David Gray & Co Pty Ltd v SP Hay Pty Ltd [No 2] - [2021] WASC 114

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   DAVID GRAY & CO PTY LTD -v- SP HAY PTY LTD [No 2] [2021] WASC 114
CORAM:   MASTER SANDERSON
HEARD:   8 MARCH 2021
DELIVERED          :   8 MARCH 2021
PUBLISHED           :   19 APRIL 2021
FILE NO/S:   CIV 2581 of 2019
BETWEEN:   DAVID GRAY & CO PTY LTD
Plaintiff

AND

SP HAY PTY LTD
First Defendant

STUART BARRY PRICE
Second Defendant

SP HAY PTY LTD
Plaintiff by Counterclaim

AND

DAVID GRAY & CO PTY LTD
Defendant by Counterclaim

FILE NO/S: CIV 1148 of 2021
BETWEEN: DAVID GRAY & CO PTY LTD
Plaintiff

AND

SP HAY PTY LTD
First Defendant

REGISTRAR OF TITLES
Second Defendant

Catchwords:

Action in debt - Application for extension of operation of caveat - Turns on own facts

Legislation:

Evidence Act 1906 (WA)
Rules of the Supreme Court 1971 (WA)
Transfer of Land Act 1893 (WA)

Result:

Judgment for the plaintiff
Caveats extended

Category: B

Representation:

CIV 2581 of 2019

Original Action

Counsel:

Plaintiff	:	P J Ward
First Defendant	:	No appearance
Second Defendant	:	In person

Solicitors:

Plaintiff	:	Nova Legal
First Defendant	:	No appearance
Second Defendant	:	In person

Counterclaim

Counsel:

Plaintiff by Counterclaim	:	No appearance
Defendant by Counterclaim	:	P J Ward

Solicitors:

Plaintiff by Counterclaim	:	No appearance
Defendant by Counterclaim	:	Nova Legal

CIV 1148 of 2021

Counsel:

Plaintiff	:	P J Ward
First Defendant	:	No appearance
Second Defendant	:	No appearance

Solicitors:

Plaintiff	:	Nova Legal
First Defendant	:	No appearance
Second Defendant	:	No appearance

Case(s) referred to in decision(s):

Nil

MASTER SANDERSON:

These reasons concern two actions involving the same parties. In the 2019 proceedings – which might properly be described as the main proceedings – these reasons deal with the action as a whole and why I entered judgment in favour of the plaintiff. The most recent proceedings – which can be described as the caveat proceedings – arose late in the day and are very much ancillary to the main proceedings. To put both actions in context, it is necessary to deal in some detail with the procedural history of the main action.
The main proceedings were commenced in the District Court on 15 May 2019. A statement of claim was indorsed on the writ. The first two paragraphs of the statement of claim identify the plaintiff and the first defendant. Paragraph 3 identifies the second defendant as the sole director and shareholder of the first defendant and 'guarantor under the SP Hay Agreement' that agreement being defined later in the statement of claim.
By par 4 of the statement of claim the plaintiff identifies a written agreement dated 3 February 2017 entered into between the plaintiff and the first defendant. Essentially the agreement was to supply agricultural products on credit. The terms and conditions of this agreement were identified and further incorporated terms and conditions were set out in par 5. This was the SP Hay Agreement. By par 6 it is alleged the second defendant was a guarantor of all monies owed by the first defendant to the plaintiff. Paragraph 7 sets out the way in which goods were supplied by the plaintiff to the first defendant. This paragraph is of some significance. It reads as follows:
7.The following supply process was applied by the Plaintiff in relation to Goods supplied to the First Defendant, in accordance with Plaintiff's standard practice in relation to customer supply:
(a)an order was generated either by way of email, phone, fax or purchase order (Order);
(b)each Order was entered into the Plaintiff's accounts system and a customer order document generated;
(c)a delivery docket was generated and the Goods were prepared for delivery;
(d)delivery was arranged by the Plaintiff to BW James Transport Pty Ltd, a delivery service nominated by the First Defendant (BW James) who either received the Goods:
i.via the Plaintiff's truck to BW James; or
ii.via collection by BW James from the Plaintiff's business premises.
(e)If the Goods were to be delivered directly from the Plaintiff's supplier (Supplier) the Goods were received by BW James:
i.by BW James collecting the Goods from the Supplier; or
ii.by BW James being delivered the goods via another freight carrier, for example, CTI Taxi Trucks, Startrack or Kinnear Transport.
(f)A signed proof of delivery was prepared for each Order; and
(g)once each Order was dispatched and the confirmation of delivery was received, the Plaintiff issued the First Defendant a tax invoice
(Supply Process).
The plaintiff pleads between 15 February 2017 and 15 February 2019 it supplied to the first defendant goods to the value of $688,898.75. It pleads despite demand and in breach of the SP Hay Agreement, the first defendant failed to pay the amount owing. The plaintiff claims against the first defendant for the amount of the debt and seeks an indemnity from the second defendant pursuant to the guarantee.
It is immediately apparent this is a very straightforward claim. Goods were provided by the plaintiff to the first defendant pursuant to a written credit agreement. The first defendant's obligations were guaranteed by the second defendant. These arrangements are so common in the world of commerce as to be regarded as the norm.
An appearance was entered by both defendants on 13 June 2019. The appearance was entered by DW Fox Tucker, lawyers in Adelaide. The use of Adelaide solicitors can be explained by the fact both defendants were resident in South Australia. On 12 July 2019, the parties filed a consent order. This order required the defendants to file any defence and counterclaim by 19 July 2019 and provided for mutual discovery by 20 September 2019. The order also anticipated mediation.
The defendants filed a defence and counterclaim on 1 August 2019. In doing so, they were some 12 days late in complying with the agreed timetable. By the time the defence and counterclaim was filed, more than six weeks had passed since the appearance had been entered. It is reasonable to expect that within that time period the defendants' solicitors would have had the opportunity to take detailed instructions. In fact it is reasonable to expect that, to allow them to draw a defence and counterclaim, detailed instructions would have been provided. In a matter which was not particularly complicated it is reasonable to expect by the time the defence and counterclaim was filed, the defendants' solicitors would have been in full possession of all relevant information although, of course, they could not have been expected to have access to any expert evidence.
The defence and counterclaim is a complex, confused and confusing pleading. In the heading it describes the plaintiff as defendant by counterclaim. It describes the first defendant as the first plaintiff by counterclaim and adds Price Agriexport Services Pty Ltd as second plaintiff by counterclaim. Paragraph 3 of the defence and counterclaim alleges the second defendant is not a shareholder of the first defendant and says that the shareholders of the first defendant are Price Agriexport Services Pty Ltd (PAE) and Agri Hay Pty Ltd. Pargraph 3 also denies that the second defendant was the guarantor of the SP Hay Agreement.
By par 4 it is pleaded that in December 2010, the plaintiff entered into an agreement pursuant to which the plaintiff would supply agricultural chemicals to PAE. This is defined as 'the Agreement'. The terms of the Agreement are pleaded. It is further pleaded on 20 September 2013, PAE signed a commercial credit application and deed of guarantee indemnity and charge which reflected the terms of the Agreement. This was referred to as 'the 2013 Credit Application'. The pleading then admits the first defendant signed a commercial credit application and deed of guarantee indemnity and charge on 3 February 2017. This is referred to as 'the 2017 Credit Application'. This appears to be the same document as the one described by the plaintiff as the SP Hay Agreement. It is difficult to know what to make of pars 4.7 to 4.9 of the pleading. It would seem the defendants say the terms of trade between the parties were not reflected in the SP Hay Agreement but were something of a miss‑mash involving oral conversations, a course of dealing, the 2013 Credit Application and the 2017 Credit Application. By par 4.10 it is said that the interest rate of 18% on outstanding balances incorporated in the SP Hay Agreement was 'penal' and unenforceable. Paragraph 6 deals with the guarantee. It alleges the second defendant has no liability to the plaintiff independent of the liability of the first defendant to the plaintiff. It is implicit in the plea that if the first defendant is liable to the plaintiff then the second defendant is liable to the plaintiff.
Paragraph 7 of the statement of claim is denied. That paragraph of the statement of claim set out above pleads the Supply Process. It sets out the way in which an order was generated and the process by which ordered goods were delivered to the first defendant. Essentially, goods were delivered either by the plaintiff or by one of the plaintiff's suppliers to a delivery service known as BW James Transport Pty Ltd (BW James). This company was nominated by the first defendant. A signed proof of delivery was prepared for each order and once the order was despatched and delivery confirmed, the plaintiff issued the first defendant a tax invoice. The defendants deny this delivery arrangement but offer no alternative. There is a bare denial the defendants received the deliveries set out in par 9 of the statement of claim.
The counterclaim identifies PAE and pleads the second defendant is the sole director of the first defendant and PAE. PAE is a substantial shareholder in the first defendant. The counterclaim then refers to the supply of product by the plaintiff to PAE in 2014. Paragraph 17 of the counterclaim shorn of particulars, reads as follows:
17.The Plaintiff made errors in its charges to PAE in 2014 in that the Plaintiff:
17.1charged PAE for products that were not delivered;
17.2failed to properly apply credits to PAE for returned products; and
17.3incorrectly charged PAE for products purchased directly from Gill Rural Traders which had been charged by Gill Rural Traders outside the terms of the Agreement.
Particulars
By letters dated 29 August 2018 ad 25 September 2018 PAE requested copies of the invoices, order forms and delivery dockets relevant to the supply of products by the Plaintiff in 2014.
The Plaintiff declined to provide the requested documents.
Further particulars will be provided following disclosure in the within action.
Paragraph 18 pleads that in breach of the Agreement (that term being defined in cl 4.1 of the defence to mean the 2010 Agreement), the plaintiff charged PAE a markup on the plaintiff's wholesale prices in excess of 5% for the plaintiff and 2% for Gill Rural Traders. Particulars are provided but no amount is pleaded – there is a plea the defendants have requested documents from the plaintiff and those documents have been denied. Paragraph 19 pleads loss and damage but provides no figures and says further particulars will be provided following discovery. Paragraphs 20 through to 24 make similar pleas in relation to supply in 2015. Paragraphs 25 through to 29 deal with supply in 2016. Essentially the same plea is made. Again, the alleged losses are not quantified.
Paragraph 30 is in the following terms:
30.On 3 February 2017, Anthia Craig on behalf of Mr Price instructed the Plaintiff to issue invoices pursuant to the Agreement to the First Defendant from 1 January 2017 rather than to PAE.
Paragraphs 33 to 37 deal with supply in 2017 and mirror the complaints made about the 2015 and 2016 years. A heading 'Loss of Yield in 2017' appears to cover pleas found in pars 39 to 46 of the counterclaim. In essence it is said the plaintiff failed to deliver to the defendant part of an order of fungicide placed by the first defendant with the plaintiff. The defendant says it was unable to source the shortfall elsewhere and accordingly it sustained a shortfall on its barley harvest. As a consequence of that shortfall it says it suffered a loss of 'approximately $978,750.00 plus GST'. It is worth noting that while this is said to be an approximate it is a remarkably precise figure. The defendants and PAE then seek damages against the plaintiff and a setoff.
Given the amount of the counterclaim exceeded the jurisdiction of the District Court the matter was transferred to this court. That occurred by way of order made 26 August 2019.
By chamber summons filed 13 September 2019 the plaintiff sought orders setting aside the joinder of the second plaintiff by counterclaim and striking out the second plaintiff by counterclaim's counterclaim. This matter progressed through to a hearing and on 5 November 2019. I made an order that the joinder of the second plaintiff by counterclaim as a party was irregular as was the joining of the second plaintiff by counterclaim's counterclaim. I ordered that the proposed second plaintiff by counterclaim file any affidavit in support of the application to be joined as a party by 19 November 2019. The proposed second plaintiff by counterclaim did not comply with those orders and on 26 November 2019 I made a springing order giving the proposed second defendant by counterclaim until 10 December 2019 to comply with my earlier order. Eventually on 17 December 2019 I dismissed the application of PAE to be a party to the proceedings.
On 15 January 2020, the defendants filed an amended defence and counterclaim. The amendments made to the defendants' defences are not presently relevant. Importantly, what was removed was any allegations in relation to the supply of product in 2015, 2016 and 2017. The pleading still put the plaintiff to proof of the alleged delivery of product as pleaded in the statement of claim and it was still alleged that the failure to deliver the fungicide in 2017 had led to the first defendant suffering loss and damage. That loss was still quantified as 'approximately $978,750.00 plus GST'.
It was clear then, by this stage, the issues between the parties had crystallised. On the one hand, the plaintiff had to prove it had made the deliveries and rendered the invoices as alleged in its unaltered statement of claim. There still appeared to be a live issue as to the precise terms and conditions upon which supply was made. But there was no issue that from February 2017 the first plaintiff had undertaken to pay for goods supplied. So far as the first defendant was concerned, it had to establish two things. First, the quantity of fungicide it had ordered had not been supplied, presumably in breach of contract. Second, it had to establish that as a consequence of the failure to supply the fungicide, it had suffered loss and damage. It was also clear, as it had been from the time the counterclaim was filed, the first defendant would need to produce expert evidence showing that as a failure of the plaintiff to deliver the fungicide, the barley harvest had been reduced as alleged and consequent upon the reduced crop, the first defendant had suffered loss and damage.
On 7 February 2020, the plaintiff applied for summary judgment on the first defendants' counterclaim pursuant to O 16 r 1 of the Rules of the Supreme Court 1971 (WA). The application was supported by three affidavits. Ainslie Joan Robinson was a management accountant employed by the plaintiff. She went through the chemicals ordered by the first defendant from the plaintiff and concluded that all chemicals ordered had been delivered. At par 22 of her affidavit she specifically says that she believed the whole quantity of 3,920 litres of fungicide ordered by the first defendant in July 2017 had been delivered.
Robert Barbary Pauley was, between mid‑2008 and February 2018, the general manager of the first defendant. He provided evidence of his knowledge of deliveries of fungicide made by the plaintiff to the defendant in 2017. He concludes that so far as he was aware, there was no short supply. Dale Morgan Williams was the Hay Maintenance manager of the first defendant's Brookton hay plant between 2003 and 2019. He was responsible for unloading freight that was delivered to the plant. He too was unaware of any delivery shortfall in 2017.
In response to the summary judgment application, the second defendant filed an affidavit affirmed 26 February 2020. It contains much irrelevant material. However, par 8.2 reads as follows:
8.2Based upon contemporaneous documents, I verily believe that the Fungicide that is the subject of tax invoice no. 1455233 was not delivered to the WA Business, and that Pauley and Williams were aware the fungicide was missing.
When the application for summary judgment came on for hearing, counsel for the plaintiff was at pains to point out the 'contemporaneous documents' referred to by the second defendant were not to be found in his affidavit and were not available elsewhere. Essentially, counsel's argument was the defendants had failed to condescend upon particulars, the defence was at best shadowy and the plaintiff was entitled to judgment. I provided short extempore reasons for dismissing the application. In summary, faced with the sworn evidence of the second defendant and despite the clear evidence from the plaintiff's three witnesses, I was not satisfied the position was so clear summary judgment should run. I did indicate to the parties that I would do everything necessary to facilitate a trial at the earliest possible time.
On 3 July 2020, I made certain programming orders. Relevantly the plaintiff was to file a reply and a defence to counterclaim by 10 July 2020 and the first defendant was to file a reply to the defence to counterclaim by 24 July 2020. By 31 July 2020 the defendants were to give discovery of certain documents. These documents included any reconciliation of chemicals ordered and received from the plaintiff during the calendar year 2017, all documents recording spray records for certain parcels of land and all documents recording planting and harvesting records for barley crops planted in 2017. By 14 August 2020, the plaintiff was to file and serve its witness outlines and by 9 September 2020 the defendants were to file and serve their witness outlines. No timetable was set for the provision of expert evidence. The trial was then listed for six days commencing 23 November 2020.
On 22 September 2020, the plaintiff filed seven witness outlines. On 14 October 2020 the defendants filed a substituted defence and counterclaim and on 2 November 2020 the plaintiff filed an amended statement of claim.
Neither of these two amended pleading significantly altered the position of either party. It still remained the defendants' position they had suffered loss and damage as a consequence of the failure of the plaintiff to deliver the contracted quantities of fungicide.
By agreement the trial date was pushed back to 8 March 2021. The defendant filed two witness outlines. The first was filed 24 December 2020. Grant James Bernhardt identified as the operations manager for the first defendant. In summary, he says in his statement he does not believe deliveries of fungicide were made. He refers to no documents to support his position. The second defendant filed a witness outline on 4 January 2021. He too states he did not believe the deliveries had been made and he also failed to include any documentary evidence to support his position. At no time did the defendants file any expert evidence. At no time did they produce any evidence to support the contention there had been a failure to deliver fungicide.

On 5 March 2021 the defendants' solicitors obtained an order from Allanson J they be removed from the record. This application was made in confidence and as was to be expected, no reasons for decision were published. It is to be noted that the application was heard and determined on the Friday before the trial was due to begin on Monday.
Before dealing with what occurred at the trial, I should refer to the caveat action. On 4 March 2021, the plaintiff issued an originating summons seeking orders that two caveats lodged over property belonging to the first defendant be extended until further order. The application was supported by an affidavit of Ainslie Joan Robinson sworn 4 March 2021. Ms Robinson attaches copies of two notices issued by the Registrar of Titles under s 138B of the Transfer of Land Act 1893 (WA). These notices advised the plaintiff that unless extended by order of the court the two caveats would expire on 17 March 2021. Ms Robinson attaches a copy of the SP Hay Agreement which, pursuant to cl 15, allows the plaintiff to lodge caveats against the property owned by the first defendant to secure payment under the SP Hay Agreement. It is not clear who caused the notices to be issued by the Registrar. But it is clear that whoever took this step did so in the full knowledge the trial of the matter was listed for 8 March 2021.
When the matter was called for trial, counsel appeared for the plaintiff. The second defendant was in Adelaide. I took the step of pointing out to the second defendant, the first defendant could only appear by counsel. I indicated I would deal first with the application for an interim extension of the caveats. I indicated to counsel the argument for the extension was compelling. At this stage the second defendant interrupted proceedings indicating he did not accept the extension of the caveats was proper. The caveats were lodged against the property held by the first defendant. I indicated to the second defendant I was not prepared to allow him to speak on behalf of the first defendant and at that stage the telephone communication was terminated.
Clearly the plaintiff's case for extension of the caveats was compelling. They had a contractual right to lodge the caveats and there was nothing on the evidence to impinge that right. Accordingly, I made orders on an interim basis which effectively protected the plaintiff's position.
Before the second defendant's involvement was terminated, he did apply for an adjournment of the trial. That application was opposed by the plaintiff. Having recounted the history of this matter, it is hardly necessary for me to say that I was not prepared to entertain the application. The matter had gone on far too long. The defendants had been given every consideration and had failed utterly to provide any defence. It would have been nothing short of a travesty of justice to have adjourned this matter. Accordingly, I ordered the trial to proceed.
It is unnecessary for me to go through the course of the hearing in any detail. Counsel established from available documents the parties had entered into the SP Hay Agreement. It is the case that the SP Hay Agreement was not in precisely the terms originally pleaded but the differences between the original plea and the actual SP Hay Agreement (or perhaps to be more precise the circumstances in which the SP Hay Agreement came about) are not significant. The defendants admitted if the first defendant was indebted to the plaintiff then the second defendant guaranteed that liability. Counsel produced and had admitted into evidence under s 79C of the Evidence Act 1906 (WA), the invoices which established delivery of goods and the failure of the first defendant to pay. There were one or two anomalies in the evidence which were explained by counsel and were of no real moment. Insofar as it is necessary to do so, I would refer to the transcript. But the simple fact is the plaintiff had delivered the goods, the first defendant had received the goods and failed to make payment pursuant to its obligations. The plaintiff was entitled to judgment. The counterclaim was dismissed. No evidence was led to support what was pleaded and there is nothing to suggest any evidence ever existed to support the alleged counterclaim.
It is difficult to conclude other than the defendants ran their defence to the plaintiff's claim in the knowledge the claim was unanswerable. It is axiomatic that a defendant must be given every opportunity to put its case in answer to a claim. In this matter every indulgence was extended to the defendants. Yet in the end they produced nothing – nothing at all – which in any way impinged upon the claim. It is difficult to see how the defendants fairly and honestly conducted their defence.
It is also very difficult to see how the solicitors for the defendants could have let this situation develop. As I indicated above, there was a reasonable delay in the defendants filing their defence and counterclaim. It is not unreasonable to expect that the defendants' solicitors should have called for and obtained copies of relevant documents which supported the defendants' contention first, that the plaintiff had overcharged the defendants and second, that supplies of fungicide had not been delivered so that crop yields in 2017 were diminished. To plead those matters without being in possession of the relevant documents is ethically questionable. Moreover, once the plea was made, and it was clear the counterclaim depended in large measure on expert evidence, that evidence should have been obtained and obtained promptly. Once again, to maintain the counterclaim without a scintilla of evidence to support the plea is ethically questionable.
As to the conduct of the defendants' solicitors I will say no more. However, a copy of these reasons will be referred to the appropriate regulatory authorities to allow them to take whatever action they deem appropriate.
As to costs, the plaintiff sought and obtained an order the defendants pay the plaintiff's costs on a full indemnity basis. I need not say anything more about that issue. Having recited the unhappy history of this matter, it is abundantly clear an indemnity costs order was appropriate. I also indicated to counsel that, if the plaintiff chose to do so, it could bring an application to have the costs paid by the defendants' former solicitors.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
19 APRIL 2021