CHEP Australia Ltd v Borgcraft Pty Ltd
[2018] VCC 1800
•9 November 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-18-00924
| CHEP Australia Ltd | Plaintiff |
| v | |
| Borgcraft Pty Ltd | Defendant |
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JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 November 2018 | |
DATE OF RULING: | 9 November 2018 | |
CASE MAY BE CITED AS: | CHEP Australia Ltd v Borgcraft Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2018] VCC 1800 | |
REASONS FOR RULING
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W Thomas | Law Squared |
| For the Defendant | Mr M Grady | SZ Lawyers |
HIS HONOUR:
1 The plaintiff (“CHEP”) applies by amended summons dated 17 October 2018 for judgment against the defendant (“Borgcraft”). CHEP relies for this purpose on a deed of settlement dated 23 April 2018 (“settlement deed”), by which the parties settled CHEP’s original claim against Borgcraft in this proceeding. That claim was for recovery of compensation, hire charges and interest owing by Borgcraft to CHEP under an agreement for the hire to Borgcraft of CHEP pallets and transportable bins.
2 I have been greatly assisted in the consideration of this application by the erudite submissions by counsel for each of the parties. They demonstrate that there is no real dispute between the parties concerning either the factual background or the principles to be applied. The essential question is whether I can be “clearly satisfied” that justice can be done between the parties by using a summary procedure to determine their dispute.
3 In my view, I cannot be so satisfied, primarily because the meanings of key terms of the settlement deed are obscure. The application will therefore be refused and I will invite the parties to make submissions concerning the appropriate orders on costs and the directions that should be made to bring the proceeding to a swift conclusion.
Factual background
4 CHEP operates a national “pallet pooling” system. For over 10 years, Borgcraft has hired wooden pallets from CHEP for use in its food manufacturing business. Borgcraft uses the pallets to store and transport food products to its customers (who are predominantly supermarkets). When goods are delivered to Borgcraft’s customers, they take possession (by necessity) of both the product and the pallet. CHEP’s pooling system allows for a pallet to be transferred off one CHEP customer’s account and on to another account. The transferee becomes liable for the hire fees for that pallet upon delivery (or at some agreed later time).
5 In 2017, Borgcraft fell into arrears in respect of its CHEP account for both hire fees and claims by CHEP for compensation for “lost” pallets. Borgcraft denied that the pallets were lost, but accepted that it had “lost track” of the pallets throughout its supply chain. By writ and statement of claim filed on 7 March 2018, CHEP claimed the sum of $369,051.16 owing by Borgcraft under CHEP’s standard form agreement for the hire of equipment from CHEP, being wooden pallets and transportable bins. The sum claimed by CHEP comprised hire fees (in arrears and ongoing), and compensation for the “lost” equipment and interest.
6 The parties settled this proceeding shortly after it was commenced. Under the settlement deed:
· Borgcraft agreed to pay to CHEP the sum of $192,831 as compensation for lost equipment;
· the equipment would be “formally reviewed” on 24 July 2018 on receipt of the final payment towards the compensation sum (which was due on or before 23 July 2018);
· the value of any equipment recovered would be credited towards Borgcraft’s account, minus hire charges; and
· the balance of the account would be paid in instalments between 30 July and 10 December 2018, in accordance with a schedule of payments.
7 Borgcraft paid the $192,831 compensation sum in full and on time. But it did not pay the sum of $10,500 due on 30 July 2018 and has paid nothing since. CHEP asserts that the failure to pay that amount represented a default under the settlement deed and relies on clause 1.3(c), which provides that following default, “CHEP will take immediate action to enforce proceedings”.
8 For its part, Borgcraft contends in substance that it is not required to pay any further sums to CHEP under the settlement deed. Borgcraft relies primarily on part of clause 1.3 of the settlement deed which provides as follows:
“The equipment will be formally reviewed on 24 July 2018 on receipt of payment due on or before 23 July 2018.
The value of each equipment recovered will be credited to the account minus hire charges. The balance of the account is to be made (sic) under the following arrangement”.
9 The settlement deed then sets out a schedule of weekly payments of $10,500 commencing on 30 July 2018. Borgcraft asserts in effect that it has “recovered” equipment within the meaning of the settlement deed with a value in excess of the sums due to be paid by it under the deed. It further asserts that the extent of that recovery would be confirmed by a formal review as contemplated under the settlement deed, but that CHEP has refused to participate in such a review.
Applicable principles
10 The parties’ submission on the applicable law are substantially in accord. Both cite, in particular, the decision of the Court of Appeal in Seachange Management Pty Ltd v Pital Business Pty Ltd (2009) 23 VR 396 at [40], in which Maxwell P and Nettle JA reviewed the authorities as to the summary enforcement procedure (notably the earlier Full Court decision in Roberts v Gippsland Agricultural Co Pty Ltd [1956] VLR 555 (“Roberts”)), concluding (at [40]) that:
“In summary, therefore, the net effect of the authorities to this point seems to be that, although the power summarily to enforce a compromise is discretionary and is wider now than once was the case, it is not to be invoked unless the court is “clearly satisfied that justice can be done”; and whether justice can be done is a question of degree. Consistently with the equitable origins of the power, one must weigh among other competing considerations the extent to which enforcement would involve extraneous matters, how substantial the questions to be determined as a precursor to enforcement may be, and procedural considerations like the desirability of pleadings and discovery and substantial cross-examination.
11 Borgcraft also referred to Dalmation Nominees v Marinovich (Unreported) Supreme Court of Western Australia, 20 November 1998, in which Murray J, after considering Roberts said: “It is right, I think, to regard an application to summarily enforce an agreement to compromise an action as being one akin to an application for summary judgment expressly so made”.
Analysis
12 In relation to the issue of recovery of equipment, CHEP argues that:
“Despite requests from CHEP, Borgcraft has not provided documentation sufficient to demonstrate that the pallets have been validly transferred. It has otherwise failed to notify CHEP of any transfers, as required under the Terms of Hire. In those circumstances too, there is no basis for any credit to be made to Borgcraft’s account.”
13 It also argues that the “formal review” required under the settlement deed was undertaken by a combination of a stocktake of pallets at Borgcraft’s premises on 9 May 2018 and a review by Ms Tadros of CHEP of the information available to CHEP as at 24 July 2018. CHEP submits that this review established that “no credit was required to be made to Borgcraft’s account under the Deed”. In my view, these conclusions urged by CHEP cannot be drawn with anything like the confidence that CHEP asserts.
14 For its part Borgcraft contends that: “The settlement deed is an imprecise, poorly drafted document. Its meaning is not clear on its face”. I agree. CHEP conceded in oral submissions that the settlement deed was imprecise. Borgcraft continues:
A stranger to the commercial arrangements between CHEP and Borgcraft, and the dispute between them, would not be capable of objectively ascertaining its meaning from its terms alone. For example, it is entirely unclear what is meant by a “formal review” of the equipment, and what such a formal review comprises. It is similarly unclear what is contemplated by the concept that equipment may be “recovered” and, if it is, that the “value” of that equipment be “credited to the account”. In the face of that material ambiguity, one must necessarily have regard to the course of dealings between the parties to make sense of the deed.
15 There is considerable force in these submissions. Borgcraft then sets out matters that it asserts are important context for the proper construction of the settlement deed and submits:
“Consequently, Borgcraft contends that the true meaning of clause 1.3(a) of the deed is that, at the end of the first tranche of payments, a formal stocktake would take place whereby Borgcraft would be credited back the compensation it had paid for:
a)each pallet it could establish remained on its premises, and was therefore not lost; and
b)each pallet it was able to ascertain had been delivered to a customer, and was able to ‘transfer’ on to that customer’s account
16 Borgcraft sets out a passage from an email from Ms Tadros to Borgcraft in which she states:
“If, down the track, equipment is recovered by way of transfers to your trading partner, CHEP would credit the compensation paid minus any applicable hire charges…Once we get to 20 July 2018 we can review what equipment has been recovered, we can review to see if any credit(s) are due as a result of any transfers off…For example, in the above arrangement you pay the compensation for all the pallets on your account $191,922.50 and say on 10 June 2018 you are able to recover 200 pallets, you would be credited the compensation minus the ongoing hire charges…”
17 Borgcraft relies on this passage as an example of objective evidence of the intention of the parties, including in respect of the construction of the phrases “equipment recovered” and “formal review”. CHEP agrees it is appropriate to have regard to the correspondence between the parties for the purposes of construing the settlement deed. However, it submits that the correspondence establishes the proper construction of the settlement deed with sufficient clarity that the court can be “clearly satisfied” that justice can be done between the parties by giving CHEP judgment on the settlement deed.
18 I agree that the correspondence relied on by CHEP goes some distance to confirming that “equipment recovered” within the meaning of the settlement deed comprises the physical return of pallets or the transfer of pallets to another CHEP customer, in accordance with the CHEP terms of hire.
19 However, this is not the end of the matter. First, there is a dispute about which terms of hire apply (CHEP asserts the 2016 version and Borgcraft the 2008 version). And more importantly, CHEP accepts that, on either version, it has an obligation to act reasonably in determining whether to approve a transfer. While Ms Tadros has deposed to the reasons for her rejection of the transfers, I am unable to determine with any degree of confidence that those reasons constitute “acting reasonably” for the purposes of the terms of hire in the context of the broader relationship between the parties and practice in the industry more generally.
20 Further, to my mind there is a real question whether the “formal review” contemplated under the settlement deed necessitated some form of engagement between the parties on 24 July 2018 in relation to the state of Borgcraft’s account as at that date. More generally, I agree with Borgcraft’s submission that “there are a number of disputed, triable issues that go to the core of CHEP’s entitlement to the amounts claimed under the deed” and that these include:
“a)The proper construction of the deed, and in particular: what is meant by the “recovery” of pallets; is CHEP entitled to unilaterally refuse to recognise such recoveries; and, if so, what constraints exist on that right?
b) how many pallets has Borgcraft, in fact, recovered?;
c)what was the basis for CHEP refusing to recognise such recovery and was such refusal permissible under the deed?;
d)if CHEP has acted within its power in refusing to recognise such recoveries, was Borgcraft’s entry into the deed vitiated by reason of pre-contractual misrepresentation?; and
e)what is the net position following recognition of legitimate recoveries?”
21 Thus in my view, I cannot be “clearly satisfied” that justice can be done under the summary procedure and the application must be dismissed.
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Certificate
I certify that these 7 pages are a true copy of the ruling of His Honour Judge Woodward delivered on 9 November 2018.
Dated: 9 November 2018
Shakti Nambiar
Associate to His Honour Judge Woodward
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