Pindan Pty Ltd v Cockram Investments Pty Ltd - [2010] WADC 69

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: PINDAN PTY LTD -v- COCKRAM INVESTMENTS PTY LTD [2010] WADC 69

CORAM: REGISTRAR WALLACE

HEARD: 14 APRIL 2010

DELIVERED : 11 MAY 2010

FILE NO/S: CIV 3839 of 2009

BETWEEN: PINDAN PTY LTD (ACN 009 009 072)
Plaintiff
AND
COCKRAM INVESTMENTS PTY LTD (ACN 078 964 335)
Defendant

Catchwords:

Order 14 Rules of the Supreme Court - Summary judgment - Deed of acknowledgement of debt - Express reservation of contractual rights and obligations - Agreement not to oppose summary judgment application - Whether contrary to public policy - Proposed set-off and counterclaim

Legislation:

Rules of the Supreme Court 1971

Result:

Judgment granted in favour of plaintiff with stay of execution pending timely prosecution of counterclaim

Representation:

Counsel:

Plaintiff: Mr A R MacPherson
Defendant: Mr P Mendelow

Solicitors:

Plaintiff: Hotchkin Hanly
Defendant: Jackson McDonald

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

Gap (ITM) Inc v Temporary Department Store Pty Ltd [2006] FCA 725
Maersk Australia Pty Ltd v Rebelo Nominees Pty Ltd [2008] WADC 81
Morgan v Pallister [2004] WASC 188
Moscow Narodny Bank Pty Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109

REGISTRAR WALLACE: By chamber summons filed within time on 4 February 2010, the plaintiff seeks summary judgment pursuant to O 14 Rules of the Supreme Court against the defendant in the sum of $125,582.02, together with interest and costs to be calculated in accordance with the provisions of a deed of acknowledgement of debt dated 4 May 2009.
The plaintiff and the defendant are parties to a building contract dated 10 August 2006 for the construction of premises in Fremantle. By May 2009, the defendant had failed to make progress payments totalling $460,392.98. On 5 May 2009, in light of the defendant's defaults and the contractual consequences the defendant was facing, the parties executed the "Deed of Acknowledgement and Payment of Debt" which is Annexure "GBA2" to the affidavit of George Barclay Allingame, sworn on 29 January 2010 and filed by the plaintiff in support of its application.
In cl 1 and cl 2 of the deed, the defendant acknowledged that it was liable to the plaintiff in the sum of $460,392.98 plus interest accrued thereupon from time to time taking into account payments that had been made ("the outstanding balance").
By cl 3, subject to the terms of the deed, the defendant acknowledged that the plaintiff was entitled to payment of the outstanding balance and was entitled to issue legal proceedings to recover the outstanding balance from the defendant.
Under cl 5 to cl 7, the defendant agreed that it would pay the outstanding balance at the rate of $50,000 per calendar month, and that the plaintiff was entitled to apply those monies as it saw fit, including accrued interest, costs and other amounts payable under the deed.
Pursuant to cl 8 and cl 9 of the deed, provided that the defendant paid the outstanding balance in accordance with the deed and strictly observed the terms of the deed, the plaintiff would not take legal proceedings against the defendant. In the event of any default on the part of the defendant, the plaintiff could commence proceedings for the outstanding balance, which would be claimable as a liquidated debt.
Clause 10 of the deed provided that a certificate from an authorised representative of the plaintiff, stating the amount of the outstanding balance, would be prima facie evidence thereof.
Clause 11 of the deed permitted the plaintiff to refer to the deed and to any certificate issued pursuant to cl 10 thereof in support of an application for summary judgment and the defendant agreed not to oppose or object to any such application. Pursuant to cl 14 of the deed, the defendant agreed to pay the plaintiff's costs on an indemnity basis.
Particular attention should be given to cl 17 of the deed. It was inserted after the deed had been drafted in its original form and submitted to the defendant's solicitors for approval.
In an email addressed to the plaintiff's solicitors sent on 7 April 2009, being Annexure "RBAT2" to the affidavit of Richard Ah Boey Tay affirmed on 10 March 2010 and filed in opposition to the plaintiff's application, the defendant's solicitor stated:
"The deed you have submitted is acceptable save for 1 addition: The deed must be without prejudice to our client's rights to liquidated damages, which is the subject of separate correspondence with your client."
The plaintiff's solicitors replied by letter dated 8 April 2009 (Annexure "RBAT3" to Mr Tay's affidavit) in the following terms:
"Whilst our client does not concede your client's entitlement to liquidated damages, it is prepared to add a clause to the deed to the effect that save as contained in the deed, the parties' rights and obligations under the building contract remain unaffected. Please advise whether this is acceptable, in which case we will forward you a final copy of the deed for execution by your client."
The exact wording of the clause in question, cl 17, is as follows:
"Except to the extent inconsistent with this deed, the parties' rights and obligations under the contract remain in full force and effect."
The deed was executed in May 2009 and the defendant started to perform its obligations under the deed. It paid instalments totalling $350,000 at the rate of $50,000 per month until October 2009, when it defaulted. Under the terms of the deed, in the event of a default by the defendant the entire outstanding balance became due, and the plaintiff gave notice accordingly, claiming $155,448.09. The arithmetical calculation of that figure is set out in Annexure "GBA5" to the affidavit in reply of Mr Allingame sworn 29 March 2010. The notice of demand warned that proceedings would be instituted if payment were not made by 3 November 2009. The defendant then made another payment of $32,292.98. The plaintiff gave the defendant further notice that such sum of money would be accepted by the plaintiff only pursuant to the deed and in part payment of the amount due under the terms of the deed. The sum was applied on that basis, giving rise to the current outstanding balance claimed by the plaintiff, ie $125,582.02. The plaintiff also claims interest from the commencement of these proceedings, and costs on an indemnity basis.
Having outlined the plaintiff's claim, it is useful to note at this point that the general legal principles relating to an application for summary judgment were summarised by Pullen J in Morgan v Pallister [2004] WASC 188. At [4], his Honour stated:
"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 legal 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."
I am satisfied that the plaintiff's claim has been sufficiently made out and verified in the two affidavits of Mr Allingame sworn on 29 January 2010 and 29 March 2010.
Moscow Narodny Bank Pty Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109 is authority for the proposition that where a plaintiff has satisfied all the requirements of O 14 and has established a prima facie entitlement to the orders sought, the evidentiary burden shifts to the defendant to satisfy the Court why judgment should not be given against it. 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 reasons to be a trial of that claim" (Rules of the Supreme Court O 14, r 3(1)).
The defendant raises a number of issues which, it is contended, should satisfy me that summary judgment should not be granted in favour of the plaintiff in the present case. I shall briefly outline the relevant issues, whilst acknowledging that some were argued at length during the special appointment hearing before me on 14 April 2010.
The defendant contends that cl 11 of the deed is contrary to public policy in that it amounts to an attempt to oust the jurisdiction of the Court by seeking to prohibit the defendant from exercising its right to resist an application for summary judgment in a sum certified by the plaintiff's authorised representative. It was submitted on behalf of the plaintiff that, whilst a provision in a deed which purports to oust the jurisdiction of the Court may be contrary to public policy, the provision in question does not purport to do so – rather, it is an acknowledgement that the defendant will not oppose matters set out in the deed if they are put forward in an application for summary judgment. Counsel submitted: "That goes to the evidentiary foundation for the application, not an ouster of the jurisdiction itself". I note that in Gap (ITM) Inc v Temporary Department Store Pty Ltd [2006] FCA 725, the deed of settlement provided that if the respondents defaulted in making payments they would consent to summary judgment. Kenny J held, in relation to the plaintiff's application for summary judgment, that there was no arguable defence on the facts, and the provision in the deed was not held to be void as contrary to public policy. I further note that cl 18 of the deed executed by the parties to the present application expressly provides that:
"If any part of this Deed is or becomes void or unenforceable, that part shall be severed from this Deed to the intent that all parts that are not or have not become void or unenforceable remain in full force and effect and unaffected by any severance."
In my view, even if I were convinced (which I am not) that cl 11 of the deed is contrary to public policy, such clause would not render the entire instrument void and unenforceable.
Another issue raised by counsel for the defendant was the contention that the deed was entered into under a mutual mistake and requires rectification because the provisional sum of $15,000 was for work that the plaintiff actually had not performed. At the hearing, counsel for the plaintiff confirmed that a concession was made in relation to the $15,000, but submitted that:
"… the important point about that $15,000 is that the contract sum adjustments arose in October 2009, after the deed was entered into. In my submission, you cannot have a common mistake where the reason for the adjustment arises after the deed was entered into."
It was the plaintiff's contention that either the entire amount should be paid pursuant to the deed with a subsequent repayment to the defendant by the plaintiff of the $15,000 in respect of work that was never carried out, alternatively that it would require an adjustment of the amount claimed whilst not undermining the entire deed. I am satisfied that it would be open to me to make an adjustment as necessary, by deducting the sum claimed by the plaintiff for work that was never performed by the plaintiff, together with the interest component in respect of such sum.
The potential overpayment by the defendant of $15,000 plus interest is not the only remaining issue in dispute. As mentioned earlier in these reasons, the plaintiff agreed to amend its draft deed by inserting an additional clause – cl 17. The terms of that short clause will be restated here for convenience:
"Except to the extent inconsistent with this Deed, the parties' rights and obligations under the Contract remain in full force and effect."
Counsel for the defendant submitted at the hearing that, having regard to the surrounding circumstances known to the parties for the purpose and object of the transaction, the defendant expressly reserved in the deed the right to make a claim for liquidated damages against the plaintiff under the contract. It was pointed out that the deed does not contain a "no set off" clause and that in February 2009, prior to the execution of the deed, it was foreshadowed that there would be a claim for liquidated damages.
Annexure "RBAT 4" to the affidavit of Mr Tay sworn on 10 March 2010 is a copy of a letter from the superintendent under the contract to the plaintiff dated 29 May 2009. The superintendent assessed the plaintiff's liability to pay liquidated damages to the defendant at that date to be $63,000.
On 9 October 2009 the superintendent issued a revised payment certificate which, inter alia, provided adjustment in the previously‑identified provisional sum of $15,000 to the credit of the defendant, and on 2 November 2009 the superintendent issued a revised payment certificate showing an outstanding balance of $32,392.98 as being payable by the defendant to the plaintiff. I note that this was exactly the amount paid by the defendant to the plaintiff shortly after the notice of demand following the default in the payments of $50,000 per month in October 2009. As recently as 25 February 2010, the superintendent issued a revised payment certificate which certified that the plaintiff owed the defendant the sum of $12,771.23 after taking into account all adjustments.
In its draft defence and counterclaim, being Annexure "RBAT 1" to Mr Tay's affidavit affirmed on 10 March 2010, the defendant seeks to set off the amount of its liquidated claim under the contract against the plaintiff's claim against the defendant under the deed, and it counterclaims the sum of $12,771.23.
Rules of the Supreme Court O 20 r 17 provides:
"Where a claim by a defendant to a sum of money (whether of an ascertained amount or not) is relied on as a defence to the whole or part of a claim made by the plaintiff, it may be included in the defence and set‑off against the plaintiff's claim whether or not it is also added as a counterclaim."
I am satisfied that the defendant's claim against the plaintiff falls within the ambit of O20 r 17.
To the extent that cl 17 of the deed preserves the right of the defendant to claim liquidated damages under the building contract, counsel for the defendant submitted, the defendant has an arguable set‑off which, if successful, would extinguish the plaintiff's claim against it, and for that reason, summary judgment should not be awarded against the defendant.
I take full account of the fact that it was the defendant's undisputed breach of the building contract between the parties that gave rise to the deed of acknowledgment of debt. The plaintiff's forbearance to sue and the defendant's monthly payments of $50,000 were entirely in accordance with the terms of the deed. It was the defendant's default under the deed that gave rise to the plaintiff's right to bring this action.
Had the deed of acknowledgment of debt relied upon by the plaintiff been executed in terms of the original draft deed (ie without cl 17), I would have been prepared simply to grant the plaintiff's application for judgment in the amount claimed less the $15,000 referred to on p 7 of these reasons plus the appropriate interest component.
In view of cl 17, however, it is necessary that I take into account the defendant's draft defence and counterclaim. The essential question that arises is: "should the plaintiff be deprived thereby of its judgment pursuant to the deed of acknowledgement of debt"? I have given careful consideration as to how, operating within the Rules of Court and taking into account the relevant case-law, I might best do justice between the parties in the present case. I am not persuaded that the defendant has raised a question or issue that should result in my simply dismissing the application now before me.
Given that the plaintiff's claim is based on the defendant's formally acknowledged indebtedness, the plaintiff is, in my view, entitled to judgment in the amount claimed less the $15,000 and interest thereon. However, in view of cl 17, the defendant should not be denied the opportunity of putting before the court the matters pleaded in its draft defence and counterclaim. Adopting an approach similar to the one which was applied by Principal Registrar Gething in Maersk Australia Pty Ltdv Rebelo Nominees Pty Ltd [2008] WADC 81, I propose to grant judgment in favour of the plaintiff, subject to a stay of execution on the judgment pending the prosecution in a timely manner of the defendant's proposed counterclaim. In so deciding, I bear in mind that O 14 r 3(2) provides:
"The court may, by order and subject to such conditions, if any, as may be just, stay the execution of any judgment given against a defendant under this Rule until after the trial of any counterclaim made or raised by the defendant in the action."
The plaintiff will have the benefit of a judgment against the defendant pursuant to the deed of acknowledgment of debt between the parties. The defendant will be given a reasonable opportunity to prosecute its counterclaim based on the building contract between the parties to the extent that such is permitted by cl 17 of the deed.
In the event that the defendant does not prosecute its counterclaim in a timely manner, the plaintiff will be at liberty to apply to have the stay of execution on the judgment lifted.
I shall hear counsel on the issue of costs and on the final form of the orders I propose to make in accordance with these reasons for decision.