Aspen Medical Pty Ltd v BA Capital Inc
[2021] ACTSC 321
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Aspen Medical Pty Ltd v BA Capital Inc |
Citation: | [2021] ACTSC 321 |
Hearing Date(s): | 8 December 2021 |
DecisionDate: | 17 December 2021 |
Before: | Crowe AJ |
Decision: | See [81] |
Catchwords: | CONTRACT – DEBT – Claim for debt or liquidated demand –where the plaintiff claims the defendant defaulted on a contractual arrangement to deliver goods by a specified timeframe – where the plaintiff seeks to recover loss incurred as a result of the defendant’s alleged default of the contract PRACTICE AND PROCEDURE – CIVIL LAW – where the plaintiff seeks summary judgment – whether summary judgment pursuant to r 1146 of the Court Procedures Rules 2006 (ACT) should be entered in favour of the plaintiff |
Legislation Cited: | Court Procedure Act 2004 (ACT) s 5A Court Procedures Rules 2006 (ACT) r 1146 Federal Court Act 1975 (Cth) s 31A |
Cases Cited: | Donohue v Volanne Pty Ltd (No 2) [2021] ACTCA 11 Financial Integrity Group Pty Limited v Farmer [2009] ACTSC 143 Spencer v The Commonwealth [2010] HCA 28; 241 CLR 118 |
Parties: | Aspen Medical Pty Ltd (Applicant) BA Capital Inc (Respondent) |
Representation: | Counsel A Fernon SC (Applicant) Dr R Lee (Respondent) |
| Solicitors O’Neill McDonald Lawyers Pty Ltd (Applicant) Globalex Tax + Legal (Respondent) | |
File Number(s): | SC 102 of 2021 |
Crowe AJ
Introduction
The plaintiff is an Australian corporation which provides health services both in this country and overseas. The defendant is a company which was incorporated in Canada in 2009. At all material times, the defendant’s Chief Executive Officer has been Mr Artan Agolli.
On 17 April 2020, shortly after the world-wide outbreak of COVID-19, the plaintiff entered into a contract with the defendant for the latter to supply 20 million N-95 face masks at a cost of $140.4 million (AUD).
The contract required delivery by instalments pursuant to a fairly tight timetable. Failure to meet the timetable, or certain other obligations imposed on the defendant, permitted the plaintiff to reduce the quantity of facemasks to be supplied, with a corresponding reduction in the consideration.
Ultimately, only five million facemasks were supplied. The plaintiff had paid $35.1 million (AUD) by way of consideration. The plaintiff claimed that 500,000 of the masks were defective, in the sense that they did not comply with the requirements of the contract. It commenced action in this Court on 16 March 2021 seeking recovery of $3,510,000 (AUD) in respect of the defective masks.
The defendant filed a defence on 28 May 2021. On 7 June 2021, the plaintiff’s solicitor wrote to the defendant’s solicitor requesting further and better particulars of the defence. Thereafter, a number of procedural directions were made by the Deputy Registrar. On 18 June 2021, by consent, it was ordered that the defendant answer the plaintiff’s request for particulars by 28 June 2021.
That order was not complied with. After some further communications between the solicitors, on 15 July 2021, again by consent, the Deputy Registrar ordered that the time for the answering of the request for particulars be extended to 30 July 2021. That order was also not complied with.
On 13 October 2021, the plaintiff filed an Application in Proceeding seeking the following orders:
1.Order pursuant to Regulation 425 of the Court Procedures Rules 2006 (ACT) (Rules), to strike out the Defendant’s Defence filed on 28 May 2021 (Defence).
2.Alternatively, to Order 1, an Order pursuant to Regulation 425 of the Rules to strike out paragraphs 3(d), 7, 10, 11, 12, 13, 14, 16 to 32 of the Defence.
3. Order that Regulation 1404 of the Rules applies as the Defendant has failed to comply with directions of the Court on 18 June 2021 and 15 July 2021 to answer the Plaintiff’s request for further and better particulars of its Defence dated 7 June 2021 (Particulars).
4.Order pursuant to Regulation 1146 of the Rules that Summary Judgment in favour of the Plaintiff is entered against the Defendant.
5. Alternatively, to Orders 1 – 4, an Order pursuant to Regulation 434 of the Rules, that the Defendant answer the Particulars within seven (7) days of this Order.
6.Any other order that this honourable Court considers appropriate.
7.Costs
The Application in Proceeding was returned before Elkaim J on 22 October 2021. At that time, the plaintiff was represented by Mr Fernon SC and the defendant by its solicitor, Dr R Lee. The matter was given a special fixture before me on 8 December 2021.
On 7 December 2021, Mr Agolli emailed the Court registry seeking to file a notice that the defendant would be acting in person. The notice specified an address for service in Canada. The registry declined to accept the document, apparently on the basis that notice was not an original document.
At the commencement of the hearing on 8 December 2021, Mr Fernon SC appeared for the plaintiff, and Dr Lee appeared for the defendant. Both appearances were by audio-visual link. Dr Lee advised the Court that his instructions had been withdrawn. Indeed, he sought to be excused from further attendance in relation to the Application in Proceeding. I made that direction.
Mr Fernon SC then proceeded with the Application. His primary application was that summary judgment should be entered in favour of the plaintiff.
The application for summary judgment
The plaintiff read the affidavits of Mr G McDonald sworn on 9 August 2021, and Mr S Ryan sworn on 12 October 2021.
Mr McDonald is the solicitor having carriage of the matter for the plaintiff. His affidavit addressed the procedural matters summarised in paragraphs 5 and 6 above.
Mr Ryan is the Procurement and Logistics Manager of the plaintiff. He recounted the making of the contract and the dealings between the parties which led to the litigation. His affidavit exhibited copies of the contract, and the documents evidencing those dealings.
Mr Fernon SC took me through the statement of claim (SoC), which pleaded the plaintiff’s cause of action in considerable detail. In relation to the allegations in the SoC which were denied or traversed in the defence, Mr Fernon SC referred me to the relevant parts of Mr Ryan’s affidavit, and the exhibits to it, which were said to sustain the plaintiff’s pleading.
In relation to the contract itself, the defendant admitted the terms as pleaded in paragraphs 3-9 of the SoC, subject to three qualifications. The first related to the pleading that the defendant was required to obtain “all necessary valid export and import licences or other approvals”… to meet the requirements of the contract. (The SoC referred to clause 5(a) of the contract.) At paragraph 3(d) of the defence, the defendant pleaded that:
… The requirements of the “Contract” (as defined in the Statement of Claim) do not require the Defendant to obtain any export or import licences or approval, and otherwise admits paragraph 3(d) of the Statement of Claim.”
Paragraph 5(a) of the contract is quite clear as to the obligation placed on the defendant (there referred to as “the Supplier”). It states:
(a)The Supplier must obtain all necessary valid export and import licences or other approvals to meet the requirements of the Contract. The Supplier must provide a copy of any necessary export or import licence or other approval, or proof that such licence or approval has been obtained, to the Customer not less than 24 hours in advance of scheduled delivery to the Delivery Place.
It is clear that paragraph 3(d) of the defence is unsustainable.
The second qualification arises from a reference in paragraph 7 of the defence to clause 16(a)(v) of the contract as having imposed on the plaintiff the “bases” for being satisfied that the defendant would be unable to deliver the facemasks. There is then no fact pleaded which, so far as I can determine, would suggest that the plaintiff was not entitled to form the opinion required by clause 16(a)(v).
Clause 16(a)(v) relevantly provided (the reference to “Customer” being to the plaintiff):
(a)The Customer may without limitation to its other rights issue a Notice to immediately terminate (on the basis of the Supplier’s breach of condition) or reduce the scope of the Contract if:
…
(v) the Supplier repeatedly breaches any of the terms of the Contract in such a manner as to reasonably justify the opinion of the Customer that the Supplier’s conduct is inconsistent with it having the intention or ability to give effect to the terms of this Contract.
It is beyond dispute that by 28 April 2020 the defendant had on three occasions failed to supply facemasks by the dates specified in the contract for those portions of the total to be supplied by those times. This was clearly in circumstances where the times specified in the contract were urgent and of critical importance to the plaintiff. So much can be inferred from the terms of the contract itself, including clause 16. The pleading in reliance on clause 16(a)(v) leads nowhere in terms of indicating a defence of substance.
The third qualification arises from a formula adopted routinely in the defence when the assertions in a particular paragraph of the SoC is admitted. By way of example, it is pleaded in paragraph 3(e):
(e)BA Capital must ensure that the Goods are fit for the purposes for which BA Capital knows or ought reasonably to know the Goods are to be used, free from faults or deficiencies in design, manufacture and workmanship, and comply with the specifications specified in Schedule 1 and the Contract. (clause 5(c)(i))
The defence pleads;
(e)admits paragraph 3(e) of the Statement of Claim, to the extent only that they reflect the terms of the Contract.
It is not clear what is intended by the words “to the extent only that they reflect the terms of the Contract”. This is particularly so when reference to the relevant clause of the contract (clause 5(c)(i)) demonstrates that the pleader of the SoC has replicated with precision the words of the contract itself. It is necessary for a pleading by way of defence to identify a proper basis for traversing an allegation of fact. If the defendant here intended to rely on some other provision of the contract to modify or counter the apparent meaning of clause 5(c)(i), it was incumbent on it to refer specifically to that other provision in sufficient detail to enable the plaintiff to understand the case which the defendant was seeking to make. I am unable to see, in the circumstances of this case, that the use of these words in the defence detracts from or qualifies the admission otherwise made.
At paragraph 10 of the SoC, the plaintiff claims that on or about 14 April 2020 it paid (by way of a payment in advance of the first supply) the amount of $35.1 million (AUD) to the defendant. Particulars are given of the account into which the money was paid.
The defendant pleads in response to this:
(a)the Plaintiff did not pay the relevant funds into the Defendant’s bank account held at T.D. Canada Trust (the “Bank”) as directed;
(b)instead, the Plaintiff paid the relevant funds into the personal bank account of Art Agolli, a director of the Defendant, to which the bank account details as particularised relate;
(c)the need for compliance with Canadian anti-money laundering and terrorism financing laws and regulations through relevant investigation and verification led to the funds not being cleared for release to the Defendant by the Bank until no less than a further ten (10) days had elapsed; and
(d)the Defendant informed the Plaintiff in writing of their error and the consequential delay.
Mr Ryan addressed the circumstances of the payment at paragraphs 23 to 27 of his affidavit. As he says, the invoice provided by the defendant required payment to be made to the bank account pleaded in the SoC. It is immediately apparent from the invoice issued by the defendant, and the surrounding emails that any difficulty in the clearance in the funds was entirely the responsibility of the defendant itself.
The plaintiff then pleads the default of the defendant in the supply of the first three shipments of masks due on 21, 22 and 27 April 2020 respectively. The defendant does not dispute the failure to deliver the shipments on time. At paragraph 11 of the defence, it firstly refers to and repeats the matters in paragraph 10 (set out in [6] above), and then pleads as follows:
(b)says that:
(i)pursuant to clause 4.2 of the Contract, an independent surveyor (the “Surveyor”) was engaged by the Plaintiff to inspect and test the Goods prior to delivery and issue “Certificates of Compliance with Specification” to certify as to their compliance with all specifications and quality requirements under the Contract;
(ii)the Surveyor sought information from the manufacturer of the Goods through the Plaintiff and the Defendant as to the multiple production lines used and in doing so delayed the issue of their certifications.
(c)says that mandatory restrictions relating to work, travel, and transport were in place during the material times at relevant municipalities and provinces of China where the production, inspection, and transport of the Goods were to take place;
(d)says that the above matters were communication promptly to the Plaintiff in writing at the time of their occurrence; and
(e)says further that:
(i)the matters related in subparagraphs (a), (b), and (c) above are force majeure events at common law and pursuant to clause 8 of the Contract, for which the Defendant is not liable; and
(ii)any provision of the Contract that required the Defendant to perform any act or obligations contrary to applicable law are unenforceable for illegality and against public policy.
It is true that clause 4.2 of the contract put in place a detailed scheme permitting the plaintiff to appoint an independent surveyor to inspect the facemasks at the factory of the defendant’s sub-supplier in China. However, it is also clear that the contract made specific provision for what could and could not amount to a force majeure event.
Clause 8 relevantly provided:
(a)Neither party is liable for any delay in performing its obligations under the Contract to the extent that the breach resulted from any event which is (i) unforeseeable by and outside the control of the affected party (Affected Party) (ii) not due to its fault and (iii) could not have been avoided, prevented or mitigated by that party taking all reasonable steps including applying additional resources (Force Majeure Event).
(b)The Affected Party shall:
(i)as soon as reasonably practicable after the start of the Force Majeure Event but no later than [5] days from its start ((failing which it shall not be entitled to rely on the Force Majeure Event in excusing any delay occurring earlier than five days before it actually gives Notice) give Notice to the other party of the Force Majeure Event, the date on which it started, its likely or potential duration, and the effect of the Force Majeure Event on its ability to perform any of its obligations under the Contract and the likely duration of any delay; and
(ii)use all reasonable endeavours to mitigate the delay and the effect of the Force Majeure Event on the performance of its obligations, including in the case of the Supplier finding alternative sources of supply.
(c)Whether or not they would otherwise qualify as Force Majeure Events under clause (a)(a). the [sic] following are agreed not to be Force Majeure Events:
…
(vii)COVID-19 Events:
For this purpose.
COVID-19 means, collectively and individually COVID-19 disease, SARS-CoV-2 virus or any other or similar name given to the disease, virus or associated pandemic by the International Committee on Taxonomy of Viruses (ICTV); and
COVID-19 Event means any event, circumstance, action or inaction that directly or indirectly results from or is connected with COVID-19, or any actual or suspected outbreak of COVID-19, including but not limited to officially mandated or recommended quarantines, social distancing, transport, travel or working bans or restrictions.
Having regard to the nature of the contract, the urgency of the supply, and the terms of clause 8, I regard the assertions in paragraph 11 of the defence as spurious and without substance. This conclusion is reinforced by what actually occurred after the time for the third shipment had passed.
The SoC pleads at paragraph 12 that the plaintiff gave notice to the defendant on 28 April 2020 under clause 16(a)(i) of the contract that, due to the breaches of the delivery requirements, the plaintiff was reducing the quantity to be supplied to 10 million facemasks. That quantity was to be supplied by 4 May 2020.
The defendant, in paragraph 12 of the defence, admitted that the plaintiff had given the notice as pleaded. However, the defendant by reference to paragraphs 7, 10 and 11 of the defence denied that it had breached the contract, and denied that the plaintiff was entitled to issue the notice. In that context, I note paragraph 30 of Mr Ryan’s affidavit which sets out the response of Mr Agolli to the 28 April notice. On 1 May 2020, Mr Agolli spoke by telephone with Mr Ryan and his colleague Mr Armstrong (who was the CEO of the plaintiff). Mr Agolli said:
“We will not be able to deliver the 10,000,000 N-95 masks by 4 May 2020, but will be able to deliver 5,000,000 N-95 Masks by 5 May 2020.”
It is significant that Mr Agolli did not dispute the validity of the 28 April 2020 notice.
Reference is made to the 1 May 2020 telephone call in paragraphs 13 and 14 of the SoC. It is pleaded that as a result of that call the plaintiff, on that same day, issued a further notice under clause 16(a)(i) further reducing the quantity to be supplied from 10 million to five million. The date for delivery was amended to 5 May 2020. The notice recorded that having regard to the $35.1 million (AUD) already paid by the plaintiff the purchase price of the facemasks to be delivered was fully paid.
The defendant, repeating paragraphs 7,10,11 and 12 of its defence, admits paragraph 13 of the SoC. In relation to paragraph 14, the defendant admits that the notice was given as alleged, but makes that admission in the context where it:
The Defendant:
(a)repeats the matters pleaded in paragraphs 7, 11, and 13 above;
(b)denies that it has breached the Contract;
(c)denies that the Plaintiff was entitled to issue any notice of breach; and
(d)denies accordingly that the Goods delivered to the Plaintiff by the Defendant have been fully paid for.
At paragraph 15, the plaintiff pleads that following the second notice of breach the defendant delivered 1,784,000 facemasks on or before 5 May 2020. That assertion is admitted by the defendant.
The plaintiff then pleads at paragraph 16 that the defendant delivered a further 3,217,300 million facemasks between 6 and 13 May 2020. The defendant admits that assertion, while repeating paragraphs 7, 11, 13 and 14 of the defence, and maintaining its denial of the validity of the 1 May 2020 notice of breach.
The plaintiff claims at paragraph 17 that on 12 June 2020 it requested the defendant to provide declarations of compliance from the defendant in relation to the facemasks which had been delivered. The defendant admits this request, but pleads that it was not required under the contract to provide such declarations.
At paragraph 18, the plaintiff pleads:
Following further requests by Aspen Medical on BA Capital for the provision of the declarations of compliance for the Goods delivered, on or about 4 August 2020, Aspen Medical was notified by Chinese Customs that 500,000 of the Goods delivered to Shanghai had failed to pass Chinese customs filtration and testing. (Non-Conforming Goods).
Particulars
Reports from Chinese Customs that the strap on masks failed testing and the Goods were not at least 10N strength with samples only reaching 7 to 9N strength.
The defendant responded to this paragraph as follows:
(a)denies that it is under any contractual obligation to provide any declaration of compliance to the Plaintiff;
(b)says that the Surveyor inspected the Goods prior to delivery and certificated them as being compliant with the specifications and quality requirements under the Contract;
(c)says further that:
(i) the purported testing by Chinese Customs was inaccurate and/incorrect and/or inconsistent with the test results produced by the Surveyor; and
(ii) it was unreasonable for the Plaintiff, both in the context of bilateral trade relations between Australia and China at that time and in the specific circumstances given the Surveyor’s certifications, to rely on purported testing by Chinese Customs as to the conformity of the Goods;
(d)says that the Goods complied with all requirements of the Contract,
And otherwise admits paragraph 18 of the Statement of Claim.
It is necessary at this point to refer to the evidence of the checking of the masks which had been conducted in China by the plaintiff’s surveyor. This is addressed in paragraphs 34-36 of Mr Ryan’s affidavit. Copies of the referenced reports from the surveyor are exhibited to Mr Ryan’s affidavit. This indicates, contrary to the assertion of the defendant, that the surveyor deemed the batches which were visually assessed on 11 May 2020 to be non-conforming with the required specifications.
It is apparent from this report that the surveyor did not perform actual strength testing of the mask straps.
The affidavit of Mr Ryan also exhibits the documents (including translations of the testing results of the Chinese Customs officials) which establish the allegation in paragraph 18 of the SoC.
At paragraph 19 of the SoC, the plaintiff pleads that on 4 August 2020 it notified the defendant of the failure of 500,000 masks to pass the testing by Chinese Customs. That allegation is admitted by the defendant. In fact, the email from Mr Ryan to Mr Agolli went further than notification. It contained the following requests:
May I ask which manufacturers are involved please?
May I ask if you have a means of replacing these masks?
According to Mr Ryan’s affidavit, he followed up the email with a text message to Mr Agolli on 6 August 2020. The latter responded:
They are in contact with ligentia and they tell me they have worked out a solution
(Ligentia was the name of the plaintiff’s warehousing agent in Shanghai.)
On or about 8 August 2020, Mr Ryan had a telephone conversation with Mr Agolli in the following terms:
Mr Agolli: The goods that failed the Chinese testing, I am arranging to be replaced.
Mr Ryan: Look forward to confirmation of the replacement masks.
It was against this background that the next pleaded event occurred. At paragraph 20 of the SoC, the plaintiff alleged that on 16 September 2020 the plaintiff had emailed the defendant seeking an update on the replacement of the non-conforming facemasks. The defendant admitted that allegation, but qualified the admission by repeating paragraphs 17 and 18 of the defence and pleading a denial of any obligation to replace the masks (see paragraph 20 of the defence).
At paragraph 21, the plaintiff pleaded that on 17 September 2020 the defendant (through Mr Agolli) had notified the plaintiff that 250,000 facemasks had not passed testing by Chinese Customs, and that they were in the process of being replaced by the manufacturer. In response, the defendant pleaded as follows:
The Defendant:
(a)repeats the matters pleaded in subparagraphs 11(c) and (e) and paragraphs 17 and 18 above;
(b)denies that any of the Goods were non-conforming;
(c)denies that it was under any contractual obligation to replace any of the Goods supplied;
(d)says that it agreed to replace some of the Goods only as a gesture of commercial goodwill but that the production and delivery of such replacement Goods would be subject to the difficulties referred to in paragraph 11(c) above;
(e)says that, in any event, subclause 6(a) of the Contract did not impose any timeframe for the provision of any goods as replacement for any non-conforming goods and provides the Plaintiff with the alternative remedy in subclause 6(c) thereof;
(f)further and in the alternative, says that the Plaintiff declined assistance from the Defendant and Ligentia to facilitate the clearance of the Goods with Chinese customs, and in doing so;
(i) was unreasonable when it was aware from the Surveyor that the Goods were compliant with specifications and quality requirements under the Contract;
(ii) failed to mitigate its loss; and/or
(iii) caused or contributed to its own loss;
And otherwise admits paragraph 21 of the Statement of claim.
The evidence of Mr Ryan indicates ongoing email communications with Mr Agolli about the replacement of the masks in September 2020. So far as I can see, there was nothing said by Mr Agolli about mandatory restrictions in China (as pleaded in 11(c) of the defence).
At paragraph 22 of the SoC, the plaintiff pleads a further email communication from Mr Agolli advising that the masks would be replaced by 19 October 2020. The defendant admitted that allegation, but repeated paragraph 21 of the defence.
Thereafter, the plaintiff pleaded at paragraphs 23 to 27 the failure of the defendant to deliver the masks and a series of further communications in which the plaintiff sought assurances of delivery of the replacement masks. The defendant admitted these allegations and again repeated paragraph 21 of its defence.
Eventually, on 4 November 2020 the plaintiff, through Mr Ryan, indicated that it could wait no longer and would cancel the order for the non-conforming masks. This is pleaded at paragraph 28 of the SoC. The defendant (at paragraph 28 of the defence) admits the communication but repeats paragraph 21 and says that the plaintiff was “..not entitled to repudiate the contract.”
The plaintiff pleads at paragraph 29 of the SoC that on 5 November 2020 Mr Ryan emailed Mr Agolli cancelling the replacement of the non-conforming masks, noting the likelihood of significant further delays. The defendant admits the communication, but repeats paragraphs 18, 21 and 28 of the defence.
At paragraph 30 of the SoC, the plaintiff pleads that on 9 November 2020 it terminated the contract by letter to the defendant and demanded that the latter remove the 500,000 non-conforming facemasks from the Ligentia warehouse in Shanghai. The letter also claimed repayment, by 16 November 2020, of the sum of $3,510,000 (AUD) as a debt. The defendant pleaded in response to this:
The Defendant:
(a)repeats the matters pleaded above, in particular but not limited to paragraphs 7, 10, 11, 13, 14, 18 and 21 above;
(b)says that the Plaintiff is not entitled to terminate the Contract; and
(c)says that the Plaintiff is not entitled to the amount sought.
In the remainder of the SoC, the plaintiff pleads the failure of the defendant to remove the unwanted masks from the Ligentia warehouse with the result that the plaintiff has incurred a daily loss of $35 (USD) per day (by way of storage costs) from 16 November 2020. The defendant admits the failure to remove and the incurring of the storage debt, but denies that it is liable.
At the hearing, I gave leave to the plaintiff to supplement the affidavits relied on with evidence as to the current exchange rate from US dollars to Australian dollars. This was provided on 10 December 2021. I have marked the “Exchange Rate” table from the Reserve Bank of Australia Exhibit “P1” in the Application in Proceeding. The plaintiff’s solicitor has also provided a document containing an updated calculation of the storage debt and the interest as claimed either pursuant to the contract or at the rate allowed under the Court Procedures Rules 2006 (ACT) (CPR). I have marked the latter document Exhibit “P2”.
The plaintiff relies on r 1146 of the CPR. That rule states:
1146 Summary judgment—for plaintiff
(1) The plaintiff may, at any time after a defendant files a notice of intention to respond or defence, apply to the court for summary judgment against the defendant.
Note Pt 6.2 (Applications in proceedings) applies to an application under this rule.
(2) The court may give judgment for the plaintiff against the defendant for all or a part of the plaintiff’s claim for relief, unless satisfied that—
(a) the defendant has a good defence to the claim for relief on the merits; or
(b) sufficient facts are disclosed to entitle the defendant to defend the claim for relief generally.
…
The test to be applied in relation to an application for judgment under this rule was summarised by Master Harper in Kevern v Marshall [2012] ACTSC 9 as follows:
[30]...The court, on the basis of affidavit evidence, may give judgment for the plaintiff if satisfied that there is no triable issue or that there is no need for a trial. Summary judgment is given sparingly, in accordance with the High Court’s pronouncement in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at [99] that summary judgment should be given with great care and only where it is clear that there is no need for a trial. Once it appears to the court that there is an issue of fact or law that deserves full consideration, the court will decline to give summary judgment and will direct the parties to proceed to trial.
[31]In applying for summary judgment the plaintiff must comply strictly with the procedural requirements of the rules and show that there is no defence to the claim or no need for a trial. The defendant may defeat a summary judgment application by showing either that the plaintiff’s application is irregular, or that the claim is of a type that cannot be disposed of summarily. Alternatively, the defendant may show that there is a factual dispute which if resolved in the defendant’s favour raises a defence.
It is clear, as Mr Fernon SC acknowledged, that the task for an applicant for summary judgment is a difficult one. Refshauge J pointed out in Financial Integrity Group Pty Limited v Farmer [2009] ACTSC 143 (Financial Integrity Group):
[12]The principles on which such applications are determined are generally not in doubt. The applicants, in this case, Mr Farmer and Bravium, face a very high threshold. The test to be applied was expressed by Dixon J in Dey v Victorian Railways Commissioners (at 91) as being reserved for “exercise as to actions that are absolutely hopeless”.
It is also clear that it is not appropriate for contested facts to be determined on an application for summary judgment. I refer to the following further paragraphs from the judgment of Refshauge J in the Financial Integrity Group case:
[18]The requirement for an affidavit or affidavits is preserved in r 1149 of the Rules; indeed, the rule makes a supporting affidavit mandatory unless the court grants leave. It is, however, no longer required that the applicant depose to a belief that the defendant has no defence as was required under O 15 R 1 of the Supreme Court Rules 1937 (ACT). The defendant, however, was always at liberty to show a good defence on the merits (O 17 R 1) and still may (r 1147(2)(b)).
[19]It is clear, however, that the use of these affidavits is not designed to encourage, or perhaps even permit, the court to adjudicate on matters of fact. The rules themselves do not permit the deponents of affidavits to be cross-examined without leave (r 1149(4)) and such leave will not readily be granted: Trinity Enterprises Pty Ltd v Drum Services(WA) Pty Ltd & Ors (1992) 7 WAR 587. No deponent of any affidavit received by me in this application was cross-examined. The courts have made it clear that it is inappropriate to proceed to summary judgment where there is a conflict on matters of fact: Kays Holdings Pty Ltd v Nassar (1967) 69 SR (NSW) 231 (at 242) per Sugerman JA (with whom Jacobs JA agreed); Spellson v George and Ors (1992) 26 NSWLR 666 (at 678).
In the context of this case, the reference to the defendant being at liberty to show a good defence on the merits is reflected in the contents of r 1146(2)(a)and (b) of the CPR.
An authority, which is often referred to in this Court in relation to applications for summary judgment, is the decision of Jagot J in Galovac Pty Ltd v Australian Capital Territory [2010] ACTSC 132 where her Honour said:
5. There was no dispute about the principles that apply:
(1)The party seeking summary judgment faces a “very high threshold” (Financial Integrity Group Pty Limited v Farmer [2009] ACTSC 143 at 12).
(2)The lack of a cause of action must be “clearly demonstrated” (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129).
(3) The procedure calls for “exceptional caution” (General Steel at 129).
(4)The necessity for argument, even extensive argument, is no bar. However, as soon as it appears that there is a “real question” to be determined on which relief depends, the summary judgment procedure is not available (General Steel at 130 citing Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91).
(5)Mere implausibility of the claim or improbability of success is insufficient; there must clearly be no real question to be tried in the sense that the claim is bound to fail (Seven Network Ltd v News Ltd (No 4) (2005) 214 ALR 686; [2005] FCA 244 at [14] citing Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 (Ch D) at 5; [1991] 4 All ER 961 at 965).
(6) The application is to be assessed on the assumption that every fact pleaded by the plaintiff is true (West v State of New South Wales [2007] ACTSC 43 at [9]).
(7)The application must be determined on the substance, not the mere form or expression, of the claim (Financial Integrity Group at [15]).
It will be noted that her Honour was dealing with an application under r 1147 of the CPR. Her Honour’s summary of the principles has been adopted by members of this court on many occasions. It was also referred to with approval by Murrell CJ in Donohue v Volanne Pty Ltd (No 2) [2021] ACTCA 11. It does seem to me that the circumstances of an application under r 1146 are slightly different from what was before her Honour. However, it is clear from what her Honour says that the threshold for the entry of summary judgment remains a very high one.
Spencer v The Commonwealth [2010] HCA 28; 241 CLR 118 (Spencer) concerned the application of s 31A of the Federal Court Act 1975 (Cth). That section allowed a challenge by a defendant to a plaintiff’s claim if the Court was satisfied that the plaintiff had “no reasonable prospect of successfully prosecuting the proceeding”. Subsection (3) provided that (relevantly) the plaintiff’s claim need not be “hopeless” or “bound to fail” in order to have no reasonably prospect of success. In Spencer, the Federal Court at first instance had summarily dismissed the plaintiff’s claim on the basis that it had no reasonable prospect of succeeding. That decision was upheld on appeal to the Full Court.
The judgment of Hayne, Crennan, Kiefel and Bell JJ makes it plain that the starting point must be consideration of the text of s 31A. By reference to that text, their Honours concluded that the decisions in the Dey and General Steel decisions should not be relied upon in elucidating the meaning of “no reasonable prospect of successfully prosecuting the proceeding” (see [56]). Their Honours concluded:
60.Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is "no reasonable prospect" of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to "no reasonable prospect" can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase "just and equitable" when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.
In the same case, French CJ and Gummow J said:
24.The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd said:
"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".
More recently, in Batistatos v Roads and Traffic Authority (NSW) Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde which included the following:
"Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way."
There would seem to be little distinction between those approaches and the requirement of a "real" as distinct from "fanciful" prospect of success contemplated by s 31A. That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary dispositions.
25.Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact…
It is true that the history of r 1146 does not demonstrate the clear intention expressed by s 31A of the Federal Court Act 1975 (Cth) to lower the threshold for the entry of summary judgment. However, it does seem to me that the change in emphasis introduced by provisions such as s 5A of the Court Procedure Act 2004 (ACT) (CPA) leads to a similar outcome. That section provides:
5A Main purpose of civil procedure provisions
(1) The main purpose of the civil procedure provisions is to facilitate the just resolution of disputes—
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
(2) Without limiting subsection (1), the main purpose includes the following objectives:
(a) the just resolution of the real issues in civil proceedings;
(b) the efficient use of the judicial and administrative resources available for the purposes of the court;
(c) the efficient disposal of a court’s overall caseload;
(d) the timely disposal of civil proceedings;
(e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
(3) The civil procedure provisions must be interpreted and applied, and any power or duty imposed by them (including the power to make rules) must be exercised or carried out, in the way that best promotes the main purpose.
(4) The parties to a civil proceeding must help the court to achieve the objectives.
(5) In this section:
civil procedure provisions means—
(a) the rules made under section 7, in their application to civil proceedings; and
(b) any provision of this Act in relation to the practice and procedure of a court in civil proceedings.
court includes a tribunal that is a prescribed tribunal under section 6.
I therefore propose to approach the plaintiff’s application here by reference to the following principles:
(1)The discretion granted to enter judgment in favour of the plaintiff must be exercised with considerable caution, with an appreciation that the outcome will deprive the defendant of a full contested hearing of the claim.
(2)The Court should not embark on a “mini-trial” to decide real issues of fact, or fact and law.
(3)It is necessary for the plaintiff to have adduced apparently reliable evidence establishing the facts asserted in its SoC.
(4)Once the plaintiff has provided that evidence, the onus moves to the defendant to demonstrate a good arguable defence as a matter of law, or, by reference to evidence, as a matter of fact and law. (In that context, I see the reference to the requirement for the defendant to satisfy the court as to a defence “on the merits”, and “sufficient facts” being disclosed, as placing an evidential onus on the defendant once step (3) has been complied with.)
(5)Having regard to the issues raised in the defence, it is necessary for the Court to make a careful assessment, by reference to the evidence, whether the defence does in reality raise issues which should be determined at a full hearing. That determination should not be made against the defendant merely on the basis of improbability or implausibility.
(6)If the Court is satisfied that the defence does not raise such issues, it should, in the light of s 5A of the CPA, enter judgment in favour of the plaintiff, unless some good reason be demonstrated why that course should not be taken.
I should say that the plaintiff’s task here was made easier by the failure of the defendant to adduce evidence to the contrary of that set out at considerable detail in the affidavit of Mr Ryan. The cogency of that evidence leads me to the conclusion that the plaintiff has provided sufficient evidence to establish the cause of action pleaded in the SoC.
In relation to the issues raised by the defence, I have set these out above. It seems to me that the pleading of paragraph 3(d) set the tone of much that followed. That is, it was plainly contrary to the contract and thus without substance.
The pleading in paragraph 10 raised an issue which upon examination was no issue at all. The money paid by the plaintiff was paid into the very account required by the defendant in its invoice.
Paragraph 11 raised assertions which appear to be contrary to the evidence of the survey process, and in any event no answer to the plaintiff’s claim of breach having regard to the force majeure provision in the contract. I do not understand how it can be said that the terms of the contract could be “unenforceable for illegality and against public policy”.
The subsequent pleadings essentially rely on the assertions in paragraphs 7, 10 and 11, until paragraph 18 of the defence. The allegation there that the surveyor had certified the facemasks as compliant is factually wrong and, in the context of the testing carried out by the Chinese Customs officials, irrelevant. The evidence demonstrates that the surveyor only carried out visual inspections. The Chinese Customs testing measured the tensile strength of the facemask straps. No facts are pleaded to counter the evidence that the batches tested by the Chinese Customs officials did not meet the requirement that the straps have a strength of at least 10N. Nor were any facts pleaded to demonstrate that it was “unreasonable” for the plaintiff to rely on the test results of the Chinese Customs.
The pleading at paragraph 21 repeats the matters previously raised and seeks to justify the clear evidence of the defendant’s acceptance of the necessity of replacing the non-conforming facemasks as a matter of “commercial goodwill”. I note the lack of a reference to this concept in the evidence of the contemporaneous communications between the parties. In any event, I am unable to see how it could provide a defence in circumstances where the plaintiff was not able to obtain permission to export 500,000 of the masks to Australia because of the Chinese Customs testing outcome. The pleading in paragraph 21(f) contains bald assertions unsupported by the identification of the relevant facts. Moreover, subparagraph (f)(i) is plainly contrary to the evidence.
The subsequent pleadings rely on the matters which were earlier pleaded in the defence.
This matter was before this Court on 22 October 2021 when it was listed. The defendant was aware of the evidence to be relied on by the plaintiff. It had an ample opportunity to file evidence in support of its defence. It is reasonable to infer that the evidence available to the defendant was not capable of contradicting that set out in Mr Ryan’s affidavit.
In any event, I am not satisfied that the defendant has a good defence to the plaintiff’s claim on the merits. Nor am I satisfied that the sufficient facts are disclosed to entitle the defendant to defend the claim generally. Indeed, it seems to me that the defence, as filed, is without substance. Bearing in mind the need for caution referred to above, I am satisfied that the defence does not raise issues which require determination at a full hearing. It is in the interests of justice, in my view, that the plaintiff’s claim should not be further delayed nor should the plaintiff be put to further expense in conducting this litigation. I propose to enter judgement in favour of the plaintiff pursuant to r 1146 of the CPR.
Conclusion
The plaintiff’s substantive claim is for the sum of $3,510,000 (AUD). In addition, by reference to Exhibits “P1” and “P2”, the plaintiff claims an additional $45,162.75 (AUD) for storage costs.
In relation to interest, it seems to me that the fairest course is to allow interest at the rate prescribed under the CPR. The plaintiff’s solicitor has calculated that to be $153,590.47 (AUD) up to 8 December 2021. I will bring that figure up to the date of judgment.
Orders
The orders of the Court are:
(1) Judgment is entered for the plaintiff in the sum $3,712,301.69.
(2) The defendant pay the plaintiff’s costs of the Application in Proceeding filed on 13 October 2021, and of the proceeding.
| I certify that the preceding eighty-four [81] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Crowe Associate: J Hester Date: |
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