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Sirrom Corporation (NT) Pty Ltd v Sodexo Remote Sites Australia Pty Ltd QDC 234
DISTRICT COURT OF QUEENSLAND
Sirrom Corporation (NT) Pty Ltd v Sodexo Remote Sites Australia Pty Ltd  QDC 234
SIRROM CORPORATION (NT) PTY LTD
SODEXO REMOTE SITES AUSTRALIA PTY LTD
SIRROM CORPORATION HOLDINGS PTY LTD
(First defendant by counterclaim)
SIRROM CORPORATION GROUP PTY LTD
(Second defendant by counterclaim)
ROBERT BRUCE MCVICKER
(Third defendant by counterclaim)
SIRROM CORPORATION (WA) PTY LTD
(Fourth defendant by counterclaim)
SIRROM CORPORATION (AUST) PTY LTD
(Fifth defendant by counterclaim)
SIRROM CATERING (AUST) PTY LTD
(Sixth defendant by counterclaim)
ACN 154 568 046 PTY LTD
(Seventh defendant by counterclaim)
BD2942 of 2019
District Court at Brisbane
29 November 2019
22 November 2019
McGill SC DCJ
Judgment that the defendant pay the plaintiff $513,084.81 including $26,754.81 by way of interest.
EQUITY – Equitable set off – whether available – claim for payment under seed – cross-claim for damages under different, earlier contract, and unrelated statutory remedy – no set off available.
Agar v Hyde (2000) 201 CLR 552 – applied.
AWA Ltd v Exicon Australia Pty Ltd (1990) 19 NSWLR 705 – distinguished.
Deputy Commissioner of Taxation v Salcedo  2 Qd R 232 – applied.
Forsyth v Gibbs  1 Qd R 403 – applied.
H P Mercantile Pty Ltd v Dierickx  NSWCA 479 – cited.
Hawes v Dean  NSWCA 380 – applied.
Indrisie v General Credits Ltd  VR 251 – cited.
R B Lease Pty Ltd v Heron  QCA 181 – applied.
Westpac Banking Corporation v Zilzie Pty Ltd  2 Qd R 214 – considered.
DC Jennings for the plaintiff
Mills Oakley for the plaintiff
- This is a plaintiff’s application for summary judgment pursuant to the UCPR r 292. By a claim filed in this court on 19 August 2019 the plaintiff claimed $486,330 as damages for breach of contract or in the alternative as money owning under the contract. In addition interest was sought under the Civil Proceedings Act 2011 s 58. A notice of intention to defend, defence and counterclaim were filed on 27 September 2019 and on 7 November 2019 the plaintiff applied for judgment under r 292. The following day an amended defence and counterclaim were filed pursuant to r 378, and on 11 November 2019 an amended application seeking summary judgment for the principal amount plus interest under s 58 was filed. That application came before me for hearing on 22 November 2019.
- Prior to 2017 the plaintiff was one of a group of companies which together carried on a business of providing accommodation in rural and remote areas for those with numbers of employees in such areas. By a contract entered into on 28 June 2017 the eight companies in the group that operated the business agreed to sell it to the defendant in accordance with the terms of that contract. This document was conveniently referred to as the BPA. The business was sold as a going concern, and the BPA had a number of provisions which were intended to facilitate the effective transfer of the business from the sellers to the buyer. There were conditions governing the conduct of the sellers between the date of contract and the date of completion, including regulating the disposal of business assets, and conditions providing for a restraint of trade on the sellers following completion of the sale.
- The contract was subject to several conditions, and completion was to occur on the last business day of the month after satisfaction or waiver of the last of the conditions, or any other time and date that the buyer’s and the sellers’ representatives agreed in writing. There was no dispute that completion had occurred. One of the contractual requirements was to deal with bank guarantees which had been provided by a seller company as security for a contract which had been entered into by that seller in the course of carrying on the business. These guarantees were set out in schedule 21 to the agreement, and there were five of them. One was a guarantee in favour of JKC Australia LNG Pty Ltd (“JKC”) relating to the Ichthys Project, in the form of a performance guarantee in the sum of $1,006,016, due to expire on 9 June 2017, although an application had been made to the ANZ Bank to extend it until 9 January 2018, because of a proposed contract extension.
- The seller guarantees were dealt with in the business purchase agreement cl 5.15 which provided:
“Immediately following completion, the buyer undertakes to put in place any assurances or measures necessary to effect the unconditional release of the seller guarantees to the sellers on and from the assignment or novation with the contract to which they relate to the buyer, and must indemnify the sellers against all liability arising in connection with the buyer’s failure to comply with its obligations under this clause 5.15.”
- Clause 8 of the BPA contained provisions requiring both parties to use their best endeavours to transfer existing contracts with third parties from the sellers to the buyer. Where assignment or novation required the consent of the other party to the contract, the sellers were required by cl 8.2 to use reasonable endeavours to obtain that consent, or to procure that the other party enter into a new contract with the buyer. There are also provisions in relation to how contracts were to be treated by the sellers, and the buyer, from completion until the contract had been transferred to the buyer, and mutual indemnities. Clause 8.8 provided for a situation where the assignment or novation in respect of a particular contract had not occurred within 12 months of completion, or where the other party to a particular contract indicated to the buyer or the seller that it would not assign or novate that contract to the buyer. One of the consequences that would happen in such circumstances was that the obligations under clause 5.15 in respect of that contract would cease to apply, without liability by the seller in the absence of a breach of clauses 8.1 or 8.4. It was not suggested that there had been any situation arising which brought clause 8.8 into operation in relation to the relevant contract.
- For the purposes of this application, I assume that the contract with JKC was assigned or novated. Accordingly the obligation arose on the defendant to procure the discharge of the guarantee given by the relevant seller, the plaintiff, in respect of its obligations under that contract. A difficulty arose however because the other party to the contract, JKC, would not accept a guarantee from the defendant to replace the security which had been provided by the plaintiff. To accommodate this difficulty, the plaintiff and defendant (among others) entered into a further deed on 6 June 2018, the Consortium Security Replacement Deed (“the deed”). One of the other parties to that deed was an independent company, Ventia, which was a party to a consortium deed with the plaintiff, and also a party to the contract with JKC. The deed recited the existence of the bank guarantee in support of the contract with JKC, that the existing guarantee expired on 7 June 2018, that JKC required the replacement of that guarantee, and another company in the sellers group and certain nominated covenantors would guarantee the obligation of the plaintiff to the defendant under the terms of the deed.
- The deed provided in cl 2 for an eight step process set out in the clause and illustrated by a series of transaction diagrams in schedule 5. It was uncontroversial before me, and on the pleadings, that steps one to seven in cl 2.1 had been completed. Step eight provided:
“Upon release of the Sodexo (HSBC) security from Ventia to Sodexo, Sodexo must release funds held by it to Sirrom in accordance with clause 3”.
Step seven, which had occurred, was that release from Ventia to Sodexo. The relevant part of cl 3 was cl 3.7 which provided:
“Within 10 business days of the end date, Sodexo must instruct distribution from the CBA account to a bank account nominated by the sellers’ representative:
- The guaranteed amount; plus
- Any interest earned on the CBA account which has not been set off against issue costs; less
- Any deductions by Sodexo from the guaranteed amount under this deed, including under clause 3.5 and 3.6.”
- The CBA account was simply the account established by the defendant with CBA to hold funds released from the ANZ bank pursuant to step five of the mechanism set out in cl 2. In substance, clause 3.7 required such money to be paid to the plaintiff. The defendant did not allege that any right arose to a deduction under the deed.
The claim and defence
- In the statement of claim the plaintiff alleged, and the defendant admitted in the defence, the incorporation of the parties, that certain persons held certain positions, that the parties entered into the deed, and that the deed had various provisions; the defendant in addition relied on the proposition that the deed contained in clause 7.4 a provision in the following terms (as it did):
- ”(a) This deed and the BPA constitute the entire agreement between the parties about their subject matter.
- (b)Despite clause 7.4(a), this deed does not prejudice or affect any rights that Sirrom, Sodexo or any other parties have under the BPA (including under clause 8 of the BPA).”
- The plaintiff alleged and the defendant admitted that the first seven steps in cl 2 in the deed had been completed, the last on or about 13 November 2018, and that the next day an account was nominated for the purposes of cl 3.7. It was also alleged and admitted that the end date was at the latest 10 November 2018, that the defendant did not pay any part of the guaranteed amount or otherwise distribute any of the funds from the CBA account in accordance with cl 3.7 of the deed by 23 November 2018, that in February 2019 the solicitors for the plaintiff demanded payment of the guaranteed amount from the defendant, that $519,686 had been paid, but that the defendant had failed to pay the balance of $486,330. This was alleged to be owing under the deed, or alternatively, the defendant was liable for that sum as damages for breach of the deed. The defendant does not allege that any further relevant payment has been made, but claims that the obligation on the defendant to make a payment under the deed was subject to cl 7.4 of the deed, and any right set off pursuant to the BPA. The defendant alleges that it is entitled by reason of the provision of the BPA and otherwise to set off the balance of the guaranteed amount, and relied on the matters raised in the counterclaim.
- The only other matter raised in the amended defence was the allegation that, by reason of the relief sought in the counterclaim, the District Court does not have jurisdiction to decide the claim pursuant to the District Court of Queensland Act 1967 s 68. This is a reference to the fact that the amended counterclaim seeks damages for breach of the BPA, and compensation under the Australian Consumer Law, in unspecified amounts but including an amount claimed in paragraph 23 of over $1,500,000 in relation to the provision of certain accommodation services. In short the amount claimed in the counterclaim exceeds the monetary limit of the District Court. This however does not deprive the District Court of jurisdiction to decide the claim.
- The matter is dealt with by the Civil Proceedings Act 2011 s 29, which applies if a party to a proceeding in this court files a counterclaim for relief not within its jurisdiction. A court having jurisdiction for the counterclaim, the Supreme Court, may order that all of the proceeding be transferred to that court, that the counterclaim be transferred to that court, or that all of the proceeding be heard and decided by the District Court. Subsection (5) provides that if no application is made for such an order within 14 days after the counterclaim is served on the other party or parties to the proceeding, the District Court is taken to have jurisdiction to hear and decide all of the proceeding.
- The parties are agreed that the counterclaim is to be transferred to the Supreme Court, but no application has been made for such transfer. Assuming therefore that the counterclaim was served promptly after it was filed in its unamended form on 27 September 2019, as things stand the District Court has jurisdiction to hear and determine the counterclaim, though it would still be open for the parties to apply to the Supreme Court and for that court to remove the counterclaim. So, the quantum sought in the counterclaim cannot have the effect of depriving the District Court of jurisdiction to hear and determine the claim, and the matter raised in paragraph 7 of the defence does not provide a valid defence to the plaintiff’s claim.
- At the present time no reply and answer has been filed by the plaintiff, or the other defendants by counterclaim, and there was no affidavit material filed in support of the allegations made in the counterclaim. The matter was argued before me on the assumption that the matters raised in the current version of the counterclaim are justified, or at least would give rise to triable issues. The matter disputed however, and the issue on which the application before me turns, is whether they give rise to a set-off, which would prevent judgment being given by the plaintiff against the defendant on its claim, or whether they are a “mere” counterclaim, which would not have that effect, leaving the defendant to pursue its counterclaim in the Supreme Court.
- By the counterclaim, it was alleged that the restraint of trade provision in the BPA was breached by the first defendant by counterclaim, or some related entity, which could include the plaintiff, carrying on a business in competition with the business sold to the defendant. This was alleged in clauses 15-23 of the amended counterclaim. It does not specifically allege that this was done by the plaintiff, the allegation being that it was done by the first defendant by counterclaim “or an entity or person controlled by it or by McVicker or his immediate family member”, an expression which would be wide enough to include the plaintiff.
- Further it was alleged that there were warranties in the BPA breached by disposing of business assets other than in the ordinary course of business, with the result that the defendant had suffered a loss of over $1,000,000. Finally it was alleged that the sellers or some of them use a particular website in which it was alleged that misleading and deceptive representations were made about the sellers, and by which it was alleged that the sellers are passing themselves off as continuing to carry on the business which has been sold to the defendant. This was alleged to be conduct occurring after the completion of the BPA, and was alleged in terms wide enough to encompass the plaintiff. It was however not alleged that there was any misleading or deceptive conduct causing the defendant to enter into the BPA. The counterclaim did not allege that the plaintiff was in breach of the deed.
No contractual set-off
- Clause 14.19 of the business sale agreement provided:
“Despite any other clause in this agreement the Buyer may set off, deduct or withhold from payment of any part of the Deferred Amount or any other amount owing under this agreement to any Seller, any amount owing by any Seller to the Buyer.”
Reference to this clause appears in the outline of argument for the defendant, but, although it would be arguably wide enough to cover the amounts claimed by the defendant in the counterclaim, the clause permits those amounts to be set off only from part of the deferred amount or any other amount owing under this agreement. The amount claimed by the plaintiff in this proceeding is not an amount owing under the BPA; rather it is an amount owing under a later agreement entered into between the parties.
- That agreement did not in terms function as an amendment to the BPA. Indeed, it did not on its face purport to modify any provision of the BPA; rather it provided a mechanism by which, in relation to a particular bank guarantee provided in respect of a contract with a particular third party, clause 5.15 could be satisfied in a way which would nevertheless overcome difficulties being created by the third party. It did not have the effect that the obligation to make the payment produced by the working out of clause 2 of the deed became an obligation on the defendant ‘under this agreement’, referring to the BPA.
- I do not consider that the effect of clause 7.4 of the deed, the clause relied on in the defence, has the effect of making the two documents one single agreement or contract. The more natural interpretation of the first part of the clause is to read it distributively, that is, that the deed is the entire agreement between the parties about the subject matter of the deed, and the BPA is the entire agreement between the parties about the subject matter of the BPA. That is shown by the second part of that clause, which provides expressly that the deed does not prejudice or affect any rights that anybody has under the BPA. A further pointer that it is a separate contract may be found in the fact that the BPA is governed by the laws of Queensland – clause 24.2 – whereas the deed is governed by the laws of Western Australia: clause 7.2.
- Ultimately the defendant did not rely on any contractual right of set off, and in circumstances where none of the amounts claimed in the counterclaim are liquidated, there is no statutory right of set-off under the Civil Proceedings Act 2011, s 20. The defendant must therefore rely on the principle of equitable set-off in order to establish the existence of a set-off which could serve as a defence to the plaintiff’s claim.
Equitable set off - cases
- A leading case on the limits of equitable set off is the decision of the Court of Appeal in Forsyth v Gibbs  1 Qd R 403. That case also involved an application for summary judgment by a plaintiff, resisted on the grounds of the existence of other claims by the defendant against the plaintiff under other transactions. It was held by Keane JA, with whom the other members of the court agreed, that those claims did not establish an equitable set-off, and on appeal summary judgment for the plaintiff was given. His Honour said at :
“The principles governing the availability of equitable set-off of cross-claims are couched in open textured terms, such as ‘sufficient connection’ and ‘unfairness’. In some cases, it will be necessary to engage in an evaluation of a range of facts which might establish ‘sufficient connection’ or ‘unfairness’ of the relevant kind. But the principles to be applied are not so vague or subjective that it is never possible to determine, for the purposes of an application for summary judgment, that the facts alleged by a defendant simply fall short of what is required.”
- His Honour continued in the next paragraph:
“It is important to emphasise that the availability of an equitable set-off between cross-claims does not depend upon an unfettered discretionary assessment of whether it would be ‘unfair’ in a general sense for a plaintiff to insist on payment of the debt owed to it while the cross-claim remains unpaid. It is essential that there be such a connection between the claim and cross-claim that the cross-claim can be said to impeach the claim so as to make it unfair for the claim to be allowed without taking account of the cross-claim.”
- His Honour went on to give, as an example, a case where a claim by a solicitor for fees was successfully impeached by a cross-claim alleging that the fees were incurred only because of the solicitor’s lack of due skill and diligence. He also referred to a Victorian decision where the defendant had guaranteed an obligation under a contract, and it was held that a claim for unliquidated damages founded upon a collateral contract which was entirely independent could not be set off. In the instant case his Honour held that the transactions which gave rise to the respondent’s claims were entirely distinct from the loans in respect of which the appellants sued . He went on to say at  that the mere fact that the misconduct relied on by the respondent might have contributed in a general way to difficulties it faced in making repayment of the loans was insufficient connection to give rise to a set-off. It was held that the application for summary judgment ought to have succeeded.
- It was submitted for the defendant that the circumstances of this case are similar to those in AWA Ltd v Exicon Australia Pty Ltd (1990) 19 NSWLR 705, where an equitable set-off was upheld. In that case there was a contract for the sale of a business, and the purchaser claimed against the vendor damages for breach of contract, in relation to a number of warranties given in the deed for sale, and for contravention of the Trade Practices Act, s 52 in relation to information provided by an information memorandum annexed to the deed, and otherwise. It was held that this claim could be set-off against a claim for money payable under certain clauses of the deed. In that case both obligations arose out of the one contract of sale, and a claim for misleading and deceptive conduct by information provided in connection with the sale could well be relevant to the proposition that the buyer had been misled as to the value of the business sold, and hence the consideration agreed to be paid. A number of other specific decisions were considered in that case, but it does seem to me that a reasonably close connection can easily be identified there.
- I was also referred to the decision of the New South Wales Court of Appeal in Hawes v Dean  NSWCA 380. This case involved litigation between two property developers and their related companies, and an attempt to set off a claim arising under one deed dealing with a particular project against a liability arising under a different deed dealing with a separate particular project. Barrett JA, with whom the other members of the court agreed, referred to a number of authorities from paragraph -, ending with a decision of the New South Wales Court of Appeal where three examples of situations where an equitable set-off was available were given. The first was the example of a solicitor suing for fees also given by Keane JA, the second was where a builder had a claim for money due under a building contract and there was claim for damages for breach of that contract, and the third was where a lender failed to provide promised further advances, as a result of which a borrower was unable to complete a development project and repay advances already made: .
- At paragraph  the test was formulated, in terms which I apprehend are essentially the same as the formulation by Keane JA, and the judgment continued at :
“In the present case, two obvious factors immediately call into question the closes of the connection between the two relevant claims. First, the person entitled to receive [X] dollars was not the person liable to pay [Y] dollars, and the person entitled to receive [Y] dollars was not the person (or even one of the persons) liable to pay [X] dollars. Mutuality is entirely lacking. Secondly, the respective liabilities and entitlements arose from different transactions entered into at different times….”
- In the present case, there is some element of mutuality in that the claim for damages for breach of warranty would lie against all of the individual companies making up the sellers under the BPA, though not specifically against the plaintiff; in other respects the counterclaim is brought in general terms against an unidentified group of defendants by counterclaim, so that the most that can be said is that it may be the plaintiff that is the relevant party liable, though there is no particular reason to expect that it would be the plaintiff rather than one other defendant by counterclaim. One cannot say that mutuality is entirely lacking, but on the other hand, it is not a case where there is clear mutuality. More importantly, the second matter is certainly present. The plaintiff’s claim arises under a contract entered into almost a year after the BPA, and well after the completion of the BPA, and hence after the cause of action for breach of warranty had arisen, if it exists.
- I was also referred to the more recent decision of Jackson J in Westpac Banking Corporation v Zilzie Pty Ltd  2 Qd R 214. That decision was principally about the effect of what was described as a “no set off” clause in a contract of loan upon which the plaintiff sued. It was conceded that claims sought to be raised in a counterclaim, such as a claim by a mortgagor that the mortgagee breached the equitable duty on the exercise of a power of sale, could be raised as an equitable set off against a debt owing or secured under the mortgage: . The issue was whether the “no set-off” clause was effective to exclude such a set off, and Jackson J held that it did in relation to all of the matters raised in the counterclaim except for the claim for relief based on unconscionable conduct under the Australian Securities and Investments Commission Act 2001 (Cth) s 12CA. No such claim is raised in the present case, nor is there a “no set-off” clause in the deed, so this issue does not arise.
- Overall, it seems to me clear that the obligation on the defendant to pay money under the deed is an obligation which is independent of the obligations of the plaintiff arising under the BPA, and in connection with it, so that any claim for damages arranged in the present counterclaim does not impeach the plaintiff’s right to sue for money payable under the deed, but unpaid. There is not such a close connection between the liability of the defendant under the deed and the claims made by the defendant in the counterclaim that it can be said to be unjust for the plaintiff to be able to enforce the liability under the deed without the court taking into account the liabilities the defendant alleges by the counterclaim. The liability under the deed is a distinct and separate liability entered into for a specific purpose, to enable an obligation on the defendant under the BPA to be complied with in a way which was consistent with the requirements of a third party. In my opinion it clearly does not give rise to an equitable set off. The point is one which is clear enough for the matter to be decided on an application for judgment under r 292.
- That rule permits a court to give judgment if it is apparent that there is no real possibility that the defendant will succeed at a trial, and that there is no need for a trial of the proceeding. The rule is to be applied according to its terms, though it is necessary to exercise some caution in granting summary judgment, and to appreciate that the rule looks to the outcome at a future trial, rather than focusing on the issues arising under, for example, the current pleadings. Nevertheless, in circumstances where it is not suggested there is any relevant factual matter in dispute, and the issue is one of the application of a legal test, a court hearing an application under r 292 is in as good a position as a trial court to decide on the correct application of the legal test. In my opinion the tests set out in r 292 are satisfied in this case, and it is appropriate to give judgment for the plaintiff for the balance payable under the deed.
- The plaintiff also claims interest under s 58 of the Civil Proceedings Act. There is no provision in the deed giving a contractual right to interest, and accordingly interest is available under s 58. The entitlement to interest arose on 23 November 2018. Interest according to the practice direction on $486,330 comes to $26,754.81, according to the court calculator. There will therefore be judgment that the defendant pay the plaintiff $513,084.81 including $26,754.81 by way of interest. I will receive submissions as to costs when the reasons are delivered, but assume that the defendant will be liable also for the costs of the claim, including the costs of this application.
Affidavit of McVicker filed 7 November 2019, exhibit RMV4.
Business purchase agreement cl 5.1, exhibit bundle p 82.
Ibid, exhibit bundle p 386.
Exhibit bundle p 86.
Affidavit of McVicker, exhibit RMV2 recital E, exhibit bundle p 37.
Evidently it had been extended.
Affidavit of Williamson filed by leave 22 November 2019.
Counterclaim cl 24-31.
Counterclaim cl 32.43.
Exhibit bundle p 115.
Citing Piggott v Williams (1821) 6 Madd 95; 56 ER 1027.
Indrisie v General Credits Ltd  VR 251.
H P Mercantile Pty Ltd v Dierickx  NSWCA 479.
Deputy Commissioner of Taxation v Salcedo  2 Qd R 232.
Agar v Hyde (2000) 201 CLR 552 at 575, 6.
R B Lease Pty Ltd v Heron  QCA 181 at .
Forsyth v Gibbs is an example of a case where the Court of Appeal upheld the appropriateness of deciding the existence or otherwise of an equitable set off on an application for summary judgment.
- Published Case Name:
Sirrom Corporation (NT) Pty Ltd v Sodexo Remote Sites Australia Pty Ltd
- Shortened Case Name:
Sirrom Corporation (NT) Pty Ltd v Sodexo Remote Sites Australia Pty Ltd
 QDC 234
McGill SC DCJ
29 Nov 2019