Zinc and Copper Corporation of Australia Limited v Clayton Utz

The plaintiffs, Zinc and Copper Corporation of Australia Limited, brought an action against Clayton Utz, their legal representatives, seeking damages for professional negligence. The case before the Federal Court of Australia revolved around the defendants' alleged failure to properly advise the plaintiffs in relation to their obligations under a copper supply agreement. Central to the dispute was the question of whether the plaintiffs were entitled to an equitable setoff of amounts owed to the defendants against the damages claimed.

The court was required to determine the appropriate test for equitable setoff, considering whether it should be a strict mutuality test or a broader test that takes into account the commercial realities of the parties' relationship. Additionally, the court had to assess whether the plaintiffs had met the burden of proving the existence of the debts that were claimed to be set off against the damages sought.

The court held that the test for equitable setoff was not confined to a strict mutuality test but rather should be assessed in light of the commercial realities of the parties' relationship. The court found that the plaintiffs had discharged the burden of proving the existence of the debts. However, it concluded that the setoff was not equitable because the debts arose out of different transactions and were not mutual debts or obligations between the parties. As a result, the plaintiffs' claim for setoff was dismissed.

The court further determined that the plaintiffs were not entitled to damages for professional negligence as the defendants had not breached their duty of care. The court ordered that the plaintiffs pay the defendants' costs of the proceeding.