AEP Belgium SA v Packaging House Aust Pty Ltd
[2003] VSC 174
•3 June 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2091 of 2002
| AEP BELGIUM SA AND FABBRICA ITALIANA ARTICOLI PLASTICI SpA | Plaintiffs |
| v | |
| PACKAGING HOUSE AUST PTY LTD (ACN 072 503 041) AND CHRISTOPHER TIMOTHY MARK BROWNIE | Defendants |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 10 APRIL; 2 MAY 2003 | |
DATE OF JUDGMENT: | 3 JUNE 2003 | |
CASE MAY BE CITED AS: | AEP BELGIUM SA v PACKAGING HOUSE AUST PTY LTD | |
MEDIUM NEUTRAL CITATION: | [2020] VSC 174 | |
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practice and procedure – Summary judgment – Defendant showing cause – Appropriate test – Consideration of alleged credits, set-offs and counterclaims – Assignment of debt under Belgian law – Leave to defend on conditions – RSC Chapter 1 Rule 22
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R.D. Keen | Minter Ellison |
| For the Defendant | Mr W.F. Gillies | Mahonys |
HIS HONOUR:
The Proceeding
By a generally indorsed Writ issued on 22 November 2002, the first plaintiff, AEP Belgium SA (“AEP”), and the second plaintiff, Fabbrica Italiana Articoli Plastici SpA (“FIAP”), sought in this proceeding against the first defendant, Packaging House Aust Pty Ltd (“PHA”), a range of relief including an enquiry and the taking of all necessary accounts relating to dealings between PHA and customers of AEP or FIAP, including but not limited to all monies received by PHA from those customers and what had become of such monies.
The general indorsement alleged that AEP manufactured in Belgium speciality plastic films for wrapping foods, especially mass produced cheeses, and that FIAP manufactured in Italy speciality plastic films for wrapping foods. It was further alleged that PHA had in or about February 1996 entered into a written agency agreement with AEP whereby PHA was appointed as its exclusive Australian agent to represent AEP and to deal with AEP’s customers in the following manner:
(a)PHA, as agent for AEP, would solicit orders for product manufactured by AEP;
(b)all such orders from AEP’s customers were to be made out to and in the name of AEP;
(c)AEP would ship to Australia (on CIF terms) ordered product for collection, customs clearance, storage and delivery by PHA as agent for AEP to AEP’s customers;
(d)PHA as agent for AEP would deliver to AEP’s customers an original invoice prepared by and in the name of AEP for the price of AEP’s product delivered by PHA as agent for AEP to AEP’s customers;
(e)PHA would separately charge to and invoice in its own name AEP’s customers for the cost of collection, customs clearance, storage and delivery of AEP’s product delivered to AEP’s customers by PHA as agent for AEP;
(f)AEP’s customers would pay AEP the full invoice price of its product so delivered by PHA as agent for AEP, alternatively, PHA would collect from AEP’s customers a cheque for the full invoice price of its product made payable to AEP and would forward such cheque forthwith to AEP; and
(g)AEP would separately pay commission to PHA calculated on a percentage of the invoice price of its product sold to its customers forthwith after receipt of payment by AEP of such invoices.
It was further alleged in the general indorsement that without the knowledge, consent or authority of AEP, PHA altered the course of dealing by invoicing AEP’s customers in PHA’s name for AEP’s product delivered by PHA to AEP’s customers and not providing to AEP’s customers AEP’s invoice and thereafter receiving payment from AEP’s customers of the PHA invoice price for AEP’s product and then paying AEP from the monies it had received. AEP complained that due to PHA’s lack of reporting, it was not able to provide particulars of any deliveries by PHA of AEP’s product to AEP’s customers or the receipt of PHA of any payment of the price of such product by AEP’s customers. However, AEP alleged that since May 2002 it had shipped to PHA for delivery to AEP’s customers product and invoices in respect of that product totalling approximately $2.55 million and had not received any payment for that product, nor any information from PHA in respect of the same.
It was also alleged that PHA had in about September 1997 entered into a written agency agreement with FIAP, the terms of which were similar to the arrangement between AEP and PHA set out above. A similar complaint was made that FIAP had not received any payment for its product shipped to PHA since May 2002, nor any information from PHA in respect of the same.
The Interlocutory Background
By a summons issued in the Commercial List on 22 November 2002, the plaintiffs sought asset preservation orders and injunctions and pre-pleading discovery and inspection orders against both defendants, pursuant to various rules of the Supreme Court (General Civil Procedure) Rules 1996 ("the Supreme Court Rules"), in particular r 37.01 and r 29.07. The affidavit in support of that application was sworn on 22 November 2002 by Evert Nicolaas Paardekooper, the Sales Manager Speciality Films of AEP Flexible Packaging, a division of AEP Europe ("Mr Paardekooper's first affidavit"). Mr Paardekooper, who resided in Holland, deposed that he was authorised by the plaintiffs to make the affidavit on their behalf. Both plaintiffs were subsidiaries of AEP Industries Inc, a United States corporation. Mr Paardekooper stated that AEP’s major Australian customers were Murray Goulburn Co-operative Limited (“Murray Goulburn”), Bega Co-operative Society Limited (“Bega”) and Bonlac Foods Limited (“Bonlac”). FIAP’s major Australian customer was Link Packaging Pty Ltd (“Link”). He set out the arrangements between AEP and PHA and between FIAP and PHA in terms similar to the allegations in the general indorsement referred to above. Further, he deposed to a meeting with the second defendant, Christopher Timothy Mark Brownie, the sole director and shareholder of PHA, at which requests were unsuccessfully made for information concerning deliveries by PHA to the above customers and concerning payments to AEP and FIAP by those customers and PHA. Mr Paardekooper referred to enquiries made of these customers and swore that he suspected that:
“(a)Murray Goulburn has paid $466,732.35 and EURO 179,584.99 (approximately $321,376) to Packaging House and that that amount is being retained by Packaging House;
(b)Bonlac has paid $108,065.79 to Packaging House and that that amount is retained held by Packaging House.
(c)Bega has paid $1,032,549.27 and EURO 57,691.20 (approximately $103,241) to Packaging House and that that amount is retained held [sic] by Packaging House;
(d)Link Packaging has paid EURO 123,179.53 (approximately $220,435) to Packaging House and that that amount is being retained by Packaging House.”
He also swore that PHA owed FIAP EURO 94,334.71 (approximately $168,816) for product sold by FIAP to PHA on its own account.
Mr Brownie swore an affidavit on 27 November 2002 in opposition to the plaintiffs’ application ("Mr Brownie's first affidavit"). He stated that the customers referred to by Mr Paardekooper were PHA’s customers and not AEP’s or FIAP’s. In July 2000 PHA had begun to invoice these customers and included on PHA’s invoices was an amount for GST. Mr Brownie deposed that orders were placed by the customers with PHA which then placed orders with AEP and FIAP in the name of PHA. Mr Brownie disputed the amounts said to have been received by or owed by PHA. There had been numerous credits, delivery problems, a transfer of product between Bonlac and Bega and some recent deliveries which, as they were on 90 day terms, were not yet due and payable by the clients. However, Mr Brownie appeared to admit that the sum of $466,732.35 in respect of AEP’s product sold to Murray Goulburn and the sum of $280,595.19 in respect of AEP’s product sold to Bega was owing by PHA.
Further affidavits sworn by Mr Paardekooper on 26 November 2002 ("Mr Paardekooper's second affidavit") and 28 November 2002 ("Mr Paardekooper's third affidavit") were filed on behalf of the plaintiffs. Another affidavit in opposition was sworn by Mr Brownie on 29 November 2002 ("Mr Brownie's second affidavit") and filed on behalf of the defendants. In that affidavit, Mr Brownie clearly admitted that PHA owed AEP the sum of $466,732.35 (paragraphs 27 and 38) and $280,595.19 (paragraph 45).
An asset preservation order was made on 22 November, extended on 26 November and varied and extended on 29 November 2002. Part of the order made on the last occasion included an undertaking by PHA to pay to AEP the sums of $466,732.35 and $280,595.19 “when it has received sufficient funds to meet each respective payment”. That order also included orders for discovery by the defendants of certain specified classes of documents and for inspection of those documents.
On 4 February 2003 the defendants’ solicitors wrote to the plaintiffs’ solicitors enclosing a bank cheque in the sum of $466,732.35 and stating:
“Our instructions at this stage are that the $280,595.19 … is to be paid on or before 28 February 2003.”
That payment was not made on 28 February 2003 and has still not been made.
The Summary Judgment Application
As a result of a further order made by me on 20 December 2002 following complaint by the plaintiffs about the defendants’ failure to comply with my earlier order, Mr Brownie filed a further affidavit sworn on 30 January 2003 ("Mr Brownie's third affidavit"). This resulted in the plaintiffs making an oral application for summary judgment on behalf of both AEP and FIAP at the directions hearing on 7 February 2003. Directions were given for the filing and serving of further material in support of that application and for the filing and serving of material in opposition and the hearing was adjourned to 24 February 2003.
A further affidavit by Mr Brownie, sworn on 19 February 2003 ("Mr Brownie's fourth affidavit"), was filed and served by the defendants in compliance with the directions. However, on 24 February 2003, the plaintiffs sought to rely on a further affidavit of Mr Paardekooper sworn on 21 February 2003 ("Mr Paardekooper's fourth affidavit"), which had not been filed and served in accordance with the directions. The hearing was therefore adjourned to 7 March 2003. Mr Paardekooper's fourth affidavit contained the concession that exhibit "ENP 41" to his first affidavit contained an arithmetic error in that he had failed to deduct the amount of the final credit note of $688 from the total outstanding to AEP. This meant that when PHA paid the sum of $466,732.35 to AEP on 4 February 2003, it overpaid AEP by $687.60. The overpayment has been reduced by $0.40 because both sides erroneously referred to the admitted Murray Goulburn figure as $466,732.35 instead of $466,732.75. This overpayment will be taken into account in due course. In his fourth affidavit, Mr Pardekooper went on to seek judgment for AEP against PHA in the sum of $285,470.81 and for FIAP against PHA in the sum of $105,935.48.
On 26 February 2003, the defendants issued a summons seeking an order that AEP’s claim be dismissed and that both plaintiffs’ claim against Mr Brownie be dismissed. The first part of the application was based on the fact that PHA had just received a letter from Fortis Commercial Finance NV (“Fortis”) stating that AEP’s accounts had been assigned to Fortis. On 28 February 2003 I ordered that the hearing of the summary judgment application and the defendants’ summons be adjourned to 25 March 2003, again with directions concerning the filing of further affidavit material. Subsequently, at the request of the parties, the hearing date was again adjourned to 10 April 2003.
The parties agreed that I should commence with the hearing of the summary judgment application and that the defendants’ summons be dealt with in due course. The hearing occupied the whole day on 10 April and was completed on 2 May 2003. In addition to the material already referred to, the plaintiffs relied on further affidavits of Mr Paardekooper, one sworn on 14 March 2003 ("Mr Paardekooper's fifth affidavit") and two on 21 March 2003 ("Mr Paardekooper's sixth and seventh affidavits"), an affidavit of Viviana Grosso, the Customer Service Manager of FIAP, sworn on 21 March 2003, an affidavit of discovery by Mr Brownie sworn on 5 March 2003 ("Mr Brownie's fifth affidavit") and a further affidavit in opposition of Mr Brownie sworn on 3 April 2003 ("Mr Brownie's sixth affidavit"). Because of the late service, I refused to allow the plaintiffs to rely on yet another affidavit of Mr Paardekooper sworn on 8 April 2003. Although the plaintiffs included in a list of affidavits relied on by them, affidavits sworn by David John Porter, the plaintiffs’ solicitor, sworn 6, 12 and 21 February and 12 and 25 March 2003 and an affidavit by Rui de Lemos, the defendants’ solicitor, sworn on 7 February 2003, I did not find anything in those affidavits which I considered to be relevant to or admissible in the summary judgment application.
Preliminary Objections To The Summary Judgment Application
The course followed by the plaintiffs in this proceeding leading to the summary judgment application was rather unusual. This resulted in the defendants raising a number of preliminary objections. First, Mr Gillies of counsel, who appeared for the defendants, submitted that it was impermissible, alternatively, inappropriate for the plaintiffs to make a summary judgment application where no statement of claim had been delivered. Although a statement of claim was delivered on the day before the hearing commenced, I ruled that this was too late to mend any deficiency and that the application should proceed as though there were no statement of claim before the Court. However, although it may be unusual for the application to proceed in this way, I consider that r.22.02(1) of the Supreme Court Rules expressly contemplates such a situation. That rule provides as follows:
“Where the defendant has filed an appearance, the plaintiff may at any time apply to the Court for judgment against that defendant on the ground that the defendant has no defence to the whole or part of a claim included in the writ or statement of claim, or no defence except as to the amount of a claim.” (Emphasis added.)
I have emphasised the phrases “any time” and “a claim included in the writ or statement of claim” because they indicate to me that an application for summary judgment can be made before a statement of claim has been delivered.
Mr Gillies correctly observed that r.22.03(1) of the Supreme Court Rules requires that the application “be made by summons” and that it be “supported by an affidavit verifying the facts on which the claim or part of the claim to which the application relates is based and stating that in the belief of the deponent there is no defence to that claim or part …”. Mr Gillies had previously said on 24 February 2003, and he repeated at this hearing, that he did not take the point that there had been no summons issued by the plaintiffs and was content if the summons for directions were treated as sufficient compliance if such were required. However, Mr Gillies objected to the plaintiffs relying on so many affidavits when, he submitted, many of their affidavits did not give direct evidence or did not properly verify the facts, but instead contained many statements of information and belief in inadmissible form (r.22.03(3)). Mr Gillies further submitted that there were so many affidavits that it was impossible to determine what it was that the plaintiffs claimed, particularly where the general indorsement on the writ did not seek judgment for a particular sum or sums. The latter point was not quite correct because the relief sought included an order for payment by PHA to each plaintiff "of any amounts found to be payable upon such enquiries and taking of accounts."
In any event, I do not agree with these submissions. In my opinion, Mr Paardekooper’s fifth affidavit satisfied the requirements of r.22.03(1) in respect of AEP’s application for summary judgment and Ms Grosso’s affidavit satisfied the requirements of r.22.03(1) in respect of FIAP’s application for summary judgment. As will be seen, both AEP and FIAP established, in my opinion, that specific sums were owing by PHA. I reject Mr Gillies' submission that because the plaintiffs' claims were based on a "manifest breach of trust" it was not appropriate that there should be a summary judgment application.
The Appropriate Test For Summary Judgment
Rule 22.06(1)(b) provides that on the hearing of a summary judgment application the Court may give such judgment for the plaintiff against the defendant on the claim or part of the claim in question as is appropriate "unless the defendant satisfies the Court that in respect of that claim or part a question ought to be tried or that there ought to be some other reason to a trial of that claim or part." In Perpetual Trustee Co Ltd v Jacobs[1], Batt J, as his Honour then was, held that the test propounded by the above subrule was "not intended to be different from that established by, and by judicial decision under, the former order 14, where the relevant words were, 'a good defence to the action on the merits', but it is intended to express more accurately the test which had been developed from the original rule."[2]
[1]Unreported, 14 April 1994. BC 9406346.
[2]BC 9406346 at 13-14.
His Honour then referred to two authorities as providing the test or criterion which a defendant opposing summary judgment must satisfy. The first was Australian Can Co Pty Ltd v Levin & Co Pty Ltd[3], in which the Full Court after a review of the cases, stated:
"From all this it appears that where there is a real case to be investigated either in fact or law, leave to defend should be given … But in whatever language the discrimen is expressed to determine in what cases liberty to the plaintiff to sign judgment or liberty to the defendant to defend should be given, the length at which or the detail in which or the vigour with which counsel has argued the matter cannot be the determining factor. … Whatever the language various Courts have used, it seems to us that the substance of the criterion to be applied is that after the matter involved has been explained to the Judge there must be a real uncertainty without full argument or further investigation of the facts as to the plaintiff's right to judgment."[4]
The second authority was Fancourt v Mercantile Credits Ltd[5], where the High Court stated:
"The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried."[6]
[3][1947] VLR 332.
[4][1947] VLR 332 at 334-5 per Herring CJ and Lowe J.
[5](1983) 154 CLR 87.
[6](1983) 154 CLR 87 at 99 per Mason, Murphy, Wilson, Deane and Dawson JJ.
In what follows, I have largely based my conclusion that the plaintiffs are prima facie entitled to judgment for some amount, on the admissions made by Mr Brownie on behalf of PHA. Further, where, after my initial analysis of the numerous "credits, set-offs and counterclaims" alleged by PHA, I have concluded that there appears to be a triable issue raised by PHA, despite the denials of the plaintiffs to the contrary, I have followed the practice of not giving detailed reasons for that decision.[7] In particular, I have refrained from any assessment of the credibility of Mr Brownie or the strength of his claims or the quantum of those claims, so long as he has put forward some basis from which it can be said that there is a triable issue. However, mere assertion without any documentary or other factual foundation where such should be available is not sufficient, in my opinion.
[7]Hills v Sklivas [1995] 1 VR 599 at 609 per Batt J, citing the unreported decision of O'Bryan J in Becton Corporation Pty Ltd v Tricontinental Corporation, 11 February 1991.
AEP's Application For Summary Judgment
I will consider first the claim by AEP. In his fifth affidavit, Mr Paardekooper said that:
“With the benefit of the affidavit of the second defendant sworn on 5 March 2003 and some of the documents discovered by the defendants in that affidavit and earlier affidavits of documents, I have been able to piece together a documentary trail which records the delivery by the first defendant to Murray Goulburn and Bega of stock of the first plaintiff described in its invoices which make up the respective accounts receivable balances in exhibits ‘ENP-41’ and ‘ENP-42’ referred to in my first affidavit (as amended in paragraphs 9(d) and (e) of my fourth affidavit), as well as the payments made by Murray Goulburn and Bega to the first defendant in respect of those deliveries.”
Relying on the business records of AEP, which he produced, and on documents discovered by PHA, Mr Paardekooper established that PHA was indebted to AEP in the sum of EURO 179,584.99, being the price in Euros of three deliveries of product by AEP to Murray Goulburn or the sum of $347,936.25, being the amount in Australian dollars, net of GST, paid by Murray Goulburn to PHA in respect of that product. In paragraphs 17 to 19 of his sixth affidavit, Mr Brownie now accepted that, despite what he had said in earlier affidavits, PHA had indeed been paid by Murray Goulburn in July and August 2002 the amount, net of GST, of $347,936.25 in respect of PHA’s invoices numbered 20, 21 and 22, which related to AEP’s claim of EURO 179,584.99.
Therefore, Mr Keen, who appeared on behalf of the plaintiffs, submitted that PHA was indebted to AEP in the sum of EURO 179,584.99 or $347,936.25, either because PHA was at all material times the agent of AEP, as claimed by AEP, and PHA had failed to account to AEP for the payments received by PHA from Murray Goulburn, or because if PHA had purchased the stock from AEP on its own account, as Mr Brownie asserted, then it was indebted to AEP for the price of the product so sold and delivered to PHA. However, Mr Brownie denied that, in respect of Murray Goulburn, PHA was indebted to AEP for any of the above amounts in either currency or “for any sum which can presently be quantified” because of “credits, set-offs and counterclaims”. These issues are examined in detail below.
Also relying on the business records of AEP and on documents discovered by PHA, Mr Paardekooper claimed to have established that PHA was indebted to AEP in the sum of $1,025,747.67, and in the sum of EURO 57,691.20, being the prices of goods sold and delivered by AEP to Bega. These sums were said to be the accounts receivable balance outstanding in the business records of AEP. The sum of $1,025,747.67 was said to be constituted by:
(a)the sum of $280,595.19, which PHA had previously admitted had been received by it from Bega and accordingly was due and owing by it to AEP and which, it was said by PHA's solicitors in a letter to AEP's solicitors dated 4 February 2003, would be paid "on or before 28 February 2003";
(b)the sum of $352,040.77, being the balance of payments, less GST, made by Bega to PHA during 2002, which AEP had been able to identify and which had not been paid by PHA to AEP;
(c)the remainder of AEP’s accounts receivable balance outstanding of $287,709.41, which AEP alleged was the amount, less GST, of other payments made by Bega to PHA in respect of AEP’s goods delivered to Bega; and
(d)the sum of $105,403 in respect of stock transferred by PHA from Bonlac to Bega.
In paragraphs 20 to 22 of his sixth affidavit, Mr Brownie accepted that PHA had been paid by Bega between January and June 2002 the sum of $747,177.11, or $697,901.48 after GST was deducted, in respect of PHA’s invoices numbered 25 to 27, 29, 30 and 32 to 34, which related to part of AEP’s claim of $1,025,747.67. Mr Paardekooper deposed in paragraph 39 of his fifth affidavit that after deducting GST from each of the payments made by Bega to PHA and after giving PHA credit for amounts paid by it to AEP, PHA "has failed to pay to the first plaintiff from those Bega receipts the sum of $352,040.07." I did not understand Mr Brownie to be contradicting the basis of AEP's claim in respect of the first two sums of $280,595.19 and $352,040.77, which together totalled $632,635.96.
The sum of $105,403 was treated separately in the above explanation of how the sum of $1,025,747.67 was constituted because of the fact that it appeared to be in respect of stock transferred by PHA from Bonlac to Bega. Mr Paardekooper deposed that PHA had not discovered any form of invoice addressed to Bega for that delivery, despite the fact that it was made more than 90 days before Mr Paardekooper’s fifth affidavit was sworn. He further deposed that PHA had not provided to AEP the details of the quantity transferred so that AEP could issue an appropriate credit note and a new invoice to Bega. Therefore, Mr Paardekooper claimed that PHA had breached its agency agreement with AEP by not taking reasonable steps to collect payment from Bega for stock of AEP delivered to Bega at the direction of PHA. If Bega had made any payment to PHA in respect of that delivery, then PHA had not accounted to AEP in respect of that payment.
In his sixth affidavit, Mr Brownie agreed that the value of the stock transferred (net of GST) was $105,403. He stated that PHA had not issued an invoice to Bega in relation to the transferred stock because of a letter received by PHA from AEP dated 28 October 2002 at about the time when PHA in the normal course of events would have been preparing that invoice. Mr Brownie said that he viewed the letter as instructing him “not to take any further steps in relation to Murray Goulburn, Bonlac and Bega”.
Mr Paardekooper claimed in his fifth affidavit, in respect of the claim in the sum of EURO 57,691.20, to have established that relevant stock of AEP to the value of EURO 56,567.84 had been delivered to Bega in October 2002. He had been unable to locate any document demonstrating delivery to Bega of the balance of the relevant stock worth EURO 1,123.36. Mr Brownie, in his sixth affidavit, now confirmed that all of the relevant stock had been delivered to Bega. However, no invoice had been issued by PHA in relation to that stock because of the letter from AEP dated 28 October 2002.
Mr Keen accordingly submitted that, in respect of Bega, PHA was indebted to AEP in the sums of $1,025,747.67 and EURO 51,691.20, either because PHA was at all material times the agent of AEP, as claimed by AEP, and PHA had failed to account to AEP for the payments received by PHA from Bega and/or had failed to take reasonable steps to collect payment from Bega for stock of AEP delivered to Bega, or because if PHA had purchased the stock from AEP on its own account, as Mr Brownie asserted, then it was indebted to AEP for the price of the product so sold and delivered to PHA.
However, Mr Brownie disputed both the third way in which it was said the sum of $1,026,747.67 was constituted and the full amount of the amounts receivable balance. He denied that, in respect of Bega, PHA was indebted to AEP for any of the above amounts or “for any sum which can presently be quantified” because of “credits, set-offs and counterclaims”. Again, these issues are examined in detail below.
As I see it, the position so far is that subject to its claim of “credits, set-offs and counterclaims”, PHA has admitted receiving from Murray Goulburn and Bega the sum of $347,936.25 (or EURO 179,584.99) and the sum of $632,635.96, a total of $980,572.21, which should have been paid to AEP, either as an agent accounting to its principal for monies received by the agent on behalf of the principal, as AEP claimed, or for goods sold and delivered by AEP to PHA, as PHA claimed. The differences between the amounts claimed by AEP and those admitted as received by PHA are $393,111.71 and EURO 57,691.20.
Part of these differences is explained by Mr Brownie’s reference to the letter from AEP dated 28 October 2002, which resulted in him not sending certain invoices. Mr Keen may well have been right in submitting that this constituted a failure by PHA as agent to take reasonable steps to collect payment from Bega, but it seems to me that this is a triable issue particularly as the damage suffered may not be the full amount of the invoice. Payment may well be received by AEP from Bega in due course either directly to AEP or indirectly through PHA after the relevant invoices are sent to Bega. When this explanation is taken into account, and deductions made of $105,403 and EURO 57,691.20, the remaining difference between the total claimed by AEP and the amounts admittedly received by PHA is $287,708.71.
I propose to allow PHA leave to defend in respect of this amount before considering its “credits, set-offs and counterclaims”, notwithstanding that some part of them may be the explanation for the difference. To that extent there would be double counting in favour of PHA on this application. Nevertheless, I have to be satisfied that there is no arguable defence and, in the absence of an admission by PHA that it has relevantly received from Bega more than the admitted sum of $632,635.96, I am not persuaded that AEP should be entitled to judgment for any greater sum. It did not appear to me that the extra sum of $287,709.41 claimed by AEP had been shown to be beyond argument.
PHA's Credits, Set-Offs and Counterclaims Against AEP
I turn then to a consideration of PHA’s claimed “credits, set-offs and counterclaims”. They were itemised and quantified in exhibit “CTMB 75” to Brownie’s sixth affidavit. They were shown in that exhibit as totalling $1,807,640.45 and EURO 57,691.20. But that calculation did not draw any distinction between claims against the two plaintiffs. When separated out, the position was that the “credits, set-offs and counterclaims” against AEP were said to total $1,238,525.88 and EURO 57,691.20 and against FIAP $569,114.57. Two of the so called “credits, set-offs and counterclaims” were, as previously discussed, the amounts of invoices not issued by PHA to customers because AEP had allegedly instructed it not to. When they are removed, the “credits, set-offs and counterclaims” against AEP total $1,133,122.88 and nothing in Euros. If all of the “credits, set-offs and counterclaims” claimed by PHA against AEP give rise to an arguable defence for the same amount then their total would exceed the amount admittedly received by PHA of $980,572.21. I will, therefore, examine in turn each of the eight claims alleged by PHA against AEP to justify the total of $1,133.122.88. Needles to say, they were all denied by AEP.
Air Freight Charges
The first of the “credits, set-offs and counterclaims” alleged by PHA is in respect of air freight costs of $135,968.34. They are said by Mr Brownie to have been paid by PHA as a result of AEP:
“being unable to keep up the supply that was required by Bega, Murray Goulburn and Bonlac. The first defendant was required on behalf of the first plaintiff to air freight the goods as the first plaintiff breached its contract with the first defendant by not providing the goods within the time specified and agreed upon to match the customers orders.” (Paragraph 15 of Mr Brownie’s fourth affidavit.)
Mr Brownie also said that he "believed" the agreement between AEP and PHA was that PHA was entitled to a credit for the cost of air freight. He produced a bundle of invoices from International Trade Services Pty Ltd ("ITS") to PHA (exhibit “CTMB 52”) which he said totalled $135,968.34. Mr Brownie swore that “all the air freight charges” had been paid by PHA on behalf of AEP, but no request by PHA for reimbursement was produced by him.
Mr Keen made a number of telling criticisms of this claim. The first point to note is that the totals of the amounts on the seven documents comprising exhibit “CTMB 52” is $132,767.96 not $135,968.34. Secondly, one of the seven documents is a credit note not an invoice so the total of $132,767.96 should in fact be reduced by $4,188.41 to $128,579.55. Thirdly, only four of the six invoices contain a reference to a relevant charge. Charges for “air freight”, “misc[ellaneous] air line fee” and “air cargo automation” would appear to be possibly claimable, but not charges for items such as “Delivery to Bonlac”, “Agency and Attendance”, “Customs Duty” and “GST”. Other items such as “IDF” and “ITF” are also not claimable, in my opinion, in the absence of an explanation from Mr Brownie as to what the charges were for. Fourthly, after deducting the irrelevant charges, the total on the four invoices comes to only $89,359.72 (air freight - $86,068.36, miscellaneous air line fee - $3,282.01 and air cargo automation - $9.35). Finally, although one of the invoices contained a typed amount of $23,848.89, the invoice bore the handwritten notation alongside that amount “claiming $2168.08”. Nevertheless, I consider that the handwriting should be ignored at this stage and the larger amount treated as the charge paid by PHA.
Despite Mr Keen’s criticisms of Mr Brownie’s vague explanation of why PHA is entitled to a credit, set-off or counterclaim for air freight charges, I consider that this item, in the reduced amount of $89,359.72, is a triable issue and should be taken into account when considering the quantum of PHA's possible set-off or counterclaim.
Storage Charges
The second of the “credits, set-offs and counterclaims” alleged by PHA against AEP was for storage charges. Mr Brownie stated in paragraph 16 of his fourth affidavit that PHA “had paid at least $30,028.25 storage fees” on behalf of AEP and he produced what were said to be the relevant invoices (exhibit “CTMB 53”). They were two ITS invoices. The first dated 1 October 2002, was addressed to PHA in the sum of $28,545.77, including charges of $19,413.02 for “Bond Storage till 08-10-02” and $6072 for “Container Demurrage”. The other charges were not relevant. The second invoice in exhibit “CTMB 53” was an ITS invoice, dated 24 August 2000, addressed to AEP in the sum of $2395.25 for “Bond Storage” and “Demurrage”. It can readily be seen that the two invoices total $30,942.02 and not $30,028.25. The latter amount apparently came from handwritten figures on each invoice of the storage and demurrage charges. The handwritten figure on the October 2002 invoice was only the demurrage charge of $6072. The handwritten figure on the August 2000 invoice was, presumably as a result of an error in copying, $23,956.25 instead of $2395.25. Together, the handwritten figures added up to $30,028.25.
Assuming in PHA’s favour that the demurrage charges are properly included in a claim for storage charges, that the "Bond Storage till 08-10-02" was incurred on behalf of AEP and that Mr Brownie was correct in saying that PHA had paid an ITS invoice addressed to AEP, the claim for storage charges totals only $27,880.27. I consider that this item, in this reduced amount, should be taken into account as a triable issue. However, I disregard the statement by Mr Brownie that he “believes” that there are other storage charges paid by PHA which will be particularised in PHA’s defence and counterclaim. It is not enough to make a bald assertion such as this. It has to have some documentary support. In any event, it is not clear whether this assertion relates to storage charges allegedly paid by PHA on behalf of AEP or FIAP or both.
Incorrect AEP Invoices Relating to Bega
The third of the “credits, set-offs and counterclaims” alleged by PHA concerned three AEP invoices relating to Bega. The amount in question totalled $50,336.60. It seems that two of the invoices (BB15174 and BB15382) were said by Mr Brownie to have been for excessive amounts because the weight of the product was stated to be more than it actually was, based on the weight contained in PHA’s own corresponding invoices to Bega. It was therefore said that PHA was entitled to credits of $9,927.72 and $23,251.88 respectively. There are a number of points to make about this rather vague assertion, not the least of which is that the credits would probably reduce the unexplained difference referred to above, rather than the amount of monies admittedly received by PHA from Bega. Nevertheless, I consider it appropriate, in all the circumstances, to take the total of the two invoices of $33,179.60 into account in PHA’s favour when considering the question of leave to defend.
The third AEP invoice disputed by PHA was invoice BB15798 for the sum of $17,157. Mr Brownie stated that the relevant produce had been delivered by AEP Industries (NZ) Ltd and that PHA had paid that company directly for that shipment. No further details were given nor any supporting documents produced. Notwithstanding this criticism, there is a clear and precise statement on oath by Mr Brownie which necessitates further investigation. Leave to defend in respect of that invoice should also be given, in my opinion.
Payments Made By PHA Not Credited
The fourth of the “credits, set-offs and counterclaims” alleged by PHA was for two payments totalling $182,991.74 allegedly made by PHA but not credited by AEP. Mr Brownie deposed that he had drawn two cheques for $110,391.74 and $72,600 respectively and sent them to AEP. He produced two cheque butts in support of his allegation. Mr Paardekooper denied that AEP had received either cheque. Therefore, no credit for the cheques had been given to PHA.
Despite saying in his third affidavit that inquiries were being made at his bank “in order to discover the true position” Mr Brownie did not produce the two cheques. The bank statements of PHA showed, Mr Keen conceded, the debiting of the two cheques on 8 January and 19 August 2002 respectively. However, Mr Keen submitted that, in the absence of supporting documentation beyond the cheque butts, such as letters to AEP enclosing a cheque or the cheques themselves, this claim should be regarded as merely a bare assertion. In all the circumstances, I consider that PHA should receive credit for the amount of these payments in this application.
Cardboard Cores
The fifth of the “credits, set-offs and counterclaims” alleged by PHA was for alleged overcharging by AEP as a result of it wrongly including the weight of the cardboard core of the roll of plastic film in the cost of the product. This was calculated by Mr Brownie to total the sum of $505,565.33 ($299,916.80 in the case of Murray Goulburn, $135,407.77 in the case of Bega and $70,240.96 in the case of Bonlac) (exhibit “CTMB 72”). However, he went on to say that the calculations did “not represent a total claim, and may be subject to adjustment as further facts come to light”.
Mr Paardekooper denied any overcharging. He said that AEP charged net not gross weight although he was specifically addressing the question of the inclusion of the weight of the pallets not the weight of the cardboard core. Mr Keen unsuccessfully attempted to demonstrate from the invoices themselves that the weight of the cardboard cores had not been included. This does not matter, in my opinion, because the simple fact is that there are no claims from any of Murray Goulburn, Bega or Bonlac against AEP in respect of overcharging because of the inclusion in the weight of the product the weight of the cardboard cores. There was no evidence that any of these customers had ever made a claim or even raised the issue with either AEP or PHA. It was raised for the first time by Mr Brownie in this proceeding when he said in his first affidavit that he "expected" claims would be made by these customers. In respect of the period before July 2000, when it was common ground that AEP was selling to these customers, it is irrelevant that Mr Brownie has raised this point. It is no defence for PHA to a claim by AEP in respect of monies received by PHA on behalf of AEP. On the other hand, I consider that it is arguable that after July 2000, if, as claimed by PHA, it started purchasing the product from AEP, then the question of possible overcharging is relevant to AEP's claim against PHA. At this stage, therefore, PHA should, in my opinion, receive the benefit of the amounts claimed by Mr Brownie for this period. In exhibit "CTMB 72", Mr Brownie claimed the sum of $91,660.80 in respect of Murray Goulburn after July 2000, and the sum of $29,379.84 in respect of Bonlac after 1 June 2000. Notwithstanding the extra month included in this figure, I am of the view that, on this application, the whole of that amount should be taken into account given that it is not possible on the material before me to break down the figures any further. The periods in respect of Bega are not identified, so on one view, PHA has not put forward any amount for the post July 2000 period. However, I am prepared to assume that the fourth line of figures in respect of Bega (as with Bonlac) relates to the post 1 June 2000 period. This is an amount of $27,248.25, making a total of $148,288.89.
Murray Goulburn Claims
The sixth of the “credits, set-offs and counterclaims” alleged by PHA was for unprocessed credits totalling $20,721.70 in respect of product delivered to Murray Goulburn. The first claim for a credit, made by a facsimile letter dated 23 January 2002, referred to a claim for 608kg of defective material valued at $2614.40. The second claim for a credit made by a facsimile letter dated either 5 February or 23 January 2002, related to eight pallets where the 4211 kg of interne film was allegedly rolled inside out. This claim was said to be for $18,107.30.
Despite Mr Paardekooper swearing, in paragraph 54 of his fifth affidavit, that each of the claims for credits in respect of product delivered to Murray Goulburn had been processed by AEP resulting in credit notes to Murray Goulburn, and had been taken into account in determining the accounts receivable balance of $466,732.75 found in exhibit "ENP 41" to his first affidavit, I am not satisfied that this is the case after examining the documents constituting that exhibit. In my opinion, this issue requires further investigation. Leave to defend should therefore be given in respect of the claim of further Murray Goulburn credits totalling $20,721.70.
Bega Claims
The seventh of the "credits, set-offs and counterclaims" alleged by PHA was for unprocessed credits totalling $42,072.40 in respect of product delivered to Bega. Exhibit "CTMB 73" to Mr Brownie's sixth affidavit was said to be a table correlating the Bega claims with the credit notes issued by AEP which showed that three claims remained outstanding. Again, despite Mr Paardekooper swearing, in paragraph 56 of his fifth affidavit, that all of the Bega claims have been processed, this issue seems to me to require further investigation at trial, in particular, Mr Keen's submission that one of the claimed credits had been wrongly magnified ten times. Leave to defend should therefore be given in respect of the claims of further Bega credits totalling $42,072.40.
Commission
The eighth of the "credits, set-offs and counterclaims" alleged by PHA against AEP was for commission at the rate of 5% of all invoiced amounts due to PHA under the agency agreement with AEP. The sum of $165,438.32 was said to be due ($72,419.39 in respect of Murray Goulburn, $82,299.26 in respect of Bega and $10,719.67 in respect of Bonlac according to exhibit "CTMB 74" to Mr Brownie's sixth affidavit). Mr Keen submitted that for a number of reasons this was an extraordinary claim. First, if as Mr Brownie claimed PHA had been purchasing product from AEP since July 2000 and not acting as its agent, then no commission would be payable on orders placed after 1 July 2000 and all of the orders referred to in exhibit "CTMB 74" fell into this category. Of course, AEP maintained that PHA was still acting as its agent. Secondly, the commission payable under the agency agreement was not deductable. PHA was required to forward to AEP all monies received from the customers and on receipt of those funds, AEP would pay PHA the appropriate commission. Thirdly, the claim in respect of Murray Goulburn included estimated amounts of commission without any reference to invoices from AEP. Fourthly, the claim in respect of Bega included $2930.47 for commission in respect of the product worth EURO 57,691.20, when, as Mr Brownie had admitted, PHA had not even sent Bega an invoice for that product and therefore obviously had not received any payment on behalf of AEP, let alone forwarded it to AEP. Fifthly, the claim in respect of Bonlac included $4637.95 for commission on invoice number 15945 when the great bulk of the product the subject of that invoice had been transferred to Bega and commission had been claimed on that transferred product in respect of Bega. Sixthly, the claim for commission was based on the full amount of the invoices without regard to any credits claimed or received by PHA.
These all appeared to be substantial criticisms of the claim for commission. Nevertheless, one thing was also clear and that was AEP had not paid PHA its commission of $17,946.90 in respect of five invoices (numbered 15669, 15765, 15797, 16036 and 16223) forming part of the payment of $466,732.35 made on 4 February 2003. No doubt this was explicable given the amount alleged by AEP to be owing by PHA, but it seems to me that PHA must be entitled to a set-off of this amount when considering the question of leave to defend. I also note that in paragraph 47 of his third affidavit, Mr Paardekooper conceded that AEP had withheld earlier commissions due to PHA in the sum of $19,191.61. This brings the total claimable for commission to the sum of $37,138.51.
Summary of AEP's Claim
Based on the above discussion of "credits, set-offs and counterclaims", I have concluded that the amount of AEP's claim in respect of which no triable issue has so far been raised is the sum of $381,094.78, which has been calculated as follows:
Amount admitted to have been received by PHA for AEP from Murray Goulburn and Bega
$980,572.21
Less "credits, set-offs and counterclaims":
Airfreight charges
$89,359.72
Storage charges
$27,880.27
Incorrect AEP invoices
$50,336.60
Payments made but not credited
$182,991.74
Cardboard cores
$148,288.89
Murray Goulburn claims
$20,721.70
Bega claims
$42,072.40
Commission
$37,138.51
$598,789.83
$598,789.83
Less overpayment by PHA re Murray Goulburn
$381,782.38
$687.60
$381,094.78
In respect of this finding that there is an undisputable amount of $381,094.78, it is worth remembering that Mr Brownie had already admitted in earlier affidavits that the sum of $280,595.19 was owed by PHA to AEP in respect of Bega's purchases and that PHA had given an undertaking to the Court to pay that sum when it had received sufficient funds. Thus, it was not surprising that in his sixth affidavit, Mr Brownie should concede that in the case of Bega, it was unlikely that PHA's alleged "credits set-offs and counterclaims" would exceed the amount claimed by AEP and that he was consequently forced to argue that until the figures could be "calculated with some degree of accuracy", AEP's application for summary judgment was "premature". I do not agree that AEP's application was premature.
The Assignment Defence
The one remaining issue in respect of AEP's claim is the defence raised by PHA based on the apparent assignment by AEP of all of its debts to Fortis including those claimed in this proceeding. Although PHA initially submitted that such an assignment was an absolute bar to AEP succeeding in its claim, it subsequently submitted that, at the least, the assignment raised an arguable defence to the whole of AEP's claim.
The factoring agreement which was made on 31 January 2003 at Turnhout in Belgium recited that AEP wished Fortis to undertake, and that Fortis had agreed to execute, the tasks of:
(a) the administration of accounts receivable resulting from the supply of goods and/or services;
(b) the financing of the accounts receivable;
(c) the collection of the accounts receivable.
Clause 1 of the agreement provided that it related to all accounts receivable resulting from the supply of goods and/or services by AEP to its debtors in the normal course of its business in the countries agreed upon, which included Australia. By clause 2, AEP assigned and transferred to Fortis all accounts receivable referred to in clause 1, so that they vested in Fortis absolutely. Clause 15.3 stated that Fortis had the right to take legal action in its own name, in AEP's name or in joint names, "without the validity of the assignment of the receivables being open to dispute." Clause 20 provided that Belgian law applied to the agreement. Finally, under the heading "Disputes", clause 12 read in part as follows:
"12.1 The client assigns to the factor only these accounts receivable that are free from disputes or any condition that might give the debtor the right to dispute the account receivable. An account receivable is excluded from financing where the client, according to the debtor, has not fulfilled the agreed conditions of sale. The factor will inform the client of such a claim, and in doing so, has the right to reassign the disputed account receivable to the client. When the factor exercises this right, the client is obliged to accept the reassignment.
12.2 All costs and/or financing incurred by the factor relating to the collection of the reassigned accounts receivable are to be reimbursed by the client.
12.3 Before deciding on reassignment, the factor will grant the client a period of time, that is customary in his particular industry to enable him to solve his debtor's complaints and during which period the client will pass on all relevant information to the factor and the disputed receivable is ineligible for financing.
12.4 Should the client not succeed in solving the dispute within the agreed period of time, and should the factor accept that this is not due to neglect by the client, the factor may temporarily renounce his right of reassignment."
By letter dated 18 February 2003, Fortis wrote to PHA advising that AEP's accounts had been assigned to Fortis "in accordance with the terms of a factoring agreement", and that PHA now had to pay its debt to Fortis. Reference was also made to art. 1690 of the Belgian Civil Law which apparently required Fortis to notify PHA of the assignment of the accounts. On the same day, Fortis sent letters to Murray Goulburn, Bonlac and presumably Bega (although no letter was put into evidence) advising that specified AEP invoices had been assigned to Fortis. Included in the list of invoices for Murray Goulburn were the three which related to the AEP claim of EURO 179,584.99.
On 26 February 2003, Fortis sent letters to Murray Goulburn, Bega and Bonlac advising that the AEP invoices assigned to Fortis had been "reassigned" to AEP and that "consequently, only the payment of your debt on your supplier's account No. is valid". On the same day, Fortis wrote to AEP confirming that the three debtors were excluded from the factoring agreement. It was rather surprising, therefore, to find that apparently Fortis wrote again to Murray Goulburn on 4 March 2003 in similar terms to its letter of 18 February 2003.
By letter dated 17 March 2003, Fortis wrote to AEP stating that the factoring agreement did not cover any accounts receivable owed by PHA to AEP. The letter continued:
"However, out of an abundance of caution and to put the question beyond doubt, pursuant to general condition 12 of the factoring agreement, Fortis hereby reassigns to AEP Belgium all accounts receivable due by Packaging House. This reassignment includes, but is not limited to:
all accounts receivable, previously assigned by AEP Belgium to Fortis, claimed by AEP Belgium against Packaging House in proceeding number 2091 of 2002 (folio 5496) in the Supreme Court of Victoria, Australia; and
Fortis has no interest in or entitlement to recover accounts receivable, debts or other money owed by Packaging House to AEP Belgium. A valid discharge for all amounts owing to AEP Belgium SA by Packaging House Aust Pty Limited can only be obtained by Packaging House from AEP Belgium not Fortis."
AEP wrote to PHA on 18 March 2003 enclosing a copy of this letter from Fortis to AEP and restating its view that PHA's debts had not been assigned to Fortis or if they had been, they had now been reassigned.
Mr Keen submitted that AEP and Fortis were correct in maintaining that the factoring agreement did not apply to PHA's debts, because they did not result from the supply of goods and/or services by AEP to its debtors, but from PHA's obligation to account to its principal. However, if the factoring agreement did apply, the debts had been validly reassigned to AEP before the hearing of the summary judgment application. Thus, there was no fatal impediment to AEP's claim in this proceeding. It was also pointed out that the agreement itself permitted Fortis to take legal action in AEP's name. Mr Keen further submitted that PHA could not be prejudiced by payment to AEP, when both Fortis and AEP were saying that this was what PHA should do in order to receive a valid discharge of the debt. There was no dispute between AEP and Fortis as to which of them was entitled to payment by PHA. Fortis had disclaimed any entitlement to be paid any debt owed by PHA. Further, out of an abundance of caution, it had "reassigned" such a debt to AEP. Both parties to the factoring agreement had, therefore, informed and directed PHA to make payment of the claims made in this proceeding to AEP.
Mr Gillies submitted that once the assignment of the accounts receivable owed by PHA occurred, AEP's proceeding was at an end. He further submitted that although Fortis had purported to reassign the debt pursuant to clause 12 of the factoring agreement, the procedure laid down in that clause had not been followed by Fortis. Finally, Mr Gillies submitted that there was no evidence of what the law was in Belgium concerning these issues.
I do not believe it necessary in this judgment to set out a detailed consideration of all of the arguments advanced by the parties on this issue. It is sufficient for present purposes to state that, in my opinion, the existence of the factoring agreement has raised triable issues, including in particular, what the result of these arguments would be under Belgian law rather than Australian law. Subject to one matter, it therefore seemed to me that PHA should have leave to defend all of AEP’s claim.
The one matter is whether I should impose any condition on the granting of leave to defend (see r 22.06(1)(c) of the Supreme Court Rules) such as requiring PHA to pay into court the sum of $381,094.78, being the amount left outstanding and unchallenged after consideration of all of PHA's “credits, set-offs and counterclaims”. In my opinion, this would be a proper approach because I have found that PHA has no defence to AEP's claim for the sum of $381,094.78, apart from the question of whether that sum should be paid to either AEP or Fortis, either as an agent accounting to its principal or the principal's factor for monies received by the agent on behalf of the principal or for goods sold and delivered. Ex hypothesi, PHA has no entitlement to that sum and it has to be paid to either AEP or Fortis. In the circumstances, I consider that I should make it a condition of PHA being given leave to defend all of AEP's claim, that it pay into Court or otherwise secure the sum of $381,094.78.
FIAP's Application For Summary Judgment
I turn now to the claim by FIAP. In paragraph 6 of her affidavit in support of FIAP's application, Ms Grosso deposed that the accounts receivable balance outstanding in respect of goods shipped by FIAP to PHA for delivery to Link was $217,501.80 and she referred to exhibit "ENP 43" to the first affidavit of Mr Paardekooper. The sum of $217,501.80 was constituted by nine invoices and Ms Grosso produced the relevant invoices and supporting documentation.
Six of the nine invoices totalled the sum of $135,824 and Ms Grosso deposed in her affidavit that on 28 March 2002 she received a memorandum from PHA dated 22 March 2002 enclosing a cheque from PHA in the sum of $135,824 in payment of those six invoices. Ms Grosso swore that at the time PHA drew that cheque, PHA:
" … must already have received from Link Packaging payment in respect of the deliveries to Link Packaging covered by these six FIAP invoices. The first defendant would not have drawn such a cheque if it had not already received those payments from Link Packaging." (Paragraph 17)
Ms Grosso stated that, on 4 April 2002, FIAP deposited PHA's cheque for $135,824 into its account with Banca Popolare de Milano but that on or about 12 June 2002 the bank reversed the relevant credit because PHA's cheque had been dishonoured. PHA did not replace the dishonoured cheque nor make any other payment to FIAP in respect of the six invoices covered by it. Ms Grosso therefore swore that PHA was indebted to FIAP in the sum of $135,824.
The remaining three invoices making up the sum of $217,501.80 claimed by FIAP totalled $81,677.80. Ms Grosso referred to paragraph 17 of Mr Brownie's third affidavit in which he deposed to PHA having received the sum of $123,059.08 from Link in five separate payments between 27 March and 30 May 2002. Ms Grosso accordingly swore that PHA was indebted to FIAP in the sum of $105,934.48, being the amount left after GST was deducted from the sum of $123,059.08.
As with AEP's claim, in order for FIAP to succeed on its summary judgment application against PHA alleging that PHA had failed to account to FIAP for payments received by PHA from Link, FIAP has to establish that PHA is holding such monies. In my opinion, the only amount which falls into this category is the sum of $105,934.48, being the amount left after GST was deducted from the sum of $123,059.08 which PHA has admitted it has received from Link and not paid on to FIAP. Even this amount may be subject to the "credits, set-offs and counterclaims" raised by PHA in respect of FIAP's claim.
In my opinion, the claim for the $135,824 paid by the cheque, which was subsequently dishonoured, does not fall into this category. In paragraph 38 of his sixth affidavit, Mr Brownie contradicted Ms Grosso's assumption referred to above that PHA "must have" received money from Link before drawing its cheque. Mr Brownie stated that:
"In fact, the first defendant did draw the cheque to the second plaintiff before receiving money from Link Packaging, in the interests of maintaining supply to the customer in order to retain its business."
It seems to me that there is some factual basis for Mr Brownie's claim in that when added together the amount of $135,824 and $105,934.48 total $241,758.48 and yet FIAP's claim is only for $217,501.80. This indicates to me that PHA has included some of its own money in the amount of the cheque, but just how much that was, and how much had been received from Link by PHA prior to the cheque being drawn, is not clear.
Mr Keen submitted that in addition to any other cause of action, FIAP had a claim against PHA under s 76 of the Cheques and Payment Orders Act 1986 (Cth) in respect of the dishonoured cheque. I am not satisfied that there should be judgment on this issue at this stage. The circumstances of the reversal by the bank need to be properly investigated, in my opinion, given Mr Brownie's claim, in paragraph 39 of his sixth affidavit, that the cheque for $135,824 was not "dishonoured" as such, but was rejected by the Italian banking system for reasons of incompatibility rather than lack of funds. He swore that when drawing the cheque, PHA "was not aware that Italian banks did not accept Australian cheques." In any event, no such claim was made by FIAP in the general indorsement.
The remaining claim by FIAP against PHA is mainly based on a straightforward goods sold and delivered situation. In paragraph 13 of her affidavit, Ms Grosso deposed to the fact that at the time it sent the cheque to FIAP, PHA advised as follows:
"Please now dispatch the balance of the material. The next payment will also be made by us on 20/04/02.
All invoices are to be made out to us as we will pay the account and then receive payment from Link Packaging.
They will not get the material you are sending until we have made payment to FIAP. In this way you are covered."
This situation arose because FIAP had been refusing to deliver to Link until it received a significant payment against its accounts receivable balance. Accordingly, Ms Grosso arranged for two container loads of goods to be shipped to PHA. The invoices, dated 3 April 2002 and numbered C 2201899 and C 2201902, were made out to PHA. The accounts receivable balance in respect of these invoices was EURO 93,028.56. Mr Brownie did not deny any of these allegations. Instead, he raised an issue relating to storage charges which I deal with below.
The remaining part of FIAP's claim in Euros against PHA was for a further EURO 1,306.15. Ms Grosso deposed that because of movements in the exchange rate, the reversal by the bank of PHA's cheque resulted in an extra amount of EURO 1,306.15 being debited to FIAP's account. FIAP raised a debit note to PHA for that sum and faxed it to PHA on 18 July 2002. On 30 October 2002, FIAP received a facsimile from PHA which read, in part:
"Please fax through a copy of the Debit Note. Please deduct this from our commission. There is still outstanding commission against invoices."
Mr Keen therefore submitted that the extra amount was recoverable under the Cheques and Payment Orders Act 1986 and further that PHA had accepted responsibility for the extra amount. However, in my opinion, given that I am not prepared to give leave to enter judgment in respect of the cheque, this extra amount should be treated in the same way.
This leaves the amount of the claim by FIAP against PHA in Euros, which FIAP has established, at EURO 93,028.56. Again, this amount may be subject to the "credits, set-offs and counterclaims" raised by PHA against FIAP.
PHA's Credits, Set-Offs and Counterclaims Against FIAP
As I have previously mentioned, the "credits, set-offs and counterclaims" set out in exhibit "CTMB 75" against FIAP were said to total the sum of $569,114.57. They arose out of three matters alleged by PHA, all of which were denied by FIAP
Storage Charges
The first of the "credits, set-offs and counterclaims" alleged by PHA against FIAP was for storage charges. Mr Brownie stated in paragraph 16 of his fourth affidavit that PHA had paid on behalf of FIAP $63,060.13 in storage charges and he produced what were said to be the three relevant invoices from ITS (exhibit "CTMB 54"). The figure of $63,06013 had apparently come from the storage and demurrage charges on each invoice. The first problem with this claim was that these charges in fact added up to $64,06013. The second problem was that two of the three invoices were identical, so that in reality the claim was for only $43,649.42 not the higher amount. The third problem was that it appeared that, on 27 December 2002, Link had reimbursed PHA $20,000 for demurrage costs paid by PHA.
More importantly, there is a real issue whether the claim for storage charges is even arguable. Ms Grosso deposed that Mr Brownie did not make any arrangements with FIAP to store any of the goods in respect of which the storage charges had been incurred. They were the goods the subject of FIAP's two invoices dated 3 April 2002 and numbered C 2201899 and C 2201902. As these goods were expressly ordered by PHA on the basis that it would hold them pending receipt of payment from Link, I do not consider it can now be said that PHA incurred these storage charges on behalf of FIAP. In my opinion, no triable issue is raised on the material before me. Again, I disregard the statement by Mr Brownie that he "believes" that there are other storage charges paid by PHA which will be particularised in PHA's defence and counterclaim.
Link Claim and Snow Confectionery Claim
The second of the "credits, set-offs and counterclaims" alleged by PHA against FIAP arose out of a claim made by Link which was said to total $108,754.44. The evidence in support of this claim was to be found in correspondence from the managing director of Link to PHA dated 18 October, 23 October, 25 November, 10 December and 13 December 2002 and 19 March 2003. This correspondence raised complaints of faulty materials, excess waste, lost production time and overcharging by FIAP as a result of it wrongly including the weight of the cardboard core of the roll of plastic film in the cost of the product. The complaints made in 2002, including the overcharging, were said to total $52,702.44 and the complaints made in 2003 total $56,052. Mr Brownie said in paragraph 21 of his fourth affidavit that he had inspected the goods in Sydney on 12 December 2002 and found certain faults in them which led him to believe that Link had a claim totalling $52,702.44 at that stage.
The third of the "credits, set-offs and counterclaims" alleged by PHA against FIAP was said to result from a claim made on Link by Snow Confectionery, a customer of Link, "for consequential loss arising from use of the faulty material" for which Link held PHA liable to indemnify or contribute. Mr Brownie produced a letter from Link to PHA dated 3 April 2003 which he said referred to a "consequential damage claim from Snow Confectionery totalling $382,300 plus processing costs of $15,000."
FIAP disputed those claims by PHA, Link and Snow Confectionery. Once again, the position is unsatisfactory because of the very general nature of the alleged "credits, set-offs and counterclaims". In paragraph 44 of his sixth affidavit, Mr Brownie said:
"The claims by Link Packaging still need to be investigated and assessed. There are several tonnes of affected material at Link Packaging which will take several weeks to physically sort through. Samples will need to be provided to the second plaintiff for analysis, and credit notes will need to be issued for any product found to be faulty. The required investigation has not taken place because these proceedings have prevented the first defendant from taking the required steps. Until the claims are properly dealt with, the first defendant denies being indebted to the second plaintiff for any sum which is presently quantifiable, and I say that the second plaintiff's application for summary judgment is premature."
Despite this statement, I do not see why I should take into account any figure other than the ones asserted by Link and Snow Confectionery. Moreover, Mr Keen severely criticised the way in which Mr Brownie had presented these two claims. As he pointed out, instead of making a claim totalling $506,054.44, as Mr Brownie had asserted, the letter from Link had, for whatever reason, deducted two-thirds of the Snow Confectionery claim, leaving the amount claimed by Link at $241,452.20. He also pointed out the lack of detailed explanation about the claim, particularly the Snow Confectionery claim. Nevertheless, it seems to me that the Link claim and the reduced Snow Confectionery claim do raise triable issues. Before leaving the letter from Link, I note that in it Link admitted owing PHA the sum of $68,467.26, which presumably meant all of the other FIAP product had been paid for. All of FIAP's claims total approximately $383,500. Thus, PHA should have received approximately $315,000 from Link. This would suggest that, contrary to the view expressed above, PHA has received from Link payment of all of the $217,501.80 due for goods shipped by FIAP to PHA for delivery to Link. Nevertheless, I am not prepared to change my decision on the basis of this unsubstantiated claim by Link in correspondence with PHA.
Mr Keen further submitted that the Link claim of $108,754.44 (and perhaps he also meant to refer to the Snow Confectionery claim which when included resulted in the Link claim increasing to $241,452.20) related to invoices of FIAP (and invoices of PHA), which had not been paid by Link as yet (according to Mr Brownie's third affidavit), and did not relate to the payments admitted to have been made by Link to PHA. He submitted that there was no dispute or claim in relation to the payments (and relevant invoices) so far made by Link to PHA and, therefore, that the two issues should be considered separately. This would mean that there would be no triable issue in respect of FIAP's failure to account claim for $105,934.48, but that there be leave to defend in respect of FIAP's goods sold and delivered claim for EURO 93,028.56 because PHA had raised set-offs or counterclaims in respect of those goods which exceeded the claim of EURO 93,028.56, or approximately $166,000 when converted to Australian dollars. But PHA's set-offs or counterclaims of $241,452.20 do not exceed the amount of that part of FIAP's claims in respect of which I am proposing to give PHA leave to defend. That amount is approximately $277,560, calculated as follows:
Amount of FIAP's first claim $217,501.80
Less amount admitted to have
been received by PHA from Link $105,934.48
$111,567.32
Plus approximate amount of FIAP's
second claim $166,000.00
$277,567.32
I consider that this is the correct approach. PHA is admittedly holding the sum of $105,934.48 received from Link, which PHA should have paid to FIAP either as an agent accounting to its principal for monies received on behalf of the principal or as the purchaser of goods in respect of which no complaint had been made. I see no reason not to give judgment for FIAP against PHA for this amount, when the proper calculation of the set-off or counterclaim shows that it does not exceed the remainder of FIAP's claim. Accordingly, there will be judgment for FIAP against PHA in the sum of $105,934.48, with leave to defend the balance of FIAP's claim.
Orders
Once the parties have had an opportunity to read and consider these reasons, I will hear submissions in respect of what orders should now be made.
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