MAK INDUSTRIAL WATER SOLUTIONS PTY LTD -v- DOHERTY [No 2] [2023] WASC 279 (26 July 2023)

(a) unpaid accrued long service leave;
>
> (b) unpaid commissions for August 2022 (the final full month in which they were employed by MAK Water); and
>
> (c) failure to pay amounts owing to them by reason of the redemption of 'Plan Shares' previously owned by them and redeemed by MAK Water pursuant to MAK Water's Employee Share Plan.

7. As I have said, Mr Hartnett and Mr Matthews now apply for summary judgment on their counterclaims. Mr Hartnett seeks summary judgment on all of the amounts in the counterclaim; whereas Mr Matthews seeks summary judgment only in relation to the unpaid commissions for August 2022 and the failure to pay the amount owing to him by reason of the redemption of 'Plan Shares'.
8. MAK Water does not dispute that it owes money to Mr Hartnett and Mr Matthews. It accepts, for example, that it owes Mr Hartnett accrued long service leave. It also accepts that Mr Hartnett and Mr Matthews are owed redemption payments for the redemption of their Plan Shares, although it disputes the precise amounts owed.
9. Nevertheless, MAK Water has paid nothing to Mr Hartnett or Mr Matthews on account of the amounts they seek in their counterclaims.
10. In addition to the issues it raises as to the quantification of the amounts owing, MAK Water raises two principal defences to Mr Hartnett and Mr Matthews' claims:

(a) first, MAK Water maintains that it is entitled to withhold payment by reason of terms of the Standard Conditions of Employment for Full Time and Part Time Employees from 2019 (2019 Standard Conditions); and
>
> (b) secondly, MAK Water claims it is entitled to a set-off against Mr Hartnett and Mr Matthews' claims in respect of its claim for damages, an account of profits and equitable compensation.

11. MAK Water also submits, generally, that the circumstances are such that there is some other reason to justify the refusal of summary judgment.
12. Mr Hartnett and Mr Matthews deny that the 2019 Standard Conditions formed part of their contracts of employment and deny that MAK Water is entitled to a set-off sufficient to defeat their summary judgment applications.

1. The principles applicable to an application for summary judgment are not in dispute, as evidenced by the parties' references to large parts of Civil Procedure, Western Australia in their written submissions. As the Court of Appeal said in Sutton Investments Pty Ltd v Realistic Investments Pty Ltd:[1]

Summary judgment will be granted only when there is no real question to be tried. The power to order summary judgment is one that should be exercised with great care: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99. It is only in the clearest of cases, when there is a high degree of certainty about the ultimate outcome of the proceedings if it went to trial, that summary judgment ought properly be granted: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57]; Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 [46]; Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 [24], [53] ‑ [55].

1. A clear case is not the same as a simple case. Extensive argument may well be necessary to demonstrate that there is no arguable defence to a claim and the fact that a transaction is intricate does not disentitle the court from examining whether there is no real question to be tried.[2]

1. Mr Hartnett relies on the following evidence in support of his application for summary judgment:

(a) affidavit of Michael Hartnett sworn on 23 March 2023 (Mr Hartnett's March affidavit);
>
> (b) affidavit of Michael Hartnett sworn on 26 June 2023 (Mr Hartnett's June affidavit); and
>
> (c) affidavit of Michael Hartnett sworn on 2 February 2023 (Mr Hartnett's February affidavit). Mr Hartnett's February affidavit was initially filed in response to an application by MAK Water for an interlocutory injunction.

2. Mr Matthews relies upon the following evidence in support of his application for summary judgment:

(a) affidavit of Kyle Matthews sworn 23 March 2023 (Mr Matthews' March affidavit);
>
> (b) affidavit of Kyle Matthews sworn 26 June 2023 (Mr Matthews' June affidavit); and
>
> (c) affidavit of Kyle Matthews sworn 2 February 2023 (Mr Matthews' February affidavit). Mr Matthews' February affidavit was also filed in response to MAK Water's application for an interlocutory injunction.

3. MAK Water relies upon the following evidence in support of its opposition to the application for summary judgment:

(a) affidavit of Andy Peter Byk sworn 9 December 2022 (Mr Byk's December affidavit);
>
> (b) affidavit of Andy Peter Byk sworn 10 February 2023 (Mr Byk's February affidavit);
>
> (c) affidavit of Andrew Peter Byk affirmed on 31 May 2023 (Mr Byk's May affidavit);
>
> (d) affidavit of Caitlin Erin Murphy affirmed on 5 May 2023 (Ms Murphy's May affidavit); and
>
> (e) affidavit of Abbi Beckwith affirmed on 12 July 2023 (Ms Beckwith's July affidavit).

4. MAK Water took objection to certain parts of Mr Hartnett's March affidavit and Mr Matthew's March affidavit and Mr Hartnett and Mr Matthews took objection to parts of Mr Byk's May affidavit. I ruled upon those objections at the hearing of the applications.
5. I propose to address the issues raised by the applications by first addressing whether Mr Hartnett and Mr Matthews have otherwise established a clear entitlement to the amounts claimed, leaving aside MAK Water's proposed defences under the 2019 Standard Conditions and its claims for set-offs. I will then address those defences and MAK Water's response to the application for summary judgment generally.
6. As to the first matter (the claims themselves), it is necessary to consider Mr Hartnett and Mr Matthew's claims separately.

1. In his Defence and Amended Counterclaim,[3] Mr Hartnett claims:

(a) accrued long service leave benefits of $46,287.00;[4]
>
> (b) unpaid commission for August 2022 of $22,983.40;[5] and
>
> (c) a redemption amount for his Plan Shares of $318,671.86.[6]

2. In compliance with O 14 r 2(1), Mr Hartnett's March Affidavit verifies the facts upon which those claims are made and deposes to Mr Hartnett's belief that there are no defences to any of the claims in the Hartnett Counterclaim.[7]
3. The detail is as follows.

1. There is no dispute that Mr Hartnett commenced employment with MAK Water in October 2010. The only issue on the pleadings is as to the day in October 2010. Both parties identify that Mr Hartnett was employed pursuant to a written contract of employment dated 17 December 2009 (Mr Hartnett's contract of employment).[8]
2. Mr Hartnett deposes, and there is no evidence to the contrary, that by letter from Mr Byk dated 8 July 2019 (Hartnett Variation Letter), he was promoted to Sales Manager.[9] The Hartnett Variation Letter sets out the changes to Mr Hartnett's remuneration, including his salary and sales commission entitlements.

1. In accordance with Mr Hartnett's contract of employment, 'Long service leave is accrued as required by state legislation'; that is the Long Service Leave Act 1958 (WA).
2. Paragraph 47 of the Hartnett Counterclaim sets out the calculation of Mr Hartnett's long serve leave in accordance with the Long Service Leave Act. Those calculations quantify the entitlement at $62,185.16, of which $15,898.16 was paid on 5 October 2022, leaving the amount claimed of $46,287.00.
3. MAK Water accepts that Mr Hartnett is owed long service leave entitlements. Mr Byk's May affidavit deposes that MAK Water admits that it owes Mr Hartnett $43,722.12 in long service leave entitlements, and annexes calculations for that alternative amount.
4. Without accepting Mr Byk's calculations, Mr Hartnett accepted MAK Water's calculations for the purposes of the summary judgment application.[10]
5. Subject to the defences raised by MAK Water, I therefore find, for the purposes of the summary judgment application that MAK Water owes Mr Hartnett long service leave entitlements in the sum of $43,722.12.

1. There is no doubt that Mr Hartnett's contract of employment, together with the Hartnett Variation Letter, entitled Mr Hartnett to be paid commissions, both in the form of a Sales Team Commission and a Sales Manager Profit Share.[11]
2. Paragraph 52 of Hartnett Counterclaim pleads that Mr Hartnett's Sales Team Commission for August 2022 was $19,877.00 and his Sales Manager Profit Share was $3,106.40, producing the total of $22,983.40. Mr Hartnett deposes that those sums are reflected in MAK Water's records, being a 'MAK Sales Team Commission' spreadsheet for August 2022 (August spreadsheet). Mr Hartnett deposes that he was shown the August spreadsheet by a sales employee of MAK Water in a Teams meeting on 13 September 2022 and that he took a screenshot of the spreadsheet at the time.[12]
3. Mr Byk's May affidavit in opposition to the summary judgment application takes no issue with the calculations set out in the August spreadsheet. Rather, he contends, by reference to the 2019 Standard Conditions and a document headed MAK - Sales Commission Structure,[13] that Mr Hartnett had no entitlement to commissions from August 2022 because he had tendered his resignation on 26 August 2022.
4. I will address whether it is arguable that the 2019 Standard Conditions formed part of Mr Hartnett's terms of employment later.
5. In relation to the MAK - Sales Commission Structure, MAK Water relies upon a statement in that document, to the following effect:

The total available Commission pool is distributed, in full, amongst the team members. If one team member leaves, his percentage allocation is proportionally distributed amongst the remaining members, after a three month period during which time the company retains his/proportion of the commission pool.

1. Whatever this means, there is no evidence that the MAK - Sales Commission Structure, is a contractual document that varied Mr Hartnett's contract of employment. There is no such provision in the Hartnett Variation Letter. On the contrary, the Hartnett Variation Letter sets out the Sales Team Commission and Sales Manager Profit Share to which he is entitled with no such restriction.
2. In any event, there is no dispute that Mr Hartnett's employment with MAK Water did not end until 23 September 2022, at the earliest. I say at the earliest because MAK Water pleads and Mr Byk deposes that his employment ceased on 26 September 2022.[14] According to Mr Hartnett's contract of employment his remuneration was 'paid fortnightly in arrears, on Tuesday's (sic)'. Correspondence from MAK Water, through its Human Resources Manager, confirmed that his commission 'was due to be paid on September 12, 2022'.[15]. Mr Hartnett was clearly still employed by MAK Water when the August 2022 commission fell due.
3. Subject to the effect of 2019 Standard Conditions, in my view there is no triable issue that Mr Hartnett was not entitled to commission in the sum of $22,983.40 at the time that his employment ceased.

1. There is no dispute that Mr Hartnett participated in MAK Water's Employee Share Plan and that, at the time his employment ended, he held 5,225 Class A Shares in MAK Water.[16]
2. The issue between the parties is as to the redemption amount payable for Mr Hartnett's shares, which in turn, depends upon their differing positions as to the applicable Prevailing Price within the meaning of MAK Water's Employee Share Plan - Plan Rules (Plan Rules).[17] Mr Hartnett contends that the applicable Prevailing Price is $65.18, producing a total redemption amount of $318,671.86.[18] MAK Water contends that the applicable Prevailing Price is $55.17, producing a total redemption amount of $266,444.[19]
3. To understand the issue between the parties it is necessary to consider the Plan Rules and the parties' competing constructions.

1. The Plan Rules commenced on or about March 2012. They are subject to a presently immaterial variation dated 11 September 2019.
2. It is not necessary to set out the provisions of the Plan Rules as they relate to eligibility to apply for, and acquire, Plan Shares. It suffices to observe that Eligible Employees may apply for Plan Shares, together with Loans up to and including the amount payable in respect of the shares. An Eligible Employee may not deal in Plan Shares, but may redeem the shares by issuing a Redemption Notice. Similarly, when an Eligible Employee ceases to be an Eligible Employee, MAK Water is required to redeem (or place with another person) all of the Plan Shares.
3. The relevant provisions of the Plan Rules as to redemption are as follows:

(a) dies;

(b) becomes bankrupt;

(c) ceases to be an Eligible Employee; or

(d) issues a Redemption Notice,

then the Company shall, at the Redemption Price and subject to the requirements of the Corporations Act, redeem (or place with another person) all of the Plan Shares of that Eligible Employee or in the case of a Redemption Notice such number of Plan Shares the subject of that Redemption Notice. The Company may redeem Plan Shares by way of a trustee arrangement to facilitate such Plan Shares being reissued in the future to an Eligible Employee.

An Eligible Employee may issue to the Company a Redemption Notice concerning any Plan Shares that they hold subject to the following conditions (which the Board may in its discretion elect to waive):

(a) a Redemption Notice may only be issued, so far as it relates to any Plan Shares, after the third anniversary of the Issue Date for such Plan Shares;

(b) no more that 20% of the Plan Shares then owned by an Eligible Employee may be the subject of a Redemption Notice;

(c) an Eligible Employee may issue a maximum of one Redemption Notice each financial year.

Any proceeds from the redemption of Plan Shares pursuant to Rule 7.1 shall be applied by the Company as follows:

(a) firstly towards all reasonable expenses, including an administration fee of $100 or such higher amount as may be fixed by the Board (having regard to increases in administration costs), associated with such redemption (or placement);

(b) then towards repayment of any outstanding Loan; and

(c) then, if any surplus, to the Eligible Employee.

1. In accordance with clause 7.1 of the Plan Rules:

(a) Redemption Price, relevantly includes the Prevailing Price;[20]
>
> (b) Prevailing Price 'for a Share means the average EBITDA for the proceeding two financial years of the company multiplied by 5.5 and divided by the number of shares then on issue';[21]
>
> (c) EBITDA 'means the earnings of the Company before interest, tax, depreciation and amortisation for a financial year (as determined by the final accounts for the Company for that financial year).'

Mr Hartnett's calculation of the Prevailing Price

1. Mr Hartnett's March Affidavit annexes MAK Water's Consolidated Financial Reports for the financial years ended 30 June 2021 and 30 June 2022.[22] By reference to those reports, he calculated the average EBITDA over those two years as being $10,973,000.[23] He also deposes to the total number of shares as at the termination date as 925,851.[24] Applying those amounts to the definition of Prevailing Price produces the Prevailing Price applied by Mr Hartnett of $65.18 per share, producing a total value of the Shares of $340,591.08.[25]
2. Mr Hartnett deposes to the outstanding loan with MAK Water as being $21,819.22.[26] Applying each of these amounts in accordance with cl 7.4 of the Plan Rules produces the amount claimed as follows:[27]

MAK Water's calculation of the Prevailing Price

1. It is apparent from Mr Byk's May Affidavit that there is no dispute as to the size of the outstanding loan owed by Mr Hartnett of $21,819.22, or the number of shares previously owned by him.[28] The only difference between the parties as to the calculation of the redemption entitlement relates to the Prevailing Price.
2. MAK Water maintains that the Prevailing Price is $55.17. It is apparent that the difference between the parties is solely a result of the financial years from which each party has taken the EBITDA to arrive at the average EBITDA for the two preceding financial years. Whereas Mr Hartnett used the EBITDA for the financial years ending 30 June 2021 and 30 June 2022; MAK Water used the EBITDA for the financial years ending 30 June 2020 and 30 June 2021.
3. The explanation for the different years used by MAK Water is explained in Mr Byk's May Affidavit as follows:
   1. The Plaintiff calculates the 'Prevailing Price' for the following year based on the Plaintiff's final accounts for the previous financial year.
   2. That calculated 'Prevailing Price' applies to all Shares redeemed under the Plan Rules for the following 12-month period after calculation of the 'Prevailing Price' or until the Plaintiff's Board calculates a new 'Prevailing Price' based on the Plaintiff's final accounts for the next financial year.
   3. On 12 December 2021, I sent an email to all the employee Shareholders, including the Third Defendant, which notified them of the new 'Prevailing Price' (which I referred to in my email as the 'share price') based on the 2021 financial year final accounts, and that price would be 'around $55'. Attached hereto and marked 'AB5' is a copy of that email.
   4. Attached hereto and marked 'AB6' is a copy of a Microsoft Teams Meeting invitation to attend a meeting on 17 February 2023 sent to the Plaintiff's then current Shareholders stating that the 'share price has risen from $55.17 last year to its current price of $65.54'.
   5. The 'Prevailing Price' referred to in above paragraph 22 and 23 of $55.17 applies to all Shares redeemed under the Plan Rules between January and 22 December 2022.
   6. The 'Prevailing Price' referred to in above paragraph 28 of $65.54 applies to all Shares redeemed under the Plan Rules after 22 December 2022 which was set at the Plaintiff's Board meeting on 22 December 2023 (sic - 22 December 2022).
   7. The Plaintiff has followed the above referred to process in setting the 'Prevailing Price' and notifying its employees of the 'Prevailing Price' since it commenced the Employee Share Plan in 2012.
   8. The Third Defendant was aware of the Plaintiff's process in setting the 'Prevailing Price' and how the 'Prevailing Price was calculated because he brought those discussions up regularly including at Senior Management Meetings, which he attended, at least 2 to 3 times each year and on other occasions.
   9. On or about 6 October 2022 the Plaintiff notified ASIC that it proposed to buy back the Third Defendant's 5,225 Shares. A copy of the Form 281 is attached to the Harnett Affidavit at page 34.
   10. On 28 November 2022 the Plaintiff lodged with ASIC a Change to Company Details Form 484 stating that the Third Defendant's Shares in the Plaintiff had decreased by 5,225 to O and the earliest change date was 26 November 2022. A copy of the Form 484 is attached to the Harnett Affidavit at page 31.
   11. Because the Plaintiff bought back the Third Defendant's Shares before the Plaintiff's Board set the new 'Prevailing Price on 22 December 2022 the applicable 'Prevailing Price' for the Third Defendant's Shares is $55.17 not $65.18 as alleged on page 155 of the Harnett Affidavit.
   12. Attached hereto and marked 'APBG' is a summary of the calculations regarding the amount payable for the Third Defendant's Shares of $266,444 (Third Defendant's Redemption Price).
4. I note that Mr Byk deposes that, based on the information contained in the financial reports for the financial years ended 30 June 2021 and 30 June 2022, MAK Water has determined that the current 'Prevailing Price' (since 22 December 2022) is $65.54 per share. This is generally consistent with Mr Hartnett's calculation based on those financial years of $65.18. This confirms that the only issue between the parties is as to the financial years applicable to the calculation of the Prevailing Price for Mr Hartnett's Plan Shares.

Which calculation of the Prevailing Price is correct?

1. It is apparent that the difference between the parties is a matter of a different construction of the definition in the Plan Rules. In particular:

(a) Mr Hartnett submits that the definition of Prevailing Price applies the EBITDA from the 'proceeding (sic preceding) two financial years' immediately prior to the redemption date, regardless of the time at which the EBITDA (and as a consequence the Prevailing Price) is calculated and notified by MAK Water; and
>
> (b) MAK Water submits that the Prevailing Price only incorporates the EBITDA from the 'proceeding (sic preceding) two financial years' when the company has undertaken a process of 'setting' and 'notifying' the Prevailing Price in a given year. Until that time the previously set 'Prevailing Price' based on the EBITDA from the financial years two and three financial years earlier continue to apply.

2. The difference between the parties, as they each acknowledge, is a question of construction of the Plan Rules. In that regard the principles of construction are well established as noted by Beech JA and me in GR Engineering Services Ltd v Investmet Ltd:[29]

The principles applicable to the construction of written contracts are well established and need not be repeated. They were outlined in Black Box Control Pty Ltd v Terravision Pty Ltd and in Sino Iron Pty Ltd v Mineralogy. By way of summary:

(1) The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose. The starting point for the proper construction of a clause is the language used in the clause. In particular, one starts by identifying the possible meanings that the words chosen by the parties can bear.

(2) Ascertaining the meaning of terms in an instrument requires a determination of what a reasonable person would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract. The instrument must be read as a whole.

(3) The general principle applicable to the construction of commercial contracts is that they should be given a businesslike interpretation. Absent a contrary intention, the court approaches such contracts on the basis that the parties intended to produce a result which makes commercial sense. This requires that the construction placed on the term or terms in question is consistent with the commercial object of the agreement. However, it must also be borne in mind that business commonsense may be a topic on which minds may differ.

1. In my view the proper construction of the Plan Rules as to the relevant financial years for determining the Prevailing Price is clear. It is, as Mr Hartnett submits, the financial years ending on 30 June in the two years immediately prior to the redemption date. There is no basis for construing the definition to require any action to be taken by the company under the Plan Rules (i.e. MAK Water) to 'set' a Prevailing Price. The Prevailing Price is determined by objective criteria independent of the actions of MAK Water, save that it is, of course, necessary that for the company to prepare financial accounts.
2. It is not entirely clear what MAK Water contends by way of the proper construction of the Plan Rules. Clearly it contends that its position is that the Board of MAK Water is required to determine the Prevailing Price. How that is manifested from the text of the Plan Rules, however, is not clear. It did refer to cl 14, which provides:
   1. PROVISION OF INFORMATION

Within 30 days of finalisation of the Company's accounts for each financial year the Company shall notify each Eligible employee that owns Plan Shares of the EBITDA of that financial year and the applicable Prevailing Price.

1. Clause 14 however is clearly a provision as to the 'Provision of Information', as its heading reveals. The company is required to advise the shareholders of the EBITDA and the 'applicable Prevailing Price'. Clause 14 does not enable the Company however to 'set' or 'determine' the Prevailing Price. That is determined by the formula in the Plan Rules.
2. Clause 14 recognises that there may be some delay between the end of the financial year and the finalisation of the accounts for that year. That is also reflected in the fact that the definition of EBIDTA includes that it is 'as determined by the final accounts for the Company for that financial year'. In that regard, until the final accounts for the financial year have been completed, it may not be possible to ascertain the Prevailing Price by applying the formula in the Plan Rules. That, however, is purely a matter of the timing at which the amount owing for a redemption can be properly ascertained; it does not affect the substantive basis upon which the Prevailing Price is to be determined.
3. Indeed, while it may be MAK Water's practice (or 'process') to set a Prevailing Price once a year for all redemptions in the upcoming year, such a practice is not contemplated by the Plan Rules; save for the notification on one occasion in cl 14.
4. Indeed, upon its proper construction it is apparent, in my view, that the Redemption Price (and Prevailing Price) is to be determined at the time of the precipitating event in cl 7.1(a) to (d) of the Plan Rules. In that regard, it is possible that the Prevailing Price could change over the course of a year because, while the average EBIDTA cannot change in any given financial year, it is possible that the 'number of Shares then on issue' (being part of the definition of Prevailing Price) might change from time to time. The definition of the Prevailing Price would, in those circumstances, produce a different result.
5. In my view, there is no textual foothold for MAK Water's application of the Plan Rules. It does not raise a triable issue.
6. As an aside, in the course of the hearing of the application, counsel for MAK Water referred to cl 15 of the Plan Rules, which provides:

The rights and obligations of any individual under the terms of his office or employment with any Group Company are not affected by his participation in the Plan and these Rules do not form part of and are not incorporated into any contract of engagement or employment of any individual with a Group Company and do not confer directly or indirectly on an individual any legal or equitable right whatsoever against a Group Company. No individual has any rights of compensation or damages in consequence of the termination of his engagement or employment for any reason whatsoever in so far as those rights arise or may arise from his ceasing to have rights under the Plan as a result of such termination.

1. Counsel did not suggest that this clause affected an Eligible Employee's right to be paid for the redemption of their Plan Shares, in accordance with the Plan Rules. Rather, he submitted it was intended to reflect the fact that the rights of an Eligible Employee as a shareholder of Plan Shares was to be kept separate to their rights pursuant to their employment contract. He accepted that, subject to MAK Water's defences, Mr Hartnett and Mr Matthews have a right to be paid for the redemption of their shares in accordance with the applicable Prevailing Price. I accept that submission. As I have said in my view, the only open construction of the Plan Rules as to the Prevailing Price was that contended for by Mr Hartnett and Mr Matthews.
2. There being no other issue between the parties, I accept that, subject to MAK Water's other proposed defences, MAK Water owes Mr Hartnett a redemption amount for his Plan Shares of $318,671.86.

Preliminary conclusions as to Mr Hartnett's entitlements

1. On the basis of the above conclusions, subject to MAK Water's proposed defences, Mr Hartnett has established a present entitlement to $385,377.38, being:

(a) accrued long service leave benefits of $43,722.12;
>
> (b) unpaid commission for August 2022 of $22,983.40; and
>
> (c) a redemption amount for his Plan Shares of $318,671.86.

1. In his Defence and Amended Counterclaim,[30] Mr Matthews claims:

(a) accrued long service leave benefits of $33,941.06;[31]
>
> (b) unpaid commission for August 2022 of $19,877.00;[32] and
>
> (c) a redemption amount for his Plan Shares of $139,976.21.[33]

2. Mr Matthews seeks summary judgment in relation to the latter two amounts. In compliance with O 14 r 2(1), Mr Matthews' March Affidavit verifies the facts upon which those claims are made and deposes to Mr Matthews' belief that there are no defences to any of those claims.[34]
3. The detail is as follows.

1. There is no dispute that Mr Matthews commenced employment with MAK Water on 21 August 2013. Both parties identify that Mr Matthews was employed pursuant to a written contract of employment dated 21 August 2013 (Mr Matthews' contract of employment).[35] Mr Matthews also deposes that at the time of his employment he received, and signed, a document entitled Standard Conditions of Employment for Full Time and Part Time Employees.[36] None of MAK Water's subsequent affidavits take issue with the veracity of that document. For the purposes of this application, I accept that it formed part of Mr Matthews' contract of employment.
2. Mr Matthews deposes, and there is no evidence to the contrary, that by letter from Mr Byk dated 26 April 2022 (Matthews Variation Letter), he was promoted to Technical Sales and Sales Manager - Service and Operations.[37] The Matthews Variation Letter sets out the changes to Mr Matthews' remuneration, including his salary and sales commission entitlements.

1. As with Mr Hartnett, there is no doubt that Mr Matthews' contract of employment, together with the Matthews Variation Letter, entitled Mr Matthews to be paid commissions, both in the form of a Sales Team Commission and a Sales Manager Profit Share.[38]
2. Paragraph 52 of the Matthews Counterclaim pleads that Mr Matthews' Sales Team Commission for August 2022 was $19,877. Mr Matthews deposes that he was advised by Mr Hartnett and believes that he is owed that sum.[39]
3. Mr Byk's May affidavit in opposition to the summary judgment application takes no issue with the amount sought by Mr Matthews for August commissions. As with Mr Hartnett, he contended, by reference to the 2019 Standard Conditions and the MAK - Sales Commission Structure, that Mr Matthews had no entitlement to commissions from August 2022 because he had tendered his resignation on 26 August 2022.
4. As I have said I will address whether the 2019 Standard Conditions formed part of Mr Matthews' terms of employment later.
5. In relation to the MAK - Sales Commission Structure, I repeat my conclusion in relation to Mr Hartnett's application: there is no evidence that the MAK - Sales Commission Structure, is a contractual document that varied Mr Matthews' contract of employment and that Mr Matthews' employment with MAK Water did not end until 23 September 2022, at the earliest.[40] Mr Matthews was clearly still employed by MAK Water when the August commission fell due.
6. Subject to the effect of the 2019 Standard Conditions, in my view, there is no triable issue that Mr Matthews was not entitled to commission in the sum of $19,877 at the time that his employment ceased.

1. There is no dispute that Mr Matthews participated in MAK Water's Employee Share Plan and that, at the time his employment ended, he held 2,465 Class A Shares in MAK Water.[41]
2. The issue between the parties as to the redemption amount payable for Mr Matthews' shares is identical to that in relation to Mr Hartnett's shares. Based on the same series of calculations as those summarised above in relation to Mr Hartnett, Mr Matthews contends that the applicable Prevailing Price is $65.18, producing a total redemption amount of $139,976.21. This may be summarised as follows:[42]

1. MAK Water contends that the applicable Prevailing Price is $55.17, producing a total redemption amount of $115,390.[43]
2. My conclusion in relation to the parties' respective contentions in relation to the construction of, and calculation of, the Prevailing Price applies equally to Mr Matthews' claim. There is no textual foothold for MAK Water's construction of the Plan Rules. It does not raise a triable issue.
3. There being no other issue between the parties, I accept that, subject to MAK Water's other proposed defences, MAK Water owes Mr Matthews a redemption amount for his Plan Shares of $139,976.21.

Preliminary conclusions as to Mr Matthews' entitlements

1. On the basis of the above conclusions, subject to MAK Water's proposed defences, Mr Matthews has established a present entitlement to $159,853.21, being:

(a) unpaid commission for August 2022 of $19,877.00; and
>
> (b) a redemption amount for his Plan Shares of $139,976.21.

MAK Water's defences and opposition to summary judgment

1. In addition to the particular matters as to the calculation of their entitlements, which I have already addressed, MAK Water raises three matters in opposition to Mr Hartnett and Mr Matthews' applications for summary judgment:

(a) that it is entitled to withhold payment of entitlements by reason of a term of the 2019 Standard Conditions;
>
> (b) it is entitled to a set-off against Mr Hartnett and Mr Matthews' claims in respect of its claims for damages, an account of profits and equitable compensation; and
>
> (c) there is 'some other reason' to deny Mr Hartnett and Mr Matthews' applications for summary judgment.

1. The 2019 Standard Conditions are relied upon by MAK Water in two respects.
2. First, in relation to the claims for commission from August 2022, MAK Water relies upon provisions in the following terms:

MAK Water Bonus Plan

Overview

To reward employees for positive performance and share the company's success, MAK Water provides employees the opportunity to earn a bonus in addition to their base salary.

The Bonus Plan applies to all MAK Water Full Time and Part Time permanent employees who have successfully completed their probation period, as detailed in individual employment agreements.

The Plan

To participate in the MAK Water Bonus Plan employees must:

• Have completed their probationary period
• Be employed at MAK Water on the date of the Bonus Plan Payment and not have handed in their notice prior to this payment date.
• Not be receiving performance management or have received a performance warning during that period. The employee's manager may request that exceptional circumstances be considered by the MAK Water board to determine whether a percentage of the bonus plan is applied at the time.

Payments under the Plan are calculated based upon completion of set Key Performance Indicators (KPI's). KPI's are normally set so that achieving budget provides a payment of 50% of the available bonus. Where performance is better than budget payments up to 100% of the available bonus can be achieved.

KPI's will be based on:

• Company performance
• Team performance
• Individual performances

KPIs are set at the commencement of the bonus period for individuals and teams to work toward, or on successful completion of an employee's probation period for individual KPl's.

All Bonus Plan Payments made will have superannuation paid on top at the prevailing rate.

The Bonus Plan provides up to 10% of annual base salary, paid in two instalments (up to 5% each) in December and in July each year. The December payment covers performance in the second half of the calendar year (first half of the financial year); and the July payment covers performance of the first half of the calendar year (second half of the financial year). (emphasis added)

1. The relevant portion of these terms that is relied upon by MAK Water is that portion emphasised in the above extract.
2. It is not immediately apparent that these provisions, referring to biannual bonus payments are referrable to the payment of commissions, which according to all of the evidence were determined and paid monthly, in accordance with rates that appear in the Hartnett Variation Letter and the Matthews Variation Letter. While it may be the case that they are intended to refer to the same payments it is not clear. The parties appear to have accepted that there was relevantly only one scheme for 'commissions' or 'bonuses' at MAK Water.
3. In relation to Mr Hartnett and Mr Matthews' claims generally, MAK Water maintains that it is entitled to withhold payment of any outstanding entitlements by reason of the following term of the 2019 Standard Conditions:[44]

On the ending of your employment, you must deliver to the Company all Company and client/customer property in you possession and control.

Final pay will be process when all the above mentioned property is returned in good order. The Company reserves the right to withhold any monies in compensation for damage and or loss of Company property caused as a direct result of your actions out of your normal scope of work.

1. MAK Water, maintains that this term operates, in effect, as a contractual set-off for amounts that might be owing to it by way of compensation. Even assuming this provision formed part of the terms of Mr Hartnett and Mr Matthews' contracts of employment, in my view, real questions would arise as to whether it was capable of applying to all of the amounts claimed by Mr Hartnett and Mr Matthews in their counterclaims.
2. For example, the context of the provision, particularly the immediately preceding sentences, rather suggests that the right to withhold monies relates to property damage to company property that had been in the employee's possession or control. It is not immediately apparent to me that this provision would enable MAK Water to withhold payment of entitlements due to an unliquidated claim for damages or equitable compensation. Moreover, in relation to Mr Hartnett and Mr Matthews' claims with respect to the redemption of their Plan Shares, as the parties identified by reference to cl 15 of the Plan Rules, it is difficult to see that the right to be paid the redemption price with respect to the ownership of shares could properly be characterised as 'pay' or remuneration to which a provision such as this would apply.
3. Nevertheless, notwithstanding these ambiguities, I will proceed on the basis that these issues as to the application of the 2019 Standard Conditions are at least triable.
4. The real issue in relation to these provisions is that both Mr Hartnett and Mr Matthews contend that the 2019 Standard Conditions never formed part of their contracts of employment.
5. In that regard, there is no evidence that either Mr Hartnett or Mr Matthews ever expressly agreed to be bound by the 2019 Standard Conditions. Each was employed well before the 2019 Standard Conditions were produced and there is no evidence that either of them were ever asked to accept or to sign them.
6. For his part, Mr Hartnett deposes to being aware of the existence of the 2019 Standard Conditions, due to his attendance at National Executive Meetings. While Mr Hartnett deposed that he was aware of other employees being asked to sign the 2019 Standard Conditions as a condition of a pay rise, he says that he was never asked to do so and, would not have done so as he 'considered this would require a full re‑negotiation of by employment terms including my salary and remuneration package'.[45]
7. Significantly, it appears that the only document relevant to Mr Hartnett's contract of employment following the creation of the 2019 Standard Conditions is the Hartnett Variation Letter. That document confirms the new remuneration package attaching to Mr Hartnett's contract of employment, but does not refer to the 2019 Standard Conditions.
8. As far as Mr Matthews is concerned, he did sign an earlier set of Standard Conditions of Employment for Full Time and Part Time Employees.[46] They did not contain the terms relied upon from the 2019 Standard Conditions. Mr Matthews deposes to attending only one Executive Team meeting, as a guest on 23 August 2022.[47] As in Mr Hartnett's case, the Matthews Variation Letter confirms the new remuneration package attaching to Mr Matthew's contract of employment, but does not refer to the 2019 Standard Conditions.
9. MAK Water's case in relation to the 2019 Standard Conditions is that both Mr Hartnett or Mr Matthews agreement to be bound by those conditions, is evidenced by a course of conduct.[48] The parties referred in that regard to Industrial Rollformers Pty Ltd v Ingersoll-Rand Australia Ltd[49] and Absolute Analogue Inc v Sundance Resources Ltd [No 3].[50]
10. The applicable principles are set out, for example, in Industrial Rollformers:[51]

There is no doubt that a contract may be found in a course of conduct. In Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 one party declined to sign a formal contract proposed by the other party, but it was held that it had by its conduct agreed to be bound by its terms. McHugh JA, with whom Samuels JA agreed, said (at 535) that the question is one of fact, and that -

' ... where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms. ...

The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted.'

It may be artificial to analyse the conduct of the parties in the traditional terms of offer and acceptance, and sometimes analysis in those terms is not possible: see the detailed discussion by Heydon JA in Brambles Holdings Ltd v Bathurst City Council (2001) NSWCA 61 at [71] ‑ [80]. In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust.) Pty Ltd (1988) 5 BPR 97326 at 11,117 McHugh JA, with whom Hope and Mahoney JJA concurred, said that the question in a contract by conduct case is whether the conduct of the parties, viewed in the light of the surrounding circumstances, shows a tacit understanding or agreement, but emphasised that the conduct of the parties must be capable of proving all the essential elements of an express contract.

1. Similarly, in Absolute Analogue, Le Miere J said:[52]

Where the intention of the parties is equivocal, conduct or correspondence subsequent to the time when the alleged agreement was made can be used as evidence to show whether or not a contract was concluded. Where it is asserted that it can be inferred that a contract has arisen from conduct, it is not sufficient that the conduct is consistent with the alleged contract. There needs to be a positive indication that the conduct is evidence of the contract alleged: Industrial Rollformers Pty Ltd v Ingersoll-Rand Australia Ltd [2001] NSWCA 111 [142]; Kriketos v Livschitz [2009] NSWCA 96 [117] - [120]; McColl JA, Macfarlan JA concurring.

1. As is reflected in both of these cases, consistency is not enough. There must be a positive conclusion of a tacit understanding or agreement.
2. The evidence relied upon by MAK Water in this context is in Mr Byk's December affidavit. In relation to Mr Hartnett, Mr Byk relevantly deposes:[53]
   1. During the Third Defendant's employment with the Plaintiff the Third Defendant had access to the Intranet and had access to documents such as:

(a) the Plaintiff's Standard Terms of Employment;
>
> (b) the Plaintiff's standard Confidentiality Agreement;
>
> (c) Codes of Conduct; and
>
> (d) Policies.

1. The Third Defendant acted in a manner consistent with the application of the Standard Terms of Employment to him including by:

(a) completing 6 monthly performance reviews;
>
> (b) claiming allowances and expenses;
>
> (c) completing weekly timesheets;
>
> (d) completing leave applications;
>
> (e) claiming vehicle allowances for fuel costs in circumstances where the Third Defendant used his personal car for travel of more than 300 km; and
>
> (f) using his work mobile telephone as required by the Policies.

2. The evidence in relation to Mr Matthews is in identical terms.[54]
3. In my view, the evidence produced by MAK Water falls well short of establishing an arguable case that Mr Hartnett's contract of employment or Mr Matthews' contract of employment were varied by a tacit understanding or agreement.
4. First, it is clear that both were existing employees, subject to specific contracts of employment. This is not a case where the existence of a contract needed to be inferred from the conduct of the parties. They each had a contract of employment which was entire and complete and they had operated under those contracts for many years. The question here is whether the course of conduct was such that there is an arguable case that the Court can positively conclude that the parties tacitly agreed to vary their contracts of employment.
5. Secondly, the conduct relied upon by MAK Water, at its very highest is evidence of consistency between their conduct and the 2019 Standard Conditions. That conduct is however equally consistent with the contracts of employment to which they had been parties since 2009 and 2013 respectively. There is nothing in their conduct that has been identified that is specifically referable to any change in the terms of their employment that could be referrable to the 2019 Standard Conditions. There is no evidence, indeed, that there had been any change at all as to the matters referred to in Mr Byk's affidavit as to performance review, allowances timesheets, applications, and use of cars and mobile phones.
6. For example, Mr Hartnett's contract of employment and Mr Matthews' contract of employment always appear to have been subject to performance reviews that have occurred since those contracts of employment commenced. In those circumstances the fact that conduct such as performance reviews had occurred before, and continued to occur, could not amount to evidence which positively pointed to a tacit understanding or agreement to be bound by new substituted conditions.
7. In my view, there is no triable issue that Mr Hartnett's contract of employment and Mr Matthews contract of employment were varied so as to include the 2019 Standard Conditions.

1. I turn then to MAK Water's alleged defence of equitable set-off. The principles in relation to equitable set-off were summarised by Smith J in Siah v Wong.[55] I need not repeat them.
2. To give rise to a set-off, the claims to be set off must, generally, be so closely connected that the countervailing claim impeaches the entitlement to the originating claim. As Buss JA (as his Honour then was) said in Palaniappan v Westpac Banking Corporation:[56]

An equitable set-off is available where the party claiming the set-off can establish a recognised equitable ground for being protected, to the relevant extent, from the other party's demand. 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 other party. The mere existence of a cross-claim or cross-demand is not sufficient to establish an equitable set-off. There must be a recognised ground for equitable intervention (beyond the mere existence of a cross-claim or cross-demand) so that the equity of the party claiming the set-off impeaches the title of the other party to the legal demand which it is seeking to enforce. See J & S Holdings Pty Ltd v NRMA Insurance Ltd [1982] FCA 78; (1982) 61 FLR 108, 127 (Blackburn, Deane & Ellicott JJ); James v Commonwealth Bank of Australia [1992] FCA 420; (1992) 37 FCR 445, 457 - 462 (Gummow J); Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62, 67 - 68 (Kennedy J, Malcolm CJ & Murray J agreeing); HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 479; (2013) 306 ALR 53 [136] (Emmett JA, Beazley P relevantly agreeing & Meagher JA agreeing); Hawes v Dean [2014] NSWCA 380 [59] - [65] (Barrett JA, Bathurst CJ & McColl JA agreeing).

1. Importantly, a mere counterclaim amounting to a cross action will not amount to a defence (by way of set-off) to a plaintiff's claim.
2. Moreover, it is necessary for the parties resisting a summary judgment application on the grounds of a set-off to enable the court to make some assessment of the likely quantum of the claim.
3. In this regard, as the Court of Appeal said in Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2]:[57]

In seeking to resist an application for summary judgment based on an equitable set‑off, the defendant must not only establish that it has an arguable claim on breach, but must also put before the court sufficient evidence to enable the court to make some assessment of the likely quantum of the defendant's claim. A defendant will not, in seeking to resist a summary judgment application, establish an arguable defence of set‑off if the evidence in support of the quantum of its claim is so vague, uncertain and lacking in substance, that the court is unable to make any informed assessment of its likely quantum and whether the quantum is likely to reach or exceed the level of the plaintiff's claim in debt: Melbourne Glass Pty Ltd v Coby Constructions Pty Ltd (1997) 14 BCL 409, 418 ‑ 419.

1. In the present case, MAK Water's alleged set-off is said to arise from MAK Water's claims in the primary action for breach of the defendant's contracts of employment, breach of fiduciary duty and use of confidential information.
2. Mr Byk's May affidavit deposes:[58]

Based paragraphs 47 to 63 of this Affidavit, if the Defendants, including the Third Defendant has used the Plaintiff's Confidential Information for the Defendants' benefit, the Plaintiff's loss and damage suffered or any account of profits by the Fourth Defendant could exceed the:

(a) Long Service Leave Entitlement;

(b) alleged commission payment, which is denied; and

(c) Third Defendant's Redemption Price.

1. As to the substance of those claims, I would observe the following.
2. MAK Water's proceedings have been on foot since December last year. There has already been an application for an interlocutory injunction which was determined by Master Sanderson on 10 May 2023, after his Honour had made orders by consent for the delivery up of certain USB devices belonging to Mr Hartnett and Mr Matthews.[59]
3. Beyond the provision of those USB devices (to which I will return), MAK Water have pointed to no evidence of any breach by the defendants.
4. For example, in his reasons on the injunction application, Master Sanderson observed:[60]

Each of the first, third and fourth defendants denies that they have used any confidential information. The plaintiff, although no doubt harbouring deep suspicions, is unable to point to any evidence which indicates the use of such information.

Assuming without deciding the defendants are bound by the restraint terms, there is simply no evidence provided by the plaintiff to establish the defendants have breached its terms.

1. In that context, in relation to the breaches alleged against them, Mr Hartnett and Mr Matthews have both gone on oath to the effect that they have no confidential information or MAK Water's price lists.
2. Mr Hartnett's February affidavit, for example, deposes that:[62]

[B]oth my home computer and work computer contained comingled personal and work documents ('Comingled Documents'). I have to the best of my knowledge and ability deleted all identified and known plaintiff documents from my home computer and storage devices, following cessation of my employment with the plaintiff, and have not made copies of any plaintiff documents which may have formed part of Comingled Documents (which have now been deleted). The deleted plaintiff documents which formed part of Comingled Documents may have included the documents listed at paragraph 108 of the Byk Affidavit;...

[N]either the second defendant nor myself have in our possession the plaintiff's price lists nor do we use the plaintiff's price lists;

1. Mr Hartnett repeat this in his June affidavit:[63]

8.1 I have to the best of my knowledge and ability deleted all identified and known documents of the plaintiff from my home computer and storage devices;

8.2 all of the deleted documents referred to in paragraph 8.1 above were copies of documents which were contained on the plaintiff's system and which were maintained on the plaintiff's system after my deletion of the copies ...

1. Similarly Mr Matthews' February affidavit deposes that:[64]

[M]y home computer and work computer contained comingled personal and work documents ('Comingled Documents'). I have to the best of my knowledge and ability deleted all identified and known plaintiff documents from my home computer and storage devices, following cessation of my employment with the plaintiff, and have not made copies of any plaintiff documents which may have formed part of Comingled Documents (and which are now deleted). I cannot recall whether those Comingled Documents included those folders or documents described at paragraph 108 of the Byk Affidavit (if so, they are amongst the documents which have been deleted). Further, in response to paragraph 108(i) of the Byk Affidavit, I deleted my personal documents from my work computer before I finished by employment with the plaintiff, but was unable to identify all such personal documents - and I therefore downloaded some files onto a USB device, which may have contained Comingled Documents.

...

[N]either the second defendant nor myself have in our possession the plaintiff's price lists, nor do we use the plaintiffs price lists ...

1. Again, this is reiterated in Mr Matthews' June affidavit:[65]

6.1 To the best of my knowledge, I have deleted all identified and known documents of the plaintiff from my home computer and storage devices;

6.2 All of the documents I deleted were copies of the plaintiff's documents kept on the plaintiff's system and which were maintained on the plaintiff's system after my deletions.

1. Against this, the evidence relied upon by MAK Water falls into two categories.
2. The first is evidence in relation to the potential possession of confidential information. That evidence arises in this way:
3. At the commencement of the proceedings, Mr Byk deposed in his December affidavit to the fact that a forensic examination of the computers used by Mr Hartnett and Mr Matthews while employed with MAK Water showed that at least two USB storage devices were connected to Mr Matthews' computer[66] and one USB storage device was connected to Mr Hartnett's computer[67] around the time of their resignations. That examination also showed that Mr Hartnett and Mr Matthews had accessed various files on the computers at around the same dates.
4. Those USB devices were provided to MAK Water for examination pursuant to orders made by Master Sanderson, with the consent of the parties. Following their production, an analysis was done by KPMG who provided a report, which is attached to Ms Murphy's May affidavit. That report describes tests done on the USB devices and a forensic analysis which revealed errors in the hard-drives, such that the final report concluded:[68]

Due to the issues set out above, we have been unable to examine the contents of any of the USB devices.

1. Since that time, further efforts have been made to examine and test the USB devices, pursuant to further orders of the court made on 2 June 2023. Reports of those examinations are annexed to Ms Beckwith's July affidavit, which reports state that there has been no recognisable data found on the devices referred to therein.
2. The upshot of all of the evidence there is no evidence as to what was on the USB devices. The highest it can be put in relation to whether confidential information may have been on those devices is there is a suspicion that there may have been material on those devices which has since been deleted. Of course, as I have said, each of Mr Hartnett and Mr Matthews say that they deleted from any storage devices anything which contained any of MAK Water's information.
3. Beyond the USB devices, Mr Beck also deposes various matters in his May affidavit:[69]
   1. The Plaintiff in its Statement of Claim that each of the Third Defendant and Fourth Defendant have misused the Plaintiff's Confidential Information.
   2. Since my Second Affidavit I have been told by Ben Marsh of 'Crushing Services International', which I verily believe to be true and correct, that the Fourth Defendant has contacted 'Crushing Services International' regarding its:

(a) 'Ken's Bore Central Processing Facility' to supply a reverse osmosis and sewage treatment plant; and
>
> (b) 'Yarrie Truck Wash Facility' to supply a sewage treatment plant and a flat rack oily water separation system (OWS),

(a) tendered for the work referred to in above paragraph 48; and
>
> (b) completed work for 'Crushing Services International' since 2018 and that client has generated revenue of more than $7,000,000 in the last 3 years.

2. Both of the Third Defendant and Fourth Defendant when employed with the Plaintiff sold OWS systems and had access to the Plaintiff's fabrication drawings for the OWS systems.
3. The Fourth Defendant managed the 'Crushing Services International' account whilst he was employed with the Plaintiff and developed a relationship with that client, including the executive manager Darren Killeen and other engineering and procurement personnel.
4. In 2013 the Plaintiff purchased its intellectual property and Confidential Information regarding the OWS systems from Clearmake, which included designs, systems and drawings.
5. The Plaintiff's Clearmake brand is the leading OWS system supplier in Australia.
6. Based on my knowledge of the Second Defendant's business (as outlined in paragraphs 96 to 103 of my First Affidavit) and experience in the water treatment industry the Second Defendant before October 2022 has not:

(a) specialised in the supply of reverse osmosis plants; and
>
> (b) previously supplied OWS systems.

7. If the Plaintiff were to lose 'Crushing Services International' as a client to the Second Defendant it would lose generated revenue of more than $2,500,000 each year.
8. In my Second Affidavit at paragraphs 35 to 37, I refer to Carnac Project Delivery Services recommending to its client that the Plaintiff, the Second Defendant and another third party to provide contaminated storm water service at Karnet Prison Farm.
9. The Plaintiff was successful in obtaining this work. However, if the Second Defendant was awarded that work instead of the Plaintiff, the Plaintiff would have lost revenue of approximately $1,000,000 plus any future work arising out of the Karnet Prison Farm.
10. On or about 15 May 2023 the Second Defendant on LinkedIn advertised that it was now providing water treatment services stating that those water treatment services was a new service offering for the Second Defendant's business. Attached hereto and marked 'APB10' is a copy of that LinkedIn post.
11. Each of the First, Third and Fourth Defendants whilst employed with the Plaintiff were involved in the Plaintiff's water treatment services and the Fourth Defendant was the service and operations manager for the whole of the Plaintiff's business. 25% of each of the First Defendant and Third Defendant's commissions arose from servicing water treatment services.
12. In addition to the clients referred to above, the Plaintiff provides its services to more than 2,500 clients nationally and approximately 1,000 clients in Western Australia.
13. In my experience:

(a) the average gestation period for the Plaintiff's projects is approximately 9 months, which includes the client making contact with the Plaintiff, determining what services the client requires, providing quotes, provide assistance in scoping and scope adjustment; and
>
> (b) the average period for completion of the design, building and delivery to site for projects is between 3 to 6 months.

14. Because the Second Defendant operates in direct competition with the Plaintiff including in relation to its reverse osmosis plants, sewerage treatment plants, water and wastewater systems and OWS systems there is the risk that the Second Defendant, together with the Third Defendant and Fourth Defendant, whilst using the Plaintiff's Confidential Information will be successful in obtaining the Plaintiff's clients.
15. Further, because of the average length of time that it takes to scope and complete projects, it is possible that the Second Defendant, together with the Third Defendant and Fourth Defendant, has not yet realised identifiable clients and/or profits, which might otherwise have been available to the Plaintiff as its clients or profits.
16. In relation to the evidence concerning Crushing International, both Mr Hartnett and Mr Matthews depose that Crushing International has been a client of ABCO since at least 16 February 2010 and that ABCO received an email from Crushing Services International notifying it of an upcoming tender and requesting capability statements.[70] Mr Hartnett and Mr Matthews each depose that Crushing International has not awarded any of the work referred to in Mr Beck's affidavit to ABCO.[71]
17. There are three issues in relation to the claim for a set off that lead me to conclude that there is no triable issue that there is a defence of an equitable set-off sufficient to defeat Mr Hartnett and Mr Matthews' claims.
18. First, and notwithstanding that the proceedings have now been on foot for over six months, there is still no evidence that the defendants have, in any way, breached any obligations they owed to MAK Water arising out of their employment. That is in circumstances in which the parties have gone on oath in relation to those matters, both in relation to these applications and the application for an interlocutory injunction (which affidavits were relied upon for the purposes of these applications).
19. At most, thus far, the evidence does not rise above legitimate suspicions on the part of MAK Water that something may be awry (based on the files accessed referred to in Mr Byk's December affidavit). Those suspicions have been expressly denied on oath. On the current state of the material in my assessment MAK Water's claims, at least against the Mr Hartnett and Mr Matthews, are best described as weak.
20. Secondly, those claims, whatever they may be, are currently wholly unquantified. The conclusions of the Court of Appeal in Field Camp, to which I have earlier referred, are in my view directly applicable in the present case. There is no basis upon which this Court could conclude that there would be a set-off in an amount that would defeat, or set-off, the claims that are made by Mr Hartnett and Mr Matthews.
21. Thirdly, in my view, there is an insufficient connection between MAK Water's claims and Mr Hartnett and Mr Matthews' employment entitlements, such as to be able to say that the former impeaches the title of Mr Hartnett and Mr Matthews claims to the latter.
22. The fact that the transactions broadly arise out of an employment relationship between the parties, in my view, does not have that consequence (namely that one claim impeaches the other).
23. The claims themselves are quite separate. Mr Hartnett and Mr Matthews' claims are for remuneration for the service they have already rendered to MAK Water and for the redemption of their property (i.e. the Plan Shares). Those are accrued rights arising from their work for MAK Water and as owners of the Plan Shares.
24. For example, the circumstances by which Mr Hartnett and Mr Matthews earned commissions and accrued long service leave did not bring about or contribute to any alleged loss and damage to MAK Water.
25. In this regard, in Siah v Wong, Smith J referred to Gummow J's observations in James v Commonwealth Bank of Australia [72] to the following effect:[73]

[T]here is a number of cases in which A's breach of duty or obligation owed to B has brought about or at least contributed to the existence of B's liability to A and in which an equitable set‑off has been allowed.

Similarly, his Honour said that there are several authorities, in particular Piggott v Williams, which suggest that:

[I]t is sufficient that the existence of the legal demand, in this case the applicant's claims to payment by the banks on the indemnities, would not have come about or were at least contributed to by the applicant's own breaches of duty owed to the banks.

1. In the present case, there is no suggestion that the work actually done by Mr Hartnett or Mr Matthews, upon which they earned their commissions, and from which Mr Hartnett accrued long service leave, is what caused or brought about any loss or damage to MAK Water.
2. Nor could there be any suggestion that their ownership of Plan Shares did so. Indeed, insofar as the shares are concerned the claim's with respect to the redemption of those shares, confirmed by cl 15 of the Plan Rules, is a claim for redemption of property rights in the shares, rather than as a result of their position under the contracts of employment.
3. For these reasons, on the basis of the material before the Court, I am not satisfied that there is a triable issue that there is an equitable set-off sufficient to defeat Mr Hartnett or Mr Matthews' claims.

1. MAK Water also relies upon the general principle, reflected in O 14 r 3(1), to the effect that 'there ought for some other reason' be a trial of the claim sufficient to give the defendant leave to defend a claim.
2. In this context, MAK Water refers to the authorities collected in Wedge v Service Finance Corporation Ltd[74] to the effect that leave to defend might be granted where, even though the defendant cannot point to a specific issue which ought to be tried, he or she may be able to satisfy the court that the circumstances ought to be investigated.[75]
3. In Wedge, Wallwork J referred to the following authorities:[76]

The authors refer to Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109 and state:

'The grant of leave to defend under this part of the rule might also be justified where the circumstances are "such as to require close investigation" (Miles v Bull (supra)) or where most or all of the relevant facts are under the control of the plaintiff and the defendant would have to seek to elicit by discovery and cross examination, those which support the defence: ibid; Harrison v Bottenheim (1878) 26 WR 362. Compare Rosser v Austral Wine and Spirit Pty Ltd [1980] VicRp 33; [1980] VR 313; Brisbane Unit Development Corp Pty Ltd v Robertson (1983) 2 Qd R 105 at 109.'

In Moscow Narodny Bank Ltd (supra) at 111 Brinsden J said:

'The matter is rather differently expressed by Brett LJ in Ray v Barker [1879] UKLawRpExch 31; (1879) 4 Ex D 279 at 293, where he said that leave should be given to defend if facts were shown leading to "the inference that at the trial of the action he (ie the defendant) may be able to establish a defence", while in Harrison v Bottenheim (1878) 26 WR 362 it was said that such leave should be given if the defendant "has shown enough to entitle him to interrogate." From all this it appears that where there is a real case to be investigated either in fact or in law, leave to defend should be given.'

1. In the present case, as I have said, Mr Hartnett and Mr Matthews have twice gone on oath to the effect that they have not used confidential information or otherwise breached their obligations to MAK Water.
2. In those circumstances, and given my conclusions in relation to the set‑off, in my view more would be required to conclude that there was 'some other good reason' for investigating whether or not there was a basis to deny Mr Hartnett and Mr Matthews' claims. Ultimately whether there is 'some other reason' would, in this case, relate to whether further investigation might reveal information that might support the claim for a set‑off.
3. While I do not discount the possibility that further investigation may reveal some basis for MAK Water's claims, unlike in cases where there has been no discovery or interrogatories, in the present case it can at least be concluded that there has been already some real investigation and, Mr Hartnett and Mr Matthew having gone on oath that they do not have any confidential information, that there has been an opportunity to directly address that issue.
4. For these reasons, in my view, this is not a case in which there is 'some other reason' to deny the application for summary judgment.
5. For all of the above reasons, in my view, there is no triable defence to Mr Hartnett and Mr Matthews' claims and they are entitled to summary judgment in the amounts that they claim.

1. At the hearing of the application MAK Water submitted that, in the event that an order for summary judgment was made in favour of Mr Hartnett and Mr Matthews that there should be a stay of execution of the judgments. In seeking that order MAK Water submitted that it would be prepared to pay into court security for Mr Hartnett and Mr Matthews' claims, either as security for conditional leave to defend or as security for the stay of execution (depending upon the outcome of the applications).
2. Order 14 r 3(2) of the Supreme Court Rules makes express provision for a stay of execution on a summary judgment where the defendant has a counterclaim against the defendant. Whether a stay will be granted is a matter of discretion to which a number of factors will be relevant. Those factors were discussed in State Bank of Victoria v Parry[77] and New Resources Holdings Pty Ltd v Lunt [No 3].[78]
3. In State Bank of Victoria Malcolm CJ set out a number of principles including:[79]

The degree of connection between the claim and the counterclaim, the strength of the counterclaim and the ability of the plaintiff to satisfy any judgment on the counterclaim are some of the considerations which the court may take account of in the exercise of its discretion whether or not to order a stay.

1. In New Resources Holdings Templeman J, drawing upon Bingham LJ's judgment in Burnet v Francis Industries plc,[80] identified eight general matters relevant to the exercise of the discretion to stay execution of judgment in light of a counterclaim. I have had regard to each of those matters. It is not necessary to refer to them each in detail.
2. The matters that, in my view, are particularly relevant in the present case include the following.
3. First, the interrelationship of the respective claims and the identity of the parties. In the present case the parties are identical and the claims are interrelated inasmuch as they arise out of the employment relationship. As I have said they are not so closely related so as to involve one claim impeaching the other, as would be required for an equitable set-off. Nevertheless, in my view it is clear from the context that, as the discretion is only applicable to counterclaims as such, that the interrelationship need not necessarily be the kind of interrelationship that would give rise to an equitable set-off. The claims in this case nevertheless potentially give rise to competing liabilities arising from the employment relationship generally.
4. Secondly, in relation to the strength of the claim, as I have indicated, I am presently of the view that the claims made by MAK Water are not strong. At present, having regard to the affidavits that have been filed in two applications, there is no evidence of the improper use of confidential information in a manner that could give rise to a claim for damages, equitable compensation, or an account of profits. What there is, is the suspicion that arises by reason of the matters deposed to in Mr Byk's December affidavit at [108].
5. The next relevant factor is prejudice to Mr Hartnett and Mr Matthews. No particular prejudice has been identified in relation to a stay. Nevertheless, Mr Hartnett and Mr Matthews are out of their money, which is always a form of prejudice and, in the circumstances of the present case, the persons who are out of their money are former employees who are seeking remuneration and entitlements directly arising from their employment relationship. So while no particular prejudice is identified, I accept that there is general prejudice of that nature.
6. Another consideration identified by Templeman J in New Resources Holdings is the likely delay before the merits of the other claim will be adjudicated.
7. This is, in my view, the most significant issue in the particular circumstances of this case. In my view, given the current state of the evidence, it would be quite unjust to keep Mr Hartnett and Mr Matthews from the fruits of their judgments for an indefinite period of time pending the ultimate trial of any action if the primary proceedings were not pursued with alacrity or, at least, if interlocutory processes of the court did not produce some more substantial basis for the claims made by MAK Water.
8. On the other hand, if MAK Water's claims could be progressed quickly, then, in my view, a stay of execution for a short period could well be justified in order to finally resolve all outstanding issues and claims between the parties and any competing liabilities that they may have. In that regard both parties accepted that it would be appropriate for this case to be entered into the Commercial and Managed Cases List to be judicially case managed. I am of the view that that is an appropriate order and that these proceedings ought to be brought to a resolution as soon as is practicable.
9. The prospect that these proceedings as a whole might be brought to a speedy resolution and all outstanding issues and potential competing liabilities between the parties may be resolved in the short term, in my assessment tips the balance in favour of a stay of execution, subject to further order of the court. In all of the circumstances, I am therefore prepared to order a stay of execution of the judgments.
10. Nevertheless, given that the stay has been granted, as the late Chief Judge Kevin Hammond AO would have said, by 'the merest of margins', the suspension or stay of execution will be on condition that MAK Water pay security into court, in the amount of the judgment sums.
11. The parties will have liberty to apply in relation to the suspension or stay of execution. In particular, I envisage that if the proceedings are not progressed quickly or if interlocutory processes of the court do not produce some more substantial basis for the claims made by MAK Water, the stay of execution will be lifted and the security released.

1. For these reasons, I would make the following orders.
2. On Mr Hartnett's application for summary judgment I would order:
   1. There be judgment for the third defendant/first plaintiff by counterclaim against the plaintiff/defendant by counterclaim for the following sums:

(a) accrued long service leave benefits of $43,722.12;
>
> (b) unpaid commission for August 2022 of $22,983.40;
>
> (c) a redemption amount for his Plan Shares of $318,671.86,

together with pre-judgment interest in an amount to be assessed if not agreed by the parties.

1. Execution of the judgment be stayed until further order of the court, conditional on the plaintiff/defendant by counterclaim paying into court the sum of $385,377.38 as partial security for the judgment sum within 21 days.
2. There be liberty to apply in relation to the stay of execution and the payment into court.
3. The costs of the application for summary judgment be reserved.
4. The third defendant/first plaintiff by counterclaim and the plaintiff/defendant by counterclaim are to file and serve any affidavits and submissions in relation to the costs of the application for summary judgment (including any special costs orders) within 14 days.
5. The costs of the application may be determined on the papers.
6. On Mr Matthews' application for summary judgment I would order:
   1. There be judgment for the fourth defendant/second plaintiff by counterclaim against the plaintiff/defendant by counterclaim for the following sums:

(a) unpaid commission for August 2022 of $19,877.00;
>
> (b) a redemption amount for his Plan Shares of $139,976.21,

together with pre-judgment interest in an amount to be assessed if not agreed by the parties.

1. Execution of the judgment be stayed until further order of the court, conditional on the plaintiff/defendant by counterclaim paying into court the sum of $159,853.21 as partial security for the judgment sum within 21 days.
2. There be liberty to apply in relation to the stay of execution and the payment into court.
3. The costs of the application for summary judgment be reserved.
4. The fourth defendant/second plaintiff by counterclaim and the plaintiff/defendant by counterclaim are to file and serve any affidavits and submissions in relation to the costs of the application for summary judgment (including any special costs orders) within 14 days.
5. The costs of the application may be determined on the papers.
6. I also order that the proceedings as a whole be entered into the CMC list to be managed by me.

I certify that the preceding paragraphs comprise the reasons for decision of the Supreme Court of Western Australia.

Principal Associate to the Honourable Chief Justice Peter Quinlan

[1] Sutton Investments Pty Ltd v Realistic Investments Pty Ltd [2017] WASCA 14 [24].

[2] See generally General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 129 ‑ 130 (Barwick CJ).

[3] Defence and Amended Counterclaim dated 18 May 2023 (Hartnett Counterclaim).

[4] Hartnett Counterclaim [47] ‑ [49].

[5] Hartnett Counterclaim [50] ‑ [56].

[6] Hartnett Counterclaim [57] ‑ [63].

[7] Mr Hartnett's March affidavit [7], [14], [27], [52].

[8] Mr Hartnett's February affidavit [5], MH-1, Mr Byk's December affidavit [44], APB10.

[9] Mr Hartnett's February affidavit [7], MH-2.

[10] Mr Hartnett's June affidavit [5].

[11] Mr Hartnett's February affidavit, MH-2.

[12] Mr Hartnett's March affidavit [19] - [21], MH-14..

[13] Mr Hartnett's February affidavit, MH-7.

[14] MAK Water pleads, and Mr Byk deposes that Mr Hartnett ceased employment on 26 September 2022 (Mr Byk's December affidavit [45]).

[15] Mr Hartnett's February affidavit, page 45.

[16] Mr Hartnett's March affidavit [30]; Mr Byk's May affidavit [19].

[17] Mr Hartnett's February affidavit [15] MH-3; Mr Byk's May affidavit [15], APB-2.

[18] Mr Hartnett's March affidavit [34] - [45].

[19] Mr Byk's May affidavit [22] - [31].

[20] The Redemption Price may also be determined by reference to an alternative calculation if it produces a greater price than the Prevailing Price. Neither party contended that that alternative applied in the present case.

[21] All of the parties agreed that, in context, the reference to the 'proceeding' two years is a spelling error and is intended to refer to the 'preceding' two years.

[22] Mr Hartnett's March affidavit, MH-9 and MH-10.

[23] Mr Hartnett's March affidavit [41].

[24] Mr Hartnett's March affidavit [42] ‑ [43].

[25] Mr Hartnett's March affidavit [39].

[26] Mr Hartnett's March affidavit [44].

[27] Mr Hartnett's March affidavit [45].

[29] GR Engineering Services Ltd v Investmet Ltd [2021] WASCA 136 [96] (Quinlan CJ & Beech JA).

[30] Defence and Amended Counterclaim dated 18 May 2023 (Matthews Counterclaim).

[31] Matthews Counterclaim [37] ‑ [44].

[32] Matthews Counterclaim [45] ‑ [51].

[33] Matthews Counterclaim [52] ‑ [60].

[34] Mr Matthews' March affidavit [7], [18], [27], [52].

[35] Mr Matthews' February affidavit [5], KM-1, Mr Byk's December affidavit [71], APB18.

[36] Mr Matthews' February affidavit [6], KM-2.

[37] Mr Matthews' February affidavit [8], KM-3.

[38] Mr Matthews' February affidavit, MH-2.

[39] Mr Matthews' March affidavit [11] - [14].

[40] MAK Water pleads, and Mr Byk deposes, that Mr Matthews ceased employment on 26 September 2022 (Mr Byk's December affidavit [73]).

[41] Mr Matthews' March affidavit [20]; Mr Byk's May affidavit [40].

[42] Mr Matthews' March affidavit [17] - [36].

[43] Mr Byk's May affidavit [40] - [44].

[44] Mr Byk's December Affidavit [22], APB-3, page 83; Mr Byk's June affidavit [9].

[45] Mr Hartnett's February affidavit [11.7].

[46] Mr Matthews' February affidavit [6], KM-2.

[47] Mr Matthews' February affidavit [10].

[48] Statement of Claim [4(g)], [5(f)].

[49] Industrial Rollformers Pty Ltd v Ingersoll-Rand Australia Ltd [2001] NSWCA 111 (Industrial Rollformers).

[50] Absolute Analogue Inc v Sundance Resources Ltd [No 3] [2014] WASC 283 (Absolute Analogue).

[51] Industrial Rollformers [136] ‑ [137].

[52] Absolute Analogue [12] (Le Miere J).

[53] Mr Byk's December affidavit [63] ‑ [65].

[54] Mr Byk's December affidavit [89] ‑ [90].

[55] Siah v Wong [2021] WASC 19 (Siah v Wong) [768] ‑ [779] (Smith J).

[56] Palaniappan v Westpac Banking Corporation [2016] WASCA 72 [50] (Buss JA).

[57] Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27 (Field Camp).

[59] MAK Industrial Water Solutions Pty Ltd v Doherty [2023] WASC 146.

[60] MAK Industrial Water Solutions Pty Ltd v Doherty [2023] WASC 146 [9] (Master Sanderson).

[61] MAK Industrial Water Solutions Pty Ltd v Doherty [2023] WASC 146 [12] (Master Sanderson).

[62] Mr Hartnett's February affidavit [26] ‑ [27] (part).

[63] Mr Hartnett's June affidavit [8.1] ‑ [8.2].

[64] Mr Matthew's February affidavit [25] ‑ [26] (part).

[65] Mr Matthews' June affidavit [6.1] ‑ [6.2].

[66] Mr Byk's December affidavit [108(a)].

[67] Mr Byk's December affidavit [108(c)].

[68] Mr Murphy's May affidavit, page 13.

[69] Mr Byk's May affidavit [47] ‑ [63].

[70] Mr Hartnett's June affidavit [12] ‑ [13]; Mr Matthews' June affidavit [10] ‑ [11].

[71] Mr Hartnett's June affidavit [14]; Mr Matthews' June affidavit [12].

[72] James v Commonwealth Bank of Australia [1992] FCA 420; (1992) 37 FCR 445.

[74] Wedge v Service Finance Corporation Ltd [2002] WASCA 54 (Wedge).

[75] See also Exchequer Australia Pty Ltd v Leopardi [2021] WASC 340 [13] ‑ [14] (Allanson J).

[76] Wedge [25] ‑ [26] (Wallwork J; Olsson AUJ agreeing).

[77] State Bank of Victoria v Parry [1989] WAR 240 (State Bank of Victoria).

[78] New Resources Holdings Pty Ltd v Lunt [No 3] [2008] WASC 221 (New Resources).

[79] State Bank of Victoria, 246 (Malcolm CJ).

[80] Burnet v Francis Industries plc [1987] 1 WLR 802.