Vesuvius Australia Pty Ltd v V & M Davidovic Pty Ltd [2011] NSWSC 539 (9 June 2011)

Last Updated: 14 June 2011

Supreme Court New South Wales

Case Title:	Vesuvius Australia Pty Ltd v V & M Davidovic Pty Ltd
Medium Neutral Citation:	[2011] NSWSC 539
Hearing Date(s):	3 June 2011
Decision Date:	09 June 2011
Jurisdiction:	Equity Division
Before:	Biscoe AJ
Decision:	(1) Defence to summary judgment claim struck out, judgment accordingly. (2) Appeal allowed against refusal of primary judge to grant summary judgment. (3) Appeal dismissed against primary judge refusal to allow plaintiff to re-open first judgment; (4) Other orders as set out at [ 56 ] of this judgment.
Catchwords:	SUMMARY JUDGMENT: - STRIKE OUT OF DEFENCE-set off defence to summary judgment claim struck out because of defendant's failure to comply with Court's directions and orders-appeal allowed from decision not to grant summary judgment in respect of part of plaintiff's claim where set-off was the only triable issue-set-off for damages for misleading or deceptive conduct or unconscionable conduct is not available against a claim for release of plaintiff's security deposit under a deed of options for lease which provided for return of the deposit if the lease does not proceed-the lease did not proceed.
Legislation Cited:	Uniform Civil Procedure Rules 2005 rr 13.1 49.41 Civil Procedure Act 2005 ss 61, 94
Cases Cited:	Cookson Plibrico Pty Ltd v V & M Davidovic Pty Ltd [2010] NSWSC 1171 Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 Lean v Tumut River Orchard Management Ltd [2003] FCA 269 Re Dalco; Ex parte Dalco v Deputy Commissioner of Taxation (1986) 67 ALR 605 Smith (Administrator of Cosslett (Contractors) Ltd) v Bridgend County Borough Council [2001] UKHL 58; [2002] 1 AC 336 Tony Lee Motors Ltd v M S MacDonald & Son (1974) Ltd [1981] 2 NZLR 281 Vesuvius Australia Pty Ltd (formerly known as Cookson Plibrico Pty Ltd) v V & M Davidovic Pty Ltd (No 2) [2011] NSWSC 48
Texts Cited:	Meagher, Gummow and Lehane's Equity Doctrines and Remedies, 4th ed (2002) LexisNexis Butterworths P W Young, C Croft, M Smith, On Equity (2009) Lawbook Co R Derham, The Law of Set-Off, 4th ed (2003) Oxford University Press
Category:	Principal judgment
Parties:	Vesuvius Australia Pty Ltd (Plaintiff/First Cross Defendant) V & M Davidovic Pty Ltd (First Defendant/Cross Claimant) Paul Armitage (Second Cross Defendant)
Representation
- Counsel:	Mr B Coles QC with Mr P Russell (Plaintiff/First Cross-Defendant) Mr M Davidovic in person (Director of the First Defendant/Cross Claimant)
- Solicitors:	Pikes Lawyers (Plaintiff/First Cross-Defendant)
File number(s):	2010/0084991
Publication Restriction:

Judgment

OVERVIEW

1. The plaintiff sues the defendant for the release of a security deposit paid under a Deed of Options for Lease, and for damages for breach of the deed. Clause 13 of the deed requires the defendant, as landlord, to immediately allow the refund of the security deposit to the plaintiff, as tenant, if the lease is not to proceed. The lease is not to proceed.
   
2. The defendant cross-claims against the plaintiff for damages for misleading and deceptive conduct and unconscionable conduct relating to the subject of the deed. In its defence to the plaintiff's claim the defendant pleads that it is entitled to set-off its claimed damages against the plaintiff's claims in relation to the security deposit.
   
3. In 2010 the plaintiff moved for summary judgment on its claims concerning the release of the security deposit ( the summary judgment claims ), but not on its claim for damages. The motion was dismissed with costs because it was held that the defendant had an arguable defence of set-off ( the first judgment ). The plaintiff moved for leave to re-open the first judgment and, consequently, for the same summary relief. That motion was also dismissed with costs ( the second judgment ). The plaintiff now appeals against both judgments.
   
4. The appeals have been overtaken by the plaintiff's further motion before me for the further amended defence and further amended cross-claim to be struck out or dismissed. That motion is grounded in the fact that the defendant has since February/March 2011 been in breach of directions or orders: (a) in relation to service of its evidence; (b) to inform the plaintiff of the basis on which an undertaking as to damages that it gave to the Court can be satisfied; and (c) to provide security for the plaintiff's costs of the defendant's cross-claim against the plaintiff. The service directions were made so that the substantive hearing would not be delayed. The service directions were aimed at a prompt hearing of the substantive matter and the undertaking, which the primary judge required. These directions influenced the primary judge when declining to grant summary judgment.
   
5. The defendant company did not have legal representation at the hearing before me but was represented by a director, Mr M Davidovic. The instructions of the defendant's former solicitors had been withdrawn.
   
6. I have decided that:
   
   • (a) the defence to the summary judgment claims should be struck out and judgment given accordingly on those claims because of the defendant's failure over a lengthy period of time to comply with the Court's directions and orders;
   • (b) the appeal against the first judgment should be allowed;
   • (c) the appeal against the second judgment should be dismissed;
   • (d) on the basis of each of (a) and (b) above, there should be judgment for the plaintiff on the summary judgment claims;
   • (e) the plaintiff's notice of motion to strike out or dismiss the balance of the further amended defence and the further amended cross-claim should be stood over; and
   • (f) in the meantime the parties should be directed to serve their evidence in relation to the cross-claim (if the plaintiff provides previously ordered security for costs) and the defence to the balance of the plaintiff's claim (damages).
     

THE HISTORY OF THE PROCEEDINGS IN MORE DETAIL

7. By a notice of motion filed on 10 August 2010 and its amended notice of motion filed 24 September 2010, the plaintiff sought, by way of summary relief pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005 ( UCPR ) that the Court below make the orders claimed in paragraphs 2, 3 and 4 of the plaintiff's amended statement of claim ( the summary relief claims ), namely:
   
   • (a) a declaration that the plaintiff is entitled to be repaid the whole of the funds standing to the credit of Illawarra Credit Union Limited account number 26210806 being the funds paid into that account pursuant to the provisions contained in clause 13 of the Deed of Options for Lease dated 8 October 2007 made between the plaintiff therein described as the Tenant of the one part and the defendant therein described as the Landlord of the other part;
   • (b) an order that within three business days of the date of this order, the defendant do all things and execute all such documents as may be necessary to procure the release of the funds standing to the credit of such account and deliver such documents to the solicitors for the plaintiff; and
   • (c) an order that in the event the defendant shall fail so to execute and deliver within the time specified the documents referred to in the previous paragraph, the Registrar of the Court shall sign and deliver such documents on the defendant's behalf pursuant to s 94 of the Civil Procedure Act 2005 ( CPA ).
     
8. In its amended statement of claim the plaintiff also claimed damages. Summary judgment was not sought in relation to that claim.
   
9. On 11 November 2011 Hallen AsJ delivered judgment and concluded that the defendant's set-off deference was arguable and should proceed to trial: Cookson Plibrico Pty Ltd v V & M Davidovic Pty Ltd [2010] NSWSC 1171. An order giving effect to that judgment by formally dismissing the plaintiff's notice of motion filed on 10 August 2010 was not made until 15 March 2011.
   
10. In the first judgment at [80] - [82] the primary judge concluded by saying:

80 I note that the rule in the UCPR relied upon by the Plaintiff permits the court to make such order as the case requires. Consequently, it is possible, for example, to not grant summary judgment but require the Defendant to give to the Plaintiff an undertaking as to damages. I propose to require such an undertaking to be given.

81 In this way, the further delay that would be caused to the Plaintiff by its not having access to its own funds, might be ameliorated if, ultimately, it is held that no defence or set-off exists.

82 I note, also, that the parties have indicated that the matter could be ready for hearing reasonably promptly. I shall hear the parties on the form of orders to now be made to give effect to the reasons for judgment and the directions necessary to have the case promptly heard.

11. On 9 December 2010, the primary judge gave effect to [82] of the first judgment by directing the defendant to serve on or before 8 February 2011 all affidavits and expert reports on which it intended to rely in relation to the plaintiff's claim and the defendant's cross-claim.
    
12. On 18 November 2010 the plaintiff filed a notice of motion for orders that the first judgment be re-opened and for summary judgment on the summary judgment claims.
    
13. On 8 February 2011 the primary judge heard that notice of motion and on 15 February 2011 dismissed it with costs: Vesuvius Australia Pty Ltd (formerly known as Cookson Plibrico Pty Ltd) v V & M Davidovic Pty Ltd (No 2) [2011] NSWSC 48 ( the second judgment ).
    
14. On 8 February 2011 his Honour also directed the defendant to inform the plaintiff in writing:
    
    • (d) within 7 days, of the reasons for the inability of the defendant to comply with the direction of 9 December 2010 to serve its evidence;
    • (e) within 7 days, of the period of time within which the defendant proposed to provide its evidence; and
    • (f) of the basis upon which the undertaking as to damages given on behalf of the defendant can be satisfied in the event any damages arise.
      
15. On 15 March 2011 the primary judge gave effect to the first judgment insofar as it dismissed the summary judgment motion and required the defendant to give an undertaking as to damages, by:
    
    • (a) noting that the parties agreement that each would bear its own costs of that notice of motion;
    • (b) noting the defendant's undertaking to the Court, in the event it is found or otherwise established that the plaintiff is entitled to be paid the whole of the funds standing to the credit of Illawarra Credit Union Limited Account Number 26210806, to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to the plaintiff by reason of it having been held out of those funds; and
    • (c) ordering that the plaintiff's notice of motion filed on 24 September 2010 be dismissed;
      
16. On 15 March 2011 his Honour ordered the cross-claimant to provide security for the cross-defendant's costs of the proceedings on the cross-claim in the sum of $60,550 and stayed the cross-claim until the security was provided.
    
17. The plaintiff now appeals by a notice of motion filed on 2 March 2011 pursuant to r 49.41 of the UCPR from:
    • (a) the first judgment and the order of 15 March 2011 giving effect to it; and
    • (b) the second judgment and order of 15 February 2011.
      
18. In addition, the plaintiff seeks orders pursuant to s 61 of the CPA that the further amended defence and further amended cross-claim be struck out or dismissed, as the case may be.
    
19. The defendant has failed to comply with any of the directions and orders referred to above, and otherwise has failed to prosecute its defence and cross-claim. It is now June 2011. The delay on the defendant's part was contrary to the expressed expectation of the primary judge when delivering the first judgment some eight months ago.
    
20. At the hearing before me the defendant company's director, Mr M Davidovic, told me (albeit without any supporting evidence) that the defendant has experienced financial difficulty such that it has been unable to comply with the Court's orders and directions; that he had been unwell over the past couple of months; that he expected the defendant to be in receipt of substantial funds in about three weeks which he intended to use to retain lawyers to prosecute the amended defence and amended cross-claim; and that he expected that the defendant's evidence could be served within about six weeks. I have difficulty in understanding why these difficulties would have prevented the defendant from complying with any of the directions of 8 February 2011 referred to at [14] above.
    

STRIKE OUT

21. For months the defendant has been in breach of the Court's directions and order referred to at [11], [14] and [16] above. On that basis, the plaintiff seeks an order striking out or dismissing the further amended defence and further amended cross-claim pursuant to s 61 of the CPA and judgment accordingly. Section 61 relevantly provides:

61 Directions as to practice and procedure generally

(1) The court may, by order, give such directions as it thinks fit (whether or not inconsistent with rules of court) for the speedy determination of the real issues between the parties to the proceedings.

(2) In particular, the court may, by order, do any one or more of the following:

(a) it may direct any party to proceedings to take specified steps in relation to the proceedings,

(b) it may direct the parties to proceedings as to the time within which specified steps in the proceedings must be completed,

(c) it may give such other directions with respect to the conduct of proceedings as it considers appropriate.

(3) If a party to whom such a direction has been given fails to comply with the direction, the court may, by order, do any one or more of the following:

(a) it may dismiss the proceedings, whether generally, in relation to a particular cause of action or in relation to the whole or part of a particular claim,

(b) it may strike out or limit any claim made by a plaintiff,

(c) it may strike out any defence field by a defendant, and give judgment accordingly,

...

22. The overriding purpose of the CPA and the UCPR is to facilitate the just, quick and cheap resolution of the real issues in dispute. It is mandatory for the Court to give effect to that overriding purpose when it exercises any power given to it by the CPA or UCPR and when it interprets any of their provisions. It is mandatory for a party to assist the Court to give effect to the overriding purpose and, to that effect, to comply with directions and orders of the Court. In that regard, ss 56 and 57 of the CPA relevantly provide:

56 Overriding purpose

(1) The overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings.

(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.

(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court.

...

57 Objects of case management

(1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects:

(a) the just determination of the proceedings,

(b) the efficient disposal of the business of the court,

(c) the efficient use of available judicial and administrative resources,

(d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.

(2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1).

23. In Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 at [36] Allsop P (Campbell and Young JJA agreeing) said:

The Civil Procedure Act , ss 56-61 brings about a new statutory balance among various factors in litigation including court and party efficiency and the delivery of individual justice. Delay and case backlog are not merely factors affecting the public cost of delivering justice, they corrode the ability of the courts to provide individual justice...it is vital that the judicial system work in a way that denies, categorically, the party against whom a legitimate claim or grievance is brought the opportunity to say, with justification: "So I owe you $x, what are you going to do about it? Sue me in Court? That will take years." The reforms that have taken place under the Civil Procedure Act ...can thus be seen not merely to reflect worthy governmental and judicial efforts for efficiency, but also to be vital for the provision of timely individual justice. To these salutary ends significant powers of case management have been placed in the hands of judicial officers which, if exercised, can often be seen to have sharp, and sometimes detrimental effects on the claims of parties. Such consequences can be seen in the very nature of the powers in the Civil Procedure Act, s 61(3).

His Honour added at [46]:

As the Court of Appeal of Victoria said in British American Tobacco Australia Services Ltd v Cowell (Representing the Estate of McCabe (deceased)) [2002] VSCA 197; 7 VR 524 at 588 [178] about the power to strike out pleadings for default, the power is not intended to be used to punish the litigant. The proportional use of the powers in s 61 is brought about by giving the fundamental weight to the (sometimes competing) considerations in ss 56 and 57 required by s 58(2)(a) and bringing to bear such of the matters set out in s 58(2)(b) as the Tribunal thinks appropriate.

24. The defendant's failure to comply with any of the directions and orders of the Court is inconsistent with the overriding purpose of the CPA and the UCPR to facilitate the quick and just resolution of the real issues. Delay breeds injustice. The defendant's delay is also contrary to the position communicated to the primary judge in 2010 by the defendant and noted at [82] of the first judgment that the matter could be ready for hearing reasonably promptly. His Honour expected that to occur and made directions necessary to have the case promptly heard. An explanation of financial difficulties was only communicated by the defendant to the Court at the hearing before me in June 2011 albeit without any supporting evidence.
    
25. The primary judge held that the only arguable defence to the plaintiff's summary judgment claims was one of set-off of the defendant's damages claim in the cross-claim. Later in these reasons I respectfully disagree and uphold the appeal against the first judgment. However, for the purposes of discussing the plaintiff's s 61 motion to strike out the defence to its summary judgment claims, let it be assumed that there is an arguable set-off defence. If that defence to the summary judgment claims were to be struck out, the plaintiff would be entitled to judgment accordingly on its summary judgment claims. But the defendant would still be able to pursue damages through its cross-claim (assuming it complies with the order that has been made to provide security for the plaintiff's costs of defending the cross-claim) and would still be able to set off any such damages against the plaintiff's damages claim. In my view, the unique nature of a defence of set-off of damages claimed in a cross claim is a significant discretionary consideration on a s 61 strike-out application. If, for example, this were a claim by the plaintiff for recovery of a debt and there was a genuine defence that the debt had been paid, then the defendant's breaches of directions for service of evidence for the length of time involved in the present case might not justify striking out the defence. But where the only defence is one of set-off of damages claimed in a cross-claim, as in the present case, and there have been serious breaches of the Court's directions relating to service of evidence and where the cross-claim is stayed because of breach of an order to provide security for costs of the cross-claim, then I think that the case for a strike-out of that defence is much stronger.
    
26. In the circumstances, I consider that it is appropriate pursuant to s 61 to strike out the defence to the summary relief claims and to give judgment accordingly. That preserves the defence to the remainder of the statement of claim (damages) and the cross claim.
    
27. In response to my inquiry at the hearing, senior counsel for the plaintiff indicated that, if I were minded to give that judgment, it would be a practical course to stand over the balance of the plaintiff's notice of motion relating to striking out the defence to the remainder of the statement of claim and to dismissing the cross-claim. I propose to take that course, to make directions to move the balance of the proceedings towards a hearing as soon as practicable, and to stand over the balance of the defendant's notice of motion to a date thereafter. The timetable will take into account that the defendant has indicated that in about three weeks it should be in receipt of sufficient funds to prosecute its cross-claim and defence to the damages claim and that within about six weeks it should be able to serve its evidence. The timetable will also take into account that the cross-claim is stayed until the cross-claimant provides the security ordered on 15 March 2011.
    

APPEAL AGAINST THE FIRST JUDGMENT

28. The plaintiff is also entitled to judgment on its summary judgment claims if its appeal against the order giving effect to the first judgment is successful.
    
29. Summary judgment is provided for in r 13.1(1) of the UCPR 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.

30. In the first judgment at [6] - [8], [14] and [66], the primary judge set out findings on relevant facts and other matters that were not in dispute or were otherwise conceded during the hearing of the plaintiff's motion for summary relief:

6 The relevant facts are usefully set out in the parties' submissions. Even on this amended motion, the following facts are, in my view, established by admission, or on the unchallenged and undisputed evidence read on the application.

(a) The Defendant owns two properties relevant to these proceedings

(i) a property at Doyle Avenue, Unanderra, New South Wales ("the Doyle Avenue property"); and

(ii) a property at Sylvester Avenue, Unanderra, New South Wales ("the Sylvester Avenue property").

(b) The Plaintiff carries on a manufacturing business of producing refractory materials and occupies a factory site at Sandon Point, near Bulli, in New South Wales;

(c) Between May and September 2006, the Plaintiff and Defendant negotiated in connection with the lease of the Sylvester Avenue property;

(d) In about September 2006, the Plaintiff indicated that it wished to negotiate a lease of the Doyle Avenue property instead of the Sylvester Avenue property;

(e) There is situated on the Doyle Avenue property, an industrial factory building of approximately 4,500 square metres. A business or undertaking, known as Obnova Concrete is carried on at the property;

(f) Between September 2006 and October 2007, the parties conducted negotiations in connection with the lease of the Doyle Avenue property;

(g) On 8 October 2007, the Plaintiff and the Defendant entered into a Deed of Options for Lease ("the Deed");

(h) So far as is relevant, the Deed provided:

(i) by Clauses 2.1, 2.3 and 3, upon the exercise of an option for the Lease (as defined in the Deed), an Agreement for Lease would come into effect on the terms as set out in the Deed;

(ii) by Clause 4 and Item 12 of the Reference Schedule, the Defendant, with all due diligence and in a proper and workman-like manner, would carry out certain Works ("the Works") as specified in Item 3 of the Reference Schedule, which Works were to be completed within twelve months of the date of the Deed, namely by 8 October 2008;

(iii) The Works, included cladding the existing industrial factory building, constructing a new industrial factory building of approximately 2,000 square metres, constructing a new administration building and a fit-out of approximately 880 square metres, constructing a new amenities block with the new industrial building and also constructing car parking for approximately 80 cars;

(iv) by Clause 6, the Plaintiff was to attend to, and complete, at its own cost and expense, its fit-out, and the Defendant was to provide access to the Plaintiff for the purpose of its fit-out by 31 May 2008;

(v) by Clause 7, the Works were deemed to be completed upon the date of issue of the Occupation Certificate (as defined in Clause 1);

(vi) by Clause 9:

(a) in the event there was a failure on the part of the Defendant to complete the Works within twelve months of the date of the Deed, the Plaintiff, by written notice to the Defendant, could advise the Defendant of its default ("Default Notice"): see Clause 9.1(b);

(b) if within 14 days of the service by the Plaintiff of the Default Notice, the Defendant failed to rectify the default to the satisfaction of the Plaintiff, the Plaintiff was entitled to exercise any of its rights and remedies pursuant to Clause 9.3;

(c) if the Plaintiff was entitled to exercise its rights and remedies under Clause 9, then the Plaintiff, at its option, by written notice to the Defendant, could terminate the Deed, in which event the Deed was terminated and the Plaintiff would have no further obligations or liabilities under the Deed;

(vii) by Clauses 10 and 11, the Commencement Date and the Rent Commencement Date of the Lease was to be the date of the deemed completion of the Works (i.e. the date of the issue of the Occupation Certificate);

(viii) by Clause 12, the Plaintiff was to execute the Lease in duplicate, in the form annexed to the Deed and return it to the Defendant's solicitors to be held by them subject to the terms of the Deed;

(ix) Clause 13 of the Deed, entitled "Security Deposit", provided:

"Upon the signing of this Deed the Tenant must deposit with the Tenant's solicitors the sum of $560,000.04 plus GST to be paid to the Tenant's solicitors' trust account and then invested by the Tenant's solicitors into an interest bearing account with The Illawarra Credit Union Limited on behalf to the Landlord and the Tenant for the purposes of securing to the Landlord the performance of the terms and conditions of this Deed by the Tenant . The Tenant's solicitors are not to release any or all of the monies in such account without the joint authority of the Landlord and Tenant.

In the event that neither the Landlord nor the Tenant exercises its option pursuant to clause 2 hereof within the time provided therein then the Landlord must immediately allow the refund to the Tenant of the full sum of money contained in the said account plus all accrued interest.

Upon the commencement date of the Lease or upon the Tenant becoming entitled to exercise its rights under clause 9 or if the lease is not otherwise to proceed, then the Landlord must immediately allow the refund to the Tenant of the full sum of money contained in the said account plus all accrued interest.

The above provision relating to the full refund of the security bond to the Tenant upon commencement of the Lease is subject to the Tenant paying to the Landlord the first year's rent plus GST under the Lease in advance.

In the event however that the Tenant becomes bound hereunder to forfeit to the Landlord the said security deposit then in that event then all accrued interest earned thereon shall be paid to the Landlord." [My emphasis]

(i) Pursuant to Clause 13 of the Deed:

(i) on 11 October 2007, the Plaintiff transferred to the trust account of its solicitors, $616,000.04; and

(ii) on 7 November 2007, the Plaintiff's solicitors transferred the security deposit into an interest bearing cash management account with The Illawarra Credit Union Limited;

(j) On 8 January 2008, pursuant to Clause 2.1 of the Deed, the Plaintiff exercised the option for the Lease referred to in that Clause in respect of the Doyle Avenue property;

(k) The Plaintiff, subsequently, executed the Lease in duplicate and returned it to the Defendant's solicitors;

(l) The Works were not completed within the time required, or at all;

(m) The time for the Plaintiff to perform its obligations to carry out its fit-out never arose.

(n) Obnova Concrete has continued to carry on business at the Doyle Avenue Property;

(o) No Lease ever commenced operation;

(p) The security deposit is still held in the Credit Union account.

7 On, or about, 22 October 2009, the Plaintiff served on the Defendant a Default Notice in respect of the Defendant's failure to complete the Works.

8 On, or about, 19 November 2009, the Plaintiff served on the Defendant, a Termination Notice dated 19 November 2009.

...

14 At the hearing of the amended notice of motion, the Defendant accepted that:

(a) the only binding agreement(s) between the Plaintiff and the Defendant were the Deed and the Lease of the Doyle Avenue Property;

(b) the Deed and the Lease were terminated; in this regard, whilst the Defendant denied the Plaintiff's right to terminate the Deed, it asserted that the Plaintiff's purported termination amounted to a repudiation of the Lease and the Deed, which entitled it (the Defendant) to terminate the Lease (and Deed), which it had done; and

(c) despite there having been lengthy negotiations for, and steps taken towards, the parties entering into a lease for the Sylvester Avenue property, no binding agreement between the parties for lease in relation to the Sylvester Avenue property had ever come into effect.

31. The critical clause of the deed relating to release of the security deposit is cl 13. It is set out, with appropriate emphasis by the primary judge, in the above quotation from the first judgment.
    
32. The summary relief claims do not involve any claim or demand for payment by the plaintiff against the defendant for any debt, damages, liquidated or unliquidated, or other monetary amount.
    
33. The defendant pleads that to the extent that the plaintiff is found to be entitled to a refund of the security deposit or any part of it (which is denied) the defendant is entitled to offset the whole of the security deposit against the damages sought in the amended cross-claim.
    
34. Relevantly, cl 13 of the Deed provides that an event that triggers the plaintiff's entitlement to a refund of the security deposit is that the lease is not otherwise to proceed. This event does not, and on the facts of this case did not, concern any failure or default by the defendant to pay any money to the plaintiff or any other monetary claim or demand by the plaintiff against the defendant.
    
35. The primary judge found that the lease is not to proceed and that this was an event, without more, that immediately entitled the plaintiff to a refund of the security deposit plus interest in the account pursuant to clause 13: [66] to [68] of the first judgment.
    
36. Subject to the set-off issue the subject of this appeal, the primary judge found that there was no triable issue in respect of the summary relief claims: [59] - [74] of the first judgment.
    
37. In the first judgment at [75] - [77], the primary judge said ( the set-off finding ):

75 Finally, I turn to whether reliance upon a set-off should prevent the Plaintiff succeeding on its claim. In answer to the set-off claim, the Plaintiff submits that there is no money claim made by it, but simply claims for a declaration and consequential orders in accordance with the provision of the Deed.

76 In light of the conclusion reached in Lean v Tumut River Orchard Management Ltd , and the authorities referred to in the case, namely that it is reasonably arguable that rights under a contract (the Deed) could be set-off against misleading or deceptive conduct, or unconscionable conduct amounting to a contravention of the Trade Practices Act , keeping in mind the strong reluctance of the court to give summary judgment, and exercising the extreme caution which must be exercised in making such a determination, I have, hesitatingly, come to the conclusion that the case advanced by the Defendant on the Plaintiff's claim for the return of the security deposit should proceed.

77 I stress that I do not, necessarily, accept as correct, the argument of set-off, and I do not intend suggest that, at the trial of the proceedings, the argument would succeed. It is, however, sufficient, for the purpose of the summary judgment application, that the Defendant raises a triable issue.

38. Accordingly, the set-off finding was the sole basis in the first judgment upon which the primary judge refused the plaintiff's application for summary relief. However, as indicated at [80] - [82] of the primary judgment (quoted above at [10]), his Honour was also moved to require the defendant to give an undertaking as to damages, and by the fact that the parties had indicated they could be ready for hearing reasonably promptly, to which end his Honour made directions for service of evidence.
    
39. The set-off finding was based on the proposition that set-off is available as a defence where, as is the case here, there are no cross-demands for money or damages between the parties. The plaintiff submits that that is a misapprehension of the law. I accept the submission. In my opinion, all set-off, including equitable set-off, is concerned with cross demands for money or damages between the parties and setting one off one against the other so as to produce a balance: P W Young; C Croft; M Smith, On Equity (2009) Lawbook Co at [15.360]; R Derham, The Law of Set-Off , 4 th ed (2003) Oxford University Press at [1.01], [3.02] and [9.01]. Ultimately, all cases of set-off require the court to (a) make a finding in monetary terms in relation to a claim or demand by the plaintiff against the defendant; (b) make a finding in monetary terms in relation to a claim or demand by the defendant against the plaintiff; (c) to set-off one against the other; and (d) to give a judgment for the plaintiff for the difference (if any) between the two amounts: Meagher, Gummow and Lehane's Equity Doctrines and Remedies , 4th ed (2002) LexisNexis Butterworths at [37-005].
    
40. The defendant has a monetary claim against the plaintiff for damages for misleading or deceptive conduct or unconscionable conduct. However, in respect of the summary relief claims, the plaintiff makes no monetary or damages claim against the defendant. Rather, it seeks a declaration and mandatory injunction that the defendant do those things it promised under cl 13 of the deed to enable the plaintiff to have its money (the security deposit) released to it from a third party, the plaintiff's solicitor. The plaintiff's entitlement to the summary relief claimed is not consequent upon the non-payment of a debt or other money from the defendant. It is simply consequent upon the fact that the lease is not to proceed.
    
41. In Re Dalco; Ex parte Dalco v Deputy Commissioner of Taxation (1986) 67 ALR 605 at 612, an authority cited in On Equity on this point, Neaves J in the Federal Court said:

The essential nature of a set-off is that it is a countervailing claim: the debtor, in effect, admits the existence of the creditor's debt but sets up a countervailing claim as excusing him from paying the creditor's debt either wholly or in part depending upon the amount of the countervailing claim.

42. In Tony Lee Motors Ltd v M S MacDonald & Son (1974) Ltd [1981] 2 NZLR 281 at 288, an authority cited in both On Equity and The Law of Set-Off on this point, Bisson J in the High Court of New Zealand stated:

...there can be no set-off in law or equity of any part of the equitable debt of $9900.56 against the plaintiff's claim for the possession of parts, plant and equipment. The Statutes of Set-off do not apply to goods or other specific things wrongfully detained and in equity set-off is likewise only concerned with debts or money demands. (See Story on Equity pp 601 and 602)...

43. In Smith (Administrator of Cosslett (Contractors) Ltd) v Bridgend County Borough Council [2001] UKHL 58; [2002] 1 AC 336 at [36], another authority cited in The Law of Set-Off on this point, Lord Hoffman said:

Similarly, equitable set-off depends upon showing some equitable reason for protection against the plaintiff's demand: see Hanak v Green [1958] 2 QB 9. In my opinion a defendant could not, in the absence of a lien or other security, claim to retain an asset belonging to a plaintiff by way of set-off against a monetary cross-claim. If this were not the case, everyone would in effect have a lien over any property of his debtor which happened to be in his possession. It follows, in my opinion, that he cannot improve his security in equity by wrongfully converting the debtor's property.

44. In the first judgment at [76] the primary judge said that he hesitatingly relied on the Carr J's decision in Lean v Tumut River Orchard Management Ltd [2003] FCA 269. In my view, that case is distinguishable. Lean concerned an application by the second respondent in those proceedings that the applicant's statement of claim be struck out. The applicant claimed (among other things) that it was entitled to damages against the first respondent for its misleading or deceptive or unconscionable conduct under the Trade Practices Act 1974, which allegedly caused it to enter into various agreements including Investor Loan Agreements. Those Investor Loan Agreements were later assigned to the second respondent. The second respondent had commenced proceedings against the applicant in the Local Court for moneys allegedly owing under the Investor Loan Agreements. In the Local Court proceedings and in its statement of claim in Lean , the applicant sought inter alia a declaration that the applicant was entitled to an equitable set-off against the first respondent. The applicant also sought a declaration that the second respondent took its rights under the alleged assignments from the first respondent subject to the applicant's equitable set-off against the first respondent.
    
45. On the second respondent's strike out application, the issues identified by Carr J at [56] of Lean were: first, whether it was reasonably arguable that the applicant was entitled to an equitable set-off against the first respondent (in respect of moneys owing under the Investor Loan Agreements) of its damages for misleading or deceptive or unconscionable conduct; and secondly, whether it was reasonably arguable that the second respondent took its rights (under the Investor Loan Agreements) as assignee from the first respondent subject to the applicant's equitable set-off against the first respondent. In respect of the first issue, the court in Lean (in the passages cited at [57] of the first judgment) found for the applicant. In respect of the second issue, the court in Lean also found for the applicant: at [62] and following, especially [79].
    
46. Hence, Lean was a case that involved cross demands of money or damages. The present case is distinguishable from Lean because the summary relief claims do not involve any monetary claims or demands against the defendant. And the plaintiff's entitlement to those summary relief claims is not consequent upon the non-payment of a debt or other money by the defendant.
    
47. In my opinion, the primary judge ought to have found that set-off was inapplicable on the facts of this case in relation to the summary relief claims and that there was no triable issue in that regard. Consequently, in the first judgment the primary judge ought to have given summary relief to the plaintiff and made the orders sought in the amended notice of motion filed on 24 September 2010. Therefore the appeal against the order giving effect to the first judgment should be allowed.
    

APPEAL AGAINST THE SECOND JUDGMENT

48. On 18 November 2010, the plaintiff filed a notice of motion for the primary judge to re-open the first judgment and give the same summary relief, relying on rr 36.16(1) or (3A) of the UCPR. The primary judge dismissed that notice of motion in the second judgment.
    
49. The plaintiff submits that in the event that the plaintiff succeeds on its appeal against the first judgment, then it is inevitable that the plaintiff succeeds on its appeal against the orders made by the Court below in the second judgment because the plaintiff will have been vindicated on its submissions regarding set-off. Hence, the plaintiff submits, it ought to be entitled to all of its costs on this appeal and in the Court below, including the costs of the application to re-open the first judgment.
    
50. I reject the submission. On the plaintiff's motion to re-open the first judgment and, consequently, for summary judgment, the plaintiff made the same submissions to the primary judge as it later made before me that it was an error of law to say that set-off was available against its summary judgment claims. I respectfully agree with the primary judge's conclusion in the second judgment, when dismissing the motion to re-open, that that cast him in the role of hearing what amounted to an appeal against his own decision: at [17]. That is sufficient, in my view, to dismiss the appeal against the second judgment.
    
51. There is one further consideration. In the second judgment, the primary judge said that another basis upon which he would refuse summary judgment was that summary judgment was a discretionary claim. His Honour took into account on discretion that: (a) the plaintiff's claim for damages and the cross-claim had to proceed to a final hearing in any event; (b) he had made directions for the further conduct of the proceedings at the conclusion of the hearing of the 2010 notice of motion for summary judgment so that, whatever the result, the substantive hearing would not be delayed; and (c) at the hearing of the 2010 notice of motion, to protect the plaintiff he had required and been given an undertaking as to damages by the defendant in case it was established that the plaintiff had been left out of what was found to be funds to which it was entitled.
    
52. The plaintiff submits that it was not open to the primary judge, in refusing leave to re-open, to add a discretionary ground for refusing the summary judgment application in the first judgment when that ground had not been mentioned in the first judgment. The plaintiff also submits that, in doing so, the primary judge misapprehended the law by overlooking that r 13.1 of the UCPR expressly empowers the Court to grant summary judgment for "any part" of a claim for relief.
    
53. Contrary to the plaintiff's suggestion, I do not think that in the second judgment the primary judge was in effect amending his first judgment by adding a discretionary ground for refusing summary relief. It would not, I think, have been open to him to do that. I read the second judgment as indicating that if his Honour had granted leave to re-open the first judgment, then an additional ground on which he would then have refused summary judgment was the discretionary ground to which he referred. As his Honour did not grant leave to re-open, his Honour's view of the discretionary ground was obiter and confined to the second judgment. The defendant's breaches or continuing breaches of the primary judge's directions and orders during the months since the hearing that led to the second judgment, have largely swept away the second and third of the three discretionary matters to which the primary judge referred in the second judgment: see [51] above. The third discretionary matter (that the remainder of the claim and the cross-claim have to proceed to a final hearing in any event) cannot suffice by itself given that r 13.1 expressly empowers the Court to grant summary judgment for any part of a claim for relief.
    
54. The plaintiff made a sweeping attack on the primary judge's discretionary ground by submitting that neither principle nor authority support the proposition that a plaintiff who has demonstrated that there is no triable issue on part of a claim, is nevertheless disentitled to summary judgment for that part of the claim on the basis of an expansive or overarching general discretion. As discussed, the discretionary matters to which his Honour referred are either largely no longer applicable or cannot stand alone. It is therefore unnecessary to pass judgment on this submission.
    

COSTS

55. The plaintiff has succeeded on its strike out motion and on its appeal against the first judgment and is entitled to an order for costs. However, there should be an apportionment of costs to reflect the plaintiff's failure on the appeal against the second judgment. That may fairly be reflected in an order that the defendant pay 90 per cent of the costs of the plaintiff's notice of motion filed on 2 March 2011.
    

ORDERS

56. The orders of the Court are as follows:
    
    • (1) Order that the defence to the relief claimed in paragraphs 2, 3 and 4 of the amended statement of be struck out.
    • (2) Appeal allowed against the order of Hallen AsJ on 15 March 2011 dismissing the plaintiff's amended notice of motion for summary judgment filed on 24 September 2010.
    • (3) The order referred to in Order 2 is set aside.
    • (4) Appeal dismissed against the order of Hallen AsJ on 15 February 2011 dismissing with costs the plaintiff's notice of motion filed on 18 November 2010 (to re-open the judgment of 11 November 2010 and for summary judgment).
    • (5) Declaration that the plaintiff is entitled to be repaid the whole of the funds standing to the credit of Illawarra Credit Union Limited account number 26210806 being the funds paid into that account pursuant to the provisions contained in clause 13 of the Deed of Options for Lease dated 8 October 2007 made between the plaintiff therein described as the Tenant of the one part and the defendant therein described as the Landlord of the other part.
    • (6) Order that within three business days of the date of this order, the defendant do all things and execute all such documents as may be necessary to procure the release of the funds standing to the credit of such account and deliver such documents to the solicitors for the plaintiff.
    • (7) Order that in the event the defendant shall fail so to execute and deliver within the time specified the documents referred to in the previous paragraph, the Registrar of the Court shall sign and deliver such documents on the defendant's behalf pursuant to s 94 of the Civil Procedure Act 2005.
    • (8) Order that the defendant pay the plaintiff's costs relating to its amended notice of motion filed on 24 September 2010 and 90% of the plaintiff's costs relating to its notice of motion filed on 2 March 2011.
    • (9) The plaintiff's bundle of documents may be returned.
    • (10) Directions as follows:

(a) The defendant is to serve by 29 July 2011 all affidavits and expert reports on which it intends to rely in relation to the plaintiff's claim for damages and, if it has provided the security for costs ordered on 15 March 2011, the cross-claim.

(b) The plaintiff is to serve all affidavits and expert reports in reply by 19 August 2011.

(c) The proceedings, including the balance of the plaintiff's notice of motion filed on 2 March 2011, will be listed before the Registrar on 26 August 2011 with a view to obtaining a hearing date.

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