Leader Computers Pty Ltd v Panlyn Australia Pty Ltd

[2023] WADC 3

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CIVIL

LOCATION:   PERTH

CITATION:   LEADER COMPUTERS PTY LTD -v- PANLYN AUSTRALIA PTY LTD [2023] WADC 3

CORAM:   REGISTRAR KINGSLEY

HEARD:   30 OCTOBER 2022 & 3 NOVEMBER 2022

DELIVERED          :   19 JANUARY 2023

FILE NO/S:   CIV 1776 of 2020

BETWEEN:   LEADER COMPUTERS PTY LTD

Plaintiff

AND

PANLYN AUSTRALIA PTY LTD

First Defendant

HONG HUA ZIAO

Second Defendant

AUSTIN COMPUTERS PTY LTD

Third Defendant

Catchwords:

Practice - Application for summary judgment - No new principles

Legislation:

Australian Consumer Law, s 23, s 24

Result:

Application dismissed

Representation:

Counsel:

Plaintiff	:	Mr J Scovell
First Defendant	:	Mr M Crowley
Second Defendant	:	No appearance
Third Defendant	:	No appearance

Solicitors:

Plaintiff	:	Oakbridge Lawyers
First Defendant	:	Exceed Legal
Second Defendant	:	Not applicable
Third Defendant	:	Not applicable

Case referred to in decision:

Rhodes v De Castro [2022] WASC 214

REGISTRAR KINGSLEY:

1. The plaintiff (Leader) has brought a summary judgment application against the first defendant (Panlyn) seeking judgment in the sum of $399,505.50.

2. Leader's application is supported by the affidavit of Christopher John Pitman, filed 21 June 2022, and the affidavit of Caitlin Margaret Deacy, lodged 18 October 2022.  Panlyn has filed an affidavit in opposition through Yonggang Tan, filed 25 August 2022. 

3. Leader's counsel submits, in essence, that Leader's claim against Panlyn is in the sum of $399,505.50 for the purchase and delivery of computer hardware to Panlyn by Leader, pursuant to a written credit agreement entered into on or about 25 May 2018 for which payment has not been made. 

4. As is often the case, the reality is a little more complicated.  The third defendant (Austin) granted, by written franchise agreement, a licence to Panlyn to operate the business known as Austin Computers from certain premises.  Pursuant to the franchise agreement, Panlyn would pay to Austin a franchising fee. 

5. By notice dated 3 December 2010, Austin gave notice to Panlyn that it was in default of its obligations under the Franchise Agreement and demanded payment of $246,420.50.  Panlyn has failed to pay that amount.

6. On 1 January 2020, Austin took possession of the various stores operated by Panlyn, such taking of possession including all computer supplies that were on the premises.

7. Panlyn was in default of its leases of the various stores by reason of non‑payment of rent.  The landlords of the various stores have assigned their debt to Austin.  Austin has brought proceedings in this court against Panlyn and Panlyn's guarantors.

8. Leader, pursuant to an agreement entered into on or about 25 May 2018, supplied computer material to Panlyn which Panlyn incorporated into computer hardware and on sold that hardware to third parties. 

9. Pursuant to the agreement, the legal and beneficial ownership of the goods remained with Leader for so long as Panlyn has paid the invoice price.  All the goods supplied by Leader fell under the Personal Property Securities Act (2009) and Panlyn acknowledged that Leader had been granted a security interest and consented to Leader registering the goods supplied to Panlyn on the PPS register. 

10. Austin's taking possession of all stock held by Panlyn as security for the debt owed to Austin by Panlyn is the subject of Leader's claim against Austin.

Legal principles

1. The legal principles applicable to a summary judgment application have been summarised by Hill J in Rhodes v De Castro [2022] WASC 214. In essence, there are two general themes; the exercise of power to summarily determine an action must be attended with caution and, secondly, it is only in the clearest of cases where there is a high degree of certainty about the ultimate outcome of the proceeding if it went to trial that summary judgment ought to properly be granted.

Discussion

1. In my opinion, this case is one of those rare incidences where Panlyn has satisfied me that there ought, for some other reason, be a trial of the action - see O 14 r 3(1).

2. Austin, under the terms of its franchise agreement and the assignment of leases, has taken possession of Panlyn's goods that were on the premises.  Some of those goods are the goods of Leader.  Leader acknowledges this insomuch as it sues Austin on the basis that Austin holds Leader's goods on trust.  Whilst Leader has brought a liquidated claim against Panlyn and Austin, the quantification of that claim (whether there can be any mitigation of loss) depends on the extent Austin is found to be holding some, or all, of Leader's goods.

3. It is accepted that Leader does not have a duty to mitigate but, in this incident, Leader has identified Austin as being in possession of some, if not all, of Leader's goods.  In my opinion, it would be inappropriate to give judgment to Leader against Panlyn when there sits, expectantly, a live claim against Austin.

4. Panlyn submits that any judgment against it by Leader would tip it into insolvency.  Ordinarily, that submission would carry little weight.  However, in the context of this proceeding, Panlyn pleads that Austin was aware that Leader had supplied stock to Panlyn and that that stock had not been paid for.  Panlyn pleads that by taking possession of the stock, Austin wrongfully, and with the intent to injure Panlyn, caused Panlyn to breach its agreement with Leader.

5. Alternatively, Panlyn pleads that in breach of the Lease agreement, Austin unlawfully removed stock because Austin had no entitlement under the lease to remove goods on the premises that belonged to third parties.

6. In my opinion, these are circumstances that warrant investigation and, again, illustrate that the claims of Leader, Panlyn and Austin are all interlinked.

7. If judgment were entered against Panlyn it is likely those claims could not be pursued.

8. In its amended defence, Panlyn pleads a breach of s 23 Australian Consumer Law in that Panlyn pleads that the agreement between it and Leader was unfair.  It was this issue that was the principal argument on the second hearing on 3 November 2022. 

9. Notwithstanding the spirited defence by Leader's counsel, there may be some argument raised in the defence.  The credit agreement was presented by Leader to Panlyn and it would appear that Panlyn had no reasonable opportunity to negotiate any of the terms.

10. A term in a consumer contract is unfair if it would cause significant imbalance in the parties' rights and obligations, is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, and it would cause detriment to a party if it were applied or relied on (s 24 Australian Consumer Law).  Leader submitted that the term of a contract was expressed in reasonably plain language, it was legible, and was clearly and readily available to Panlyn. 

11. In my opinion, there is at least an arguable point in that it would appear Leader had most of the bargaining power in the transaction; the contract was prepared by Leader apparently before any discussions relating to the transaction, and it would appear Panlyn was, in effect, required to accept or reject the contract in the terms in which they were prepared. 

12. Finally, there is an argument that the statement of claim is defective.  The admitted 2018 agreement was a promise by Leader to supply goods to Panlyn.  Panlyn made an offer to Leader for the supply of goods and Leader raised an invoice for each offer; that invoice incorporating the general terms and conditions.  Leader pleads that Panlyn is indebted to Leader pursuant to the invoices, but the invoices outstanding are not particularised.

13. It would appear that there have been a series of transactions resulting in the rendering of the invoices by Leader to Panlyn.  Some of those invoices have been paid but, according to Leader, some $363,186.82 remains outstanding.  As each individual invoice is a formed contract, Leader must plead the breach of each contract to sustain a viable cause. 

14. Leader's statement of claim does not identify which particular invoices remain unpaid and are therefore in breach of the terms of the contract.  Panlyn does not have any particulars of the invoices to which it can properly plead.

Conclusion

1. For the reasons given above, in my opinion, judgment ought not be given to Leader on its claim.

2. I will hear from counsel as to the form of orders, costs, and the future progress of the action.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.

TS

Court Officer

19 JANUARY 2023