National Australia Bank Ltd v Idoport Pty Ltd

[2007] NSWSC 1349

CITATION:	National Australia Bank Ltd v Idoport Pty Ltd [2007] NSWSC 1349
HEARING DATE(S):	17/10/07
JUDGMENT DATE :	27 November 2007
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Young CJ in Eq
DECISION:	The separate question must be answered "No".
CATCHWORDS:	CONTRACT [145]- Contractual set-off- Differs from procedural set-off- Operates as a defence- Whether rival claims must both be liquidated a matter of contract-However both must be due and payable- A claim that is barred from prosecution held not to be capable of set-off.
LEGISLATION CITED:	Civil Procedure Act 2005, s 21 Corporations Act 2001 (Cth), ss 459E, 459P Sale of Goods Act 1923, s 54(1) Supreme Court Rules 1970, Pt 15 r 25 (repealed) Uniform Civil Procedure Rules 2005, r 28.2
CASES CITED:	Bayview Quarries Pty Ltd v Castley Development Pty Ltd [1963] VR 445 Cherry v Boultbee (1839) 4 My & Cr 442; 41 ER 171 Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co Ltd (1929) 43 CLR 247 Fliway Transport Pty Ltd v Soper (1988) 21 NSWLR 19 Francis v Dodsworth (1847) 4 CB 202; 136 ER 482 Langley Constructions (Brixham) Ltd v Wells [1969] 2 All ER 46 Maniotis v Valimi Pty Ltd (2002) 4 VR 386; 169 FLR 291 McDonnell & East Ltd v McGregor (1936) 56 CLR 50 Mersey Steel & Iron Co v Naylor Benzon & Co (1882) 9 QBD 648 Opal Maritime Agencies Pty Ltd v The Proceeds of Sale of the Vessel MV "Skulptor Konenkov" (2000) 98 FCR 519 Re Application of Keith Bray Pty Ltd (1991) 23 NSWLR 430 Re GEB [1903] 2 KB 340 Re K L Tractors Ltd [1954] VLR 505 Re Moss [1905] 2 KB 307 Smith v Betty [1903] 2 KB 317 Stehar Knitting Mills Pty Ltd v Southern Textile Converters Pty Ltd [1980] 2 NSWLR 514 Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 289 Westpac Banking Corp v Eltran Pty Ltd (1987) 14 FCR 541
PARTIES:	National Australia Bank Ltd (P1) National Markets Group Ltd (P2) National Australia Financial Management Ltd (P3) Australian Market Automated Quotation (Ausmaq) System Ltd (P4) Glenn L L Barnes (P5) Francis J Cicutto (P6) David M Krasnostein (P7) Kevin F Courtney (P8) Russell A McKimm (P9) Richard McKinnon (P10) Simon Moore (P11) Donald Robert Argus (P12) Idoport Pty Ltd (D)
FILE NUMBER(S):	SC 1878/07
COUNSEL:	T F Bathurst QC, R A Dick and K J Williams (P) B A Coles QC, M J Dawson and Dr R Derham (D)
SOLICITORS:	Freehills (P) TressCox (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

YOUNG CJ in EQ

Tuesday 27 November 2007

1878/07 – NATIONAL AUSTRALIA BANK LTD v IDOPORT PTY LTD

JUDGMENT

1 HIS HONOUR: These reasons deal with an issue that has arisen in winding up proceedings brought by the plaintiffs against the defendant and which has been tried in advance of other issues pursuant to rule 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) prior to the determination of the application by the plaintiffs for the winding up of the defendant.

2 The separate question is: On the assumption (which is not admitted by the plaintiffs) that the defendant has an arguable claim against the plaintiffs for the payment of performance bonuses under the Consulting Agreement and the Guarantee (hereafter “the Performance Bonus Claim”), is the defendant entitled to raise the Performance Bonus Claim as any grounds of opposition to the plaintiffs’ claim for an order that the defendant be wound up?

3 I need to set out some brief matters of background, none of which appears to be controversial. In them, I will refer to the first plaintiff as “NAB” and the defendant as “Idoport”.

4 On 13 September 1996, Valenti Pty Ltd, an associated entity of the first plaintiff (hereafter “Valenti”), the Australian Market Automated Quotation System Ltd, the first plaintiff, National Australia Bank Ltd (hereafter “the NAB parties”) and Idoport executed a Consulting Agreement whereby Idoport would provide consulting services to the NAB parties in regard to computing and communications systems, preparations, designs, developments, maintenance and so forth.

5 All the agreements were said to be governed by the law of Victoria. All counsel have assured me that this does not provide any complications.

6 Clause 7 of the Consulting Agreement provided for the calculation and payment of performance bonuses by Valenti to Idoport.

7 The calculation of and liability for payment of these performance bonuses have been a source of dispute between the parties since 1998.

8 Clause 25(b) of the Consulting Agreement provided that Idoport irrevocably authorised Valenti to set-off any amount payable under the Agreement or otherwise by Valenti to Idoport against any sum due and payable by Idoport to Valenti under the Agreement. Importantly, the provision expressly stated that Valenti was not obliged to exercise the set-off. Valenti has chosen not to activate cl 25.

9 On 6 November 1996, NAB and Idoport executed a Guarantee whereby NAB unconditionally and irrevocably guaranteed the due and punctual payment of all “Guaranteed Money”: cl 2.1. “Guaranteed Money” is defined as all money owed by Valenti to Idoport in connection only with clause 7 of the Consulting Agreement (ie the performance bonuses): cl 1.1.

10 Clause 3(a) of the Guarantee (hereafter “the Guarantee Set-Off clause”) provided that:

“Each party to this Agreement irrevocably authorises the other party to apply any amount owing in any currency (whether or not matured) to the other party towards satisfaction of any sum at any time due and payable by it to the other party under or in relation to the Consulting Agreement.”

[emphasis added]

11 On its face, the Guarantee Set-off Clause is ambiguous as to whom exactly the phrase “the other party” refers. I will discuss this further below.

12 On 24 September 1998, Idoport commenced proceedings against the NAB parties for breach of the Consulting Agreement and claimed damages of between US$190 million and US$8 billion (hereafter “the Main Proceedings”). The hearing of the Main Proceedings commenced before Einstein J on 24 July 2000.

13 Idoport also commenced separate proceedings against the NAB parties seeking the payment of performance bonuses in respect of the revenue of additional “operating entities” which had become part of the subsidiaries of the NAB parties after the Main Proceedings were commenced (hereafter “the MLC Proceedings”).

14 On 5 October 2000, Einstein J ordered that the Main Proceedings and the MLC Proceedings be heard and determined together and that the evidence in one be evidence in the other: Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 945.

15 In late August and early September 2001, the NAB parties brought notices of motion for security for costs. On 24 September 2001, Einstein J made formal orders that Idoport, and the other plaintiff in the Main Proceedings, Market Holdings Pty Ltd, a company associated with Idoport, provide security for costs.

16 The first instalment was due on 1 November 2001. Idoport failed to pay it.

17 On 29 January 2002, Idoport’s claims in the Main Proceedings and the MLC Proceedings were dismissed by Einstein J because of its failure to provide security for costs: Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWSC 18.

18 Justice Einstein’s orders (hereafter “the Barring Orders”) included:

“That the plaintiff and each of the cross-claimants to the second cross-claim be barred from bringing fresh proceedings concerning any cause of action or the whole or any part of any claim for relief by any of them in these proceedings, until costs in these proceedings have been paid in full.”

19 In August 2002, Idoport was unsuccessful before the Court of Appeal where Mason P, Stein and Giles JJA unanimously ordered that Idoport’s appeal against Einstein J’s judgment be dismissed with costs: Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWCA 271. Idoport’s subsequent application for special leave to appeal to the High Court of Australia in June 2003 was dismissed with costs by Kirby and Heydon JJ.

20 In March 2004, Burchett AJ made a declaration as to the construction of the Barring Order making it clear that Einstein J’s order refers to any cause of action or claim for relief in regard to the Main Proceedings: National Australia Bank Ltd v Idoport Pty Ltd [2004] NSWSC 212.

21 However, on 1 April 2005, Idoport sought to commence proceedings in the Equity Division, Commercial List, No 50046 of 2005, against the NAB parties in respect of the performance bonuses alleged to be owing to Idoport under the Consulting Agreement and the Guarantee.

22 On 28 July 2005, Bergin J dismissed these new proceedings and held that they “concerned” the Performance Bonus Claim which was a cause of action and part of the relief claimed by Idoport in the Main Proceedings and, as such, the current proceedings were an “inappropriate device” as they offended the Barring Order: Idoport Pty Ltd v National Australia Bank Ltd [2005] NSWSC 752 at [55].

23 Bergin J held that the word “concerning” in the Barring Order meant “regarding, touching, in reference or relation to; about” (at [40]). Further, her Honour held that Idoport’s attempt to commence the new proceedings constituted an abuse of the Court’s process (at [55]).

24 Again, Idoport unsuccessfully appealed to the Court of Appeal where Mason P, Ipp and Beazley JJA unanimously dismissed the appeal against Bergin J’s judgment with costs: Idoport v National Australia Bank Ltd [2006] NSWCA 202.

25 However, Beazley JA, with whom Mason P and Ipp JA agreed, said at [115]:

“The Order dismissing the present proceedings did not constitute shutting the appellant out of a right of access to the Court. Rather, the position was that the appellant engaged the resources of the Court and the respondents in order to mount a case of mammoth proportions. It was entitled to do so, but only within the construct of the Court’s processes. Not being able to comply with the Court’s Order in relation to security for costs, the Court is entitled to exercise its inherent jurisdiction to prevent its process being abused. … the present proceedings fall within the terms of the barring Order and in any event are an abuse of the Court’s process.”

26 Again, Idoport made an application for special leave to appeal to the High Court and again this was refused with costs. Gummow and Heydon JJ said that they were not satisfied that there were sufficient prospects of success by Idoport in proving that Bergin J and later the Court of Appeal had erred in their construction of the Barring Order: Idoport Pty Ltd v National Australia Bank Ltd [2006] HCA Trans 673 (8 December 2006).

27 In February 2007, Einstein J delivered a gross sum judgment in favour of the NAB parties for costs: Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23. His Honour made orders, among other things, that Idoport pay the NAB parties a gross sum of $42.05 million and interest from 29 January 2002 at Supreme Court rates.

28 Idoport did not pay the judgment debt or any part of it.

29 On 12 March 2007 Idoport delivered by hand a letter to the NAB (hereafter “the Notice of Set-Off”) stating that:

“Pursuant to the Guarantee and Clause 3(a) of the Guarantee, Idoport hereby gives notice to the Bank that the judgment debt in the total sum to a maximum of $63,789,154.88 calculated to 7 March 2007 is set off against the amount of four hundred and fourteen million four hundred thousand dollars that the Bank owes Idoport.”

30 On 16 March 2007, the NAB parties applied for an order to wind up Idoport (the instant proceedings). The NAB parties claim to be creditors of Idoport in regard to the judgment debt.

31 As at 16 March 2007, the amount of the judgment debt had increased to $63,892,839.81 including interest which continues to accrue as Idoport has not made any contribution towards payment of the debt to date.

32 By the issue of the Notice of Set-off, Idoport purports to have set off the judgment debt. In other words, Idoport alleges the debt has been paid and the NAB parties cannot therefore be its creditors for the purpose of s 459P of the Corporations Act 2001 (Cth).

33 I now turn to the submissions on the separate question. These were put to me orally on 17 October 2007. Mr T F Bathurst QC, Mr R A Dick and Ms K J Williams appeared for the plaintiffs and Mr B A Coles QC, Mr M J Dawson and Dr R Derham appeared for the defendant.

34 The basic proposition put by Mr Bathurst and his team was that whilst it was conceded for present purposes that Idoport may have a claim against NAB in some amount, if it is ever able to bring the proceedings to enforce it, there is not at present any sum due and payable by NAB to Idoport which could constitute a liquidated sum capable of being the subject of contractual set-off.

35 This submission was fleshed out as follows:

(1) The Performance Bonus Claim is a disputed, unliquidated claim which, because of the Barring Order, cannot be pursued until the judgment debt is satisfied;


(2) Even if the Performance Bonus Claim were capable of being set-off against the judgment debt (and it is not), the Barring Order precludes Idoport from raising this issue in opposition to the NAB parties’ application for winding up.

(3) The existence of the Performance Bonus Claim does not excuse Idoport’s failure to pay the judgment debt.

36 The riposte by Mr Coles and his team was:

(1) This is a case of contractual set-off. Contractual set-off operates so that the set-off is equivalent to payment.

(2) The true construction of the Guarantee Set-Off Clause operates to effect a contractual set-off.


(3) The process occurs automatically so that Idoport is not making a claim before a court in respect of the Performance Bonus Claim.

(4) The NAB judgment debt having thus been extinguished, NAB is not a creditor with status to present an application to wind up Idoport.

(5) In any event, the Performance Bonus Claim should be classified as a liquidated claim.

37 Both sets of counsel argued that some of the claims made by their opponent went outside the scope of the separate questions. As appears later, I agree with these comments.

38 Although each side addressed me on whether a claim which is not currently in a certain sum, but which may be made certain on facts currently known is a liquidated demand or not, it seems to me quite unnecessary to resolve the matter as such resolution can have no bearing on the result of the present issue.

39 Questions of set-off can raise very complicated questions of law. Set-off is of at least six different categories and each has its own basis and peculiarities.

40 At common law, if parties had debts owing to each other on the same or connected accounts, only the balance due was a debt which could be recovered by action; see Montague on Set-Off (1825) p 1.

41 At common law, after the introduction of the Statutes of Set-Off, unconnected debts could be set-off by way of defence. The right given under these statutes was reintroduced into NSW by s 21 of the Civil Procedure Act 2005.

42 There are also some miscellaneous situations where, at common law, set-offs may be permitted. Examples are where there are competing orders for costs, or where the plaintiff sues on an indebitatus count, or where the relevant statute allows a diminution of the price if there are defects, eg section 54(1) of the Sale of Goods Act 1923. These are not relevant to this case.

43 In equity, set-off was permitted in a wider range of circumstances. This equitable set-off does not feature in the present case except to note that cases decided in respect of equitable set-off are not necessarily helpful to other classes of set-off.

44 In insolvency, there are special statutory provisions dealing with mutual debts and special rules such as the rule in Cherry v Boultbee (1839) 4 My & Cr 442; 41 ER 171.

45 Finally, there is set-off at common law where parties have agreed that in certain circumstances monies owing to each of them may be automatically, or may at a party’s election, be set-off. This is called in these reasons, “contractual set-off”.

46 Types two to five, discussed above can be categorised as “procedural set-off”. Type one is difficult to categorise.

47 Type six contractual set-off, is entirely distinct from procedural set-off. It depends solely upon the construction of the contract that the parties have made. Except by analogy, cases decided on procedural set-off are of no assistance when considering contractual set-off.

48 There are few reported cases of contractual set-off. I was referred in argument to the decision of the Full Federal Court in Opal Maritime Agencies Pty Ltd v The Proceeds of Sale of the Vessel MV “Skulptor Konenkov” (2000) 98 FCR 519, 562 [161] where the Court noted that the general effect of a contractual set-off was to deem the equal liabilities from each party to the other to have been paid with the balance only claimable.

49 In Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co Ltd (1929) 43 CLR 247, 263-4, Knox CJ and Dixon J said:

“It is, of course, well settled that when the liability upon shares and the liability upon a cross-demand against the Company of a sum immediately payable are mutually extinguished by an agreed set-off, this amounts to payment … .”

50 However, their Honours noted the caveat that these principles are called into play only where there was a sum lawfully payable by the Company which when paid might lawfully be repaid to the Company in discharge of a liability.

51 Thus, where set-off is alleged, it is usually necessary to examine the pleadings and facts with care and precision to see whether the set-off in issue arises out of contract, or under some principle of circuity of action or otherwise at law, or under statute or as a matter of equity.

52 In the present case, Mr Coles put that Idoport’s claim is contractual in that the $414,000,000 claimed is a “sum” which was “due and payable” for the purposes of the Guarantee Set-off Clause. Further, Mr Coles says the sum can be characterised as a liquidated demand because, even though Idoport may not know the precise amount, when all the facts are known the claim will be for a sum certain and it will simply be a matter of addition and subtraction and will not require an assessment of damages.

53 Indeed, Idoport concedes that the Performance Bonus Claim is not capable of being the subject of procedural set-off against the judgment debt under statute, or at common law, or in equity.

54 Mr Bathurst submits that the so-called “sum” referred to by Mr Coles is really an alleged debt for services rendered under the Performance Bonus provisions of the Consulting Agreement, or is money payable as unliquidated damages, or is a disputed claim based on alleged breach of contract.

55 Further, he says it is clear that, because of the Barring Order, Idoport cannot sue for the $414,000,000 until it pays the judgment debt.

56 If contractual set-off is found to exist the consequence is that the set-off is “in law equivalent to actual payment of each side”: Re Application of Keith Bray Pty Ltd (1991) 23 NSWLR 430, 431 per M H McLelland J. (This statement must be read sub modo in some cases of insolvency, as Ch 16 of Dr Derham’s The Law of Set-Off (3rd ed) shows, but that is not relevant to the present dispute.)

57 I now turn to the Guarantee Set-Off Clause whose construction is a matter of dispute, with both sets of counsel agreeing that it raises problems.

58 Mr Bathurst says the proper construction of the clause is as if it read:

“Each party to this Agreement [NAB] irrevocably authorises the other party [Idoport] to apply any amount owing in any currency (whether or not matured) to the other party [Idoport] towards satisfaction of any sum at any time due and payable by it [Idoport] to the other party [NAB] under or in relation to the Consulting Agreement.”

[Emphasis added]

59 Mr Coles, on the other hand, says the Guarantee Set-off Clause should be read:

Each party to this Agreement [NAB] irrevocably authorises the other party [Idoport] to apply any amount owing in any currency (whether or not matured) to the other party [NAB] towards satisfaction of any sum at any time due and payable by it [NAB] to the other party [Idoport] under or in relation to the Consulting Agreement.”

[ Emphasis added]

60 There is no doubt that if the authorising party is NAB then the first reference to “the other party” is Idoport. Both sides agree on this. There is also no doubt that the expression “the other party” cannot sensibly refer to one specific party.

61 If the second reference to “the other party” means NAB, as Mr Coles submits, then Mr Bathurst puts that the remainder of the clause does not make sense commercially or otherwise. Indeed, if this construction of the clause is correct, one would question, why a creditor would allow a debtor to have a choice of whether or not to pay back moneys owing or set-off them against reverse debts.

62 Mr Bathurst further submits that Idoport’s construction of the Guarantee Set-off Clause is commercially unreasonable as it permits Idoport to decide whether any amount owing to NAB should be paid or applied towards a sum payable by NAB to Idoport under or in relation to the Consulting Agreement. Usually, Mr Bathurst says, such a decision is in the hands of the creditor and not the debtor.

63 Mr Coles’ riposte is that it is wrong to class NAB as a “creditor” and Idoport as a “debtor” in a commercial agreement in which it was contemplated that there would be debts flowing in both directions.

64 Mr Coles puts that the Guarantee Set-off Clause was created by NAB and Idoport as part of NAB’s guarantee that the liability of Valenti to pay the performance bonuses under certain circumstances to Idoport would be met. In that context, it is logical that the intention of the parties was that NAB agreed to authorise Idoport to set-off debt owed by NAB to Idoport against debt owed by Idoport to NAB.

65 Both sets of counsel say that their interpretation is the commercially sensible one. This really depends on one’s point of view.

66 Whilst there will be difficulties with either construction, there are respectable arguments for each of the interpretations and I do not consider that the clause is so inscrutable as to be void for uncertainty. It seems to me that the better interpretation is to read the clause as saying that NAB authorises Idoport to set-off any monies owing to it by NAB against monies it owes to NAB. It also means that Idoport authorises NAB to set-off any monies owed by Idoport against monies it owes to Idoport. Although this gives both parties the right to make an appropriation, the practicalities of the matter are that the appropriation will be made by the party owing the lesser amount.

67 However, Mr Bathurst says that it really does not matter that much what is the true interpretation of the Guarantee Set-off Clause. This is because it just cannot be said that there is any amount owing by NAB to Idoport nor that there is any money due and payable by NAB to Idoport.

68 Generally speaking, the authorities favour the proposition that money is only due and owing when, if not paid, the person to whom it should be paid may maintain an action for it at law or in equity; see eg the dictum of Darling J in Re Moss [1905] 2 KB 307, 314, the subsequent history of which I discussed in Fliway Transport Pty Ltd v Soper (1988) 21 NSWLR 19, 22-24.

69 In all cases of procedural set-off, a claim cannot be set-off unless it is enforceable by action: Francis v Dodsworth (1847) 4 CB 202, 220; 136 ER 482, 489; Smith v Betty [1903] 2 KB 317, 323 and Stehar Knitting Mills Pty Ltd v Southern Textile Converters Pty Ltd [1980] 2 NSWLR 514, 522.

70 Again in Re GEB [1903] 2 KB 340, 349, set-off was not available where the debtor did not have a claim which he could enforce by action. See also Maniotis v Valimi Pty Ltd (2002) 4 VR 386; 169 FLR 291.

71 The view that money can only be said to be due when it can be recovered by action fits in with these authorities on procedural set-off.

72 It also accords with the principles discussed by Knox CJ and Dixon J in the case involving the Commissioner of Stamp Duties referred to earlier.

73 Accordingly, I accept this submission.

74 I now pass to the next group of submissions. Mr Bathurst says that the act of raising a defence of set-off in winding up proceedings constitutes the making of a claim which is barred by the Barring Order.

75 Mr Coles submits that the Barring Order only operates to bar Idoport from bringing “fresh proceedings” which concern “any cause of action or the whole or any part of any claim for relief by any of them in these proceedings” [emphasis added]. Thus, says Mr Coles, the Barring Order does not bar the bringing of a claim per se but rather the bringing, commencement or continuation of legal or quasi-legal proceedings (such as arbitration).

76 It is necessary at this stage to refer to the problems involved in considering whether a defence of set-off raises a fresh claim or is merely a defence to an existing claim.

77 Mr Bathurst further submits that although a set-off strictly operates as an answer to a plaintiff’s claim and as a plea in bar, it is still “in effect” a separate proceeding by the defendant.

78 A good place to commence this analysis is with Mersey Steel & Iron Co v Naylor Benzon & Co (1882) 9 QBD 648. In that case, a liquidator had a liquidated claim against Naylor. Naylor had an unliquidated claim for damages against the company for breach of contract. Sir George Jessel MR in argument commented at p 656, regarding set-off generally that “[i]t is in the nature of a defence. A defendant sued by a company must be entitled to raise any defence without leave”. [emphasis added].

79 Mr Bathurst, on the other hand, cites Stehar Knitting Mills Pty Ltd v Southern Textile Converters Pty Ltd at 518 and 521 per Hutley JA, among others, as authority for his submission.

80 In Stehar at 518, Hutley JA referred to Widgery LJ in Langley Constructions (Brixham) Ltd v Wells [1969] 2 All ER 46 and said “a claim and counter-claim are not truly a single proceeding. The counter-claim cannot be regarded as part of the claim. Set-off is really identical in this regard”.

81 At 521 of Stehar, Hutley JA said that “[h]aving regard to the above analysis of set-off, that is, it is one of the means of bringing conflicting claims to a single adjudication, I am of the opinion that claiming to set off a sum of money is commencing a proceeding against the company, and this is by statutory force prohibited. The fact that it is done by way of defence is immaterial. It is still a claim”.

82 In the particular circumstances of Stehar the defendant was prohibited from commencing proceedings against the plaintiff by a provision of a scheme of arrangement. The Court held that for the defendant to set-off its claim against that of the plaintiff was to commence a proceeding. Therefore, even though set-off was available as an option for the defendant pursuant to Pt 15 r 25 of the then Supreme Court Rules 1970, the defendant was not able to exercise it because of the scheme of arrangement.

83 Mr Bathurst also cites Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 289, 301-2 and Westpac Banking Corp v Eltran Pty Ltd (1987) 14 FCR 541, 548-9 as authority for his submission.

84 However, none of these cases were cases of contractual set-off. There are sound reasons for saying that: (a) the first type of set-off discussed above; (b) set-off under s 54(1) of the Sale of Goods Act; and (c) contractual set-off, do not operate as separate counter-claims, but are true matters of defence.

85 Mr Coles submits that the set-off available to the defendant in the circumstances of the instant case is contractual set-off and not set-off by statute (as in Stehar) or equitable set-off. Contractual set-off is a non-judicial step which does not require the assistance of the court (being more along the lines of a self-help remedy), but rather is the exercise of a contractual right; it does not fall within the scope of “fresh proceedings” and is therefore not barred by the Barring Order.

86 I agree with that submission. However, because there is no contractual set-off as the claim by Idoport does not constitute monies owing to it by NAB, victory on that submission does not win the battle for the defendant.

87 Mr Coles puts that, because there was set-off, NAB cannot be considered a creditor because the judgment debt has already been paid by way of Idoport serving the Notice of Set-off on the NAB on the ground that contractual set-off is equivalent to payment.

88 This submission is to my mind outside the terms of the separate question. However, its fate may be sealed by the determination I have already made.

89 Some time was spent in submissions as to whether Idoport’s claim was a liquidated claim or not and the consequences of such classification. It is clear that in some classes of procedural set-off the distinction is critical; see eg McDonnell & East Ltd v McGregor (1936) 56 CLR 50; Bayview Quarries Pty Ltd v Castley Development Pty Ltd [1963] VR 445.

90 Mr Bathurst then says that the Court should not allow Idoport to evade the purpose and intended effect of the Barring Order and frustrate the NAB parties’ recovery of their costs.

91 He points out that Idoport has had the opportunity to have this Court determine the Performance Bonus Claim. Further, in written submissions to the High Court, Mr Walker SC who then appeared for Idoport accepted that until the judgment debt was paid, the judgment of the Court of Appeal precluded Idoport from seeking any remedy in relation to the Consulting Agreement, even to the extent of denying Idoport the ability to claim and quantify the Performance Bonuses, which could otherwise be set-off against the claim for costs made by the NAB parties.

92 A finding of abuse of process is not lightly to be made: it is unnecessary to make it in the present case, and I do not do so. It is my duty, however, to note the submission.

93 A further matter was raised by Mr Coles and that is that these proceedings in themselves are an abuse of process because NAB did not serve on Idoport a notice of demand as a precursor to winding up proceedings pursuant to s 459E of the Corporations Act 2001 (Cth).

94 There is nothing in this point, s 459E makes it clear that a creditor “may” serve a statutory demand but is not obliged to do so.

95 Finally, Mr Coles submits that this Court ought not otherwise exercise its discretion to order the winding up of Idoport. He cites Re K L Tractors Ltd [1954] VLR 505, 512 where O’Bryan J said “a winding up order will not as a matter of discretion be made on a debt that is bona fide disputed provided the dispute is based upon a substantial ground”.

96 This matter is not really within the separate question. However, despite Mr Coles’ submissions, I can see no reason at present why a winding up order should not be made in favour of the creditor as a matter ex debito justiciae.

97 The separate question must thus be answered, “No”.

98 I will publish these reasons and stand the matter over for short minutes to be brought in. Those short minutes should deal with the answer to the question, costs (which I presently assume will need to be ordered against Idoport) and the ongoing progress of the winding up proceedings.

99 I will provisionally fix 9.30am on 6 December 2007 for those short minutes to be brought in. However, if my Associate is contacted the previous week, it may be possible to change that time.

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