Sanders Bros v Marshall

[1995] QCA 475

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 225 of 1994

Brisbane

[Sanders Bros. v. M.R. Marshall Earthmoving Contractor]

BETWEEN

SANDERS BROS

(Plaintiff) Respondent

AND

M.R. (BOB) MARSHALL trading as
M.R. MARSHALL EARTHMOVING CONTRACTOR

(Defendant) Appellant

McPherson J.A.
Williams J.

MacKenzie J.

Judgment delivered 27/10/95

Separate concurring reasons for judgment by each member of the Court.

APPEAL ALLOWED. THE JUDGMENT BELOW IN FAVOUR OF THE DEFENDANT IS VARIED BY INCREASING IT TO $21,742.50. THE JUDGMENT BELOW IN FAVOUR OF THE PLAINTIFF IS VARIED BY REDUCING THE TOTAL AMOUNT OF $30,012.50 BY $6,841.00. THE APPELLANT MUST PAY THE COSTS OF THE RESPONDENT OF AND INCIDENTAL TO THE APPEAL. THE APPELLANT HAS LEAVE TO AMEND THE DEFENCE AND COUNTERCLAIM.

CATCHWORDS	CIVIL - CONTRACT - Money owing on Hire Agreement - Statute of Limitations - Whether written acknowledgment of indebtedness took the claim outside the statute - section 35(3) Limitation of Actions Act - Whether there was a running account between the parties that operated as a defence not subject to a time bar.
Counsel:	K.C. Fleming Q.C., with him P.C.P. Munro, for the appellant
L.F. Kelly for the respondent
Solicitors:	Welsh & Welsh for the appellant
Sykes Pearson & Miller for the respondent
Hearing Date:	18 September 1995
IN THE COURT OF APPEAL	[1995] QCA 475
SUPREME COURT OF QUEENSLAND

Appeal No. 225 of 1994

Brisbane

Before McPherson J.A.
Williams J.
MacKenzie J.

[Sanders Bros. v. M.R. Marshall Earthmoving Contractor]

BETWEEN

SANDERS BROS

(Plaintiff) Respondent

AND

M.R. (BOB) MARSHALL trading as
M.R. MARSHALL EARTHMOVING CONTRACTOR

(Defendant) Appellant

REASONS FOR JUDGMENT - McPHERSON J.A.

Judgment delivered the 27th day of October 1995

The plaintiffs were a partnership carrying on the business of a quarry operator

and earthmoving contractors. It is convenient to refer to them as Sanders. The

defendant Marshall, who is the appellant in this Court, carried on business as an

earthmoving plant operator and contractor. He and Tom Sanders, who was one of the

plaintiffs, were friends or acquaintances of long standing, who had had many business

dealings over the years. In 1985 Marshall agreed to hire from Sanders a crusher plant

for use at Marshall's quarry at Parklands. It may perhaps be inferred that at the time

Sanders was in some financial difficulty, and Marshall's hiring of the plant was designed

to help him out.

There were some later variations in the terms of the original hire contract, which

lasted until about 1986; but, according to Marshall's evidence at the trial, the parties

agreed that he would pay a rate of $100 a day for the hire of the crushing plant and the

employees who operated it, with Marshall to supply fuel, and Sanders undertaking to

supply oil and accepting responsibility for repairs. In the result, however, Marshall paid

for oil and repairs required by the crusher, which proved not to be in the best working

order. Although the learned trial judge did not make precise findings on all matters, it

seems a compelling conclusion from the judgments he gave that he accepted Marshall's

evidence on the subject. His Honour specifically found that it was agreed that Sanders

would pay for oil and repairs.

Tom Sanders died in about 1991. The plaintiff firm's bookkeeping in relation to

the state of accounts between his firm and Marshall had been conducted in what, to say

the least, was a somewhat informal manner. Dockets and statements of amount were

from time to time delivered by Sanders to Marshall, and vice versa, but the precise state

of the resulting indebtedness, when allowance is made for credits or claims by one side

against the other, proved difficult to determine. At some stage an accountant named

Ramsden was engaged by Sanders in sorting the matter out. He wrote letters to

Marshall including one dated 11 September 1990 (ex. 12) and another dated 15

November 1991 (ex. 13) in which reference was made to the hire of the crushing plant

and amounts due to Sanders in respect of it.

When the matter came to trial in the District Court at Maroochydore, the plaintiffs

Sanders were claiming a sum of $25,212.00 for amounts unpaid in respect of plant hire

for the period to June 1986, together with interest thereon. The learned judge gave

judgment on that claim in the amount of $23,312.50, together with interest of $8,700,

and costs of the action. Marshall had filed a defence and a counterclaim for $29,696.00 with interest. On that counterclaim it was adjudged that the defendant Marshall recover

$20,023.74, with interest of $4,300.00 "and the plaintiff's costs of and incidental to this

action to be taxed". Although the words quoted appear in the formal judgment in the

record, it is apparent from the reasons for judgment that a slip has occurred in passing

and entering it. The reasons say that it is ordered that "the plaintiffs pay the defendant's

costs of and incidental to his counterclaim to be taxed".

The amount of $20,023.74 for which judgment was given in favour of the

defendant Marshall on his counterclaim was arrived at after disallowing a further sum of

$5,122.24 representing three items for which Marshall had made a counterclaim. They

were all items of his claim to be reimbursed for the cost of repairs and oil for the

crushing plant ("the reimbursement claim"). The judge found those items proved but he

disallowed them for the reason that they were barred by the statute of limitations.

Marshall now appeals against that judgment, asking that the judgment in his favour be

increased to $26,864.84 with interest.

The appeal was argued on two bases. The first was that the sum of $5,122,24

should not have been disallowed because it formed part of a running account between

the parties and so was an amount which the defendant Marshall was entitled to deduct

from the Sanders claim and not merely to maintain as a counterclaim. It is convenient to

begin with the second basis relied on, which is that there was a written

acknowledgement of indebtedness which took the claim or $5,122.24 out of the statute.

The acknowledgement was said to be contained in the correspondence exs. 12 and 13

from Ramsden to which reference has been made. The learned judge rejected this

submission below for the reason that, in the view he took of it:

"... the acknowledgment was in respect of equipment hire and not with respect to indebtedness for repairs or parts to the crushing plant. On the evidence in this case, Ramsden's correspondence was not ... an acknowledgment of a general indebtedness, but was in respect of indebtedness for plant hire from the defendant."

He accordingly held that the subject claim for $5,122.24 for repairs and oil was statute

barred, and had not been acknowledged by Sanders.

Paragraph 2(b) of the notice of appeal challenges this conclusion on the ground

that the judge was wrong in holding that the acknowledgment by the plaintiffs Sanders

did not apply to the whole of Marshall's claim the subject of his counterclaim. The

resolution of the question depends on the terms of the correspondence which is relied

on as the acknowledgement , read in conjunction with s.35(3) of the Limitation of

Actions Act 1974, which provides:

"(3) Where a right of action has accrued to recover a debt or liquidated pecuniary claim ... and the person liable or accountable therefore acknowledges the claim or makes a payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment."

By s.36 any such acknowledgement, which may be made by an agent, must be in

writing and signed. It is not disputed that these requirements are satisfied by exs. 12

and 13.

In considering whether or not there was an acknowledgement in terms of s.35(3),

it is pertinent to notice that all that was relied on by the defendant Marshall in his

pleading (amended defence and counterclaim, para.18) were the two letters dated 11

September 1990 (ex. 12) and 15 November 1991 (ex. 13) written by Ramsden

acknowledging that the plaintiffs Sanders were indebted to the defendant in the total

sum of $10,000 for plant hire for the years ended 30 June 1986 and 30 June 1987. No

other letter was pleaded or relied on as constituting the acknowledgment. The letter ex.

12 was accompanied by a schedule headed "Details of amount owing to Sanders

Brothers". It is described in the letter as being Ramsden's "understanding of the transactions with you from 1985 with a view to arriving at an agreed amount owing by

you and to make arrangements for its ultimate settlement". The schedule contains

references to docket numbers and amounts with which Marshall is debited. It also

refers in two instances to "plant hire - estimate", for which two specified sum of $4000

each are credited to Marshall. Together they total $8,000 and not $10,000 as alleged in

para. 18 of the amended defence and counterclaim.

It is these two entries and the two sums credited that were and are relied on as

the acknowledgement alleged to have been made by or on behalf of Sanders. It is said

that the "Plant hire" for which the estimated amounts are credited represented

Marshall's claims to be paid for repairs and oil for the crushing plant hired and used at

Parklands. It is, however, clear that those two entries do not refer to that transaction at

all. It is, within certain limits, permissible for a party who relies on an acknowledgment

to elucidate its meaning by reference to extrinsic evidence: see Dungate v. Dungate

[1965] 1 W.L.R. 1477, 1483. Those limits may be narrower under a statutory provisions

like s.35(3) than they were under the old law antedating s.23(4) of the Limitation Act

1939 (U.K.) from which s.35(3) of our Act is taken. See Good v. Parry [1963] 2 Q.B.

418, 423-424. But, on any view of the matter, the acknowledgment, when so elucidated,

must relate to the indebtedness sought to be enforced or brought to account. Here it is

clear that what Ramsden was referring to in the schedule enclosed with ex. 12 was not

any claim by Marshall for reimbursement for expenditure for repairs and oil which should

have been supplied by Sanders. He was referring to other quite distinct transactions of

plant hire, which gave rise to a different indebtedness on the part of Sanders to

Marshall. They were, or were part of, the transactions and indebtedness which resulted

in the judgment of $21,742.50 given in favour of Marshall on his counterclaim. They had

no connection with the sum of $5,122.24, which the judge held to be statute-barred.

Ground 2(b) of the notice of appeal therefore fails. The other matter argued on

appeal was the running account basis already referred to. Its foundation is what was

said by Lord Denning M.R. in Henriksen Rederi A/S v. T.H.L. Rolimpex [1974] 1 Q.B.

233, 246-247, about the right to rely on opposing demands arising out of the same

transaction; in those circumstances, his Lordship said, no question of set-off properly so

called arises. As authority for that proposition, reference was made to Green v. Farmer

(1768) 4 Burr. 2214, 2221, where Lord Mansfield said:

"Where the nature of the employment transaction or dealings necessarily constitutes an account consisting of receipts and payments, debts and credits, it is certain that only the balance can be the debt ..."

Accepting that proposition, the learned Master of the Rolls held that when a matter went

to reduce or extinguish the claim, it operated as a defence that was not subject to a time

bar, and so was not within the scope of s.28 of the Limitation Act 1939 (U.K.). The

Queensland analogue of s.28 is s.42 of the Limitations of Actions Act 1974, which

provides that "a claim by way of set-off or counterclaim shall be deemed to be a

separate action", and to have been commenced on the same date as the action in

which the set-off or counterclaim is pleaded.

In the present case, Marshall's reimbursement claim for expenditure on repairs

and oil for the crushing plant satisfies the tests laid down by Lord Denning in Henriksen.

It was therefore not subject to the provisions of s.10(1)(a) of the Limitation of Actions

Act 1974 (which imposes a six year limitation period for claims founded on simple

contract), or to the provisions of s.42. Mr Kelly of counsel for Sanders on appeal did not

submit to the contrary. What, however, he did say was that the matter had not been

raised at the trial; that it ought to have been properly pleaded and addressed at the trial;

and, if that had been done, the trial judge could legitimately have been expected to

make an appropriate deduction from the plaintiff's claim.

Whether or not it constitutes a matter of set-off in the strict or any other sense, it

plainly is desirable and convenient for particulars of a reimbursement claim like that

raised by Marshall to be affirmatively pleaded in the defence. If not raised by the

pleadings, it is something which would, in terms of r.92(2) of the District Court Rules, be

likely to take the plaintiff by surprise. The defence and counterclaim here did refer to

and raise the matter in para.10 of that pleading (although only in relation to repairs and

not oil) but did so only in, and in support of, Marshall's counterclaim. Rule 92(2) of the

Rules was therefore not complied with. Before any effect is given to the reimbursement

claim, it ought now to be properly pleaded by way of defence.

Marshall accordingly asked for leave to amend his defence on appeal in order to

raise the reimbursement claim for $5,122.24 as a defence and not merely as a

counterclaim. The application to that effect was opposed by Mr Kelly counsel on behalf

of the plaintiffs. Their own position on appeal is not quite beyond reproach. As to the

sum of $5,122.24 they succeeded in defeating Marshall's claim on the basis of a

defence under the statute of limitations which does not appear in their amended

pleadings at the trial. What happened, according to the affidavit of the solicitor who

instructed at the trial, was that the original reply and answer raised a plea of the statute

against the claim for that sum; but, in the course of preparing an amended version of

that pleading immediately before the trial, the paragraph raising that plea was

accidentally omitted. When this oversight was discovered in the course of counsel's

address at the trial application was made to amend the reply and answer by re-instating

the allegation. Leave was granted; but by the time the appeal came on for hearing the

amendment had not been made. Counsel for Sanders has presented to this Court a

version of the pleading appropriately amended. In so far as leave may be required to

make the amendment in the form permitted at the hearing, it should be granted to Saunders. The particular issue was determined in the court below on the footing that

the amendment had been or would be made, and Marshall has suffered no identifiable

disadvantage or prejudice through the omission to carry into effect the order made at

the trial granting leave to amend.

Marshall's application on appeal to amend his defence and counterclaim stands

on a somewhat different footing. No application to raise the claim for $5,122.24 as a

defence was ever made or granted at the trial. The issue was approached at the trial

and determined upon the pleadings as they then stood and now stand. It was relied on

only as a counterclaim and not as a defence to the plaintiffs' claim. On one view, that

may be considered a technical objection or complaint; but the matter is one where the

way in which the proceedings below were conducted forms an important element in the

discretion to allow an amendment requested for the first time on appeal. There was

ample opportunity at the trial to amend the defence in the manner applied for now, but

no such leave was sought even after leave to rectify the omission in the plaintiffs' own

pleading had been granted. The amount involved is not large, but it may have an impact

on the incidence of costs at the trial or on this appeal.

The leave sought by the defendant on appeal to amend the defence and

counterclaim should now be granted only on terms as to costs. The defendant should

be regarded as bound by the manner in which his case was conducted below by

counsel who appeared for him at the trial. My view is that the order with respect to costs

made at the trial should stand subject only to the emendation already referred to; that is

to say, the defendant should be ordered to pay the plaintiffs' costs of and incidental to

the action; and the plaintiffs should be ordered to pay the defendant's costs and

incidental to the action. As to the costs of appeal, the appellant Marshall should be

ordered to pay costs of the respondent Sanders of and incidental to the appeal. If the decision in Henriksen had been relied upon at the trial and the reimbursement claim

had been raised as a defence, the appeal would not have been necessary.

The parties have, however, persuaded the Court that they should be permitted to

make written submissions on the subject of costs. As regards the substance of the

matter, the appeal will be allowed. The notice of appeal asks for an order that judgment

in favour of the defendant Marshall on his counterclaim be varied by increasing it to

$26,864.74 together with interest. However, the only footing on which such an order

would be justified is if the trial judge had been wrong in his decision as to the

acknowledgement: ground 2(b). On that point the defendant's appeal has failed. He is

entitled to succeed only on the Henriksen ground, which incidentally is not within the four

corners of the notice of appeal as it now stands. The appropriate order is to vary the

judgment of $23,312.50 in favour of the plaintiffs by reducing it by the amount of the

reimbursement claim of $5,122.24 and the interest awarded on that sum. According to

Mr Kelly's calculation, which was not disputed on appeal, the result will be to reduce the

total amount of $32,012.50 (judgment sum and interest) which his clients the plaintiffs

recovered by $6,841.00. The matter does not quite end there because in the course of

the appeal an arithmetical error has been noticed in the calculation of the amount for

which judgment was given for the defendant. The amount should not have been

$20,023.74 as appears in the formal judgment. It has not proved possible to be

completely confident about where or how the error occurred. What is clear, however, is

that the amount for which the defendant was entitled to judgment was $21,742.50 (which

is the sum shown at the foot of the first page of the calculation submitted to this Court by

the appellant defendant).

The judgment below in favour of the defendant will therefore be varied by increasing it to that amount. The judgment in favour of the plaintiff is varied by reducing the total amount of $30,012.50 (representing the addition of principal debt and interest)

by $6,841.00 The appellant defendant must pay the costs of the plaintiff respondent of

and incidental to the appeal. The appellant is to have leave, if thought fit, to amend the

defence and counterclaim.
IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 225 of 1994

Brisbane

Before McPherson JA

Williams J

Mackenzie J

[Sanders Bros v. M.R. Marshall Earthmoving Contractor]

BETWEEN:

SANDERS BROS

(Plaintiff) Respondent

AND:

M.R. (BOB) MARSHALL trading as
M.R. MARSHALL EARTHMOVING CONTRACTOR

(Defendant) Appellant

REASONS FOR JUDGMENT - GN WILLIAMS J

Judgment delivered 27/10/1995

I have had the advantage of reading the reasons for judgment prepared by McPherson JA and agree with those reasons and with the orders proposed therein.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 225 of 1994

Brisbane

Before McPherson JA
Williams J
Mackenzie J

[Sanders Bros v. M.R. Marshall Earthmoving Contractor]

BETWEEN:

SANDERS BROS

(Plaintiff) Respondent

AND

M.R. (BOB) MARSHALL trading as
M.R. MARSHALL EARTHMOVING CONTRACTOR

(Defendant) Appellant

REASONS FOR JUDGMENT - MACKENZIE J

Judgment delivered 27/10/1995

I agree with the orders proposed by McPherson JA for the reasons given by him.