Slater & Gordon Ltd v Sellars

Consideration

Ms Sellars has not complied with the procedures prescribed by the workers compensation legislation before filing the cross-claim seeking work injury damages. The workers compensation legislation is in mandatory terms which make clear that, before an employee can bring such a claim, various tasks must first be attended to.
The language of the legislation does not permit a construction that its procedures may be ignored where a worker brings their claim for injury by way of cross-claim and defence, rather than being the principal plaintiff. The definition of "work injury damages", set out at [9], refers to a worker and employer in generic terms rather than their status as a plaintiff or defendant, cross-claimant or cross-defendant, applicant or respondent. Rather, the definition focuses on the remedy sought, being a tortious claim for damages "whether the damages are recoverable in an action for tort or breach of contract or in any other action". In any event, once a cross-claim is commenced in the Court, a cross-claimant is effectively the plaintiff on that cross-claim. Rule 9.1(3) of the Uniform Civil Procedure Rules 2005 (NSW) provides that the rules apply to cross-claims in the same way as they apply to statements of claim.
As to Ms Sellars' right to bring a cross-claim, section 22(1) of the Civil Procedure Act 2005 (NSW) provides: (emphasis added) 22 Defendant's right to cross-claim (1) … the court may grant to the defendant in any proceedings (the first proceedings) such relief against any person (whether or not a plaintiff in the proceedings) as the court might grant against that person in separate proceedings commenced by the defendant for that purpose.
The section is procedural only and the substantive right to claim the relief sought must exist independently: Dillingham Constructions Pty Limited v Steel Mains Pty Limited (1975) 132 CLR 323. The question, therefore, is whether the Court may grant Ms Sellars the relief sought in the cross-claim as commenced, in circumstances where she has not complied with the requirements of the workers compensation legislation before commencing that claim. As matters presently stand, given the clear language of the legislation as already canvassed, the answer must be no.
That, of course, does not prevent Ms Sellars, after complying with the relevant procedures, from bringing a claim for work injury damages. Whilst such a claim would ordinarily be brought in the Workers Compensation Commission or the District Court of New South Wales, it may be convenient to bring her claim for work injury damages in this Court so that all issues between the parties can be resolved in one proceeding. That will be for another judge to decide in due course.
Turning then to set-off, section 21 of the Civil Procedure Act 2005 (NSW) provides: 21 Defendant's right to set-off (1) If there are mutual debts between a plaintiff and a defendant in any proceedings, the defendant may, by way of defence, set off against the plaintiff's claim any debt that is owed by the plaintiff to the defendant and that was due and payable at the time the defence of set-off was filed, whether or not the mutual debts are different in nature. … (4) This section does not affect any other rights or obligations of a debtor or creditor in respect of mutual debts, whether arising in equity or otherwise. … (6) In this section, debt means any liquidated claim.
As the learned authors of Taylor P, E Elms E, Justice G Bellew and M Meek, Ritchie's Uniform Civil Procedure NSW (Looseleaf, LexisNexis) note at [s 21.5], the statutory right of set off is restricted to "mutual" debts involving liquidated claims that are due and payable when the defence is filed. Because of these restrictions, section 21(4) of the Civil Procedure Act is expressed not to affect any other rights of set off and does not affect any equitable rights of set off. Ms Sellar's cross-claim cannot be said to be a liquidated claim, and thus section 21(4) is the relevant sub-section here.
The right of set-off in equity depends on the proposition that the contrary liabilities are sufficiently closely connected that it would be inequitable for the plaintiff to be permitted to proceed with its claim without making allowance for the defendant's claim against it. It was explained in Roadshow Entertainment by Gleeson CJ, Handley JA and Brownie A-JA at 481: Equitable set-off is a substantive defence: see S R Derham, Set-Off, 2nd ed (1996) at 56-65. As Goff LJ said in Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1978] QB 927 at 982, a defence of equitable set-off may be set up "not merely as a means of preventing … judgment, or, at any rate, execution, but also as an immediate answer to … liability to pay". This must be correct because an equitable set-off impeaches the title of the other party to the legal demand against which it is asserted. When "the circumstances which support an equitable set-off exist, it is unconscionable for the creditor to regard the debtor as being indebted": Derham (at 60). The debtor can therefore claim that the payment demanded was never due: see Tomlinson v Cut Price Deli Pty Ltd (1992) 38 FCR 490 at 494-495, per Drummond J and the cases there cited.
The defence is also available where the two claims are interdependent, such as where one party's default contributed to the other party's liability: Grant v NZMC Ltd [1989] 1 NZLR 8 at 12-13, where Somers J delivered judgment for the Court of Appeal: The defendant may set-off a cross claim which so affects the plaintiff's claim that it would be unjust to allow the plaintiff to have judgment without bringing the cross-claim to account. The link must be such that the two are in effect interdependent: judgment on one cannot fairly be given without regard to the other; the defendant's claim calls into question or impeaches the plaintiff's demand.
The circumstances to be taken into account in respect of equitable set-off are the nature of the claims, the nature of the connection between them and the conduct of the parties: Sydmar Pty Ltd v Statewise Developments Pty Limited (1987) 11 ACLR 616; (1987) 73 ALR 289 per Smart J.
As to whether there is an equitable set off here, Ms Sellars' cross-claim is for tortious damages. Ms Sellars is not presently entitled to bring the cross-claim without first complying with the workers compensation legislation. In circumstances where the Parliament has seen fit to prescribe a detailed legislative scheme, equity follows the law and does not recognise a set-off which at present, cannot be maintained. Whether any obligation on Ms Sellars' to account for profits might be considered to be sufficiently connected with any liability by Slater & Gordon for work injury damages such that it would be inequitable for Slater & Gordon to proceed with its claim without making allowance for Ms Sellars' claim will be for another judge to decide in due course. But at the moment, Ms Sellars is not presently entitled to bring such a claim at all.
The portions of the defence and the cross-claim identified by Slater & Gordon cannot presently stand and should be struck out.
For these reasons, I make the following directions and orders: 1. Pursuant to rule 14.2 of the Uniform Civil Procedure Rules 2005 (NSW), strike out: 1. paragraphs [5] to [7] of the Cross Claim dated 12 October 2020; and 2. "the breaches of the Employment …. on 14 August 2020" in paragraph 38 of first defendant's Defence dated 12 October 2020. 1. Order the first defendant to pay the plaintiff's costs of its motion filed on 2 November 2020. 2. Direct the plaintiff to file and serve a defence to the Cross Claim by 4.00 pm on 22 December 2020. 3. In respect of the plaintiff's motion filed on 2 December 2020: 1. Direct the first defendant to file and serve any evidence by 9.00 am on 11 December 2020. 2. Stand the motion over to the Callover List on 15 December 2020 with a view to allocating a hearing, preferably before the end of Court term.

At a glance

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Judgment (7 paragraphs)

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Legislation Cited (6)

Cases Cited (9)

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