Grand Metal Pty Ltd v Nashco Pty Ltd

[2021] NSWSC 1005

Supreme Court

New South Wales

Medium Neutral Citation:

Grand Metal Pty Ltd v Nashco Pty Ltd [2021] NSWSC 1005

Hearing dates:

2 - 4 August 2021

Decision date:

12 August 2021

Jurisdiction:

Equity - Commercial List

Before:

Stevenson J

Decision:

Summons to be dismissed; judgment to be entered in favour of the cross-claimant against the first cross-defendant; cross-summons to be otherwise dismissed

Catchwords:

CONTRACT – sale of goods – whether implied term of contract that credit to $1,400,000 would be available – whether vendor estopped from denying such credit – cross-claim against guarantors – assignment of guarantee – nature of interest assigned

GUARANTEE AND INDEMNITY – cross-claim against guarantors – assignment of guarantee – nature of interest assigned

Cases Cited:

Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; [2004] HCA 28

Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410; [1995] HCA 24

Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21

Norman v Commissioner of Taxation (1963) 109 CLR 9; [1963] HCA 21

Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197; [1988] HCA 32

Surfstone Pty Ltd v Morgan Consulting Engineers Pty Ltd [2017] 2 Qd R 66; [2016] QCA 213

Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7

Texts Cited:

J D Heydon, Heydon on Contract (2019, Thomson Reuters)

Category:

Principal judgment

Parties:

Grand Metal Pty Ltd (Plaintiff/First Cross-Defendant)
Nashco Pty Ltd (Defendant/Cross-Claimant)
Tun Yang (Second Cross-Defendant)
Yingjia Fu (Third Cross-Defendant)
Yihui Zheng (Fourth Cross-Defendant)
Lui Yin Ko (Fifth Cross-Defendant)

Representation:

Counsel:
A J Greinke (Plaintiff/First Cross-Defendant)
J Sleight (Defendant/Cross-Claimant)
A J Macauley with S J Murray (Second, Third, Fourth and Fifth Cross-Defendants)

Solicitors:
Auyeung Hencent & Day Lawyers (Plaintiff/First Cross-Defendant)
Neville, Hourn & Borg Legal (Defendant/Cross-Claimant)
Du & Associates Lawyers (Second, Third, Fourth and Fifth Cross-Defendants)

File Number(s):

2019/342624

Judgment

1. The plaintiff, Grand Metal Pty Ltd, is a distributor of metal building materials (“the Goods”).

2. The defendant, Nashco Pty Ltd, is a fabricator of such Goods and, between July 2018 and October 2019, supplied the Goods to Grand Metal pursuant to the arrangements to which I refer below.

3. Grand Metal claims damages from Nashco arising out of Nashco’s alleged failure to allow it “to purchase goods on credit up to $1,400,000”.

4. Grand Metal claims that Nashco’s refusal to supply further Goods on such credit terms was a breach of an implied term of the contract pursuant to which Nashco supplied the Goods to Grand Metal or was “alternatively subject to an estoppel preventing [Nashco] from refusing that supply or withholding credit”.

5. By Cross-Summons, Nashco seeks to recover from Grand Metal and also from four individuals (“the Guarantors”) the balance it contends is owing to it by Grand Metal, being $943,694.25 together with interest from 27 February 2020.

Decision

6. Grand Metal’s claim against Nashco fails and must be dismissed.

7. On the Cross-Summons, Nashco is entitled to judgment against Grand Metal. Its claim against the Guarantors fails and must be dismissed.

The events leading to these proceedings

8. The sole shareholder of Nashco is A K B Investments Pty Ltd, a family company associated with Mr Adrian and Mrs Kristina Brewer and their son, Mr Brenton Brewer.

9. Prior to July 2018, the business now operated by Nashco was operated by Mr and Mrs Brewer, as partners, trading under the name “Nashco”.

10. On 29 June 2016, Mr and Mrs Brewer entered into a Supply Agreement with Grand Metal (“the 2016 Supply Agreement”).

11. There were terms of the 2016 Supply Agreement that:

1. the agreement would apply to each Order Form issued by Grand Metal to Mr and Mrs Brewer during the Term, defined to mean five years from the date of the 2016 Supply Agreement; [1]

   1. Clause 2(a).

2. it and its attachments contained the entire agreement between Mr and Mrs Brewer and Grand Metal with respect to the sale and purchase of the Goods; [2]

   2. Clause 2(b); “Goods” defined to mean “concealed ceiling systems and wall systems, or otherwise as specified in the Pricing Schedule”.

3. it included the attached Credit Account Application and that “such Credit Account Application shall not be amended unless agreed to by [Mr and Mrs Brewer] in writing to” Grand Metal; [3]

4. Mr and Mrs Brewer could revise the Pricing Schedule at any time by giving Grand Metal 15 business days’ notice; [4]

5. unless otherwise specified in the Order Form, Grand Metal must pay the Price of the Goods “within the terms outlined in the Credit Account Application” whether or not there was any dispute or difference about the matter; [5]

6. to the extent permitted by law, and with an irrelevant exception, Mr and Mrs Brewer’s “aggregate liability…arising from any cause of action…in connection with the Goods, any obligation under this Agreement, or the relationship between the parties, is limited to the Price; [6] and

7. Mr and Mrs Brewer could terminate the Agreement for any reason by giving Grand Metal three months’ notice and could terminate the Agreement immediately if Grand Metal defaulted on payment in accordance with cl 7. [7]

   3. Clause 2(d).

   4. Clause 3(e).

   5. Clause 7.

   6. Clause 10(c).

   7. Clauses 12(a) and (b).

12. On 1 July 2016, Grand Metal executed a “Credit Account Application” in the form attached to the Supply Agreement. The application sought an “Approved Credit Limit” of $750,000 and specified that the “Approved Payment Terms” were “60 Days from the last calendar date of the month in which the goods were received”.

13. There were attached to the Credit Account Application as executed by Grand Metal “Terms and Conditions of Trade”.

14. Those Terms and Conditions included terms that:

1. such terms could only be amended with the written consent of Mr and Mrs Brewer; [8]

2. Mr and Mrs Brewer “shall be under no liability whatever to [Grand Metal] for any indirect loss and/or expense (including loss of profit) suffered by [Grand Metal] arising out of a breach by [Mr and Mrs Brewer] of these terms and conditions”; [9] and

3. “[i]n the event of any breach of this contract by [Mr and Mrs Brewer] the remedies of [Grand Metal] shall be limited to damages which under no circumstances shall exceed the Price of the Goods”. [10]

   8. Clause 2.3.

   9. Clause 19.3.

   10. Clause 19.4.

15. Also attached to the 2016 Supply Agreement was a form of “Personal/Director Guarantee and Indemnity” (“the Guarantee”).

16. On 1 July 2016, the Guarantors executed the Guarantee. I will return to its terms when considering Nashco’s Cross-Summons against the Guarantors.

17. From July 2016, Grand Metal submitted “Purchase Orders” for Goods to “Nashco”.

18. Mr and Mrs Brewer, trading as “Nashco,” provided Goods to Grand Metal on the terms of the Supply Agreement.

19. Nashco was incorporated on 1 June 2018.

20. Without formal announcement, Nashco began fulfilling Purchase Orders addressed by Grand Metal to “Nashco”.

21. Nashco did not seek to have Grand Metal execute a fresh Supply Agreement or Credit Account Application and did not seek to have the Guarantors execute a further guarantee.

22. Evidently, both Grand Metal and Nashco were content to proceed on the basis that their contractual arrangements were on the same terms as those hitherto governing the arrangements between Grand Metal and Mr and Mrs Brewer.

23. Thus, in closing submissions, Dr Greinke, who appeared for Grand Metal, submitted that the “better inference is that the parties implicitly by conduct adopted the previous relationship that has existed between [Grand Metal] and the previous partnership through its supply agreement”. [11]

    11. T122.16.

24. That submission, which I accept, reflects the manner in which the parties conducted themselves from July 2018.

25. I return below to the position of the Guarantors.

26. From July 2018, Grand Metal continued to place orders on “Nashco” for Goods. Nashco delivered and invoiced Grand Metal for those Goods. Grand Metal paid Nashco for the Goods, albeit not timeously.

27. Throughout the period from June 2017 to October 2019, Grand Metal regularly failed to pay the amounts due to Mr and Mrs Brewer, and then Nashco, within the “Approved Payment Terms” specified in the 1 July 2016 Credit Account Application: 60 days from the end of month of delivery of the Goods.

28. In 20 of those 28 months, Grand Metal exceeded the credit limit of $750,000 specified in the 2016 Credit Account Applications.

29. The monthly Statements sent by Mr and Mrs Brewer to Grand Metal between July 2017 and June 2018, and by Nashco to Grand Metal from July 2018 to October 2019 showed that the “Total Balance” and “Overdue Balance” owing by Grand Metal were as set out in the following table:

Date	Total Balance	Overdue Balance
Mr and Mrs Brewer partnership
30 June 2017	$1,249,494.27	$746,505.09
31 July 2017	$1,492,656.44	$966,589.86
31 August 2017	$1,461,302.41	$1,029,055.76
30 September 2017	$1,317,314.58	$958,313.23
31 October 2017	$1,158,345.86	$791,248.00
30 November 2017	$1,069,192.22	$726,099.21
31 December 2017	$908,345.36	$710,190.87
31 January 2018	$859,681.73	$541,247.50
28 February 2018	$910,877.12	$516,588.72
31 March 2018	$927,742.63	$462,722.63
30 April 2018	$1,298,246.35	$859,308.40
31 May 2018	$1,458,918.15	$903,957.95
30 June 2018	$1,068,316.87	$554,960.20
Nashco
31 July 2018	$451,002.09	$ nil
31 August 2018	$513,356.67	$513,356.67
30 September 2018	$1,235,013.64	$964,053.16
31 October 2018	$1,084,825.29	$784,011.55
30 November 2018	$720,531.77	$300,813.74
20 December 2018	$944,283.02	$720,531.77
31 January 2019	$883,424.37	$643,469.28
28 February 2019	$661,626.00	$463,706.34
31 March 2019	$493,843.88	$197,919.66
30 April 2019	$619,640.32	$295,924.22
31 May 2019	$748,903.18	$419,640.32
30 June 2019	$527,708.06	$329,262.86
31 July 2019	$946,326.16	$497,116.94
31 August 2019	$1,056,022.29	$623,510.39
30 September 2019	$943,694.25	$881,721.12
31 October 2019	$943,694.25	$943,694.25

30. During this period, there were many communications between Mr Adrian or Mr Brenton Brewer on the one hand, and directors of Grand Metal on the other, concerning Grand Metal’s continual failure to pay for the Goods delivered within the Approved Payment Terms. Grand Metal pointed to cash flow difficulties it had arising from the failure of its customers to make timeous payments and, the evidence suggests, did its best to remedy its failure to adhere to the Approved Payment Terms. Nonetheless, it was very regularly in breach of those terms.

31. In March 2019, and in the context of notifying a price increase, [12] Nashco notified Grand Metal that the Approved Payment Terms would be reduced from 60 days from the end of the month of delivery to 45 days from end of month, and then 30 days from end of month.

    12. As was its entitlement under cl 3(e) of the Supply Agreement: see [11(d)] above.

32. At the hearing, much time was devoted to this decision and to the question of whether or not Grand Metal agreed with it or acquiesced in it. But it was not suggested on behalf of Grand Metal that Nashco was not, in the circumstances, entitled to take this course. In my opinion, Nashco was entitled by cl 2(d) of the Supply Agreement to alter the Approved Payment Terms. [13]

    13. See [11(c)] above.

33. Ultimately, in September 2019, Nashco refused to supply Goods to Grand Metal other than on a “cash on delivery” basis and in October 2019 ceased all supply.

34. By this time, as I have said, Grand Metal had regularly been in default of the Approved Payment Terms. Nashco was thus entitled to terminate the Supply Agreement “immediately”. [14]

    14. See [11(g)] above.

35. Grand Metal makes no complaint about these matters in the proceedings.

36. Rather, Grand Metal’s complaint relates to Nashco’s provision of credit to it beyond the Approved Credit Limit of $750,000. Throughout this period there were also regular communications between the parties about that matter. I will return to the detail of these communications below when considering Grand Metal’s estoppel claim.

Grand Metal’s case

37. Grand Metal’s case as articulated in its List Statement is that because Nashco permitted the balance of Grand Metal’s account to exceed $750,000 to the extent revealed in the table at [29]:

1. there was an agreement implied by conduct[15] between Grand Metal and Nashco “for the provision of credit, which terms afforded [Grand Metal] ongoing credit of up to at least $1,400,000 for goods supplied by [Nashco]”; or

2. alternatively, Nashco “is estopped from denying that [Grand Metal] would continue to be extended credit for goods purchased from [Nashco], up to at least $1,400,000”. [16]

   15. List Statement C18 - see Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410 at 442; [1995] HCA 24 (McHugh and Gummow JJ); and J D Heydon, Heydon on Contract (2019, Thomson Reuters) at [10.900].

   16. List Statement C19.

38. Grand Metal alleges in its List Statement [17] that from May 2019, and in breach of that implied term and contrary to a representation that appears to be implicit in Grand Metal’s estoppel claim, Nashco informed Grand Metal that:

1. its credit “was reduced immediately to $750,000”;

2. it was required “to make repayment of the excess”; and

3. Nashco “would not supply any further goods…on credit, save in accordance with the reduced credit terms”.

   17. At C20.

39. Grand Metal contends that Nashco was not entitled to “unilaterally [reduce] the credit terms” nor demand “payment of the excess” without giving Grand Metal “at least 12 months’ prior notice” so as to allow Grand Metal time “to arrange its affairs to avoid any consequential detriment”.

40. Grand Metal claims it has thereby suffered damage because:

1. goods supplied by Nashco represented approximately 60% of the total sales revenue for Grand Metal;

2. Grand Metal was placed in the position where it could not fulfill the existing orders;

3. such orders were accordingly cancelled or unfulfilled;

4. Grand Metal became liable for damages for breach of contract of supplies;

5. Grand Metal became unable to accept any new orders for supply of goods;

6. Grand Metal fell under cash flow and capital pressure; and

7. Grand Metal suffered loss of reputation and goodwill in the marketplace. [18]

18. List Statement C26.

Grand Metal’s case in contract

41. The first point to make about Grand Metal’s contract claim is that, contrary to the allegation in its List Statement [19] , Nashco did not, in May 2019, nor at all, inform Grand Metal that the Approved Credit Limit “was reduced immediately to $750,000”. The Approved Credit Limit was at all times $750,000. The misconception behind this allegation appears to derive from Grand Metal’s directors’ apprehension that the fact that Nashco from time to time permitted Grand Metal credit beyond $750,000 somehow had the effect of increasing the Approved Credit Limit beyond that figure. [20]

    19. See [38(a)] above

    20. See the evidence of Mr Richard Yang at T76.31ff.

42. It was an express term of both the Supply Agreement and of the Credit Account Application that the terms of the Credit Account Application, including as to the Approved Credit Limit, could only be varied with Nashco’s written consent. [21]

    21. See [11(c)] and [14(a)] above.

43. There is no suggestion in the evidence that Nashco consented, let alone in writing, to a variation of the Approved Credit Limit by increasing it from the $750,000 to $1,400,000.

44. Indeed, as I set out below when dealing with Grand Metal’s estoppel claim, Nashco regularly drew Grand Metal’s attention to the fact that its drawings under its account with Nashco over and above the $750,000 Credit Limit were unacceptable to Nashco.

45. In closing submissions, Dr Greinke in effect accepted that this was so, and that this was fatal to Grand Metal’s contract case. [22]

    22. T122.49.

46. Leaving aside the contractual provisions concerning a variation of contract, I see no basis upon which I could conclude that there was any conduct of the parties from which it could be implied that there was an agreement binding on Nashco to permit Grand Metal a Credit Limit of $1,400,000.

47. Grand Metal’s contract case fails.

Grand Metal’s estoppel case

48. As developed in closing submissions, Dr Greinke put Grand Metal’s estoppel case as being one of “estoppel by acquiescence”.

49. In his written submissions, Dr Greinke pointed to the “actual conduct of the trading” between Mr and Mrs Brewer, and then Nashco and Grand Metal and to the fact that there were “credit amounts consistently in excess of $750,000 and in excess of some $1,400,000” as set out in the table at [29] above.

50. Dr Greinke submitted in writing that “Nashco (whether as the partnership or the company) did not complain about Grand Metal regularly exceeding the $750,000 ‘credit limit’” and submitted orally that:

“…there was an acquiescence in my client ordering goods that have an amount of credit in excess of the 750,000, and regularly doing that without complaint”. [23]

23. T124.8.

51. But both Mr and Mrs Brewer, and then Nashco, did “complain” about Grand Metal exceeding the Approved Credit Limit; and Grand Metal in terms acknowledged the Approved Credit Limit.

52. Thus:

1. on 7 March 2018, Mr Brenton Brewer had a conversation with the managing director of Grand Metal, Mr Richard Yang:

Mr Brewer:

“You need to make payment within 60 days and keep the account down to the $750,000 limit at all times. We have allowed some leniency however, this was never intended to be ongoing”.

Mr Yang:

“We have had cash flow difficulties. Our cash flow will be back to normal by April 2018”.

2. on 13 August 2018, Mr Brewer wrote to Mr Steven Fu, another director of Grand Metal:

“I have just been advised your account has been put on hold as you have reached your credit limit, as well as the May balance being overdue. Are you able to attend to this urgently please?”

3. On 30 July 2019, Mr Adrian Brewer wrote to Mr Phoenix Zheng, the operational director of Grand Metal:

“Thanks for your orders below.

These orders will take you over your Credit limit. We will need payment of May invoices so we can process them and book freight for pickup here tomorrow”.

4. On 5 August 2019, Mr Brenton Brewer had a conversation with Mr Fu:

Mr Fu:

“We cannot make payment until after the 15^th. We have two cheques from customers but we cannot bank them until after the 15^th”.

Mr Brewer:

“I can’t release any supply as you’re over your credit limit”.

5. On 16 August 2019, Mr Yang wrote to Mr Adrian Brewer:

“So we hope you could lift credit limit for Grand Metal as we don’t want these customers upset because we are running out of stock. We are more than happy to pay 30 days to Nashco and likewise we hope Nashco can give us support on credit limit to develop our business in this slow market”.

6. On 29 August 2019, Mr Adrian Brewer wrote to Mr Zheng:

“Unfortunately I cannot dispatch [an identified load] until I receive another payment as your credit limit has been exceeded again. In fact I need to get another payment before the truck arrives on Friday”.

7. On 30 August 2019, Mr Brenton Brewer wrote to Mr Yang:

“We have already extended credit to you well past your agreed credit limit of $750,000”.

8. Mr Yang replied the same day:

“Thanks, if we purchase 500k a month, we need at least 1000K limit to keep our business running”.

9. On 25 September 2019, Mr Brenton Brewer wrote to Mr Fu:

“Grand Metal has, for some time now, broken the agreed credit terms as per our Supply Agreement which are payment within 60 days with $750,000 credit limit”.

10. On 25 September 2019, Mr Zheng wrote to Mr Adrian Brewer:

“Due to the situation of account status and credit limit issue, please CANCEL below purchase orders or back orders”.

11. On 30 September 2019, Mr Adrian Brewer wrote to Mr Fu:

“Your Credit Limit was set out in the Supply Agreement which also outlines the terms & conditions of payment. Unfortunately, we cannot increase your credit limit when we are receiving your payments outside of these terms and we have no security over unencumbered assets from you. We can review your credit limit if we receive this support from you”.

53. Thus, throughout the period from, at least, March 2018 to very shortly before Nashco ceased supply to Grand Metal, Mr and Mrs Brewer, and then Nashco made clear, time and time again, that they expected Grand Metal would operate within the credit limit of $750,000. And, Grand Metal regularly acknowledged the credit limit and did not once suggest that it understood the limit had been increased beyond the Approved Credit Limit of $750,000.

54. In relation to the credit limit, Mr Yang gave this evidence in one of his affidavits:

“During the course of dealing from 2016 to 2019, Grand Metal regularly purchased goods from the Nashco business on credit. The amount of credit often exceeded $750,000 and would in credit up to $1,400,000, without [Mr and Mrs Brewer] or [Nashco] requiring Grand Metal to comply with a credit limit.

Because of this trading history, on behalf of Grand Metal I assumed that Grand Metal would continue to be able to purchase goods from the Nashco business, without any issues as to a credit limit, up to $1,400,000 or more.

I relied on this assumption in continuing to purchase building materials from the Nashco business, and to purchase goods on credit up to $1,400,000 and more.”

55. As the table at [29] reveals, it is true, as Mr Yang deposed, that the amount of credit afforded by Mr and Mrs Brewer, and then Nashco to Grand Metal, exceeded $750,000 and, on one occasion [24] exceeded $1,400,000.

    24. May 2018.

56. But the communications that I have set out at [52] above show that Mr and Mrs Brewer, and then Nashco, did not acquiesce in that arrangement and regularly reminded Grand Metal of its contractual obligation to observe the Approved Credit Limit. Not only that, but Grand Metal, in writing, acknowledged the limit and did not ever suggest it had the understanding or made the assumption to which Mr Yang deposed.

57. Dr Greinke relied upon a promissory estoppel of the kind referred to in the High Court of Australia in Waltons Stores (Interstate) Ltd v Maher. [25]

    25. (1988) 164 CLR 387; [1988] HCA 7.

58. But an essential element of the extended promissory estoppel established in that case is that the plaintiff assumed that a particular legal relationship existed and that “the defendant has induced the plaintiff to adopt that assumption or expectation”. [26]

    26. At 429 (Brennan J).

59. That has not been established here. Nashco did not induce Grand Metal to assume that the Approved Credit Limit had been increased from $750,000 to $1,400,000. To the contrary, Nashco regularly reminded Grand Metal that it had not.

60. Grand Metal’s estoppel claim fails.

Damages

61. In those circumstances, it is not necessary to deal with Grand Metal’s claim for damages.

62. However, I will do so briefly.

63. Grand Metal adduced evidence from an expert forensic account, Mr Paul Croft from BRI Ferrier.

64. Mr Croft expressed an opinion as to Grand Metal’s loss based on assumptions he made, which were very largely based on the evidence of Mr Yang.

65. Mr Croft expressed his opinions based on two scenarios. Dr Greinke accepted that, in the events that have happened, only “Scenario Two” was relevant, namely that:

“[T]he conditions for continued supply of Nashco products imposed by [Nashco] were too onerous for the business to continue to sell Nashco products, causing [Grand Metal] to cease its Nashco operations, continuing to sell only non-Nashco products”.

66. Mr Croft expressed the opinion that Grand Metal’s loss on that scenario was $191,897.

67. Mr Croft assumed, for the purpose of his report, that “as a result of [Nashco’s] actions” Grand Metal had “suffered a loss of sales” because Grand Metal could not “provide its customers” with Goods of the nature and quality supplied by Nashco and because Grand Metal’s customers preferred to acquire Goods “from a single supplier”.

68. The evidence that Grand Metal sought to adduce to establish that it had suffered loss as a result of Nashco’s alleged conduct was in an affidavit made by Mr Yang.

69. A difficulty for Grand Metal is that almost all that evidence was in inadmissible form, was objected to and rejected.

70. The only evidence that Mr Yang deposed to in his affidavit that survived objection relevant to the question of loss was that “Grand Metal tried to source alternative suppliers”. I gave Dr Greinke leave to adduce evidence from Mr Yang in proper form as evidence in chief.

71. Mr Yang gave evidence that, at some time during Grand Metal’s relationship with Nashco, alternative suppliers, being “Rondo Metal” and “Knauf”, approached him as potential suppliers of goods to Grand Metal. Mr Yang said that he told the representatives of each of these entities that he did not wish to “change the supplier” from Nashco.

72. Mr Yang did not give evidence as to whether or not, following the cessation of Grand Metal’s relationship with Nashco, he again approached either entity.

73. Ultimately, Mr Yang gave this evidence:

“Q. Were you able to source alternative suppliers?

A. After, after, we had a problem with Nashco, yes, I can find an alternative supplier from overseas.

Q. Which alternative supplier are you talking about?

A. The suppliers making the metal material, but it is not actually the Nashco range, the Nashco range.

Q. Okay. Were you able to find any alternative suppliers for the Nashco range of products?

A. No, we asked them to, so they can find for me.

Q. I didn't quite understand your answer. Could you explain what you mean by that?

A. My answer is "yes".

Q. And when did this happen?

A. After we had the supply problem with Nashco, I think in the November, you know, 2019. I start contacting with overseas supplier, because we got a seriously supply shortage from Nashco.”

74. As Dr Greinke accepted in closing submissions:

“It's candidly, I’d have to say, opaque, your Honour.”

75. The result is that Grand Metal did not prove the critical matters assumed by Mr Croft, thus rendering his report inadmissible. [27]

    27. Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21 at [66] (Heydon J).

76. In any event, it was an express term of the Supply Agreement that Nashco’s liability for any breach of the Supply Agreement was limited to the “Price” for Goods and did not extend to indirect losses including loss of profit. [28] Dr Greinke referred to cases referring to the need to draw the terms of exemption clauses to the attention of those sought to be bound by them. [29] But those cases are concerned with circumstances where the person sought to be bound did not execute the document containing the exemption clause. That is not this case. Grand Metal executed both the Supply Agreement and the Credit Account Application. It is bound by the terms of those documents, whether or not any of its officers read them. [30]

    28. See [11(f)] and [14(b) and (c) above].

    29. For example, Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 229; [1988] HCA 32 at [15 ] (Brennan J) and the cases there referred to; Surfstone Pty Ltd v Morgan Consulting Engineers Pty Ltd [2017] 2 Qd R 66; [2016] QCA 213 at [51]-[56] (Margaret McMurdo P, Morrison JA and Atkinson J.

    30. For example, Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [57] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

Conclusion on Grand Metal’s case

77. Grand Metal’s case against Nashco fails and must be dismissed.

Nashco’s cross-claim against Grand Metal

78. It follows that Nashco’s cross-claim against Grand Metal succeeds. Nashco claims “damages” of $943,694.25 plus interest.

79. In fact, Nashco’s claim against Grand Metal is in debt. The parties should confer and agree on the quantum of that debt and of the orders necessary to give effect to these reasons.

Nashco’s cross-claim against the Guarantors

80. Nashco’s case against the Guarantors relies upon an assignment by Mr and Mrs Brewer to Nashco of their entitlements under the Guarantee.

81. The Guarantee was, relevantly, in the following terms:

“AG BREWER & KM BREWER T/AS NASHCO…

Personal/Directors Guarantee and Indemnity IN CONSIDERATION of A G Brewer & K M Brewer T/A Nashco and its successors and assigns (‘the Seller’) at the request of the Guarantor (as is now acknowledged) supplying and continuing to supply goods and/or services to:

(Full Name) Grand Metal Pty Ltd (‘the Customer’)

I/WE (also referred to as the ‘Guarantor/s’) UNCONDITIONALLY AND IRREVOCABLY:

1.   GUARANTEE the due and punctual payment to the Seller of all moneys which are now owing to the Seller by the Customer and all further sums of money from time to time owing to the Seller by the Customer in respect of goods and services supplied or to be supplied by the Seller to the Customer or any other liability of the Customer to the Seller, and the due observance and performance by the Customer of all its obligations contained or implied in any contract with the Seller. If for any reason the Customer does not pay any amount owing to the Seller the Guarantor will immediately on demand pay the relevant amount to the Seller.” (Emphasis added.)

82. By a “Deed of Assignment of Business” dated 3 July 2018, Mr and Mrs Brewer assigned their right in the Nashco “Business” to Nashco.

83. Thus cl 3 of that deed provided:

“[Mr and Mrs Brewer] with effect from 3 July 2018, assigns to [Nashco] absolutely the whole of [Mr and Mrs Brewer’s] right, title and interest in all the Business and the Business rights and obligations, and all rights and privileges incidental thereto”.

84. Assuming that the benefit of the Guarantee was thereby assigned by Mr and Mrs Brewer to Nashco, and that Nashco was an “assign” of Mr and Mrs Brewer, [31] the question arises as to what benefit under the Guarantee was so assigned.

    31. It was not suggested on behalf of Nashco that it was a “successor” to Mr and Mrs Brewer.

85. Mr and Mrs Brewer could only assign to Nashco the rights they had at the time of the assignment. [32] Those rights were to recover from Grand Metal any monies due to them by Grand Metal. The reference in the opening words of the Guarantee that I have set out at [81] to “assigns” can only be a reference to such entity as Mr and Mrs Brewer have assigned their interest under the Guarantee. If the parties’ intention had been to refer to an entity to which Mr and Mrs Brewer had assigned their interest in the “Nashco” business, much clearer words would have been required. To the extent there is any ambiguity in the words used, it must be resolved in favour of the Guarantors. [33]

    32. This is common ground: see the submissions of Mr Sleight for Nashco at [89] and of Mr Macauley and Mr Murray for the Guarantors at [27]; and see Norman v Commissioner of Taxation (1963) 109 CLR 9; [1963] HCA 21 at 26 [11] (Windeyer J).

    33. See Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; [2004] HCA 28 at [17] (Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ) and the cases there referred to therein.

86. Nashco as assignee of that entitlement, could recover from Grand Metal any amount owing by Grand Metal to Mr and Mrs Brewer.

87. But, it is common ground that no such amount is owing. The amounts owing are owing by Grand Metal to Nashco itself.

88. Nashco’s cross-claim against the Guarantors proceeds upon the basis that the effect of the Deed of Assignment was somehow to novate the Guarantee in favour of Nashco.

89. In my opinion, that was not the effect of the Deed of Assignment.

90. Accordingly, Nashco’s cross-claim against the guarantors fails.

Conclusion

91. The parties should confer and agree on the orders necessary to give effect to these reasons.

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Endnotes

Decision last updated: 12 August 2021