where the defences raised included that to which I have just referred, Archiworks was estopped from pursing its cross-claim. It is convenient to deal with that point before turning to the separate questions.

Is Archiworks estopped?

The offer of compromise

13 The offer of compromise was in the following terms (excluding formal parts):

“The defendants offer to compromise the plaintiffs’ claim in the following manner:
1. By making a payment in the sum of $175,000.00 plus costs.
2. This offer shall be open for acceptance until 5:00pm on 1 May 2009.”

14 The acceptance was in the following terms (again excluding formal parts):

We refer to the above proceedings and the Offer of Compromise dated 27th April 2009, served under cover of correspondence of the same date.
Pursuant to UCP Part 20 r 27 we advise acceptance of the Offer. Judgement may be entered to give effect to the compromise tomorrow.
There remains in the proceedings the Cross Summons. This aspect of the matter might, at your election, proceed to a hearing in the Supreme Court. In the event that you intend to proceed as per the latter then we would appreciate your urgent advice accordingly.
Further we assume that, you now being the moving party, will be complying with respect to the Cross Summons to comply with His Honour’s directions this afternoon as to compliance with the Practice Note. In particular this will entail the compilation of the Court Book. Please ensure that you include all of the Plaintiff’s exhibits to the affidavits.

15 It is also necessary to bear in mind the provisions of UCPR r 20.26(1):

20.26 (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms.

Construction of the agreement to compromise

16 If the question of estoppel fell to be determined by reference to the proper construction of the contract embodied in the offer and acceptance, the answer would be clear. What the defendants offered to settle was “the plaintiffs’ claim”. (I have referred to “the defendants” because Mr and Mrs Chua sued the directors of Archiworks, Mr and Mrs Hoang, alleging among other things contravention of certain provisions of the Trade Practices Act 1974. Mr and Mrs Hoang could not, and therefore did not, raise any defence by way of set-off of the kind advanced through para 52 of Archiworks’ defence.) The reference to “the plaintiffs’ claim” must be understood as encompassing the claims for relief made by Mr and Mrs Chua through the FASC, on the grounds therein alleged. Those claims included:

(1) Claims against Archiworks for damages for breach of each of the contracts; and for equitable compensation; and pursuant to s82 of the Trade Practices Act ; and for other damages.

(2) As against Mr and Mrs Hoang: damages under s82 of the Trade Practices Act .

17 It is clear that the offer of compromise was in a form expressly authorised by r 20.26(1). The defendants, by specifying that they were offering to compromise “the plaintiffs’ claim”, necessarily conveyed that they were not offering to compromise Archiworks’ cross-claim. It is clear from the terms of the acceptance that Mr and Mrs Chua intended to accept the offer, so understood. When the offer and acceptance are read together it is clear that, viewed objectively, the contract thereby created was one for the resolution for Mr and Mrs Chua’s claims against all defendants, but not for the resolution of Archiworks’ cross-claim against Mr and Mrs Chua.

18 Thus, if the question presently under consideration were to be considered by reference to contractual principles, the answer would be clear. Archiworks is not estopped.

An application to reopen

19 After the hearing had concluded but before the parties delivered the further written submissions that had been directed, Mr Ashhurst sought leave to reopen Archiworks’ case, and to rely on an affidavit sworn by his instructing solicitor Mr Taylor. That affidavit set out (in part, on information and belief) a conversation said to have taken place in which an offer of settlement was made. The material was said to be relevant because the conversation was said to have preceded, and to have led to, the service of the offer of compromise.

20 Mr Ashhurst submitted that the evidence could bear on the construction of the agreement created by acceptance of the offer of compromise. He submitted that, if there were ambiguity in the agreement so created (and his primary submission was that there was not), the conversation was admissible as “factual matrix” evidence.

21 I have concluded that there is no ambiguity in the agreement created by acceptance by the offer of compromise. It follows that the evidence in question is not relevant. It is unnecessary to consider whether, if there were ambiguity, the evidence might be relevant, or whether it would amount to no more than evidence of some antecedent oral agreement that has given way to the ultimate written agreement.

22 I reject the affidavit in question, and I reject exhibit PX3, which was tendered in connection with the affidavit. That exhibit was a notice under s 67 of the Evidence Act 1995, and was admitted on the voir dire.

The effect of the judgment

23 For present purposes, the relevant effect of the judgment may be stated as follows:

(1) Mr and Mrs Chua’s causes of action, as articulated in the FASC, merge into the judgment; and their rights are confined to enforcement of that judgment.

(2) Each of Mr and Mrs Chua and the defendants is estopped from rearguing any issue necessarily decided by the judgment, or inconsistent with it.

(3) Each of Mr and Mrs Chua and the defendants may be estopped from raising any issue that could have been, but was not, raised in the proceedings and thus decided by the judgment.

24 Ordinarily, the ambit of an estoppel created by a judgment will depend on the issues that the parties propounded for the court’s determination. However, where the judgment is given pursuant to a contract, it is relevant to look not only at the pleaded issues but also at the terms of the contract. For example, the contract may state expressly that particular issues are excepted from the compromise, and are not to be taken as being resolved by any judgment given pursuant to the compromise.

25 The point is illustrated by Isaacs v The Ocean Accident and Guarantee Corporation Ltd (1958) SR (NSW) 69. In that case, the majority (Street CJ and Roper CJ in Eq) had regard to terms of settlement signed by counsel to see what it was that the parties, by their express agreement recorded in those terms, intended to be resolved through the entry of judgment. Those terms were said to be “without admission of liability”. Their Honours said at 75 that the terms of settlement showed that the parties had “removed from the Court’s consideration any question of the liability of the plaintiff… to the … defendant”. Their Honours said at 76 that “[i]n effect, the parties, by their compromise of the action, agreed that the issue of liability should not be submitted to the adjudication of the court, and the judgment, when entered, was not to be taken as establishing that the plaintiff… was in fact liable to [the defendant]”. Their Honours said that the contrary conclusion “would make an estoppel operate in a manner contrary to the clear intention of the parties as disclosed by the record”.

26 Mr Bailey submitted that acceptance of the offer of compromise had the effect of compromising not only Mr and Mrs Chua’s claim but also Archiworks’ defence of set off (or, as he put it, “set off claim”.) He relied on UCPR rr 20.26, 20.27 and decisions such as Whitehouse Properties Pty Ltd v Bond Brewing (NSW) Ltd (1992) 28 NSWLR 17. It is sufficient to say that the submissions, and for that matter the authorities to which Mr Bailey referred, do not address the point arising from the decision of the majority in Isaacs, and do not detract from, or render inapplicable in this case, their Honours’ analysis.

27 In this case, for the reasons that I have given, a consideration of the terms of the contract created by acceptance of the offer of compromise makes it clear that the parties’ intention (objectively ascertained) was to compromise only Mr and Mrs Chua’s claim, and to leave alive for subsequent resolution (if necessary, by the Court) Archiworks’ cross-claim. The parties removed from the Court’s consideration, and therefore from the effect of any judgment entered pursuant to the accepted offer of compromise, Archiworks’ claim as advanced in its cross-claim.

28 Thus, I conclude, Archiworks is not estopped, by the terms of the judgment, from pursuing its cross-claim. The contrary position would be inconsistent with the intention of the parties, objectively ascertained (and, I might add, with the subjective understanding and intention disclosed in the letter of acceptance).

29 Mr Ashhurst also submitted that, having regard the procedural nature of statutory set-off (or a defence by way of set-off – see s21 of the Civil Procedure Act 2005), the same result would follow. He submitted that there could be no issue estoppel on a defence by way of set-off until either an order of set-off was made or, where the subject matter of the set-off was also articulated as a positive claim (for example, through a cross-claim) by a judgment on that claim. It is unnecessary to deal with that submission.

Are Mr and Mrs Chua estopped?

30 It is convenient to consider this issue (number 2 in Mr Ashhurst’s statement) out of sequence.

The parties’ submissions

31 It was common ground that all the claims pleaded by Mr and Mrs Chua had merged into the judgment (see my summary of the effect of the judgment at [23(1)] above. Mr Ashhurst submitted that the effect of the merger of the pleaded claims into the judgment, combined with the effect of the issue estoppels and extended issue estoppels created by the judgment (see at [23(2), (3)] above) was to prevent Mr and Mrs Chua from asserting that they had made any overpayments the effect of which was to reduce or extinguish any liability that they might have to Archiworks for its fees.

32 Mr Bailey acknowledged that one of the effects of the judgment was to preclude his clients from asserting any further claim, whether for damages, “on restitutionary principles” or otherwise, that had been or could have been pleaded in the FASC. However, he submitted, the judgment did not preclude them from asserting, in answer to Arhiworks’ claim for fees, that they had made overpayments to Archiworks of such extent as to extinguish any further liability for fees. Mr Bailey stressed that the claim was purely defensive, and that no attempt was made to recover the amount of the alleged overpayments.

Relevant terms of the contract

33 By cl 14(a), (b) of the contract, read in conjunction with schedule 5, Mr and Mrs Chua were obliged to pay Archiworks a lump sum fee, for construction management services, in the sum of $108,000.00 plus GST. That fee was to be paid by monthly instalments calculated in a specified manner. Clause 14(b) provided that the amount of the fee might vary with variations in the cost of the works.

34 The contract gave either party the right to terminate it by giving the other ten written days notice of intention to do so (cl 17). Upon such termination, any outstanding construction management fees were payable, as were any outstanding fees for preconstruction duties; and a “termination fee” in accordance with cl 19 also became payable. By cl 19(a)(i), the termination fee was stated to be, in effect, the lump sum fee of $108,000.00 pro-rated by reference to the value of construction work, compared to the estimated total cost of the works at the time termination, less all amounts paid.

35 Archiworks asserted that the cost of works executed to the date of determination was $545,000.00, and that the estimated total cost of works at that time was $899,000.00 (in each case, in round figures). It claimed an entitlement to 60.5% of the lump sum fee of $108,000.00: $65,347.00; and said that $35,000.00 of this had been paid. (In addition, Archiworks claimed reimbursement of the costs of some windows, doors and shower screens, in the total sum of about $21,000.00, that it said it had bought and paid for on behalf of Mr and Mrs Chua.)

36 Clause 16 of the contract dealt with progress payments. It required Archiworks to submit, monthly, a statement of the cost of works during the month in question and the estimate of fees due. Mr and Mrs Chua thereupon became obliged to pay within a specified time the costs incurred and the fee. It is not clear why cl 16 is relevant. The regime for payment of the termination fee is dealt with in cls 17 and 19. Clause 16 deals with something different: namely, payment for work and on account of fees during the currency of the contract. To divert a moment: Mr Bailey submitted that Archiworks was not entitled to payment of its termination fee except upon demonstration of compliance with cl 16. I do not accept that submission, for the reason that I have just given. Nonetheless, I should note that Archiworks included in its tender what it said was a certificate pursuant to cl 16 dated 9 August 2005, showing (or purporting to show) both the estimated value, as at the date of termination, of all works under the contract and the amount of all deposits and progress payments paid to it up to that date.

The restitutionary claim

37 I have already referred briefly to the nature of the claims that Mr and Mrs Chua advanced by the FASC. It is necessary to refer in a little more detail to the claim for “restitution” of the alleged overpayments made by them to Archiworks. That claim is asserted in paras 29 and 30 of the FASC.

38 Paragraph 29 alleges that Archiworks, in its capacity as construction manager, was the agent of Mr and Mrs Chua and owed fiduciary obligations to them. Paragraph 30 alleges breaches of those obligations. In particular, subpara (g) (first appearing) alleges as follows:

(g) the fact that the Principals have paid to Archiworks in the order of $767,431.17, but Archiworks records show that progress payments to third-party trades is only $506,460.00; and
Particulars
(i) Pages 123-124 of Exhibit “DC 1” to the affidavit of Dorothy Chua sworn 27 October 2006.
(ii) Schedule prepared by Archiworks dated 9 August 2005.

39 I am not sure what is the first document referred to in the particulars, but the second document referred to is the certificate of 9 August 2005 to which I have just referred.

40 The claim for recovery of the alleged over-payments is made in subpara (g) (second appearing):

(g) overpayments made by the Principals to Archiworks as pleaded in the preceding paragraph were paid by mistake and are sought to be recovered on restitutionary principles.

41 The cross-claim list statement raises the claim for fees in paras 6 to 13. Only paras 10 to 13 require consideration:

10. The Chuas incurred costs for approved works totalling approximately $588,922 which were included in the estimated total cost of works.
11. Archiworks is entitled to the sum of $70,670.64 (net GST) for fees for approved works up to the date of termination pursuant to clause 19(a)(i) of the CMA.
12. As at the date of the termination the Chuas had paid to Archiworks the sum of $43,182 (net GST) in construction manager’s fees.
Particulars
(a) Invoice dated 8 August 2005 from Archiworks to the Chuas.
13. By reason of the facts, matters and circumstances pleaded at paragraphs 6 to 12 above, the Chuas are obliged to pay to Archiworks the sum of $27,488.64 in fees for approved works up to the date of termination pursuant to clause 19(a)(i) of the CMA.

42 The document referred to in the particulars to para 12 is, as it says, an invoice delivered (or said to have been delivered) the day before the certificate of 9 August 2008 appears to have been prepared, and appears to have been based on the calculations set out in that certificate.

43 By paras 9 to 11 of their cross-claim response, Mr and Mrs Chua answered the claim for fees as follows:

9. In answer to paragraphs 9 and 10, the Chuas say that they paid to Archiworks in the order of $767,430.00, but otherwise does not admit paragraphs 9 and 10. The Chuas further say that Archiworks breached the Agency Agreement by failing to keep proper accounts.
10. The Chuas deny paragraph 11, and in doing so, refer to paragraph 9 above. In further answer to paragraph 11, the Chuas say that any obligation to pay any sums under clause 14 is conditional upon:-
(a) Monies being outstanding or payable to Archiworks, and
(b) Archiworks complying with the contractual pre-conditions prescribed by clauses 16(a) and (c) of the Agency Agreement, which Archiworks did not so comply.
11. In answer to paragraphs 12 and 13, the Chuas do not know and cannot admit the same, because, of the monies in the order of $767,430.00 paid by the Chuas to Archiworks, because Archiworks has failed to keep proper accounts and/or records, the Chuas do not know how Archiworks has applied these monies paid to it, as its request. The Chuas also, so far as a claim is made by Archiworks for $27,488.64, refer to the contractual preconditions in pleaded in paragraph 10 above, which were not complied with by Archiworks.

Decision

44 Mr and Mrs Chua have not sought to set off, against any liability that they may have to Archiworks under its cross-claim, the amount of the judgment that they have recovered. Further, the effects of that judgment include that Mr and Mrs Chua cannot assert that Archiworks has any liability to them, under the contracts for provision of architectural and construction management services, other than the liability under the judgment. Equally, Archiworks cannot dispute that it owes that amount to Mr and Mrs Chua.

45 Thus considered, I think that this estoppel issue is in reality a false issue. For the reasons that I have given, the judgment establishes conclusively the liability of Archiworks (and the other defendants) to Mr and Mrs Chua upon Mr and Mrs Chua’s claim. It does not establish the liability (or otherwise) of Mr and Mrs Chua to Archiworks under Archiworks’ cross-claim. Nor, and again for the reasons that I have given, does the judgment preclude Mr and Mrs Chua from raising such defences as may be available to them under their cross-claim response to Archiworks’ claim. Thus, if on a fair reading the list response asserted that Mr and Mrs Chua had paid more than enough to Archiworks to satisfy all their payment obligations to it, including for its fees as for well as the cost of construction works, the judgment entered pursuant to r 20.27(3) would not preclude them from arguing that defence.

46 It would be otherwise if Mr and Mrs Chua made an affirmative assertion of over-payment, and sought to set off, against any liability that they might have to Archiworks for fees or the value of goods purchased by Archiworks, the amount of that over-payment. In that hypothetical situation, Mr and Mrs Chua would be seeking to set off, against a claim (or cause of action) by Archiworks, a countervailing claim (or cause of action) against Archiworks. See the analysis of Hutley JA in Stehar Knitting Mills Pty Ltd v Southern Textile Converters Pty Ltd [1980] 2 NSWLR 514 at 518 (11)), (13), (16), 521 (33). That countervailing claim would not be available to them; it would have merged in the judgment that they have recovered.

Have Mr and Mrs Chua alleged a defence of payment?

47 This is the question raised by the first of Mr Ashhurst’s issues.

48 I have set out at [41] and [43] above the relevant terms of the cross-claim list statement and list response. In my view, it is clear that no affirmative defence of payment is “pleaded” (an inaccurate but convenient term). The closest approach to a defence of payment is to be found in para 11 of the list response. In that paragraph, Mr and Mrs Chua do no more than “not admit” the claim for the fee advanced in paras 12 and 13. They make no affirmative assertion that the amounts paid by them were sufficient (or more than sufficient) to satisfy all their payment obligations to Archiworks. On the contrary, they say that the state of the records is such that they do not know whether or not this is the case. (For the reasons that I have indicated at [36] above, the reference to “the contractual preconditions in [sic] pleaded in paragraph 10 above” – i.e., clause 16 – may be disregarded.)

49 Accordingly, I conclude, Mr and Mrs Chua are entitled to put Archiworks to proof of its claim, but are not entitled to advance a defence of payment.

Onus of proof

50 This is the second of the questions – and the only question of principle – raised by the third of Mr Ashhurst’s issues. It does not arise, because I have just held that the answer to the first question – have Mr and Mrs Chua raised the defence of payment? – is “no”. Nonetheless, it is convenient to deal with it.

51 It was common ground that, in general, the burden of proof of a particular fact lay with the party asserting it. In Archiworks’ case, the matters it would be required to be proved would include the following (what I say should not be taken as being exhaustive):

(1) The relevant terms of the contract.

(2) The estimated value, as at the date of termination, of all work under the construction contract.

(3) The value, at the same date, of all construction work actually carried out.

(4) The total amount of the fees paid to it up to that date.

(5) The amounts paid by it for goods ordered on behalf of Mr and Mrs Chua and utilised in the construction process.

52 If, contrary to my view, Mr and Mrs Chua had raised a defence of payment, they would bear the onus of proving that they had paid to Archiworks amounts in total sufficient to discharge all of their monetary obligations to Archiworks under the contract: for fees, as well as for the cost of construction work carried out.

Conclusions and orders

53 It follows from what I have said that the separate questions referred to at [7] above should be answered as follows:

First question: No.

Second question: No.

Third question (in so far as it raises the question of onus of proof): does not arise.

54 The issue raised by Mr Bailey in supplementary written submissions (see at [6] above) should be answered by saying that the judgment entered (or to be entered) pursuant to the accepted offer of compromise does not estop Archiworks from maintaining the causes of action asserted by it in its cross-summons in these proceedings.

55 I propose to stand these proceedings over for a week, to enable the parties to consider what follows from them. What is left is at most a task of quantification, to be undertaken having regard to what I have said. If the parties cannot agree on the outcome of the task of quantification, I propose to refer it out to a suitably qualified expert. However, having regard to the amount at stake and the likely costs of that process (or, indeed, of a further hearing in the Court) and having regard also to the terms of s56 of the Civil Procedure Act 2005, I expect the parties, properly advised, to be able to reach agreement on the process of quantification of Archiworks’ claim.

56 I make the following orders:

(1) Direct that the answers to the separate questions be recorded.

(2) Stand the proceedings over to 28 May 2009 at 9:30am.

(3) Reserve the question of costs.

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