Martinez v Heavy Machinery Pty Ltd

Supreme Court of NSW|2013-03-25|Before: Button J

Judgment 1Before the Court is a notice of motion of the plaintiff seeking summary judgment on a statement of claim filed on 7 March 2013. The orders sought were originally as follows: (1)Judgment against the first and second defendant in the amount of $608,429.62; (2)Interest pursuant to clause 3.2 of the Deed, or in the alternative, pursuant to s 100 of the Civil Procedure Act 2005; (3)Costs on a solicitor/client basis pursuant to clause 6(b) of the Deed; and (4)Any others Order that this Honourable Court deems appropriate. 2That judgment is sought only against the second defendant. For convenience I shall refer to the plaintiff as Ebsworth Lawyers, to the first defendant as Reed Heavy Machinery, and to the second defendant as Mr Reed.

Background 3Counsel for Ebsworth Lawyers submitted that the background of the matter, as demonstrated by way of affidavits and annexures, is as follows. The solicitor for Mr Reed did not place the following in dispute. 4On 21 July 2010, Ebsworth Lawyers entered into a retainer to act for Reed Constructions Australia Pty Ltd, which has since gone into liquidation. I shall refer to that company as Reed Constructions. Mr Reed was a director of Reed Constructions, and indeed of Reed Heavy Machinery. A substantial debt for that legal work accrued. 5On 2 March 2012, a deed was entered into by Ebsworth Lawyers, Reed Constructions, Reed Heavy Machinery, and Mr Reed. Its short effect was that Reed Constructions agreed to pay its debt for the legal services provided by Ebsworth Lawyers, and Reed Heavy Machinery and Mr Reed guaranteed that debt. 6Some payments were made thereafter, and some further work done. 7On 20 April 2012, a second deed was entered into. Again, Reed Constructions accepted its liability to pay the debt to the lawyers - now in the sum of about $2.5 million - and Reed Heavy Machinery and Mr Reed guaranteed it. 8On 15 June 2012, administrators were appointed to Reed Constructions. 9On 20 July 2012, a third deed was entered into. Again, to state its effect with great succinctness, the debt owed to Ebsworth Lawyers by Reed Constructions was assigned to Reed Heavy Machinery and Mr Reed, in return for them paying Ebsworth Lawyers a substantial sum of money. That money was to be paid in instalments. 10The timetable of instalments was not complied with. Ebsworth Lawyers issued a default notice, and then filed a statement of claim. At the same time, the motion under discussion was filed. On the morning of the hearing of the motion, the solicitor for Mr Reed filed his defence.

Course of the hearing 11No written submissions were provided by either party. 12Counsel for the plaintiff submitted that the stringent test for summary judgment pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005 had been made out. She submitted that the defence filed did not seriously put in issue the indebtedness of Mr Reed pursuant to the third deed. 13She did take the opportunity at an early stage to amend Order 2. She sought an amended order for the payment of interest as follows: "[I]nterest on the amount of $608,429.62 calculated at a rate of 6.25% per annum, calculated daily and compounded and capitalised monthly up to and including the date of judgment." 14At the commencement of the oral submissions of the solicitor for Mr Reed, the following exchange took place between him and me: "TASSELL: The problem with the statement of claim is the way it is pleaded. It incorrectly pleads the facts and the effect of the deed of assignment which leads to a couple of problems which compound as time goes on. I can tell your Honour there is no challenge to the deed. Indeed, we embraced it in some proceedings last year. HIS HONOUR: When you say, "There is no challenge to the deed", do you mean by that, for example, there is no reliance on the Contracts Review Act or unconscionability, or the proposition that the second defendant didn't sign it or completely misunderstood what he was signing, and things of that nature? TASSELL: There is nothing like that, your Honour. The points are a little subtle but they do have an effect at the end of the day. Paragraph 8 of the statement of claim purports to summarise part of cl 3.2 of the deed, which is on page 11 of the affidavit. If you start at the statement of claim. It says the interest is due (read). Clause 3.2, firstly, "the debt as defined", is not what is payable by the defendants but rather the consideration as defined in cl 3.1 of the deed, at para 10. They are not the same thing. Actually, the consideration is by instalments and, secondly, and more importantly, interest in cl 3.2 is charged on the amount of the instalment of the consideration and interest capitalised under the clause. HIS HONOUR: What are you saying, that para 8 of the statement of claim is wrong? TASSELL: Yes, your Honour." (emphasis added). 15A little later, the following exchange took place: "HIS HONOUR: Are you in a position to say what you say the ultimate debt should be mathematically? TASSELL: Yes, your Honour. The last three instalments under clause 3.1 of the deed are outstanding and if the plaintiff's case is correct and they have validly issued a notice of default then they would be due now and that is 687,894.86. HIS HONOUR: I am not seeking to bind you inappropriately and if you don't wish to answer this directly please don't but is it your position that it is accepted that the second defendant owes that amount of money to the plaintiff? TASSELL: I can't be heard against that, your Honour. We embrace the deed and that is what the deed provides." (emphasis added) 16Thereafter, the solicitor for Mr Reed went on to develop two points. 17The first was that the statement of claim is confusing in that, it does not distinguish clearly between the debt said originally to have been owed by Reed Constructions for legal services, and the debt said now to be owed by Reed Heavy Machinery and Mr Reed pursuant to the third deed. 18Secondly, he submitted that the interest calculations are incorrect. 19The response of counsel for the plaintiff was as follows. 20Without accepting any criticism of the statement of claim, and in order to accommodate the first submission of the solicitor for Mr Reed, counsel for Ebsworth Lawyers sought to amend it. That involved very minor modifications; indeed, a substantial proportion of them were amending whether the use of the word "debt" at various stages of the statement of claim should be by way of the first letter of that word being in upper or lower case. 21Remarkably, the solicitor for Mr Reed opposed me permitting those amendments that were designed to alleviate the very concerns that he had raised. I delivered a short judgment rejecting his submission and permitting those amendments to be made. Shortly after the hearing, in accordance with my direction, Ebsworth Lawyers filed an amended statement of claim reflecting the amendments that I had permitted. 22As for the second submission of the solicitor for Mr Reed, on reflection and having obtained further instructions, counsel for Ebsworth Lawyers accepted that the proposition that the interest calculations were not free from error had merit. A further document was filed by her setting out a lesser sum. She did that whilst nevertheless submitting that in truth it was not necessary, because the orders sought in the notice of motion, whilst quantifying the principal, do not quantify the interest upon that sum. 23Thereafter, the following exchange took place between the solicitor for Mr Reed and me: "TASSELL: There is nothing more I wish to say about the amendments, your Honour. HIS HONOUR: Just being clear about it then, the amendments resolve your concerns about ambiguity arising or the confusion arising from the statement of claim? TASSELL: I still have a concern about para 16 but I think that is becoming an arid debate and I don't wish to be heard again about the sum of the judgment sought. HIS HONOUR: What about these new calculations, is there any further dispute about the interest payable? TASSELL: Whilst I still disagree with the, as it were, starting point in the right-hand table as I look at it in the calculations, it makes no difference, and I haven't gone through those calculations line by line, they are very close to my equivalent, my friend having amended the starting point to 20 July, which was my principal concern. HIS HONOUR: As I say, your assertion that there was an error has been demonstrated to be correct. TASSELL: Yes, your Honour. HIS HONOUR: Just to get it clear in my mind, it is there an arguable dispute about prayer 1 in the statement of claim; namely, that there should be judgment entered in the sum of over a little under $608,000? TASSELL: In light of the amendments, I am not able to identify any. HIS HONOUR: Is the logical expansion of your position that there should be summary judgment with regard to prayer 1 in the statement of claim? TASSELL: I can't be heard against that. HIS HONOUR: And with regard to prayer 2 in the statement of claim, is there an arguable dispute -- I appreciate that's not the precise legal test -- it is there an arguable dispute about interest calculations? TASSELL: No, my friend said a form of the order that she sought this morning. Subject to seeing that, I have nothing to put. HIS HONOUR: As I recall, it did not actually include quantum, it just recited an interest rate and the aspects of the interest rate in the deed. TASSELL: Yes, and just two alternatives. I don't have an issue with that. HIS HONOUR: You accept that the logical expansion of that is that summary judgment should be entered for the plaintiff in accordance with the prayer for relief 2 in the statement of claim? TASSELL: I don't have instructions to do that but I have nothing to say in opposition to it." (emphasis added) 24A little later, the following exchange occurred: "HIS HONOUR: Just to be clear about it, without any dispensation or any concession nevertheless as things have turned out and boiled down you're not really in a position to make submissions to the contrary of summary judgment being entered? TASSELL: That is the position." 25Finally, as to the order for costs sought in the motion, counsel for the plaintiff explained that the third order sought in the motion is founded on clauses 6(b) and 8(a)(ii) of the third deed. 26Clause 6(b) reads: "The Assignees must pay all costs and expenses of HWLE in relation to: ... (b) the enforcement, attempted enforcement, protection of waiver of any rights or powers under this deed." 27Clause 8(a)(ii) reads: "(a) The Assignees indemnify HWLE against any loss, damage, liability, cost or expense which HWLE pays, suffers, incurs or is liable for, in respect of any of the following: ... (ii) HWLE exercising its powers consequent upon or arising out of the occurrence of any Event of Default." 28She submitted that in short, those clauses of the deed comfortably found an order for solicitor/client costs. Indeed, she submitted that, if they had wished to do so, Ebsworth Lawyers could have sought indemnity costs. 29As for costs, the solicitor for Mr Reed submitted that there was, in contrast to the other two orders, a serious triable issue about them. He submitted that summary judgment should not be entered for solicitor/party costs.

The rule 30Rule 13.1 is as follows: "13.1 Summary judgment (1) If, on application by the plaintiff in relation to the plaintiff's claim for relief or any part of the plaintiff's claim for relief: (a) there is evidence of the facts on which the claim or part of the claim is based, and (b) there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed, the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires. (2) Without limiting subrule (1), the court may give judgment for the plaintiff for damages to be assessed. (3) In this rule, a reference to damages includes a reference to the value of goods."

Legal principle 31That great caution should be exercised before summary judgment is entered against a defendant, or a plaintiff's claim summarily dismissed, has been emphasised by the High Court of Australia since Burton v Shire of Bairnsdale [1908] HCA 57; (1908) 7 CLR 76. 32In General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129, Barwick CJ said of an application for summary dismissal: "The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'". 33In Brimson v Rocla Concrete Pipes Ltd (1982) 2 NSWLR 937, Cross J said of the analogous procedure when called in aid by a defendant against a plaintiff: "Where the court is asked to reject a plaintiff's case, either under its statutory rules or its inherent jurisdiction, the fundamental principle is that prima facie a plaintiff is entitled to have his case come to trial; and applications to deprive him of that right will succeed only in the clearest of cases. True, the court will not look merely at the suggested weakness of the plaintiff's case but - though to a less extent - at the suggested strength of the defendant's case; and, true, forensic argument and subsequent judicial reflection are not necessarily inconsistent with a firm conclusion that the cause of action should not be allowed to proceed. But fatal defects in the plaintiff's case must be very clear before the court will intervene in this fashion." 34In Empire Shipping Company Inc v Owners of the ship "Shin Kobe Maru" (1991) 32 FCR 78, Gummow J said of an application to strike out a statement of claim said not to disclose a reasonable cause of action at 80: "the orders sought will not be made unless it appears that the cause of action propounded is manifestly untenable." 35In the recent decision of Shaw v State of New South Wales [2012] NSWCA 102, Barrett JA (with whom Beazley JA (as her Honour then was), McColl JA, Macfarlan JA, and McClellan CJ at CL (as his Honour then was) agreed) said: "[30] I have said that the 'triable quality' of the three matters just mentioned is in issue. There is no dispute that the central inquiry is that indicated by Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62, General Steel Industries Inc v Commissioner for Railways [1964] HCA 69; (1964) 112 CLR 125 and, more recently, Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 where Gaudron, McHugh, Gummow and Hayne JJ said at [57]: 'Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.' [31] That formulation has since been re-affirmed: see Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 at [46]; Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [24]; and, while it was said in Batistatos that the General Steel formulation should not be given 'canonical force', it is convenient, for present purposes, to refer to the criteria laid down by the case law I have mentioned as the 'General Steel test'. [32] The question is therefore whether the claims in question are so obviously untenable or groundless that there is 'a high degree of certainty' that they will fail if allowed to go to trial; and whether this is one of the 'clearest of cases' in which the court may accordingly intervene to prevent the claims being litigated. [33] It was submitted on behalf of the respondent that this test requires refinement in the light of provisions of the Civil Procedure Act 2005. The substance of the submission is that statutory directives about case management may sometimes require the court to put an end to a claim even though it is not found to be of the doomed or hopeless quality indicated by the General Steel test; and that the question of what I have termed 'triable quality' may be affected accordingly. [34] I shall return to this submission. At this point, I proceed to consider whether the claims are of the doomed or hopeless quality indicated by the General Steel test." 36As for the latter question as to the effect on well-established principle of ss 56 and 58 of the Civil Procedure Act, Barrett JA later said at [133] - [134]: "[133] Those directives may require and justify steps which, although not otherwise imperatively indicated, will contribute to the timely and efficient dispatch of the court's business: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175. In the present case, however, it is not suggested that retention of the claims based on paragraphs 4, 11, 11A and 11C will entail expansion of the factual inquiry or entail time and effort that would otherwise be saved. There is no submission by the respondent that the parts of the third further amended statement of claim alleging constructive dismissal, breach of express contractual terms and breach of statutory duty are susceptible to being struck out or summarily dismissed. That, plus the fact that the claim for damages in paragraph 13 is advanced in the same terms in respect of all the pleaded causes of action, means that the course of the proceedings with paragraphs 4, 11, 11A and 11C retained will be very substantially the same as it would have been had they been struck out. [134] For that reason in particular, it is not shown that the Civil Procedure Act provisions warrant any result different from that indicated by the General Steel test."

Application of principle to this case 37Adopting what was said by Barrett JA at [32], the question I ask myself is whether the defence is so obviously untenable or groundless that there is "a high degree of certainty" that it will fail if allowed to go to trial; and whether this is one of the "clearest of cases" in which the court may accordingly intervene to prevent the claims being litigated. 38As I have demonstrated by the extracts from the transcripts, by the end of the hearing, the solicitor for Mr Reed did not resist the proposition that summary judgment should be entered against his client in the sum arrived at from the deed. As I have indicated, he informed me that he "embraced" that document. 39And after the clarifying amendments to the statement of claim were permitted by me, he did not place any evidence or submissions before me as to why that originating process should not found summary judgment in that sum against Mr Reed. 40Nor did he place before me any basis upon which he submitted that the defence gives rise to a triable issue. 41Accordingly, I consider that the first order sought in the notice of motion should be made. 42Again, I have demonstrated from the transcript that his position was identical with regard to the second order once counsel for the plaintiff altered it and moved the interest calculation downwards. In any event, it can be seen that the second order sought in the notice of motion does not quantify the precise sum of interest. It merely sets out a calculation derived from the deed. The result is that it would be open to the parties, if necessary, to refine with precision the correct sum. 43In those circumstances, I consider that the second order sought in the notice of motion should be made. 44However, I consider that the position is different with regard to costs. I do not consider that, on the material placed before me, I can be affirmatively satisfied that the proposition that costs must be paid on a solicitor/client basis is forensically irresistible. 45As a result, I propose to stand over the question of costs, both as to the matter generally and of this motion, to the Registrar's list. 46As for the costs of the motion, whilst I make no determination about them, I simply note that, although Ebsworth Lawyers have substantively succeeded, Mr Reed had some success, in that counsel for Ebsworth Lawyers accepted that the original interest calculations were incorrect.

Orders 47I make the following orders: (1)Judgment against the second defendant in the amount of $608,429.62. (2)Interest on the amount of $608,429.62, calculated at a rate of 6.25% per annum, calculated daily and compounded and capitalised monthly up to and including 16 April 2013. (3)Costs of the whole proceedings and this motion are stood over to the Registrar's list on 23 April 2013 at 9am.

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: 16 April 2013

At a glance

Court

Decision date

Before

Source

Judgment (8 paragraphs)

Parties

Cases Cited (17)

Cited By (1)