Probert v Ericson[2014] QSC 4

SUPREME COURT OF QUEENSLAND

1. The applicants are plaintiffs in a proceeding before the Supreme Court in which they claim money owing under a deed of agreement and in which the respondent counterclaims for damages to his reputation, business and health.

2. The dispute between the parties arose in the course of the respondent building a house for the applicants at Palm Cove near Cairns.

3. In the present application the applicants seek summary judgment in respect of their claim and the counterclaim of the respondent. The applicants seek lesser orders in the alternative.

Background  

4. The applicants claim $1,165,172.14^[1] as a liquidated debt owing under a deed of agreement executed by the parties on 9 June 2012.

5. Over five years earlier, on 23 March 2007, the applicants entered into a building contract with the respondent under which he was to construct a house for them at Palm Cove. The initial contract price was $3,369,743. The practical completion date under the contract was 10 July 2008. The contract made provision for payment of liquidated damages if the works were not completed by then.^[2]

6. The applicants engaged Total Project Group (“TPG”) to design, oversee and administer the construction of the house on the applicants’ behalf in accordance with the building contract.^[3]  TPG’s architect, Roger Mainwood, tended to those obligations.  Consistently with the contract, Mr Mainwood approved extensions of time, variations and prepared progress payment certificates in relation to payment claims submitted by the respondent.^[4]  Over the course of the construction, variation approvals increased the total sum payable under the contract by the applicants to the respondent to $3,883,653.^[5]

7. The respondent failed to meet the practical completion date of 10 July 2008 but continued to work on the project. TPG and the applicants approved an extension of time under the contract to January 2009.^[6]  The respondent did not meet that date either but still the respondent continued on the project.

8. The applicants subsequently made some direct payments to the respondent’s subcontractors on behalf of the respondent on the basis that such payments were a loan to the respondent. A schedule of payments deposed to in the affidavit of the first applicant shows the total payments made by the applicants to or on behalf of the respondent total $3,357,805.70.^[7]

9. By June 2012, some four years after the initial date for practical completion and three and a half years after the extended date for completion, construction on the house still had not been completed. On 9 June 2012 the applicants and the respondent entered into a deed of agreement (“the deed”)^[8] in an apparent attempt to bring certainty to the remaining construction and the parties’ financial obligations. 

10. The respondent admits entering into the deed with the applicants on 9 June 2012.^[9] He claims to have done so against a background of cash flow problems caused by delays associated with the project, particularly the applicants’ failure to make progress payments when they became due.^[10]  The respondent alleges he raised this concern with Mr Mainwood in an email of 15 May 2012 in which he complained of a payment shortfall of $62,125.93.^[11]  The respondent also alleges he emailed the applicants itemising the shortfall of the progress payments but the email exhibited in support of that proposition makes no reference to progress payments.  It simply lists amounts paid and a total of $106,123.59 owing to creditors.^[12]  It concludes, “The funds I have left at present will only cover some wages and private and business expenses, eg accountant’s fees”.  The respondent implies this email prompted the meeting of 9 June 2012.^[13]  The first applicant deposes the respondent’s ‘cash flow’ problems were one of several reasons behind them pursuing the deed between the parties.^[14] 

11. The deed recited, inter alia:

“H.The Builder now advises that he has insufficient capital to presently complete the job.

I. The Owners and the Builder now agree that the builder’s liability to the owner, and further funds expended on the works, should be governed by the terms of a new agreement.

J. This deed records the final dispensation of the matters relating to that new agreement.  This deed is to be read in conjunction with the Contract.”[15]

12. The parties agreed under the deed that:

1. the respondent had been paid $3,357,805.70, leaving $525,847.30 payable to him under the contract;^[16]

2. amounts paid by the applicants on behalf of the respondent would result in an adjustment of the liabilities of the parties in favour of the applicants;^[17]

3. the respondent owed the applicants the sum of $170,157.89 for payments made or to be made on his behalf,^[18] thereby reducing the amount then payable by the applicants under the contract to $355,689.41;^[19]

4. the respondent was also liable under the terms of the contract to pay the applicants liquidated damages in the sum of $620,000, which would continue to accrue in accordance with the terms of the contract at the rate of $500 per day;^[20]

5. the amount of liquidated damages owing was to be set off against the amount remaining payable by the applicants under the contract;^[21]

6. the respondent had therefore been paid his full entitlement as at the date of the deed;^[22]

7. the applicants could pay the respondent’s subcontractors and for further materials for use in the construction and those payments would be subtracted from the amount the applicants were liable to pay under the contract;^[23]

8. despite the respondent’s liability to the applicants being greater than the applicants’ liability to the respondent, if the respondent completed works specified in the deed within the timeframes specified in the deed, the applicants would release the respondent from the liquidated damages liability and its set off effect and pay the respondent any amount then remaining payable by them under the contract;^[24]

9. the terms of the deed could be pleaded by the applicants as an absolute acknowledgement of the amount of the debt payable;^[25] and

10. in the event of the respondent breaching the deed he would indemnify the applicants for any costs and losses suffered by the applicants as a result of the breach, including for proceedings instituted for breach of the deed.^[26]  

13. The deed also provided that the applicants may lend funds to the respondent in respect of the building work, with the amount of the loan to initially be $5,000 and any such loans being repayable on demand.^[27] 

14. The deed provided for a practical completion date of on or by 20 August 2012.^[28] Practical completion of the project was not reached by this date. 

15. The respondent does not admit he failed to comply with the completion date as, notwithstanding the admission that he executed the deed, he deposes that at the meeting, prior to executing the deed, the second applicant verbally agreed a completion date “into November would be OK”.^[29]  The applicants deny that allegation^[30] and the first applicant deposes the respondent actually said the deed’s timeframe gave him “plenty of time”.  In any event, the project remained incomplete by the end of November 2012.

16. On 20 December 2012 the second applicant attended a meeting with the respondent and Mr Mainwood at TPG’s office, convened due to the applicants’ concerns about the delay in the construction of the house.^[31] The applicants deposed that at this meeting the respondent indicated he was unable to complete the work and fulfil his obligations under the contract.  Both the second applicant and Mr Mainwood deposed to the respondent stating he was unable to continue working on the project without further funding, was no longer insured and was walking away from the project.^[32]  The applicants contend the respondent’s assertion he was no longer able to continue working on the project amounted to a repudiation of the contract and that they accepted his repudiation and the contract was terminated.

17. The respondent says it was the second applicant who terminated the contract at the meeting. He deposes the second applicant advised they were not prepared to spend any further money on the project and asked if the respondent could finance it, to which he indicated he could not as he did not have any more money.^[33] The respondent alleges the second plaintiff said, “Let’s call it quits. We will not pursue you for the liquidated damages”.^[34] 

18. On the same day the applicants engaged a security guard to guard the property and the guard only allowed the respondent’s subcontractors on site to collect their belongings.^[35]

19. By this date the applicants depose they had lent the respondent one amount of $5,000 and four amounts of $10,000, each pursuant to the deed.^[36]  However, the $5,000 was lent on 4 June 2012, five days before the deed was entered into.

20. The applicants also depose that by this time they had, since entering into the deed, paid $422,563.35 on the respondent’s behalf to subcontractors and for materials pursuant to clauses 4 and 5 of the deed.^[37]

21. The applicants subsequently engaged third party contractors to carry out and complete the construction of the house.^[38] At the time the applicants filed their claim, (18 April 2013) construction of the house was still not complete.  The first applicant deposes the remaining completion costs through third party contractors are:

Eastbuild Designer Homes $             318,715.20

Fox Gardens$                  4,510.00

Crathern Investments Pty Ltd$                12,573.00

Total$              335,798.20[39]

22. The applicants claim a total sum of $1,165,172.14 as a debt under the deed. This figure comprises the following amounts:

Liquidated damages as at 08/06/2012               $   620,000.00

Liquidated damages from 09/06/2012 to 20/12/2012$     97,500.00

Total purported loans to respondent               $     45,000.00

Third party completion costs              $   335,798.20

Payments pursuant to clauses 4 and 5 of deed              $   422,563.35

Less Owners’ liability to pay under the contract              $   355,689.41

Total              $1,165,172.14             

23. The respondent counterclaims for the sum of $2,000,000 for general damages to his reputation, business and health but the counterclaim is wholly deficient. It pleads no detail whatsoever.

Objections

24. The applicants object to the two affidavits of the respondent filed in the proceeding and complain they should not be relied upon for the following reasons.

25. Firstly, the applicants were not served with executed copies of the affidavits. Secondly, they only received unexecuted copies of them less than the four business days before the date for hearing required by r 296 of the Uniform Civil Procedures Rules 1999 (Qld) (“UCPR”).  Thirdly, it is alleged the affidavits contain statements of information and belief but that the respondent does not state the sources of the information and the reasons for the belief in accordance with r 295(2). 

26. The first and second complaints are technically correct. However, given the respondent did at least file affidavit material and given the adverse consequences of him failing to meet a summary judgment application with any evidence, the preferable course, consistent with the purpose of the rules,^[40] was to consider the materials notwithstanding the irregularities and remedy any prejudice to the applicants by affording them more time.  They identified no prejudice and required no additional time. 

27. There is no substance to the third complaint. The factual assertions in the respondent’s affidavits are either self evidently his own direct evidence or assertions of information accompanied by exhibited documents from which the source of the information, and the reason why he believes it, is readily apparent. The real problems with the respondent’s affidavits are that some of his evidence is irrelevant to the determinative issues and some of his purportedly direct evidence is so generalised and bereft of detail that it is of little evidentiary assistance in showing he has prospects of meeting the claim or succeeding on his counterclaim. Nonetheless, those problems did not ground any of the objections about the affidavits’ admissibility. The objections are overruled.

Legal Principles

28. The plaintiff’s application for summary judgment is made pursuant to rr 292 and 293 of the UCPR.  Rule 292(2) provides:

“If the court is satisfied that –

1. the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim; and
2. there is no need for a trial of the claim or 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.”                           

29. Rule 293 imposes the same test, viz, “no real prospect of succeeding” and “no need for a trial”, in circumstances where summary judgment is sought against the plaintiff.

30. The test for summary judgment in the UCPR has been the subject of considerable judicial analysis. A useful analysis of the relevant authorities by White JA in LCR Mining Group Pty Ltd v Ocean Tyres Pty Ltd^[41] emphasised the following. The words “no real prospect of succeeding” mean what they say. They are to be applied in conjunction with the requirement of satisfaction that there is no need for a trial, so as to ensure before any summary intervention that there is a high degree of certainty that a respondent would have no real prospect of succeeding if the case were allowed to go to trial in the ordinary way.

31. Consideration of whether a respondent has a real prospect of defending a claim is not limited to the matters raised by the respondent and must include consideration of whether the applicant can establish a prima facie case.^[42]  That is because an apparent inability to establish a prima facie case logically demonstrates the respondent has a real prospect of successfully defending the claim.

32. The logical sequence in which to consider the present application is to first consider the application as it relates to the applicant’s claim, before later turning to the counterclaim.

Summary judgment on the claim?

33. The applicants’ claim is for money owing as a debt under a deed of agreement.  Consideration of the application for summary judgment necessarily involves a consideration not only of the apparent enforceability of the deed but also of each of the different categories of debt claimed under it.

Enforceability of the deed

34. The deed is styled “Deed of Agreement” and was expressly executed “as a deed”.^[43] Its content shows it was signed and attested to by a witness other than the parties.  The date of execution was not endorsed where the parties’ signatures appear, but that does not detract from its validity.^[44]  The date was endorsed at the outset of the document and the respondent’s pleadings admit that it was entered into by the parties on that date.  There is also evidence the deed was delivered.  The first applicant deposes to the respondent taking a copy of the deed with him after executing it on 9 June 2012^[45] and, while the respondent denies receiving a copy then, he does depose to receiving a copy of it on 22 June 2012.

35. The respondent’s pleadings do not identify any reason why the deed would not prima facie be of legal effect. The respondent’s pleadings make non-admissions about the deed and the consequences of non-compliance with it. In those instances the reason pleaded for the non-admission is “the legality of the ‘Deed’ is questioned.”^[46]  No material facts are pleaded in support of that purported reason, which in any event fails to comply with r 166(4) of the UCPR because it is not a direct explanation for the belief the allegation cannot be admitted.

36. The deed of agreement is prima facie enforceable on its terms against the respondent.

37. The applicants submit that the respondent’s failure to comply with r 166(4) has the consequence pursuant to r 166(5) that the respondent is taken to have admitted the relevant allegations. In summary, this is said to have the effect that the respondent admits the deed is enforceable on its terms against him. The question whether the respondent has a real prospect of defending the claim is not necessarily resolved merely by applying rules of pleading to deficiencies which in the normal course could potentially be remedied by amendment or application to amend, depending upon the circumstances. If the respondent’s evidence filed in the application shows he has a real prospect at trial of avoiding the terms of the deed of agreement then that evidence should not be ignored merely by reason of deficiencies in his pleadings on this issue.

38. The evidence filed by the respondent is of tenuous relevance to the issue of the legitimacy or enforceability of the deed. The respondent deposes to various problems that delayed the project prior to him entering into the deed, many of which could be no fault of the applicants.^[47]  His main complaint about the applicants is that they contributed to the financial difficulties he was facing at the time of entering into the deed.   He deposes that they failed to “fully pay variations when due and presented” and to “fully pay progress payments when due”.^[48]  The applicants took issue with the limited extent of the supporting evidence advanced in support of those assertions, particularly emphasising the absence of any evidence the respondent had complied with the requirements of ss 79 to 83 of the Domestic Building Contracts Act 2000 (Qld) in respect of the variations.  However, the accuracy of the assertions is not to the point.  The respondent has proffered no explanation how the past alleged shortcomings of the applicants in making timely payments could bear upon the legitimacy of the deed.

39. The written submissions of the respondent drew upon his financial difficulties as at the time of entering into the deed to argue that the circumstances surrounding the signing of the deed “created economic duress” for the respondent.^[49]  He submitted this “economic duress vitiated the contract”, presumably referring to the deed of agreement.  He submitted, citing Crescendo Management Pty Ltd v Westpac Banking Corp,^[50] that his entry into the deed “was induced” by “illegitimate economic pressure”.  The submission is misconceived.

40. In Crescendo Management McHugh JA explained that while economic duress does not require an overbearing of the will, it does require evidence of the application of illegitimate pressure inducing entry into the agreement.  In an oft-quoted passage his Honour said:

“… The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress.”[51]

In the present matter there is no evidence that the applicants applied any particular pressure, let alone that it was illegitimate, unconscionable or unlawful.

41. The respondent’s account of the lead up to the meeting, summarised earlier, is that he had informed the applicants by email that creditors were owed $106,123.59 and he only had sufficient funds to pay some wages and private and business expenses. Consistently with that information, the deed’s recitals recorded that the respondent advised he had “insufficient capital to presently complete the job”. While the respondent, an experienced builder, claims he only briefly looked through the deed before signing it,^[52] he does not suggest the applicants pressed him into entering into to the deed. Moreover, the deed placed him in a better position than he would have been in without it.  As he implicitly conceded in submissions,^[53] the deed gave him an opportunity to finish the project and avoid the likely extent of the loss he would otherwise incur for having failed to fulfil the contract.  On his own account, his entry into the deed was not induced by illegitimate pressure.  His purported allegation of economic duress would have no prospect of success in avoiding the effect of the deed.

42. The other basis upon which the respondent challenged the legal effect of the deed in his submissions was the second applicant’s alleged oral assurance in the meeting prior to the execution of the deed to the effect that a completion date “into November would be OK”. The respondent submits such an assurance ought estop the applicants from enforcing the deed’s provisions.^[54]  It is difficult to see how such an assurance could preclude reliance upon all of the deed, but the point is academic.  Even if it was agreed that the deed would apply as if the respondent had until the end of November to complete the project, he still breached the deed because he failed to complete the project by then. 

43. The respondent has no real prospect of success in challenging the legitimacy of the deed or its enforceability against him.

Debt owing

44. That is not the end of matter. By its terms the deed can, as it has been, be pleaded as an absolute acknowledgement of the amount of debt owing.^[55]  However, the question of what sum is owed under the agreement does not fall to be determined by reference to the deed alone.  The deed provided for the basis upon which further payments, made consistently with the terms of the deed, would bear upon the calculation of the debt owing.  It also made provision for the circumstances under which liquidated damages would or would not be payable. 

45. The evidence relevant to the quantum of the amounts owing has been summarised above.

Liquidated damages

46. The deed unequivocally identified the amount of liquidated damages owing under the contract as at its execution as $620,000. The deed made provision for waiver of the respondent’s liability for liquidated damages in the event he completed works in accordance with the timetable stipulated in the deed. That did not occur (even if it was agreed that the timetable extended to November). It follows the $620,000 liquidated damages identified in the deed is prima facie payable under it.

47. The only remaining basis raised for the respondent to arguably avoid that obligation is the respondent’s allegation that at the meeting of 20 December 2012, when the contract was terminated, the second applicant said, “We won’t pursue you for the liquidated damages”. It is unclear whether this allegation, which is disputed, might be said to relate to all liquidated damages or only some, for instance the additional liquidated damages said to have accrued subsequently to those fixed by the deed. Further, this allegation of fact was not pleaded and the respondent did not articulate any submissions as to what if any legal significance he alleges it has.

48. The circumstances in which liability might be avoided on the basis of waiver in its potential guises were discussed in The Commonwealth v Verwayen.^[56]  No such circumstances are alleged here.  The limited facts proffered by the respondent do not suggest he in any way acted to his detriment on the basis of what was allegedly said so that, for example, it would be unconscionable for the applicants to now pursue the debt for liquidated damages. Nor do the facts proffered suggest the alleged statement of the second applicant provided some advantage to the applicants to which they would not otherwise have been entitled so as to deny them their right to pursue the debt for liquidated damages. Further, the deed expressly provided that a right created by it could not be waived other than in writing.^[57] These considerations all demonstrate the respondent has no prospect of avoiding liability by reliance on the alleged statement of the second applicant.

49. The respondent has no real prospect of successfully avoiding his liability for the $620,000 liquidated damages agreed to in the deed.

50. The applicants also seek an amount of $97,500 liquidated damages said to have accrued between 9 June 2012 and 20 December 2012 at the rate of $500 per day. In this context the deed provided:

“2.3 Liquidated damages continue to accrue at the rate of $500 per day, in accordance with the terms of the contract.” 

51. The addition of the words “in accordance with the terms of the contract” in clause 2.3 creates ambiguity. This clause might merely refer to the contract in the context of it having provided the rate for liquidated damages of $500 that was then adopted in the deed.^[58]  Equally, the clause might also mean the terms of the contract relating to the circumstances under which liquidated damages become payable is nonetheless intended to apply.  That provision, at clause M8 of the contract, provided for the respondent’s liability to pay liquidated damages in the event of the completion date not being met.  It contemplated a regime for notification of the intention to enforce that entitlement.  No evidence was advanced in the application about whether any such notification occurred after the entry into the deed.  Given the deed’s recitals provided the deed was to be read in conjunction with the contract,^[59] and given clause 2.3’s inclusion of the words “in accordance with the terms of the contract”, the latter interpretation of the contract is fairly arguable.  Argument as to the correct interpretation may well justify reference to extrinsic evidence not lead in the application for summary judgment. 

52. Against this background it is not possible to conclude the respondent has no real prospect of successfully defending this alleged debt and that there is no need for a trial on this aspect of the matter. I will not give summary judgement in respect of this component of the alleged debt.

Loan

53. The deed made provision for the applicants to loan the respondent funds that would be repayable on demand.^[60]  Repayment was demanded on 14 March 2013.^[61]

54. The applicants allege a total of $45,000 was lent under the deed, but as mentioned above, $5,000 of that total was actually lent prior to the deed being entered into. While the respondent may well owe the applicants that $5,000, it does not appear to be money owing under the deed.

55. As for the remaining $40,000, the evidence that it was lent and is payable under the deed is not contradicted by any evidence filed by the respondent.

56. The respondent has no real prospect of successfully avoiding his liability for that debt of $40,000 under the deed.

Third part completion costs

57. The applicants seek $335,798.20 for third party completion costs.

58. The applicants submit these costs were a detriment arising from the respondent’s breach of the deed by not completing the works. It was submitted they were therefore recoverable pursuant to clause 7.3 of the deed which provides:

“7.3  If the Builder breaches this deed, the Builder by this deed indemnifies the Owners in respect of any costs (on a full indemnity basis), charges, expenses, loss (including consequential loss), damages or any other detriment (whatsoever and howsoever arising) suffered by them as a result of that breach, including proceedings instituted for breach of this deed.”

59. An argument was identified in the course of submissions that this component of the claim was more properly founded on a breach of the contract and, if so, that the factual dispute as to who terminated or repudiated the contract on 20 December 2012 would tend to preclude the degree of factual certainty required for summary judgment. A difficulty related to that issue is that this claim is founded on a breach of the deed, not the contract. However, the potential breaches of the deed and the contract are not mutually exclusive. Regardless of whether the respondent was in breach of the contract he was, on the face of it, in breach of the deed, by failing to complete the works in time. It is at least prima facie arguable that the detriment of having to incur the costs of other parties completing the works was suffered as a result of that breach.

60. The more concerning difficulty with this component of the case is the skeletal state of the evidence advanced in respect of that alleged detriment and its connection with the breach.

61. The only evidence about those costs is contained in the first affidavit of the first applicant wherein she deposes:

“12.As a consequence of Mr Ericson not continuing with the work my husband and I had to engage other contractors to carry out and complete the construction of the house. …

14. At the time we filed our claim and statement of claim in this proceeding the construction was not complete but we had been able to quantify our remaining cost to achieve a completion.  We have engaged other contractors and agreed costs with them as follows:

a. Eastbuild Designer Homes$ 318,715.20

b.Fox Gardens$ 4,510.00

c.Crathern Investments $ 12,573.00”[62]

Those assertions are not accompanied by any further breakdown of the costs or by any supporting exhibited materials.^[63]

62. The degree of evidentiary detail that should be provided by an applicant in an application for summary judgment will inevitably vary with the circumstances of the case. Where a single witness for an applicant purports to depose to an aspect of an applicant’s case which necessarily involved significant actions by a variety of persons about which the respondent has no direct knowledge, it will rarely be sufficient to depose to that aspect generally without providing some descriptive detail of what actually transpired and why. To omit such detail is in effect for an applicant to assert as a matter of fact that it has a case without demonstrating the evidentiary foundation for the assertion or exposing that foundation to challenge by a respondent.

63. The requirement in r 295(2) that sources of information and reasons for belief be stated is a safeguard against the omission of detail of the above-mentioned kind. It is at least likely that the above-mentioned skeletal facts deposed to by the first applicant have an evidentiary foundation that derives from a variety of sources additional to the deponent and it is thus doubtful that r 295(2) has been complied with. Further, the skeletal factual assertions deposed to involved players other than the respondent, so it should not be assumed from the absence of contradicting evidence from him that those facts ought be more readily accepted.

64. The lack of descriptive detail about what transpired and why does not allow the court to make a properly informed conclusion, in respect of this component of the case, as to whether the applicant has a prima facie case. In the absence of such a conclusion about this component of the case it can hardly be said the respondent has no real prospect of defending it. For that reason I would not give summary judgment in respect of this component of the alleged debt.

Payments pursuant to clauses 4 and 5 of deed

65. The applicants also seek $422,563.35 for payments made to subcontractors and for materials pursuant to clauses 4 and 5 of the deed. While there is prima facie evidence that such payments were made it is less clear how such payments fall for recovery under the deed. Clauses 4 and 5 relevantly provided:

“4 Subcontractors…

4.5The Owners may, in their absolute discretion, elect to pay those subcontractors on the Builder’s behalf.

4.6The sum of any payments made on the Builder’s behalf in accordance with this Clause 4, will be subtracted from the Owner’s Liability.

5Materials…

5.4Where the Owners pay for and provide any materials to the Builder, the sum of any payments made on the Builder’s behalf in accordance with this Clause 5, will be subtracted from the Owner’s Liability.

5.5The Builder remains solely liable for the costs incurred arising in relation to the provision of materials used or to be used in relation to the works on the Lot or under the Contract, whether paid by the Owners or the Builders or not at all. …”

66. The language of clause 4 of the deed did not contemplate that payments to subcontractors would become a debt owing under the deed other than to the extent of the quantum of those payments being deducted from the quantum of the owners’ liability. The “owners’ liability” was a term adopted in the deed to describe the amount payable by the applicants to the respondent under the contract.^[64]  The deed contemplated that the applicants’ liability for that amount could be reduced by amounts paid or to be paid by the applicants on the respondent’s behalf.^[65]  Thus, at the date of the deed the owners’ liability to pay the respondent under the contract had been reduced on account of other payments made to $355,689.41. The payments subsequently made pursuant to clauses 4 and 5 of the deed, totalling $422,563.35, exceeded, and were therefore sufficient to extinguish, the owner’s liability.  The deed did not provide however that amounts paid pursuant to clause 4 of the deed that exceeded the owner’s liability would then become debts due and owing under the deed. 

67. In the circumstances, the respondent does have a real prospect of defending any component of the claim that seeks to recover as a debt under the deed payments made to contractors by the applicants on the respondent’s behalf, in excess of any extent to which they may be applied under the deed to extinguish the so-called owners’ liability. On the other hand, he does not have a real prospect of defending their application to extinguish the owners’ liability.

68. In contrast, the deed’s provisions relating to materials contains at clause 5.5 a provision which indicates the builder is liable for the costs paid for by the applicants of provisions and materials used or to be used in relation to the works. That provision provides at least a prima facie basis for recovery of such costs as a debt under the deed.

69. Unlike the information provided in respect of the third party completion costs, reasonable detail has been provided in respect of the payments for materials and subcontractors, particularly having regard to the fact that they were materials used and works performed during an era when the respondent was still working on the project. Unlike the third party completion costs, the respondent is well positioned to know whether the relevant costs were properly incurred. He has filed no affidavit material to suggest that they were not properly incurred.

70. It is therefore apparent that the respondent does not have a real prospect of defending that component of the claim which seeks to recover payments made by the applicants for materials as a debt under the deed.

71. A difficulty in quantifying the debts incurred pursuant to clause 5, as distinct from clause 4, is that those debts are combined in the schedule itemising them in the first affidavit of the first applicant. The itemised description therein of what each payment was for makes it possible in most although not all instances, to determine whether the payment is for materials or the work of the subcontractor. Further, in some instances it appears likely the payment is both for a subcontractor and the materials the subcontractor may have provided. In schedule A to this judgment I have listed those entries in the schedule from the affidavit which appear to clearly relate to payments of material as distinct from the provision of services by subcontractors.^[66]  The total of the amounts listed in Schedule A is $165,431.79. 

72. The respondent has no real prospect of success in defending that component of the claim seeking a debt owing for materials up to an amount of $165,431.79.

73. The total amount sought by the applicants for payments made to subcontractors and for materials was $422,563.35. Deducting the above allowed amount for materials from that total leaves a sub total of $257,131.56 which is hypothetically available for subtraction from the owner’s liability as discussed above.

Total debt for which summary judgment will be given

74. The respondent has no prospect of successfully defending the claim and there is no need for a trial of that part of the claim relating to the following debts under the deed:

Liquidated damages per cl 2.2$620,000.00

Payments for materials per cl 5$165,431.79

Loans to respondent per cl 3.1(a)$40,000.00

Gross total$825,431.79

75. As against this, the so-called owners’ liability is $355,689.24.

76. Under the terms of the deed, the liquidated damages are “set off” against the owners’ liability. Further, the payments for subcontractors and materials may be “subtracted” from the owners’ liability. The respondent has no real prospect of defending the application of the $422,563.35 paid pursuant to clauses 4 and 5 of the deed for subtraction from the owners’ liability, however by the standards required for summary judgment I am only satisfied, for the reasons earlier given, that only $165,431.79 of that amount is summarily recoverable as a debt under the deed.

77. The sequence in which the set off or subtraction of the above components is applied effects the net total debt to be awarded by summary judgment. The application of either the liquidated damages or alternatively the amount owing for subcontractors and materials would entirely extinguish the owners’ liability. If the subcontractors components of the amount owing for subcontractors and materials were subtracted first, followed by part of the amount owing for materials sufficient to extinguish the owners’ liability, then the balance of the amount owing for materials and the whole of the liquidated damages would be payable. On the other hand, if the liquidated damages are set off first a lesser net total will be payable as a debt awarded by summary judgment. That is because, of the $422,563.35 paid to subcontractors and for materials, any part of it can be applied for subtraction from the owners’ liability but only $165,431.79 thereof can be summarily awarded as a debt payable under the deed.

78. For the reasons now developed the respondent has a real prospect of successfully arguing the payments for subcontractors and materials should not be subtracted before the set off of liquidated damages but no such prospect in respect of the converse sequence.

79. The deed’s provisions, considered in context, strongly indicate the liquidated damages set off should apply first. It was agreed at the time of the deed that the respondent was already liable for the “liquidated damages liability” of $620,000.^[67]  Further, clause 2.12 expressly provided the liquidated damages liability “is … set-off against the Owners’ Liability for the purposes of calculating the amount payable to any party to this deed”.  Moreover, clause 2.18 provided that the respondent’s full entitlements “have … been satisfied by payment claims already made, and the set-off” of the owners’ liability.  Apart from payments already made the only amount that could have been applied at that time to stipulate the respondent’s entitlement had been satisfied by set off was the liquidated damages liability.  At that point the payments for subcontractors and materials were yet to occur.

80. The deed contemplated that the applicants would release the respondent from the liquidated damages liability in the event he complied with the completion timeframe, but that did not occur. The combined effect of the deed’s provisions appears to be that the liquidated damages liability was at the time of the deed already set off against the owners’ liability and the only basis upon which that set off would be revised would be if there was compliance with the deed’s completion timeframe.

81. All of these considerations support the conclusion the liquidated damages liability existing at the date of the deed should be set off against the owners’ liability before there should be any subtraction from the owners’ liability of amounts paid after the deed was entered into to for subcontractors and materials. The practical consequence of that sequence being applied for the purposes of summary judgment is that part of the liquidated damages liability will wholly extinguish the owner’s liability with the balance of the liquidated damages not needed for that purpose - $264,310.59 - remaining as a debt. Because the set off of liquidated damages will extinguish the owner’s liability the need to subtract payments for subcontractors and materials does not arise.

82. The net amount for which summary judgment ought be given is therefore calculated as follows:

Owners’ liability$355,689.41

Less part of liquidated damages liability$355,689.41

$0.00

Balance of liquidated damages liability$264,310.59^[68]

Payments for materials per cl 5$165,431.79

Loans to respondent per cl 3.1(a)$40,000.00

Net total summary judgment$469,742.38

83. It is noted for completeness that the respondent has not pleaded any set off as against a potential judgment amount against him.

Summary judgment on the counterclaim?

84. The solitary “pleading” proffered in support of the counterclaim is:

“This counterclaim is made in reliance upon the following facts:

General Damages to Defendant’s reputation, business and health.”

85. The pleading of the counterclaim undoubtedly fails to comply with the UCPR.  However the respondent purported to demonstrate his counterclaim has some substance.

86. The respondent’s second affidavit makes two allegations of potential relevance to the counterclaim. Firstly, that the applicants’ claim against him, contrary to the second applicant’s “verbal promises”, has caused the respondent to suffer extensive stress requiring medical treatment.^[69]  Secondly, the respondent deposes in effect that his counterclaim is for compensatory damages from the applicants due to their termination of the contract, the subsequent cancellation of the respondent’s builder’s licence and loss of livelihood and reputation.^[70]  The only purported particularity to these allegations is his first affidavit’s exhibit DE-17, which consists of a medical certificate and a copy of a letter by him of 22 July 2013 to the applicants’ solicitor. 

87. The medical certificate certifies that as at 6 May 2013 the respondent was receiving medical treatment for adjustment disorder with mixed anxiety and depressed mood, which became apparent after the termination of his building contract. The certificate states that as a result of the effects of his mood disorder and the fact he is facing financial ruin he has not been able to meet deadlines and find information to substantiate his case. That certificate related to the respondent’s condition about four months before the application for summary judgment was filed. The respondent, who appeared for himself, sought no adjournment of the hearing of the application nor did he suggest at the hearing that he was medically unfit to meet the application.

88. The letter of 22 July is ostensibly a response to a complaint in the Reply and Answer^[71] that the counterclaim is not properly pleaded and is frivolous and vexatious.  The letter complains about a number of matters but does not provide any particularly enlightening detail as to what the substance of the counterclaim might be were it properly pleaded.

89. The relief sought by the applicants in respect of the counterclaim contemplates that if summary judgment is not given it should in any event be struck out. In Chen v Australian and New Zealand Banking Group Limited & Anor[72]Atkinson J relevantly observed, citing General Steel Industries Inc v Commissioner for Railways (NSW):^[73]

“The jurisdiction to enter summary judgment in favour of the defendant because the statement of claim does not disclose a cause of action should of course be exercised sparingly.  The jurisdiction to dismiss the plaintiff’s action should only be exercised where the plaintiff cannot improve its position by a proper amendment of the pleading.”

90. The respondent did not attempt to meet the applicants’ application by an attempt to amend his pleadings. The material filed by the respondent strongly suggests that he would be unlikely to improve his position by amendment to his pleading of the counterclaim. As against this, the quality of the attempted pleading and the material filed in support of it may be the product of incompetence rather than the complete absence of a potential case. There exists a risk that exercising the finality of summary judgment against the counterclaim may unjustly preclude the respondent from the opportunity to properly pursue a case in the remote event it can be properly articulated.

91. In all the circumstances, the safer course is to decline summary judgment on the counterclaim, but to strike it out and direct that no further counterclaim can be filed in this proceeding without the leave of the court. It may be the respondent is not disposed to further pursue a counterclaim. However if he is, such a direction will afford the applicants the protection of the respondent having to do that which he has hitherto failed to do before he is permitted to resurrect his counterclaim, namely, demonstrate that a counterclaim can be properly pleaded against the applicants.

Conclusion

92. Summary judgment should be given on part of the claim in the amount of $469,742.38.

93. The claim seeks “interest” without elaboration. This was not the subject of submissions. I will hear the parties as to what, if any, interest ought be awarded on the above judgment amount.

94. I will hear the parties as to the further conduct of the matter in respect of those components of the claim not finalised by the judgment, namely:

1. Liquidated damages from 09/06/2012 to 20/12/12$97,500.00

2. Part of the loans to the respondent not included in

summary judgment$5,000.00

3. Third party completion costs$335,798.20

4. Payments for contractors and materials not included

in summary judgment$257,131.56[74]

$695,429.76

95. The counterclaim should be struck out and a direction given that the respondent not file a further counterclaim in the proceedings without the leave of the court.

Orders

96. My orders are:

1. Summary judgment for the applicants on part of the claim in the amount of $469,742.38. 

2. The counterclaim is struck out. 

3. It is directed no further counterclaim may be filed in the proceeding without the leave of the court.

4. I will hear the parties as to:

1. interest;

2. costs;

3. directions for the further conduct of the proceeding in respect of those components of the debt claimed but not finalised by the summary judgment.

SCHEDULE A

Items in “Annexure A Schedule of Payments” (first affidavit of S.Probert) which relate to payments of materials per Deed clause 5.