Unic, Connor, Besto v Besto, Unic
[1997] QSC 136
•5 August 1997
IN THE SUPREME COURT
OF QUEENSLAND
WS No. 2381 of 1997
Brisbane
Before the Hon. Mr Justice Shepherdson
[Unic, Connor, Besto v. Besto, Unic]
BETWEEN:
UNIC S.A. RCS GRASSE B 958 806 408 -
SIRET 958 806 408 00034 APE 295 E
Plaintiff
AND:
PENELOPE JAYNE CONNOR
First Defendant
AND:
BESTO NO. 54 PTY LTD
ACN 060 899 597
Second Defendant
BY ORIGINAL ACTION
AND:
BESTO NO. 54 PTY LTD
ACN 060 899 596
Plaintiff
AND:
UNIC S.A. RCS GRASSE B 958 806 408 -
806 408 00034 APE 295 E
Defendant
BY COUNTERCLAIM
REASONS FOR JUDGMENT - SHEPHERDSON J.
Judgment delivered 5/8/1997
CATCHWORDS: Application for security for costs by second defendant - quantum only in issue. Application for security for costs by plaintiff against second defendant. KP Cable Investments Pty Ltd v. Meltglow Pty Ltd (1995) 13 ACLC 437 followed.
Counsel:Mr Oliver counsel for the plaintiff
Mr Bond counsel for the defendant
Solicitors:Collins & Stephens for the plaintiff
Hunt & Hunt for the second defendant
Hearing date: 17 July 1997
IN THE SUPREME COURT
OF QUEENSLAND
Brisbane WS No.2381 of 1997
Before the Hon. Mr Justice Shepherdson
[Unic, Connor, Besto v. Besto, Unic]
BETWEEN:
UNIC S.A. RCS GRASSE B 958 806 408 -
SIRET 958 806 408 00034 APE 295 E
Plaintiff
AND:
PENELOPE JAYNE CONNOR
First Defendant
AND:
BESTO NO. 54 PTY LTD
ACN 060 899 597
Second Defendant
BY ORIGINAL ACTION
AND:
BESTO NO. 54 PTY LTD
ACN 060 899 596
Plaintiff
AND:
UNIC S.A. RCS GRASSE B 958 806 408 -
806 408 00034 APE 295 EDefendant
BY COUNTERCLAIM
REASONS FOR JUDGMENT - SHEPHERDSON J.
Judgment Delivered 5 August 1997
The plaintiff has sued the first defendant for $302,973.05 said to be the balance of the price of coffee machines and parts of coffee machines sold and delivered by the plaintiff to the first defendant during the period from 21/2/994 to 28/6/1994. The amended writ alleges that the first defendant traded under the name of Kona Coffee Co.
The plaintiff was incorporated in and has its registered office in France. The sum claimed in the writ is the Australian currency equivalent of the balance price in French francs.
The plaintiff's claim against the second defendant is in the alternative to the claim against the first defendant and is for the same amount. However it adds an alternate claim for $75,000 for dishonoured cheques. The statement of claim alleges that cheques to the value of $75,000 were drawn by the second defendant in part payment of the plaintiff's total claim but dishonoured on presentation.
In December 1995 the second defendant changed its name to Besto No.54 Pty Ltd.
There are two applications before me:-
An application by the second defendant for an order that the plaintiff by original action give security for the second defendant's costs to the action.
An application by the plaintiff that the second defendant give security for the plaintiff's costs of defending the second defendant's counterclaim to the action.
As to the first of these applications, Mr Oliver, counsel for the plaintiff conceded that an order for security for costs should be made but disputed the amount.
As to the second application, Mr Bond, counsel for the second defendant opposed the application by the plaintiff.
Application by second defendant
The second defendant relying on affidavit evidence, seeks security in the amount of $59,450 based on a five day trial, and further submits that if that security were paid only up to and including the first day of the trial the amount should be $50,650. The plaintiff has relied on an affidavit by Mr McLellan, a solicitor, who is a costs assessor. Mr McLellan, assesses costs of the original action based on a five day trial in an amount of $47,500; he says that if security were paid up to and including the first day of the trial only, that figure would reduce to $35,500. There is also evidence in the form of an affidavit from the plaintiff's solicitor suggesting that $10,170 is the correct amount which I should order.
I ignore the solicitor's estimate of $10,170. The difference between the estimates of Mr McLellan and the estimate relied on by the second defendant is substantial. It appears to emanate from the plaintiff's legal advisers not having given any weight to the second defendant's defences of abatement based on the rule in Mondel v. Steel (1841) 8M&W 858; 151 ER 1288 and a plea of equitable set-off of damages. Mr McLellan's affidavit refers to costs of the original action and expressly excludes the counterclaim. These defences, which I shall canvass in greater detail when dealing with the plaintiff's application for security for costs against the second defendant are alleged to be quantified at some $391,900 which amount exceeds the plaintiff's claim. As to the claim on the dishonoured cheques, the second defendant has pleaded that these were delivered conditionally and payment was stopped once it was determined that the condition had failed. Because, as will be later seen, I have concluded that the defendant's pleas, on the evidence presently before me, do appear to establish true defences including an equitable set-off, I consider that the estimates relied on by the plaintiff cannot be accepted. The pleaded defences including set-off must be dealt with when considering the validity and quantum of the plaintiff's claim and the amount (if any) for which, at the end of the day, it may be entitled to judgment. Although the matters pleaded by way of defence and set-off are also counterclaims that fact does not diminish the need to take them into account when considering the plaintiff's claim against the second defendant.
In my view the plaintiff should be required to pay security for the second defendant's costs up to and including the first day of the trial. I fix that amount at $45,000. I have slightly discounted the figure for which the second defendant contends. I have deliberately not taken into account Mr Oliver's submission that in fixing the amount I should take into account the position of the first defendant who may seek an order for security for costs against the plaintiff. That matter is in my view irrelevant. The submission is hypothetical.
Application by plaintiff against second defendant for security for costs
The principles relevant to this application are different from those applied in the second defendant's application for security for costs. In KP Cable Investments Pty Ltd v. Meltglow Pty Ltd & Ors (1995) 13 ACLC 437 Beazley J. of the Federal Court of Australia referred to the discretion to order security for costs being unfettered, and to its being exercised having regard to all the circumstances of the particular case without any predisposition in favour of the award of security. She then went on to set out what she described as "a number of well established guidelines which the court typically takes into account in determining any such application". One of these was (at p.440):-"7. Security will only ordinarily be ordered against a party who is in substance a plaintiff, and an order ought not to be made against parties who are defending themselves and thus forced to litigate: see Interwest Ltd (Receivers and Managers Appointed) & Ors v Tricontinental Corporation Ltd & Anor (1991) 9 ACLC 1,218 at 1,228; (1991) 5 ACSR 621 at 626; Heller Factors Pty Ltd v John Arnold's Surf Shop Pty Ltd (in liq) & Allert (1979) CLC ¶40-571; Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 5 ACLC 480; Weily's Quarries v Devine Shipping Pty Ltd (1994) 14 ACSR 186 where Zeeman J stated at 189:
"[t]he general proposition that security ought not to be ordered where the proceedings are defensive in the sense of directly resisting proceedings already brought or seeking to halt self help procedures is no more than that, a general proposition. It ought not to be elevated to being a rule of law. In many cases of that nature it could be considered oppressive to require security and that in itself may be sufficient to refuse to make an order ... [see] Sydmar Pty Ltd v Statewise Developments [supra] and ... Interwest Ltd v Tricontinental [supra],"
With respect, I adopt the above passage from Beazley J's judgment.
There is before me a photocopy of an affidavit of David Ritchie Alexander the solicitor for the abovenamed defendant which was filed in Application No.1008 of 1996 in this Court made by the second defendant to set aside a statutory demand issued by the present plaintiff. That photocopy affidavit has as an exhibit a copy of an affidavit (unsworn) of Barry Edward Connor, the managing director of the second defendant. The photocopy of Alexander's affidavit is exhibited to an affidavit of the plaintiff's solicitor Michael James Howe, sworn 16 July 1997. The copy affidavit from Alexander deposes to his (Alexander's belief) based on information he received from Connor, that the contents of the unsworn affidavit of Connor are true and correct. Based on information he received from Connor which he believes to be true and correct Alexander swore that:-(a)the amount claimed by the plaintiff is excessive as the products supplied were not worth the amount invoiced;
(b)that the second defendant then had a set-off and/or counterclaim against the present plaintiff for an amount exceeding the amount of the claim;
(c)that the second defendant was not insolvent.
Connor's unsworn affidavit also alleges that the coffee machines supplied to his company came with faulty electrical switches, pressure stats and control boxes, and were not worth the invoiced prices. Connor's affidavit also refers to "an extraordinarily high number of breakdowns of those machines".
It is not necessary to refer further to the contents of the copy affidavit of Connor - suffice it to say that Alexander's affidavit evidence is admissible in these interlocutory proceedings. As Mr Bond has submitted, the essence of the second defendant's case is that the machines were not fit for the purpose for which they were bought and were in fact so defective as to be worthless to the second defendant. Replacement costs and consequential damages have been estimated by Connor to be some $391,000. Alexander's affidavit was filed in an application by the second defendant to set aside the statutory demand and the evidence before me shows that that application has been adjourned sine die and has not been brought back for hearing.
An affidavit of the second defendant's solicitor combined with the defence shows that the $391,000 is divided into some $145,000 in reliance upon the plea of abatement and $246,000 in reliance upon the pleaded equitable set-off.
If I am satisfied that the second defendant's proceedings are defensive then in my view I should refuse the plaintiff's application.
I turn now to the case of Mondel v. Steel (supra) on which the defendant has based its plea of abatement. This case was applied by the Queensland Court of Appeal in R v. McKay; ex parte Cassaniti (1993) 2 Qd.R 95.
The relevant passage from Mondel v. Steel (set out at p.99 in the Queensland decision) reads:-"It must however be considered, that in all these cases of goods sold and delivered with a warranty, and work and labour, as well as the case of goods agreed to be supplied according to a contract, the rule which has been found so convenient is established; and that it is competent for the defendant, in all of those, not to set-off by a proceeding in the nature of a cross action, the amount of damages which he has sustained by breach of the contract, but simply to defend himself by shewing how much less the subject matter of the action was worth, by reason of the breach of contract; and to the extent that he obtains, or is capable of obtaining, an abatement of price on that account, he must be considered as having received satisfaction for the breach of contract, and is precluded from recovery in another action to that extent; but no more."
In AWA Limited v. Exicom Australia Pty Ltd (1990) 19 NSWLR 705 Giles J. sitting in the Commercial Division considered the principles covering equitable set-off, and whether in the case before him a claim for damages for breach of contract could be set-off against a claim for moneys due under the contract. He held there was no general rule preventing a claim for damages for breach of a contract being set-off against a claim for an amount due under the contract, or a claim for an account under the contract and, as the head note states "a defendant will be permitted to raise a cross demand by way of equitable set-off (or, strictly called, equitable defence) where it would be unjust or inequitable for the plaintiff to be permitted to proceed with its claim without making allowance for the cross-demand.
All the circumstances of the case must be considered and Giles J. pointed out (at p.710):-"While it is correct that the mere fact that Exicom has a claim against AWA is insufficient for an equitable set-off, all the circumstances must be considered in order to determine whether what Woodward J. referred to as "the equity of the case" requires that AWA be restrained from proceeding to judgment upon its claim without there being determined and set-off against it Exicom's claim.
This consideration should be undertaken bearing in mind the juristic basis of an equitable set-off. Prior to the Judicature Act, an equitable set-off was enforced by an injunction obtained in equity to restrain the defendant at law from proceeding with his action without giving a credit to the defendant for the amount of his cross-demand. Hence it was not enough simply to point to a cross-demand; there had to be shown "... some equitable ground for the defendant being protected against his adversary's demand": see Rawson v. Samuel (1841) G and Ph 161 at 178; 41 E.R. 451 at 458 per Lord Cottenham LC. Hence also where that equitable ground was shown the defendant had a defence to the claim and more than just a cross-demand. The so called equitable set-off could be better described as an equitable defence ...; and operates to reduce or extinguish the plaintiff's claim: [authorities cited]
Thus the effect of an equitable set-off is not just a restraint upon enforcement of a judgment but a restraint which if imposed will have important consequences if (for example) the plaintiff be insolvent. Its effect is not just procedural; see Derham, Set-Off (1987) (at 47-52). There must be something additional to the fact of a cross- demand to cause the court in the exercise of its equitable jurisdiction; to require the plaintiff to set-off against his claim the claim of the defendant."
I do not propose to refer further to the AWA case other than to say that the authorities on which Mr Justice Giles relied show that "In the consideration of all the circumstances of the case no mechanical test is to be applied" (p.712). Thus if the present defendant can satisfy a trial judge that the subject matter of its claimed equitable set-off is such that it will be "positively unjust" for the plaintiff to recover without deduction then equitable set-off will be permitted.
Mr Oliver in supporting his client's application has submitted that there was no complaint regarding the quality of the goods until Mr Levy from the plaintiff company travelled to Australia in May 1996 and that no particulars have been given of matters pleaded in the defences relied on. He has submitted that I will not be satisfied the counterclaim is a true defence and that in effect the defence is not really "defensive" and thus the second defendant should be ordered to give security for costs.
So far as concerns the lack of particulars in the defence there is no evidence before me that the plaintiff has at any stage sought particulars from the defendant. Furthermore, the affidavit of Alexander including its exhibit is part of material relied on by the plaintiff - it was annexed to the plaintiff's solicitor's affidavit sworn on 16 July 1997 - an affidavit read by Mr Oliver. I place little weight on this fact. Alexander's evidence is not really challenged and that aspect is important.
In my view the affidavit of Alexander and Exhibit A thereto does appear to show that the whole of the counterclaim which includes the plea of abatement and the claim to equitable set-off is defensive. The plea of equitable set-off has a connection with the plaintiff's claim which, if proved could induce an equity court to protect the second defendant (see also United Dominions Corp Pty Ltd v. Jaybe Homes Pty Ltd (1978) Qd.R 111 and Eversure Textiles Manufacturing Co Ltd & Webb (1978) Qd.R 347 at 348-9).
The plaintiff is the applicant for security for costs and in my view it has failed to satisfy me that this is a case in which the second defendant should be ordered to give the security sought.
In the result the orders I make are as follows:-
On second defendant's application
I order the plaintiff do give security for the second defendant's costs up to and including the first day of trial of the action in the sum of $45,000 in a form of security to be agreed by the parties and failing agreement within 14 days to be settled by the Registrar of the Supreme Court at Brisbane.
I order the plaintiffs to pay the second defendant's taxed costs of and incidental to the second defendant's application for security for costs.
I grant liberty to apply.
On Plaintiff's Application
I dismiss the plaintiff's application for security for costs against the second defendant and order the plaintiff to pay the second defendant's taxed costs of and incidental to such application.
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