LEFRASCO Rural Pty Ltd as trustee for Vanderkley Family Trust v Eureka! Mfg Pty Ltd

[2010] WASC 50

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   LEFRASCO RURAL PTY LTD as trustee for VANDERKLEY FAMILY TRUST -v- EUREKA! MFG PTY LTD [2010] WASC 50

CORAM:   MASTER SANDERSON

HEARD:   3 MARCH 2010

DELIVERED          :   16 MARCH 2010

FILE NO/S:   CIV 2069 of 2008

BETWEEN:   LEFRASCO RURAL PTY LTD as trustee for VANDERKLEY FAMILY TRUST (ACN 078 530 793)

RICHARDS INVESTMENTS (WA) PTY LTD as trustee for RICHARDS FAMILY TRUST t/as CHEMFORCE AUSTRALIA (ACN 108 011 525)
Plaintiffs

AND

EUREKA! MFG PTY LTD (ACN 125 568 667)
Defendant

Catchwords:

Practice and procedure - Application by defendant for judgment on counterclaim - Turns on own facts

Legislation:

Nil

Result:

Judgment for defendant

Category:    B

Representation:

Counsel:

Plaintiffs:     Mr G A Rabe

Defendant:     Mr P G McGowan

Solicitors:

Plaintiffs:     Michael Rogers & Associates

Defendant:     Cullen Babington Hughes

Case(s) referred to in judgment(s):

Clambake Pty Ltd v Tipperary Projects Pty Ltd [2009] WASC 52

1. MASTER SANDERSON:  This was the defendant's application for summary judgment on its counterclaim.  The application is brought under O 14 r 6; the principles to be applied are those set out in O 14.  There was no dispute between the parties on this issue.

2. Nor is there any dispute between the parties as to the relevant facts.  In its statement of claim the plaintiffs identify themselves as carrying on business in Western Australia under the name of 'Chemforce Australia'.  The plaintiffs say they made three contracts with the defendant, pursuant to which the defendant was to supply the plaintiffs with a chemical known as Glyphosate.  The plaintiffs say the first of these agreements was made in August 2007 and the other two agreements were concluded in September 2007.  The plaintiffs allege the defendant breached all three of these agreements by failing to supply the Glyphosate.  It claims damages for breach of contract.

3. In its counterclaim, the defendant refers to four contracts its says were made with the plaintiffs.  The first contract was made in July 2007 and was for the supply of certain herbicides.  The other three contracts were made in February 2008 and were for the delivery of the chemical Glyphosate.  In all four cases it is alleged by the defendant that the plaintiffs did not pay for the chemicals which were delivered.

4. In its defence to the counterclaim, the plaintiffs admit the contracts and admit non‑payment.

5. It is important to note that there are different contracts referred to by the plaintiffs and the defendant in their respective claim and counterclaim.  In no case is it alleged that any or all of these contracts were concluded at the same time and form part of the same transaction.  Each contract is pleaded separately, as is each breach.

6. The plaintiffs' defence to the defendant's counterclaim is that they have an equitable set‑off.  It was conceded that in the circumstances of this case there could be no legal set‑off.

7. The distinction between a legal set‑off and an equitable set‑off was considered by Heenan J in Clambake Pty Ltd v Tipperary Projects Pty Ltd [2009] WASC 52 at [152]. His Honour said:

   There is a fundamental distinction between a legal set‑off and an equitable set‑off.  A set‑off at law under the statutes of set‑off is simply procedural and does not take effect until judgment in the action in which the set‑off is claimed  …  By contrast a substantive equitable set‑off will not provide merely a procedural defence.  Being a substantive defence an equitable set‑off can provide immediate justification for refusal to pay the debt otherwise due.

8. An equitable set‑off being a substantive defence requires more than mutuality.  It requires identification of some equity in the matter which would properly justify a defence as to the amount and provide justification for the refusal to pay what is otherwise an admitted debt of the defendant.

9. The learned authors of Meagher, Gummow and Lehane:  Equity Doctrines and Remedies (4th ed), put the position as follows (at par 37‑005):

   A set‑off is said to exist when a defendant in answer to the 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 although 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.  That it is also capable of being used defensively, as a sword, is not to the point.  What is meant by the aphorism is that whether or not it can be used defensively it is capable of being pleaded as a ground for absolution, as a shield.

10. Once that principle is stated it is clear that in this case no equitable set‑off is available to the plaintiffs in answer to the defendant's counterclaim.  During the course of his submissions, counsel for the plaintiffs referred to the application for summary judgment as being 'unfair, inequitable and unconscionable'.  The first two of those descriptive terms are really without precise meaning in the context of an application such as this.  Counsel was unable to give any content to the claim that the defendant's application was 'unconscionable'.

11. That being so there is no defence to the defendant's counterclaim.  There should be judgment on the counterclaim in favour of the defendant.