Maersk Australia Pty Ltd v Rebelo Nominees Pty Ltd
[2008] WADC 81
•12 JUNE 2008
MAERSK AUSTRALIA PTY LTD -v- REBELO NOMINEES PTY LTD [2008] WADC 81
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WADC 81 | |
| Case No: | CIV:1273/2007 | 9 MAY 2008 | |
| Coram: | PRINCIPAL REGISTRAR GETHING | 12/06/08 | |
| PERTH | |||
| 15 | Judgment Part: | 1 of 1 | |
| Result: | Judgment awarded - Stay of execution granted | ||
| PDF Version |
| Parties: | MAERSK AUSTRALIA PTY LTD REBELO NOMINEES PTY LTD |
Catchwords: | Summary judgment Equitable set-off Defective delivery of goods under a freight contract |
Legislation: | Nil |
Case References: | Bank of Western Australia v Stein & Anor [2005] WASC 43 Bayview Quarries Pty Ltd v Castley Development Pty Ltd [1963] VR 445 Casella v Costin Pty Ltd, unreported; SCt of WA; Library No 5416; 22 June 1984 Hazcor Pty Ltd v Kirwanon Pty Ltd [1995] 12 WAR 62 Jacka Nominees Pty Ltd (in liq) v Edwards Karwacki Smith & Co Pty Ltd, unreported; SCt of WA; Library No BC9200989; 12 October 1992 Main Roads Construction Pty Ltd v Samary Enterprises Pty Ltd [2005] VSC 388 Morgan & Son Ltd v S Martin Jonson & Company Ltd [1949] 1 KB 107 Morgan v Pallister [2004] WASC 188 Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109 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 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
REBELO NOMINEES PTY LTD
Defendant
Catchwords:
Summary judgment - Equitable set-off - Defective delivery of goods under a freight contract
Legislation:
Nil
Result:
Judgment awarded - Stay of execution granted
(Page 2)
Representation:
Counsel:
Plaintiff : Mr G Mettam
Defendant : Mr C A Grasso
Solicitors:
Plaintiff : Machlins Lawyers
Defendant : Millsteed Grasso
Case(s) referred to in judgment(s):
Bank of Western Australia v Stein & Anor [2005] WASC 43
Bayview Quarries Pty Ltd v Castley Development Pty Ltd [1963] VR 445
Casella v Costin Pty Ltd, unreported; SCt of WA; Library No 5416; 22 June 1984
Hazcor Pty Ltd v Kirwanon Pty Ltd [1995] 12 WAR 62
Jacka Nominees Pty Ltd (in liq) v Edwards Karwacki Smith & Co Pty Ltd, unreported; SCt of WA; Library No BC9200989; 12 October 1992
Main Roads Construction Pty Ltd v Samary Enterprises Pty Ltd [2005] VSC 388
Morgan & Son Ltd v S Martin Jonson & Company Ltd [1949] 1 KB 107
Morgan v Pallister [2004] WASC 188
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109
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
(Page 3)
1 PRINCIPAL REGISTRAR GETHING: In this application, the plaintiff, Maersk Australia Pty Ltd, has sought summary judgment against the defendant, Rebelo Nominees Pty Ltd. The judgment sought by the plaintiff is for an amount of just under $110,000, with interest, said to be the balance due and owing for freight charges for services provided by the plaintiff to the defendant at the defendant's request between 3 July 2006 and 7 March 2007.
2 The application was filed more than 21 days after the defendant filed its appearance on 18 July 2007. Accordingly, pursuant to Rules of the Supreme Court O 14, r1(1), the plaintiff is required to seek, and has sought, leave to make the application. The defendant did not oppose the grant of leave. As the grant of leave is consistent with the principles laid down in authorities like Jacka Nominees Pty Ltd (in liq) vEdwards Karwacki Smith & Co Pty Ltd,unreported; SCt of WA; Library No BC9200989; 12 October 1992 and Bank of Western Australia v Stein & Anor [2005] WASC 43, I am prepared to grant the plaintiff leave to bring the application.
3 The plaintiff relies on two affidavits sworn by Kristine Christensen dated 11 December 2007 and 24 April 2008 ("First Christensen Affidavit" and "Second Christensen Affidavit" respectively). At the hearing of the application, I granted the plaintiff leave to file a further affidavit from Ms Christensen to cure a formal defect in the application, which I will refer to subsequently in the decision. The defendant relies on an affidavit of Romeo Rebelo sworn 31 January 2008 ("Rebelo Affidavit").
Relevant law
4 The basic legal principles regarding summary judgment applications are summarised in the judgment of Pullin J in Morgan v Pallister [2004] WASC 188 at par 4 in the following terms:
"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 to defend should not be granted, and that judgment should be given for the plaintiff. The party showing cause against the application assumes an evidentiary burden but the overall burden of persuasion remains on the applicant. The power to order summary judgment should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried. It is clear however, that the procedure is not confined to cases which are immediately plain and obvious and the fact that a transaction is intricate does not
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- disentitle the plaintiff to relieve in a clear case. It was never intended that when the facts are in dispute, an action should be disposed of summarily. If a defendant's affidavit reveals inconsistencies which might in a trial persuade a court not to believe the defendant's evidence, this will not necessarily lead to judgment for the plaintiff. It is not necessary to cite authority for these propositions."
5 Where there are disputed facts, and in the absence of cross-examination, the application is to be determined on the basis that the defendant's version of the facts, assuming that it is not inherently incredible, would ultimately be accepted at the trial of the action: Webster v Lampard (1993) 177 CLR 598 at 608 per Mason CJ, Deane J and Dawson J. In the same case, the members of the High Court had previously commented that the "issue before the learned Master on the application for summary judgment was … whether the material before the Master demonstrated that the action should not be permitted to go to trial in the ordinary way because it was apparent that it must fail" [at 602].
Plaintiff's claim
6 Rules of the Supreme Court O 14, r 2(1) provide that an application for summary judgment is to be supported by an affidavit verifying the facts on which the claim is based. The following relevant facts are taken from the First Christensen Affidavit. The plaintiff carries on the business of providing international shipping and logistic services. Between September 2006 and March 2007 the plaintiff and the defendant entered into 26 contracts of carriage pursuant to which the plaintiff agreed to ship the defendant's freight to various destinations in the Middle East and Asia. The total amount due on the 26 invoices is the sum of $109,952.56. A copy of each of the invoices is annexed to the First Christensen Affidavit along with a statement in the total amount. The defendant has refused or neglected to pay the plaintiff's invoices.
7 In both the statement of claim and the First Christensen Affidavit, reference is made to a credit agreement dated 10 June 2005 ("Credit Agreement") between the plaintiff and the defendant. The plaintiff's case in the statement of claim is put on the basis that the plaintiff's entry into the 26 subsequent contracts of carriage was in consideration of the Credit Agreement. The Credit Agreement is annexed to the First Christensen Affidavit. In its introduction it provides that it sets out the terms on which the plaintiff, through its agent Beaufort Shipping Agency (WA) Pty Ltd ("Beaufort"), would extend credit to the defendant in connection with
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- contracts for the carriage of goods made between the plaintiff and the defendant. By cl 2, it was agreed that any contract of carriage entered into by the plaintiff with the defendant during the term of the credit agreement would incorporate terms described as "Credit Terms", being terms set out in appendix 1 to the Credit Agreement. The term of the Credit Agreement was defined to be "periods starting on the date when [the] agreement has been executed by both Parties and ending on the first anniversary of that date". It was common ground in submissions that the Credit Agreement ended on 10 June 2006.
8 By cl 9.1 of the Credit Agreement, that "Agreement and any dispute claim or controversy arising from it shall be governed by and interpreted under the laws of England". Clause 9.2 contains a choice of jurisdiction clause under which the defendant "shall not bring proceedings except in the High Court of Justice in London".
9 The Credit Terms included cl 3.1 which reads as follows:
"Each payment under the Contract shall be made in full without set-off, withholding, abatement, counterclaim or deduction or stay of execution of any kind and notwithstanding it being disputed by the Client [the defendant] or any other person."
10 Counsel for the plaintiff in his submissions conceded that the Credit Agreement was valid for only 12 months and that it expired on 10 June 2006, prior to the contracts of carriage the subject of the plaintiff's claim. Be that as it may, it is clear from the First Christensen Affidavit that the plaintiff provided shipping services to the defendant in accordance with the 26 invoices set out in the statement of claim, totalling $109,952.56. The defendant does not contest the fact that the services have been provided. On this basis, I am satisfied that the plaintiff's claim is sufficiently verified by the First Christensen Affidavit.
11 Rules of the Supreme Court O 14,r 2(1) provides that the affidavits in support of an application for summary judgment must also state "that in the deponent's belief there is no defence to [the] claim or part thereof, as the case may be, or no defence except as to the amount of any damages claimed". In both the First Christensen Affidavit (par 15) and the Second Christensen Affidavit (par 12), Ms Christensen deposes that she "submits" that the defendant has no defence. However, she does not state that in her "belief" there is no defence. Although somewhat technical in its context, the requirements of O 14 r 2(1) need to be strictly complied with in order to enliven the Court's jurisdiction to grant summary judgment.
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- Accordingly, and without objection from the defendant, I gave the plaintiff leave to file a further affidavit correcting this defect. This affidavit was filed on 15 May 2008.
12 Where a plaintiff has satisfied all the requirements of O 14 to give it prima facie the right to an order in the terms asked, the burden shifts to the defendant to satisfy the court why judgment should not be given against it: Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109 per Brinston J at 110; Westwind Air Charter Pty Ltd v Hawker De Havilland Ltd (1990) 3 WAR 71 per Murray J at 74. The defendant must satisfy the Court "with respect to the claim … that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim": Rules of the Supreme Court O 14 r 3(1). As noted in the quote above from Pullin J in Morgan v Pallister (supra), this is an evidentiary burden, the overall legal burden of persuasion remaining on the applicant.
Defendant's defence
13 In its defence filed 14 November 2007, the defendant denies the substantive allegations in the statement of claim and states that insofar as there was a contract between the plaintiff and the defendant for cartage, there was a total failure of consideration by the plaintiff to the defendant. Were this all that was before me in relation to the defendant's position, I would have no hesitation in striking out the defence, refusing leave to defend and granting judgment to the plaintiff. However, in the Rebelo Affidavit, the defendant presents facts which it asserts allow it to raise an equitable set-off to the plaintiff's claim.
14 In his affidavit, Mr Rebelo deposes that the defendant engages in the business of exporting vegetables. It has traded with the plaintiff for the last 17 years using it for shipping its vegetables overseas. The defendant has always paid its account with the plaintiff over the last 17 years. Mr Rebelo deposes that (at par 6):
"The reason the current 26 invoices have not been paid, on (sic) account of misleading and deceptive conduct on the part of the Plaintiff by its agent which has resulted in loss or damage to the company."
15 The alleged misleading and deceptive conduct arises out of representations said to have been made by an officer of the plaintiff's agent, Beaufort. In about 2005, the defendant was approached by an employee of Beaufort and asked whether it could give the plaintiff more
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- business by way of containers. The defendant's vegetables are transported overseas in containers. Mr Rebelo advised the representative of Beaufort that the only extra business it could provide at that time was the shipping of containers to a place called "Ponte Des Galets" near Port Louis on Reunion Island in the Indian Ocean. The representative of Beaufort said that they did not have a service to Ponte Des Galets but that she would go back to her principal, the plaintiff, and make enquiries to see if they could provide a service to that location. A few weeks later, the representative of Beaufort came back to Mr Rebelo and said that the plaintiff could provide a shipping service to Ponte Des Galets and provided a quote. The defendant subsequently agreed to ship four containers of carrots with the plaintiffs to Ponte Des Galets.
16 When the containers arrived at Port Louis in Reunion Island, the plaintiff had no resources and had made no arrangements to have the containers shipped by feeder vessels to Ponte Des Galets. As a result of the delays in shipment, the carrots in the containers began sprouting and became unsaleable. The carrots had to be sold at a "serious loss". The loss for each container was $25,000, (each container containing 24.5 tonnes of carrots). The total loss is in the region of $100,000.
17 The representative of Beaufort told Mr Rebelo that the reason for the delay (and consequent loss) was that the plaintiff was not aware that the containers in which the carrots were exported could not be put on the barges which were available at Port Louis for transport to Ponte Des Galets. The containers were too heavy for the barges.
18 The defendant, through Mr Rebelo, raised the issue of loss with the plaintiff. Mr Rebelo deposes (par 32):
"At the time of the loss, the Plaintiff Company said they would consider the matter of the loss; but they dragged their feet and it took them six months to reply to one letter. The principal from the eastern states came over from Sydney to see me and admitted that the Plaintiff was at fault and said he would take the matter up with the head office in Copenhagen to push the claim. But he refused to put that in writing. Later he said that they might pay my loss but I had to pay the account. I was willing to negotiate. But the negotiations of the plaintiff as told to me was that I could get '50 cents or $100,000'. The representative refused to commit. I said I would settle for 50 per cent of the loss. I asked him to make an offer. The only offer was 'pay and then you will find out'."
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19 Mr Rebelo then deposes that because the defendant had a running account with the plaintiff, the accounts relating to the four containers shipped to Ponte Des Galets had already been paid. The defendant company continued to pay all invoices as they came in, until the invoices the subject of this action.
20 Mr Rebelo annexes to his affidavit a survey report which he says confirms that the reason for the loss was the delay in shipping the carrots.
21 In the Second Christensen Affidavit, Ms Christensen states that she denies "Mr Rebelo's said allegations". However, she does not go into any detail on the allegations to put a different version of events on behalf of the plaintiff. Rather, she deposes that the conduct complained of relates to four shipments to the Port of Reunion between 10 June 2005 and 8 July 2005. The plaintiff's claim, she deposes, is for 26 separate shipments between September 2006 and March 2007. She deposes that each of the shipments were totally unrelated to the shipments referred to by the defendant.
22 As noted above, where there are disputed facts, the application is to be determined on the basis that the defendant's version of facts, assuming that it is not inherently incredible, would ultimately be accepted at the trial of the action. I do not find the defendant's version of the facts to be inherently incredible.
23 The critical question is whether or not the defendant's version of the facts gives rise to an equitable set-off.
Law relating to equitable set-offs
24 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: Morgan & Son Ltd v S Martin Jonson & Company Ltd [1949] 1 KB 107 at 113-114.
25 The broad framework for considering set-offs is provided by Rules of the Supreme Court O 20, r 17 which provides:
"Where a claim by a defendant to a sum of money (whether of an ascertained amount or not) is relied on as a defence to the whole or part of a claim made by the plaintiff, it may be included in the defence and set-off against the plaintiff's claim, whether or not it is also added as a counterclaim."
(Page 9)
26 Rules of the Supreme Court O 20, r 17 does not displace the rules governing equitable set-offs: Hazcor Pty Ltd v Kirwanon Pty Ltd [1995] 12 WAR 62 at 69. In equity, an unliquidated claim may be set-off against a liquidated claim: Westwind Air Charter Pty Ltd (supra) at 84.
27 In W Pope & Co Pty Ltd v Edward Souery & Co Pty Ltd [1983] WAR 117 at 120-121 per Olney J and Casella v Costin Pty Ltd, unreported; SCt of WA; Library No 5416; 22 June 1984, per Wallace J (with whom Burt CJ agreed) the law in relation to equitable set-offs was summarised by reference to a passage from ICF Spry, "Equitable Remedies" 2nd ed, 1980 at 170-171. The passage relied on is as follows:
" … if an otherwise sufficient equity can be found, it does not matter whether or not the material claim of the defendant is for an unliquidated amount, nor whether or not the opposing claims might properly be described as 'mutual'. But a defendant can establish an equity only by bringing forward a claim which impeaches that of the plaintiff. For this purpose it is not sufficient merely to prove a countervailing claim; nor, indeed, is it necessarily sufficient to prove a countervailing claim arising out of the same contract as that upon which the plaintiff is bringing suit. What generally must be established is such a relationship between the respective claims of the parties that the claim of the defendant has been brought about by, or has been contributed to by, or is otherwise so bound up with the rights which are relied upon by the plaintiff that it would be unconscionable that he should proceed without allowing a set-off. Thus if conduct of the plaintiff is such to induce the defendant to incur an obligation in favour of the plaintiff, and that conduct itself is fraudulent, negligent or otherwise wrongful so as to give a cause of action to the defendant, the plaintiff will not ordinarily be permitted to proceed until he has made good the material claims of the defendant. Again, where a joint debt has been incurred as security for the payment of a several debt, and the creditor sues the joint debtors, it will generally be regarded as inequitable to enforce the security without taking account of payments which have been received by him in respect of the several debt. Again, it may appear that an amount is payable by the defendant but that the plaintiff has agreed to pay back a proportion of that amount and that it would be inequitable that he should succeed without allowing a set-off. There are, of course, other cases also where it will be held that an equitable set-off lies, provided that it appears that the claim
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- of the defendant does in truth impeach that of the plaintiff, for the application of the principles which are here in question should not be arbitrarily restricted."
28 Immediately proceeding quoting this passage, Olney J in Pope (supra) stated that (at p 120):
"It has become recognised that where a common injunction would formally have issued restraining a plaintiff at law from proceeding until he had satisfied a claim, be it legal or equitable, an equitable defence now arises in courts having both legal and equitable jurisdictions."
29 The facts in Pope (supra) are similar to those in the present case. The receivers of the plaintiff sued for the price of hard frozen boneless full carcass mutton supplied by the plaintiff to the defendant. The defendant sought to raise an equitable set-off arising out of an earlier shipment of mutton. It was a term of the contract for the previous shipment that the meat would be delivered free on board on a nominated vessel at Fremantle for export to Greece. The defendant contended that in breach of the contract, the plaintiff had not delivered the contractually required quantity of meat and that the meat delivered was not in accordance with the contractual specifications. The defendant sought to set-off the losses incurred as a result of these breaches against amounts claimed by the receiver of the plaintiff for a second contract entered into two months later. Prior to this second contract being entered into, and without knowledge of the breaches (as the meat had not yet arrived in Greece), the defendant paid the plaintiff in full for the meat delivered under the earlier contract. Olney J concluded that the defendant was not entitled to set-off in equity its claim against the plaintiff in respect of the earlier contract against its liability to the plaintiff under the second contract.
30 The decision of Olney J is consistent with a decision of Scholl J in Bayview Quarries Pty Ltd v Castley Development Pty Ltd [1963] VR 445. In that case, Scholl J commented (at 449):
"I do not see why equity would have intervened to restrain the present action by injunction merely because of an allegation by the defendant that some 10-12 months earlier there had been defects in other deliveries about which the defendant had done nothing in the meantime except pay for them in full."
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31 A similar issue arose in Westwind Air Charter (supra). 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, in their defence to counterclaim, 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. 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 p 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 defensively: it cannot be used defensively. But a set-off, like an estoppel, and in the same limited sense, is a shield not a sword."
32 Murray J also refers to the following passage from the same text (p 85 of judgment – p 776 of text):
"One ingredient was necessary in equity but not required at law, i.e. 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."
33 His Honour concluded (at pp 85-86):
"Here, what is said for the plaintiff's raising the question of set-off in answer to the defendant's counterclaims is not that the nature of their claims by writ was such as to deny Hawker relief upon its counterclaim. Indeed, as we have seen, there are admissions on the affidavits that at least to some extent the
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- claims may be made out, in the sense that they are claims for Hawker to be paid for maintenance work performed, but for which it has not been remunerated. All that is said for the plaintiff is that there claims relates to the same contractual relationship in respect of the maintenance of aircraft, as those of the defendant. That is all that can be said, I think, and it is fairly insufficient, leading me to conclude that a set-off is unavailable and causing me to confirm my view that I would order judgment to be entered for Hawker against Westwind."
34 For present purposes, it is significant to note that in WestwindAir Charter the plaintiffs' claims for unliquidated damages arose more or less at the same time as the defendant's claims for payment. There was not the time delay evident in Pope (supra) and Bayview Quarries (supra).
35 In the present case if all that the defendant was asserting was a claim to unliquidated damages arising out of a contract or negligent mis-statement (as to the fact that the plaintiff could deliver goods to Ponte Des Galets in a saleable form) or even breach of Trade Practices Act 1974 s 52, the above authorities are to the effect that would not suffice to give rise to an equitable set-off. More is required.
36 The defendant's argument is that it would be unconscionable for the plaintiff to proceed with its claim without the set-off being taken into account due to an estoppel which arose. The defendant's argument is that:
(a) At the time the loss was identified, the plaintiff said that they would consider the matter;
(b) The plaintiff delayed in doing so;
(c) Because the defendant had a running account with the plaintiff the accounts for the Ponte Des Galets shipment were paid;
(d) It was only when the defendant through Mr Rebelo was told that the plaintiff would not be compensating them for losses that the defendant stopped paying its accounts with the plaintiff.
37 The nature of the estoppel claimed seems to be that the plaintiff is estopped from taking the benefit of any delay in the defendant ceasing payment of its invoices due to the delay it took in considering the defendant's claim. The nature of an estoppel of this kind is conveniently summarised in the decision of Brennan J in Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, at 413 as following:
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- "The nature of an estoppel in pais is well established in this country. A party who induces another to make an assumption that a state of affairs exists, knowing or intending the other to act on that assumption, is estopped from asserting the existence of a different state of affairs as the foundation of their respective rights and liabilities if the other has acted in reliance on the assumption and would suffer detriment if the assumption were not adhered to …"
38 In order to consider the effect of this estoppel, it is necessary to consider whether the defendant could have raised the question of defective delivery as an equitable set-off had it done so at the time when the relevant invoice was presented for payment.
39 On the authority of Westwind Air Charter (supra), the answer would seem to be no. Although in the assumed state of affairs the claims would relate to the same contract, there is nothing in the nature of the claim that goes to impeach the title of the plaintiff to bring its claim.
40 There is another reason why the defendant could not have raised defective delivery as a set-off. Clause 3.1 of the Credit Terms, quoted above in par 9, appears to contractually preclude the defendant from raising defective delivery as a set-off against freight charges. The key question is whether cl 3.1 in its terms would have prevented the defendant from raising defective delivery as a set-off to a claim by the plaintiff for payment of the invoice under which each container was delivered. If it would have, then the fact that the defendant deferred its decision to suspend payment to the plaintiff based on the conduct of the plaintiff in saying it was considering the defendant's claim (whether or not this be made out as a matter of fact) becomes irrelevant.
41 The effect of cl 3.1 is complicated as it has to be interpreted in accordance with English law – see cl 9.1 of the Credit Agreement quoted above. Under Australian law, it is clear that the parties may by contract exclude the right to rely on a set-off to a claim under the Contract – see generally Main Roads Construction Pty Ltd v Samary Enterprises Pty Ltd [2005] VSC 388 (28 September 2005). The position is the same under English law: "Halsbury's Laws of England", Vol 42 par 432 (4th ed reissue).
42 The defendant raises a preliminary objection that cl 3.1, on its terms, would not have prevented an equitable set-off from being raised. Rather, on the defendant's argument, all that the clause would have done was to
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- have prevented the defendant from relying on its claims to decline to pay the plaintiff's invoice. To my mind, that is the precise point. If the clause, on its face, would have prevented the defendant from being able to decline payment, then it must also operate to prevent the defendant from being able to raise an equitable set-off in a claim for payment. Otherwise it has no meaning. I consider that had the defendant not paid the relevant freight charges, cl 3.1 would have prevented the defendant from raising defective delivery as a set-off.
43 Thus even if the plaintiff could be estopped from departing from the assumed state of affairs (that delay would not count against the defendant), under the assumed state of affairs, there would still be no basis for an equitable set-off to arise.
44 On this basis, the defendant has not satisfied me that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason be a trial of the claim. The plaintiff is entitled to judgment on the claim.
Stay of judgment
45 The next issue to consider is whether or not there ought to be a stay in any judgment awarded to the plaintiff pending determination of the defendant's proposed counterclaim. Order 14 r 3(2) provides:
"The court may, by order and subject to such conditions, if any, as may be just, stay execution of any judgment given against a defendant under this Rule until after the trial of any counterclaim made or raised by the defendant in the action."
46 To my mind, there are four reasons why it is just that a stay be granted in this case:
(a) The dispute arose in the context of a 17-year trading relationship between the plaintiff and the defendant. In those circumstances, it was both not unreasonable and entirely understandable that the defendant continued trading with the plaintiff, and did not stop payment, while the defendant's claim was being considered by the plaintiffs.
(b) On the limited information before me, the defendant's counterclaim appears to have strong prospects of success on the merits. The plaintiff chose not to specifically
- answer the allegations made by the defendant in the Rebelo Affidavit.
- (c) The amount of the counterclaim is in the order of $100,000. The defendant appears to have consciously withheld payment of approximately that amount of money from the plaintiff.
(d) Under cl 9.2 of the Credit Agreement, the defendant would be obliged to litigate any separate action for defective delivery in the High Court of Justice in London. It would be unjust for the plaintiff to have the benefit of this jurisdictional bar when it has commenced the present action in Western Australia.
47 However, given the delays in pursuing the action to date, the stay would be subject to more stringent conditions than usual to ensure that the counterclaim is entered for trial and determined expeditiously.
Orders
48 It is thus appropriate that the Court makes orders granting judgment to the plaintiff, then staying that judgment pending the expeditious determination of the counterclaim. I will hear counsel on the issue of costs and the final form of the orders.
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