Lodur Pty Ltd v Pearl Bay Corporation Pty Ltd - [2000] WADC 243

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: LODUR PTY LTD -v- PEARL BAY CORPORATION PTY LTD [2000] WADC 243

CORAM: LA JACKSON DCJ

HEARD: 15 SEPTEMBER 2000

DELIVERED : 6 OCTOBER 2000

FILE NO/S: CIV 1759 of 2000

BETWEEN: LODUR PTY LTD (ACN 008 969 257)
Plaintiff
AND
PEARL BAY CORPORATION PTY LTD (ACN 070 319 103)
Defendant

Catchwords:

Practice and procedure - Summary Judgment application

Legislation:

Nil

Result:

Application for Summary Judgment partially successful

Representation:

Counsel:

Plaintiff: Mr R M Wilenski
Defendant: Mr R Shaw

Solicitors:

Plaintiff: Hammond Worthington
Defendant: Phillips Fox

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

Galambos v McIntyre (1974) 5 ACTR 10
Mondel v Steel (1941) 8 M & W 858

Case(s) also cited:

Algons Engineering Pty Ltd v Taras Nominees Pty Ltd [1998] VSC 205
Causer v Browne [1952] VLR 5-7
Clark Equipment v Covcat (1987) 71 ALR 367
Colonial Bank of Australia v De Faro (1894) 20 VLR 241
Dames & Moore Pty Ltd & Ors v Jovista Pty Ltd & Ors [1998] WASC 157
Evans v Bartlam [1937] AC 34
Fancourt v Mercantile Credit Limited (1983) 154 CLR 87
Hazcor Pty Ltd v Kinwanon (1995) 12 WAR 62
LU Simon Builders Pty Ltd v H D Fowles & Ors (1992) 2 VR 189
Modern Engineering v Ash [1974] AC 689
Petera Pty Ltd v EAJ Pty Ltd (1984) 7 FCR 375
Saberno Pty Ltd v de Groot (1991) 8 BCL 132
Webster v Lampard (1993) 177 CLR 598
Westwind Air Charter Pty Ltd v Hawker De Havilland Ltd (1990) 3 WAR 71

LA JACKSON DCJ: This is an application by the plaintiff for summary judgment.
The plaintiff trades as Bergmeier Earthmoving carrying on the business of, inter alia, suppliers of road base materials for use in construction work. The defendant is a civil engineering contractor trading as Monaveen Civils. Early in 2000 the defendant entered into a contract with the City of Kalgoorlie Boulder, for civil works to the Kalgoorlie Boulder Airport. As part of that contract the defendant entered into a contract with the plaintiff for the supply of road base materials to be supplied in March, April and May 2000.
Although I have no specific information about it, it appears that the plaintiff had supplied materials to the defendant for other contracts on earlier occasions. It appears that the plaintiff's methods of operation for the supply of materials over a period of time included a requirement for the purchaser to enter into a credit account agreement. By an undated document bearing a facsimile date 19 August 1999 headed in the name of the plaintiff and styled "Application for Credit Account" the defendant applied for credit with the plaintiff. On 24 August 1999 the defendant's application was accepted. The defendant was given an account number 1918. Some materials had been supplied by the plaintiff to the defendant and the defendant had been charged pursuant to the credit account. I will turn to the details of the account in due course.
The first issue I need to consider is whether or not the credit account applied to the contract for the plaintiff to provide road base for the Kalgoorlie Boulder Airport.
On 7 January 2000 the defendant requested a price for 6,750 cubic metres of crushed rock in accordance with a set out specification. On 10 January 2000 the plaintiff submitted a quotation for the supply of road base delivered to Kalgoorlie Boulder Airport.
The next event appears to have been a meeting between representatives of the plaintiff and the defendant in March 2000 where agreement was reached for the plaintiff to supply road base material for the Kalgoorlie job for the defendant at a price of $720 per tonne. By a letter dated 22 March 2000 the plaintiff's Finance Manager wrote to the defendant. That letter appears to be partly concerned with delays in payment of the account and partly with respect to the proposed Kalgoorlie Airport job. He offered gravel as an alternative to crushed rock road base but the price was considerably higher. He then said:
"Ken, should you wish to proceed with the purchasing of road base or gravel material from Bergmeier Earthmoving, we would seek your written commitment that you will maintain your account within our trading terms as detailed above, and in the event that payment is not received within those trading terms that you will pay 16.5% pa interest calculated daily on any outstanding amounts. In addition we would want your agreement that should Bergmeier Earthmoving be forced to take legal action to recover any outstanding moneys beyond our normal trading terms that Monaveen Civils and/or its directors would meet all such recovery costs."
On 23 March 2000 the defendant, after having dealt with the matter of an earlier account said:
"We are pleased to confirm that your product has been accepted by our client and we therefore wish to proceed with the commercial aspects of the arrangements.
In line with your letter we agree to keep the account within your 30 day terms and accept that late payments will attract a penalty of 16.5% calculated daily and that, in the event of legal proceedings required by Bergmeier to recover outstanding amounts, we will meet such costs.
We look forward to a mutually rewarding association at Kalgoorlie."
Deliveries started shortly thereafter, it appears on 27 March 2000. On 5 April 2000 the defendant sent a formal purchase order to the plaintiff for 22,768 tonnes of crushed rock base at $7.20 per tonne for a total value of $163,929.60.
I have no doubt that the credit agreement was intended by the parties to apply to the supply of the crushed rock road base by the plaintiff to the defendant for the job at the Kalgoorlie Boulder Airport. The documentation to which I referred is clearly consistent with it. There is nothing for me to indicate a contrary intention by the parties.
The contract was performed from late in March until towards the end of May 2000. There were complaints by the defendant of delay in delivery. There were some problems with quantities alleged to have been delivered. After the road base had been delivered there were problems with the coating of the road base with asphalt. There were claims by the defendant against the plaintiff for damages arising out of the late delivery and a claim that the road base was unsuitable for its purpose because the salt content was too high to allow the asphalt to adhere to it. Accounts were rendered to the defendant by the plaintiff. Some were paid but the plaintiff claims $147,811.15 in unpaid moneys pursuant to the contract together with interest. The $147,811.15 is made up of road base $144,713.87, sand $60.00, tipper hire $180.00, and truck hire to remove the road base $2,856.50. In an affidavit of 24 August 2000 Stephen Harold Jones, a director of the defendant, deposed to the defendant's calculations as to the quantity of road base delivered, arguing that the amount due by the defendant to the plaintiff would be $116,250 and not $144,713.87 as claimed by the plaintiff. I could see no specific reference to the other amounts in any of the affidavits. The defendant also argued that it is entitled to set off against the amount due or to counterclaim against the plaintiff's demand for damages for late delivery and for unmerchantable quality.
This leads to perhaps the most important issue in this application.
Clause 3.3 of the terms and conditions to the credit agreement provides:
"The applicant must pay for all goods supplied on or before the due date notwithstanding the date on which any invoice or statement in respect of the goods is received or any dispute in respect of the goods."
The due date is the date for payment of invoices which is the end of the month following the delivery of the invoice.
The plaintiff argues that the effect of clause 3.3 is to require the defendant to pay for the road base delivered even though there is a dispute with respect to it. It does not suggest that the defendant is precluded from claiming damages for late delivery or poor quality but says it is entitled to payment and such issues can be dealt with later. The defendant argues that the clause does not prevent it from arguing on the principle in Mondel v Steel (1941) 8 M & W 858 that the value of the goods is diminished. It also argues that the clause should be read down as being potentially unfair to the defendant. For example if an invoice which is plainly wrong is delivered is the defendant liable to pay it? What happens if there is a dispute as to the quantity of the goods delivered. There is no provision in the contract for any certification as is common in construction contracts. The defendant also argues that the contract is subject to s 52 of the Trades Practices Act and s 87 of that Act expressly provides for a set‑off against the plaintiff's demand.
I agree that the clause has potential difficulties in its interpretation. Certainly if the plaintiff demanded payment for goods delivered and the defendant denies there was any such delivery it would be difficult to see how cl 3.3 could require payment in the absence of some independent form of certification or in the absence of some provision deeming the invoice to be correct. But this is not such a case. In this case whilst there is some dispute as to the quantity delivered due to arguments either as to the method of weighing or as to the specific gravity of the road base material, the defendant does not deny that it has received some quantity of the goods. In my view a sensible commercial interpretation of the clause would require the defendant to pay for such quantity as is not in dispute. The clause does not prevent the plaintiff from pursuing the balance it claims is owing and does not prevent the defendant from arguing that it is entitled to damages for breach of contract either because of late delivery or because of the quality of the material. In the circumstances it is difficult to see why cl 3.3 does not require payment by the defendant to the plaintiff of the sum undisputed, namely, $116,250.
What is important is that the clause does not purport to exclude any rights the defendant has with respect to the goods. It does not purport to exclude the operation of the Trade Practices Act or of common law or equitable rights. What it does do is to require payment of the goods delivered notwithstanding any dispute.
The defendant referred to the decision of Galambos v McIntyre (1974) 5 ACTR 10. This was a decision of Woodward J in the Supreme Court of the Australian Capital Territory, dealing with a claim and counterclaim under a building contract. Having reviewed the various authorities, his Honour said at 25‑26:
"I believe that the relevant principles to be extracted from the authorities are as follows:
(i)Failure in part to perform a contract, or defective performance of a contract requiring work to be done again or directly reducing the value of work done or goods supplied, may be raised as a defence to an action for money due under that contract: Allen v Cameron (1833) 1 Cr & M 832; 2 LJ (Ex) 263; Lowe v Holme (1883) 10 QBD 286; 52 LJ (QB) 270; 31 WR 400; Mondel v Steel (1841) 8 M & W 858; 10 LJ (Ex) 426; [1835‑42] All ER Rep 511.
(ii)Claims for money due under a contract and for damages for breach of the same contract (arising for example, from delay) may be set‑off against each other where the equity of the case requires that it should be so. This will depend upon how closely the respective claims are related, particularly as to time and subject‑matter. The general conduct of the respective parties will, as always, be relevant to the granting of such equitable relief: Young v Kitchin (1878) 3 Ex D 127; 47 LJ (QB) 579; 26 WR 403; Newfoundland Government v Newfoundland Railway Co: Bankes v Jarvis [1903] 1 JV 549l 88 KT20; [1900‑3] All ER Rep 656; Hanak v Green (1888) 13 App Cas 199; 58 LT 285; [1886‑90] All ER Rep Ext 1590.
(iii)Even where one of the claims is not in terms based upon the contract, but it flows out of and is directly connected with it, a court may be prepared to recognize an equitable set‑off; Piggott v Williams (1821) 6 Madd & G 95; 56 ER 1027; Beasley v D'Arcy(1800) 2 Sch & Lef 403; Smith v Parkes (1852) 16 Beav 115; 51 ER 720; Morgan & Son v Martin Johnson & Co [1949] 1 KB 107; 64 TLR 381; [1948] 2 All ER 196; Hanak v Green (supra) (per Sellers LJ)."
The defendant also relied on the old case of Mondel v Steel (supra) in which Baron Parke said:
"It must however be considered, that in all these cases of goods sold and delivered with a warranty, and work and labour, as well as the case of goods agreed to be supplied according to a contract, the rule which has been found so convenient is established; and that it is competent for the defendant, in all of those, not to set‑off, by a proceeding in the nature of a cross‑action, the amount of damages which he has sustained by a breach of the contract, but simply to defend himself by showing how much less the subject matter of the action was worth, by reason of the breach of contract; and to the extent that he obtains, or is obtaining, an abatement of price on that account, he must be considered as having received satisfaction for the breach of contract, and is precluded from recovering in any other action to that extent, but no more."
In neither of these cases does it appear there was a clause the equivalent of cl 3.3 of this contract. In my view whilst the law is quite properly and correctly stated, it is subject to specific contractual provisions. It may be arguable that equitable principles would give relief in appropriate circumstances but this was not the argument raised on behalf of the defendant. Indeed in an ordinary commercial contract of this kind, it may well have no application.
In my view the contract is clear and allows for the plaintiff to be paid for the goods delivered. A dispute as to their real value if there be a breach of merchantable quality is adequately covered within the terms of the clause itself.
Likewise, I do not accept that the contract purports to exclude the operation of the Trade Practices Act. If the defendant is entitled to damages for misleading conduct it may recover those by pursuing its counterclaim.
In view of these findings I do not need to consider the merits of the counterclaim. They will no doubt come to be considered should the action proceed. I make it clear that this decision does not preclude the plaintiff from seeking to recover the balance of account it seeks to recover, nor to preclude the defendant from pursuing its claims against the plaintiff.
There should therefore be judgment for the plaintiff for $116,250 being the value calculated on behalf of the defendant for the road base. The liability for the other items of sand, tipper hire and truck hire is not so clear and in my view they are relatively small. Nothing in this summary judgment precludes the plaintiff from pursuing its claim for those items.
I would also allow the plaintiff interest on $116,250 at 16.5 per cent per annum from the due date of payment of each of the invoices until payment. The calculation of such interest was not argued before me and I will give the parties the opportunity to so argue it if necessary.
As the plaintiff has been substantially successful in this summary judgment application I would also allow the plaintiff to recover its costs of this application on an indemnity basis as that is what the defendant agreed on 23 March 2000.
I will hear the parties as to the calculation of interest before making any formal orders.