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R & D Veterinary Services Pty Ltd v Streamlined Veterinary Solutions Pty Ltd QCATA 114
R & D Veterinary Services Pty Ltd v Streamlined Veterinary Solutions Pty Ltd  QCATA 114
R & D VETERINARY SERVICES PTY LTD
STREAMLINED VETERINARY SOLUTIONS PTY LTD
Minor civil dispute
12 July 2016
19 July 2016
THE APPEAL TRIBUNAL ORDERS THAT:
APPEAL – LEAVE TO APPEAL – MINOR CIVIL DISPUTE – where the applicants were ordered to pay an amount owing under a contract – where the applicants claim the contract provides for compulsory external assessment when there is a dispute under the contract – whether the tribunal failed to take into account relevant considerations – whether leave to appeal should be granted.
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – CROSS–CLAIMS: SET–OFF AND COUNTERCLAIM – SET–OFF – WHAT MAY BE SET–OFF – EQUITABLE SET–OFF – where the applicant’s potential claim for an equitable set – off was not properly raised or considered in the first instance.
Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 142(3)(a)
Forsyth v Gibbs  QCA 103
Hawes v Dean  NSWCA 380
HP Mercantile Pty Ltd v Dierickx  NSWCA 479
APPEARANCES and REPRESENTATION:
Pieter de Wet.
Dr. Andrew Morris.
REASONS FOR DECISION
- The parties are collaborative animal research companies in dispute over the payment of fees.
- The respondent (SVS) was set up in 2013 to research novel vaccines and immunotherapies. Dr. Sharon de Wet and Dr. Andrew Morris were senior researchers and half owners of SVS.
- In 2014, Dr. de Wet and her husband, Pieter, (the R&D directors) formed R&D to conduct a sperm selection project at its Karana Downs premises using equipment leased from SVS.
- On 30 June 2014 and 30 September 2014, SVS invoiced R&D for user fees totalling $37,041.85 for the 15 months from 1 June 2013 and 30 September 2014 (tax invoices 6 and 7). R&D made a part payment of $17,916.90 in December 2014.
- On 12 November 2015, SVS started minor debt proceedings in QCAT to recover $25,000 of the alleged $28,960.41 unpaid balance of tax invoices 6 and 7, relying on an agreement evidenced in an email trail between the parties in June 2014.
- On 2 February 2016, R&D served SVS with tax invoice number 160201 for facility costs for the use of the Karana Downs premises between 13 February 2013 and September 2014 in the amount of $23,385.05 plus 2% interest “as per clause 7.2 of the Service Agreement” (SA).
- The SA is dated 1 January 2015. According to the R&D directors, it was entered into “to regulate” the (business) relationship between SVS and R&D.
- Under the terms of the SA, R&D provided scheduled facilities and specified services and SVS supplied the research and other equipment for the project.
- Invoices for estimated facility and user fees are exchanged monthly and adjusted annually at the end of the tax period in accordance with clauses 6.2(b) and 7.2(b) respectively of the SA so that the estimated invoiced amounts for each financial year equal the actual fees payable.
- Under clauses 6.1 and 7.1(d) of the SA, either party “may” refer disputed issues about fees for determination by an expert appointed under cl 14 by agreement or as nominated by the President of the Queensland Law Society. The expert’s decision on a referred issue is binding on both parties.
- Cl 1.2(d) states that the recited background does not form part of the SA, while clauses 15.2(b) and (c) provide that the deed is the entire “agreement and understanding between the parties on everything” and “supersedes any prior agreement or understanding on anything connected with the subject matter”.
- Despite this, the R&D directors claim the SA has retrospective – as well as prospective – effect, and was intended to govern the rival invoices so that all it owes is the difference between the rival invoiced amounts (about $5,000 before the other variations) and wants to set one off in reliance on clauses 6.2(b) and 7.2(b).
- SVS denies that there was any mutual intention to back-date the SA’s operation, and refuses to participate in the 2015 arbitration process. It also argues that no facilities fee is payable to R&D because the rate has not been agreed yet and the invoiced amount is so excessive that it appears calculated to illegitimately negate R&D’s indebtedness to it.
- At 1-15:41 of the record of proceedings, the SVS director explains:
“…he’s charging almost as much for the land to sit the laboratory on as it is for us to provide $56-60,000 worth of equipment which is being paid for, you know, on credit all the time.”
- And at 1-16:1:
“…it’s almost to the point where we’re being asked to pay him for the privilege of supplying them with a large amount of equipment.”
- As is evident from 1-19:10-15 of the record of proceedings, the tribunal approached the resolution of the dispute on the mistaken assumption that SVS was claiming under the 2015 SA:
“…this… hearing is about this one particular matter, which is the invoices outstanding to September 2014 – I find for (SVS) who has abided by the agreement and there appears to be no agreement at this stage or no attempt at agreement with regard to having an expert intervene to decide or to help the parties agree to a facilities fee. So the application will be granted and I’m going to order that (R&D) pay $25,000 to (SVS).”
The application for leave
- R&D propose to appeal on the ground that the tribunal “…should not have issued an order against (it)” but “should have directed that the (three) disputed invoices be referred to an expert for determination pursuant to clauses 6, 7 and 14 of the agreement”.
- As this tribunal has repeatedly said, leave to appeal a minor civil dispute decision is not just for the asking. The decision whether to grant or refuse leave is discretionary. It is intended to ensure that finite judicial administrative reasons are not wasted on unmeritorious cases. The key role and function of the appeal tribunal is to correct error and avoid substantial injustice.
- The only arguable justification for appellate interference, it seems to me, is the tribunal’s alleged failure to consider and apply the equitable set-off doctrine, even though R&D admittedly did not file a cross-claim or directly ask the tribunal to do so.
- A set-off is a competing demand or claim used by respondents to reduce or extinguish legal liability for a debt. It is aimed at stopping an applicant from recovering money owed to him when he is indebted to the respondent and unjustly refuses to pay. It is not that the claim is denied or worth less, but that it should be abated. There must be some equitable ground for protecting the respondent from the unconscionability of making him or her pay a debtor who will not reciprocate.
- What is needed is an equity (such as fraud or inseparability) that impeaches the other party’s demand “in the sense that it makes it positively unjust that there should be recovery without deduction”.
- Three examples of equitable set-off were given by Emmett JA in HP Mercantile Pty Ltd v Dierickx. The first is where a mortgage in favour of a solicitor as security for fees is given and the client has a cross-claim for unprofessional work. The second is where a builder has a progress payment claim under a building contract against an owner with a claim for damages for breach of warranty. The third case involves a lender who fails to provide promised funds for the completion of a development project that consequently fails, leaving the borrower with no capacity to repay the original loan. Another would be rival claims by a landlord and tenant over mutual breaches of a shop lease.
- Here, the two wrongs or defaults are closely enough connected for R&D to raise an arguable equitable set-off. There are coincident legal rights and interests rooted in the same commercial transaction and R&D’s ability to discharge its fee liability to SVS depends on it honouring its own to it.
- The closeness of the connection between the competing claims was mentioned but not fully developed by R&D at the hearing. The issue was certainly not investigated by the tribunal because of the erroneous belief that both parties were invoking the 2015 SA.
- However, as I understand it, SVS relies on a prior oral agreement to substantiate its claim for unpaid invoices up to the end of September 2014, while R&D says in support of its tax invoice that the SA is retroactive. As such, there is no mutuality of genesis or source of the debts.
- This may have been a reason for the tribunal not to allow equitable set-off if it had inquired into the issue. Perhaps, the tribunal should have been alert to the possibility of set-off, but there is no guarantee that the outcome of an investigation into it would have favoured R&D so that it could complain that it was deprived of its benefit. Nor does the company have any justifiable grievance along the lines that it was denied a hearing on the point. Allowing an equitable set-off to be raised or decided in tribunal proceedings does not depend on an unfettered discretionary assessment of what is fair. It was not up to the tribunal to argue R&D’s case for it; the tribunal’s role is not an advisory but an adjudicative one. It made the only order it could make on the evidence presented to it.
- Thus, R&D cannot demonstrate appellable error causing injustice and to the extent leave is needed, it is refused. Otherwise, the application is dismissed.
- Apart from likely short-term cash flow problems, there is no injustice in this for R&D. It still has its right to enforce its own unpaid tax invoice in an effort to claw back some or all of the $25,000 it was ordered to pay SVS.
 The limit of QCAT’s monetary jurisdiction.
 Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 142(3)(a).
 See 4.1, 4.1(a)&(h) in R&D’s submissions filed 18/4/2016.
 Martin Van Der Walt, ‘The Clarification of Equitable Set Off’ (1998) 72 Australian Law Journal 516, 520.
  NSWCA 479.
 Hawes v Dean  NSWCA 380 .
 Forsyth v Gibbs  QCA 103.
- Published Case Name:
R & D Veterinary Services Pty Ltd v Streamlined Veterinary Solutions Pty Ltd
- Shortened Case Name:
R & D Veterinary Services Pty Ltd v Streamlined Veterinary Solutions Pty Ltd
 QCATA 114
19 Jul 2016