Sika (nz) Limited v Pegasus Engineering Limited [2023] NZHC 834, 19 April 2023

The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried. The Court must be left without any real doubt or uncertainty.

“The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried ... The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated ... The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility... In the end the Court’s assessment of the evidence is a matter of [judgement]. The Court may take a robust and realistic approach where the facts warrant it. [11]”

No set-off clauses have been held to be enforceable and effective according to their terms and regularly appear in contracts for the supply of goods between commercial parties.

“No set-off clauses have been held to be enforceable and effective according to their terms. They regularly appear in contracts for the supply of goods between commercial parties, such as that entered into between Sika and Pegasus. [17]”

A no set-off clause can preclude a party from raising a counterclaim in response to a demand for payment, as commercial parties should be required to honour the bargain they have made.

“[17] … We consider that commercial parties should be required to honour the bargain they have made, absent other grounds that tell against the recognition of a statutory demand. … [18]”

A no set-off clause does not prevent a defendant from raising a defence that they are not bound by the obligation at all because it should be set aside under s 43 of the Fair Trading Act.

“A contractual no set-off clause is procedural. It suspends a party’s right to raise a matter of opposition to a claim, as opposed to extinguishing those rights... When a defendant denies any liability at all to the plaintiff as when the defendant alleges the obligation never arose or that, if it arose, it should be set aside the defendant is not raising a set-off. Instead, the defendant is asserting a defence which goes to the foundation of the plaintiff’s claim, not just to reduction of an established liability. [23]”

A party wishing to have an agreement avoided under s 43(3)(a) of the Fair Trading Act must claim that relief expressly.

“...a party in the position of Pegasus wishing to have an agreement avoided under s 43(3)(a) will need to claim that relief expressly. [31]”

A no set-off clause does not operate when there is a total failure of consideration.

“Carters accepted, however, that the clause does not operate when there is a total failure of consideration. There could arguably be a total failure of consideration if there is no delivery at all, if what was delivered is not what was ordered or if what was delivered is so defective that it is no use at all to the customer. [25]”

The reasoning that a no set-off clause does not preclude a defence seeking to avoid or vary an agreement applies where the counterclaim is attacking the very agreement on which the claim is based.

“As the above passage in Harcourts indicates, the remedial nature of the orders sought in a counterclaim should not obscure the point that the counterclaim is attacking the very agreement on which the claim is based. I consider the same reasoning applies whether the attack is to avoid the agreement entirely or to vary it insofar as the variation impugns the very payment obligation on which the claim is based. [28]”

A no set-off clause does not override any provision in the Fair Trading Act if it merely requires payment of the price of product supplied, leaving the party's rights to pursue claims under the Act wholly intact.

“In my view, the no set-off clause does not override any provision in the Fair Trading Act to which Mr Russ referred. The no set-off clause does not purport to bar any claim that Pegasus may bring, nor does it impose constraints upon it contrary to any provision in the Act. What it does do is require payment of the price of product supplied leaving Pegasus’s rights to pursue claims under the Act wholly intact. [48]”

There is a presumption that if a person purports to sign on behalf of a company, they are signing only in that capacity, but this can be displaced by clear words or extrinsic evidence.

“No one disputes that it is possible for a person to sign a contract once but in a dual capacity. But there is a presumption that, if a signer purports to sign on behalf of a company or another, he or she is signing only in that capacity. Such presumption may be displaced by clear words within the contract or by extrinsic evidence from which may be inferred the signer’s intention when affixing his or her signature. [64]”