P N Corporation Pty Ltd v Oxford Uniforms Pty Ltd - [2012] WADC 149

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: P N CORPORATION PTY LTD -v- OXFORD UNIFORMS PTY LTD [2012] WADC 149

CORAM: PRINCIPAL REGISTRAR GETHING

HEARD: 19, 28 SEPTEMBER 2012

DELIVERED : 26 OCTOBER 2012

FILE NO/S: CIV 1704 of 2012

BETWEEN: P N CORPORATION PTY LTD
Plaintiff
AND
OXFORD UNIFORMS PTY LTD
Defendant

Catchwords:

Summary judgment - Legal set off - Equitable set off - Delivery of goods on a running account

Legislation:

Statutes of Set-off, Insolvent Debtors Relief 1728 (UK)
Statute of Set-off 1734-5 (UK)

Result:

Leave to defend given - Order for payment of part of claim into court

Representation:

Counsel:

Plaintiff: Mr S England
Defendant: Mr T Darbyshire

Solicitors:

Plaintiff: Lawton Gillon
Defendant: Kott Gunning

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

Alexander v Ajax Insurance Co Ltd [1956] VLR 436
Amalta Holdings Pty Ltd v Richard Luff (Unreported, WASCA, Library No 8003, 21 December 1989)
Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184
Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662
Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191
Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344
Barclays Bank Ltd v WJ Simms Son & Cooke (Southern) Ltd [1980] QB 677
Bayview Quarries Pty Ltd v Castley Development Pty Ltd [1963] VR 445
Casella v Costin Pty Ltd (Unreported; FCt SCt of WA; Library No 5416; 22 June 1984)
Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 80
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353
Day & Dent Constructions Pty Ltd (in liq) v North Australian Properties Pty Ltd (1982) 40 ALR 399
DMS Shipping & Trading Co Ltd v Lionheart Asia Ltd [1996] 2 Qd R 20
Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87
Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27
Foaminol Laboratories Ltd v British Artid Plastics Ltd [1941] 2 All ER 393
Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Hadley v Baxendale (1854) 9 Exch 341, 354; (1954) 156 ER 145
Harbeck v Vasse Dozer Hire Pty Ltd [2009] WADC 48
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62
Herbert Clayton & Jack Waller Ltd v Oliver [1930] AC 209
Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365
Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125, 143
Maersk Australia Pty Ltd v Rebelo Nominees Pty Ltd [2008] WADC 81
Malik v Bank of Credit & Commerce International SA (in liq) [1998] AC 20
Marketforce Advertising Limited v Stadium Events Pty Ltd [2009] WADC 126
McDonnell & East Ltd v McGregor [1936] HCA 28; (1936) 56 CLR 50
Melbourne Glass Pty Ltd v Coby Constructions Pty Ltd (1998) 14 BCL 409
Morgan & Son Ltd v S Martin Johnson & 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
MV Yorke Motors (a firm) v Edwards [1982] 1 All ER 1024
Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GmbH (1977) 1 Lloyd's Rep 463
Rawley v Rawley (1876) 1 QBD 460
Re Daintrey [1900] 1 QB 546
Re Pennington and Owen Ltd [1925] Ch 825
Robinson v Harman (1848) 1 Exch 850, 855; (1848) 154 ER 363
South Australian Cold Stores Ltd v Electricity Trust of South Australia [1957] HCA 69; (1957) 98 CLR 65
Spalla v St George Wholesale Finance Pty Ltd [1999] FCA 1566
State Bank of Victoria v Parry [1989] WAR 240
Stumore v Campbell & Co [1892] 1 QB 314
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 83 ALJR 390
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
W Pope & Co Pty Ltd v Edward Souery & Co Pty Ltd [1983] WAR 117
Webster v Lampard (1993) 177 CLR 598
West Street Properties Pty Ltd v Jamison [1974] 2 NSWLR 435
Westwind Air Charter Pty Ltd v Hawker De Havilland Ltd (1990) 3 WAR 71
Wilson v United Counties Bank Ltd [1920] AC 102

PRINCIPAL REGISTRAR GETHING: For a number of years the plaintiff, P N Corporation Pty Ltd (PNC), has manufactured and wholesaled school uniforms for the defendant, Oxford Uniforms Pty Ltd (Oxford), who in turn is a retail supplier of uniforms to various schools throughout Perth. It appears that the relationship between them broke down in early 2012. PNC says that Oxford owes it in excess of $350,000 for unpaid invoices, damages for expenses incurred on cancelled orders and a dishonoured cheque. It seeks summary judgment for the bulk of this amount.
Oxford says that it does not owe PNC any money at all due to a combination of pricing errors, invoicing errors, credits for defective uniforms and damages arising as a consequence of the delivery of defective uniforms and the late delivery of uniforms. It further says that because of these breaches by PNC it has lost orders from the schools it was supplying at the time, which in turn has caused it to suffer loss in the form of lost profits.
There are six main issues which need to be determined:
(a)whether there is any issue in dispute which ought to be tried in relation to PNC's claims for unpaid invoices;
(b)whether there is any issue in dispute which ought to be tried in relation to PNC's claim for damages for expenses incurred on cancelled orders;
(c)whether there is any issue in dispute which ought to be tried in relation to PNC's claim for the dishonoured cheque;
(d)whether Oxford's counterclaims for overpayments and supply of defective uniforms can be set off against PNC's claims;
(e)the weight that may be given to Oxford's other counterclaims in determining the appropriate orders in the application; and
(f)the appropriate final orders.
PNC commenced the action on 12 June 2012 by writ endorsed with a statement of claim. On 11 July 2012 it filed a chamber summons seeking summary judgment. It filed two affidavits in support of the application, each by Tuan Nguyen, the sole director of PNC, dated 11 July 2012 and 7 September 2012 (which I will refer to as TN1 and TN2 respectively).
Oxford filed three affidavits in opposition to the application. Two were filed by Paul Glendining, a director of Oxford. These were dated 22 August 2012 and 25 September 2012 (which I will refer to as PG1 and PG2). A further affidavit was filed by Neilma Jones, Oxford's office manager, dated 22 August 2012 (which I will refer to as NJ).

Is there an issue to be tried in relation to the unpaid invoices?

What is PNC required to prove to obtain summary judgment?

An applicant for summary judgment who complies with the requirements of Rules of the Supreme Court 1971 (WA) O 14 (RSC), establishes a prima facie right to summary judgment: Westwind Air Charter Pty Ltd v Hawker De Havilland Ltd (1990) 3 WAR 71, 74. In the present case, the application was made within the time limit in RSC O 14 r 1(1). PNC submits that Mr Nguyen in his affidavits has verified the facts on which each of its claims are based as required by O 14 r 2(1). Mr Nguyen also deposes that he believes that Oxford has no defence to the claim brought by PNC, as required by O 14 r 2(1).
Where a plaintiff has satisfied all the requirements of RSC O 14 so as 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, 110; Westwind, 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': RSC O 14 r 3(1). A defendant does not have to show a defence on the balance of probabilities, but must at least show cause why there is an arguable defence: Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27 [4]. This is an evidentiary burden, the overall legal burden of persuasion remaining on the plaintiff as applicant: Morgan v Pallister [2004] WASC 188 [4]. In Morgan, Pullin J comments on the burden of persuasion in the following terms [4]:
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 disentitle the plaintiff to relief 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.
Where, as in the present case, there are disputed facts, an application for summary judgment 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, 608. 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' [602]. If after argument there remains real uncertainty as to the plaintiff's right to judgment without further investigation of the facts, summary judgment must be refused: Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184 [28]; Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332, 335.

On what basis did the parties contract?

For present purposes, the relevant business dealings between PNC and Oxford date back to March 2009. It is common ground between Mr Nguyen and Mr Glendining that at meeting in March 2009 they agreed to an arrangement whereby:
(a)Oxford would place orders for school uniforms with PNC by giving PNC an order form;
(b)PNC would batch the orders from various schools and then manufacture the uniforms in its factory in Vietnam;
(c)the uniforms would then be either shipped to Perth or sent to Perth by air;
(d)the batches would then be collected by Oxford;
(e)around or upon collection PNC would issue Oxford an invoice;
(f)the invoice would be on the basis of an agreed price list; and
(g)the price list would be the price as landed in Australia.
Mr Glendining added that Oxford's order would specify the delivery date for the uniforms. He says that he knew that the uniforms were to be manufactured in Vietnam and that, when a bulk order had been completed, Oxford had to allow four to eight weeks for delivery by ship.
In the amended statement of claim, PNC characterises the relationship between the parties as being an agreement pursuant to which Oxford would from time to time place orders with PNC for the manufacture and purchase of school uniforms. On this characterisation, each order by Oxford would comprise an offer to enter into a separate contract, which PNC could either accept or reject.
In the defence, set‑off and counterclaim, Oxford characterises the relationship between the parties as being a supply agreement, that is, there is one contract between the parties.
In my view, there is no basis for Oxford's contention that there was only one contract. Having reviewed in detail the extensive factual materials presented, there is no basis for a contention that PNC was contractually obliged to accept any order placed by Oxford. Nor is there any basis for a contention that Oxford was contractually obliged to place a certain amount of orders with PNC. That being so, the appropriate characterisation is posited by PNC – each order by Oxford was an offer capable of acceptance or rejection by PNC.
The agreements between PNC and Oxford from time to time were thus as to the terms which would be incorporated into the contract formed by each order placed by Oxford that was accepted by PNC.

Was there an agreement to vary the prices in 2011?

Mr Nguyen's evidence is that in July 2011, he gave Mr Glendining an updated price list. He says that the two of them agreed that this would be the price list for all future orders.
Mr Glendining's evidence is that there was no such agreement. Rather, there was an agreement in about March 2011 that the 2009 price list would continue to apply until March 2013 (though in the defence, set‑off and counterclaim, this agreement is said to have been made in July 2011).
Mr Nguyen goes on to state that Oxford were 'constantly late' in paying their invoices (TN1 [10]). This culminated in an email from him to Mr Glendining dated 2 November 2011 in which he:
(a)attached a copy of a set of terms of trading;
(b)attached the updated price list;
(c)stated that PNC would only allow Oxford a credit limit of $50,000; and
(d)stated that the terms of payment were 30 days with a 3% discount for payment within 15 days.
Mr Nguyen states that the price list attached to his 2 November 2011 email was identical to the one he gave Mr Glendining in July 2011.
Mr Glendining's evidence is that he did not respond to the communication from PNC dated 2 November 2011 as Mr Nguyen had expressly agreed with him that the 2009 price list would remain in place until March 2013. He further states that Mr Nguyen made adjustments to invoices after that date which appeared to be more consistent with the continued application of the 2009 price list.
Mr Glendining did, however, place a significant order with PNC by email dated 5 November 2011, by returning the 2 November 2011 email from PNC. It is thus clear that Mr Glendining received the 2 November 2011 email, with the terms and conditions attached.
For the purposes of the summary judgment application, PNC conceded that there was an issue to be tried as to whether the 2009 or the 2011 price list applied to orders placed prior to 2 November 2011. PNC did not concede that there was an issue to be tried as to whether the 2009 or 2011 price list applied to orders placed after 2 November 2011.
The terms on which parties contract are to be determined objectively from all the circumstances of the action. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, the High Court described the principle as follows (p 179 [40]):
This Court, in Pacific Carriers Ltd v BNP Paribas [[2004] HCA 35; (2004) 218 CLR 451], has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction …
The fact that Mr Glendining placed orders by return email (5 November 2011) to the one containing the amended price list and terms (2 November 2011) is a significant objective indicator that the terms attached to the first email were accepted as forming the basis of the agreement. However, I am conscious that I do not have all the evidence as to the surrounding circumstances before me. Mr Glendining's evidence on this point is not inherently incredible, given his evidence surrounding the agreement he asserts in March 2011 to keep using the 2009 price list for a further two years. For the purposes of a summary judgment application, I need to proceed on the basis that Mr Glendining's evidence would be accepted by the trial judge. On that basis, I am satisfied that there is an issue to be tried as to whether the 2009 or 2011 price list applied to orders placed after 2 November 2011.

Which of PNC's invoices are said to be unpaid?

In the amended statement of claim, PNC claims that Oxford owes it $325,095.83, from seven invoices:

Invoice

Date

Amended amount (incl GST)

OX 40

29 December 2011

$117,641.54

OX 41

29 December 2011

$89,305,65

OX 42

27 January 2012

$6,163.33

OX 43

26 March 2012

$11,679.18

OX 45

12 April 2012

$32,071.33

OX 46

7 April 2012

$65,258

OX 47

23 April 2012

$33,456.28

$355,575.31

(Unless otherwise stated, all amounts I will refer to are inclusive of GST.)

The invoices the subject of the claim are said by Mr Nguyen to relate to orders placed by Oxford from late October 2011.
PNC then concedes in the amended statement of claim that Oxford is entitled of a credit of $30,479.48 from payments made for previous invoices, reducing the amount owed to $325,095.83.
PNC characterises the relationship between it and Oxford as a running account. Mr Nguyen annexes the account statement as at 5 July 2012 to his first affidavit. The account statement shows the application of payments to invoices on the basis that that any amounts received are credited against the oldest invoice outstanding.
Mr Nguyen's evidence is that since the start of January 2012, PNC has had to 'continually chase' Oxford for payment of outstanding invoices (TN2 [3]). He annexes 22 items of communication between PNC and Oxford relating to demands for payment.
Invoice OX 46 was initially claimed as an unpaid invoice. In the course of submissions, the claim in relation to this invoice became one for damages for expenses incurred following the cancellation of a number of orders. I will review invoice OX 46 in the following part. In the remainder of this part, it is necessary to review each of the remaining invoices in detail.
In Oxford's defence, set‑off and counterclaim, Oxford sets out a number of pricing and invoicing errors. These are the subject of evidence by Mr Glendining. Oxford submits that the failure of PNC to accurately identify the balance owed by Oxford at any given time is one of the main issues to be tried in the action.

Invoice OX 40

According to the amended statement of claim, invoice OX 40 was dated 29 December 2011 and was in the amount of $117,641.54. The amended statement of claim also alleges that Oxford has taken delivery of the school uniforms the subject of invoice OX 40 and that a demand for payment has been made. These facts are verified by Mr Nguyen.
Mr Glendining is critical of the reliability of PNC's invoicing system. He reviewed invoice OX 40 and identifies instances in which he says that the incorrect price was used. As I have noted above, I consider that there is an issue to be tried as to whether the 2009 or 2011 price list applied. Mr Glendining also identified the inclusion of items that had not been delivered or had been returned to PNC or for which a credit was claimed. He also disputes the entitlement of PNC to charge air freight. He annexed to his first affidavit an annotated version of invoice OX 40 identifying these issues. Taking into account all these issues, the amount owing becomes, in his view, $81,951.65.

I am not satisfied that Mr Glendining's evidence on these issues is inherently incredible. Further, even Mr Nguyen identified errors in his review of PNC's invoices for the purposes of preparing for the summary judgment application. Given that both Mr Glendining and Mr Nguyen identified errors, and my own review of the materials, I was not left with any confidence that PNC's invoicing system is accurate and reliable.
If Mr Glendining's evidence is accepted at trial, there is the basis for the amount owing pursuant to invoice OX 40 to be reduced to $81,951.65. I am satisfied that:
(a)there is no issue to be tried in relation to PNC's claim for payment of $81,951.65 on invoice OX 40 (subject to the issue of set‑offs and counterclaims); and
(b)there is an issue to be tried to the extent that PNC claims in excess of this amount in relation to invoice OX40.

Invoice OX 41

According to the amended statement of claim, this invoice was dated 29 December 2011 and was in the amount of $89,305.65. The amended statement of claim also alleges that Oxford has taken delivery of the school uniforms the subject of invoice OX 41. PNC also asserts that a demand for payment has been made. These facts are verified by Mr Nguyen.
As with invoice OX 40, Mr Glendining reviewed invoice OX 41 in detail and annexed an annotated version to his first affidavit. He identified a number of instances in which he says the incorrect price was used and where the items were not in fact delivered. If his evidence is accepted, the amount owing would be reduced to $56,917.52. For the same reasons as for invoice OX 40, I am satisfied that:
(a)there is no issue to be tried in relation to PNC's claim for payment of $56,917.52 on invoice OX 41 (subject to the issue of set‑offs and counterclaims); and
(b)there is an issue to be tried to the extent that PNC claims in excess of this amount in relation to invoice OX 41.

Invoice OX 42

According to the amended statement of claim, invoice OX 42 was dated 27 January 2012, and was in the amount of $6,163.33. PNC alleges that Oxford has taken delivery of the uniforms the subject of invoice OX 42 and that demand for payment has been made. These facts are verified by Mr Nguyen.
As with the other invoices, Mr Glendining identified mispricing and non‑delivery issues with invoice OX 42. He annexed an annotated version of the invoice to his first affidavit. If his evidence is accepted at trial, the amount owing would be reduced to $5,466.67.
I am satisfied that:
(a)there is no issue to be tried in relation to PNC's claim for payment of $5,466.67 on invoice OX 42 (subject to the issue of set‑offs and counterclaims); and
(b)there is an issue to be tried to the extent that PNC claims in excess of this amount in relation to invoice OX42.

Invoice OX 43

According to the amended statement of claim, invoice OX 43 was dated 26 March 2012, and was in the amount of $11,679.18. PNC further alleges that Oxford has taken delivery of the uniforms the subject of invoice OX 43 and that demand for payment has been made. These facts are verified by Mr Nguyen, though he initially said that the amount of the invoice was $13,109.79.
Mr Glendining's evidence is that invoice OX 43 also contained pricing errors. However, in relation to this invoice, he says that he and Mr Nguyen agreed to the adjustments. He annexes an annotated version of the invoice which he says contains notes made during the course of a conversation with Mr Nguyen. The adjusted amount owing is said to be $11,679.18. PNC then issued an amended invoice OX 43 for $11,679.18, which Mr Glendining annexes to his first affidavit. Mr Glendining goes on the say that Oxford paid this amount on 27 March 2011, reflected in the fact that there is an annotation to this effect by Mr Nguyen on the annexed document.
In his second affidavit, Mr Nguyen accepts that he agreed to reduce the amount of invoice OX 43 to $11,679.18. However, he says that this was done by way of a discount because a competitor of Oxford was attempting to secure the business of the school to which the uniforms were being supplied.
In submissions, counsel for PNC made the point that even if this amount was paid and applied against invoice OX 43, in the context of a running account, it simply meant that there was an equivalent amount owing on an earlier invoice. I agree with this submission, and regard the $11,679.18 paid by Oxford as generally diminishing the amount owed under the running account.
I not satisfied that there is any issue to be tried in relation to PNC's claim for payment of $11,679.18, whether it be on invoice OX43 or on the running account generally. PNC does not seek the claim any amount in excess of this figure.

Invoice OX 45

According to the amended statement of claim, invoice OX 45 was dated 12 April 2012, and was in the amount of $32,071.33. It is not in issue that Oxford has taken delivery of the uniforms the subject of this invoice OX 45. As I will discuss in more detail shortly, the cheque used to pay for the uniforms was dishonoured. PNC further alleges that demand for payment has been made. These facts are verified by Mr Nguyen.
Mr Glendining says that invoice OX 45 contains pricing errors which result in an overcharge of $257.63. He does not give any evidence to the effect that the remainder of the amount set out in invoice OX 45 is not due and payable (though there are set‑offs and counterclaims which are reviewed below).
Given that invoice OX 45 was the subject of specific agreement and payment, I am not satisfied that there is any issue to be tried in relation to PNC's claim for payment of $32,071.33 on invoice OX 45. If Oxford wishes to assert an overpayment, it can do so by way of set-off and counterclaim.

Invoice OX 47

In the amended statement of claim, invoice OX 47 is said to have been dated 23 April 2012, and be in the amount of $33,456.28. PNC further alleges that it is holding the uniforms the subject of OX 47 pending payment by Oxford. It further asserts that it has demanded such payment. These facts are verified by Mr Nguyen.
Mr Nguyen further states that in the course of reviewing the materials for preparing his affidavit, he noted that there were two items in invoice OX 47 which had already been charged in Invoice OX 46 and should thus be removed. These items total $10,413.90.
In the defence, set-off and counterclaim, Oxford states that in addition to certain errors (which appear to be those identified by Mr Nguyen), the balance of the invoice relates to an order which was cancelled by Oxford's customer as a result of delays in delivery by PNC. Mr Glendining confirms this in his affidavit and further states that some of the items in invoice OX 47 were ordered as early as 4 August 2011. He disputes that any amount is due and payable on the invoice.
I am satisfied that there is an issue to be tried in relation to whether Oxford is liable in relation to invoice OX 47. As I will shortly elaborate in detail in relation to invoice OX 46, there are a number of issues which need to be determined at trial in relation to the cancellation of orders by one or other of the parties.

What amounts are in dispute in relation to PNC's invoices?

The following table summarises the amounts for which there is an issue or question in dispute which, in my view, ought to be tried:

Invoice	Amended amount claimed	Amount in dispute or conceded by PNC	Amount not in dispute
OX 40	$117,641.54	$35,689.89	$81,951.65
OX 41	$89,305.65	$32,388.13	$56,917.52
OX 42	$6,163.33	$696.66	$5,466.67
OX 43	$11,679.18	$0	$11,679,18
OX 45	$32,071.33	$0	$32,071.33
OX 47	$33,456.28	$33,456.28	$0
$290,317.31	$102,230.96	$188,086.35

PNC accepted that from this figure, the amount of $30,479.48 should be deducted for payments made for previous invoices and other credits. This reduces the amount owed for which for which I am satisfied that there is no issue or question in dispute to $157,606.87.
The fact that there is an amount of $157,606.87 for which there is no issue to be tried does not entitle PNC to summary judgment in this amount. This is because RSC O 14 provides the court with a wide discretion. Specifically, the options open to the court in this case include to:
(a)give such judgment for PNC against Oxford on the claim as a whole or part of it 'as may be just, having regard to the nature of the remedy or relief claimed', allowing among other options, the option of granting judgment in part of the amount not in issue (O 14 r 3(1));
(b)grant leave to Oxford to defend the claim (or relevant part of it) on the basis that Oxford has satisfied the court 'that there ought for some other reason to be a trial of the claim' (or relevant part of it) (RSC O 14 r 3(1));
(c)grant leave to Oxford to defend the claim (or relevant part of it) on the basis that is has a claim which may be set‑off against any amount for which there is no issue in dispute;
(d)impose conditions on the grant of leave to defend, including terms as to giving security (RSC O 14 r 4(3)); and
(e)if judgment is to be given, to stay execution of the judgment (including on condition) until the trial of Oxford's counterclaims (RSC O 14 r 3(2)).
Before considering these issues, I need to review the remaining two claims made by PNC.

Is there an issue to be tried in relation to PNC's claim for damages for expenses incurred on cancelled orders?

In the original statement of claim, invoice OX 46 was dated 7 April 2012 and was in the amount $119,518.08. In the amended statement, this is reduced to $65,258. PNC further alleges that it is holding the uniforms the subject of Invoice OX 46 pending payment.
Mr Nguyen's evidence, and the submissions made on the basis of that evidence, presents a slightly different claim. In summary terms, PNC claims that Oxford cancelled an order for uniforms made out of tricot fleece material, in reliance on which PNC expended $65,258 in purchasing and manufacturing the material to be used to make the uniforms the subject of the orders. A loss of this kind may be claimed arising out of a breach of contract: Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1, 11 ‑ 12; Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191, 269 [276].
Mr Nguyen states that Oxford placed the order for the tricot fleece program for a number of schools on 7 October 2011, including Christ the King Catholic Primary School (CKCPS). He says that he advised Mr Glendining at the time the orders were placed that it would take approximately two to three months to purchase and manufacture the material, a further 12 weeks to make the tracksuits and then a further three to four weeks for delivery by sea. He says that Mr Glendining was also aware that PNC's factory in Vietnam would be closed for the lunar New Year. He sent a production plan to Mr Glendining on 1 March 2012, which set out that the tricot fleeces would not be ready for shipping until 30 March 2012.
Mr Nguyen then says that on 20 March 2012 Mr Glendining advised him by email that Oxford wished to proceed with the tricot fleeces.
There then followed a meeting between Mr Nguyen and Mr Glendining on 24 March 2012. After that meeting Mr Nguyen sent Mr Glendining an email stating that he would be cancelling all of Oxford's orders unless all outstanding invoices were paid. He also said that he would only make new orders if there was a 50% deposit on order and cash on delivery.
Mr Nguyen then says that he had a meeting with representatives of Oxford on 4 April 2012 at which it was agreed that Oxford would pay a 30% deposit in order for PNC to continue with the tricot fleece program. He confirmed this by email to Mr Glendining. At the date of swearing his second affidavit, Oxford had not paid this deposit.
Ms Jones and Mr Glendining refer to the issues in relation to the tricot fleece program in their evidence about the various schools whose orders they say that Oxford has lost as a result of delays and deficiencies in delivery. In relation to CKCPS their evidence is that Oxford had a contract to supply this school's tracksuit program. Oxford had contracted to deliver the uniforms to CKCPS by 1 March 2012. Oxford was not able to meet this deadline because it had not been supplied with the garments by PNC. They refer to communications between Mr Glendining and Mr Nguyen in March 2012 which led to Mr Nguyen providing Oxford with a production plan which they say showed that the order for CKCPS would not be provided by the due date. Mr Glendining says that this production plan 'provides an illustration of the delays in the [Oxford's] deliveries that had become endemic during that time' (RG1 [102]). Their evidence is that the order for CKCPS was never provided as all the 'fleece program orders' were cancelled by PNC in late March 2012.
In its defence, set‑off and counterclaim, Oxford pleads a counterclaim for breach of contract which appears to include these claims. The claims for breach of contract by non-delivery do not appear to be raised by way of set‑off.
I am satisfied that there are a number of issues or questions to be tried in relation to PNC's claim for damages for expenses incurred on cancelled orders (invoice OX 46). These are:
(a)whether any of the contracts between PNC and Oxford constituted by each order contained a term requiring PNC to deliver the uniforms to Oxford by a certain date and, if so, what that date was;
(b)if there was a contractually binding delivery date for a particular order, whether PNC breached it;
(c)whether PNC was entitled to demand a deposit from Oxford when it did;
(d)whether PNC was entitled to cease production when it did and, if so, whether Oxford is liable to damages as a result of this decision;
(e)if PNC is entitled to damages, what those damages are properly assessed at;
(f)whether Oxford is entitled to damages as a result of a breach of any contract by PNC; and
(g)if Oxford is entitled to damages, what those damages are properly assessed at.
Accordingly, I am of the view that Oxford is entitled to unconditional leave to defend this aspect of the claim.

Is there an issue to be tried in relation to the dishonoured cheque?

There is no dispute in the evidence before me that:
(a)PNC would not allow Oxford to take delivery of the uniforms the subject of invoice OX 45 unless that invoice was paid;
(b)on or about 12 April 2012, Ms Jones on behalf of Oxford gave PNC a cheque in the amount of $32,071.33;
(b)the cheque was in payment of invoice OX 45;
(c)as a result of receiving the cheque, PNC allowed Oxford to take delivery of the uniforms the subject of OX 45;
(d)the cheque was dated 12 April 2012;
(e)the cheque was presented on 12 April 2012;
(e)the cheque was dishonoured on presentation.
Ms Jones' evidence is that she told Mr Nguyen that the funds would be available to pay this cheque the following day (13 April). She goes on to say that 'Tuan Nguyen on behalf of the Plaintiff agreed to accept the cheque on condition that he would not present it until the following day, being Friday, 13 April 2012' (NJ [7]). On the morning of 13 April 2012, Ms Jones went to the bank to deposit $10,000 'in cash' into the bank account on which the cheque was drawn. Ms Jones says that the she asked for a print out of the bank statement, which showed that Oxford's bank account was overdrawn. She then deposes that (NJ [11] ‑ [12]):
I knew that the account being overdrawn was due to the Plaintiff presenting the cheque I have provided Tuan Nguyen the previous day because the amounts declined and the amount in the cheque shown in the bank statement correlated.
I was surprised because at that time it was my understanding that a cheque would take two to three business days to process and the deposit in cash would have gone straight into the account as soon as I provided it to the bank.
Ms Jones does not annexe the statement she was provided with.
She concludes her evidence by stating that despite her agreement with Mr Nguyen, Oxford's cheque was presented before she deposited the $10,000 into the account on the morning of 13 April 2012.
In response, Mr Nguyen states that he did not agree to defer banking the cheque until 13 April 2012.
Mr Nguyen further states that since the cheque was dishonoured, Oxford has not paid PNC for the uniforms the subject of invoice OX 45, despite demand to do so. There is no evidence from Ms Jones or Mr Glendining that at any time after 13 April 2012 they, or any other person on behalf of Oxford, invited PNC to re‑present the cheque. Neither is there any evidence that PNC was given a new cheque to present.
The Cheques Act 1986 (Cth) clearly creates a right of action against the drawer of a dishonoured cheque: s 69, s 71, s 76. The claim is one for a liquidated amount: s 76(2). I am satisfied on the basis of Mr Nguyen's evidence that PNC has a prima facie right to summary judgment in relation to the dishonoured cheque.
I need to assess the merits of Oxford's defence on the basis that Ms Jones' evidence is accepted at trial. In particular, I need to assess the merits of Oxford's claim on the basis that there was an agreement between representatives of Oxford and PNC not to present the cheque until 13 April 2012.
As a matter of law, a cheque, which is not post‑dated, may be handed over on a condition that it not be presented until a certain date or the happening of a certain event: Spalla v St George Wholesale Finance Pty Ltd [1999] FCA 1566 [112] ‑ [116]. In particular, the Cheques Act does not override such an arrangement.
The issue that then arises is whether the effect of an agreement as described by Ms Jones would prevent PNC from enforcing the cheque at all. Oxford did not provide me with any authority to the effect that a breach of a condition upon delivery prevents the person to whom the cheque was issued from subsequently enforcing the cheque once the condition expired. The decision in Spalla is not authority to this effect, as the relevant factual finding was that the condition upon delivery had not expired by the time the action was commenced: [116].
I am satisfied that there no issue to be tried in relation to the claim for the dishonoured cheque.
Moreover, I have doubts about the bona fides of Oxford's defence to the dishonoured cheque claim. This is for two reasons. The first is that having accepted goods on the basis of cash on delivery, and given a cheque in order to induce delivery, and having placed funds into the account out of which the cheque was to be drawn, I am not told why Ms Jones did not invite the PNC to re‑present the cheque. This would have been consistent with Ms Jones' evidence as to an agreement to defer presentation to 13 April 2012. Oxford's decision to retain the uniforms the subject of invoice OX 45 without honouring the cheque which induced their delivery is not a style of commercial practice that should be condoned by this court.
The second reason I doubt the bona fides of Oxford's defence is that that the dishonour notice is dated 16 April 2012. It is on BankWest letterhead. I infer from this that the bank account into which the cheque was banked was a BankWest account. That being so, one would expect that had sufficient funds in 'cash' - as Ms Jones states (and not by cheque) - been placed into the account on 13 April 2012 for the cheque to be honoured, the cheque would have cleared before 16 April 2012. The fact that the cheque did not clear by 16 April 2012, notwithstanding the deposit of $10,000 cash on 13 April 2012, casts a real doubt on whether $10,000 cash was a sufficient injection of funds to enable the cheque to be presented.
I will return to the consequences of this finding at the conclusion of this decision.

Can Oxford's counterclaims for overpayments and supply of defective uniforms be set-off against PNC's claims?

What counterclaims does Oxford seek to assert as a set-off?

A counterclaim merely amounting to a cross action, and not constituting a set-off, does not provide a defence to the claim of a plaintiff so as to prevent the award of summary judgment: McDonnell & East Ltd v McGregor [1936] HCA 28; (1936) 56 CLR 50, 57 – 58; Field Camp Services [6]. Where the counterclaim may be raised as either a legal or equitable set-off, as a general rule, an immediately enforceable summary judgment should not be awarded: State Bank of Victoria v Parry [1989] WAR 240, 246; Morgan & Son Ltd v S Martin Johnson & Company Ltd [1949] 1 KB 107, 113 – 114; Harbeck v Vasse Dozer Hire Pty Ltd [2009] WADC 48. RSC O 20 r 17 permits a counterclaim to be raised as a set-off, but does not displace the common law and equitable rules substantively governing set-offs: Hazcor 62, 64, 69; Harbeck [34] ‑ [37]. The existence and merits of a counterclaim will also be relevant more generally in determining the appropriate orders in the application as a whole: State Bank of Victoria, 246.
In its defence, set-off and counterclaim, Oxford asserts that it is entitled to set‑off a credit of $121,013.76 for previous orders of school uniforms supplied by PNC. It does not set out the how these credits are said to arise and the basis on which they may be raised as a set off.
From Mr Glendining's affidavit, it appears that the set-off has two components:
(a)disputes about the quantum of earlier invoices issued by PNC to Oxford; and
(b)unresolved credit claims for the supply of defective uniforms by PNC to Oxford.

Can Oxford's dispute about overpayment be raised as a set-off?

In his affidavit, Mr Glendining reviews invoices OX 29 to 39 and annexes copies of each invoice with notes as to the adjustments to be made to these invoices as a result of errors. He identified errors to the effect that Oxford was overcharged $47,725.19. In the course of submissions, it became apparent that this figure is overstated as Mr Glendining did not take into account GST in invoice OX 39. The revised amount is said by PNC to be $33,756.88.
Mr Nguyen in his second affidavit states that he and Mr Glendining had a meeting in October 2011 to discuss the issue of overcharging. He says that the overcharging issues raised by Mr Glendining were discussed. There was also a discussion about some credits claimed for defective uniforms. They agreed that the amount then owing by Oxford to PNC would be reduced by $42,448. He then produced a summary schedule for invoices 29 to 39 which identified the amount of the credit. He then says that prior to reading Mr Glendining's affidavit, Oxford has not raised any other issues with these invoices with PNC.
If I accept Mr Glendining's evidence, then there is an issue to be tried in relation to overcharging. I am not prepared to find that his evidence is inherently incredible, though not without some hesitation given the schedule produced by Mr Nguyen. I do however observe that Mr Glendining did not have an opportunity to respond to Mr Nguyen's second affidavit. I am satisfied that there is an issue to be tried in relation to overcharging on invoices.
An overpayment of an amount alleged to be due under a contract may be recovered through an action in unjust enrichment to recover a payment made by mistake: Barclays Bank Ltd v WJ Simms Son & Cooke (Southern) Ltd [1980] QB 677, 695; David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353, 378 - 380; Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662, 671 ‑ 672; South Australian Cold Stores Ltd v Electricity Trust of South Australia [1957] HCA 69; (1957) 98 CLR 65, 74; Harbeck [26] ‑ [28].
An action in unjust enrichment to recover money paid under a mistake is a liquidated common law claim: Alexander v Ajax Insurance Co Ltd [1956] VLR 436, 445; Lagos v Grunwaldt [1910] KB 41 at 48; Harbeck [29].
The law is relation to set-offs of common law claims is substantively governed by the Statutes of Set-off, Insolvent Debtors Relief 1728 (UK) (2 Geo II c 22 s 13) and Statute of Set-off 1734-5 (UK) (8 Geo II c 24, s 4), which have not been repealed in Western Australia: Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62, 64, 67, 69; Harbeck [36]. The position under that legislation is that:
(a)a defendant may set off a mutual debt owed to it by the plaintiff: Hazcor 64, 67, 69;
(b)only liquidated sums can be a set-off against each other: McDonnell & East Ltd v McGregor, 62;
(c)the debt sought to be set-off must be an actionable debt, one capable of being pursued in a separate proceeding: Rawley v Rawley (1876) 1 QBD 460, 463 ‑ 465;
(d)a debt will be mutual if it between the same parties and held in the same right: Hazcor 64, 67, 69; West Street Properties Pty Ltd v Jamison [1974] 2 NSWLR 435, 441; Stumore v Campbell & Co [1892] 1 QB 314; Re Pennington and Owen Ltd [1925] Ch 825, 829 ‑ 834;
(e)the debts need not arise at the same time: Day & Dent Constructions Pty Ltd (in liq) v North Australian Properties Pty Ltd (1982) 40 ALR 399; and
(e)the debts need not arise out of the same transaction: Re Daintrey [1900] 1 QB 546, 573 - 574.
Oxford's claim for overpayment, if established, can thus be set-off at law against debts found to be owed by it to PNC. However, I am not satisfied that the amount of this claim is more than $33,756.88.

Can Oxford's unresolved credit claims be raised as a set-off?

Mr Glendining's evidence about the credits for supply of defective uniforms has two components. The first is that he identifies some 15 items which he says were defective or incorrectly supplied. These items total $75,910.63.
The second component is that he asserts that Oxford has more than $60,000 worth of stock sitting in its warehouse which is said to be defective. This relates to the supply of polo shirts by PNC in late 2010 or early 2011 that were pilling; that is, after the shirts were washed a couple of times, small fabric balls would form on the shirts.
Mr Nguyen states that the credits referred to by Mr Glendining have never previously been raised by PNC with Oxford. He goes on to say that he believes 'this is simply a matter now being raised by the Defendant to avoid paying the outstanding moneys' to PNC (TN2 [73]).
Oxford's claim for supply of defective uniforms is an unliquidated claim. It cannot be raised as a legal set‑off.
An equitable set-off may only be raised where the claim impeaches the claim of the plaintiff or has otherwise been brought about or contributed to or is so bound up with the rights which are relied upon by the plaintiff that it would be unconscionable for the plaintiff to succeed without allowing the set-off: Hazart Pty Ltd v Rademaker (1993) 11 WAR 26, 38; Casella v Costin Pty Ltd (Unreported; FCt SCt of WA; Library No 5416; 22 June 1984). The authorities are to the effect that a defendant cannot set-off against a plaintiff's claim for payment under a contract an unliquidated claim for defective performance of the contract: see generally Westwind 85 ‑ 86; W Pope & Co Pty Ltd v Edward Souery & Co Pty Ltd [1983] WAR 117, 120 - 121; Bayview Quarries Pty Ltd v Castley Development Pty Ltd [1963] VR 445, 449; Maersk Australia Pty Ltd v Rebelo Nominees Pty Ltd [2008] WADC 81; Marketforce Advertising Limited v Stadium Events Pty Ltd [2009] WADC 126, [26].
Where a defendant seeks to resist an application for summary judgment based on an equitable set-off, the defendant must not only establish that it has an arguable claim on breach, but must also put before the court sufficient evidence to enable the court to make some assessment of the likely quantum of the defendant's claim: Field Camp Services [7]. 'A defendant will not, in seeking to resist a summary judgment application, establish an arguable defence of set‑off if the evidence in support of the quantum of its claim is so vague, uncertain and lacking in substance, that the court is unable to make any informed assessment of its likely quantum and whether the quantum is likely to reach or exceed the level of the plaintiff's claim in debt': Field Camp Services [7]; Melbourne Glass Pty Ltd v Coby Constructions Pty Ltd (1998) 14 BCL 409, 418 ‑ 419.
In my view, Oxford's claim for supply of defective uniforms does not impeach the claims made by PNC. Nor is there a basis in the evidence before me to suggest that it would be unconscionable for PNC's claim to succeed without taking into account Oxford's claim for supply of defective uniforms. Counsel for Oxford submitted that the inequality of bargaining power between Oxford and PNC gives rise to issues of unconscionability. In my view this submission is wholly unsupported in the affidavit material before me. Neither is it mentioned in the defence, set‑off and counterclaim. The claim for supply of defective uniforms cannot thus be raised as an equitable set‑off.
The claim for supply of defective uniforms is also raised as a counterclaim. It should proceed to trial as a counterclaim.
As a counterclaim, the claim for supply of defective uniforms is not, in my view, one which should be given significant weight in determining the appropriate final orders to be made on the application. Aside from some documents in relation to claims for lost profits by schools, Mr Glendining does not support Oxford's claim for credits for defective or incorrect supply with the trail of documents raising the issue one would ordinarily expect to find to support a concern of the magnitude raised by Oxford. Nor is the quantum established with sufficient detail for the court to be able to make an informed assessment of it.

What weight is to be given to Oxford's other counterclaims in determining the appropriate orders in the application?

What other counterclaims does Oxford assert?

Oxford asserts three other counterclaims.
The first counterclaim is for commissions on blazers sold by Oxford. The counterclaim contains assertions that:
(a)in about 2005 Mr Glendining and Mr Nguyen agreed of behalf of their respective companies that PNC would manufacture blazers which Oxford would sell to the schools it supplied;
(b)PNC would pay Oxford a commission of $10 per blazer sold;
(c)Oxford has sold 745 blazers for which it is entitled to commission of $8,195 (the basis of this calculation is not apparent); and
(d)PNC has failed to pay Oxford this amount.
Mr Glendining verifies these facts.
Mr Nguyen accepts that there was an agreement along the lines asserted by Oxford, but states that the amount outstanding was $6,897.
This counterclaim is by way of a claim in debt. On the authorities I have discussed above, it could be raised as a legal set‑off. Further, the evidence in support of this counterclaim is in sufficient detail for it to be appropriate for me to give it weight in determining the final orders to be made on the application. It is at least in dispute that the amount owed is as asserted by Mr Glendining.
The second counterclaim is for the return of samples, sizing kits, patterns and material provided by Oxford to PNC. It seeks the return of this property or alternatively damages for its retention. Aside from estimating the value of some material at $14,500, Mr Glendining does not seek to estimate these damages. This counterclaim could not be raised as either a legal or an equitable set-off. Beyond the observation that this claim should proceed through to trial, I do not have sufficient evidence about this counterclaim to take it into account in determining the appropriate orders to be made on the application.
The third counterclaim is a claim that because of (among other breaches) the repeated late delivery by PNC and defective supply by PNC, Oxford suffered loss in the form of loss of profits from orders from schools which it supplied which were either cancelled or not placed. In the affidavit material before me, the quantum of this claim was set out in terms of lost sales. In the course of submissions, counsel for Oxford accepted that the claim would ultimately be determined based on lost profits. This counterclaim said to give rise to a claim for damages well in excess of the amounts claimed by PNC.
The counterclaim for loss of profits is an unliquidated claim. On the authorities that I have set out above, it cannot be raised as an equitable set‑off. However, given its alleged quantum, it is necessary for me to review it in detail for the purposes of considering the appropriate final orders in the application.

What is the nature of Oxford's counterclaim for loss of profits?

In the counterclaim, Oxford frames its claim for lost profits on the basis that from or about July 2011, PNC breached various terms of the supply agreement. Specifically, the terms breached are particularised as being:
(a)failure to deliver uniforms within 8 weeks of them being ordered;
(b)failure to deliver uniforms in time to fulfil orders made by the Oxford's customers;
(c)failure to warn Oxford of delays in the production and delivery of orders;
(d)failure keep sufficient fabric in stock to fulfil orders made by Oxford;
(e)failure to manufacture uniforms in accordance with the instructions and designs provided by Oxford;
(f)failure to manufacture garments using the specified fabrics and dyes for certain items; and
(g)failure to manufacture uniforms of merchantable quality.
As I have already found, I do not consider this characterisation to be one able to be supported by the factual material available to me. As each order placed by Oxford is a stand-alone contract, albeit on common terms, the counterclaim for breach of contract will ultimately need to be repleaded to:
(a)identify the contract formed by a particular order for a school which is said to have been breached;
(b)identify the facts said to constitute the breach; and
(c)identify the particular loss and damage said to flow from the particular breach of the particular contract.
Oxford has gone some way towards undertaking this exercise in the affidavit evidence before me.
The schools in question fall into two categories. The first category is those schools for which there is detailed evidence in the material before me, being Austin Cove Baptist College, Christ the King Catholic Primary School, Mater Christi Catholic Primary School, Mandurah Baptist College and St Bernadette's Catholic Primary School. The second category is other schools which are set out in summary form.
To review this aspect of Oxford's counterclaim I need to consider eight further sub-issues:
(a)the legal basis for the claim for loss of profits;
(b)the claim for lost profits from Austin Baptist College;
(c)the claim for lost profits from Christ the King Catholic Primary School;
(d)the claim for lost profits from Mater Christi Catholic Primary School;
(e)the claim for lost profits from Mandurah Baptist College;
(f)the claim for lost profit from St Bernadette's Catholic Primary School;
(g)the claim for lost profits from other schools; and
(h)the merits of the claim for loss of profits.

Is there are legal basis for Oxford's claim for loss of profits?

At a conceptual level, the claim by Oxford for loss of profits on future orders with schools can be expressed as being a claim for damages with the following characteristics:
(a)party A and party B were in a contract;
(b)A breached the contract with B;
(c)as a result of the breach by A of the contract with B, B either breached a contract with C or performed it in a manner considered by C to be unsatisfactory;
(d)as a result of (c), C did not enter into further contracts with B; and
(e)as a result of (d), B suffered damages in the form of loss of profits on potential future contracts with C.
Oxford did not draw my attention to any case law in which damages had been awarded in these circumstances.
Going back to general principles, there is no conceptual reason why damages could not be awarded in the scenario set out in [112]. As a general rule, the innocent party suing for breach of contract is to be placed in the same position, so far as money can do it, as if the contract had been performed: Robinson v Harman (1848) 1 Exch 850, 855; (1848) 154 ER 363, 365; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 83 ALJR 390 [13]; Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 80; Australian Goldfields [276]. The corollary of this is that an innocent party is not entitled, by the award of damages upon breach, to be placed in a superior position to that which it would have been in had the contract been performed: Amann Aviation, 82.
The compensation is to represent 'fair and adequate compensation for the loss suffered by reason of the breach of contract': Australian Goldfields [276]. The innocent party is entitled to both expectation loss – damages for loss or bargain – and reliance loss – damage suffered, including expenditure incurred, in reliance on the contract: Gates 11 ‑ 12; Australian Goldfields [276]. The assessment of these damages will ordinarily involve 'a comparison between the position in which the innocent party would have been if the breach of contract had not occurred and what, relevantly, represents the position in which the innocent party is in after the occurrence of the breach': Australian Goldfields [276], referring to Amann Aviation.
As Mason CJ and Dawson J observe in Amann Aviation, the onus of proving damages lies on the innocent party, and must be objectively determined (80):
The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff's expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation.
The general principle is subject to the rules as to remoteness of damage and the innocent party's duty to mitigate its loss: Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125, 143. The question of remoteness is governed by the rule in Hadley v Baxendale (1854) 9 Exch 341, 354; (1954) 156 ER 145, [151]. In the words of Mason CJ and Dawson J in Amann Aviation (91 - 92, footnotes omitted):
According to Alderson B's renowned formulation, the plaintiff is entitled to recover such damages as arise naturally, that is, according to the usual course of things, from the breach, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach. It is now accepted that this is the statement of a single principle and that its application may depend on the degree of relevant knowledge possessed by the defendant in the particular case.
(See also: Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, 368).
The decision in Amann Aviation provides some support of the scenario in [112]. In that case, Amann sued the Commonwealth for breaching a contract pursuant to which it was to provide aerial coastal surveillance services. The initial contract was for three years. There was no legal obligation on the Commonwealth to renew the contract. Amann's prospects of making a substantial profit rested on its prospect of securing a renewal of the contract. The cost and value of the aircraft it acquired to perform the contract were such that a period of operation significantly longer than three years was needed in order to generate a substantial profit. The evidence was that the prospect of Amann securing a renewal was strong as it would be fully equipped with the cost of its aircraft written down and it would be very difficult for a competitor to match this advantage.

The trial judge awarded Amann modest damages. The majority of the Full Court of the Federal Court held that Amann was entitled to have its damages assessed on the basis of its expenditure rendered futile by the Commonwealth's repudiation. This totalled well over $6 million. The Commonwealth argued that such a loss could not be claimed where, even if the breach of contract had not occurred, the returns from the initial three year contract would not have been sufficient to recoup the expenditure. The Full Court held that the onus on this point was on the Commonwealth, who did not discharge it.
A majority of the High Court dismissed the appeal. For present purposes, it is only necessary to briefly consider the opinion of two of the justices in the majority, Mason CJ and Dawson J. Their honours applied the rule in Hadley v Baxendale (quoted in [117] above). They commented that in 'assessing damages, the court is necessarily engaged in a hypothetical exercise, that is, ascertaining how the contract would have turned out had it not been brought to an end by Amann's acceptance of the Commonwealth's wrongful repudiation' (94). Their Honours stated (92):
[I]n the present case, the application of the rule in Hadley v Baxendale turns not on the degree of knowledge possessed by the defendant but on what may reasonably be supposed to have been in the contemplation of the parties as the probable result of the breach. If it be right to suppose that the loss of the prospect of securing a renewal of the contract was within the contemplation of the parties as a probable result of the breach, then…, Amann is entitled to compensation which takes into account the value of the loss of the prospect of securing a renewal of the contract.
A decision at the limits of the losses that may be claimed as damages for breach of contract is Herbert Clayton & Jack Waller Ltd v Oliver [1930] AC 209. In that case, the House of Lords affirmed the award of damages to an actor, the respondent, for loss of publicity arising out of a breach of a contract by which he was to appear in public in a 'leading comedy part' at an establishment known as the 'Hippodrome'. Their Lordships were of the view that the award of damages was merely an application of the rule in Hadley v Baxendale to the facts of the case (220, 221). Lord Buckmaster stated (220):
In the present case the old and well established rule applies without qualification, the damages are those that may reasonably be supposed to have been in the contemplation of the parties at the time when the contract was made, as the probable result of its breach, and if any special circumstances were unknown to one of the parties, the damages associated with and flowing from such breach cannot be included. Here both parties knew that as flowing from the contract the plaintiff would be billed and advertised as appearing at the Hippodrome, and in the theatrical profession this is a valuable right.
Another relevant decision at the limits of the losses that may be claimed as damages for breach of contract is Foaminol Laboratories Ltd v British Artid Plastics Ltd [1941] 2 All ER 393. In that case, the plaintiff's sought damages for the loss of their reputation with the 'beauty editresses' of certain ladies' papers. The loss was said to arise out of a breach by the defendant to supply certain containers in which the plaintiff was to market its summer cream. As part of the marketing the plaintiff secured favourable editorial comment from the 'editresses', and upon the cream not being able to be supplied lost their goodwill. The trial judge, Hallett J, observed that the cases in which such damages had been awarded were ones in which 'the reputation of one party was part of what the other party, by his contracts, had undertaken to confirm' (399). His Honour stated (400):
… if pecuniary loss can be established, there mere fact that the pecuniary loss is brought about by the loss of reputation caused by a breach of contract is not sufficient to preclude the plaintiffs from recovering in respect of that pecuniary loss.
Such a plaintiff has to overcome two difficulties. In the first place, he must prove with sufficient certainty the occurrence of the pecuniary loss, and, in the second place, he must prove that such pecuniary loss was within the contemplation of the defaulting party at the time when the contract was made. Otherwise it is not recoverable, having regard to the law respecting remoteness of damage.
His Honour found that the plaintiff had failed to overcome these two difficulties.
The claim by Oxford is not made in the context of a contract in which PNC expressly agreed to maintain the reputation of Oxford: Wilson v United Counties Bank Ltd [1920] AC 102, 120, 132; Baltic Shipping 363 ‑ 365, 370 - 371, 381, 383, 405. Nor could such an obligation be implied into what is a plain vanilla commercial trading contract, in contrast to, say, an employment contract: Malik v Bank of Credit & Commerce International SA (in liq) [1998] AC 20, 33, 41, 45 ‑ 46, 52. Consequently, Oxford could not make a general claim for loss of reputation; rather, as it has asserted in argument before me, its claims are for loss of profits on orders from specific schools: Baltic Shipping, 370.
In summary terms, for Oxford to maintain a claim for loss of profits, it would have to establish on the balance of probabilities:
(a)a breach of contract between it and PNC in relation to the manufacture and supply of uniforms for a specific school;
(b)as a result of the breach of contract in (a), the specified school did not give Oxford certain identified orders;
(c)had PNC not breached the contract as set out in (a), the specified school would have given Oxford the additional identified orders;
(d)the amount of profit Oxford would have made on the additional identified orders;
(e)that the damages in (d) arose naturally, that is, according to the usual course of things, from the breach in (a), or that they were within the reasonable contemplation of both parties at the time they made the contract as the probable result of a breach of the kind set out in (a); and
(f)that it was not able to mitigate its loss by replacing the lost orders with orders from other schools.
In my view, it is not possible to state with the certainty required of a summary judgment application that Oxford's claim for loss of profits on future orders from schools has no merit. Consistently with general principles, it could potentially be maintained, though not without considerable legal and forensic difficulty. The diversity in the reasoning in the decisions of the members of the High Court in Amman Aviation lends support to the view that the limits of damages that may be awarded for a breach of contract are not fixed. Further, I am conscious that I should be 'particularly astute not to risk stifling the development of the law by summarily terminating actions in respect of which there is a reasonable possibility that it will be found, in the development of the law, still embryonic, that a cause of action does lie': Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365, 373.
Accordingly, even though Oxford's claim is at the limits of the losses that may be claimed as damages for breach of a contract, if properly pleaded and particularised, it is nonetheless a potential claim. I thus need to proceed further to consider the strength of this potential claim on the merits.

Austin Cove Baptist College

Ms Jones deposes that Oxford supplied uniforms to Austin Cove Baptist College (ACBC) for a period commencing in around August 2010. She says that Oxford was unable to supply all of the uniforms ordered by ACBC on time because the majority of the orders Oxford placed with PNC were delivered to Oxford after the specified delivery dates in the order forms and the deadlines provided by Oxford to ACBC. She annexes three letters from ACBC to Oxford, each dated 8 May 2012. The letters refer to late delivery of each of 'Grey Elastic Back Trousers', 'Grey Youth Trousers' and 'Secondary Men's Trousers'. In each case, there appears to have been partial late delivery resulting in cancellation of the remainder of the order.
Mr Nguyen states that from his review of the records of PNC, the grey trousers ordered by ABCB referred to in the letters annexed to Ms Jones' affidavit were not ordered from PNC.
Ms Jones then refers to issues that arose concerning an order for ACBC polo tops placed by Oxford with PNC for delivery by 1 September 2012. These polo tops were not delivered by PNC to Oxford until January 2012, who then provided them to ACBC. ACBC returned the polo tops to Oxford on 6 February 2012 as they were defective, having the incorrect collars and fabric. Oxford returned the polo tops to PNC, and had not received replacement polo tops as at the date of Ms Jones affidavit.
Mr Nguyen also states that he accepts that the ACBC polo shirts supplied by PNC were defective, and that PNC agreed to replace them. The value of this order was $6,545.22. He says that PNC has manufactured replacements, but has not delivered them to Oxford due to the significant amount of money owed by Oxford. He sought to sell the polo tops directly to ACBC to mitigate the losses of PNC.
Both Mr Glendining and Ms Jones give evidence is that in May 2012 they had a meeting with representatives of ACBC. At this meeting, they were informed that all orders by ACBC with Oxford would be cancelled. They were advised that the reason for the cancellation was the continual late supply of orders.
Ms Jones deposes that but for the actions of PNC in delaying supply of school uniforms to Oxford, and providing defective uniforms, she believes that ACBC would have continued to order uniforms from Oxford. She estimates the loss of earnings (not profit) from this to be $650,000.

Christ the King Catholic Primary School

Ms Jones deposes that Oxford had been supplying uniforms to Christ the King Catholic Primary School (CKCPS) from 2006.
Ms Jones identifies two specific orders that caused contention between Oxford and CKCPS. The first was an order for staff polo tops. She says that PNC was late in delivering the polo tops to Oxford, which meant that Oxford was in turn late delivering the tops to CKCPS.
Mr Nguyen states that the reason for late delivery due to the way in which Oxford ordered the polo tops.
The second was that PNC gave Oxford very late notice that it was not prepared to produce school faction polo shorts which Oxford had ordered because of the inset panel work required. Oxford in turn could not fulfil the orders for CKCPS.
There is a letter from CKCPS to Oxford dated 30 November 2011 annexed to Ms Jones' affidavit that confirmed a commitment by Oxford to deliver the school faction polo shirts by the week commencing 30 January 2012, and advising that failure to meet this commitment may result in termination of Oxford's services with CKCPS. There is then a second letter from CKCPS dated 13 February 2012 to the effect that if these shirts were not delivered by 24 February 2012, all school uniform orders would be cancelled.
Mr Nguyen states that the reason for late delivery was that the order was not placed with PNC until 5 December 2011, which (as he advised Mr Glendining at the time) made it very difficult for PNC to meet a 31 January 2012 deadline. He further states that Mr Glendining cancelled this order at a meeting within him on 31 January 2012.
Both Ms Jones and Mr Glendining refer to issues with CKCPS concerning its tricot fleece tracksuit program. I have dealt with this above in relation to invoice OX 46.
There is no evidence from Oxford as to the loss of profits resulting from the cancellation of the orders by CKCPS.
Mr Glendining says he was advised by the representative of CKCPS that the school would not deal with Oxford as a supplier in the future and would instead take the school's business to a competitor. Ms Jones deposes that but for the actions of PNC in delaying supply to Oxford of uniforms for CKCPS, Oxford would have continued to supply uniforms to CKCPS to 2013. The value of the lost earnings is estimated to be $80,000.

Mater Christi Catholic Primary School

Ms Jones deposes that Oxford supplied uniforms to Mater Christi Catholic Primary School (MCCPS) from 2006.
She says that there were problems with polo shirts supplied by PNC for MCCPS in 2011 which ultimately resulted in the polo shirts having to be replaced by Oxford. Mr Nguyen's evidence confirmed that PNC had agreed to replace these polo shirts for MCCPS.
There was a second set of issues with polo shirts supplied by PNC for MCCPS in January 2011, which resulted in PNC agreeing to replace the polo shirts. Ms Jones deposes that the replacement polo shirts supplied by PNC in January 2012 were also defective, and were returned by MCCPS to Oxford shortly after being supplied. Ms Jones does not give any information as to the losses, if any, incurred by Oxford as a result of these issues.
Mr Nguyen states that the second set of issues related to polo shirts supplied pursuant to invoice OX 30, at a cost of $30,542.90. As a result of the pilling, PNC agreed to replace the polo shirts. It gave Oxford a credit of $19,591.40 for this issue. He says that he was not aware of there being ongoing issues relating to the replacement polo shirts supplied by PNC until he read Ms Jones' affidavit.
There is hearsay material in Ms Jones' affidavit that MCCPS is now placing its uniform orders with a different provider.
Ms Jones states that but for the actions of PNC in delaying supplying to, and providing defective uniforms to, MCCPS, she believes that MCCPS would have continued to order uniforms from Oxford. The value of the lost earnings (not profit) is estimated to be $186,000.

Mandurah Baptist College

Ms Jones deposes that Oxford supplied uniforms to Mandurah Baptist College from 2006. From May 2011 there were multiple orders from MBC which Oxford failed to deliver on time, because PNC had failed to meet deadlines agreed with Oxford. There are two emails from MBC to Oxford (dated 22 and 23 May 2012) that record MBC cancelling orders with Oxford, one of which specifies the reason as being non‑delivery. Ms Jones does not give evidence about the income, nor profits, from the cancelled orders.
Mr Nguyen states that PNC has not invoiced Oxford for these uniforms.
Mr Nguyen's evidence is that he was not aware of Oxford making any unresolved specific complaints about delivery times for uniforms to be supplied to MBC. He says that PNC has refused to supply Oxford with uniforms due to its failure to pay outstanding moneys.
There is a double hearsay reference in Ms Jones' affidavit to the effect that representatives of PNC had visited the uniform shop at MBC and told the manager that Oxford was not able to pay its bills and that Nell Gray (a competitor of Oxford supplied by PNC) could supply their uniforms. Aside from the hearsay issues, I am not told when this conversation was said to have occurred. I disregard these comments for the purposes of the present application.
Ms Jones again deposes that but for the actions of PNC in delaying the supply of MBC uniforms to Oxford to sell to MBC, MBC would have continued to order uniforms from Oxford to 2013. The value of the lost earnings (not profit) is estimated to be $486,000.

St Bernadette's Catholic Primary School

In her affidavit, Ms Jones says that Oxford has lost sales from St Bernadette's Catholic Primary School (SBCPS) that would have provided it with income of around $80,000. She does not specify the profit that would have been made on these sales.
Ms Jones says that in from March 2012 SBCPS had problems with some of the polo shirts supplied by PNC that were piling and had defective button holes. However, she does not go on to say whether these defective polo shorts were returned and, if so, what loss Oxford suffered.
Mr Nguyen states that he was not aware of there being any outstanding issues relating to uniforms supplied by PNC to Oxford for SBCPS.
Ms Jones then says that in March 2012 SBCPS cancelled certain orders for track pants and jumpers. According to the emails from SBCPS annexed to Ms Jones' affidavit, these uniforms were ordered in June 2011 for a delivery date of 5 March 2012. She says that Oxford was not able to supply these uniforms because PNC had not supplied them to Oxford. SBCPS cancelled the orders at the end of March 2012 for non-delivery. Although it is not clear, it appears that Oxford would have earnt $30,063 income (not profit) from these orders.
Mr Nguyen states that these tracksuits were part of the tricot fleeces being produced for Oxford, which is dealt with at [56] ‑ [65] above. He further states that Mr Glendining advised him in March 2012 that the tracksuit pants for SBCPS were required urgently. PNC completed the manufacture of the tracksuit pants and shipped them to Perth. They are awaiting collection by Oxford upon payment (comprising part of invoice OX 47).
Ms Jones says that by 22 March 2012 SBCPS had cancelled all its contracts and orders with Oxford. She then goes on the assert that but for the actions of Oxford in delaying supplying to, and providing defective uniforms, she believes that SBCPS would have continued to order uniforms from Oxford for 2013. The income which Oxford would have earnt from this is estimated to be $52,000.

Other schools

Ms Jones also gives evidence that due to the significant delays in the delivery of uniforms by PNC to Oxford and also the ongoing problems with Oxford providing defective school uniforms, Oxford had either lost, or expect to lose, contracts from six other named schools and the University of Western Australia. She deposes that Oxford had previously provided uniforms to each of these customers.
In the absence of any details about these potential claims, I am not able to assign any weight to them in the process of exercise the discretion I am required to exercise in determining PNC's summary judgment application.

Does Oxford's claim for loss of profits have any merit?

It is readily apparent from the review that I have undertaken that there are significant factual issues in relation to the alleged breaches of contract by PNC which will need to be resolved at trial. These include:
(a)the contractually agreed delivery dates as between Oxford and PNC for each specific order (if indeed there was one);
(b)whether specific deficiencies and delays complained of by the schools actually relate to orders placed by Oxford with PNC or uniforms sourced by Oxford from another supplier (eg ACBC);
(c)if there was late supply by PNC, whether there was any direct loss of profits to Oxford if the uniforms were subsequently accepted and paid for by the school;
(d)where the contractual responsibility lies for the tricot fleece program – see [56] ‑ [65] above;
(e)whether there are any remaining claims for defective supply and, if so, the measure of damages flowing to Oxford (eg MCCPS); and
(f)the extent, if any, profits lost by Oxford on orders cancelled by a school, if that cancellation did result from a breach of the contract between Oxford and PNC (eg MBC).
As to the measure of damages, there is nothing in the materials before me as to the measure of any losses flowing directly to Oxford as a result of a breach of a contract arising from a specific order with PNC. For example, this could have been readily ascertained for the cancellation of orders for non-delivery for MBC.
There is then the claim for loss of profits on future orders. In my view, there are a number of considerable difficulties in Oxford being able to successfully maintain its claim for loss of profits:
(a)as there can be no general claim for loss of business reputation, the claim for loss of profits from each school would need to be separately identified;
(b)if there was no underlying breach of contract by PNC in relation to the specific school, the fact that the school may have not placed further orders with Oxford cannot be sheeted home PNC by way of damages for breach of contract;
(c)in each case, Oxford would have to identify specific orders from the school that it expect to have received, but did not receive, as a result of the identified breach of contract by PNC;
(d)the damages would be limited to lost profits on the specifically identified orders, not lost income;
(e)in each case, Oxford would have to prove that the loss of profits claimed was not too remote from the breach of contract by PNC; and
(f)the inquiry in (e) would need to consider all factors potentially having a bearing on the decision by the school to not place further orders with Oxford.

In relation to this, Mr Nguyen makes three general observations about Oxford's counter claim. This first is that PNC is only one of at least five other manufacturers of school uniforms used by Oxford. The second is that, in his view, the estimated average amount a new student will spent on uniforms used by Ms Jones is overstated. The third is that the individual orders placed by Oxford with PNC are much less than the lost earnings claimed by Ms Jones.
On balance, I am of the view that the merits of the counterclaim for loss of profits are not sufficiently strong so as to cause the counterclaim to be factor militating against discretionary relief in favour of PNC. It should, however, proceed to trial as a counterclaim.

What final orders are appropriate?

Is PNC entitled to summary judgment in any amount?

In summary terms, the findings I have made so far are:
(a)of the $290,317.31 claimed by PNC for invoices OX 40, 41, 42, 43, 45 and 47, there is an amount of $157,606.87 for which there is no issue to be tried;
(b)Oxford is entitled to unconditional leave to defend PNC's claim for $65,258 expended in purchasing and manufacturing the material to be used to make the uniforms the subject of invoice OX 46;
(c)there no issue to be tried in relation to PNC's claim for the dishonoured cheque in the amount of $32,071.33 for invoice OX45, though this is included in the amount in par (a);
(d)Oxford's claim for overpayment on old invoices, if established, can be set‑off at law against debts found to be owed by it to PNC, though the amount of this claim appears to be no more than $33,756.88;
(e)Oxford's claim for supply of defective uniforms totalling identified items of $75,910.63 and stock of $60,000, if established, may not be raised as a set off, but should proceed to trial as a counterclaim;
(f)Oxford's counterclaim for commission on blazers in the amount of $8,195, if established, may be raised as a set‑off against debts found to be owed by it to PNC;
(g)Oxford's counterclaim for the return of samples, sizing kits, patterns and material provided by Oxford to PNC may not be raised as a set‑off, and should simply proceed to trial as a counterclaim;
(h)Oxford's counterclaim for loss of profits from lost future orders arising out of breaches of contracts by PNC is a claim that may potentially be made, but not as a set‑off; and
(i)Oxford will have considerable difficulties in successfully pursuing the claim in (h) such that its existence should be given little weight in determining the appropriate final orders.
It is well established that 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: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99. Great care must be exercised to ensure that under the guise of achieving expeditious finality, a party is not improperly deprived of its opportunity for the trial of the case in the appointed manner by the court: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 129 ‑ 130.
I am not prepared to award summary judgment in relation to the undisputed amount of $157,606.87 from invoices OX 40, 41, 42, 43, 45 and 47. In my view, 'there ought for some other reason be a trial' of this claim: RSC O 14 r 3(1). If each set‑off is established, the amount owed is reduced by $41,951.88 (see [54](d) and (f) above) to $115,654.99. Oxford's counterclaims, if established, could well exceed this amount. The dispute between the parties is factually complex and detailed, and there are many aspects to it. As I have noted, I do not have a high degree of confidence in PNC's invoicing systems. More specifically, I do not have sufficient confidence in the accuracy of the undisputed amount to consider it appropriate to award judgment. With one caveat, the claim and the counterclaim should proceed to trial.
The caveat is that there should be orders made in favour of PNC in relation to the claim for the dishonoured cheque. I am satisfied that there is no issue to be tried in relation to PNC's claim for the dishonoured cheque in the amount of $32,071.33. It is no defence to PNC's claim on the cheque that Oxford has an unliquidated counterclaim: Amalta Holdings Pty Ltd v Richard Luff (Unreported, WASCA, Library No 8003, 21 December 1989); Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GmbH(1977) 1 Lloyd's Rep 463, 477. To the extent that Oxford has valid set-off's, if established, they still leave a claim well in excess of the amount of the cheque. However, I again consider that the factual complexity of the many disputes between the parties to be 'some other reason' why I should not grant an immediately enforceable summary judgment on the claim for the dishonoured cheque. For the same reason, I am not prepared to grant judgment on this claim and stay its enforcement: RSC O 14 r 3(2); State Bank of Victoria 246; Maersk [45] ‑ [47].
I have earlier observed that I have doubts as to the bona fides of Oxford's defence to the claim for the dishonoured cheque. This in turn raises the issue of whether it is appropriate to order Oxford to pay the amount of the claim for the dishonoured cheque into court pending resolution of the balance of the claim and the counterclaim.
The existence of doubts as to the bona fides of defence is a well‑established ground for ordering payment of the amount of a claim into court as a condition of the grant of leave to defend: State Bank of Victoria, 246; Hazart Pty Ltd v Rademaker (1993) 11 WAR 26, 31 - 32; DMS Shipping & Trading Co Ltd v Lionheart Asia Ltd [1996] 2 Qd R 20, 23. MV Yorke Motors (a firm) v Edwards [1982] 1 All ER 1024, 1027, 1028. In DMS Shipping Thomas J stated the following of this discretion to (23):
… the Rules of the Supreme Court [give] the judge an unfettered discretion, when leave to defend is granted, to impose such terms as to giving security as the judge may think fit. Commonly the discretion is exercised when the judge perceives the defence to be 'shadowy', 'insubstantial', 'tricky', 'suspicious' or 'almost one in which summary judgment should be ordered'.
…
In my view, it is sometimes appropriate that in a dubious case that security be provided as a condition of the advantage thereby secured of delaying the plaintiff, of running up costs which are probably going to be wasted and of giving a commercial advantage to a defendant who has faintly arguable defence. Such factors namely the perception of the strength of the defence, influence many forms of pre-trial execution, such as Mareva injunctions, applications for security for costs and the imposition of a condition of the present kind which is in effect a security for judgment. The apprehension of the strength of the case or of the flimsiness of the defence may be a relevant basis for the exercise of the discretion and of course questions of degree are involved.
In Hazart Anderson J, went on to say that the court should not order payment into court of the amount of the claim where the defendant was able to show that 'compliance with such condition would be so onerous as to practically deny the defendant a real opportunity to present his defence' (32). It is thus usual for the defendant to be given an opportunity to produce evidence as to its financial position to assist the court with the exercise of its discretion. In the present case, I made directions for this to occur following the hearing of the application, along with an opportunity for the parties to file submissions on the point. Oxford did not take advantage of this opportunity.
In all the circumstances of this case, it is appropriate that I make an order that Oxford have leave to defend the claim for the dishonoured cheque subject to paying the amount of this claim into court (or some other equivalent arrangement agreed between the parties). This outcome also reflects the fact that there is no issue to be tried in relation to in excess of $100,000 of the claims by PNC on the invoices, even after the application of the set‑offs. Compliance with the condition will be a significant indicator of the bona fides of Oxford in relation to its defence of the claim, and intention to prosecute the counterclaims, as a whole. It reflects the concerns I have identified in these reasons as to the merits of the various set-offs and counterclaims raised by Oxford. It also reflects the fact that Oxford has not placed before the court sufficient evidence for me to be able to assess the likely quantum of the counterclaims it asserts may be raised as equitable set-offs. It represents an appropriate balance of the risks of injustice to both PNC and Oxford.
In the event that the money is not paid into court, PNC should have an immediately enforceable judgment for this claim with interest and costs.

Without prejudice material in Mr Glendining's affidavit

In the affidavit of Mr Glendining dated 22 August 2012 there is an email from him to Mr Nguyen dated 25 March 2012 which is headed 'without prejudice'. There was some discussion at the hearing of the application as to whether this document should be excluded. In the end, the application proceeded on the basis that I would review the email having formulated my views on the application to determine whether the contents of the email would have changed my views in any respect. If they would, then I would hear further submissions on the without prejudice point.
Having read the email, I do not consider that it alters my views in any respect. I therefore do not take it into account in determining the application, and do not need to rule on whether or not it is privileged. This issue should, however, be dealt with prior to trial to obviate the risk of the trial judge viewing privileged material.

Proposed draft orders

It is evident from my review of this action that any trial of the action will be long, complex and expensive. It seems to me that there may well be commercial opportunities for the parties to mitigate their respective losses, opportunities which may well disappear at the commencement of the 2013 school year. This suggests that, in addition to the orders determining PNC's summary judgment application, the court should facilitate a mediation conference occurring as soon as practicable. Directions can be made to preserve the rights of appeal from this decision pending the mediation.
To this end, I propose the following by way of a discussion draft of orders to give effect to these reasons and facilitate a mediation of the dispute between the parties:
(1)the defendant have leave to defend the claim in paragraphs 12 and 13 of the amended statement of claim subject to paying the amount of $32,071.33 into court (or equivalent security agreed by the parties) by 5 December 2012 (that is, 7 days after the mediation conference in proposed order 5 below);
(2)in the event that the amount in paragraph 1 is not paid into court (or otherwise dealt with by agreement), there be judgment for the plaintiff against the defendant in the amount of $32,017.33 together with interest to be assessed and costs to be taxed (on the evidence available to me, I would not be prepared to suspend the enforcement of this judgment);
(3)the defendant have leave to defend the balance of the claim;
(4)the plaintiff's application for summary judgment otherwise be dismissed;
(5)the parties attend a without prejudice mediation conference before a Registrar on 28 November 2012 at 9.30 am (or another a date to be fixed by the court taking into account the unavailable dates of the parties);
(6)each party must attend the mediation conference by an agent who is authorised by the body corporate to conduct settlement negotiations and to settle the case;
(7)not less than 7 days before the mediation conference, the lawyer for each party provide the party with notice in writing of the issues as to costs set out in 2005 DCR r 36;
(8)not less than 7 days before the mediation conference, each party serve on the other a without prejudice schedule of damages for any unliquidated damages claimed;
(9)not less than 3 clear days before the mediation conference, each party must send to the Registrar presiding at the mediation a bundle of documents comprising:
(a)any schedule of damages served pursuant to paragraph 8; and
(b)a copy of any significant without prejudice correspondence exchanged between the parties; and
(c)a copy of any document that would be useful for the Registrar to have to facilitate the mediation (being a document that is not already before the court in an affidavit filed in the present application);
(10)the time within which any party may appeal these orders be extended to 5 December (that is, 7 days after the mediation conference); and
(11)the action be listed for a directions hearing on 12 December (that is, around 14 days after the date of the mediation conference).
I will hear from counsel as to the extent to which these orders are appropriate and on the issue of costs.

Invoice	Date	Amended amount (incl GST)
OX 40	29 December 2011	$117,641.54
OX 41	29 December 2011	$89,305,65
OX 42	27 January 2012	$6,163.33
OX 43	26 March 2012	$11,679.18
OX 45	12 April 2012	$32,071.33
OX 46	7 April 2012	$65,258
OX 47	23 April 2012	$33,456.28
$355,575.31