Fuel Tank and Pipe Pty Ltd v Integrated Fuel Services Pty Ltd
[2012] WASC 71
•1 MARCH 2012
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: FUEL TANK AND PIPE PTY LTD -v- INTEGRATED FUEL SERVICES PTY LTD [2012] WASC 71
CORAM: ALLANSON J
HEARD: 31 JANUARY 2012
DELIVERED : 1 MARCH 2012
FILE NO/S: CIV 2538 of 2011
BETWEEN: FUEL TANK AND PIPE PTY LTD
Plaintiff
AND
INTEGRATED FUEL SERVICES PTY LTD
Defendant
Catchwords:
Application for summary judgment - Test for entering summary judgment - Uncertainty of terms of contract
Legislation:
Nil
Result:
Application refused
Category: B
Representation:
Counsel:
Plaintiff: Mr C S Williams
Defendant: Mr M F Holler
Solicitors:
Plaintiff: Solomon Brothers
Defendant: G A Lacerenza & Associates
Case(s) referred to in judgment(s):
DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423
Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68
McDermott v Black [1940] HCA 4; (1940) 63 CLR 161
Scaffidi v Perpetual Trustees Victoria Ltd [2011] WASCA 159
Webster v Lampard [1993] HCA 20; (1993) 177 CLR 598
ALLANSON J: The plaintiff, Fuel Tank & Pipe Pty Ltd, commenced these proceedings by writ on 18 August 2011. It claims relief against the defendant, Integrated Fuel Services Pty Ltd, under statutory causes of action for misleading and deceptive conduct and also damages for breach of contract. The defendant has not pleaded to the claim. It brings this application for summary judgment.
Background
The defendant's business includes supplying services to companies in the fuel industry. It has distribution rights for the sale of fuel storage tanks, described as 'self bunded tanks'. The plaintiff was supplying tanks to Downer EDI Mining Pty Ltd for use at a mining project at Christmas Creek. In correspondence the parties referred at various times to Downer and to EDI and I will follow that usage. It appears that Fortescue Mining Group was also part of that mining project.
On 5 November 2010, the plaintiff and the defendant made an agreement called the Asset Sales Agreement. By cl 2.1, the defendant agreed to sell and the plaintiff agreed to purchase all of the defendant's right, title and interest in 'the Assets' for the price and on the terms set out in the agreement. The Assets were defined in the agreement as 'the supply of 43 x 110,000 litre self bunded tanks'. Neither party made any point regarding the way in which the agreement describes the assets.
For the purposes of this application, these clauses of the agreement are relevant. First, by cl 2.2, the defendant retained title in the Assets until payment of the purchase price. By cl 3.1, payment was due upon certification by representatives of the plaintiff and the defendant in China that the assets 'are suitable for use on Site'. Clause 4 dealt with delivery, and cl 5 with events of default. By cl 7.10, the agreement could be amended or varied only by writing signed by the parties. By cl 7.18, unless expressly provided otherwise, 'a party has no right of set‑off against a payment due to another party'.
Disputes arose during the course of the agreement. On 18 July 2011, the plaintiff wrote to the defendant to the effect that:
1.It had incurred loss and damage due to the defendant's 'late, incomplete and defective delivery of the tanks'.
2.It had entered the contract because of representations made to it, and the tanks delivered were not what the contract required or what the defendant had represented it would supply.
The letter concluded:
FT&P is seeking to finalise this matter as fairly as it can and is willing to discuss an acceptable settlement. In the interim it will not be making any further payments unless and until it receives a satisfactory response to this letter from IFS.
On the same day, lawyers on behalf of the defendant wrote to the plaintiff claiming that payment of $1,253,179 for 14 tanks was outstanding, and demanding immediate payment. The letter referred to the contractual exclusion of set‑off, and to the defendant's retention of title. The defendant said that if cleared funds were not received by 22 July 2011 it reserved the right to issue proceedings without further notice, and would notify Downer and Fortescue Mining Group of its intention to remove the tanks for which title had not passed.
The parties met on Friday, 5 August 2011. Only the plaintiff has provided any evidence regarding that meeting. Neither party has claimed privilege for what was said. During the meeting the defendant repeated its statement that it had title to the tanks, and could recover those tanks if the plaintiff did not pay $1.2 million. The defendant's company manager also said, in effect, that he would write to Downer to get Downer to pay, or to stop funds being paid by Downer to the plaintiff.
Over the weekend the plaintiff and the defendant exchanged emails. The defendant's application for summary judgment is based on those emails which it says constituted a completed agreement settling the claims between the parties in exchange for the plaintiff's promise to pay $500,000. I set out the emails in full. On 6 August, the plaintiff wrote:
To the Directors, Integrated Fuel Services Pty Ltd (IFS),
Written with the authority of and at the instruction of Des Roche and Mike Raine of Fuel Tank & Pipe Pty Ltd (FTP).
In the interests of bringing to a conclusion the Agreement for the Supply of the 43 Self Bunded Tanks, FTP offers, WITHOUT PREJUDICE, to make further payments to a total of $500,000. This will bring total payments incl GST to $2,845,742. After allocation to various sundry supplies and Fuelfix hire tanks, a total of 2,054,930 (excl GST) will have been for the supply of 34 self bunded tanks (an average of $60,439 per tank). In addition FTP will discharge the liability to Fuelfix for the remaining 9 tanks.
The timing of the payments will be in line with the payments from Downer EDI, to be advised on Monday 8 August, but are expected to be $250,000 in the week commencing 8 August and $250,000 not more than 4 weeks later.
In addition, FTP is expecting to be awarded the Karrara fuel farm work and it is the intention to promote the use of four SBT's on that site. FTP will purchase those from IFS for $100,000 each.
It is recognised that there will be a loss of margin for IFS but it should also be recognised that FTP will sustain losses in excess of $2,000,000. It should further be recognised that there is a demonstrable case of IFS's culpability for those losses.
It is understood that the Directors of IFS are contemplating the voluntary administration of the Company and if this offer assists in averting that action then we will be pleased with that outcome. We ask that a variation to the original contract be executed accordingly.
On 7 August, the defendant wrote (addressed to the plaintiff's accountant, Mr Bob Williams):
Bob,
Thank you for communicating the Board offer from FTP below. The Board of IFS have met this morning to consider this and other matters.
In the interests of bringing this matter to a conclusion and avoiding a protracted and costly legal dispute, the offer is accepted. Whilst not meeting our objectives in this contract, it gives certainty to both parties.
I have asked our solicitor Mr Ian Murie to prepare a short form contract amendment to formalise our agreement but in keeping with the assurances from FTP consider this exchange of emails to constitute a legally binding contract.
We look forward to receiving the first payment of $250,000 plus GST no later than COB on Friday the 12th August 2011. Earlier payment would be appreciated. At this stage we will defer other actions discussed at our meeting last Friday.
Thank you for your assistance in mediating this disagreement.
On 9 August 2011, Mr James Harris, on behalf of the defendant, sent an email to Mr Williams, on behalf of the plaintiff, advising that he had been instructed not to incur further costs of drafting a formal contract document until receipt of the funds promised by the plaintiff. He asked 'can you confirm timing and method of payment'. Mr Williams replied on the same day 'I am comfortable that we have agreement and have in fact delayed departure to Auckland until Friday so that the timing of the payment can be confirmed. I will keep you informed'.
The plaintiff did not pay $250,000 by 12 August. On 18 August 2011, the defendant's solicitor wrote, referring to the claim for monies owed in the letter of 18 July, and stating:
I also refer to the recent informal offer made by FTP to compromise and settle the outstanding debt to IFS dated the 6th August 2011 and the conditional acceptance of such offer by IFS dated the 7th August 2011.
FTP has neglected and/or failed to pay the sum of $250,000 by the 12th August 2011.
Accordingly, we advise that any such conditional agreement for payment is rescinded due to the breach by FTP in failing to pay the agreed sum of $250,000.
The defendant reserved its rights to recover all money owing under the Asset Sales Agreement and also stated that it would notify EDI and Fortescue Mining Group of the dispute and the property rights that it continued to have in the tanks. On the same day, and after receiving the defendant's letter, the plaintiff issued these proceedings.
The defendant's case for summary judgment
The defendant contends that the emails are unambiguous, and that the parties have formed an agreement which, properly construed, is a complete answer to the plaintiff's claim. The defendant says that the plaintiff by the agreement immediately and forever discharged, abandoned or released its claim for damages against the defendant in return for the defendant accepting the promise of further payments by the plaintiff to the defendant to a total of $500,000 only, rather than the $1.2 million being sought by the defendant. The defendant says that the plaintiff agreed to a promised certain payment and also to dropping its claim against the defendant. The compromise of the plaintiff's claim, 'points to an immediate satisfaction on the making of the agreement and not only on payment of the promised sum'.
Specifically, the defendant submits:
1.That properly construed, the agreement was that the sum of $500,000 was to be paid within a reasonable time. Alternatively, if the court does not construe the agreement as expressly providing when payment was due, it was an implied term that payment was to be made within a reasonable time.
2.The plaintiff promised to pay $500,000 to the defendant and to discharge certain liabilities and, implicitly, promised to release the defendant from the plaintiff's claim; and the defendant accepted that promise of payment and other consideration. This resulted in an immediate agreement.
3.The defendant further says that immediately on the exchange of emails the parties were free from any prior claims against each other 'including threats of tanks being recovered by the defendant from Downer'. The only claim surviving between the parties was that the plaintiff was obliged to pay the defendant $500,000 within a reasonable time, and was also required to ensure that Fuelfix had been paid.
4.The subsequent conduct of the plaintiff and defendant did not amount to a repudiation of the agreement. The letter of 18 August 2011 from the defendant's solicitor proceeded on an incorrect interpretation of the agreement. It did not amount to repudiation and the plaintiff should have attempted to persuade the defendant to a different interpretation or give the defendant an opportunity to reconsider its position (relying on DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423, 432). It should not be inferred that the defendant did not intend to perform the contract according to its terms and the plaintiff was not entitled to repudiate by commencing proceedings.
The defendant contended that, as a matter of fact, it was owed $500,000 by the plaintiff. But it has not to date brought a counterclaim, and did not persist in its claim for summary judgment for that amount.
The plaintiff's submissions
The plaintiff submits, in summary, that there was no valid and binding contract constituted by the exchange of emails. It says that those emails are ambiguous, and the court will ultimately be required to construe them having regard to the evidence in the case regarding the subject matter of the agreement and the surrounding circumstances.
First, the plaintiff says there was no agreement as to the timing of payment, as the offer by the plaintiff was that it would make payments when received from Downer, and the specific times referred to in its email of 6 August 2011 were an indication of when those payments were expected. The defendant however, required payments to be made by fixed dates. The plaintiff says the timing of payment would be an essential term of the contract and no agreement was reached on that issue.
The plaintiff says, alternatively, that if there was a binding contract it did not constitute an immediate discharge of existing causes of action. The plaintiff referred to the distinction between accord and satisfaction, accord executory, and accord and conditional satisfaction: see McDermott v Black [1940] HCA 4; (1940) 63 CLR 161, 183 ‑ 185; Scaffidi v Perpetual Trustees Victoria Ltd [2011] WASCA 159 [26] ‑ [33]. It says that the defendant's statement that it would defer further actions is consistent with existing causes of action remaining extant until the promised payment is made, and is inconsistent with an immediate extinguishment of those claims in exchange for the promise itself.
Alternatively, the plaintiff submits that, if there was an agreement formed by the exchange of emails, it was subsequently abandoned and that abandonment had the effect equivalent to rescission of the contract. The plaintiff accepts that termination of a contract will not revive a cause of action that has been discharged by agreement. It submits, however, that at the time of termination the cause of action had not been discharged.
Test for entering summary judgment
There was no dispute regarding the principles that I should apply. The power to order summary judgment is one that should be exercised with great care and should never be exercised unless its clear there is no real question to be tried: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99. The question is not whether the defendant would probably succeed in defending the action against the plaintiff. It is whether on the material before the court it has been demonstrated that the plaintiff's action should not be permitted to go to trial in the ordinary way because it is apparent that it must fail: Webster v Lampard [1993] HCA 20; (1993) 177 CLR 598, 602. While summary disposal should only be granted in clear cases, it is not reserved for 'those cases where argument is unnecessary to evoke the futility of the plaintiff's claim': General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 130.
If, as the defendant argues, the only question were the proper meaning of an agreement expressed unambiguously, so that it is a matter of construing the intention of the parties from what they said in the emails, it might be a proper case to exercise the power to grant summary judgment. But I am not satisfied that there is an agreement which can be approached in that way. There are, in my opinion, significant ambiguities or uncertainties arising from the language of emails passing between the parties.
I am satisfied that the parties intended to form a contract. The emails exchanged on 6 and 7 August 2011, in my opinion, evinces the parties' intention that they be bound to a legally enforceable agreement. The emails were between businessmen, and it appears that they were written without legal assistance. But they have the following features:
1.The plaintiff addresses its email to the directors of the defendant.
2.The plaintiff expresses its email to be with the authority and at the instruction of two directors of the plaintiff and the plaintiff. Similarly, the defendant expresses its reply as being made after consideration by the board of the defendant.
3.The parties use the language of offer and acceptance of offer.
4.Both parties refer to the preparation of a variation of the original contract (the Asset Sales Agreement).
5.The defendant says that 'in keeping with the assurances from [the plaintiff] consider this exchange of emails to constitute a legally binding contract'.
The next question is whether the essential and critical terms are agreed upon. It is, of course, difficult to separate this question from consideration of what was agreed. The essential terms were the amount to be paid, the timing of the payments, and whether the existing claims were settled.
The plaintiff in its email offers to make further payments to a total of $500,000. It says this will bring total payment to $2,845,742 'including GST'. The $500,000 is not expressed to be inclusive or exclusive of GST but that presumably is a matter that is readily calculable by the parties due to the reference to the total sum. The defendant's acceptance is expressly in terms of the sum being exclusive of GST. On the material before me, I cannot say that there was agreement as to whether the $500,000 was to be inclusive or exclusive of GST. If that were the only uncertainty, it may be possible to resolve it without the expense of a full trial.
The plaintiff says the timing of the payments 'will be in line with' payments from Downer EDI to be advised on Monday, 8 August, and then says that it is expected to be $250,000 in the week commencing 8 August and $250,000 'not more than four weeks later'. That is a sufficiently clear statement on the part of the plaintiff. The defendant responds that it looks forward to receiving the first payment no later than close of business on 12 August. Again, that is an expression of expectation, and does not signify any lack of consensus. It does, of course, leave the question of time of payment uncertain at least at 7 August 2011. The emails of 9 August refer to confirmation of the time of payments, but there is no evidence that it was confirmed. The defendant says that the law would imply that payment must be within a reasonable time. It is not necessary, in order to resolve this application, to decide whether that is correct, or to decide whether uncertainty about the time of payment is sufficient to deny that the parties had reached a legally binding agreement on 7 August or perhaps the following week.
The uncertainty regarding when payment is to be made flows into what I regard as the central question in this application: did the parties intend to immediately settle all matters relating to the contract on the promise to pay, or was the agreement conditional upon payment being made?
The email of the plaintiff sufficiently indicates that its offer is for a settlement of both parties' claims. First, it offers payment of a total of $500,000 to the defendant 'in the interests of bringing [the Asset Sales Agreement] to a conclusion'. Second, it expressly refers to the compromise of each party's claims ‑ referring to the defendant's 'loss of margin' and also to the losses suffered by the plaintiff and its case that the defendant is liable for those losses.
Similarly, the defendant refers to the aim of avoiding protracted and costly legal disputes. The defendant also says, however, 'at this stage we will defer other actions discussed at our meeting last Friday'. Those 'other actions' are not specified, and the reference to deferring them introduces an element of uncertainty into what has been agreed. In my opinion, evidence of surrounding circumstances is admissible to show what the defendant was describing when the email referred to the 'actions discussed': see DTR Nominees Pty Ltd v Mona Homes Pty Ltd (429). There is evidence that the actions discussed at the meeting included the defendant's options of recovering the tanks to which it still had title, and writing to Downer to get Downer 'to pay IFS or stop funds being paid by Downer to FTP'. If the defendant was maintaining both its retention of title and its right to pursue remedies by self help, it is uncertain whether the parties intended to effect an immediate discharge. Even if the plaintiff's email would be read as offering settlement with immediate discharge of all claims, it is at least arguable that the purported acceptance was conditional, with discharge to occur only upon the receipt of payment. There may have been agreement on a conditional release. Or there may not have been agreement at all.
Should the matter proceed, evidence of subsequent conduct and correspondence may be received to show whether or not a contract was concluded: Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68. But that is not a question I can determine on the evidence in this application.
It follows that it is also arguable that when the defendant purported to rescind the agreement on 18 August 2011, the parties' claims against each other had not been extinguished.
In the circumstances, I am not satisfied that this is such a clear case that the agreement of the parties was to an immediate discharge and extinguishment of their claims, that it should be determined summarily. The application is refused.
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