Cosmo Cranes & Rigging Pty Ltd v EQ Constructions Pty Ltd

PRINCIPLES FOR SUMMARY JUDGMENT APPLICATIONS

1. The application is brought under r 13.1 of the Uniform Civil Procedure Rules 2002 (NSW) ('UCPR'). No point was taken by the respondent that the procedural and evidentiary requirements under that particular rule were not satisfied. The ultimate issue is whether the power should be exercised.
2. There was no real dispute about the principles. They are conveniently set out in the written submissions of the respondent's Counsel. It is convenient to reproduce them. With some modification (and excluding citations) they are as follows: "Where there is an application for summary judgment in respect of rights given by the SOP Act, the test is no different to that applicable where there is an application for summary judgment in respect of other kinds of rights. … The onus is on the party seeking summary judgment…. Summary judgment should not be given unless the Court is satisfied that there is "reasonable prospect of successfully prosecuting" the defence, and the power to issue summary judgment should not lightly be exercised…. There is a particular need for caution where, even if summary judgment is given, there will still be a trial on other parts of the case... Summary judgment is also commonly inappropriate where a case raises novel issues...appellate courts should be loath to consider the application of the law to evidence in novel contexts without the benefit of evidence having been adduced in a concluded trial. Further, it is generally not appropriate to resolve reasonably disputed issues of fact on a summary judgment application. Rather, the evidence of the party resisting summary judgment "should be taken at its highest": Further, while the Court can decide issues of law on a summary judgment application, it is generally not appropriate to go further where there is "a real question of law that is serious, important, or is apparently arguable yet novel..."
3. In context, the applicant's claim under the Act depended upon proof of two matters: the service of a payment claim on the respondent (s 14(4)(a) of the Act) and the respondent's omission to provide a payment schedule to the applicant (s 14(4)(b)). This case only concerns the operation of s 14(4)(a). It is common ground that service of a payment claim means the service of a valid payment claim [1] . It was uncontroversial that the applicant, as the claimant, bore the onus of establishing its rights [2] .

EVIDENCE

1. For the application, the plaintiff (as applicant) relied upon the affidavits of Jonathan Handley affirmed 27 September 2021 (Ex A), Karissa Ruttle affirmed 27 September 2021 (Ex B) and Ms Ruttle affirmed on 15 November 2021 (Ex C). In the circumstances that emerged, having regard to the issues raised in argument, however, only brief reference was made to this evidence.
2. The defendant/cross-claimant (as respondent) formally relied upon the affidavit of Issam Abayechi affirmed 22 November 2021. However, Counsel for the respondent did not refer to this affidavit in oral argument, or, indeed earlier in his written submissions, so this evidence may be put aside.

THE ARGUMENT

1. To reiterate, two obstacles were identified by the respondent in its opposition to the applicant obtaining summary judgment on its statutory claim. The first was a breach of what was called the 'one contract' rule. The second was the availability of a defence in set-off.

Whether it was reasonably arguable that the payment claims were invalid

1. It was common ground that a payment claim under the Act is invalid if it claims for work under two or more construction contracts.

The applicant's submissions

1. Counsel for the applicant submitted, first, that it was clear that the two disputed payment claims were made under the single Hire Agreement. Counsel for the applicant drew the Court's attention to the tax invoices in the two disputed payment claims referred to in Ms Ruttle's affidavit of 27 September 2021 (Ex B). Both of those invoices indicated the work was referable to an agreement whose reference number (EQP290012) was equivalent to the reference number for the Hire Agreement. Further, on the payment claims generated, there was a single common reference number, EQP29040. Counter-intuitively, given that they appeared on a document under the applicant's insignia, that was different to the reference number of the Hire Agreement (EQP290012), however Counsel for the applicant explained that the respondent's software portal was used to make the payment claims.
2. When the matter of the applicant's pleaded reference to multiple agreements was raised by the Court, Counsel for the applicant explained that although the Statement of Claim had pleaded the question of separate agreements relating to the supply of the Maeda crane and the brick cage, this was a formal matter designed to address points raised in pre-dispute correspondence (whose content was not drawn to the Court's attention) about different reference numbers, lest the applicant's primary point that there was a single contract not be accepted. Another function, I understood Counsel for the applicant to argue, was to utilise the (alternative) notion of separate agreements to ground the common law claim for breach of contract and the restitution counts which were run alternatively to the statutory claim. Those common law actions cite separate agreements.
3. The applicant's Counsel submitted secondly, that there was no real doubt that the work which was the subject of the payment claims was pursuant to variations referable to a single Hire Agreement; rather than to separate agreements. Several evidentiary matters were emphasised. Counsel referred to the email from the defendant's agent, Mr Truong (the Contract Administrator) to Mr Handley on 16 April 2021 which requested the Maeda crane and, amongst other things, asked that "the hire be under the existing hire agreement for the tower crane."
4. Another email from Mr Blanch (of the plaintiff) to personnel within the respondent on 4 June 2021 referred to the brick cage (both emails contained within Mr Handley's affidavit).
5. In addition, the applicant also drew the Court's attention to the content of annexures to a subsequent payment schedule (August 2021, Ex C) exhibited to Ms Ruttle's affidavit of 15 November 2021, which listed 'Approved Variations'. On its face, reference was made to the work involving the hire of the Maeda crane and the hire of the brick cage.
6. Counsel for the applicant referred the Court to a passage from the decision of Basten JA (Meagher JA agreeing and Emmett AJA concurring) in TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 93 at [18]-[23] to support a proposition that if the respondent wished to raise a point that what occurred (the requests for other equipment) on 16 April 2021 and 4 June 2021 gave rise to more than one construction contract, rather than as variations to the single Hire Agreement, than this was something which should properly have given rise to the service of a payment schedule. That it did not do so means that by reason of s 15(4) of the Act, the respondent was now precluded from disputing that there were variations to a single construction contract.

The respondent's submissions

1. Counsel for the respondent submitted that it was reasonably arguable that claims were made under more than one construction contract. First, it was evident on the face of the pleadings there was a reasonable argument. The respondent noted that the applicant had itself pleaded alternative contracts, being the 'Maeda Crane Agreement' and the 'Brick Cage Agreement' (which the respondent had admitted). The content of this pleading had been verified by the applicant's director, Mr Handley. A related pleading point was that the respondent, by its Defence, had expressly denied the allegation that there were only 'variations' to the Hire Agreement, in terms of the Maeda Crane and the brick cage requested. There was, on the pleading, therefore joinder on a factual issue.
2. Secondly, the respondent referred to the decision of Rees J in Ventia Australia Pty Ltd v BSA Advanced Property Solutions (Fire) Pty Ltd [2021] NSWSC 1534 where (at [42]) in the context of considering the jurisdiction of an adjudicator's determination, her Honour noted that the question of whether a payment claim was made in respect of one (or more) construction contracts did not depend on what was raised in any payment schedule (assuming one was served). Her Honour distinguished TFM Epping as a case which considered the "more detailed requirements" of s 13(2) of the Act, not the anterior question of whether a payment claim was valid or not for infringing the 'one contract rule'. Thus, the respondent argued, it did not matter that the respondent did not serve any payment schedule in respect to the two disputed payment claims. It was not barred by s 15(4) of the Act from doing so in opposition to this application.
3. It followed, so the respondent argued, that it was not conclusive that the disputed payment claims, in common with the payment claims that had been paid, expressly shared a single reference number. It was a matter of substance, and evidence, whether the work carried out was referable to one or more construction contracts.
4. Thirdly, the evidence relied upon by the applicant on this application to establish that there were variations, rather than arguably separate contracts (even separate contracts on the same terms as the Hire Agreement) was not as clear, let alone conclusive, as the applicant had argued. The content of the 'Approved Variations' indicated in the July 2021 payment schedule could not, by reason of cl 11.8 of the Hire Agreement, be taken to constitute admissions that they were variations. The two emails of 16 April 2021 and 4 June 2021 referred to in Mr Handley's affidavit were weak evidence, in their own way, in establishing variations. Neither bore the contractually stipulated expression 'Variation Direction'. In the case of the former email, the respondent wishes to contend that the reference to the request being made 'under the existing Hire Agreement' should be construed as a request for a separate agreement on the same terms as under the Hire Agreement. That was not inconsistent with the respondent's argument. In any event, such 'admission' as arose from the former email could only extend to the subject matter of the Maeda crane and not the brick cage. The probative value of the latter email was even weaker. There was no reference to other terms of the request. The email on its face requested the provision of a purchase order. There was no evidence that this was forthcoming.

Consideration

1. I do not accept that the respondent is precluded from arguing, in the absence of payment schedules being served and by reference to the evidence before the Court, that there was more than one construction contract to which the work was performed. Although s 15(4)(b) of the Act places a limitation upon matters which a respondent may raise in opposition to a proceeding to recover a debt sourced in the Act, in order to obtain a judgment, it still remains necessary for a claimant to establish that the respondent was liable to pay the debt (ss 15(4)(a) and 15(1)). Such liability in the respondent will only arise if, in fact, a valid payment claim has been issued (under s 14(4)(a)). A payment claim cannot be valid if it claims for work performed under two or more contracts. I do not consider that what was said in TFM Epping precludes the respondent from joining issue on whether the requests made and actioned in April and June 2021 were variations or amounted to separate agreements. The respondent's argument was marshalled in aid of its position that a valid payment claim had not been issued. The point has not been reached whereby s 15(4)(b) fettered what the respondent may do in a proceeding to enforce a debt sourced in the Act.
2. I am not persuaded to the high level of proof mandated by authorities concerning applications of this kind that it is inarguable for the respondent to contend that there were more than one construction contract in relation to the work performed. It is a question of fact. The framing of the alternative separate agreements in the statement of claim is an indication of the plaintiff's own ambivalence on this matter.
3. It is notoriously doubtful in contract law generally, that when parties enter into an agreement they substitute new terms; by doing so, they are varying the agreement or entering into a new agreement [3] , even if on similar terms to the earlier agreement. In this case, on the basis of the evidence alluded to by the parties on this application, I do not share the applicant's confidence that the circumstances that arose on 16 April 2021 and/or 4 June 2021 make the respondent's denial of there being variations of a single contract so manifestly groundless so as to sustain the application. I generally agree with the respondent that the evidentiary matters cited by the applicant in this application to establish that there were merely variations are not conclusive of the issue.
4. On this basis alone, the application should be refused. In case the matter goes elsewhere, however, I will consider the respondent's second point in opposition to the application, that summary judgment on the statutory claim is inapposite because of the respondent's pleaded set-off defence.

Whether it is arguable that a set-off applies to the statutory claim

1. Counsel for the respondent observed that it was unusual for claimants in building disputes to combine claims of the debt sourced from the provisions of the Act with common law claims for damages for breach of contract and restitution.
2. Be that as it may, Counsel for the respondent submitted that it was at least reasonably arguable that when a claimant commences a proceeding under s 15(2)(a)(i) of the Act (a debt sourced in statute in the particular circumstance that the respondent has not served a payment schedule in response to a valid payment claim), but adds common law claims in the same proceeding, it waives the right conferred under the Act (in s 15(4)(b)) to prevent the respondent, relevantly, from raising any defence in relation to matters arising under the construction contract. Counsel argued that when a claimant adds common law claims, it "opens itself up to" the respondent bringing defences at law (or in equity), including materially, a defence of set-off.
3. In support of what he appeared to accept was a novel argument (which Counsel attributed to the unprecedented circumstance of the applicant commencing a proceeding involving mixed claims in debt and common law), Counsel for the respondent relied upon the authority of observations of Emmett JA (Beazley P agreeing on this point and Meagher JA generally agreeing) in HP Mercantile Pty Ltd v Dierickx (2013) 306 ALR 53; [2013] NSWCA 479 at [136]-[138]. That case a did not concern a construction dispute, but rather involved a borrower arguing a defence of set-off in answer to an assignee's claim to enforce a loan agreement. The set-off was said to arise from conduct by the lender which contravened trade practices legislation thereby causing loss and damage to the borrower. In that context, Emmett JA materially said the following (excluding citations): "136 For there to be an equitable set-off, the set-off must essentially be bound up with and go to the root of, challenge, call in question, or impeach the title of the claimant. Equitable set-off is available where the party seeking it can show a recognised equitable ground for being, to the relevant extent, protected from its adversary's demand. The mere existence of a cross-claim is not sufficient. There must be some ground for equitable intervention beyond the mere existence of a cross-claim, such that it can be said that the equity of the defendant impeaches the claimant's title to the legal demand being enforced... 137 ….. a court of equity may recognise a set-off of an unliquidated claim for damages for breach of a building contract against claims for money due under the contract….. 138 It is not, of itself, an objection to the availability of equitable set-off that either or both of the legal demands is made pursuant to a statute that creates new obligations and rights that give rise to debts or liabilities in unliquidated damages. The question is whether the statute excludes what otherwise would be the operation of equitable set-off upon those statutory debts and liabilities. The claim to set-off must involve an impeachment of the title to the claimant's demand, and not merely the right to obtain judgment on the demand. It is sufficient that the existence of the claimant's demand would not have come about but for the claimant's breaches of duty. It is sufficient if the defendant's set-off complaint against the claimant goes directly to impeach the claimant's demand..."
4. Here of course, contrary to paragraph 137 of Emmett JA's judgment, the unliquidated claim is not relied upon as a set off against a claim for monies due under the contract. It is a claim for monies arising from rights sourced in statute. But on the authority of the balance of his Honour's observations, Counsel for the respondent argued that there was no insuperable impediment to the respondent arguing a set-off in answer to a claim in debt sourced in statute. He submitted that it was reasonably arguable that the respondent's claim for unliquidated damages, founded on alleged late or defective work performed by the applicant, would impeach the applicant's title to sue on a debt, even where that was sourced in statute.
5. Counsel for the applicant maintained that by the terms of s 15(4) of the Act, in circumstances where the applicant had not served a payment schedule, the respondent was precluded from raising a defence of set-off.

Consideration

1. Although in its pleading, the respondent invoked equitable set-off and statutory set-off, under s 21 of the Civil Procedure Act 2005 (NSW), the statutory defence cannot run since the respondent's claim has to be a liquidated claim (s 21(6)). The respondent's claim against the applicant is one for unliquidated damages. If it has a defence of set-off, it must be an equitable set-off.
2. Unlike its first point in opposition to the application for summary judgment, in which it was a live question whether the disputed payment claims were validly made, this point is independent and truly alternative: it does not raise a question whether a valid payment claim was issued. The premise for consideration of this particular argument is that the disputed payment claims were valid. (It was not suggested that the other detailed requirements in s 13(2) of the Act were not established). Even if the Court was to assume that the claimant was in breach of its contract in the manner alleged by the respondent, this would not derogate from that premise.
3. This in my view would mean that (on the stated premise) s 15 of the Act would operate according to its terms.
4. However 'unusual' it may have been for a claimant to commence a proceeding in which mixed claims were made involving the recovery of a debt under s 15(2)(a)(i) of the Act and other common law claims, I agree with Counsel for the applicant that there is no bar to a claimant bringing mixed claims.
5. Having done so, points of construction of s 15(4) potentially may arise. The respondent's argument elides consideration of whether properly construed the Act, as a whole, excludes a defence of equitable set-off. With respect, neither party advanced very developed submissions as to whether or not it had that effect. There may be a forceful view that, given the objects of the Act generally, the text and its context, the ouster of defences under s 15(4)(b)(ii) is confined only to a proceeding to the extent that the proceeding concerns the claim based on a statutory debt; but would permit a respondent to run defences to the common law claims. This might be considered more consistent with the objects and purposes of the Act, in context, that a respondent should be required to pay the debt whilst retaining the opportunity, subsequently, to seek the effective recoupment of such payment, along with the opportunity to agitate its own claim for damages in proceeding.
6. Ordinarily, for the purpose of dealing with a novel point in an application of this kind, it would be inappropriate to preclude the respondent from raising contrary arguments to the constructional matters I have raised (especially where they were not argued at length). The constructional point raised by the respondent would not be so groundless that it should be precluded from running it in the trial of this matter. I am especially mindful, in this regard, of the principle alluded to earlier in these reasons about a court's need for caution before peremptorily terminating a proceeding involving novel points of law.
7. Nevertheless, even if there was arguable merit in the respondent's constructional argument whether an equitable set-off could be invoked against a debt sourced in the Act, it remains the position that the respondent did not serve a payment schedule asserting it. On the basis of s 15(4)(b)(ii) of the Act, I accept the applicant's argument that summary judgment would have been available on the debt claim having regard to this point; leaving the respondent with the defence of a set-off (and its cross-claim) in a proceeding which finally determines the parties' rights. In short, it is arguable that a defence of equitable set-off may be raised to absolve the respondent of liability for a valid payment claim, but it must be raised in a payment schedule.
8. For the foregoing reasons, the applicant's notice of motion is dismissed with costs.
9. That motion was filed over 4 months ago. Having regard to the nature of the proceeding, it is particularly important that it proceed with dispatch. It does not appear that to date there has been any real case management of the proceeding as a whole. Accordingly, the proceeding should be listed for Directions before the Registrar on 10 February 2022 or such other date as is notified to the parties.

Endnotes

1. Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd (2016) 260 CLR 340 at [14], [44]
2. Ausipile Pty Ltd v Bothar Boring and Tunnelling (Australia) Pty Ltd [2021] QSC 39 at [7]
3. Eg Concut Pty Ltd v Worrell (2000) 176 ALR 693 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 February 2022