Huntly Quarries Limited v Bridgeman Concrete (Hamilton) Limited HC Hamilton CIV 2004-024-25

[2005] NZHC 1218

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV 2004-024-25

BETWEEN  HUNTLY QUARRIES LIMITED

Plaintiff

ANDBRIDGEMAN CONCRETE (HAMILTON) LIMITED

First Defendant

ANDBRIDGEMAN CONCRETE AKLD LIMITED

Second Defendant

ANDBRIDGEMAN CONCRETE (TAURANGA) LIMITED

Third Defendant

Hearing:         31 May 2005 Appearances: D O’Neill for plaintiff

N Hall for defendants Judgment:  1 June 2005 at 15:00

JUDGMENT OF ASSOCIATE JUDGE FAIRE

[on application for summary judgment]

Solicitors:           Nielsen Law, PO Box 1108, Hamilton for plaintiff

Simpson Grierson, Private Bag 92 518, Auckland for defendants

Huntly Quarries Ltd V Bridgeman Concrete (Hamilton) Ltd & Ors HC HAM CIV 2004-024-25 1 June 2005

[1]    The plaintiff seeks summary judgment against each defendant for the following amounts:

a)        First defendant	$67,056.86
b)        Second defendant	$6,680.18
c)        Third defendant	$43,006.81

[2]    The plaintiff’s claim was first filed on 18 February 2004 in the District Court at Huntly. The defendant named at that time was Bridgemans Ready Mix Limited. The proceeding included an application for summary judgment.

[3]    Bridgemans Ready Mix Limited opposed the application for summary judgment and also sought leave to issue a notice pursuant to s43 of the District Courts Act 1947 that a District Court Judge transfer the proceeding and all applications to the High Court for hearing. The application for leave was declined in the District Court but granted in the High Court on appeal by a judgment given  orally by Venning J on 11 March 2005 and sealed on 14 March 2005.

[4]    The parties, by agreement, sought, and were granted, an amendment by deleting Bridgemans Ready Mix Limited as a defendant and the addition of the current three-named defendants. An amended statement of claim and an amended application for summary judgment was filed. Although the amended pleading was not verified, Ms Hall waived that point on the basis that what the parties required in this case was a ruling on a substantive point. That point, I will explain later in the judgment, but put shortly is whether or not the three defendants have an equitable set-off which is an answer to the application for summary judgment.

[5] The plaintiff’s claim was originally pleaded for $116,743.85 against Bridgemans Ready Mix Limited. The present statement of claim seeks the same sum but is broken down between the three defendants as I have indicated in [1]. That situation came about because the plaintiff misunderstood the contractual position between the parties. The three defendants are part, of what I will call, the Bridgeman

group of companies. The respective defendants now operate the Bridgeman  business, as far as the first defendant is concerned at Hamilton, as far as the second defendant is concerned at Auckland, and as far as the third defendant is concerned at Tauranga. The claims against each defendant relate to aggregate products supplied  by the plaintiff to each defendant in the period May 2003 to August 2003. No  issue is taken with supply or the amount charged for that supply.

[6]    The defendants raise a defence of set-off. In addition, I was provided with proceedings issued out of the Auckland High Court in which the three defendants and another related company sue this plaintiff and an associated company as defendants for the same matters that the defendants raise in this proceeding as a set- off defence. Not surprisingly, Venning J indicated in his judgment that, in the event that summary judgment was not granted in this proceeding, there would be a need to review the position of the two sets of proceedings, because, as they currently stand, they involve the same issues.

[7]    The set-off raised by the defendants allege that they have been over-charged by the plaintiff for products supplied over several years. That has been quantified in the affidavits that were filed in opposition to this application for summary judgment as follows:

a)In respect of the first defendant, its claim against the plaintiff is

$91,058.31;

b)In respect of the second defendant, its claim is $30,271.38; and

c)In respect of the third defendant, its claim is $194,945.58.

It is self-evident that these claims substantially exceed the amount of the plaintiff’s claim in respect of each defendant and, to that extent, they are counterclaims.

[8]    Accordingly, the issue that I must determine is whether the unanswered assertions of the defendants that they were over-charged for product previously supplied raise a defence to the plaintiff’s claim of equitable set-off.

[9]    The law can be shortly stated. Equity will allow a set-off where it would be inequitable or unconscionable to allow a plaintiff to proceed without bringing the defendants’ claim to account: Laws of New Zealand Set-off and Counterclaim [2].

[10]   The effect of a set-off (as distinct from a counterclaim) is referred to by the Court of Appeal in Grant v NZMC Ltd [1989] 1 NZLR 8 at 11 where the Court said:

The effect of the distinction between set-off and counterclaim is well understood. A counterclaim is a cross-action which may have no connection at all with the subject-matter of the claim, … and is not confined to money claims. It is not of itself a defence to the claim … Set-off affords a  defence to an action wholly or in part depending upon the amount and is by its very nature limited to money claims. When a set-off is established by judgment it will pro tanto extinguish the plaintiff's claim …

And at 12:

The principle is, we think, clear. The defendant may set-off a cross-claim which so affects the plaintiff's claim that it would be unjust to allow the plaintiff to have judgment without bringing the cross-claim to account. The link must be such that the two are in effect interdependent: judgment on one cannot fairly be given without regard to the other; the defendant's claim calls into question or impeaches the plaintiff's demand. It is  neither  necessary, nor decisive, that claim and cross-claim arise out of the same contract.

[11]   In Pemberton v Chappell [1987] 1 NZLR 1 the Court of Appeal recognised, for the purposes of summary judgment that a set-off may result in reducing or extinguishing a claim and therefore is a defence for the purposes of an application for summary judgment.

[12]   I now analyse the factual background. The defendant  companies manufacture and supply concrete from plants in Hamilton, Papakura and Tauranga respectively. They are three of a number of companies in the Bridgement Concrete Group. That group has manufacturing plants throughout the North Island. It is a substantial operation. The plaintiff has supplied aggregate to various companies in the group since the early 1990s. There is some issue as to the commencement  date  of supply, but that is not material to the issue raised in this application.

[13]   There is also an issue between the principal deponent  for the  plaintiff and Mr Bridgeman, a director of each of the defendant companies, as to whether supply throughout the period was pursuant to a specific contract. What is evident is that there was provided to me no written contract. There is, however, a course of dealing which has proceeded on a continuous basis for a large number of years. Pursuant to that course of trading orders were placed by each company from time to time. Product was supplied. Invoices were issued for that product. As I have said, the defendants admit they have received and not paid for the amounts of aggregate referred to in the statement of claim.

[14]   Up until approximately mid-2000, the plaintiff supplied aggregate by volume, ie cubic metres. The practice changed in mid-2000 so that the plaintiff supplied the aggregate and charged for it by weight, ie tonnes. Mr Bridgeman said that he made inquiries about the plaintiff’s trucks which transported the aggregate purchased. He established that the trucks had a maximum load capacity of 27 tonnes of aggregate. He then applied the industry conversion rate for 27 tonnes, which, according to him and to an engineer, Mr Beatson, equated to the position where 27 tonnes equalled between 17.76 and 18.9 cubic metres. The defendants claim that when they purchased product by volume they were regularly charged for at least at 21 cubic metres and sometimes as much as 23 cubic metres per load. They therefore say that they have been overcharged for the aggregate by approximately 10% to 20% of its total aggregate purchases.

[15]   That, in summary, forms the basis of the claims that they make in the proceedings that I have mentioned which have been issued in Auckland and which they rely on as a set-off defence to this proceeding.

[16]   The defendants’ claims are supported by  the  affidavits  of  their  director, Mr Bridgeman, an engineer, Mr Beatson, and by the three companies’ officer manager, who has prepared appropriate schedules setting out how the claims are made up. This evidence is  not  refuted  by any reply  affidavit  from the  plaintiff. Mr O’Neill said that the reason there was no reply affidavit is because his client argues, as a matter of principal, that the claim of over-charging does not fit within

the requirements of an appropriate set-off to the particular claims that are made by the plaintiff.

[17]Ms Hall relies on the following specific matters to justify the set-off defence:

a)The same supply arrangements apply both to the period where the set- off is claimed and to the period which is the subject of the statement of claim;

b)The same parties are involved;

c)The same product is involved; and

d)The only difference is that there is a change in methodology as to the way the charging is arrived at, namely by a reference to the volume supplied, ie in cubic metres, as to opposed to the later basis, that  is to a charge by the weight of aggregate supplied, ie by tonnes.

[18]   Ms Hall submitted that there was a sufficient link to the defendants’ claim to amount to an equitable set-off to the plaintiff’s claim because of the factors that I have mentioned.

[19]   Mr O’Neill acknowledged the factors that I have mentioned and which were raised by Ms Hall are the specific matters on which a judgment is required as to whether this is a set-off. He placed greater emphasis on the time difference and the fact that the basis for charge changed from a volume assessment to a weight, or tonnage, assessment.

[20]   Ms Hall referred me to the oral judgment of Master-Kennedy Grant in Leigh Fisheries Ltd v New Zealand Fish Limited HC AK CP430/98 23 November 1998 where he referred to the significance of the continuing relationship between the parties when considering whether the claim and counterclaim are linked so that the counterclaim can be regarded as a set-off.

Conclusion

[21]   In my judgment these defendants’ claims are clearly set-offs. It plainly  would not be right to let the plaintiff have judgment for the cost of supply of product when the plaintiff has some potential liability to the defendants in respect of the plaintiff’s charging for products supplied at an earlier time but under the same general conditions of supply. Accordingly, I conclude that the plaintiff  is  not entitled to summary judgment because there is a defence of set-off which requires to be determined at trial in the ordinary way.

[22]Accordingly, the application is declined.

Next event

[23]   I discussed with counsel what was the appropriate way to move forward, having regard to the fact that there is an Auckland proceeding which raises the very issues that are signalled in the defendants’ set-off defence in this proceeding. Although I make no specific order for the transfer of this proceeding at this time, it will be convenient if this Hamilton proceeding be conferenced at the same time as the Auckland proceeding, so that appropriate directions can be given to establish how best both should proceed. Counsel advised me that the Auckland proceeding is Civ 2004-404-6833. They are to attend a conference on 13 July 2005 at 9.30am by telephone.

[24]   Accordingly, I adjourn this proceeding for a conference by telephone at the same time. In respect of this proceeding, the defendants must file and serve a statement of defence as required by r142A of the High Court Rules. The directions  in relation to this proceeding will be made, as appropriate, at the conference on 13 July 2005.

Costs

[25]   In accordance with the normal position relating to costs on a plaintiff’s summary judgment application as established by the Court of Appeal in NZI Bank Ltd v Philpott [1990] 2 NZLR 403, I reserve costs.

JA Faire Associate Judge