CITATION  WASC 152
JUDGE/S TOTTLE J
Hamersley owed Forge money for work done under engineering contracts, and possibly also for breach of the contracts. Forge was in liquidation. Hamersley claimed that Forge it owed money for breach of the contracts, exceeding the amounts owed by Hamersley, and sought to set (or net) the relevant amounts off. ANZ held a general security agreement over all Forge’s assets.
The court held as follows:
- Hamersley’s contractual rights provided for set-off, under which amounts due by Forge could be offset against amounts due by Hamersley; they were not netting rights under which amounts in excess of the net balance never became due.
- Corporations Act s553C, providing for set-off of mutual debits and credits in liquidation, displaced contractual and equitable rights of set-off. Accordingly Hamersley could not rely on contractual or equitable set-off.
- A PPSA security interest is a statutory interest that is proprietary in nature. ANZ’s security interest, being a proprietary interest, was sufficient to destroy mutuality between Hamersley and Forge, and so s553C did not allow set-off by Hamersley. Pre-PPSA arguments that a floating charge might not have destroyed mutuality were not relevant. PPSA s80(1)(a), under which the rights of a transferee of accounts are subject to equities and defences including set-off, was not relevant. Section 553C covered the field, and s80(1)(a) did not displace it.
The decision was overturned on appeal in Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd  WASCA 163.
The summary of the pertinent points in this legal case update has been provided by Steve Pemberton, Lawyer and Consultant, as an extract from his digest of PPSA cases.