Pacific Sheet & Coil Pty Ltd v Panel Tech Industries (Australia) Pty Ltd

[2000] QSC 454

IN THE SUPREME COURT  [2000] QSC 454

OF QUEENSLAND

BRISBANE  No 3018 of 2000

BETWEEN:

PACIFIC SHEET & COIL PTY LTD (Administrators appointed) ACN 060 359 113

Plaintiff

AND:

PANEL TECH INDUSTRIES (AUSTRALIA) PTY LTD

ACN 003 695 010

Defendant

REASONS FOR JUDGMENT

B.W. Ambrose J.

Delivered the Fourth day of December 2000

CATCHWORDS: SALE OF GOODS – CONTRACT –whether Deed of Release Discharge & Indemnity was subject to a collateral warranty or promissory estoppel – estoppel by deed upheld – whether s 52 Trade Practices Act 1974 permits formal deeds to be set at nought by reference to statements in negotiations.

Greer v Kettle  [1938] AC 156

Seabridge Australia v ILW (NSW) (1991) ATPR 41-112

Corporations Law (Cth)

Trade Practices Act 1974 (Cth) ss 52, 87

Counsel:Mr P A Freeburn for the plaintiff

Mr A W Duffy for the defendant

Solicitors:Tucker & Cowen for the plaintiff

Ebsworth & Ebsworth for the defendant

Hearing Dates:           23 & 24 November 2000

1. At all material times the plaintiff (“Pacific”) was a company which imported steel from overseas suppliers in Asia and elsewhere and sold that steel to persons in Australia for use in the manufacture of industrial and other goods.

1. At all material times the defendant (“Panel Tech”) conducted a manufacturing business in the course of which it used steel supplied to it by Pacific.

1. In the months of April and May 1999 Panel Tech purchased from Pacific large quantities of steel invoiced in the following terms –

“PREPAINTED GALVANISED STEEL COIL – COOLROOM

TO JIS G3312 BASE MATERIAL, JIS G3302SGCC (YP274‑362MPA) Z27

TOPSIDE: OFFWHITE:  OFF WHITE 25 MICRONS
REVERSE:  FOAM GREY REVERSE 8 MICRONS

EPOXY COATING SUITABLE FOR COOLROOM SANDWICH PANEL ADHESION

ALL SIZES BMT

FIS MELBOURNE”

1. The terms of trading between Pacific and Panel Tech which described those parties as “supplier” and “customer” respectively provided, inter alia -

“3.1Any claim against the supplier must be made in writing within seven (7) days of delivery of goods …  All claims must refer to the original invoice number, date and reason for the claim.”

1. Clause 4.5 provided, inter alia, and relevantly to the issue in this case –

“… The supplier shall not be liable or responsible for any loss, damage, injury to property or persons (including loss of profits or other consequential indirect, incidental or special damages) resulting from any defects in the goods or arising out of or in connection with the acquisition, installation, use or possession of the goods and all representations, terms, conditions and warranties that the goods:

(i)          Shall correspond with their description;

(ii)Correspond with any sample;

(iii)        Be of merchantable quality;  or

(iv)Be reasonably fit for a purpose express or implied by common law or by Federal, State or Territorial laws (that are capable of being excluded)

are hereby excluded.”

1. Clause 6.1 provided –

“6.1Until full payment for the goods has been made the customer acknowledges and agrees that –

6.1.1The ownership of the goods shall remain with the supplier.

6.1.2It shall store the goods in such a manner so the goods are clearly identifiable as the property of the supplier.

6.1.3It shall comply with all reasonable demands of the supplier concerning the manner and method by which the goods or objects are to be stored.

6.2In this clause “objects” is defined as the making of a new product, good(s) or device from the goods or part of the goods supplied by the supplier or the mixing of the supplier’s goods or part thereof with any other products or materials to make another object.

6.2.1Where the customer makes a new object mixes the supplier’s goods with other objects or the goods become constituent of any other object the customer acknowledges and agrees that –

6.2.2The supplier shall be granted ownership of the objects in lieu of full payment notwithstanding that the customer may have paid for part of the goods.

6.2.3Ownership shall be deemed to have been transferred to the supplier at the commencement of the single operation or event by which the goods are converted into a new object or mixed with or become a constituent of any other object.

6.2.4…

6.2.5The customer shall store the objects in the capacity of a bailee.

6.2.6…

6.2.7The customer shall be responsible for all loss and damage to the goods and objects.

6.2.8The customer shall be responsible for payment of the goods and objects from the proceeds of any sale of the goods including the right to trace the proceeds of sale or such goods where the goods are converted into new objects.

6.2.9These terms and conditions constitute the whole of the agreement between the customer and the supplier unless varied in writing in accordance with this agreement.

6.2.10In the event of any inconsistency or alternative provisions contained in any order, invoice or other agreement between the customer and the supplier the terms and conditions here shall prevail.”

1. In April – May 1999 Pacific supplied to Panel Tech coil steel to the invoice value of $860,624.56.

1. Panel Tech failed to pay moneys owing for this steel and over a period of some months, discussions about meeting these payments took place between Mr Corliss who represented Pacific and Mr White who represented Panel Tech.

1. Eventually two statutory demands pursuant to the Corporations Law were served on Panel Tech requiring payment all told of the sum of $860,624.56.  Subsequent to that demand Panel Tech in fact paid part of that sum. The parties have proceeded on the basis that the outstanding amount was $779,222.66.

1. Panel Tech took proceedings in the Supreme Court of New South Wales heard on 18 November 1999 to set those statutory demands aside.  It is unnecessary for me to analyse the material that was there relied upon by Panel Tech but in respect of each of the statutory demands it was held that Panel Tech had shown an arguable offsetting claim and on this finding orders were made setting aside both statutory demands and in respect of those orders Pacific was ordered to pay the costs of Panel Tech.

1. Prior to the hearing of Panel Tech’s application to set aside the statutory demands, Corliss and White had a discussion on 5 November 1999 in which White raised the question of defects in the steel which Pacific had supplied to it.  White advised that to that date there were claims from its customers to the extent of $217,000.00 in respect of deficiencies in the steel supplied to Panel Tech which had been used in the manufacture of equipment for its customers.

1. Corliss said that in the course of this discussion he asked White for samples of the defective steel and for evidence of any claims that his customers had made based upon that defective steel with particulars so that the claim could be substantiated.  He said that it was normal practice in Australia when claiming compensation in respect of the supply of defective steel to produce a sample of that defective steel.  According to Corliss, White advised that the defective steel that had been supplied had been thrown out because Panel Tech did not have space at its factory to store that faulty product.  He said that between that discussion on 5 November 1999 when he requested White to supply samples of the defective steel and particulars of the damage suffered by Panel Tech allegedly resulting from deficiencies in the steel until he had a telephone call from White on 21 January 2000 he received no samples of defective steel nor, apart from the contents of an affidavit used by Panel Tech to set aside Pacific’s statutory demands, any particulars of damage allegedly resulting from it.  However on 21 January 2000 at 4:20 pm he said that White advised by telephone that he wished “to resolve the matter by way of a commercial agreement”.  He advised that he wanted to buy more steel from Pacific and that he would pay for that additional material “by way of credit” as opposed to putting it on the account of Panel Tech.  It was proposed that this arrangement would be made “until everything was settled”.  He advised that he sought “a discount” of $217,000.00 together with $30,000.00 towards his legal costs incurred in setting aside the two statutory demands amounting all told to $247,000.00 which would leave a sum of $525,000.00 to be paid in full settlement of Pacific’s outstanding account.  He also had discussions concerning Pacific making a  claim on its steel mill supplier – Dong Bu Steel Company which was located in Korea.  White suggested that Panel Tech pay to Pacific the sum of $525,000.00 over a period of 3½ to 4 months.  The $217,000.00 “discount” was said to be the total of the claims made by his customers in respect of defective steel which he had used in manufacturing items for them.

1. According to Mr Corliss Pacific had never seen any of the product supplied to Panel Tech.  Presumably it arrived in Melbourne by ship from Korea pursuant to Pacific’s order.  I infer that it had never been uncoiled or inspected by Pacific before it was transported to the Panel Tech factory.  He observed that at that stage Pacific had never seen anything in writing and had never received any written notice of claim from Panel Tech of the sort contemplated by Clause 3.1 of the terms of trade.  Indeed there had been nothing in writing indicating that any problem had been experienced with any of the steel delivered to Panel Tech apart from matters asserted in Mr White’s affidavit sworn 16 November 1999 and used on the application to set aside the statutory demands heard on 18 November 1999. One customer appears to have complained of deficiencies in July 1999. Three customers appear to have made complaints re colour or delamination towards the end of September 1999 and seven to have made similar complaints in the first half of November 1999. These complaints were first notified in the affidavit of Mr White sworn on 16 November 1999 – two days before the hearing of the application to set aside the statutory demands.

1. Mr Corliss next spoke to Mr White on 27 January 2000.  He made a diary note of that conversation which was tendered and I accept his evidence as reliable and accurate.  Corliss said that Pacific wished to settle the matter “one way or the other”.  The money had been outstanding for a significant time and he discussed with White various terms on which the dispute might be resolved.  On that occasion White indicated that Panel Tech sought a significant reduction of the total bill together with compensation or credit towards future purchases in respect of any other claims which Panel Tech could substantiate and which resulted in Dong Bu Steel Mill providing compensation to Pacific for the defective steel allegedly supplied to Panel Tech.  White suggested that when the “final deed” was executed Panel Tech would make a payment of $250,000.00 to Pacific and the balance would be paid over three months and that White would give his personal guarantee for the performance of the obligations assumed by Panel Tech under the deed.  Corliss indicated that Pacific would seek the personal guarantee of White and an agreement that all legal costs incurred by the parties to the date of execution of the deed would be borne by those parties.  Undoubtedly this suggestion was made because Pacific had been ordered to pay the costs of Panel Tech in getting the statutory demands set aside.

1. Subsequent to that discussion the terms of which were relayed by Corliss to the directors of Pacific there was a further telephone discussion between Corliss and White at the end of which they eventually reached a tentative “agreement”.  It is clear that the terms of the “agreement” were to be referred to their respective solicitors and to be recorded in a formal way.  The discussion took place at 11:30 am on 28 January 2000 when it was agreed that there should be a “discount” of $150,000.00 upon the invoiced price of the steel delivered and that the first $30,000.00 of any “compensation” recovered by Pacific from Dong Bu Steel Company in respect of defective steel delivered by it to Panel Tech should be available to Pacific.

1. The first payment to be made by Panel Tech upon signing the deed was to be $180,000.00.  A personal guarantee would be given by Mr White of payment by Panel Tech of moneys due under the agreement and the balance of the payments would be made over the following four months or earlier and each of the parties would pay their own costs (including the costs order made upon Panel Tech’s successful application to have the statutory demands set aside).

1. It was agreed that each of Pacific and Panel Tech would have its lawyer involved in preparing a deed reflecting this agreement.

1. Ultimately the solicitors for Pacific prepared a draft deed which was sent to Mr White of Panel Tech on 1 February 2000.

1. Not hearing anything from Mr White about the draft deed Mr Corliss advised him that if the draft sent was not acceptable then Pacific would have to pursue its legal remedies.

1. The draft deed of Release Discharge and Indemnity which Corliss said embodied what had been agreed between him and White on 28 January 2000 contained the following recitals –

“A.The creditor served the debtor with statutory demands dated 19 August 1999 and 1 October 1999.  The total claimed under those statutory demands (after deduction of … is $779,222.66).

B.The debtor brought actions to set aside the statutory demands.  The debtor was successful in the actions to set aside the statutory demands.  The debtor relied on various offsetting claims to set aside the statutory demands.

C.The creditor intended to institute court proceedings against the debtor for recovery of the debt.

D.         The debtor admits that the debtor owes the creditor the debt.

E.The parties without any admission of liability by the creditor have agreed to settle their differences on the following terms:”

It continued -

“1.         OPERATIVE PROVISIONS

1.        Definitions

1.1‘Offsetting claims’ means any claims the debtor may have in relation to delamination, discolouration or transit damage for material supplied by the creditor to the debtor prior to the date of this agreement including the debtor’s claim as specified in the affidavit of Michael Frank White sworn on 13 September 1999 as set out in Schedule 1 to this agreement.

‘Debt’ means Seven hundred and seventy nine thousand dollars two hundred and twenty two dollars and sixty six cents ($779,222.66) owed by the debtor to the creditor.

‘Discounted debt’ means $629,222.66 being the debt less the estimated amount recoverable by the creditor from Dong Bu Steel Company Limited for the offsetting claims.”

1. Clause 3 then provides for an initial payment of $180,000.00 on 9 February 2000 and four subsequent payments to be made on the fourteenth day of each of the four following months in the sum of $112,305.66.

1. Clause 3.1.2 required Panel Tech to obtain a personal guarantee from Mr White.

1. Clause 3.1.3 then provided –

“3.1.3The debtor must use its best endeavours to comply with all requests of the creditor to enable the creditor to recover the offsetting claims from Dong Bu Steel Company Limited including without limitation the following:

3.1.3.1Provide to the creditor all documents to substantiate the debtor’s offsetting claims;

3.1.3.2Provide to the creditor all samples of materials to substantiate the debtor’s offsetting claims;

3.1.3.3Provide access or assist in obtaining access for the creditor to various sites where delamination and discolouration occurred;  and

3.1.3.4Provide answers to any of the creditor’s queries in relation to the debtor’s offsetting claims.

3.2If the debtor fails to comply with any of the terms specified in Clause 3.1 the debtor agrees that:

3.2.1The creditor may without demand institute proceedings against the debtor for recovery of the debt.

3.3The debtor is responsible for all legal costs incurred by the debtor up to the date of this agreement and the legal costs payable by the creditor pursuant to New South Wales Supreme Court Judgment dated 17 December 1999 in relation to the application to set aside the creditor’s statutory demands dated 19 August 1999 and 1 October 1999.”

1. By letter dated 4 February 2000 the solicitors for Panel Tech advised the solicitors for Pacific, inter alia, in the following terms –

“Our client has handed us a copy of a Deed of Release Discharge and Indemnity which we understand was prepared by your firm but was passed on to PTI directly by Pacific.

As matters presently stand the Deed is not satisfactory to PTI insofar as it contains numerous clauses which are couched in unacceptable terms and in any event it does not properly reflect the nature of the agreement reached between the parties.

Our client believes that there is little or no point in amending the Deed since any such amendments are likely to be so numerous and time consuming that it would be more cost effective to prepare a fresh document.  Our instructions are that the parties reached an agreement to the following effect:

1.PTI will pay Pacific the sum of $629,222.64 albeit in five instalments.

2.Pacific will release and indemnify PTI from payment of the debt of $779,222.66.

3.PTI will release and indemnify Pacific from payment of any damages arising out of the offsetting claims.

4.PTI is to release Pacific from any costs payable under the costs order made by the Supreme Court on 17 December 1999.

In other words the parties’ present rights and liabilities are to be substituted in a new relationship as set out above.

Apart from these issues our client and its managing director, Michael White have noted that there is presently no guarantee in place for the purported debt due to Pacific.  In these circumstances our client sees no reasons for Pacific to seek a fresh guarantee and Mr White likewise declines to provide such a guarantee.

Assuming your client wishes to pursue a settlement along the above lines would you please submit a fresh Deed which incorporates the above arrangements.

If your client does not wish to pursue a settlement then we are instructed:

(a)To take appropriate steps to re-list the Supreme Court proceedings before Master Macready (in accordance with leave granted by him) to seek an order that PTI’s costs of those proceedings be paid by Pacific on an indemnity basis;  and

(b)To commence proceedings on PTI’s behalf against Pacific to recover damages for the losses incurred by PTI as a result of the offsetting claim …”

1. On 10 February 2000 a second draft was prepared by Pacific’s solicitors in an attempt to meet the requirements of the letter from the solicitors for Panel Tech to which I have referred.

1. By letter of 15 February 2000 the solicitors for Panel Tech advised, inter alia –

“Our client has since provided us with a copy of a fresh Deed of Release Discharge and Indemnity.  We advise that this Deed is satisfactory to our client subject to the following changes being made.”

1. It is unnecessary to set out the further amendments required because in fact they were incorporated in yet another draft deed prepared by the solicitors for Pacific on 15 February 2000.

1. A deed was prepared by the solicitors for Pacific in terms of the amended draft which met the requirements of Panel Tech.  This deed was executed by the parties on 16 February 2000 when Panel Tech paid Pacific $180,000.00 as required by clause 3.1.1. thereof.  Clause 3.1.2 to clause 3.1.5 required the balance due under the deed ($449,222.64) to be paid by 16 June 2000.  Panel Tech has failed to pay any part of the balance and indeed now seeks to recover the $180,000.00 paid on 16 February 2000.

1. As in the earlier drafts the definition Clause 1.2 defined “discounted debt” to mean “$629,226.66 being the debt less the estimated amount recoverable by the creditor (Pacific) from Dong Bu Steel Company Limited for the offsetting claims”.  However, in the deed ultimately executed, Clauses 3.1.2 and 3.1.3 and Clauses 3.2 and 3.3 of the first draft were at the insistence of the solicitors for Panel Tech entirely deleted.  Under the heading “Releases” there are two additional clauses inserted –

“4.3The creditor agrees that this deed may be pleaded as a bar to any action that the creditor may take to recover the debt.

4.4For the avoidance of doubt, Clause 4.3 does not apply to any action the creditor may take to recover the discounted debt.”

1. The indemnity clause 5.1 was amended to read –

“5.1The debtor agrees to indemnify and keep indemnified the creditor in respect of any and all loss arising from all actions, suits, claims (including but without limiting the generality of the foregoing claims for legal costs and consequential loss of profit) counterclaims, set-offs, demands and liabilities of any nature whatsoever including costs which the debtor may now or at any time have but for the execution of this deed could or might have had against the creditor in connection with directly or indirectly or incidental to the creditor’s supply of materials to the debtor and/or the materials supplied prior to the date of this agreement.”

1. A new clause 10 was inserted under the heading “Costs” which reads –

“10.1The parties agree that each party shall bear its own costs including legal costs.

10.2For the avoidance of doubt the debtor agrees that the creditor is not liable for any costs awarded or to be awarded by the court in relation to the debtor’s application to set aside the creditor’s statutory demands.”

1. Two days after the Deed of Release Discharge and Indemnity was executed by Pacific and Panel Tech an administrator of Pacific was appointed on the basis that it was unlikely that Pacific would be able to continue to trade and meet its liabilities as they became due.

1. On 28 February 2000 the administrator of Pacific advised Panel Tech that he had been appointed and drew attention to the fact that the first payment of $112,305.66 was due under the Deed on 16 March 2000.  He requested that that instalment and future instalments be made payable to the administrator of Pacific and to make the necessary alterations to bank orders etc.

1. On 17 March 2000 the administrator referred to his letter of 28 February 2000 and advised that the instalment due on 16 March 2000 had not been paid and requested that payment be effected on 20 March 2000.

1. No payment having been made by that time the solicitors acting for (sic) the administrator of Pacific by letter of 22 March 2000 requested payment of the March instalment and advised that if the payment was not made it proposed to issue a statutory demand.

1. In reply to that letter the solicitors for Panel Tech wrote a letter which on its face was without prejudice.  No claim of privilege was made upon trial – indeed as had been the case with other documents marked “without prejudice” and it was tendered in evidence without objection.

1. Panel Tech’s solicitors advised that “there is a dispute about the liability under the Deed”.

1. It is convenient to set out fully the content of this letter because essentially the Defence and Counterclaim pursued by Panel Tech in this action was prepared or seems to have been prepared on the basis of the assertions and arguments contained in that letter - although it seems to have been written principally for the purpose of dissuading the administrator of Pacific from serving the threatened statutory demand on Panel Tech.  The letter reads as follows -

“Thank you for your letter dated 22 March 2000.  I do act for Panel Tech Australia Pty Limited in this matter.

There is a dispute about the liability under the deed.  The dispute arises as follows:-

1.On 17 December 1999, Master Macready in the Equity Division of the Supreme Court of New South Wales gave judgment in favour of Panel Tech against Pacific Sheet and Coil with respect to applications to set aside statutory demands under the Corporations Law. The Master found that Panel Tech had established that there was a dispute between the parties arising out of the claims for damages which Panel Tech could make against Pacific. While it was not possible for those claims to be quantified precisely, they amounted to hundreds of thousands of dollars.

2.Panel Tech and Pacific then conducted negotiations, which resulted in the deed to which you refer, dated 16 February 2000.  However, the deed was made in the context of the discussions between Mr White and Mr Corliss which also involved the following agreements and representations:-

a)It was agreed that Panel Tech and Pacific would co-operate in pursuing compensation from Pacific’s supplier, Dong Bu Steel.  Panel Tech would supply the necessary supporting information to Pacific which, so Mr Corliss represented, would then make the claim against Dong Bu arising out of the poor quality of material supplied.  Mr Corliss expressed confidence of recovering sums from Dong Bu Steel on the basis of past experience recovering credits from that supplier.

b)It was agreed that Panel Tech would make instalment payments to Pacific, but that Pacific would refund money to Panel Tech once recovered from Dong Bu, and that Pacific would ultimately refund to Panel Tech the full amount of Panel Tech’s claim against Pacific, equivalent to the amount being paid by Panel Tech under the deed.

c)It was further agreed that Pacific would provide roofing steel at a reduced price to Panel Tech if there was any shortfall of recovery from Dong Bu compared to Panel Tech’s claims, the reduction in price to equate to the balance due on Panel Tech’s claim.

3.Pacific appointed a voluntary administrator within two days of the deed being completed.  Information available to my client suggests that Pacific will enter liquidation rather than trade out of the administration.

4.At the time of Mr Corliss’ discussions with Mr White it must have been apparent to him and to Pacific that Pacific would not be in a position to fulfil its future commitments, its financial position being so parlous that it was about to enter voluntary administration.  Even if Mr Corliss was not aware, his conduct is conduct of Pacific, and was objectively misleading, whatever he may have known subjectively.

In these circumstances my client is entitled to claim:-

a)          damages from Pacific for breach of a collateral contract;

b)damages from Pacific under sections 52 and 82 of the Trade Practices Act;

c)orders under section 87 of the Trade Practices Act that the deed be set aside on the grounds that it was induced by misleading or deceptive conduct; and

d)damages from Mr Corliss under s75B of the Trade Practices Act arising from his knowing involvement in misleading or deceptive conduct.

Panel Tech requires Pacific to refund the payment already made under the deed of $180,000, on the grounds stated, and will include this claim in proceedings if necessary.

In these circumstances, there is clearly a substantial dispute between the parties.  If you issue a statutory demand as foreshadowed, my client will have no alternative but to apply to have that demand set aside.  In view of this prior notice to you of the dispute, we would then seek costs against your client on an indemnity basis.”

1. According to Mr White, the managing director of Panel Tech it was in April or May 1999 or perhaps earlier that he first raised with Mr Corliss complaints about deficiencies in the steel supplied (for which Panel Tech had not at that stage paid) resulting in problems with colour and delamination of the steel sheeting in May or April 1999 or earlier.  The only written complaints exhibited to his affidavit of 16 November 1999 were made in July, September and November 1999.

1. Mr White does not suggest that Panel Tech made any effort to comply with Clause 3.1.

1. It would seem therefore that it was in the course of Mr Corliss making contact with Mr White about the outstanding account for material supplied that questions of deficiencies in the material were first raised.  Mr Corliss of course says that this matter was first mentioned on 5 November 1999 – long after the statutory demand/s of August and October 1999 had been served on Panel Tech.

1. Mr White obtained advice from people who supplied adhesive for the purpose of laminating the steel to polystyrene sheeting used for construction of coldrooms etc and concluded as a result that there must have been some deficiency in the paint on the back of the sheeting which interfered with the efficacy of the adhesive to laminate the steel to the polystyrene foam.  When precisely he asserts that he came to this conclusion does not emerge on the evidence – it may have been in July, September or November 1999.

1. Certainly by January 2000 Mr White desired to “settle the matter” by having Pacific “pursue Dong Bu” rather than have Panel Tech litigate the matter with Pacific and he informed representatives of Pacific to this effect.  He said that the first time he spoke to Mr Corliss towards the end of January 2000, he said that it may have been 26 January 2000, it was agreed between the two of them that it would be in the best interests of both if their dispute could be settled.  This involved “chasing Dong Bu”, and the supply by Pacific to Panel Tech of future steel requirements.  In the course of his evidence Mr White observed –

“I said (ie to Mr Corliss) that I believed in the first conversation that we should get Dong Bu to come and we should lodge a claim and we should pursue them.  So that was the basis that I wanted to start the settlement negotiation to quantify the claim, to quantify our loss and to go to Dong Bu and get the money from the correct source.”

He said that Mr Corliss said –

“Yes we could put together a substantial claim and we could pursue Dong Bu.”

1. The problem I have with this rather imprecise account of the discussion is that it is clear that Panel Tech had no contractual relationship with Dong Bu and the reference to “we” pursuing Dong Bu, I infer, must have been to Pacific pursuing that Korean corporation pursuant to whatever legal rights it had to do so under its contract with Dong Bu or alternatively under whatever commercial custom there may have been according to which buyers and sellers of international steel products conducted their trading activities.  Unfortunately there is no evidence as to the terms of the contract between Pacific and Dong Bu pursuant to which Pacific may have had rights against Dong Bu in a legal sense.  Neither is there any evidence as to any commercial practice or custom according to which it might be anticipated that any successful effort might be made by Pacific to recover compensation of some sort from Dong Bu with respect to any obligation it may have been under to Panel Tech to pay damages or compensation in either November 1999 or January 2000 in respect of defective steel procured from Dong Bu in the early part of 1999 to meet the order of Panel Tech.

1. For the all the evidence shows there may have been difficulties in the way of Pacific recovering anything more than an “ex gratia” payment of compensation from Dong Bu should it provide convincing evidence supported by samples of the allegedly defective steel and expert reports on the deficiencies in colour and adhesive qualities of the paint on that steel for the purpose for which it was supplied even if sought within a period of perhaps a couple of weeks or months of that supply.

1. The terms of the exclusions in Clause 4.5 of the terms of trading between Pacific and Panel Tech certainly indicate problems in the way of Panel Tech pursuing Pacific successfully in a claim for damages for breach of contract.  The contract between Pacific and Dong Bu is not in evidence and I feel it impossible to draw an inference as to what exclusions or time limits etc there may be in that contract although one would expect there would be time limitations for making claims and exclusions etc of some sort.

1. The absence of evidence on this point makes it difficult to give adequate consideration to the prospects of Pacific pursuing with success a claim against Dong Bu either in Australian or Korean courts or in accord with any commercial custom that may have prevailed at the relevant time between Dong Bu and persons who purchased steel from it - even assuming it possible to prove that some at least of that steel exhibited the deficiencies of which Panel Tech complained.

1. Although Mr White said that “we” had been discussing the pursuit of Dong Bu for Panel Tech’s “offsetting claim” for six or eight months and that it was for this reason that he was attempting towards the end of January 2000 to settle the legal dispute with Pacific, it is abundantly clear on the evidence of both Mr Corliss and Mr White that there had never been anything remotely resembling a claim in writing prepared by Panel Tech prior to the affidavits of Mr White prepared in September and November 1999 to get the statutory demand/s set aside.  It is equally clear that no effort had ever been made to provide Pacific with a single sample of the allegedly defective steel to support any claim that Pacific may have been able to pursue in respect of that defective material against Dong Bu.  I accept the evidence of Mr Corliss that on one occasion when he visited Melbourne he had specifically requested to see some of the allegedly defective steel but had been informed by Mr White that he had disposed of it in some way because his factory premises did not have sufficient storage space to keep material that was of no use because of its deficiencies.  Mr White said that eventually it was agreed that Pacific would “discount” the moneys Panel Tech owed for the allegedly defective steel and it was agreed that Panel Tech would pay off the balance in instalments.  He went on to say that the arrangement was that should Pacific obtain some compensation or “credits” from Dong Bu that sum would be applied for the benefit of Panel Tech “in reduction of the debt” – presumably the sum of $629,222.66.  In my view it would be an improbable arrangement for Pacific to make having regard to the proposal that it also discount the invoice price of the steel by $150,000.00.

1. He added that “if we were ultimately totally unsuccessful with Dong Bu – then there could possibly also be some form of a discounting system applied”.  Presumably this was a possibility that in future purchases of steel by Panel Tech Pacific would provide that steel at less than market rate until the damage for which it was allegedly liable to Panel Tech had been “off-set”.

1. The alleged representations, undertakings, promises or understanding of which Mr White gave evidence and upon which Panel Tech relies to avoid the consequence of its execution of the Deed of Release Discharge and Indemnity on 16 February 2000 upon which Pacific brings its action have not been proved to my satisfaction on the balance of probabilities. They are quite inconsistent with both the terms of the “agreement” asserted in the letter of Panel Tech’s solicitors of 4 February 2000 and indeed with the terms of Clauses 1.1, 4.3 and 5.1 of that Deed.

1. I find it quite improbable in any event that Pacific would have agreed in effect or undertaken to seek to recover from Dong Bu for the benefit of Panel Tech its admitted indebtedness to Pacific upon the deed of settlement for the dubious advantage of avoiding putting Panel Tech to proof of loss it suffered as a consequence of alleged deficiencies in the quality of steel it was delivered by Pacific.

1. Whilst it is abundantly clear that in the course of negotiations for settlement the pursuit of Dong Bu by Pacific for compensation in respect of the alleged defects in steel delivered to Panel Tech was raised and discussed and indeed I accept the evidence of Corliss to this effect supported as it is by the terms of the first draft deed prepared on behalf of Pacific which sets out essentially what the first negotiated provisional agreement was.  I say that however subject to there being no evidence that it was specifically agreed between Corliss and White that should Panel Tech fail to provide the information needed to permit Pacific to pursue such compensation then the settlement agreement would be at an end.  In this respect I refer to Clauses 3.1 and 3.2 (vide para 23 of this judgment).  White explained that he had instructed his solicitor to have the whole of Clause 3 of the first draft deed deleted because of the content of Clause 3.2.1.  I am unimpressed with this explanation for the deletion of Clauses 3.1 and 3.2 upon White’s instruction.  In my view Clause 3.2 could easily have been deleted if White had taken the view that Panel Tech’s failure to comply with Clause 3.1.3 should not set the deed of settlement at nought.  Obviously it was quite outside the ability of Pacific to seek compensation from Dong Bu unless Panel Tech gave the assistance outlined in Clauses 3.1.3 to 3.1.3.4.

1. In my view the most persuasive reason for Panel Tech’s decision to exclude those clauses is that set out in its solicitor’s letter to Pacific of 4 February 2000 (para 24 of these reasons).

1. In my view the first draft deed probably did accurately record the terms of the proposed agreement reached in discussion between Corliss and White prior to its preparation. At that stage of settlement negotiations clearly no concluded agreement had been reached and in my view it is impossible to spell out of the negotiations any representations or undertakings or promises which either at that stage or subsequent to execution of the deed had any legal or binding effect either in law or equity or under s 52 of the Trade Practices Act.

1. On the other hand I take the view that the letter of 4 February 2000 was in the nature of a “counter-offer” or perhaps a stating of the position that Panel Tech wished then to adopt with a view to reaching a concluded settlement of its dispute with Pacific.

1. I am satisfied upon the evidence that by the time the final draft of the Deed of Release Discharge and Indemnity was prepared and executed by both Pacific and Panel Tech, each of the parties had received legal advice as to its effect and it is quite impossible to spell out of the negotiations leading to the final form of that deed any collateral warranty or agreement or misleading conduct or misrepresentation whether promissory or otherwise relating to the imposition of  any legal obligation upon Pacific to pursue compensation rights against Dong Bu for the benefit of Panel Tech.  Whatever may have been the content of the preliminary settlement negotiations that led to the preparation of the first draft deed to the terms of which I have referred, those matters were set to rest by the letter from Panel Tech’s solicitors of 4 February 2000 and the attempt by Panel Tech to resurrect them by way of collateral agreement etc after its failure to meet its clear obligations under the deed executed on 16 February 2000 in my view must fail.

1. In any event the deed in the clearest of terms in my view on its face purports to settle all the outstanding claims and disputes between Pacific and Panel Tech relating to Panel Tech’s non-payment of the cost of the steel delivered to it because of loss or damage it suffered as a consequence of deficiencies in the steel delivered; and as well any rights of action of the sort asserted by Panel Tech which may conceivably have arisen in the course of negotiations leading to its execution.  In my view it would only be in the most exceptional cases that the parties to such a deed could avoid its clear unambiguous effect by calling in aid discussions, understandings, promissory statements etc that were allegedly made by the parties in negotiations leading up to its preparation and final execution.  In Greer v Kettle [1938] AC 156 Lord Maugham observed –

“Estoppel by deed is a rule of evidence founded on the principle that a solemn and unambiguous statement or engagement in a deed must be taken as binding between parties and privies and therefore as not admitting any contradictory proof.”

1. Similarly with respect to the alleged “representations” and the deceptive conduct sought to be established under s 52 of the Trade Practices Act, Beaumont J observed in Seabridge Australia v ILW (NSW) (1991) ATPR 41-112 –

“There are reasons of both principle and policy why the court should not permit the stability of commercial relationship and dealings to be threatened by reliance upon oral statements said to found an estoppel made in the course of negotiating a formal contract. … In my opinion notwithstanding that we are here concerned with a statutory cause of action this reasoning may be applied by analogy in the present case. The courts should exercise caution in invoking provisions such as s 52 based upon what is said or not said in oral discussion in the course of negotiations which led to a formal document or agreement being drawn up. Much will depend on the subject matter of the alleged representation. If the oral statement bears upon a matter which had been dealt with specifically by the parties in a formal document or contract the courts in my view should ordinarily be reluctant to interfere by setting aside or altering the formal instrument or contract in the absence of proceedings for rectification of the written instrument purporting to evidence the real agreement. Where however an oral statement bears upon a subject not dealt with in the formal contract the position may be different.”

1. In this case the so-called “offsetting claims” are specifically dealt with in Clause 1 of the Deed from which it is made abundantly clear that the “discounted debt” of $629,222.66 is arrived at by deducting $150,000.00 being the “estimated amount recoverable by the creditor from Dong Bu Steel Company for the offsetting claims”.

1. It is clear in my view when one considers the deed executed by the parties in the context of the content of the first draft deed and its amendment at the request of Panel Tech in the terms required by its solicitor’s letter of 4 February 2000 that Pacific was under no obligation to pursue Dong Bu for compensation for defective steel for the benefit of Panel Tech.  While Pacific may well have kept in mind pursuing Dong Bu for its own benefit – to recover some of the $150,000.00 it had discounted the obligation of Panel Tech to pay for the steel, it must have been apparent that this right was of very limited value should Panel Tech decline or be unable to provide samples, particulars of deficiencies, etc.  Indeed the amendment of the first draft deed to conform substantially with the form of deed ultimately executed by the parties expressly relieves Panel Tech of the obligation to provide samples of defective steel or to give any particulars or give any assistance whatever to Pacific in pursuing any claim for the alleged defect in it against Dong Bu in respect of the steel delivered to Panel Tech which the first draft deed sought to impose.

1. With respect to the contention of Mr White that Mr Corliss represented that Pacific was in a financial position to continue trading and over some unspecified but indefinite time to supply to Panel Tech Union roofing steel at a price discounted by some unspecified amount I am unpersuaded on the whole of the evidence that any such representation was in fact made.  In the course of his evidence Mr White said that the only conversation touching on Pacific’s financial position was to the effect that he asked Corliss, “How are things?” to which Corliss replied, “You know things are going well.  We’re getting over the receivership.  We’ve got some new investors but this takes time.”  Mr Corliss said that he had no recollection whatever of a conversation with White to the effect that Pacific was in a financial position to continue trading although he certainly was of that opinion during the January discussions with White.  He agreed that if he had discussed with White Pacific’s ability to supply Union roofing steel he would have informed him that Pacific did have access to that product – and presumably if it was ordered by Panel Tech - could fill the order.

1. It must have been abundantly clear to White at the time of any discussions in January 2000 that Pacific had in fact fallen into financial difficulties to such an extent that a receiver had been appointed.  It is clear on his own evidence that he was informed that there had been an infusion of money into the company from “new investors” but that it would “take time” before Pacific could reach a comfortable financial trading position.

1. Mr Corliss said that he did not ever discuss the company’s financial position with Mr White at any stage because it was not his place to do so.  The only evidence given by Mr White as to what Corliss did say to him concerning that company’s financial position and trading activities in my view simply does not support the assertion made by Panel Tech with respect to the alleged oral representations as to Pacific’s financial viability.

1. The effect of the deed upon which the administrator of Pacific sues is simply to reduce the obligation of Pacific to pay the invoiced price of $779,222.66 for the material supplied by $150,000.00 – a sum obviously attributed to the compensation the parties were prepared to adopt for the purpose of settling their dispute as the sum that might be payable with respect to the deficiencies – which to that time had never been particularised or notified as required by the terms of trade between the parties and in respect of which not a single sample had been provided – in spite of the requests made by Corliss in this regard.

1. In any event this aspect of the case advanced for Panel Tech really relies upon accepting that there were rights and liabilities between the parties to the deed arising by reason of oral representations, understandings, promises, etc which were made in the course of negotiations leading to the execution of the deed which had legal and binding consequences.  For the reasons I have already given I am unpersuaded that the obligation clearly imposed on Panel Tech under the deed was contingent upon the meeting of any obligation of Pacific or right of Panel Tech resulting from what was said or discussed in the course of negotiating the terms of the deed which was executed by both parties.

1. With respect to the reliability of the witnesses who gave evidence I must say I found the evidence of Mr Corliss more persuasive than that of Mr White.  Mr Corliss had taken contemporaneous notes in his diary of the discussions he had in which the date and the main points discussed were recorded.  The photostat copies of these diary entries were tendered.  On the other hand Mr White while asserting that he had also made notes in a diary which was in court did not seek to refer to them to enable him to refresh his memory as to dates of discussions and their content.

1. When pressed in cross-examination about why Panel Tech sought deletion of Clause 3.1.3 he said that he received legal advice which he thought was to the effect that –

“If we wrote it in clearly the debt they could take it to Dong Bu and Dong Bu could just come straight for us.  Again – the whole point of this matter was to try to resolve it mutually as opposed to having say a Dong Bu corporation suing me from Korea.”

1. On what conceivable basis Dong Bu might attempt to sue Panel Tech upon a deed executed in the terms of the first draft in the event that Pacific provided to it samples of defective steel together with particulars of loss and expert evidences as to the adhesive quality of the steel was not explained.  One possible explanation for this fear on the part of Panel Tech I suppose was that Panel Tech wished to avoid any obligation of proving in a court – or for that matter on a commercially acceptable basis to Pacific or Dong Bu that in fact the steel delivered to it was defective as asserted by Panel Tech upon its application to have the statutory demands set aside.  It is clear of course that Pacific would have no knowledge whatever of any deficiencies in the delivered steel unless Panel Tech provided samples, particulars, etc – which it had not merely declined to do up until the date of the execution of the deed but had specifically had removed any obligation to do so under the deed in consideration of the $150,000.00 “discount” given by Pacific.

1. There is no basis demonstrated in my view upon the evidence for setting aside the deed – under ss 52 and 87 of the Trade Practices Act.

1. It has not been demonstrated at all that the deed was unreasonable.  There is not the slightest acceptable evidence as to the quantum of any damage suffered by Panel Tech as consequence of any deficiencies in the delivered steel.  The only evidence is that which was placed before the Supreme Court of New South Wales with a view to setting aside the statutory demands.  No evidence whatever was called on behalf of Panel Tech to establish those deficiencies.  At its highest the affidavit evidence of Mr White tendered demonstrates that Panel Tech may have had a claim – had proper evidence been called to enable it to pursue such claim.  In fact the statutory demands were set aside to enable Panel Tech to pursue whatever legal rights it might have against Pacific – probably by way of counterclaim to an action to be instituted by Pacific.  It was to avoid such litigation in which the claims by Panel Tech of deficiencies in the steel could have been properly investigated that Mr White on behalf of Panel Tech embarked upon efforts to settle the action and thus avoid having investigated in court the question of any deficiencies in the steel delivered and any loss or damage suffered by Panel Tech as a result.  It does not follow of course from the fact that clients of Panel Tech were dissatisfied with some of the work performed for them with steel supplied by Pacific that deficiencies in that work were necessarily or solely attributable to deficiencies in the steel, as distinct from the way it was handled and applied to manufacture goods for Panel Tech’s customers.  This was the very matter which Panel Tech sought to avoid having determined in an action between it and Pacific in Australia.  I am unpersuaded that there would be any rational basis for either Pacific or Panel Tech to conclude that Dong Bu might be persuaded to refund the whole or most of the moneys it had received from Pacific in respect of the steel delivered to Panel Tech in the absence of evidence of deficiencies of the sort that would be canvassed in any action between Pacific and Panel Tech in Australia.

1. In my view Panel Tech has not made out any defence to the plaintiff’s claim.

1. I decline to set aside the Deed of Release Discharge and Indemnity executed by the plaintiff and the defendant on 16 February 2000.

1. Upon that deed I give judgment for the plaintiff in the sum of $449,222.64 plus interest.

1. I assess interest on that sum for the period 30 March 2000 to 30 November 2000 (8 months) at the rate of 9% per annum which amounts to $26,953.35.

1. I give judgment for the plaintiff in the sum of $476,176.00.

1. I order that the defendant pay to the plaintiff its administrators’ costs of and incidental to the action to be assessed.

1. I will hear argument, if either party so desires, as to whether costs should be assessed on a standard or indemnity basis.