Agriproducts Pty Ltd v Brown & Hatton Group Ltd

[1991] FCA 621

Re: AGRIPRODUCTS PTY LIMITED
And: BROWN AND HATTON GROUP LIMITED
No. N G74 of 1991
FED No. 621
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Burchett J.(1)

CATCHWORDS

Practice and Procedure - application for summary judgment pursuant to Order 20 rule 1 - whether appropriate to enter summary judgment prior to determination of cross-claim - construction of contract - meaning of "usual trading terms of the vendor".

Federal Court Rules, Order 20 rule 1

HEARING

SYDNEY

#DATE 9:9:1991

JUDGE1

This is a matter in which the applicant seeks to recover a substantial sum of money in respect of the supply of stock feed to two piggeries. In respect of one of the piggeries, the claim relates, entirely, to interest on allegedly overdue accounts. In respect of the other piggery, the claim relates partly to such interest, and partly to a portion of the principal. There are a number of defences which have been raised, and in addition there is a Cross-claim. The defences include a defence, raised by cl. 14 of the Statement of Defence, which relies in several respects upon s. 47 of the Trade Practices Act 1974. The Cross-claim relies, inter alia, upon s. 52 and s. 46 of the same Act.

1. The agreement which founds the applicant's claim recites that, on the day of its date being 19 October 1988, the purchaser under the agreement had acquired a business. The business was the business of the two piggeries I have mentioned, one of which was situated at Scone in New South Wales and the other at Warwick in Queensland. The recital went on to state that a request had been made for the supply of stock feed, for use by the purchaser in the business, and that the parties had agreed that the purchaser would, during the term of the agreement, acquire stock feed for use in the business from the vendor. Clause 5.5 provided as follows:
   

"The Purchaser agrees that it will observe the usual trading terms of the Vendor, including the payment to the Vendor of interest on moneys due but unpaid, established by the Vendor from time to time and notified to the Purchaser and that the Vendor's terms of sale then current and so notified shall be deemed to be included in each Order."

In purported pursuance of that clause, a letter was written on 13 December 1988 by, it appears, Fielders Agricultural Products, a division of Goodman Fielder Industries Limited, to Mr Constantinidis, who was a director of the respondent, referring to the supply agreement as an agreement between Goodman Fielder Wattie Limited, Parkville Farms Pty Limited and the respondent, and to cl. 5.5. The letter went on:

"The credit terms of trading are as follows:

(1) Strictly net 30 days - payment for all products delivered in previous month must be made by the vendors' close of trading for the following month.

(2) If payment is not received within the period specified in clause (1), the Vendors shall be entitled to recover in addition liquidated damages in the amount equivalent to interest at the rate of 18% per annum on the payment to which the default is made up and until payment is received in full.

(3) Any variation to this interest rate will be advised in writing to the purchaser 30 days prior to its implementation.

(4) A list of vendor closing dates is attached for the purposes of point (1)."

The list of dates indicated that the closing date for a month was not necessarily the last day of the month, and the evidence indicates that the practice of companies in the Goodman Fielder Wattie Limited Group was to close the month on the last Friday of the month.

1. The notice of motion seeks, pursuant to Order 20 rule 1, summary judgment in favour of the first applicant, Agriproducts Pty Limited, against the respondent in the sum of $381,893.48, together with interest at the rate of 18% per annum from 16 April 1991 until payment or judgment. It further seeks, pursuant to Order 11 rule 16, that para. 14 of the Statement of Defence be struck out. Mr Stevenson, for the applicant, has advanced with admirable clarity and realism all that could be said in support of this motion.

2. In the first place, Mr Stevenson has contended - and I think with accuracy - that cl. 14 of the defence fails to plead all the matters which it would be necessary to plead to state a formally correct defence under s. 47 in any of the three respects the clause seeks to set up. He also points out that the clause is a clause in the Statement of Defence only and does not form part of the Cross-claim; and that may have consequences in respect of the relief which can be obtained if a case under s. 47 is made out. I think there can be little doubt that the respondent ought to be required to re-plead the defence; and it also plainly emerges from the argument that, in order to rely on the point in the way the respondent intends, it will be necessary for it, in addition, to include by amendment a corresponding allegation in the Cross-claim.

3. However, I note that the argument which Mr Stevenson pressed - that cl. 14 should be struck out as not providing, even if its drafting were tidied up and its allegations filled out, a ground of defence, as distinct from a ground of cross-claim - is in conflict with the decision of Mr Justice Rogers in Commercial Banking Co of Sydney Ltd v Pollard (1983) 1 NSWLR 74. Mr Stevenson relied on the decision of Mr Justice Lusher in WR Carpenter Finance Corporation Ltd v Moloney (1979) 2 ATPR 18,306 at 18,309. However, Mr Justice Rogers in Pollard at 76-77 declined to follow another decision of Mr Justice Lusher's which seems, on the face of it, to have been based on precisely the same line of reasoning. I do not think that, faced with that judicial disagreement between judges of the Supreme Court, I would be inclined to strike out a defence on such a basis. It need hardly be emphasised that, in General Steel Industries Inc v Commissioner for Railways (NSW) 112 CLR 125, it was made plain that the court should be sparing of the use of summary procedures of this kind. What I think I should do about cl. 14 is strike it out in its present form, but grant leave to the respondent to re-plead it within 21 days; and grant leave to the respondent, if so advised, to amend also the Cross-claim by the insertion of a corresponding claim in it, likewise within 21 days.

4. I turn to what is much the more significant aspect of the motion, the question of entry of summary judgment upon the applicant's claim, to which I have earlier referred. There are a number of difficulties at the outset. The claim has undergone a process of whittling away, and even during the course of the argument before me, it underwent a reduction to the extent of between $18,500 and $19,000. I do not think that this is accidental. The reason for the changes of approach, that have taken place, is the inherent difficulty of giving precise meaning to the clause and letter to which I have already referred. Apart from the difficulties of parties, which arise from the fact that a group of companies was involved and that care has not always been taken to keep separate the transactions of the members of the group, there is also the difficulty of interpreting cl. 5.5, and of seeing whether the letter carries that clause out accurately, and whether the pre-conditions for its operation have been established. The claims that were made, following the sending of the letter, included a claim to charge interest at rates up to at least 24%, and possibly more; a claim to compound interest; and a claim to apply the letter of 13 December 1988 in respect of invoices delivered prior to its date. I think there were other claims that fall outside the letter, as I presently understand its language. I think Mr Finch, who appeared for the respondent, is correct when he says that there was certainly legitimate room for argument about the effect of the letter.

5. No evidence, in my view - and I am conscious that Mr Stevenson attempted to point to some evidence - no evidence, in my view, was offered to show that the terms stated in the letter of 13 December 1988 were such terms as could come within cl. 5.5. I do not think a glancing reference will do; it is necessary, in order to sustain the validity of what was asserted in the letter, for the applicant to show that the trading terms stated fell within the true meaning of the expression, "the usual trading terms of the vendor". It was not shown that there was any substantial body of customers, other than the respondent, upon any of the possible definitions of customers - and I am far from being clear on the evidence before me as to what persons ought to be taken into account in the determination of usual trading terms - to show that the terms referred to in the letter purportedly written pursuant to cl. 5.5 were terms falling within that expression, i.e. "the usual trading terms of the vendor". Unless there were some identifiable body of customers to whom cl. 5.5 pointed, it would be difficult to reach the conclusion that particular terms could be describe as "usual". If there were customers falling in disparate categories, there might be a question of construction to resolve whether cl. 5.5 was to be applied, taking them all into account, and determining what was usual in respect of them as one group, or whether certain only of them were to be looked at for the purposes of cl. 5.5 - for instance, customers for stock feed or customers for stock feed for piggeries. However, one goes about the task, the fact is it has not been attempted in this case.

6. The clause goes on to provide that these "usual trading terms" are "established by the vendor from time to time". It also refers to terms of sale being "current". All these expressions have to be taken into account before cl. 5.5 can be finally construed, and nothing that I have said for the purposes of this interlocutory application is intended to express any final view of the conclusion at which the court, on a final hearing, would arrive.

7. Further confusion is added if one looks to what was actually done, following upon the sending of the letter of 13 December 1988; for in fact invoices were sent, in which different terms were expressed as "terms of sale". These alleged terms of sale provided: "Interest will be charged on overdue accounts at 1 per cent over the current indicator rate of interest for the Westpac Banking Corporation, terms strictly 28 days nett".

8. There is also, it seems to me, some internal inconsistency apparent between cl. 5.5 and cl. 3 of the letter of 13 December 1988. Clause 3 appears to contemplate that it will be within the vendor's power to vary the interest rates simply by advising the purchaser in accordance with that clause. This, of course, is inconsistent with the fundamental underlying necessity for there to be established "usual trading terms", which may then be the subject of notification.

9. All these matters would provide difficulties in the way of the entry of summary judgment for any precise sum claimed. However, the most important and significant barrier to the entry of summary judgment in this case is to be found in the Cross-claim. The Cross-claim is brought, as I have already indicated, in reliance upon more than one cause of action. In particular, it alleges causes of action under the Trade Practices Act, ss. 52 and 46; and it is to be expected, following the leave I have given to amend, that it may also include a claim under s. 47. So far as s. 52 and s. 46 are concerned, in both these respects the Cross-claim relates to the farms, the supply of stock feed to which is the subject of the claim, and there appears to be a close relationship between the particular transactions which have given rise to the claim and to the Cross-claim. Furthermore, it is alleged in the Cross-Claim that the conduct which is asserted to constitute breaches of s. 52, and to constitute abuse of market power within s. 46(1)(c), was engaged in in an attempt to enforce the very claims which were made by the applicant in the Statement of Claim. Under s. 87 of the Trade Practices Act, if the Cross-claim is made out the court will have power to remould the agreements between the parties. Indeed, the wide powers contained in s. 87 go well beyond even the remoulding of the agreements. In those circumstances, it does not seem to me to be appropriate to enter a summary judgment prior to the determination of the questions raised by the Cross-claim.

10. For these reasons, the motion will be dismissed, and the respondent is to have three quarters of its costs of the motion.