Cookson Plibrico Pty Limited v V & M Davidovic Pty Limited

Supreme Court of NSW|2010-10-08|Before: Mr P

CITATION : Cookson Plibrico Pty Limited v V & M Davidovic Pty Limited [2010] NSWSC 1171

DECISION : Summary judgment refused but Defendant ordered to give undertaking as to damages. The form of orders to now be made to give effect to the reasons for judgment and the directions necessary to have the case promptly heard and any argument on costs to be subject of further submissions.

CATCHWORDS : PRACTICE AND PROCEDURE - Summary judgment - Whether the proposed defence demonstrates entitlement to retain funds - EQUITY - set-off - whether reasonably arguable that a claim for damages based on misleading or deceptive conduct gives rise to an equitable set-off in respect of moneys repayable under Deed

Civil Procedure Act 2005 LEGISLATION CITED : Conveyancing Act 1919 Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005

Abignano v Wenkart (1998) 9 BPR 16,765 AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR Bayview Quarries Pty Ltd v Castley Development Pty Ltd [1963] VR 445 Blacksheep Productions Pty Ltd v Waks [2008] NSWSC 488 Bonner v Great Western Railway Co (1883) 24 ChD 1 Commonwealth v Verwayen [1990] HCA 39 Discount & Finance Ltd v Gehrig's NSW Wines Ltd (1940) 40 SR (NSW) 598 E (a Minor) v Dorset County Council [1995] 2 AC 633 Fong v Cilli (1968) 11 FLR 495 Forsyth (as trustees for the C&S Forsyth Superannuation Fund) v Gibbs [2008] QCA 103 Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58 CASES CITED : Hawker Noyes Equipment Pty Limited v Dueeasy Pty Limited (Court of Appeal, Meagher, Sheller and Cole JJA, 18 July 1996, unreported) Knight v Wilson [2008] NSWSC 1083 Lean v Tumut River Orchard Management Ltd [2003] FCA 269 Legione v Hateley [1983] HCA 11 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 McDonnell & East Ltd v McGregor (1936) 56 CLR 50 O'Rourke v Hoeven [1974] 1 NSWLR 622 Penrith v Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 176 Powercell Pty Ltd v Cuzeno Pty Ltd [2003] NSWSC 600 Quality Bakers Australia Pty Limited v Yassin Modern Bakery Pty Limited (t/as Yassin Lebanese Bakery) [2007] NSWSC 804 Rawson v Samuel (1941) Cr & Ph 161 Spencer v Commonwealth [2010] HCA 28 Theseus Exploration NL v Foyster (1972) 126 CLR 507 Thompson v Palmer [1933] HCA 61 Wickstead v Browne [1992] NSWCA 272

TEXTS CITED : Meagher, Gummow and Lehane's Equity Doctrines and Remedies 4th ed (2002) Set-Off Dr Rory Derham 3rd ed (2003)

PARTIES : Cookson Plibrico Pty Limited (Plaintiff) V & M Davidovic Pty Limited (Defendant)

COUNSEL : Mr B Coles QC and Mr P Russell (Plaintiff) Mr S Wells (Defendant)

SOLICITORS : Pikes Lawyers (Plaintiff) Rosier & Partners (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2010/84991 COOKSON PLIBRICO PTY LIMITED v V & M DAVIDOVIC PTY LIMITED JUDGMENT 1 HIS HONOUR: This is the hearing of an amended notice of motion, filed by the Plaintiff, in which summary judgment is sought. Alternatively, the Plaintiff seeks an order that the Defendant should take such steps as are necessary to procure the release of funds paid by the Plaintiff to its solicitor and held by its solicitor in the Illawarra Credit Union Limited account in circumstances to which I shall refer. The amount in issue is about $616,000 ("the security deposit"). 2 The Plaintiff obtained leave to file an amended statement of claim, in which the name of the Plaintiff was changed to Vesuvius Australia Pty Limited. The only other amendment was the addition of paragraph 24A to which I shall return. In addition, at this time, the amended notice of motion was filed. 3 At the commencement of the hearing of the amended motion, the Defendant handed up a proposed amended defence and cross-claim. Even though these documents were not verified and had not been filed, I was requested, without opposition, simply to treat the proposed amended defence and cross-claim as the relevant documents for the purpose of considering the amended notice of motion. 4 Two affidavits of the Plaintiff's general manager were read in support of the Plaintiff's amended notice of motion. In an affidavit dated 11 August 2010, he stated that it was his belief that the Defendant had no defence to the Plaintiff's claim for the return of the security deposit. He was not cross-examined. 5 No affidavit evidence was read in the Defendant's case opposing the grant of summary judgment. Background facts 6 The relevant facts are usefully set out in the parties' submissions. Even on this amended motion, the following facts are, in my view, established by admission, or on the unchallenged and undisputed evidence read on the application. (a) The Defendant owns two properties relevant to these proceedings (i) a property at Doyle Avenue, Unanderra, New South Wales ("the Doyle Avenue property"); and (ii) a property at Sylvester Avenue, Unanderra, New South Wales ("the Sylvester Avenue property"). (b) The Plaintiff carries on a manufacturing business of producing refractory materials and occupies a factory site at Sandon Point, near Bulli, in New South Wales; (c) Between May and September 2006, the Plaintiff and Defendant negotiated in connection with the lease of the Sylvester Avenue property; (d) In about September 2006, the Plaintiff indicated that it wished to negotiate a lease of the Doyle Avenue property instead of the Sylvester Avenue property; (e) There is situated on the Doyle Avenue property, an industrial factory building of approximately 4,500 square metres. A business or undertaking, known as Obnova Concrete is carried on at the property; (f) Between September 2006 and October 2007, the parties conducted negotiations in connection with the lease of the Doyle Avenue property; (g) On 8 October 2007, the Plaintiff and the Defendant entered into a Deed of Options for Lease ("the Deed"); (h) So far as is relevant, the Deed provided: (i) by Clauses 2.1, 2.3 and 3, upon the exercise of an option for the Lease (as defined in the Deed), an Agreement for Lease would come into effect on the terms as set out in the Deed; (ii) by Clause 4 and Item 12 of the Reference Schedule, the Defendant, with all due diligence and in a proper and workman-like manner, would carry out certain Works ("the Works") as specified in Item 3 of the Reference Schedule, which Works were to be completed within twelve months of the date of the Deed, namely by 8 October 2008; (iii) The Works, included cladding the existing industrial factory building, constructing a new industrial factory building of approximately 2,000 square metres, constructing a new administration building and a fit-out of approximately 880 square metres, constructing a new amenities block with the new industrial building and also constructing car parking for approximately 80 cars; (iv) by Clause 6, the Plaintiff was to attend to, and complete, at its own cost and expense, its fit-out, and the Defendant was to provide access to the Plaintiff for the purpose of its fit-out by 31 May 2008; (v) by Clause 7, the Works were deemed to be completed upon the date of issue of the Occupation Certificate (as defined in Clause 1); (vi) by Clause 9: (a) in the event there was a failure on the part of the Defendant to complete the Works within twelve months of the date of the Deed, the Plaintiff, by written notice to the Defendant, could advise the Defendant of its default ("Default Notice"): see Clause 9.1(b); (b) if within 14 days of the service by the Plaintiff of the Default Notice, the Defendant failed to rectify the default to the satisfaction of the Plaintiff, the Plaintiff was entitled to exercise any of its rights and remedies pursuant to Clause 9.3; (c) if the Plaintiff was entitled to exercise its rights and remedies under Clause 9, then the Plaintiff, at its option, by written notice to the Defendant, could terminate the Deed, in which event the Deed was terminated and the Plaintiff would have no further obligations or liabilities under the Deed; (vii) by Clauses 10 and 11, the Commencement Date and the Rent Commencement Date of the Lease was to be the date of the deemed completion of the Works (i.e. the date of the issue of the Occupation Certificate); (viii) by Clause 12, the Plaintiff was to execute the Lease in duplicate, in the form annexed to the Deed and return it to the Defendant's solicitors to be held by them subject to the terms of the Deed; (ix) Clause 13 of the Deed, entitled "Security Deposit", provided: "Upon the signing of this Deed the Tenant must deposit with the Tenant's solicitors the sum of $560,000.04 plus GST to be paid to the Tenant's solicitors' trust account and then invested by the Tenant's solicitors into an interest bearing account with The Illawarra Credit Union Limited on behalf to the Landlord and the Tenant for the purposes of securing to the Landlord the performance of the terms and conditions of this Deed by the Tenant . The Tenant's solicitors are not to release any or all of the monies in such account without the joint authority of the Landlord and Tenant. In the event that neither the Landlord nor the Tenant exercises its option pursuant to clause 2 hereof within the time provided therein then the Landlord must immediately allow the refund to the Tenant of the full sum of money contained in the said account plus all accrued interest. Upon the commencement date of the Lease or upon the Tenant becoming entitled to exercise its rights under clause 9 or if the lease is not otherwise to proceed, then the Landlord must immediately allow the refund to the Tenant of the full sum of money contained in the said account plus all accrued interest. The above provision relating to the full refund of the security bond to the Tenant upon commencement of the Lease is subject to the Tenant paying to the Landlord the first year's rent plus GST under the Lease in advance. In the event however that the Tenant becomes bound hereunder to forfeit to the Landlord the said security deposit then in that event then all accrued interest earned thereon shall be paid to the Landlord." [My emphasis] (i) Pursuant to Clause 13 of the Deed: (i) on 11 October 2007, the Plaintiff transferred to the trust account of its solicitors, $616,000.04; and (ii) on 7 November 2007, the Plaintiff's solicitors transferred the security deposit into an interest bearing cash management account with The Illawarra Credit Union Limited; (j) On 8 January 2008, pursuant to Clause 2.1 of the Deed, the Plaintiff exercised the option for the Lease referred to in that Clause in respect of the Doyle Avenue property; (k) The Plaintiff, subsequently, executed the Lease in duplicate and returned it to the Defendant's solicitors; (l) The Works were not completed within the time required, or at all; (m) The time for the Plaintiff to perform its obligations to carry out its fit-out never arose. (n) Obnova Concrete has continued to carry on business at the Doyle Avenue Property; (o) No Lease ever commenced operation; (p) The security deposit is still held in the Credit Union account. 7 On, or about, 22 October 2009, the Plaintiff served on the Defendant a Default Notice in respect of the Defendant's failure to complete the Works. 8 On, or about, 19 November 2009, the Plaintiff served on the Defendant, a Termination Notice dated 19 November 2009. 9 The Plaintiff asserts, and the Defendant denies, that because the Works were not completed, the Lease never came into operation and, therefore, no obligation to pay rent ever arose. 10 The Defendant asserts that between April and June 2008, the Plaintiff altered its position again, and indicated that it preferred to lease the Sylvester Ave property instead of the Doyle Avenue property. It says that as a result, it (the Defendant), to the knowledge of the Plaintiff, ceased performing the Works in connection with the Doyle Avenue property, and concentrated its efforts on preparing the Sylvester Avenue property. 11 The Defendant alleges that the Plaintiff is estopped from relying upon non-completion of the Works in connection with the Doyle Avenue property as a ground for terminating the Deed. It also submits that the Plaintiff's conduct was in breach of the Trade Practices Act 1974 (Cth). Damages for the breach are sought in the proposed amended cross-claim. 12 On 24 September 2010, when the matter was first before the court, the Plaintiff stressed the significance of the part of Clause 13 of the Deed which did not relate to termination rights under Clause 9 of the Deed, and which stated "if the lease is not otherwise to proceed", as the ground for the Defendant being required to "immediately allow the refund to the [Plaintiff] of the full sum of money contained in the said account plus all accrued interest". 13 Because that part of Clause 13 had not specifically been pleaded in the statement of claim, the Plaintiff, without opposition, sought to amend the statement of claim and to add Paragraph 24A specifically referring to that part of Clause 13. It was then that the opportunity was given to the Defendant to file an amended defence and an amended cross-claim. By consent, the motion was adjourned until 8 October 2010. Submissions 14 At the hearing of the amended notice of motion, the Defendant accepted that: (a) the only binding agreement(s) between the Plaintiff and the Defendant were the Deed and the Lease of the Doyle Avenue Property; (b) the Deed and the Lease were terminated; in this regard, whilst the Defendant denied the Plaintiff's right to terminate the Deed, it asserted that the Plaintiff's purported termination amounted to a repudiation of the Lease and the Deed, which entitled it (the Defendant) to terminate the Lease (and Deed), which it had done; and (c) despite there having been lengthy negotiations for, and steps taken towards, the parties entering into a lease for the Sylvester Avenue property, no binding agreement between the parties for lease in relation to the Sylvester Avenue property had ever come into effect. 15 The Plaintiff submits that since the lease referred to in the Deed "did not otherwise proceed" (which is sustained by the Defendant's allegation that it has terminated the Deed and the Lease by reason of the Plaintiff's alleged repudiation), there are no remaining purposes that justify the retention of the security deposit. 16 The Plaintiff then submits that, in so far as the purpose of the security deposit was to secure the performance, by the Plaintiff, to the Defendant, of the terms and conditions of the Deed, that purpose no longer remains, since: (i) the termination of the Deed, by whatever means, ended the obligation of the Plaintiff to perform the terms and conditions of the Deed from that point in time; and (ii) the Plaintiff had performed all obligations required of it up until the date of termination. 17 The Plaintiff also submits that despite the Defendant claiming relief to the effect that the Plaintiff has forfeited the security deposit by reason of the Plaintiff's alleged repudiatory conduct: (a) there is no term of the Deed by which the Plaintiff became bound under the Deed to forfeit the security deposit in the event that the Plaintiff repudiated the Deed; and (b) the Defendant does not allege, in the amended defence and/or the amended cross-claim, any fact, matter or circumstance that would support the existence of such term in the Deed; (c) the Defendant does not allege the implication of such term of the Deed. 18 The Defendant in its submissions, points to the amended cross-claim, which, in addition to seeking declarations and injunctive relief, seeks an order for the payment of the security deposit to it, as well as damages under s 82 Trade Practices Act 1974 (Cth) and interest. However, as is clear, no evidence to support the matters pleaded was relied upon. 19 Importantly, for present purposes, paragraphs 45A, 90A and 97 of the proposed amended cross-claim provide: "45A Further, on or about 14 May 2008, the plaintiff and the defendant agreed that if the plaintiff did not ultimately proceed with the Sylvestor (sic) Avenue Lease for any reason whatsoever it would pay to the defendant the sum of $744,000 by using the Security Deposit and additional funds from its resources. Particulars The agreement was oral and entered into during a conversation between Prince on behalf of the plaintiff and Davidovic on behalf of the defendant on 14 May 2008.

… 90A In the premises, the defendant is entitled, and the Court should make, orders pursuant to: (a) s. 80 of the TPA restraining the plaintiff from relying upon any breach of clauses 4, 8, 9.1(a) or (b) of the Deed of Options for Lease dated 8 October 2007 or the fact that the Lease of the Doyle Avenue property is not to proceed as a ground for terminating the said deed or seeking a refund of the security deposit paid by the plaintiff pursuant to clause 13 of the said deed; (b) s. 87(2)(ba) of the TPA refusing to enforce any of the provisions of the Deed of Options for Lease dated 8 October 2007, except for the term set out in the final paragraph of clause 13 of the said deed; (c) s. 87(2)(c) or (d) of the TPA requiring the Security Deposit to be paid to the defendant; and

97 Further, by reason of the matters pleaded in paragraphs 44 - 65 and 69 - 78, the Plaintiff:

(a) has waived its rights to strictly enforce the terms of the Deed; and

(b) is estopped from denying that the Defendant is entitled to the Security Deposit paid under the Deed-; and

(c) is estopped from relying upon any breach of clauses 4, 8 or 9.1(a) and (b) of the Deed of Options for Lease dated 8 October 2007 as a ground for terminating the said deed or seeking a refund of the security deposit paid by the Plaintiff pursuant to clause 13 of the said deed.; and

(d) is estopped from relying upon the fact that the Lease is not to proceed as a ground for seeking a refund of the Security Deposit pursuant to clause 13 of the Deed." 20 The thrust of the Defendant's money claims, as asserted in the proposed amended cross-claim, are for: (a) damages for repudiation of the Lease; (b) damages said to have been suffered by the Defendant as a result of the misleading conduct of the Plaintiff; (c) damages pursuant to s 82A of the Trade Practices Act; (d) damages generally; (e) interest and costs. 21 In answer to the submission that paragraph 45A provides a basis for defeating the Plaintiff's claim for summary judgment, the Plaintiff submits: "4. In relation to paragraph 45A of the Draft Further Amended Cross Claim: (a) this is a new and opportunistic allegation clearly drawn with a view to the plaintiff's Outline of Submissions handed to the Court on 24 September 2010; (b) it is not and could not be alleged that this agreement is a stand-alone agreement enforceable on its own or that it rescinds or varies the Deed; (c) the "agreement" is merely part of the second Sylvester lease negotiations, and has been so pleaded, and is not a concluded agreement and is not pleaded as a concluded agreement of itself: cf Australian Broadcasting Corporation v X1Vth Commonwealth Games Ltd (1998) 18 NSWLR 540; (d) the allegation is inconsistent with the allegation in paragraph 45, namely that the Security Deposit would be held on the same terms with respect to any proposed Sylvester lease as it was being held under the Deed; (e) obligations in a Deed can only be effectively released or varied by an informal agreement where there is valuable consideration; in this case, no identifiable valuable consideration has been pleaded (no doubt because it was part of negotiations) to support the alleged promise by the plaintiff that it would pay the sum of $744,000.00 to the defendant in any event - this undoubtedly includes events such as the defendant's breach of any agreement that may be reached in relation to Sylvester Avenue or indeed that the parties (sic) failure to reach agreement in relation to Sylvester Avenue; (f) further, as in this case, where the original contract was required to be in writing, any variation of that contract is required to be in writing to be effective: see Tallerman & Co. Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 at 112-3; (g) in any event, the promise is merely to pay a sum of $744,000.00 together with an indication that it would be paid by using the Security Deposit together with additional funds from the plaintiff's resources; it does not give the defendant a proprietary interest in the Security Deposit." 22 Following completion of the Plaintiff's oral submissions, Mr S Wells, Counsel for the Defendant, sought an opportunity to file further written submissions in relation to any authorities in support of the oral submission that an agreement granting an option for lease of real property was not required to be in writing in order to be effective. 23 Mr Wells provided further written submissions on 20 October 2010. In those submissions, Mr Wells submitted that, in fact, since there had been no defence to the Defendant's cross-claim filed, the Plaintiff had not sought to rely upon s 54A of the Conveyancing Act 1919. It was conceded, however, that if, and when, a defence to the cross claim was filed, the Plaintiff would rely upon that section. 24 The Defendant then submitted that if the section was relied upon, the Defendant would plead acts of part performance, being acts done by it "under and by force of the alleged agreement that are unequivocally and in their own nature referable to the alleged agreement". Reference was made to Khoury v Khouri [2006] NSWCA 184; (2006) 64 NSWLR 241, per Hodgson JA, at [16]. 25 It was submitted that reliance upon s 54A in answer to the oral agreement alleged in paragraph 45A of the cross claim was not sufficient to justify granting the relief sought in the amended notice of motion. 26 The Plaintiff provided further written submissions on 26 October 2010. It was submitted that the Defendant's submissions did not address the limited matter in respect of which leave had been granted and that the Defendant had purported to raise, for the first time, the doctrine of part performance. It was submitted that the court should ignore the supplementary submissions as these did not address the issue for which leave to make the further submissions had been granted. 27 It was also submitted that even if further leave were granted, the Defendant had not pleaded acts of part performance, and, in any event, could not rely upon part performance because that doctrine is only available where a party seeks relief based upon a claim for specific performance (O'Rourke v Hoeven [1974] 1 NSWLR 622 at 626A-C, per Glass JA). The Statutory Framework and Authorities Summary Judgment 28 Uniform Civil Procedure Rules 2005, rule 13.1, authorises the Court, on an application by the Plaintiff in relation to the claim for relief, if there is evidence of the facts on which the claim is based, and there is evidence given by the Plaintiff, or some responsible person, that in the belief of the person giving the evidence, the Defendant has no defence to the claim, to give such judgment for the Plaintiff, or make such order on the claim, as the case requires. 29 Thus, the Plaintiff must establish that there is evidence of the facts on which the claim is based, that is to say, the essential material facts in the cause of action pleaded in the Statement of Claim. In addition, the Plaintiff, or responsible person, must state a belief that the Defendant has no defence. This requires real attention to be given to the question of the absence of a defence, because the Plaintiff, or responsible person, must be prepared to depose, and, if necessary, be cross-examined, as to the belief that there is no defence. If those two requirements are established, then the court has a discretion whether to exercise the power conferred by the rule. 30 Interestingly, unlike other rules that deal with summary judgment (e.g. UCPR r 13.4 and r 14.28), other than requiring the evidence of the facts on which the claim is based, and evidence of a belief that the defendant has no defence, there is no reference to the court having power to receive other evidence on the hearing of an application for an order. It follows that the Defendant is not obliged to rely upon evidence if it does not choose to do so. I accept that in applications under UCPR r 13.1, the plaintiff carries the onus of proof and the defendant does not affirmatively have to establish the defence relied upon: Knight v Wilson [2008] NSWSC 1083 per Malpass AsJ at [28]. Summary relief is, however, a discretionary remedy. 31 In Hawker Noyes Equipment Pty Limited v Dueeasy Pty Limited (Court of Appeal, 18 July 1996, unreported), Sheller JA (with whom Meagher JA agreed and with whom, in regard to the following principles, Cole JA, although dissenting, was also in agreement) said: "In Clarke v The Union Bank of Australia Limited (1917) 23 CLR 5 Barton ACJ, speaking for the High Court of Australia, quoted Lord Halsbury in Jones v Stone [1894] AC 122 at 124 who said that an analogous proceeding for summary judgment was peculiar, "intended only to apply to cases where there can be no reasonable doubt that a plaintiff is entitled to judgment, and where, therefore, it is inexpedient to allow a defendant to defend for mere purposes of delay". In Fancourt v Mercantile Credits Limited (1983) 154 CLR 87 at 99 the High Court of Australia said that the power to order summary or final judgment was one that should be exercised with great care and should never be exercised unless it was clear that there was no real question to be tried. In that case their Honours said it was not possible to say "without doubt, on the whole of the material, that there is no question to be tried". In Singh v Varinder Kaur (1985) 61 ALR 720 at 722 Samuels JA, with whom Kirby P and Glass JA agreed, after referring to Fancourt , said: That language suggests to me that the burden lies on the plaintiff seeking summary judgment of persuading the tribunal that there is no real question to be tried. It is not consistent with the reverse proposition - that the defendant resisting judgment must show that there is a real question to be tried." 32 The Court of Appeal also pointed out that before deposing to a belief that there is no defence, the deponent should take care to consider the precise claim pleaded and ensure that the evidence which is adduced in support of the application supports that precise claim (see, Quality Bakers Australia Pty Ltd v Yassin Modern Bakery Pty Ltd (t/a Yassin Lebanese Bakery) [2007] NSWSC 804). 33 The principles otherwise applicable to summary judgment are well understood. There should be summary judgment granted if the facts are undisputed and the law is clear. In general, however, an application for summary judgment is not the occasion to dispose of difficult or substantial questions of law which cannot be determined without full argument: Theseus Exploration NL v Foyster (1972) 126 CLR 507 at 514, 515. Yet, the court, in appropriate cases, may reach a conclusion on a question of law, even one involving considerable argument, if at the conclusion of the argument, the answer is thought to be clear: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129; Wickstead v Browne [1992] NSWCA 272; (1992) 30 NSWLR 1. 34 A similar approach has recently been confirmed in Spencer v Commonwealth [2010] HCA 28. There, French CJ and Gummow J said at [24]: "The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action General Steel Industries Inc v Commissioner for Railways (NSW ) [1964] HCA 69; (1964) 112 CLR 125 at 128 - 130 per Barwick CJ; or on the basis that the action is frivolous or vexatious or an abuse of process Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91 per Dixon J. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd said [1983] HCA 25; (1983) 154 CLR 87 at 99: 'The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.'

More recently, in Batistatos v Roads and Traffic Authority (NSW ) [2006] HCA 27; (2006) 226 CLR 256 at 275; Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 at 575-576 [57]; which included the following: "'Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91 per Dixon J; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 130 per Barwick CJ, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.'" 35 Another comment that I consider useful on the topic of summary judgment is that made by Sir Thomas Bingham M.R. in E (a Minor) v Dorset County Council [1995] 2 AC 633, at 694, in the Court of Appeal (in which the Defendants' Appeal to the House of Lords was dismissed): "... where the legal viability of a cause of action is unclear (perhaps because the law is a state of transition), or in any way sensitive to the facts, an order to strike-out should not be made". 36 The evidence before the court on the motion for summary judgment is read, not for the purpose of making findings of fact where the evidence conflicts, but to determine whether a triable issue is disclosed: Wickstead v Browne at 9. Thus, if the pleadings, affidavits, and other evidence produced on the summary judgment application reveal that there is a real issue of fact or law that has to be resolved for the defence to succeed, summary judgment on the plaintiff's claim should not be granted. 37 I must also give consideration to the provisions of ss 56, 57, 58 and 59 of the Civil Procedure Act 2005, which require that the discretion in question be exercised by the Court 'in accordance with the dictates of justice' and that the overriding purpose of the Act and of the Rules, namely, 'the just, quick and cheap resolution of the real issues in the proceedings' is facilitated. This consideration, too, requires the Court to be satisfied that there is a real dispute between the parties on the issue the subject of the claim for summary judgment. Mandatory Injunction 38 In its amended notice of motion, the Plaintiff seeks a mandatory injunction. A mandatory injunction may be granted on an interlocutory application as well as at the trial: Bonner v Great Western Railway Co (1883) 24 Ch D 1 at 10. The form of the injunction must always indicate, clearly and precisely, the act, or acts, that the defendant is required to perform. Additionally, if there is any time limit to be placed upon the requirement of performance of the act or acts, then that must also be stated. 39 An undertaking as to damages was proffered on behalf of the Plaintiff.

Estoppel 40 The Defendant submits that the Plaintiff is estopped from relying upon non-completion of the Works in connection with the Doyle Avenue property as a ground for terminating the Deed. It relies upon paragraph [97] of the proposed amended cross-claim, which paragraph I have stated. 41 In Discount & Finance Ltd v Gehrig's NSW Wines Ltd (1940) 40 SR (NSW) 598, at 602-603, Jordan CJ described the different categories of estoppel. One category described was estoppel by representation, which "prevents a person who, by a representation of fact, has led another to alter his position, from denying that the fact is as represented". 42 In Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507, Dixon J treated estoppel by representation as a species of estoppel by "assumption" from which it would unjust to depart. His Honour, at 547, said "the object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment". His Honour then went on to explain the circumstances in which the first person may be required to abide by the assumption. One such circumstance was where that person "directly made representations upon which the other party founded the assumption": see also Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641, 674-676; Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406, 430-432; Commonwealth v Verwayen [1990] HCA 39 (1990) 170 CLR 394.

Part Performance 43 Despite the circumstances in which the Defendant raises this issue, I should refer to it at this point in the proceedings. 44 The Plaintiff is correct in asserting that part performance has not been pleaded in the Defendant's cross claim. 45 I do not have to decide whether part performance is not available to the Defendant in the present circumstances. If the Defendant, ultimately relies upon it, that will be a matter for a trial judge. 46 On the topic, however, reference may be made to the remarks of Campbell J (as his Honour then was) at first instance, in Powercell Pty Ltd v Cuzeno Pty Ltd [2003] NSWSC 600 (2003) 11 BPR 21,385. His Honour commenced (at 21,391, [29]) and continued at [31]: "... Part performance is a doctrine invented by the Chancery Court, and provides a basis upon which a court of Equity will provide equitable relief concerning a contract, when that contract is unenforceable by reason of non-compliance with the Statute of Frauds. The equitable relief most commonly provided when acts of part performance of a contract are established is specific performance of that contract. It may be that part performance can also provide a basis for other equitable remedies, sch as an injunction to enforce a provision of the contract: R P Meagher, J D Heydon and M J Leeming, Meagher, Gummow and Lehane's, Equity: Doctrines and Remedies, 4th ed, LexisNexis Butterworths, Sydney, 2002, para 20-220), or some other equitable remedy: Jones v Baker (2002) 10 BPR 19,115. However, an action for damages for breach of contract is a common law action, to which part performance is irrelevant. His Honour said (at 21,391-21,392, [30]) that these principles had been adopted, authoritatively, in New South Wales. He referred to O'Rourke v Hoeven [1974] 1 NSWLR 622 where Glass JA (with whom Reynolds and Hutley JJA agreed) said (at 626): The doctrine of part performance was developed in the Equity courts and has never been available in an action at law for damages to excuse absence of the writing which the Statute of Frauds demanded. As Dixon J, as he then was, said in J C Williamson Ltd v Lukey (1931) 45 CLR 282; [1931] ALR 157; BC3100020 at p 297. An action of damages could not but fail, because, when a common law remedy is sought, part performance never did and does not now afford an answer to the Statute of Frauds … if the doctrine is not confined to cases in which a decree might be made for the specific performance of the contract, it is at least true that the doctrine arose in the administration of that relief and has not been resorted to except for that purpose' (and see per Starke J and Evatt J (1931) 45 CLR 282; [1931] ALR 157 at pp 294, 306). The position is in no way altered by the concurrent administration of law and equity directed by Pt IV of the Supreme Court Act. This is not a fusion of two systems of principle but of the courts which administer the two systems: Britain v Rossiter (1879) 11 QBD 123 at p 129. The rules continue to be influenced by the system to which they belong, so as to disentitle a party claiming damages at law from praying in aid an exemption from writing on equitable grounds. …

Before 1858 the Court of Chancery might have had a limited jurisdiction to award damages in lieu of, or in addition to, specific performance: Meagher, Gummow and Lehane's, Equity: Doctrines and Remedies, para 23-025. In 1858, Lord Cairns' Act conferred on the Court of Chancery jurisdiction to award damages either in addition to, or in substitution for, the grant of an injunction for specific performance; that provision now has its equivalent in New South Wales in s 68 Supreme Court Act 1970 (NSW)." 47 His Honour's remarks were described as having "ineluctable persuasive force" in Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 176; (2007) 13 BPR 24,799, at [40]. Set-Off 48 In its defence, the Defendant has raised set-off. 49 Section 21 of the Civil Procedure Act 2005 provides: 21 Defendant's right to set-off (1) If there are mutual debts between a plaintiff and a defendant in any proceedings, the defendant may, by way of defence, set off against the plaintiff's claim any debt that is owed by the plaintiff to the defendant and that was due and payable at the time the defence of set-off was filed, whether or not the mutual debts are different in nature.

(2) This section extends to civil proceedings in which one or more of the mutual debts is owed by or to a deceased person who is represented by a legal personal representative.

(3) This section does not apply to the extent to which the plaintiff and defendant have agreed that debts (whether generally or as to specific debts) may not be set off against each other.

(4) This section does not affect any other rights or obligations of a debtor or creditor in respect of mutual debts, whether arising in equity or otherwise.

(5) This section is subject to section 120 of the Industrial Relations Act 1996.

(6) In this section, debt means any liquidated claim. 50 The section, as can be seen, only applies to liquidated claims. 51 At law, there can only be set-off between liquidated demands, and a counter-claim, sounding in damages, cannot be pleaded as a defence to a liquidated demand: McDonnell & East Ltd v McGregor (1936) 56 CLR 50; Bayview Quarries Pty Ltd v Castley Development Pty Ltd [1963] VR 445; Fong v Cilli (1968) 11 FLR 495; Blacksheep Productions Pty Ltd v Waks [2008] NSWSC 488 at [19]. 52 Thus, for there to be a set-off, one has to look to the rules of equity. In Rawson v Samuel (1841) Cr & Ph 161 (1841); 41 ER 451, Lord Cottenham LC said at 178 (458): "We speak familiarly of equitable set-off, as distinguished from the set-off at law; but it will be found that this equitable set-off exists in cases where the party seeking the benefit of it can shew some equitable ground for being protected against his adversary's demand. The mere existence of cross-demands is not sufficient … Is there, then, any equity in preventing a party who has recovered damages at law from receiving them, because he may be found to be indebted, upon the balance of an unsettled account, to the party against whom the damages have been recovered? … If they have no such equity, there can be no good ground for the injunction." 53 An equitable set-off is said to exist where a defendant, in answer to a plaintiff's claim, is able to plead successfully that a countervailing claim, which he has against the plaintiff, absolves him, wholly or partially, from liability to the plaintiff: R P Meagher, J D Heydon and M J Leeming, Meagher, Gummow and Lehane's Equity Doctrines and Remedies 4th ed (2002) [37-005]. 54 Dr Rory Derham, in his book Set-Off, 3rd ed (2003), OUP, at para 4.03 states: "The traditional basis of this form of equitable set-off is that the title of the plaintiff to his demand is impeached. The concept of impeachment has not been precisely defined. In general terms, what it requires, in the absence of some other equitable ground for being protected such as fraud, is that there be a sufficiently close connection between the demands. In its traditional sense this was not simply a question whether the demands arose out of the same transaction … It involves a consideration of the circumstances of the particular case, and indeed a close connection may not suffice to impeach the title if there are other discretionary factors which militate against equitable relief. The closeness of the connection that courts of equity traditionally required has been expressed in various terms, for example that the cross-demand must go to the very root of the plaintiff's claim, or that it must call in question, impugn, disparage or impede the title of the claim or that there must be some equitable ground for protection such as inseparability … ." (Cited in Blacksheep Productions Pty Ltd v Waks at [22].)

55 A useful summary of the principle of set-off has been set out in Forsyth (as trustees for the C&S Forsyth Superannuation Fund) v Gibbs [2008] QCA 103; [2009] 1 Qd R 403, in which Keane JA (as his Honour then was), with whom the other members of the court agreed, said at 406-7:

"[9] Consistently with the technique of equity, which does not seek to define what an elephant is but knows one when it sees one, the principles governing the availability of equitable set-off of cross-claims are couched in open textured terms, such as "sufficient connection" and "unfairness". In some cases, it will be necessary to engage in an evaluation of a range of facts which might establish "sufficient connection" or "unfairness" of the relevant kind. But the principles to be applied are not so vague or subjective that it is never possible to determine, for the purposes of an application for summary judgment, that the facts alleged by a defendant simply fall short of what is required.

[10] It is important to emphasise that the availability of an equitable set-off between cross-claims does not depend upon an unfettered discretionary assessment of whether it would be "unfair" in a general sense for a plaintiff to insist on payment of the debt owed to it while the cross-claim remains unpaid. It is essential that there be such a connection between the claim and cross-claim that the cross-claim can be said to impeach the claim so as to make it unfair for the claim to be allowed without taking account of the cross-claim.

[11] Thus in Piggott v Williams , the claim of a solicitor who sued his former client to recover fees for services rendered was successfully met by a plea of equitable set-off on the basis that the fees were only incurred by reason of the solicitor's lack of due skill and diligence. The solicitor's breach of his obligations of skill and diligence was itself the source of the claim for his fees. This case affords an example of what is meant when it is said that the claim to set-off must "impeach" or go to "the root of" the plaintiff's claim. [12] An example of a failed attempt to assert an equitable set-off, which is particularly pertinent to a summary judgment situation, is afforded by the decision of the Full Court of the Supreme Court of Victoria in Indrisie v General Credits Ltd . There, an order for summary judgment was upheld against a guarantor who sought to rely upon a cross-claim for damages available to the principal debtor against its creditor by way of set-off against the guarantor's liability on the guarantee. The Full Court said: "... reference to cases such as Edward Ward and Co v McDougall [1972] VR 433; British Anzani (Felixstowe) Ltd v International Marine Management (UK) Ltd [1978] EWHC 2 (QB); [1980] QB 137; [1979] 2 All ER 1063 and Eagle Star Nominees Ltd v Merril [1982] VR 557 shows that, in order to rely upon a cross-claim as an equitable set-off, there must be such a nexus between the claim and cross-claim that the cross-claim can be said to impeach the plaintiff's claim. In the present case the claim for unliquidated damages is founded, not upon the transaction in respect of which the principal debtor is said to be liable, but upon a collateral contract entirely independent of that for which the respondent has the benefit of a security for due performance. The appellants' claim clearly does not meet the test to be applied, namely can the cross-claim be said to impeach the title to the respondent's legal demand?"" 56 In AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 Giles J (as his Honour then was) analysed the principles to be extracted from the authorities in respect of equitable set off. At 707, his Honour repeated part of the judgment in Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10, at 25-26: "… (ii) Claims for money due under a contract and for damages for breach of the same contract…. may be set off against each other where the equity of the case requires that it should be so. This will depend upon how closely the respective claims are related, particularly as to time and subject-matter. The general conduct of the respective parties will, as always, be relevant to the granting of such equitable relief… (iii) Even where one of the claims is not in terms based upon the contract, but it flows out of and is directly connected with it, a court may be prepared to recognize an equitable set-off." 57 In Lean v Tumut River Orchard Management Ltd [2003] FCA 269, a summary dismissal claim, Carr J, in the Federal Court, considered whether rights under a contract could be set-off against misleading and deceptive conduct or unconscionable conduct amounting to a contravention of the Trade Practices Act 1974 (Cth). His Honour said: "[59] In respect of the first issue, the second respondent submitted that the applicant's statement of claim disclosed no cause of action against it. It contended that there was "clear doubt" as to whether misleading or deceptive conduct contrary to s 52 of the Act can give rise to an equitable set-off. [60] The applicant submitted that it was quite clear that its claim against the first respondent for damages for breach of contract was a classic example of an equitable set-off. It conceded that it was not so clear that a claim for damages for misleading or deceptive conduct can support an equitable set-off. However, it relied upon three cases in which it appears to have been assumed that a claim for a compensatory remedy for misleading or deceptive conduct can amount to an equitable set-off: Tomlinson v Cut Price Deli Pty Ltd (1992) 38 FCR 490 at 494 Ferro Corp (Aust) Pty Ltd v International Pools Aust Pty Ltd (1993) 30 NSWLR 539; and Re Kleiss; Ex parte Kleiss v Capt'n Snooze Pty Ltd (1996) 61 FCR 436 at 440-441. It claimed that equitable set off is still available under the laws of New South Wales even though the Statutes of Set-Off have been repealed in that State. It relied on two of those cases and four other cases, namely AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 at 712 AMP Society v Specialist Funding Consultants Pty Ltd (1991) 24 NSWLR 326 at 329 Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439 at 465 , 468 and Doherty v Murphy [1996] 2 VR 553 for the proposition that such an equitable set-off may be asserted against a plaintiff particularly if the plaintiff has induced entry into the agreement giving rise to the obligation which the plaintiff is seeking to enforce. [61] In my opinion, the state of the authorities is such that it is reasonably arguable that relief under the Act by way of damages for contraventions of s 52 may give rise to an equitable set-off as against a party said to have engaged in that conduct - in this case the first respondent. I refer to the authorities set out in para 60 above. In my view, a reading of those authorities puts the applicant's case in respect of the first of the four issues identified above at a much higher level than simply being "reasonably arguable". 58 It must always be remembered that whether to allow, or not allow, equitable set-off is in the discretion of the Court, and that the Court must consider all the relevant circumstances; see Derham paragraph 4.44; and, for example, Abignano v Wenkart (1998) 9 BPR 16,765. Decision 59 In my view, the Plaintiff has complied with the requirements of UCPR r 13. 1. There is evidence of the facts on which its claim is based, and there is evidence given by the general manager of the Plaintiff, that in his belief, the Defendant has no defence to the claim. There is no suggestion that the general manager of the Plaintiff is not a "responsible person" within the meaning of the rule. The question then is whether I should exercise my discretion. 60 The fate of the Plaintiff's application is dependent, at least in part, upon the construction of the Deed. Significantly, there was really no real dispute about that construction. In my view, subject to the claim of equitable set-off, the Plaintiff's evidence, generally, appears to support the submissions made on its behalf and set out above. However, I do not have to determine whether it does or does not. 61 Be that as it may, something should be said about the construction of the Deed. As stated in the first paragraph of Clause 13, the security deposit was to be paid "for the purposes of securing to the [Defendant], the performance of the terms and conditions of this Deed by [the Plaintiff]". 62 When I requested counsel for the Defendant to identify the terms and conditions the performance of which were secured, he submitted that they were the Plaintiff's obligations in Clause 6 (the Plaintiff's Works and Fit-out) and in Clause 12 (the Lease Execution). 63 Yet, neither the amended defence, nor the amended cross-claim, asserts a breach of either of these Clauses of the Deed by the Plaintiff. Counsel for the Defendant did not submit that a further opportunity to amend either document to remedy that omission was required. Accordingly, the security deposit could not be retained for that purpose. 64 Also, there is no dispute by the parties that the Deed is at an end. Therefore, there are no terms and conditions left to be performed by the Plaintiff, which require the security deposit to be retained: McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-477. 65 Next, the third paragraph of Clause 13 of the Deed provides for the Defendant immediately to allow the Plaintiff the refund of the security deposit on the happening of three alternative events. These events were: (i) the commencement date of the lease; or (ii) the Plaintiff becoming entitled to exercise its rights under Clause 9 of the Deed; or (iii) the lease "is not otherwise to proceed". (An additional event, referred to in the second paragraph of Clause 13, being that "neither party exercises its option pursuant to Clause 2 of the Deed", which event is not relevant, does not play any part in this application and I have ignored it.) 66 On the amended motion, the Plaintiff relied upon alternative (iii) (paragraph 24A of the amended statement of claim) set out above, and in this regard, I consider, it has pointed out, correctly, that there is no dispute by the Defendant that "the lease is not to proceed" (see, paragraph 2A(a) of the proposed amended defence). 67 In this regard, the use of the word "otherwise" in Clause 13 is significant. It must mean that the lease is not to proceed for reasons, or in circumstances, different to the alternatives previously provided for. 68 In those circumstances, and without more, an event that gave rise to the refund of the security deposit as required by the Deed occurred. The Plaintiff was, then, immediately entitled to the refund of the security deposit and any interest accrued thereon. 69 The Plaintiff, for the purposes of its claim for summary judgment, did not rely upon becoming entitled to exercise its rights under Clause 9 of the Deed. It is not necessary, therefore, to consider the estoppel argument further. 70 In case I am wrong, the facts asserted as founding an estoppel are likely to be in dispute. (I leave aside whether the Defendant may rely upon acts of part performance.) Accordingly, for the purpose of a summary judgment application, that those facts are, provides a basis for not granting the Plaintiff's application for summary judgment. 71 It is necessary to consider the Defendant's reliance upon the final paragraph of Clause 13 of the Deed, which provided for the possibility that the Plaintiff "becomes bound [under the Deed] to forfeit the said security deposit" to the Defendant. The Defendant relies upon this part of the Clause. 72 However, nowhere in the Deed are the circumstances set out that give rise to when the Plaintiff becomes bound to forfeit the security deposit. When I enquired of the Defendant's counsel what were such circumstances prescribed by the Deed, he was unable to suggest any. No such circumstances are stated in the proposed amended defence or in the amended cross-claim. 73 What is stated is the unverified assertion that the Plaintiff has forfeited the security deposit. The factual basis of such forfeiture is not the subject of any evidence, I do not consider that the mere assertion gives rise to a triable issue particularly when no factual basis has been stated. 74 It seems to me that the allegations raised in the proposed amended cross-claim, if proved, may give rise to damages being payable by the Plaintiff to the Defendant. Even if they do, that possibility does not provide a basis for not ordering the refund of the security deposit to the Plaintiff immediately. To cause the security deposit to be retained for that purpose would be to require it to be held to secure the amount of damages, if any, payable by the Plaintiff to the Defendant, not for the purpose of securing to the Defendant the performance of the terms and conditions of the Deed by the Plaintiff, or for securing the payment of the first year's rent plus GST or for any other purpose provided for in the Deed. 75 Finally, I turn to whether reliance upon a set-off should prevent the Plaintiff succeeding on its claim. In answer to the set-off claim, the Plaintiff submits that there is no money claim made by it, but simply claims for a declaration and consequential orders in accordance with the provision of the Deed. 76 In light of the conclusion reached in Lean v Tumut River Orchard Management Ltd, and the authorities referred to in the case, namely that it is reasonably arguable that rights under a contract (the Deed) could be set off against misleading or deceptive conduct, or unconscionable conduct amounting to a contravention of the Trade Practices Act, keeping in mind the strong reluctance of the court to give summary judgment, and exercising the extreme caution which must be exercised in making such a determination, I have, hesitatingly, come to the conclusion that the case advanced by the Defendant on the Plaintiff's claim for the return of the security deposit should proceed. 77 I stress that I do not, necessarily, accept as correct, the argument of set-off, and I do not intend suggest that, at the trial of the proceedings, the argument would succeed. It is, however, sufficient, for the purpose of the summary judgment application, that the Defendant raises a triable issue. 78 I have considered whether I should strike out any parts of the defence and cross-claim. However, in Wickstead v Browne (1992) 30 NSWLR 1, Kirby P said (at 5): " ... as the trial must now proceed, there is merit (as it seems to me) in permitting the appellant to present his case in various ways. The marginal utility to the respondent of preventing the appellant from proceeding upon the alternative cause of action in negligence is minimal. But the marginal cost of doing so would be very great if, subsequently, the trial was concluded, limited by the orders proposed, and it was then held, either by this Court or by the High Court of Australia, that the appellant's cause of action in negligence was viable; 2. Common experience teaches that it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are adduced and the suggested action can be judged with a full understanding of all relevant evidence. Testimony gives colour and content to the application and development of legal principle." 79 Although in dissent on the question whether a disputed cause of action pleaded in negligence should have been permitted, his Honour's decision was upheld in the High Court (Wickstead v Browne (1993) 10 Leg Rep SL2). 80 I note that the rule in the UCPR relied upon by the Plaintiff permits the court to make such order as the case requires. Consequently, it is possible, for example, to not grant summary judgment but require the Defendant to give to the Plaintiff an undertaking as to damages. I propose to require such an undertaking to be given. 81 In this way, the further delay that would be caused to the Plaintiff by its not having access to its own funds, might be ameliorated if, ultimately, it is held that no defence or set-off exists. 82 I note, also, that the parties have indicated that the matter could be ready for hearing reasonably promptly. I shall hear the parties on the form of orders to now be made to give effect to the reasons for judgment and the directions necessary to have the case promptly heard. 83 I shall also hear any argument on costs. **********

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Trade Practices Act 1974(Cth)

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Cases Cited (45)