Lee Crane Hire Pty Ltd v Lifese Pty Ltd
[2012] QSC 410
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- Unreported Judgment
- Lee Crane Hire Pty Ltd v Lifese Pty Ltd[2012] QSC 410
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Lee Crane Hire Pty Ltd v Lifese Pty Ltd[2012] QSC 410
Lee Crane Hire Pty Ltd v Lifese Pty Ltd[2012] QSC 410
SUPREME COURT OF QUEENSLAND
CITATION: | Lee Crane Hire Pty Ltd v Lifese Pty Ltd [2012] QSC 410 |
PARTIES: | LEE CRANE HIRE PTY LTD (ACN 064 917 817) (Plaintiff) V LIFESE PTY LTD (ACN 003 075 410) (Defendant) |
FILE NO/S: | S472 of 2012 |
DIVISION: | Trial Division |
PROCEEDING: | Application |
ORIGINATING COURT: | Supreme Court Rockhampton |
DELIVERED ON: | 14 December 2012 |
DELIVERED AT: | Rockhampton |
HEARING DATE: | 30 November 2012, 10, 14 December 2012 |
JUDGE: | McMeekin J |
ORDERS: |
|
CATCHWORDS: | PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PRACTICE UNDER RULES OF COURT – SUMMARY JUDGMENT – where application for summary judgment Civil Proceedings Act 2011 s 20 Uniform Civil Procedure Rules 1999 rr 5, 173, 292 Agar v Hyde (2000) 201 CLR 552 Andrews v Australian and New Zealand Banking Group Limited [2012] HCA 30 Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 Forsyth v Gibbs [2009] 1 Qd R 403 LCR Mining Group Pty Ltd v Ocean Tyres Pty Ltd [2011] QCA 105 Queensland Pork Pty Ltd v Lott [2003] QCA 271 Waterside Workers' Federation of Australia v Stewart (1919) 27 CLR 119. |
COUNSEL: | GF Crow SC for the plaintiff AD Grant (solicitor) for the defendant |
SOLICITORS: | Macrossan & Amiet for the plaintiff Grant & Simpson Lawyers as town agent for Surry Partners for the defendant |
McMEEKIN J:
- This is an application by the plaintiff for summary judgment pursuant to r 292 Uniform Civil Procedure Rules 1999 (“UCPR”). By its claim the plaintiff claims $796,468.01 being monies allegedly owing pursuant to an agreement or alternatively by way of damages for breach of contract. The plaintiff says that, given the defence filed, it is entitled to summary judgment in the sum of $452,966.76.
- When the matter initially came before me the defendant sought an adjournment, the solicitor for the defendant advising that he had had difficulty obtaining instructions and that he believed that a further amended defence was required. I granted an adjournment of a week over the plaintiff’s objection to allow any amended defence to be filed. The plaintiff had a point – the defendant had paid scant regard to its obligations under the rules.[1] An amended defence was filed and the matter came back before me. However the plaintiff had insufficient time to prepare its materials, contending that it remained entitled to summary judgment in some amount despite the matters now raised in the amended defence. I allowed an adjournment, again of a week, to enable the parties to better prepare their evidence.
- Upon hearing the application I pronounced orders and indicated that I would deliver my reasons in due course. These are my reasons.
Factual Background
- On or about 7 February 2011 the defendant entered into a written agreement with the plaintiff for the hire of a 280 tonne Hitachi Sumitomo crane. The express terms of the agreement included that:
- the rate of hire was $14,000 per week excluding GST;
- invoices were due 30 days from the date of the invoice;
- unpaid invoices incurred interest at the rate of 1.5% per month;
- the defendant indemnifies the plaintiff in respect of any uninsured loss; and
- the hire period continued until the crane was returned to the plaintiff and was in an undamaged, serviceable condition.
- In or about mid June 2011, whilst the crane was under hire from the plaintiff to the defendant and whilst subject to the terms of the agreement, the crane became damaged and unserviceable. The crane’s boom sections, head section, track frames, hook and counter weights were lost or damaged.
- The plaintiff alleges that it was not until on or about 15 April 2012 that the crane was returned to its possession in a serviceable condition.
- The plaintiff asserts in its Claim and Statement of Claim that $796,468.01 is yet to be paid. Interest is accumulating under the terms of the contract. It is common ground that no amount has been paid.
- The defendant contends by its defence:
- That had the plaintiff acted reasonably in mitigation of its loss the crane would have been returned to service by “mid November 2011”;
- That the clause of the lease under which the plaintiff makes its claim is a penalty and so unenforceable;
- That the plaintiff has received $345,112.91 from an insurer that is attributable to loss of profits from the hire of the crane and should be brought into account;
- That the Federal Court has awarded the defendant costs against the plaintiff in related proceedings and these should be offset. The costs are yet to be certified but are estimated by a Registrar of the Court at $28,460.
Summary Judgment
- The High Court held in Agar v Hyde (2000) 201 CLR 552 that “… Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.”
- Rule 292 provides:
292 Summary judgment for plaintiff
- 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.
- If the court is satisfied that—
- the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim; and
- 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.
- The key expressions in the rule are “no real prospect of successfully defending” a claim and “there is no need for a trial of the claim”: LCR Mining Group Pty Ltd v Ocean Tyres Pty Ltd.[2] McMurdo P in Deputy Commissioner of Taxation v Salcedo[3] opined that r 292 should be applied using its “clear and unambiguous language and keeping in mind the purpose of the UCPR to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense”.
- The onus here initially lies on the plaintiff to make out a prima facie case. Once established, the evidentiary onus then shifts to the defendant: Queensland Pork Pty Ltd v Lott.[4] It is quite apparent that the plaintiff has made out a prima facie case – that is effectively conceded on the defence.
Issues in Dispute
- The question of whether or not the plaintiff has failed to mitigate its alleged loss remains in issue between the parties. It is conceded that this is a triable issue. The plaintiff’s application for summary judgment is limited to that part of the plaintiff’s claim that arises up to mid November 2011, the point in time when the defendant alleges the crane would have been serviceable and in the plaintiff’s possession had it acted reasonably to mitigate its alleged loss.
- There remain three arguments raised by the defendant in the Amended Defence relevant to this application:
- the penalty argument;
- the insurance damages argument; and
- the costs set off argument.
The Penalty Argument
- At paragraph 5(e)(iv) of the Amended Defence it is pleaded “…that clause 3 of the Hire Agreement is a penalty and is unenforceable because it it (sic) is not a genuine pre-estimate of the loss likely to result to the plaintiff if the crane is damaged during the period of hire so as to prevent it being let on hire to another party.” That is so it is pleaded “because it assumes that the crane will be hired on a constant weekly basis 52 weeks of the year when that is not so”.
- Clause 3 of the agreement states:
Prior to delivery the equipment will be subject to an “On Hire Survey” by an independent surveyor to establish the general condition thereof. At the completion of the hire period the equipment will be subject to an “Off Hire Survey” to be arranged by the Owner. Any damage caused during the hire period will be established by reference to the two Surveys and boom damage of any description and howsoever caused shall be the responsibility of the Hirer. Notwithstanding anything herein contained the cost of repairs, if any, necessary to re-instate the equipment to its “on hire” condition, will be paid by the Hirer and the hiring charges will continue, uninterrupted, during the period of repair. The Owner shall pay for the “On Hire Survey” and the Hirer shall pay for the “Off Hire Survey”. (emphasis added)
- No authority was cited for the proposition that a clause of the type here – that deals with the definition of the end of a period of hire – is capable of being a penalty.
- The High Court has recently considered the equitable doctrine of penalty in Andrews v Australian and New Zealand Banking Group Limited [2012] HCA 30. In defining the scope of the penalty doctrine the Court[5] said[6]:
“Mason and Deane JJ observed in Legione v Hateley[7] that, as the term suggests, a penalty is in the nature of a punishment for non-observance of a contractual stipulation and consists, upon breach, of the imposition of an additional or different liability.
In general terms, a stipulation prima facie imposes a penalty on a party ("the first party") if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of a second party and this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party an additional detriment, the penalty, to the benefit of the second party[8]. In that sense, the collateral or accessory stipulation is described as being in the nature of a security for and in terrorem of the satisfaction of the primary stipulation[9]. If compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation. The first party is relieved to that degree from liability to satisfy the collateral stipulation.
It has been established at least since the decision of Lord Macclesfield in Peachy v Duke of Somerset[10] that the penalty doctrine is not engaged if the prejudice or damage to the interests of the second party by the failure of the primary stipulation is insusceptible of evaluation and assessment in money terms. It is the availability of compensation which generates the "equity" upon which the court intervenes; without it, the parties are left to their legal rights and obligations. The point is illustrated by Waterside Workers' Federation of Australia v Stewart[11]. A bond was given by the appellant in the sum of £500 on condition that it pay £50 if and so often as its members in combination should go on strike. Isaacs and Rich JJ[12] emphasised that, whilst refusal to work almost inevitably would cause loss to employers, “no one can ever tell how much loss is sustained by not doing business” and on the principle stated by Lord Macclesfield no relief was to be given against payment of the £50.
- Thus, in order to engage the penalty doctrine, there must be “the availability of compensation” to generate the “equity” upon which the court may intervene. The very example given by the Court in Andrews highlights the difficulty that the defendant faces here. As Isaacs and Rich JJ observed in Waterside Workers' Federation of Australia v Stewart[13] “no one can ever tell how much loss is sustained by not doing business”.
- So here. The difficulties in establishing the loss sustained in the plaintiff’s business are no different to those facing the plaintiff in Waterside Workers' Federation of Australia v Stewart. It is far from evident that there is available to the plaintiff compensation to generate the necessary equity.
- I note that there is no complaint about the weekly rate charged under the clause - the plaintiff is claiming no more than the cost of the rental of the crane under the hire agreement. That can involve no penalty, nor is it alleged that it does.
- What then of the period? Can it be said that the assumption of constant hire until the crane is repaired involves some “additional or different liability” and an additional detriment?
- Several things are evident.
- One is that if the machine was returned in an unserviceable state the plaintiff could not use it to make any profit.
- Two, the period that it would take to repair was unknowable in advance.
- Three, the plaintiff would have significant difficulty in proving what profits precisely might be lost during any repair period. Once the unavailability of the crane became known in the industry then prospective customers would not think to approach the plaintiff to hire their machine. There would be no record of their prospective interest. The prospect of proving loss would depend on many things, not least the goodwill felt towards the plaintiff by prospective customers. No doubt the Court could assess the prospective loss in the usual way, estimating where necessary and discounting for contingencies that are essentially unprovable. But that is the problem. Compensation is not available in the sense intended in Andrews.
- Nor does it seem to me that a requirement in a contract of hire that the hire period continues until the machine is returned in the same condition as it was let has the necessary character of a penalty. The definition of the end of the hire period in cl 3 of the contract of hire does not impose upon the defendant “an additional detriment” as the authorities require, nor does it have that character of a “collateral or accessory stipulation … described as being in the nature of a security for and in terrorem of the satisfaction of the primary stipulation”.
- The defendant argues that there must be down time for servicing and repairs so that an assumption of constant earnings for the whole of the period of repair must involve a penalty. No evidence is proffered to support these assertions. But the argument assumes that the rate of $14,000 per week does not bring that into account. The rate presumably did for the defendant’s period of hire. And the plaintiff’s evidence was that the usual daily rate of $4,500 per day was well above the rate paid by the defendant – there was no evidence that this difference did not well and truly encompass any possible down time.
- In my view clause 3 of the agreement does not operate as a penalty. The defendant has not pointed to the possibility of any evidence emerging that would suggest that it has any prospect of showing that it does. In my judgment the defendant is not entitled in equity to any relief from its bargain.
- Given that determination it is not necessary to consider in detail the evidence that the plaintiff advanced to demonstrate that there was apparently ample demand for its crane and at greater rates than allowed for in the contract. However it serves to show that there is no need for a trial. The evidence shows that in the six and a half months after returning to work the crane returned about $21,000 per week on average – $589,570 in total.[14] That compares to the claim made of about $600,000 (ignoring interest) for the 10 months from mid June to the return of the crane into service the following April. Far from being a penalty the implication is that the defendant is getting off lightly.
The Insurance Point
- The amount paid under the policy is not in issue. The reason for the payment is. The issues are whether such payments are attributable to loss of profits from the hire of the crane and if so whether they should be brought into account.
- As to the first issue either the policy provided for the payment of loss of profits or it did not. The defendant was unable to produce a copy of the policy. In the course of the hearing the plaintiff produced the policy which had been forwarded on the morning of the hearing by the broker with whom the plaintiff dealt. Clause 3.16(f) expressly provides that the insurer will not pay “consequential loss of any kind”.
- The plaintiff denies that it received any such payment and swears positively that the monies received were in respect of parts and labour to repair. There is no evidence that these assertions are wrong and documentary evidence in the form of contemporaneous invoices to support the claims.
- The defendant does not point to the possibility of any evidence existing that might justify a trial.
- There is no merit in this point.
The Costs Point
- It is common ground that an order for costs has been made as the defendant contends. The amount of the costs is yet to be determined but has been estimated by an independent judicial officer.
- The plaintiff argues that until the costs are ascertained by assessment and there is a certificate issued then there can be no set off.
- The pleading of a set off is governed by r 173 UCPR. It expressly provides that an amount may be claimed as a set off whether ascertained or not. It is debateable whether the provision in the Rules provides a statutory basis for such a claim.[15] The Civil Proceedings Act 2011 does provide a statutory basis for the setting off of mutual debts, but “debt” is defined as “any liquidated claim”. This claimed debt is not yet liquidated.
- If a right to set off exists then it must be by way of an equitable set off. Such set offs are expressly preserved by the legislation: s 20(5)(a) Civil Proceedings Act 2011.
- To establish a right to an equitable set off the transactions must be mutual and the equity has to be such as to “impeach” the plaintiff’s title to demand payment.[16] To do that there must be “such a connection between the claim and cross claim … so as to make it unfair for the claim to be allowed without taking account of the cross claim.”[17]
- Here the defence contends that the costs were awarded in “related proceedings”. I do not understand that the plaintiff disputes that assertion. Those proceedings concerned the setting aside of a statutory demand served on the defendant by the plaintiff in relation to the debt now pursued in these proceedings.[18] In my view that would be sufficient for there to be the necessary close connection to make it unfair that the defendant pay the plaintiff’s claim without bringing the countervailing cross claim into account. The value of that cross claim is estimated to be $28,640.
Conclusions and Orders
- I am satisfied that apart from the set off of the costs awarded in the Federal Court there is no reasonable prospect of the defendant successfully defending the claimed loss to mid November and no need for a trial of the proceedings so far as that part of the claim is concerned.
- Since the filing of the application interest as provided for under the contract has accumulated. The amount presently owing for the period to mid November 2011 including interest to 30 November 2012 is $452,966.76. From that sum should be deducted the set off of $28,640.
- There will be judgment for the plaintiff in the sum of $424,326.76.
- The plaintiff has substantially succeeded in its arguments. The defendant is ordered to pay the costs of and incidental to the application.
- The plaintiff has sought that the outstanding issues be set for trial, submitting that the issues are very narrow. I agree. To have the matter ready for trial speedily I direct that:
- the plaintiff file and serve any reply that it might be advised on or before 4pm on 21 December 2012;
- the parties complete their disclosure of documents on or before 4pm on 25 January 2012;
- the proceedings be listed for trial to commence at 10am on 4 March 2013;
- the parties have liberty to apply on giving two days notice in writing.
Footnotes
[1] See r 5 UCPR
[2] [2011] QCA 105
[3] [2005] 2 Qd R 232
[4] [2003] QCA 271
[5] French CJ, Gummow, Crennan, Kiefel and Bell JJ
[6] At [9]-[11]
[7] [1983] HCA 11; (1983) 152 CLR 406 at 445
[8] Waterside Workers' Federation of Australia v Stewart [1919] HCA 63; (1919) 27 CLR 119 at 128-129, 131; [1919] HCA 63; Acron Pacific Ltd v Offshore Oil NL [1985] HCA 63; (1985) 157 CLR 514 at 520; [1985] HCA 63.
[9] Rolfe v Peterson [1772] Eng R 40; (1772) 2 Bro PC 436 at 442 [1 ER 1048 at 1052]; Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1914] UKHL 1; [1915] AC 79 at 86; cf, as to irrevocable letters of credit and "performance bonds", the proceeds of which are in substitution for performance by a contractor, Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1998] 3 VR 812; Mason, "'I'll have my bond; speak not against my bond': Constructive trusts and surplus proceeds from performance bonds", (2012) 6 Journal of Equity 74 at 81-83.
[10] (1720) 1 Strange 447 [93 ER 626]
[11] [1919] HCA 63; (1919) 27 CLR 119
[12] [1919] HCA 63; (1919) 27 CLR 119 at 131-132
[13] [1919] HCA 63; (1919) 27 CLR 119
[14] Mr Crow SC who appeared for the plaintiff put the average significantly higher but I have restricted my calculations to what I perceive to be the dry hire return, comparable to the contract in question.
[15] See LCR Mining Group Pty Ltd v Ocean Tyres Pty Ltd [2011] QCA 105 per White JA at [35]-[36]
[16] Forsyth v Gibbs [2009] 1 Qd R 403 per Keane JA at [9] – [10]; LCR Mining Group Pty Ltd v Ocean Tyres Pty Ltd [2011] QCA 105 per White JA at [34]
[17] Forsyth v Gibbs [2009] 1 Qd R 403 per Keane JA at [10]
[18] Lifese Pty Limited v Lee Crane Hire Pty Limited [2012] FCA 302