Amcor Trading Pty Ltd v Metal Roofing & Cladding Pty Ltd - [1999] QSC 42

IN THE SUPREME COURT
OF QUEENSLAND  No. 6133 of 1996
Brisbane
[Amcor Trading Pty Ltd v Metal Roofing & Cladding Pty Ltd]
BETWEEN:
  AMCOR TRADING PTY LTD
  (ACN 006 409 936)
  Plaintiff
AND:
  METAL ROOFING & CLADDING PTY LTD
  (ACN 010 035 266)
  Defendant
REASONS FOR JUDGMENT - MOYNIHAN J.

Judgment delivered 10 March 1999

CATCHWORDS: Plaintiff sought the balance of the price of PVC resin sold and delivered to the defendant and damages for the loss suffered on resale of the recovered goods - DEFENCE AND COUNTERCLAIM - whether the plaintiff delivered resin that breached the contractual terms - whether the plaintiff induced the defendant to purchase the resin by false claims - whether the defendant relied on the plaintiff's representations - whether customary basis for implied term - whether resin of merchantable quality and fit for purpose - whether resin had correct chemical composition.

Solicitors:Bowdens (Town Agents for Macpherson & Kelley) for the plaintiff.
Hemming & Hart (Town Agents for Kanji & Co) for the defendant.

Counsel: Mr. D. Savage for the plaintiff.
Mr. D. Campbell for the defendant.

Hearing Dates: 25 and 31 March 1998, 1-2 April 1998 and 6 April 1998.
IN THE SUPREME COURT
OF QUEENSLAND  No. 6133 of 1996
Brisbane
BETWEEN:
  AMCOR TRADING PTY LTD
  (ACN 006 409 936)
  Plaintiff
AND:
  METAL ROOFING & CLADDING PTY LTD
  (ACN 010 035 266)
  Defendant
REASONS FOR JUDGMENT - MOYNIHAN J.

Judgment delivered 10 March 1999

The plaintiff, among other aspects of its business, sells chemicals manufactured overseas and imported into Australia for use in various industrial processes. Among these chemicals is PVC resin used in the manufacture of PVC piping. The defendant is a manufacturer of such piping.
The plaintiff sues the defendant for the balance of the price of PVC resin it sold and delivered to the defendant and for its loss on the resale of goods which it recovered from the defendant.
I am satisfied that the resin, the subject of the plaintiff’s claim, was ordered by the defendant and delivered by the plaintiff and that the balance of $542,895.00 claimed by the plaintiff remains unpaid. This was not in issue at trial. The plaintiff also claims $60,879.00 damages for breach of contract. This relates to a loss on the resale of a quantity of resin reclaimed from the defendant. The claim is supported by evidence which was not seriously challenged and I am satisfied the claim has been made out.
The trial focussed on a number of issues raised by the defendant by way of defence and counterclaim. The matter went to trial on the basis that it was alleged that in breach of contractual terms the plaintiff delivered resin:-
(a)       which was not fit for use in the manufacture of PVC pipes;
(b) which contained less than 99.6% poly vinyl chloride;
(c)       in bags which did not weigh 25 kilograms;
(d)       which was not of merchantable quality.
There was also a claim that the plaintiff induced the defendant to purchase the resin by false claims to the effect of (a), (b) and (c). This claim was essentially on the same factual basis as the contractual claim.
As a consequence of amendments, claims of oral representations, representations by silence and a breach of s.52 of the Trade Practices Act 1974 (Cth) were added.
The alleged oral representations related to the resin’s fitness for use in the manufacture of PVC pipe. It was alleged the plaintiff’s sales representative represented that:-
“a.the plaintiff could supply to the defendant good quality PVC resin manufactured in China;
b.the plaintiff could supply to the defendant resin manufactured in China, similar to the Korean resin previously supplied by the plaintiff to the defendant;
c.the defendant would have no difficulty in running the Chinese resin.”
The allegation of representation by silence was in terms:-
“i. representations by silence; and/or
ii.amounted to the withholding of information which might have alerted the defendant to material facts namely that:-
·the S1000 resin was not reasonably fit for use by the defendant in the manufacture of PVC pipe;
·both the S1000 resin and the WS1000S resin would not be delivered in bags consistently weighing 25 kilograms;
·the S1000 resin was not of merchantable quality;
·the S1000 resin did not consist of 100% poly vinyl chloride.”
It was alleged that the representations pleaded were made in the course of trade and commerce and their making constituted conduct in trade and commerce that was misleading or deceptive conduct in contravention of s.52 of the Trade Practices Act. It was then pleaded by way of defence and counterclaim that the representations were relied on, were false, and contravened s.52.
The defendant alleges that the plaintiff’s breaches caused it to suffer damages as a consequence of:-
(a)loss of output;
(b)loss of quality in the pipes produced.
I should mention that as to (a), I am not prepared to find that there was any contractual term or representation that the Chinese resin would produce pipe at the same rate as Korea.
In late 1993 one of the plaintiff’s sales representatives, who had identified the defendant as a user of PVC resin, approached the defendant’s general manager and asked him whether he was interested in purchasing PVC resin of Korean manufacture identified as P1000 resin. The plaintiff’s representative provided the manufacturer’s specifications for the P1000 resin and offered to sell it at $1.255 per kilo. The plaintiff had not previously supplied the defendant but the defendant had previously used P1000 resin. On 1 December the defendant accepted the plaintiff’s offer to supply P1000 resin at a $1.205 per kilo and ordered 170 tonnes. Since the defendant was a new customer the sales representative stated it would be required to complete a credit application and have its application accepted. On the following day the sales representative confirmed the order subject to receipt of a purchase order and a successful application for an account. The completed application of 2 December 1993 expressly acknowledged the defendant’s receipt of and acceptance of the plaintiff’s general terms and conditions of sale. These included:-
“B. SALE BY SAMPLE
Where the Contract is subject to the Customer’s approval of a sample provided by Amcor Trading although every effort will be made to supply goods similar to the sample, Amcor Trading gives no undertaking, express or implied, that the goods supplied will be exactly the same as the sample. The Customer shall not be discharged from its obligations under the Contract should the goods be found not to be precisely the same as the sample.
C. DIMENSIONS, WEIGHTS AND MEASURES
Amcor Trading shall be allowed a tolerance of up to plus or minus 5% in respect of all dimensions, weights and quantities. All dimensions, weights and quantities mentioned in catalogues, price lists and quotations or assessed from samples are acknowledged by the Customer to be estimates.
D. WARRANTIES
(a)Any advice, recommendation, information, assistance or service provided by Amcor Trading in relation to the goods supplied by it or their use or application is given in good faith, is believed by Amcor Trading to be appropriate and reliable, however, it is provided with a disclaimer for any liability or responsibility on the part of Amcor Trading.
(b)The Customer accepts all risk and responsibility for consequences arising from the use of the goods whether singly or in combination with other products.
(c)All warranties, guarantees and conditions, other than those expressly stated in the contract, and whether implied by statute, common law, custom of the trade or otherwise are to the extent that the law permits, expressly excluded.”
There was no evidence to the contrary of the terms being known and accepted by the defendant and the parties acted consistently with that being the case.
The first delivery of resin pursuant to the contract was made to the defendant in January 1994. A course of dealing then developed whereby the plaintiff supplied resin on the defendant’s account using standard documentation containing the standard terms and conditions against the defendant’s orders.[1]
[1]There were variations, for example, in terms of payment but none of any consequence here.
In late February 1994, the plaintiff learned that increasing domestic demand in Korea was likely to have the effect that the supply of Korean manufactured PVC resin (P1000) would dry up. As a result the plaintiff investigated alternative sources of supply of resin including a Chinese manufacturer whose resin was identified as S1000.
In May 1994, the plaintiff’s sales representative identified the Chinese manufacturer to the defendant’s manager and gave him the manufacturer’s specifications. Since the defendant had not used the particular resin before he agreed to supply approximately a hundred kilograms of S1000 resin so that the defendant could evaluate it before deciding to buy it in any substantial quantities. A sample was supplied and on 14 June 1994, the defendant placed its first order for 51 tonnes of S1000 resin. In late June 1995, the plaintiff learned that the source of S1000 resin was to be closed for routine maintenance and identified an alternative source of supply from another Chinese manufacturer of resin identified as WS1000. The manufacturer’s specifications for this resin was supplied to the defendant. In September of 1995, the resin of Korean manufacturer (P1000) became available again. The defendant’s complaint is in respect of the resin of Chinese manufacture particularly by comparison with the Korean P1000 resin.
I am not persuaded that the defendant gave the plaintiff any reason to believe it relied on the plaintiff’s judgment or that the defendant relied on any representation by it in deciding to buy Chinese resin. The defendant ordered PVC resin by description relying on its own (or rather its servants’) judgment based, among other things, on the manufacturer’s specification sheets and of the test it conducted with the S1000 resin. It is convenient to mention here that certificates of analysis were also provided from time to time. It is convenient to turn to the defendant’s allegations of representations.
As mentioned earlier, the defendant raised representations on three bases. The first mirrored the alleged contractual terms identified earlier. The second are oral representations made by the plaintiff’s sales representative to the defendant’s representative, at the defendant’s factory in Brisbane prior to its first ordering Chinese resin. The alleged representatives are:-
(a)       the plaintiff could supply to the defendant good quality PVC resin manufactured in China;
(b)       the plaintiff could supply to the defendant resin manufactured in China, similar to the Korean resin previously supplied by the plaintiff to the defendant;
(c)       the defendant would have no difficulty in running the Chinese resin.
The third category was the representations by silence set out earlier.
The plaintiff did not make the representations pleaded. It did no more than point to the pending unavailability of the Korean and later the S1000 resin, identified an alternative source of supply and passed on the manufacturer’s specification sheets, a quantity of S1000 for the defendant to test, leaving it to the defendant to make its own enquiries and to exercise its own judgment.
Essentially, I accept the evidence of the plaintiff’s representative (Nelson). In this respect I do not regard the evidence of the defendant’s representative (Basit) as reliable. I do not conclude that he is dishonest, rather his evidence is subsequent reconstruction in the light of subsequent events.
There are moreover difficulties with the misrepresentations as particularised being made out. There was, for example, no evidence of the characteristics of the Korean resin which might be compared to those of the Chinese resin.
So far as the case of representation by silence is concerned, it was pleaded by late amendment and may well have been designed to address the jurisdictional issues raised by s.82 of the Trade Practices Act. It is unnecessary to determine if this was successful. In any event the defendant has failed to satisfy me that the plaintiff’s sales representative had information giving rise to any obligation of disclosure, or that he withheld information; indeed it is fair to say he was not challenged as to this.
The defendant’s case based on representations therefore fails. I turn therefore to case based on contract. It is convenient to commence with the allegation that it was a term of the supply that each bag of PVC resin would weigh 25 kilograms.
Such a term was said to be implied as customary because of the plaintiff’s knowledge that the defendant could not handle PVC resin in quantities greater than 25 kilograms. I am not satisfied that the defendant could not handle the PVC resin in the quantities supplied in bags by the plaintiff or that the plaintiff had any knowledge that the defendant’s plant could not handle resin in other than 25 kilogram lots. In any event, the pleading appears to be irrelevant to the complaint which emerged in the evidence which seems to be based on a term (unpleaded) that the bag weights would not vary from 25 kilograms exactly. No such term was proven. The contract was not one for the sale of bags of resin but for the sale of quantities expressed in terms of overall weight in fact delivered in and accepted in 25 kilogram bags. The contractual terms between the parties allow for 5% tolerance; see general condition C set out earlier. Not surprisingly, there were discrepancies in the weight of individual bags. It is true that this could cause difficulties to a small manufacturer such as the defendant which batched mixed in four bag lots. The difficulties could be minimised by mixing. There is no occasion to conclude the plaintiff concerned itself, or ought to have concerned itself with the defendant’s mixing process from this or any other perspective.
Put shortly, the customary basis for the term is not made out, a term such as pleaded or relied on; such a term cannot be implied from the course of dealing and the evidence falls far short of what is required otherwise for the implication of such a term; see Codelfa Construction Pty Ltd v. State Rail Authority of NSW[2].
[2](1982) 149 CLR 337
As to the issues of merchantable quality and fitness for purpose as I have said, the defendant did not rely on the plaintiff’s judgment and the contract contained the clauses set out earlier.
The fact is that, with the exception of a quantity of no present relevance, the defendant used the Chinese resin to manufacture PVC piping. Subject to an exception to be mentioned shortly, there is no evidence that the piping was other than suitable for the purpose for which it was manufactured. There was no evidence that the price of any pipe was discounted to reflect any consideration of unsuitability, there was no evidence that any pipe was ever returned as unsatisfactory or giving rise to a suggestion that any person who purchase pipe manufactured with Chinese resin was pursuing or contemplating a claim against the defendants. There was no evidence from any other user to suggest that the resin was other than suitable for the manufacturing pipe that there were any difficulties encountered in its use or that there were any problems with pipe manufactured with it. There was no complaint, until the issue of payment became pressing, made to the plaintiff about the resin. Put shortly, the resin was used to manufacture pipe which was sold on the open market without any suggestion of imperfection or defect.
There is evidence that capable is of sustaining a conclusion that some unidentified quantity of pipe manufactured with Chinese resin supplied by the plaintiff did not comply with Australian Standard 126 requirements as to the amount of poly vinyl chloride. That however does not found a conclusion of lack of merchantable quality or of unfitness for purpose. There is no evidence that it was drawn to the plaintiff’s attention that the defendant was under an obligation to comply with the particular standard or indeed that the defendant had obligations to produce piping to that standard. No claim for damages based on this issue was pursued at the trial.
The defendant’s case based on contractual terms of merchantability and fitness for purpose therefore fails.
I turn to the defendant’s claim that PVC resin is a material which consists of at least 99.6% poly vinyl chloride and that a quantity of resin was supplied which contained 96.80 poly vinyl chloride and 3.2% of another substance (poly vinyl alcohol) and so was not PVC resin. That the PVC resin should consist of 99.6% poly vinyl chloride was said to be a “recognised industry standard” and this founded three considerations. First that the term PVC was descriptive in that it refers to poly vinyl chloride. Secondly, that it was customary within the Australian manufacturing industry which uses PVC resin that “PVC resin” would consist of a minimum of 99.9% poly vinyl chloride. Thirdly, that the standards set out in the American Standard for testing methods required PVC to contain 100% poly vinyl chloride.
The evidence founds a conclusion that some sample of S1000 resin contained poly vinyl alcohol. It does not establish that its presence adversely effected the use of the resin in the manufacture of a piping or effected the finished product. The evidence supports a conclusion that it could be expected that PVC resin would contain quantities of other substances notably poly vinyl alcohol which is an agent used in the production of the resin. There was some disagreement as to the quantities which might be expected but the overall range was between 0.1 and 0.3 percent. The evidence is far from founding a custom binding on the plaintiff. It cannot be said that the American Standard applied and there was evidence that material not containing 100% poly vinyl chloride was sold as PVC. The evidence simply does not establish that the resin supplied by the plaintiff was other than poly vinyl chloride satisfying a contractual arrangement between the parties.
In any event, the evidence founds a conclusion that there is room for differences in determining the poly vinyl chloride content of resin which is an exact task requiring the use of sophisticated equipment. It is also open to the conclusion that in the present case the chlorine microanalysis process is a more accurate method and it establishes that the resin in question was 99.5% poly vinyl chlorine. Put shortly, the defendant has not proved the breach on where it relies. For completeness, I should mention that there is no evidence founding any agreement that the plaintiff would accept the return of resin in full satisfaction.
The considerations being those I have adverted to, the defendant’s counterclaim is dismissed and the plaintiff is entitled to judgment in the amount of $589,086.50. The plaintiff is entitled to interest. Clause K(b)(i) of the general terms and conditions entitles the plaintiff to charge interest from the date the amount falls due at the rate equal to the Commonwealth Trading Bank overdraft index rate as specified from time to time and if there is no such rate then at the rate charged by the bank on overdrafts in excess of $100,000.00. It is a matter of extending the calculations in evidence.
The plaintiff is entitled to its costs. Clause K(6)(ii) of the standard terms of agreement provides to the effect that this is on a solicitor-client basis.