Access Australasia Pty Ltd v Griffiths [2004] QDC 368

DISTRICT COURT OF QUEENSLAND CITATION: Access Australasia Pty Ltd v Griffiths [2004] QDC 368 PARTIES: ACCESS AUSTRALASIA PTY LTD T/A LOCATIONS REALTY Appellant and GAYLIA JOY GRIFFITHS Respondent FILE NO: 90/03 PROCEEDING: Appeal ORIGINATING COURT: Magistrates Court Southport DELIVERED ON: 11 June 2004 DELIVERED AT: Southport HEARING DATE: 2 June 2004 JUDGE: Newton DCJ ORDER: Appeal dismissed CATCHWORDS: APPEAL FROM ORDER OF MAGISTRATE GRANTING SUMMARY JUDGMENT – Rule 292 Uniform Civil Procedure Rules Equity – whether equitable set-off operates to impeach respondent’s title Cases cited: CSR Investments Pty Limited v Alcan Northern Territory Alumina Pty Limited [2003] NSW SC 1137 D Galambos & Son Pty Ltd v McIntyre 5ACTR 10 Gibb Australia Pty Limited v Cremor Pty Limited No. SC 143 of 1991, No. SCA 68 of 1991, (1992) 108 FLR 129; [1992] ACTSC 68 COUNSEL: Mr N Thompson – appellant Mr R Lawson - respondent SOLICITORS: Grays – appellant Porter Davies – respondent -- 1 of 12 -- - 2 - [1] This is an appeal against an order of a Magistrate granting summary judgment on a claim for damages for breach of contract. [2] The respondent (who was the plaintiff in the court below) claimed the sum of $13,076.25 as being her share of commissions earned while she was employed as a sales consultant in the appellant’s real estate agency at the Gold Coast. The statement of claim, which was filed on 11 August 2003, identified three separate and distinct sales secured by the respondent in respect of which it was alleged that the appellant, her employer, had paid none or part only of the commission fee to the respondent: “The Sanctuary Pines Commission 4. In or about November 2002, the Plaintiff secured the sale of Unit 24, Sanctuary Pines, Santa Barbara Road, Hope Island in the State of Queensland, for consideration of $222,000.00 (‘the Unit 24 Sale’). 5. The total commission payable to the Defendant in respect of the Unit 24 Sale was $6,600.00 (including GST) of which $3,300.00 (including GST) was payable to the Plaintiff as a commission fee pursuant to the contract (‘the Unit 24 Commission Fee’). 6. On 21 January 2003, the Plaintiff delivered invoice no. 38 in the amount of $3,300.00 (including GST) to the Defendant in respect of the Lot 24 Commission Fee. 7. Settlement of the sale of Unit 24 took place on 17 January 2003. 8. On 7 February 2003, the Defendant paid to the Plaintiff the sum of $2,750.00 in partial reduction of monies owed to the Plaintiff in respect of the Unit 24 Commission Fee. The Gracemere Island Commission 9. In or about September 2002, the Plaintiff secured the sale of Lot 11 Gracemere Island, Hope Island, in the State of Queensland, for consideration of $375,00.00 (‘the Lot 11 Sale’). -- 2 of 12 -- - 3 - 10. The total commission payable to the Defendant in respect of the Lot 11 sale was $10,807.50 (including GST) of which $5,403.75 (including GST) was payable to the Plaintiff as a commission fee pursuant to the contract (‘the Lot 11 Commission Fee’). 11. On 3 April 2003, the Plaintiff delivered invoice no. 43 in the amount of $5,403.75 (including GST) to the Defendant in respect of the Lot 11 Commission Fee. 12. Settlement of the sale of Lot 11 took place on or about 21 June 2003. 13. No monies have been received from the Defendant in respect of the Lot 11 Commission Fee. The Cressbrook Parade Commission 14. In or about November 2002, the plaintiff secured the sale of Lot 38, Cressbrook Parade, Hope Island, in the State of Queensland, for consideration of $500,00.00 (‘the Lot 38 Sale’). 15. The total commission payable to the Defendant in respect of the Lot 38 Sale was $14,245.00 (including GST) of which $7,122.50 (including GST) was payable to the Plaintiff as a Commission Fee pursuant to the contract (‘the Lot 38 Commission’). 16. On 3 April 2003, the Plaintiff delivered invoice no. 44 in the amount of $7,122.50 (including GST) to the Defendant in respect of the Lot 38 Commission. 17. Settlement of the sale of Lot 38 took place on or about 21 June 2003. 18. No monies have been received from the Defendant in respect of the Lot 38 Commission. 19. On 14 July 2003, the Plaintiff did (by its solicitors) make demand of the Defendant for payment of outstanding monies owed under the contract. 20. The Defendant has failed and/or refused, despite demand, to make payment of the sum of $13,076.25 to the Plaintiff and, in the premises, is in breach of the contract.” [3] The defence, which was filed out of time on 15 September 2003, simply alleged that the defendant was not indebted as alleged or at all. -- 3 of 12 -- - 4 - [4] On 17 September 2003 an application for summary judgment was filed supported, inter alia, by an affidavit of Ben Walker Seccombe, an articled clerk in the employ of the respondent’s solicitors which included the following paragraphs: “2. On 14 July 2003, I spoke via telephone with one Tony Petty (‘Petty’) who I believed to be the principal and ‘guiding mind’ of Locations Realty (the Defendant). The subject of that conversation was a notice lodge pursuant to the Trust Accounts Act (1973) in respect of settlement funds held by McCullough Robertson Solicitors on the Gold Coast. Petty indicated on a number of occasions that he did not know why the Plaintiff had felt compelled to issue such a notice as he had every intention of paying the Plaintiff the money which she was owed in respect of consultancy fees. … 3. On several occasions throughout the conversation referred to at paragraph 2, Petty acknowledged that the fees the subject of these proceedings were due and owing to the Plaintiff by the Defendant.” [5] An affidavit of Anthony Christopher Petty was filed on 9 October 2003 and served on the respondent at the hearing of her application for summary judgment on 10 October 2003. In that affidavit Petty confirmed that he was the general manager of the appellant and also that the respondent was employed as a saleswoman by the appellant at the relevant times. Petty did not dispute the respondent’s claim but sought to set off the amounts claimed by her against a sum in respect of agent’s commission resulting from the sale of a property (“the Bullivant sale”) by the respondent in circumstances where it was alleged that the respondent had failed to obtain an appointment of the appellant in writing in respect of that property and where the respondent had misused confidential information in order to position herself in her own business, at which time the sale of the property in question was concluded. It was also alleged by Petty that the respondent had destroyed or removed records of the appellant in order to deprive it of its right to commission with respect to the Bullivant sale. -- 4 of 12 -- - 5 - [6] Exhibited to Petty’s affidavit was a draft defence and counterclaim, which has not been filed, which admitted the claims of the respondent in respect of unpaid commission fees but which sought to set off the sum of $65,560.00 claimed in respect of the Bullivant sale as one half of the commission payable. [7] The application for summary judgment was brought pursuant to r 292 of the Uniform Civil Procedure Rules which provides: “[r 292] Summary judgment for plaintiff 292(1) A plaintiff may, at any time after a defendant files a notice of intention to defend, apply to the court under this part for judgment against the defendant. (2) If the court is satisfied that - (a) the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim; and (b) there is no need for a trial of the claim or the part of the claim; the court may give judgment for the plaintiff against the defendant for all or the part of the plaintiff’s claim and may make any other order the court considers appropriate.” [8] In her reasons for judgment the Magistrate traversed the submissions made on behalf of both parties and concluded, in allowing the application for summary judgment, that: “I think in the end, I accept the plaintiff’s submission that even if the defendant does show prospects of successfully establishing the counterclaim that the Court is not prevented from making an order for judgment pursuant to Rule 292 and I accept the submission that should the defendant wish to maintain its claim against the plaintiff, the counterclaim can proceed separately, and, in the circumstances, it should not interfere with the plaintiff being granted judgment.” [9] A notice of appeal was filed on 11 November 2003 whereby the appellant (the defendant in the court below) seeks to appeal from the order of the Magistrate on the grounds that the Magistrate erred in finding that: -- 5 of 12 -- - 6 - (1) the appellant had no defence by way of set-off to the respondent’s claim; (2) there was no need for a trial of the proceeding; (3) the appellant’s claim for set-off depended “upon suspicion” and there was little or an insufficient basis upon which to make the inferences upon which the appellant relied. [10] Ground 3 is clearly a reference to that part of the Magistrate’s reasons which state that: “The defendant could not point to any evidence at all that Bullivant signed any appointment in writing for the defendant to act to sell his property at any time. And really what is being said on behalf of the […] defendant is that the Court can draw inferences that the plaintiff either failed to obtain a written appointment from Bullivant or that she wilfully destroyed written paperwork in the course of her engagement with the defendant. But there of course may be alternative and reasonable inferences and one reasonable one simply might be that Mr Bullivant chose not to sign a written appointment and simply did not choose for the defendant to act on his behalf. There is no material, of course, from Bullivant, either way. My assessment is, the defendant’s case, on the material so far depends upon suspicion and requesting that the Court draw inferences about serious misconduct on the part of the plaintiff when really there is little factual basis upon which to draw those inferences.” [11] The basis of the attack upon the Magistrate’s decision is a defence of equitable set-off. As noted in Derham, Set-off, 2nd edition, Clarendon Press, Oxford 1996, p 41: “The seminal authority on this form of equitable set-off is Lord Cottenham’s judgment in Rawson v Samuel [(1841) Cr & Ph 161; 41 ER 451]. The Lord Chancellor said in that case that the mere existence of cross-demands is not sufficient to give rise to a set-off. Rather, he said that the applicant for relief must show some good equitable grounds for being protected against the plaintiff’s demand, such that the plaintiff’s title to his demand is impeached.” -- 6 of 12 -- - 7 - [12] In CSR Investments Pty Limited v Alcan Northern Territory Alumina Pty Limited [2003] NSW SC 1137(2 December 2003) Einstein J, having referred to Lord Cottenham’s judgment observed that accordingly, the defence of equitable set-off will not necessarily be available in circumstances where the basis for the claim is that the cross-demand arises out of the same contract as the claim against which the set-off is sought. His Honour then proceeded to identify numerous Australian decisions where the test established by Lord Cottenham in Rawson v Samuel has been applied and explained: “In Lord v Direct Acceptance Corp (1993) 32 NSWLR 362 at 367, Sheller JA (with whom Kirby P and Meagher JA concurred) approved the view of the concept of equitable set-off as stated in Meagher, Gummow and Lehane, Equity, Doctrines and Remedies, 3rd ed. (1992), paragraph 3709(h) at 818, to the effect that: ‘It is an indispensable requirement of equitable set-off that the set-off actually go to the root of, be essentially bound up with, and “impeach” the title of the plaintiff’. 37. Similarly, in Just Juice Corporation Pty Ltd, Re; James v Commonwealth Bank of Australia (1992) 37 FCR 445, Gummow J applied and discussed the formulation of the test in Rawson v Samuel. His Honour stated at 457-458: ‘…equitable set-off is available where the party seeking it can show a recognised equitable ground for being, to the relevant extent, protected from his adversary’s demand and the mere existence of cross-demands is not sufficient. …’ 38. Gummow J cited the New Zealand Court of Appeal’s decision in Grant v NZMC Ltd [1989] 1 NZLR 8 at 13 where the Court observed that “It is neither necessary, nor decisive [for equitable set-off to be available] that claim and cross-claim arise out of the same contract” (emphasis added). 39. The learned authors of the 4th edition of Meagher, Gummow and Lehane’s, Equity, Doctrines and Remedies (Butterworths, 4th ed., 2002) have noted that “in Australia, the initial test of impeachment is still generally applied” (paragraph 37-050, page 1062) and a similar observation has been made by the learned author of The Law of Set-Off (Derham, R, The Law of Set-Off, Oxford University Press, 3rd ed., 2003, paragraph 4.21) as follows: -- 7 of 12 -- - 8 - ‘In Australia the Courts have been more prepared to emphasise impeachment of title as the basis of equitable set-off, and generally have tended to be more conservative on questions of equitable set-off than their English counterparts.’ 40. The concept of “impeachment” has been expressed in various ways. It has been described: (a) as requiring a cross-demand to go to “the very root of the plaintiff’s claim”: British Anzani (Felixstowe Ltd) v International Marine Management (UK) Ltd [1980] QB 137 at 145; or (b) as requiring the cross-demand to call into question, impugn, disparage or impede the title to the claim: MEK Nominees Pty Ltd v Billboard Entertainments Pty Ltd (1993) V Conv R 54-468; or (c) as requiring the cross-claim to flow out of and to be inseparably connected with the dealings and transactions which also give rise to the claim: Tooth v Brisbane City Council (1928) 41 CLR 212 at 224; Bank of Boston Connecticut v European Grain and Shipping Ltd [1989] AC 1056; or (d) as requiring that the link between the respective demands must be such that the two demands in effect are interdependent: Hamilton Ice Arena Ltd v Perry Developments Ltd [2002] 1 NZLR 309 at 312. 41. Another formulation of the test of equitable set-off, which appears to derive from the decision of Lord Denning in Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1978] QB 927, suggests that the ultimate test is whether it would be unjust, or inequitable, that a plaintiff should be allowed to proceed with its claim without regard to the claim of the defendant. This formulation of the test requires consideration of the relationship and closeness of connection between the two claims and the general conduct of the parties and has been applied in certain instances in Australia: see AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705, especially at 710-711, per Giles J; Australian Mutual Provident Society v Specialist Funding Consultants (1991) 24 NSWLR 326 at 328-9, per Rogers CJ.” [13] Further assistance as to the circumstances in which a set-off will be ordinarily allowed in equity is provided in the judgment of Woodward J in D Galambos & Son Pty Ltd v McIntyre 5 ACTR 10 at 25-26. Having reviewed a number of authorities his Honour extracted the following principles: “(i) Failure in part to perform a contract, or defective performance of a contract requiring work to be done again or directly reducing the value of work done or goods supplied, may be raised as a defence to an action for money due under that contract: Allen v Cameron [(1883) -- 8 of 12 -- - 9 - 1 Cr & M 832; 2 LJ(Ex) 263; 149 ER 635]; Lowe v Holme [(1883) 10 QBD 286; 52 LJ(QB) 270; 31 WR 400]; Mondel v Steel [(1841) 8 M&W 858; 10 LJ(Ex) 426; [1835-42] All ER Rep 511]; (ii) Claims for money due under a contract and for damages for breach of the same contract (arising, for example, from delay) may be set-off against each other where the equity of the case requires that it should be so. This will depend upon how closely the respective claims are related, particularly as to time and subject-matter. The general conduct of the respective parties will as always be relevant to the granting of such equitable relief: Young v Kitchin [(1878) 3 Ex D 127; 47 LJ(QB) 579; 26 WR 403]; Newfoundland Government v Newfoundland Railway Co [(1888) 13 App Cas 199; 58 LT 285; [1886-90] All ER Rep Ext 1590]; Bankes v Jarvis [[1903] 1KB 549; 88LT 20; [1900-3] All ER Rep 656]; Hanak v Green [[1958] 2QB 9; [1958] 2 All ER 141; [1958] 2 WLR 755]; (iii) Even where one of the claims is not in terms based upon the contract, but it flows out of and is directly connected with it, a court may be prepared to recognise an equitable set-off: Piggott v Williams [(1821) 6 MADD & G 95; 56 ER 1027]; Beasley v Darcy [(1800) 2 Sch & Lef 403]; Smith v Parkes [(1852) 16 Beav 115; 51 ER 720]; Morgan & Son v S Martin Johnson & Co [[1949] 1KB 107; 64 TLR 381; [1948] 2 All ER 196]; Hanak v Green [supra] (per Sellers LJ); (iv) The above statements of principle cannot be regarded as having universal application. They do clearly apply to contracts for work and labour, but special considerations are relevant in other areas such as – bills of exchange; … landlord and tenant… and carriage of goods.” [14] In attempting to apply these principles to the present case in order to determine whether the set-off actually goes to the root of, or is essentially bound up with, and impeaches the title of the respondent to her claim, it is necessary to examine the competing demands. I note, firstly, that none of the four relevant transactions (i.e. the Sanctuary Pines, Gracemere Island, Cressbrook Parade or the Bullivant sales) can be said to be interdependent. The sales were in respect of quite distinct parcels of land involving vendors and purchasers who, to the best of my knowledge, are not connected in any way and the contracts were signed on different dates. None of the contracts depended upon any of the other contracts being fulfilled for their efficacy. Each stood alone as a separate and distinct -- 9 of 12 -- - 10 - transaction with the only common feature of the sales being that the respondent was the real estate agent in each matter and the appellant was the employer of the respondent. A contract of employment was in existence between the parties at the relevant times. The terms of this contract as pleaded in the statement of claim were as follows: “3(a) The Plaintiff would assist the Defendant to locate purchasers for certain parcels of real estate in respect of which the Defendant had been granted or was exercising real estate agency rights; (b) In circumstances where the Plaintiff successfully secured a purchaser on the Defendant’s behalf, or contributed thereto, the Defendant was to pay the Plaintiff a commission fee (‘the commission fee’); (c) The commission fee was calculated on a percentile split of the commission paid to the Defendant in respect of the sale; (d) The percentile division of the commission was to be 50% to the Defendant and 50% to the Plaintiff; (e) The Plaintiff would invoice the Defendant for the respective commission fee one week (7 days) prior to the expected date of settlement; (f) The invoices became due and payable on, or immediately after, settlement of the property the subject of the commission fee had occurred.” The defence that was filed contained no denial of any of the matters pleaded in respect of the contract of employment. The affidavit of Petty made reference to the terms of engagement in paragraph 2 which is in these terms: “2. The Plaintiff was employed by the Defendant as a saleswoman between the 24th August 2002 and 24th January 2003 on (inter alia) the following basis: (a) as a saleswoman on commission and paid remuneration on the basis of sales of real estate actually achieved by her endeavours; (b) the remuneration payable was half the commission payable to the Defendant in respect [sic] any such sale of real estate; (c) such remuneration was payable out of the commission received by the Defendant; -- 10 of 12 -- - 11 - (d) the Defendant provided her with office and other facilities, including phone, stationary [sic], typing, administration and support staff; (e) the Defendant paid for advertising costs of the agency generally and contributed to advertising of home properties sold through the Defendant’s agency.” The draft defence and counterclaim, which has not been filed, in relation to paragraph 3 of the statement of claim pleads that the terms of the respondent’s engagement included the following terms: “2(a) the Plaintiff was employed by the Defendant as salesman [sic] on commission; (b) the Plaintiff was paid remuneration on the basis of sales of real estate actually achieved by the Plaintiff’s endeavours; (c) the remuneration payable was half the commission payable to the Defendant in respect [sic] any such sale of real estate; (d) such remuneration was payable out of the commission received by the Defendant. (e) otherwise denies the allegations in paragraph 3 and says that in particular that [sic] the Plaintiff’s engagement was not limited ‘to locating purchasers for parcels of real estate in respect of which the Defendant had been granted or was exercising real estate agency rights’.” It can be seen, then, that the Magistrate had no material before her contradicting the respondent’s allegation that invoices in respect of commission fees became due and payable on, or immediately after, settlement of a property the subject of a commission fee. There is no suggestion in the material that a commission fee was payable in circumstances otherwise than those pleaded by the respondent who confirmed in her affidavit filed on 9 October 2003 that the allegations contained in the statement of claim were correct. [15] In these circumstances I am unable to see how the cross-claim in respect of the Bullivant sale can be said to flow out of and to be inseparably connected with the dealings and transactions in the other three sales which give rise to the -- 11 of 12 -- - 12 - respondent’s claim. To this extent I reject the contention of the appellant that the cross-demand calls into question, or impugns, or disparages or impedes the title of the respondent to her claim. In other words it cannot, in my opinion, be said that the cross-demand goes to the very root of the respondent’s claim. I cannot discern a sufficient nexus between the opposing claims capable of showing an equity of the necessary kind in respect of the appellant’s indebtedness to the respondent. [16] I do not overlook that the Magistrate’s order granting summary judgment, even if stayed, may affect the appellant’s financial credit and reputation. Nevertheless, as was pointed out by the Supreme Court of the Australian Capital Territory in Gibb Australia Pty Limited v Cremor Pty Limited No. SC 143 of 1991, No. SCA 68 of 1991, (1992) 108 FLR 129; [1992] ACTSC 68 (10 July 1992) these matters in themselves, are insufficient to give rise to an equitable right to set-off. [17] In my view, no grounds have been established upon which the order of the Magistrate should be overturned. The appeal is dismissed. If required, I will hear submissions in relation to costs in due course. - - - - - -- 12 of 12 --