DISTRICT COURT OF QUEENSLAND

1. [1]
   On 24 February 2009 I granted the plaintiffs’ application to strike out the defendant's defence and counterclaim and gave leave to the defendant to file and serve a further defence or defence and counterclaim within 14 days. I adjourned the plaintiffs’ application for summary judgment.

2. [2]
   An amended defence and amended counterclaim were filed on 12 March 2009. A Reply and Answer was filed on 26 March 2009. A further application to strike out the amended defence and the amended counterclaim was filed on 25 March 2009.

THE AMENDED PLEADING OF THE DEFENDANT

3. [3]
   The defendant now admits the plaintiffs’ claim save for an assertion about the time of the payment of the last of a series of weekly instalment payments. However, the defendant has in reality admitted the whole of the plaintiffs’ claim made pursuant to a Deed of loan. The loan was by way of vendor finance in the sum of $71,000 repayable at $500 per week. Payments of $7,000 have been made by the defendant.

4. [4]
   The defence and the counterclaim have been completely redrawn. The amended defence pleads a common law set-off said to arise upon an alleged breach, inter alia, by the plaintiffs of a restraint clause contained in a separate Agreement for the Sale of the Business. Alternatively, the defendant pleads an equitable set-off on the same basis and pleads that the sale of the business is a common factor to both the defendant's claim and the plaintiffs’ claim. An equitable set-off permits a damages claim to be made against a liquidated sum. The set-off in each case is constituted by way of a counterclaim.

THE CLAIM FOR DAMAGES

5. [5]
   Paragraph 11 of the amended counterclaim is pleaded as follows:

 “11. In the premises the defendant has suffered loss and damage as a result of the plaintiffs’ breaches of contract.

PARTICULARS

The defendant has paid to the plaintiffs the sum of $88,000 for the business including the restraint of the plaintiffs from carrying on painting and decorating activities in the Townsville/Thuringowa Region.”

6. [6]
   The amount of $88,000 referred to in paragraph 11 is the loan, (including the actual payments of $7,000 made by the defendant) of $78,000 and the deposit of $10,000 made by the defendant. It is readily apparent that the defendant has in fact only “paid” to the plaintiffs the sum of $17,000, not the sum of $88,000.

7. [7]
   I do not need to deal with the content of the Reply and Answer other than to the extent that it is relevant to the issues on this Application and the resumed application for summary judgment. Suffice to say that, to the extent possible on the defendant's pleading, the counterclaim is denied by the plaintiffs.

THE ISSUES

8. [8]
   The formulation of the damages claim gives rise to two issues:

1. Is paragraph 11 sufficient in fact or correct as a matter of law and, if not, is that fatal to the cause of action in the amended counterclaim or any amended defence;

2. Is paragraph 11 an embarrassing pleading in the sense that the quantum of the counterclaim is not known and therefore the extent of any set-off is unable to be established?

SUBMISSIONS

9. [9]
   The plaintiffs submitted that the pleading of the alleged damages for breach of contract is wrong at law; and that there has been no proper legal quantification of the counterclaim.

10. [10]
    The defendant submitted that there was “almost a complete failure of consideration”; that the damages are – inferentially – the purchase price; and that a further quantification is necessary that can be supplied by further and better particulars given in respect of paragraph 11.

11. [11]
    The only defence to the claim is the set-off. If the defendant proved a breach of restraint he would be entitled to damages for the loss occasioned by the breach.

12. [12]
    However, the quantification of the claim for damages is wrong. The claim represents the purchase price and seems to be predicated on a recovery of that sum, even though the substantive part of it is a debt and the business itself remains and appears to be intended to remain in the hands of the defendant.

13. [13]
    The plaintiffs submitted that the defendant has failed to establish that it has a counterclaim and what the extent of it is; and that no real attempt has been made to quantify the counterclaim according to proper legal principles. The plaintiff relies on the rule in Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145.  The rule governs the law of remoteness of damage in contract and is expressed in the following terms (at pages 356 and 151 respectively):

 “Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be as such as may fairly and reasonably be considered as arising naturally, that is, according to the usual course of things, from such breach of contract itself, OR such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.” 

14. [14]
    See also Cabanda Pty Ltd v National Formal Wear Group Pty Ltd (2001) QSC 290 per Wilson J at paragraph 12. 

15. [15]
    Accordingly the plaintiff submitted that it should succeed in the application for summary judgment. The defendant submitted that he could not oppose summary judgment but that a stay of the judgment, until the determination of the counterclaim, should be ordered.

OTHER MATTERS

16. [16]
    There were submissions made about other issues arising out of the amended defence and the amended counterclaim, namely:

• Paragraphs 8(a) to (e) and (i) – these provide particulars of breaches of the restraint provision.

• Paragraphs 8 (f) (g) and (h) – the first two sub paragraphs were conceded by the defendant to be incorrectly pleaded at the hearing but sub paragraph (h) remained in issue.  The plaintiffs maintain that the clause of the agreement that might afford a basis for sub paragraph (h) has not been pleaded.

However these matters are peripheral to the material issues.

THE LEGAL POSITION

17. [17]
    I do not consider that a set-off has been properly pleaded in the amended defence and the amended counterclaim.

18. [18]
    The practical effect of the set-off – either at common law or equitable – is that it is predicated on the existence of the debt due on the Deed of loan, which is admitted by the defendant, but he asserts reasons why the plaintiff is not entitled to recover the debt. The reasons asserted are breaches of the restraint clause in the separate Business Contract. So far, so good. However, the damages as pleaded are contrary to legal principle. To plead the recovery of the purchase price as the damages is not correct at law. The purchase price of itself does not constitute damages for the breach of contract that has been pleaded. It may be the case that the damages, properly pleaded and proved, coincidentally might amount to the purchase price. However, that is in my view highly speculative, unlikely and too remote.

19. [19]
    Difficulty in estimating damages does not relieve the Court from assessing them as best it can. But there must be in a claim a statement of what the nature of the damages is in the first instance: that is, a statement of the relevant kind of damage or the loss that has been suffered by reason of the alleged breach of contract.

20. [20]
    The defendant has not done this in the amended pleading. He has not in reality pleaded any damages in a comprehensible sense or in accordance with legal principle. There is nothing remotely resembling the proper quantification of damages for any alleged breach of contract. Paragraph 11 is not sufficiently pleaded and is not correct as a matter of law. The set-off cannot succeed as pleaded. It is not appropriate in my view to defer summary judgment to enable further and better particulars to be provided.

21. [21]
    Rule 173 of the Uniform Civil Procedure Rules provides that a defendant may rely on a set-off (whether or not of an ascertained amount) as a defence to all or part of a claim made by the plaintiff, whether or not it is also included as a counterclaim; and importantly in this case, the court – if it considers that a set-off cannot be conveniently be dealt with in a proceeding – may set aside a counterclaim in the proceeding by way of set-off and may order that the set-off be dealt with in a separate proceeding.

22. [22]
    I will strike out the amended defence and the amended counterclaim rather than dismiss it. In my view if there is a proper basis for a set-off, as a matter of law or in equity, then it should be re-pleaded as a claim in a separate action rather than as an action in the plaintiffs’ claim. The plaintiffs should not be delayed in having their claim, which is admitted, determined upon a summary judgment. This will have the effect akin to setting it aside for that purpose, since there may be merit in the defendant’s claim – a determination of which I will not make on these applications.

23. [23]
    In the first judgment in this matter I made the following statements:

“[30] I have granted the application on that ground rather than grant  summary judgment because the defendant may be able to improve its position upon amendment of his pleadings and/or the institution of a claim in respect of the allegation of breach of contract.  Accordingly I am prepared to give the defendant an opportunity to re-plead the defence. Whether a pleading of a counterclaim is open or is pursued or a claim in respect of the contract is made is a matter for the defendant to determine.

 [31] It follows that I would have granted summary judgment on the claim if I had not taken the view that the defendant should have an opportunity to replead his defence.  Subject to there being further pleadings filed and served within the time that I will allow and if the amended pleading is the subject of further challenge giving rise to the issue of summary judgment, the present summary judgment application  is adjourned.  The parties will have liberty to apply.”

CONCLUSION

24. [24]
    In my view the proper course is for the defendant to make a claim in an action on the Business Contract, which is separate from the plaintiffs’ claim on the Deed of loan. I also propose to grant the application for summary judgment. I do not need to apply the test since the plaintiffs’ claim is admitted.

STAY OF JUDGMENT 

25. [25]
    The defendant has admitted the claim. An application for a stay of the execution of the summary judgment has been made by the defendant pursuant to rule 185 of the Uniform Civil Procedure Rules. However, that rule relates to a defendant who does not plead a defence but makes a counterclaim and applies for the staying of the enforcement of the judgment given in the action against the defendant until the counterclaim is decided.

26. [26]
    However, the stay of enforcement of a judgment may be ordered pursuant to rule 300 of the UCPR

“300 The court may order a stay of an enforcement of a judgment given under this part for the time and on the terms the court considers appropriate.”

27. [27]
    An order pursuant to rule 300 is at the discretion of the court. See Daewoo Australia Pty Ltd v Porter Crane Imports Pty Ltd t/as Betta Machinery Sales (2000) QSC 050 co-heard with Porter Crane Imports Pty Ltd v Daewoo Australia Pty Ltd (2000) QSC 050, wherein reference was made to the decision of the Court of Appeal in The “Fedora” (1986) 2 Lloyd’s Rep 441 and Coca-Cola Financial Corporation v Finsat International Ltd (1998) QB 43 where the court said:

“We do not doubt that the court has a discretion to grant a stay but it should in our view be ‘rarely if ever’ exercised…”

28. [28]
    In Lu Simon Builders Pty Ltd v H D Fowles & Ors (1992) 2 VR 189, Smith J said the following (at page 196) in respect to a summary judgment claim in a building contract dispute:

“Finally, the defendants argued that, if I came to the conclusion that the plaintiff was entitled to summary judgment, that judgment should be stayed pending the determination of the cross claims.  I accept that ordinarily where there is a bona fide counter-claim for an amount  not less than the plaintiff’s claim, a stay of execution of a summary judgment will usually be ordered until the trial of the counter-claim:  see discussion in State Bank of Victoria v Parry (1989) WAR 240 at 246.”

29. [29]
    In State Bank of Victoria v Parry (supra): 

“Where there is no defence to the plaintiffs' claim, but there is a plausible counterclaim for an amount not less than the plaintiffs’ claim, summary judgment will be ordered with a stay of execution until the trial of the counterclaim or further order… in a proper case the court may order payment into the court of part of the claim with a stay of execution pending the counterclaim…where the counterclaim arises out of quite a separate and distinct transaction, or there is no connection between the claim and the counterclaim, the proper order is for  judgment for the plaintiff with costs without a stay pending the trial of the counterclaim…the degree of connection between the claim and the counterclaim, the strength of the counterclaim and the ability of the plaintiff to satisfy any judgment on the counterclaim are some of the considerations which the court may take account of in the exercise of its discretion whether or not to order a stay.  In general, therefore, a counterclaim which is in effect an unconnected cross action will not provide a basis for a stay under O14, r3.  Consistently with this proposition a stay of execution of a judgment will not ordinarily be granted simply because the defendants bring a cross claim in another action against the plaintiff, in the absence of special circumstances rendering it inexpedient to enforce the judgment” (my underlining).

30. [30]
    The expression “special circumstances” are particular to the order of the Supreme Court in Western Australia and is not a relevant consideration with respect to rule 300 UCPR.

31. [31]
    The issue of whether there is a bona fide counterclaim at all remains in issue for as long as the damages remain unquantified. The onus remains on the defendant to prove (now in the separate claim), according to the appropriate measure, that he has suffered loss. See Goldberg v Shell Oil Co of Australia Ltd (1990) 95 ALR 711 (at 714).

32. [32]
    I am not prepared to grant a stay of the summary judgment on the Deed of loan on any of the information presently before me. If the defendant has a proper claim on breaches of the restraint clause in the contract for sale of the business, and a proper measure of damages is pleaded, then there may perhaps be a basis for an application for a stay of execution of the summary judgment. Of course, there would need to be circumstances demonstrated on admissible evidence that would persuade the court to exercise its discretion to order such a stay. In the premises I refuse the stay application.

33. [33]
    ORDERS

1. Application for summary judgment granted. Judgment for the plaintiffs against the defendant in the sum of $71,000.00 plus interest to 16 April 2009 in the sum of $7,745.23.

2. Application to stay judgment refused.

3. Application to strike out amended defence and amended counterclaim granted.

4. Leave to the defendant to commence a separate action in respect of his claim.

5. The defendant to pay the plaintiffs’ costs of and incidental to the application assessed on the standard basis or as agreed.