The University of Western Australia v TSW Analytical Pty Ltd [No 2]
[2014] WADC 145
•24 OCTOBER 2014
THE UNIVERSITY OF WESTERN AUSTRALIA -v- TSW ANALYTICAL PTY LTD [No 2] [2014] WADC 145
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WADC 145 | |
| Case No: | CIV:3792/2013 | 31 JULY 2014 | |
| Coram: | STAUDE DCJ | 24/10/14 | |
| PERTH | |||
| 33 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| PDF Version |
| Parties: | THE UNIVERSITY OF WESTERN AUSTRALIA TSW ANALYTICAL PTY LTD |
Catchwords: | Appeal Appeal from decision of deputy registrar on application to set aside default judgment Whether good defence on the merits disclosed Whether unconditional leave to defend should be granted |
Legislation: | Nil |
Case References: | Hall v Hall [2007] WASC 198 Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62 James v Commonwealth Bank of Australia (1992) 37 FCR 445 Lumbers v W Cook Builders Pty Ltd (in liquidation) [2008] HCA 27 McDonnell and East Ltd v McGregor (1936) 56 CLR 50 Pan Ocean Shipping Co Ltd v Creditcorp Ltd [1994] 1 All ER 470 Parker v Transfield Pty Ltd [2000] WASCA 382 Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 Vautier Holdings Pty Ltd v Kagioulis Trading Pty Ltd [2014] WASC 209 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
TSW ANALYTICAL PTY LTD
Defendant
Catchwords:
Appeal - Appeal from decision of deputy registrar on application to set aside default judgment - Whether good defence on the merits disclosed - Whether unconditional leave to defend should be granted
Legislation:
Nil
Result:
Appeal dismissed
Representation:
Counsel:
Plaintiff : Ms P A Martino
Defendant : Mr S Penglis
Solicitors:
Plaintiff : P A Martino
Defendant : Thompson Downey Cooper
Case(s) referred to in judgment(s):
Hall v Hall [2007] WASC 198
Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62
James v Commonwealth Bank of Australia (1992) 37 FCR 445
Lumbers v W Cook Builders Pty Ltd (in liquidation) [2008] HCA 27
McDonnell and East Ltd v McGregor (1936) 56 CLR 50
Pan Ocean Shipping Co Ltd v Creditcorp Ltd [1994] 1 All ER 470
Parker v Transfield Pty Ltd [2000] WASCA 382
Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221
Vautier Holdings Pty Ltd v Kagioulis Trading Pty Ltd [2014] WASC 209
- STAUDE DCJ:
Introduction
1 This appeal is a fresh hearing of the defendant's application to set aside a default judgment regularly entered on 11 December 2013 for $696,462.46 and interest of $1,717.30 on the plaintiff's liquidated claim by writ of summons dated 26 November 2013. The plaintiff will be referred to as UWA and the defendant as TSW.
2 The decision of the learned deputy registrar at first instance was to reduce the judgment sum by $30,045.79 and grant the defendant leave to defend the plaintiff's claim with respect to that amount.
3 The appeal is a fresh hearing of the application. It is not necessary for the defendant to show error in the decision appealed from. In order to enliven the court's discretion to set aside a default judgment which has been regularly entered the defendant must show a reason for its failure to enter an appearance and that it has a defence. The discretion is unfettered: there are no hard and fast rules. The discretion must be exercised so as to do justice between the parties according to the circumstances of the case: Hall v Hall [2007] WASC 198 (Newnes M) [63].
4 The principles to be applied were conveniently summarised by Master Sanderson recently in Vautier Holdings Pty Ltd v Kagioulis Trading Pty Ltd [2014] WASC 209 [10]:
(1) The decision whether or not to set aside the judgment must have as its paramount consideration the interests of justice. It is an essential principle of civil litigation that a party should be entitled to put their case to the court.
(2) Simply because a judgment is regular does not provide grounds for refusing to set it aside. What is important is the merits of the defence raised by the party against whom judgment is entered.
(3) Some explanation for the failure to enter an appearance ought be provided. The stronger that explanation the more likely judgment will be set aside. But a failure to adequately explain the delay will not in and of itself lead to the application being refused. All relevant circumstances must be considered.
(4) The test to be applied in determining whether the judgment should be set aside is similar to the test applied on summary judgment. The defendant must establish there is a serious question to be tried.
(5) A defendant who seeks to have a judgment set aside should 'condescend upon particulars' of the defence. In other words, on an application to set aside a default judgment a defendant ought provide the same level of detail as would be provided if the defendant was responding to an application for summary judgment by the plaintiff.
5 With respect to the last two points the learned master observed that the authorities do not formulate the test as requiring an applicant to establish that there is a serious question to be tried, but it was logical, having regard to the effect of the authorities, that that should be the test:
There will be no point in setting aside a default judgment immediately after the defendant entered an appearance the plaintiff made a summary judgment application which was found to succeed. Furthermore, adopting that test offers a level of consistency when considering whether summary disposal of an action is appropriate. It is to be emphasised, of course, as all the authorities make clear, that it is only in the clearest of cases a defendant ought be put out of court. [11]
6 A plethora of affidavit evidence has been filed. Both parties have filed further affidavits since the initial decision was made. Much of the affidavit evidence is repetitive. No point is taken by either side in this respect. Although much of the affidavit evidence does not comply with the rules of admissibility, for example, where the source of information is not stated or statements of opinion or belief are made, to cite just two, neither party made any formal objections to the affidavit evidence of the other. Neither party sought to cross-examine any deponent.
7 The following affidavits have been read:
1. Affidavit of Cameron Jay Scadding in support of application to set aside default judgment sworn 30 December 2013.
2. Affidavit of David Thompson, sworn 10 February 2014.
3. Supplementary affidavit of Cameron Jay Scadding in support of application to set aside default judgment sworn 28 February 2014.
4. Affidavit of Abbe Louise Rorrison sworn 4 March 2014.
5. Affidavit of Cameron Jay Scadding in support of appeal sworn 4 July 2014.
6. Affidavit of John Watling in support of appeal sworn 4 July 2014.
7. Affidavit of Abbe Louise Rorrison sworn 21 July 2014.
Late appearance
8 The writ of summons was served on the registered office of TSW on 29 November 2013. Default judgment was entered on 11 December 2013, being the day following the expiration of the period prescribed for the entry of the appearance.
9 There is no issue with respect to the reasons given in Mr Scadding's affidavit of 30 December 2013 for TSW's failure to enter an appearance. In simple terms, the history is as follows:
(1) TSW received a letter of demand from the solicitor for UWA on or about 15 November 2013.
(2) Mr Scadding wrote to UWA's lawyer on 21 November 2013 indicating that the amount claimed was disputed and requesting that it be reviewed and negotiated.
(3) Mr Scadding was informed by TSW's administrative officer, Ms Vicki Green, that on 3 December 2013 a sealed envelope addressed to him was received by courier from TSW's accountant, whose office is the address of TSW's registered office.
(4) Mr Scadding did not receive the envelope until 5 December 2013. He was not informed as to the date of service of the writ. He assumed that it had been couriered to TSW on the day it was received by its accountants and thought that the last day for an appearance was 13 December 2013.
(5) Mr Scadding instructed TSW's solicitors to enter a memorandum of appearance which they attempted to do on 13 December 2013 by which time judgment had been entered.
(6) TSW applied by chamber summons dated 30 December 2013 to set aside the default judgment and for leave to defend.
10 TSW has satisfactorily explained the circumstances of its default. There is no question of undue delay in the bringing of the application to set aside.
Issue to be determined
11 The issue for determination is whether TSW has a credible defence. It is not for the court to resolve factual disputes for this purpose. Provided the defendant's case is not inherently incredible, the test is whether, if the defendant's evidence were accepted at trial, the defence would have a real prospect of success: Hall v Hall [67]; Parker v Transfield Pty Ltd [2000] WASCA 382 [3].
Background
12 The action arises from a business relationship between the parties which subsisted from 2008 to 2013. UWA conducted the Centre for Forensic Science as part of the faculty of science at its Crawley campus. Winthrop Professor Ian Dadour was the head of the Centre. TSW was formed by three UWA employees to do consultative work for industry. An arrangement was made whereby TSW would periodically offer a research funding grant to UWA calculated according to the salaries of UWA personnel engaged in work for TSW. UWA would issue monthly invoices for the funding grant. These invoices were paid by TSW until December 2012 when it failed to pay an invoiced amount of $71,833.00 plus GST.
The claim
13 The indorsement of claim on the writ is as follows:
1. The Plaintiff is a body corporate pursuant to Section 6 University of Western Act 1911 and is capable of suing and being sued.
2. The Defendant is duly incorporated under the Corporations Act 2001 and is capable of suing and being sued and carries on the business of chemical analysis and scientific consultancy services ('Business').
3. Throughout 2009 to 2013 the Plaintiff and Defendant entered into a partly verbal and partly written research grant and funding agreement whereby the Plaintiff would provide academic staff, students and provision of laboratory and other resources ('infrastructure resources') and the Defendant would pay the Plaintiff the expenses for the infrastructure resources and provide funding to the Plaintiff ('research grant and funding agreement').
4. In accordance with the research grant and funding agreement the Plaintiff provided academic staff, students to the Defendant and the infrastructure resources for the purpose of the Defendant carrying on its Business.
5. In breach of the research grant and funding agreement the Defendant has failed to:
(a) reimburse the Plaintiff for the infrastructure resources provided by the Plaintiff for the period January 2009 to September 2013 in the total sum of $27,314.35 plus GST;
(b) pay funding for the December 2012 being a monthly instalment of $71,833.00 plus GST; and
(c) pay funding for the period of January 2013 to June 20113 on a monthly instalment basis of $89,000.00 plus GST.
6. The Plaintiff claims:
(a) The total sum of $696,462.46 including GST representing the following pursuant to the research grant and funding agreement particulars of which have been previously provided:
Expenses for the period January 2009 to
September 2013 $ 27,314.35
GST on expense for the period January 2009 to
September 2013 $ 2,731.44
Funding for December 2012 $ 71,833.34
GST on the December 2012 funding $ 7,183.33
Funding for January 2013 to June 2013
inclusive $534,000.00
GST $ 53,400.00
Total $696,462.46
(b) Interest at the rate of 6% per annum pursuant to Section 35 Supreme Act 1921 (as amended) as from the date of this Writ to payment or judgment;
(c) Costs.
15 The indorsement does not plead with any particularity the terms of the agreement or what the defendant's contractual obligations were, but pleads by way of an allegation of breach that the defendant failed to pay certain amounts pursuant to the agreement.
Evidence
Scadding (30 December 2013)
16 The application is supported by the affidavit of Cameron Jay Scadding sworn 30 December 2013 in which he deposes to the history of the relationship between the parties, the significant aspects of which I summarise as follows:
1. TSW was incorporated in 2007 by himself, Allen Thomas and John Watling who were all employed by UWA at the Centre for Forensic Science (the Centre).
2. TSW was formed as a vehicle for doing consultative work for industry in association with the work of the Centre.
3. Initially, TSW did work in a particular area of expertise, namely data interpretation in association with fingerprinting technology and pattern recognition. Over time the work of TSW expanded to include analytical services.
4. TSW operated from within the Centre from May 2009.
5. No formal agreement was made between the parties in relation to TSW's use of UWA staff and facilities, but there was an understanding that the arrangement would be cost neutral. Students would have access to TSW's facilities at reduced rates.
6. TSW would offer 'research grant funding' to the Centre calculated according to the remuneration of UWA staff engaged in TSW business and the use of UWA facilities. UWA would issue monthly invoices for the offered funding.
7. The money paid by TSW to UWA would be used to pay staff at the Centre 'for the time they spent on TSW business or to recompense UWA in the event staff were paid before funding was received'.
8. In September 2009 the parties came to an understanding that a facilities access agreement was required in order to regulate their relationship. None was ever made.
9. At this time TSW was supplying services to UWA, which included:
(a) support for research students including the provision of analytical services, training and research supervision;
(b) provision of funds for PhD research programmes; and
(c) provision of laboratory resources, including access to equipment owned by TSW.
10. By letter on 20 December 2011 TSW offered UWA a research funding grant of $431,000 for the period 1 July 2012 to 30 December 2012, calculated according to the salaries of UWA staff who would be working full-time for TSW, including Mr Scadding, and an infrastructure charge for the use of facilities.
11. In early 2013 the parties engaged in discussions regarding the level of funding by TSW for the period 1 January 2013 to 30 June 2013. By letter of 28 February 2013 TSW offered a research funding grant of $534,000 for that period, again calculated by reference to the wages of UWA personnel who would be working for TSW.
12. Between February 2013 and July 2013 two employees were away, one on long service leave and the other on maternity leave, and were thus not working for TSW. In addition, John Watling, a director of TSW, was not available to TSW because he was engaged full-time in supervision of a number of PhD students. In the same period Mr Scadding and two others were engaged in teaching for significant periods.
13. Consequently, the UWA did not provide TSW with the services reflected in the calculation of the research funding grant amount for that period.
14. On Mr Scadding's calculations the value of UWA services not provided to TSW during that period was $334,697.24, inclusive of GST and the infrastructure charge.
15. In May 2013 TSW obtained a lease of premises at Bibra Lake to which it intended to re-locate.
16. From that time Mr Scadding engaged in discussions with the head of the Centre, Winthrop Professor Ian Dadour, regarding any amount that may be due by TSW to UWA or vice versa and a possible ongoing relationship between the Centre and TSW.
17. On or about 10 October 2013 TSW received an invoice in the amount of $30,045.79 from UWA for the period 1 January 2009 to mid-2013. The charges were set out in a schedule which is annexed to Mr Scadding's affidavit. The legal basis of these charges is not apparent. Specifically Mr Scadding states that there is no basis for the charges listed under the heading 'Miscellaneous Charges'.
18. Mr Scadding wrote to Professor Dadour on 12 November 2013 setting out the position of TSW with respect to its relationship with the Centre.
19. On 12 December 2013 Mr Scadding wrote to Professor Dadour setting out a summary of charges by TSW for analytical services provided by TSW to UWA students in the period 2008 – 2013. That letter is attachment CJS-11, but is incomplete. (The full letter is attachment CJS-27 to the affidavit of Mr Scadding sworn 5 March 2014.) It indicates a total charge of $3,266,422.00 ex GST, discounted to $2,613,137.60. Other costs associated with student research projects, including 'travel costs for sampling exercises, attendance at meetings, new hardware for projects and other essential items required' were charged at $44,534.30 ex GST. In addition the letter set out staff costs for providing supervision and training to PhD and MSc students, teaching forensic and analytical chemistry units, provision of building and fire wardens, first aid officers, safety personnel and a safety framework, other input at UWA's direction and UWA promotional activities in an amount of $1,052,253.66. The total of these charges is $3,709,925.56 ex GST.
20. The letter attaches a tax invoice addressed to UWA for $3,709,925.56 ex GST stated to be 'summary of UWA related expenses paid by TSW Analytical January 2008 to December 2013'.
17 I understand from par 52 of Mr Scadding's affidavit that TSW disputes that there is any legal enforceable agreement between it and UWA pursuant to which UWA is entitled to the amount of the judgment, and that even if there is a legal basis for its claim, the amount to which it is entitled is considerably less than the amount of the judgment and may be entirely offset by TSW's counterclaim. It is also said that it is not clear that the writ was issued with the authority of UWA.
Rorrison (31 January 2014)
18 In opposition to the application UWA's solicitor filed an affidavit by Abbe Louise Rorrison sworn 31 January 2014. Ms Rorrison is the faculty business manager for the faculty of science.
19 Ms Rorrison states that UWA provided academic and research staff, and administration and payment of salaries and related costs for staff, pursuant to an arrangement by which TSW would fund those services by making a research grant. The arrangement was cost neutral to UWA. The research grant is said to be for the purpose of promoting research and analysis in the field of chemistry and forensics. Within the Centre there existed the Forensic and Analytical Chemistry Group, the sole purpose of which was to manage and conduct the business of TSW. The group comprised Mr Scadding, Rachel Green, Vicki Green, John Watling, Sven Fjastad, Allen Thomas and Chris May.
20 I understand from par 15 of Ms Rorrison's affidavit that the above named UWA personnel who were engaged in the work of TSW within the Centre were on periodic contracts and that those contracts were determined by the requirements of TSW.
21 In par 22 Ms Rorrison states that TSW agreed to pay the research grant to UWA in exchange for the services provided by UWA. The affidavit does not point to any other evidence of a contract and does not identify any terms, other than that the grant was made up of the salaries paid by UWA to the personnel provided to TSW and a 15% infrastructure charge based on the amount of the salaries. She also said that the costs of UWA in providing the services for which the research grant was made were to be fully funded by TSW.
22 Ms Rorrison's affidavit then goes on to depose to the manner in which the periodic research grants were determined, invoiced, and paid.
23 Paragraph 27 of Ms Rorrison's affidavit details the circumstances of the proposed research grant for the period from 1 January to 30 June 2013 which was calculated by Mr Scadding, as appears from his email of 14 February 2013 (attachment C) , and confirmed by him by letter dated 28 February 2012 (sic) to be $534,000 ex GST (attachment D). Consequent to that confirmation UWA issued invoices for a monthly amount of $89,000 ex GST (attachment E).
24 According to Ms Rorrison's affidavit, the calculation of the research grant by TSW in this manner was consistent with the parties' prior dealings from 2008 to 2012. At par 32 the particulars of the debt represented by the judgment are given as follows (including GST):
December 2013 (invoice 12 December 2012): $ 79,016.67
January/February/March 2013 (invoice 28 March 2013): $293,700.00
June 2013 (invoice 15 May 2013): $ 97,900.00
April – May 2013 (invoice 18 Mary 2013): $195,800.00
Total: $666,416.67
25 Ms Rorrison states that she sent an email on 19 February 2013 regarding the cost overruns for prior years (attachment J). An email from Mr Scadding in reply on 25 February 2013 appears to accept TSW's liability to pay the difference between actual and estimated salary costs, but does not admit the amounts set out in Ms Rorrison's email.
26 Ms Rorrison states that on 28 June 2013 Professor AG O'Donnell wrote to TSW advising that the research funding agreement would not be renewed from 30 June 2013. UWA informed TSW that the contracts of personnel whose salaries were covered by the research grants would not be renewed. The letter referred to amounts not yet invoiced and stated that UWA's invoices were based on estimated costs and that no adjusting invoices had been raised to recognise the difference between estimated and actual costs.
27 According to Ms Rorrison, discussions were then commenced between the parties with respect to what are described as cost overruns. I understand from the affidavit that because the research grant arrangement was cost neutral, UWA considered it was entitled to charge TSW for costs which it considered were not covered by the research grants paid or invoiced to that point. These were calculated by UWA in the amount of $30,045.79, inclusive of GST (attachment L).
28 Subsequently, on 10 October 2013 UWA raised an invoice in the amount of $30,045.79 said to be for TSW related expenses paid by UWA between 1 January 2009 and September 2013 (being the amount in respect of which leave to defend has been granted).
29 Ms Rorrison states that pursuant to what she describes as the research funding agreement, TSW paid all invoices issued by UWA other than those amounts which make up the judgment sum. She deposes to UWA's belief that TSW does not have a defence to UWA's claim.
30 Ms Rorrison's affidavit does not address the affidavit evidence of Mr Scadding with respect to the absence of certain personnel on leave in the first half of 2013, or the engagement of other TSW personnel in teaching and supervision of UWA's students outside of TSW's operations.
31 It does not address TSW's tax invoice for $3,709,925.56 ex GST dated 12 December 2013 or Mr Scadding's assertion of a counterclaim and set-off with respect to the costs represented by that invoice.
Scadding (28 February 2014)
32 The further affidavit of Mr Scadding dated 28 February 2014 attaches a copy of a document called 'Project Grant Transaction Activity – By Project Grant'.
33 This document is a computer report to UWA showing income and expenditure with respect to project grant 50003600 for the period 1 September 2010 to 31 October 2013. It shows a credit balance brought forward of $69,512 and income for the period of $1,304,994.58. The expenditure for the period is $1,108,043.35. The balance at the end of the period is $266,393.25.
34 Mr Scadding states that this project grant relates to the arrangement between UWA and TSW. There had been a number of project grant arrangements between the parties. By 10 November 2011 most of these had closed down. Balances were transferred from closed projects to open ones. Attachment CJS-15 includes an email of 3 June 2011 from Alexandra Knight, administrative assistant at the Centre, to Michael Arkins, the faculty accountant. It refers to an attached spreadsheet which summarises TSW's project grants and indicates that four would be closed and the balances transferred to the two remaining project grants numbered 50003300 and 50003600.
35 With respect to the balance brought forward, Mr Scadding was unable to explain how that figure was derived. With respect to the income details he states that all of the entries, except the last under that heading, appeared to correspond to UWA invoices. The report did not include eight invoices detailed at par 28 of the affidavit, all of which are said to have been paid. The report did not include an invoice dated 12 December 2012. These invoices cover a period from April to December 2012 inclusive. They do not appear to be represented in the report. The amount of the invoices, which Mr Scadding says were paid, is $647,163.26 in total.
36 With respect to expenditure Mr Scadding observes that the report details salary payments made to UWA staff who were associated with TSW. The entries indicate that salaries were paid irrespective of whether the staff member was actually working for TSW, on TSW business, for UWA on non-TSW business, or on leave.
37 Mr Scadding says that the balance shows an excess of income over expenditure of $266,393.25. If the invoices said to have been omitted from the income section of the report had been included, the balance would have been $841,433.27 in favour of TSW.
Rorrison (4 March 2014)
38 The further affidavit of Ms Rorrison dated 4 March 2014 points out that within the Centre there were two business units which related to TSW. These were numbered 00550 and 00580. In par 12 she says that the research grant, which I understand to mean the funding arrangement between UWA and TSW, 'was to be fully funded as at the conclusion of the research grant period being 30 June 2013'. Ms Rorrison states:
This meant that all amounts expended by the plaintiff had to be fully invoiced to the defendant which would result in a nil balance on the defendant's project grants.
39 At par 14 she states that this action concerns the recovery of money due under project grant numbers 50003300 and 50003600 for business units 00550 and 00580. In this regard she refers to attachment CJS-15 to Mr Scadding's affidavit of 28 February 2014.
40 Ms Rorrison observes that Mr Scadding's affidavit of 28 February 2014 deals only with the report in respect of project grant 50003600 (business unit 00550). It does not refer to business unit 00580. Ms Rorrison attaches to her affidavit a project grant transaction activity report for that unit (project grant 50003600) which includes the invoices referred to in pars 28 and 29 of Mr Scadding's affidavit. This report shows a balance in favour of TSW in the amount of $527,940.23.
41 By reference to the further project grant transaction activity reports attached to her affidavit Ms Rorrison says that the negative balance of $264,462.67 with respect to project grant 50003300 corresponds to a positive balance in the same amount with respect to project grant 50003600. The affidavit confirms that TSW has not paid invoices totalling $696,462.46 inclusive of GST.
42 At the hearing of the appeal there was no argument with respect to what should be made of the reports, accordingly I will proceed on the basis that Ms Rorrison's affidavit of 4 March 2014 adequately explains the apparent anomaly pointed out in Mr Scadding's affidavit of 28 February 2014.
Watling (4 July 2014)
43 Professor Watling is employed as the Winthrop Professor of Forensic and Analytical Chemistry at UWA. He was a director of TSW until 9 April 2014. Prior to July 2005, Professor Watling was an associate professor of applied chemistry and professor of forensic science at Curtin University of Technology (Curtin). In June 2005 he was approached to join UWA by Professor George Stewart, dean of science.
44 Professor Watling joined UWA on the basis that the same laboratory facilities he had at Curtin would be provided at UWA, including a laser ablation inductively coupled plasma mass spectrometer (LA-ICP-MS). When Professor Watling commenced at UWA he brought with him eight PhD students and a research scientist in forensic chemistry, Mr Allen Thomas.
45 Shortly after he commenced his tenure at UWA he was informed that the faculty of science had little money for forensic chemistry research. The LA-ICP-MS system was costly to run. The system was required for the research being done by the PhD students. Professor Watling stated that Professor Stewart indicated to him that he would be required to generate income from external consultancy work as he had done to some extent at Curtin.
46 Professor Stewart informed him that he would be given two years in which to build up a consultancy income to the expected level of $200,000. Over this period, however, Professor Watling stated that he struggled to generate income, as he was concentrating on 'establishing courses in analytical chemistry, teaching undergraduate chemistry, working with eight PhD students, working with third year students on their projects, and with other students on their honours, dissertations and MSc theses, and undertaking forensic chemistry courses'.
47 Professor Watling said that he was pressured by the financial services department of UWA to make money. It became clear to him by mid-2006 that he could not rely on grant funding to support forensic chemistry research at UWA and that the consultancy work that he had previously undertaken would not be enough.
48 In or around July or August 2006 he met with Mr Thomas and Mr Scadding with a view to establishing an entity that 'could undertake high end analytical and research chemistry for external clients … which would provide sufficient income to support the research which my group of post-graduate students were undertaking'. He conceived of a group of scientists at UWA working with industry, government and commerce to provide high end chemical consultancy services so as to obtain funds for forensic science at UWA that would otherwise not be available. The profit from such consultancy work would support PhD and MSc students primarily, and also fourth year honours students.
49 Professor Dadour was approached in this regard in August/September 2006. Subsequently, there was a meeting with the vice chancellor who gave permission for Professor Watling, Mr Scadding and Mr Thomas to become directors of TSW.
50 According to Professor Watling, TSW started trading in 2007. The income generated through TSW was applied to salaries, student support and equipment purchases. In mid-2009, at Professor Dadour's suggestion, TSW's staff were placed on UWA's research staff payroll.
51 The process by which TSW contributed funds to UWA to pay for the staff was known as the 'green form' system whereby external parties would pay for research services provided by UWA.
52 In March 2010, Professor Watling was informed that UWA proposed to commission an investigation into TSW by Deloitte Forensics (Deloitte). According to Professor Watling, UWA was concerned that TSW directors were benefiting personally from TSW income.
53 The investigation which followed resulted in a report dated October 2011of which only a draft was provided to the directors of TSW. That draft is annexed to Professor Watling's affidavit (RJW-2). The final report is attachment ALR 6 to the affidavit of Ms Rorrison sworn 21 July 2014.
54 The report concluded that the majority of funds generated by TSW every financial year was applied to the purchase of capital equipment and tax. No distributions or other payments to directors were made. In the three financial years to 2010 TSW had generated a cash surplus of $7,964. There was nothing to indicate any notifiable misconduct by TSW. Notably, the authors found at 3.3:
· TSW funds the salaries of university staff used on its consultancy engagements through the green form process. While the method by which this amount is submitted to the university is not in accordance with agreed guidelines/policy (as only one form per annum is submitted for all of the consulting jobs), the wages of this, as well as the 15% infrastructure charge, are paid through this process.
· Other expenses identified relate to normal operating costs of the business; however these costs do not include any rental agreement for the UWA building in which TSW is based as no facilities agreement is currently in place with the university. Expenses were incurred, however, relating to student use of TSW equipment and other related student costs (both masters and PhD students of the university).
· While TSW uses the building at no cost, there is a trade-off in that university students are permitted to use the equipment funded and owned by TSW at no cost. We are unable to comment on the overall equity of this trade-off.
55 Under the heading 'Other observations' at 4.2, the report stated that in 2011 there were six PhD and six MSc students using TSW's laboratory. The associated costs were absorbed by TSW.
56 The report recommended that if the current arrangement were to continue then a comprehensive facilities agreement should be implemented. Alternatively, a model could be used which involved TSW paying its staff directly.
57 Professor Watling stated that when TSW decided to relocate to other premises, he was involved in a discussion with Professor Dadour about what payments may be due, and by whom, given that no written agreement had been made regarding TSW's financial and other contributions to UWA and that the arrangement was to be cost neutral. Professor Watling understood that this issue was being negotiated when these proceedings were commenced.
58 As I understand Professor Watling at par 117, UWA staff involved in TSW had provided valuable services to UWA students in respect of whom UWA received government funding on completion of their programmes, specifically:
10 PhD students at $154,891.
16 MSc (Forensic Science) students at $77,445.
1 MSc (Food Science) student at $77,445.
15 MSc (Analytical Chemistry) students at $77,445.
205 graduate diploma students (Chemical Instrumentation and Taphonomy) at $6,500.
59 As UWA's industry partner for chemical analysis and interpretation, TSW was involved in projects for which three Australian Research Council (ARC) grants were made to a total of $1.5 million. In particular, he referred to ARC grant DPO772740 described as 'Prof RJ Watling, Prof CE Oxnard, A/Prof I Dadour – Estimating time since death: application of radionuclide technology' which was worth $490,000.
60 Professor Watling said that TSW completed this research project for no cost, except 'some salaries for the scientists that worked on the research'.
61 At par 130 he stated:
TSW provided analyses of:
(a) 1,311 LA-ICP-MS samples, services that would ordinarily be charged at $25.00 per sample, or a total of $33,000.00;
(b) ICP-MS and ICP-AES solution analysis of 3,760 samples, services that would ordinarily be charged at $65.00 per sample, or a total of $240,000.00.
62 He said no charge was made for the services of Mr Sven Fjastad who assisted him for one semester per year for three years in the MSc analytical chemistry course, accompanying Professor Watling in field and practical sessions and running a number of practical sessions on his own.
63 Further, Professor Watling said that no charges were made by TSW for services worth $44,000 to UWA's Centre of Rock Art in June 2012 (although it is not clear from par 132 whether no charge was made at all, or whether this amount was the amount by which TSW's fee was reduced).
64 According to Professor Watling, who is still employed by UWA, TSW did not charge for its services because the relationship was meant to be cost neutral and involved mutual benefits (par 134). He also stated that while half of his salary was paid by TSW in 2013, he did not work for TSW for 'anywhere near' half his time (par 135).
65 He said that Ms Rorrison was not involved in any discussions by which the relationship between UWA and TSW was established.
66 He denied that there was a research funding agreement or a number of such agreements. He said the grant funding was simply a mechanism for transferring money from TSW to UWA (par 138).
67 At par 139 he deposed to TSW's proposed defence to UWA's claim in the following terms:
(a) A joint venture agreement exists between TSW and UWA;
(b) The terms of that joint venture agreement included:
(i) neither party would be obliged to pay the other for what the other contributed to the joint venture;
(ii) neither party would profit at the expense of the other party;
(c) The alleged 'research funding agreement' was not a binding agreement (or set of agreements) between the parties, also notably any such agreement(s) did not stand or operate separately from the joint venture agreement between TSW and UWA, but rather was no more than an agreed mechanism by which funds were paid to TSW to UWA under the umbrella of the joint venture agreement;
(d) Alternatively, if UWA denies the existence of the joint venture agreement, then TSW has a counterclaim and set-off against UWA with respect to all of the work done by TSW for the benefit of UWA (including students) for which TSW did not invoice UWA and which amount exceeds the amount claimed by UWA in this action. It would also have a counterclaim and set-off against UWA for breach of the alleged 'research funding agreement' as a consequence of UWA staff members not being available to TSW. Notwithstanding that, the amounts claimed by UWA against TSW in this action related to those people being wholly available to TSW.
Scadding (4 July 2014)
68 Mr Scadding's affidavit filed in the appeal attaches a further 21 documents. The affidavit is consistent with Professor Watling's. Mr Scadding says that he was a PhD research student at Curtin when Professor Watling was recruited by Professor Stewart and Professor Dadour to set up a unit in forensic chemistry at UWA. Mr Scadding subsequently became a PhD student at UWA and was employed as an analytical chemist in the forensic chemistry group. This group undertook consultancy work in 2005 and 2006. Money earned from the consultancy work funded the group's research activities.
69 In mid-2006 he, Mr Thomas and Professor Watling decided to establish a company to do the consultancy work. This was done in consultation with Professor Dadour. There was a meeting with the vice chancellor Professor Robson in the latter part of 2006 at which it was discussed that the company to be established would act as an industry partner of the Centre. Subsequently, there was discussion with Dr Kim Heitman of UWA Legal Services regarding the proposed incorporation.
70 The three directors of TSW wrote to the vice chancellor on 23 November 2006 requesting his approval for them to act as directors of a private company. In that letter the directors of TSW stated that their work for the company would be done outside working hours and would not impact on their commitment to the university and its teaching and research programmes. The vice chancellor responded by letter dated 8 December 2006 approving the request.
71 Mr Scadding states that initially the work undertaken by TSW was carried out by the three directors either outside of work hours or within the 20% of time allowed to UWA staff to undertake consultancy work.
72 In October 2007 Mr Scadding and Professor Watling had discussions with Professor Dadour which resulted in the forensic chemistry group relocating from the chemistry building to the Centre. The relocation was concluded in October 2010.
73 According to Mr Scadding, in a meeting in March 2008 Professor Dadour suggested that staff employed by TSW should be employed by UWA. The reasons given, according to Mr Scadding, were that it would attract government funding, that TSW research publications would be credited to the Centre, that the relationship between TSW and the Centre would be strengthened and that the growth of the Centre in that way would be beneficial to it.
74 In September 2009, Professor Doug McEachern, deputy vice chancellor (research and innovation), indicated that there would need to be a facilities access agreement put in place 'to cover the rental of space and facilities being used in the Myer Street building'. Professor McEachern's letter of 7 September 2009 also requested clarification as to how TSW staff would be funded 'particularly any with a shared appointment at UWA'.
75 Subsequently, on 24 September 2009 UWA's project manager (commercialisation), Mr Simon Handford, emailed Mr Scadding suggesting that two agreements were required, a consulting agreement relating to staff and a facilities access agreement relating to the space to be occupied by TSW and any associated costs.
76 On the same date Mr Scadding wrote to Professor McEachern on behalf of TSW to clarify the relationship between TSW and UWA (CJS-35). He stated:
Through an excellent working relationship with Professor Ian Dadour, the director of the Centre for Forensic Science, a funding model was established for the staff which are undertaking TSW Analytical related work. TSW Analytical provides funding for research and services through the research grant (green form) process so all 'staff' are fully funded by TSW Analytical, but paid through the university. This model may be a little different to other commercial companies on campus, but works well within the Centre for Forensic Science. It must be noted that TSW Analytical pays the infrastructure charge associated with such research grants. This model was established to facilitate the expansion of analytical chemistry in the Centre for Forensic Science. Essentially, TSW Analytical is subsidising the academic growth of this area by not only providing extensive teaching and research support to forensic science and analytical chemistry students, but also through the provision of the state of the art instrumentation for the section and the comprehensive resourcing of the infrastructure and consumables of associated laboratories. TSW is securing instrumentation by either direct purchasing from its reserve funds or through establishment of linkages with industry, including instrument manufacturers, or instruments are provided to undertake specific consultancy research or for the development of new instrument based technology.
TSW Analytical acknowledges the need for a formal agreement with the university, whether this be in the form of a facilities access agreement or a simple memorandum of understanding, this can still be negotiated. We (TSW) have never attempted to avoid signing or negotiating such agreements but have simply been waiting for the university to establish how this model is best formalised.
To assist in getting to a common ground it is possible to outline what TSW believes it brings to the university:
1. Support for research students – technical, laboratory and supervisory support for Honours, Masters and PhD students.
2. Provision of funds for PhD research – currently one programme is fully supported with another two likely programmes to be established prior to the completion of next year. All other students are supported through infrastructure and resources provided by TSW to the laboratory.
3. Student tuition and lecturing in forensic science and analytical chemistry.
4. Provision of laboratory resources (all chemicals, gases, consumables, etc).
5. Provision of new state of the art instrumentation (will be most notable when we have the space to house it all).
6. A practical and dynamic educational environment – through exposure of students to a real forensic and analytical facility which is engaged with the industry.
7. Potential public relation and marketing opportunities (UWA can benefit in some aspects if it chooses to).
8. New vision and direction including support of a Masters in food science and innovative mineral work being undertaken on different ore resources, which is in line with real industry demand.
9. Practical applied engagement with industry.
TSW Analytical acknowledges the following clear benefits for being on campus at the University of Western Australia:
1. Space (offices and laboratories).
2. Peripheral facilities management (support infrastructure).
3. A perceived association and credibility by located at the university and integrated within the Centre for Forensic Science.
4. Access to university facilities (library and other services).
5. Better positioning to source other expertise within the university.
6. An opportunity to provide high quality applied scientific training within a highly theoretical teaching environment in line with industries and TSW Analytical vision.
77 The letter goes on:
A number of the points outlined can be converted into a value or cost, depending on the perspective. This exercise has been undertaken and TSW Analytical can substantiate that there is a greater cost contribution to the running and development of university courses and support of research students than can be assigned the cost of rent of the facility. However, the cost equity or [sic] is not the issue. TSW believes that as it has chosen to operate using the model developed through the Centre for Forensic Science, within the University of Western Australia, the arrangement be considered cost neutral. The extent and value of the TSW Analytical contribution is constantly under review by myself and the director of the Centre for Forensic Science Professor Dadour and should the situation change or no longer be sustainable the university will be informed.
78 According to Mr Scadding, there was no reply by Professor McEachern or anyone else to that letter. Yet on 3 March 2010 Professor Bill Louden, senior deputy vice chancellor, wrote to TSW (without reference to the 24 September 2009 letter), stating that there appeared to be some ambiguity about the relationship between UWA and TSW (CJS-37). Professor Watling responded in detail by letter of 21 March 2010 (CJS-38). The letter makes a number of points, including:
1. Professor Watling was specifically tasked by Professor Stewart to earn money to support his position and the equipment required for research.
2. Professor Stewart and Professor Dadour had been regularly informed of major projects.
3. Research grants (green form) had been established for all major projects involving industry financed research.
4. All profits made by TSW were applied to 'a new equipment base, running expenses for students, support of students for conferences and workshops, seed money for new research initiatives, maintenance contracts for equipment and running [costs]'.
5. Equipment purchased with consultancy income was used extensively for teaching and research by undergraduate MSc and PhD students. There was no departmental funding for equipment acquisition, running costs or maintenance.
6. All of TSW's equipment was available to undergraduate and post-graduate students.
79 Completed and current industry grants since August 2005 are detailed in the letter, as well as proposed grants and research contracts and ARC grants.
80 At page 12, in response to a question about the terms of use of UWA premises, Professor Watling wrote that TSW had been trying to get an agreement on terms and conditions of its association with UWA for 18 months, but no reply had been made by UWA.
81 At page 13 he confirmed that TSW staff were employed by UWA and that salaries and overheads were covered by research grants. Professor Watling also set out his teaching and post-graduate supervision load, as well as details of his external lectures and papers and conference presentations.
82 On 3 May 2010 Mr Scadding wrote to Mr Scott Logan of UWA in response to a request for information concerning the structure of TSW, stating that TSW had paid no salaries to any UWA employees. No dividends been paid to any directors through either the TSW Analytical Unit Trust or the TSW Analytical Trust. The letter detailed TSW's assets and current project grants (CJS-39). There followed the external audit of TSW by Deloitte.
83 At par 46, Mr Scadding states that when TSW decided to relocate to premises at Bibra Lake in 2013 it appeared obvious to him that there would need to be an account taken of each party's contribution. In this respect he attached his letter of 12 December 2013 to Professor Dadour (CJS-44) in which he stated:
Our previous meetings were positive and I think secured the future of the Centre for Forensic Science and TSW Analytical Pty Ltd relationship for the future [sic]. Subsequent actions by the university with respect [to] costs that UWA incurred by which TSW obtained a commercial benefit have led me to undertake a detailed review of all costs incurred by TSW from which UWA gained a benefit in its delivery of research and teaching to its clients (students). This action taken by TSW I believe is in line with the understanding that the relationship was based around mutual and equitable benefits to both parties.
84 Mr Scadding states at par 59 that prior to the commencement of this action TSW had not invoiced UWA for any of the support it provided to students which 'took the form of absorbing analytical service charges for analysis of research samples, direct costs such as consumables, chemicals, and travel, as well as staff support and supervision'. At par 60 he states that no invoices had been issued because of the terms of TSW's agreement with UWA. He stated at par 61 that it was because UWA 'had decided to renege on our agreement' that he undertook a detailed review of TSW's contribution to the Centre since 2008.
85 By way of explanation of the invoice for TSW's charges, Mr Scadding said that the charges for analytical services were in line with those charged to other UWA students who were not enrolled in the Centre, but who accessed and paid for TSW's analytical services in the period 2008 to 2013. CJS-46 is a copy of a schedule of commercial charges. The discount applied of 25% was offered to all UWA students other than those who were enrolled in the Centre. The claimed student costs ($44,534.30) were actual costs. The staff costs charged for teaching and supervision were estimated on the basis that TSW personnel worked two days per week on UWA tasks which were a combination of teaching, supervision and research student support. The figure of $1,052,253 is calculated as a proportion of the total cost of TSW funded UWA staff ($2,630,634.15).
86 Mr Scadding goes on to say at par 75 that since TSW invoiced UWA he had made a detailed review and had identified further recoverable costs. He states at par 76 that analytical services were provided to Masters students. A total of 1,107 sample analyses were provided at a cost of $74,909 ex GST.
87 In 2010 TSW resources were applied to complete an ARC project on bone dating which involved 1,311 solid sample analyses and 3,760 solution sample analyses. No costs were recovered from UWA for this work which had a value of $277,000 ex GST.
88 Further, in the period 2008 – 2013, TSW personnel supported 205 post-graduate forensic science students in courses in chemical instrumentation and forensic chemistry, including taphonomy. It is also said that TSW personnel rendered assistance to the students without recompense. In the same period TSW supported 25 post-graduate students in forensic science and 16 post-graduate students in analytical chemistry. TSW had not received any share of the fees or other revenue derived by UWA in respect of these students. The courses could not have been offered without TSW's input.
89 Like Professor Watling, Mr Scadding states that Ms Rorrison was not involved in any discussions by which the relationship between the parties was established. Mr Scadding deposes to the proposed defence in the same terms as Professor Watling.
Rorrison (21 July 2014)
90 The affidavit of Ms Rorrison sworn 21 July 2014 iterates her previous evidence that the claim is based on a research funding agreement whereby TSW would pay UWA to provide staff to TSW. Again, she states that the research funding agreement was cost neutral. She states that the expression 'green form' refers to the acceptance of an offer of a research funding grant. In the case of TSW the grant 'was essentially a "tab" whereby the plaintiff would pay for the salaries'.
91 In relation to the affidavits of Mr Scadding and Professor Watling (4 July 2014), Ms Rorrison makes reference to the Deloitte report (ALR6). The suggestion implicit in this reference is that the findings in the report support UWA's position in relation to its claim. Ms Rorrison states at par 30 that the research funding agreement ended on 30 June 2013 on the basis that none of the staff employed by UWA and associated with TSW would have their contracts renewed apart from Professor Watling and that all staff entitlements would be the responsibility of TSW.
Other evidence
92 There is an affidavit of the solicitor of TSW, Mr David Thompson, sworn 10 February 2014 which attaches materials relating to UWA's delegations policy. This relates to the suggestion that the issue of the writ of summons was not duly authorised, a point no longer pressed.
Submissions
93 TSW's position is that the agreement to pay the green form invoices was part of a broader arrangement, described as a joint venture, which involved other obligations, including, on UWA's part, to pay TSW for analytical, teaching and other student support services. In its outline of submissions dated 28 July 2014 TSW submits:
The true nature of the agreement was a (probably non-fiduciary) joint venture between the plaintiff and the defendant by reason of which the defendant obtained, amongst other things, accommodation and the corporate positioning of being a partner of the plaintiff and by reason of which the plaintiff received, amongst other things, the capacity to operate the Centre of Forensic Science including, without fee, the provision of the defendant's equipment for use by the plaintiff's PhD and Masters students, the provision of analytical service charges for the work of those students and the supervision of those students by the staff paid for by the defendant.
94 In support of its submission that the research funding agreement on which the claim of UWA is based was part of a broader contractual relationship, TSW argues that the evidence shows that the relationship was one in which neither party would profit at the expense of the other. TSW submits, on the evidence, that benefits were derived by UWA from TSW that exceeded in value those that TSW derived from UWA.
95 From 2008 to the end of 2012 TSW paid UWA's monthly invoices in respect of the agreed research funding grants. Those grants were based on the predicted salaries of TSW personnel employed by UWA.
96 TSW submits that if it were under a legally enforceable obligation to pay the agreed research funding grants, it has a defence in the form of an equitable set-off on the basis that:
1. UWA is indebted to TSW for services rendered to UWA students; and
2. UWA breached the research funding agreement for the period January – June 2013 by not providing services to replace those of the staff who were away on leave or engaged in non-TSW work.
97 TSW does not identify any contract which obliged UWA to pay for the services which are the subject of TSW's invoice dated 10 December 2013 (Scadding, 5 March 2014, CJS-27). Prior to the date of that invoice TSW had never charged UWA for any services it provided. Professor Watling in his affidavit said TSW absorbed the costs of these services because the joint venture agreement was cost neutral and involved mutual benefits. Mr Scadding suggests TSW did not invoice UWA for its services for the same reason (4 July 2014, par 60).
98 Absent a contract in respect of such services, TSW submits that it is entitled to a quantum meruit.
99 UWA says that the agreement was simply that TSW would pay the agreed amounts to UWA in consideration of UWA employing and paying its staff. The contract was formed periodically by the acceptance by UWA of an offer of a research grant by TSW. The existence of the contracts on which the judgment is based is also evidenced by Mr Scadding's admissions as to TSW's indebtedness in his emails of 14 and 25 February 2013. There was no other agreement.
100 The research funding grants in question involved the acceptance by UWA of offers of funding by TSW. Salaries were paid to the nominated staff on the basis of the offer.
101 In relation to the quantum meruit, UWA maintains that it has not been shown that it requested or agreed to pay for any services by TSW. On the other hand the correspondence from time to time is consistent with the parties providing mutual benefits on a cost neutral basis. No claim for unjust enrichment is available as there was a valid contract between the parties.
Equitable set-off as a defence
102 A counterclaim is not a defence unless it constitutes an equitable set-off: McDonnell and East Ltd v McGregor (1936) 56 CLR 50, 57 - 58. Equitable set-off is available where the party seeking it can show a recognised equitable ground to be protected from its adversary's claim: James v Commonwealth Bank of Australia (1992) 37 FCR 445,457; Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62, 67. It is well-established that in order to be a defence, the claimed set-off must be so directly connected with the plaintiff's claim that it would be unjust to allow the plaintiff to recover without taking it into account.
103 These principles are not in issue. The only question is whether TSW has made out a claim against UWA that amounts to a defence.
Conclusions
104 I approach the question of whether TSW has a defence by looking for evidence which if accepted would establish a defence. The first issue is whether TSW is liable to pay the amounts represented by the judgment. The second is whether TSW is entitled to an equitable set-off.
105 Because the relationship between the parties is not the subject of a comprehensive agreement careful consideration has been given to the affidavit evidence of the conduct of the parties and their correspondence. It is necessary to discern between evidence of fact and evidence of opinion, intention and belief, particularly as to matters of contractual agreement. As the following reasons will show, there is no substantive issue of fact disclosed in the evidence.
106 Two things are clearly established. The first is that there was from 2009 to 2013 a series of funding agreements pursuant to which TSW paid UWA for the salaries of its personnel and a 15% infrastructure fee. The second is that there was never any agreement made between the parties with respect to payment for TSW's use of UWA facilities, or for the teaching, supervision and analytical services rendered by TSW personnel to UWA students.
Liability for the judgment sum
107 The judgment sum is made up of the last monthly instalment for the period July – December 2012 and the total amount invoiced for the period January – June 2013. I understood counsel for TSW to concede contractual liability for those amounts. In case I have misapprehended him I will deal with the issue.
108 The periodic offers and acceptances in relation to salary funding over the period 2008 to 2013 are undisputed. By this means TSW personnel were paid as UWA employees. Those agreements were wholly consistent with the arrangement by which TSW was permitted to operate within the Centre. The evidence of the agreements in question is the offers of Mr Scadding in writing and the acceptance of those offers by UWA. On each occasion Mr Scadding calculated the salary cost for the period, added a 15% infrastructure fee, and submitted the offer to UWA (Rorrison, 31 January 2014, attachment F). In consideration of the grants UWA employed and paid the nominated TSW personnel. The description of the agreements by UWA as research funding agreements is apposite for present purposes.
109 In its written submissions TSW characterises its relationship with UWA as a joint venture. It is described in detail by Mr Scadding in his letter to Professor McEachern dated 24 September 2009 (Scadding, 4 July 2014, CJS-35) referred to above. That letter demonstrates that there was more to the arrangement between the parties than the funding of salaries of TSW personnel through research funding grants. Clearly, there were mutual benefits. They were not costed. Mr Scadding made it plain that although TSW saw itself contributing more to the relationship than UWA, in terms of value, the model adopted was intended to be cost neutral. In relation to that he said,
The extent and value of the TSW Analytical contribution is constantly under review by myself and the director of the Centre for Forensic Science Professor Dadour and should the situation change or no longer be sustainable the university will be informed.
110 That the arrangement was cost neutral in that way is common ground. There was, on the evidence of Mr Scadding and Professor Watling, no agreement by which UWA would be liable to pay TSW for its services. TSW has not pointed to the existence of any such agreement.
111 The only agreement involving the payment of money was the research funding agreement made from time to time in respect of salaries. TSW does not deny the relevant agreements, but suggests that they are not binding. It has not, however, adduced any evidence, or made any submission, that would tend to put in issue any of the necessary conditions of enforceability. TSW has not raised any triable issue as to formation, consideration or performance. It is not suggested the there was any lack of contractual intent.
112 The lack of a formal agreement covering all aspects of the relationship does not vitiate the funding agreements on which the judgment has been obtained. The submission that the relationship between the parties was a joint venture does not alter the existence, as a legal fact, of a contractual agreement to pay the invoices in question.
Defence of equitable set-off
113 TSW claims $3,709,925.56 ex GST for services rendered to UWA.
114 As found, there is no evidence of any agreement whereby UWA agreed to pay TSW for its services to UWA students. In relation to matters other than the funding of the salaries of TSW personnel, there was no express agreement other than that the arrangements between the parties would be cost neutral. TSW has not condescended to any particulars of any agreement which would permit it to charge UWA for its services to students.
115 There is a lot of evidence of a formal agreement being discussed over the years, but the plain fact is that none was made.
116 The email from Mr Handford to Mr Scadding of 24 September 2009 (Scadding, 4 July 2014, CJS-34) indicates that a 'consulting agreement' would need to include 'an associated acknowledgement of the benefits TSW brings to UWA'. The memorandum from the senior deputy vice chancellor to Professor Watling of 7 July 2010 (Scadding, 4 July 2014, CJS-41) requested TSW to cooperate with, amongst other things, 'formalising the need for arrangements for the university to use company equipment'. The Deloitte report (Rorrison, 21 July 2014, ALR6) refers to the need for a formal agreement which 'should, at a minimum, include the following provisions … funding arrangement for TSW's use of UWA's offices and facilities … UWA's continuing access to TSW owned and operated medical equipment for students'.
117 I also observe that while a formal agreement was clearly contemplated, there is no evidence that, if made, it would necessarily have involved more than a formal documentation of the arrangement then existing. At no point was there any discussion which acknowledged or predicted a situation whereby UWA was or would be liable for services by TSW to its students.
118 It is not TSW's case that there was an implied contract.
119 The argument that TSW is entitled in quasi contract to a quantum meruit, as I understand it, is premised on the proposition that it would be unconscionable for UWA, having requested services from TSW from which it has benefited, not to pay a reasonable fee for them.
120 This argument was not developed. A restitutionary remedy is available to recover money pursuant to an unenforceable contract as in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221. It is important to remember, however, that it is essential to consider how the claim fits with contracts the parties have made. The plurality in Lumbers v W Cook Builders Pty Ltd (in liquidation) [2008] HCA 27 cited with approval the warning of Lord Goff of Chieveley in Pan Ocean Shipping Co Ltd v Creditcorp Ltd [1994] 1 All ER 470, 475 that 'serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract'.
121 It is common cause that the agreement by which TSW was able to operate its business within the Centre involved the mutual benefits described in Mr Scadding's letter to Professor McEachern.
122 Accordingly, the proposed defence is simply not tenable. It is not reasonably open to TSW, having benefited from the relationship with UWA in the way that Mr Scadding described, to argue at the conclusion of that relationship that UWA accepted a benefit which it would be unconscionable for it to retain. It involves no finding of fact, nor any adjudication of an issue of law, to find that no defence of set-off is available on this basis.
123 By admitting an agreement that the mutual benefits provided by the parties would be cost neutral, TSW is precluded from maintaining a claim for restitution. No triable issue is disclosed.
124 The second limb of the proposed defence cannot be maintained either. Mr Scadding (4 July 2014, par 85) and Professor Watling (4 July 2014, par 139) contend that, if there were an enforceable research funding agreement, UWA breached the agreement by not providing services for which TSW paid. This aspect of the case was put on the basis that the agreement had been characterised by Ms Rorrison as a contract for services (Rorrison, 31 January 2014, par 7).
125 It was submitted that TSW's offer of funding was based on an estimate of its staff requirements in the relevant period. Not all of the nominated personnel on whose salaries the funding grant was calculated were available to TSW in the period January – July 2013. TSW says that UWA breached the agreement because it did not replace their services. TSW says it is entitled to recover, presumably as damages, the value of the services paid for but not provided.
126 In my view, TSW's calculation of the salaries of its personnel for the period in question as the basis of its research funding grant contradicts its submission that it was only liable to pay for the time the nominated employees were actually working on TSW business. The research funding agreement was, as TSW accepts, merely a means of funding the salaries of TSW personnel. The periodically agreed grant amounts were calculated by TSW. The salary calculations on which the funding for the period January - June 2013 was based were made in the knowledge that one employee would be on long service leave and another on maternity leave, and that Professor Watling, Mr Scadding and others would be involved in supervision and teaching.
127 There is no credible evidence before the court that the research funding grants were calculated other than by the cost of the salaries of TSW personnel, or that any account was taken at any time during the contractual relationship of the time actually spent by the nominated staff on TSW, as opposed to UWA, matters as TSW has sought to do in the face of this action.
128 The alleged set off in this respect is illusory. The agreement was, on TSW's case, for the purpose of funding the employment by UWA of specified TSW personnel, not for services as such. This can be seen from Mr Scadding's letters of 20 December 2012 and 28 February 2013 (Scadding, 30 December 2013, CJS-2, CJS-3). He states in each that the funding commitment is to 'allow the extension of the current research grant and facilitate the continuity of existing staff'.
129 The reliance on the characterisation of the agreement by Ms Rorrison is mistaken and misplaced. Ms Rorrison (31 January 2014, par 7) states that by the agreement UWA agreed to provide 'academic and research staff and administration and payment of salaries and related costs for the staff'. That statement is consistent with Mr Scadding's statement in his letter to Professor McEachern (page 3) that 'all salaries and overheads are covered by University Research Grants by TSW Analytical'. There is no evidence of any agreement that TSW was liable only to pay for actual services.
130 There is no reason why, in February 2013, TSW would have agreed to fund the salaries in the amount for which they were duly invoiced if it were not liable to do so.
131 I am mindful of the reluctance with which a court should decide to deny a party a trial. Yet it is for the defendant who seeks to set aside a regularly entered judgment to show that it has a credible defence.
132 The court has had put before it a considerable amount of evidence. It appears from that evidence that the material facts of this matter are not controversial. No ambiguity about the relationship between the parties has been shown with respect to their financial obligations at the material time. TSW may well have benefited financially from a formal contract, in terms of securing an agreement for payment of its teaching and analytical services, but no such agreement was ever made.
133 TSW's contractual obligation to pay the money the subject of the judgment is not in doubt. In my view, the evidence does not demonstrate a possible equitable set-off or any credible defence.
134 The appeal must be dismissed.
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