Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [No 2]
[2009] WASC 73
•26 MARCH 2009
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: PAHARPUR COOLING TOWERS LTD -v- PARAMOUNT (WA) LTD [No 2] [2009] WASC 73
CORAM: LE MIERE J
HEARD: 24 & 26 SEPTEMBER 2008
DELIVERED : 26 MARCH 2009
FILE NO/S: CIV 1549 of 2007
BETWEEN: PAHARPUR COOLING TOWERS LTD
Plaintiff
AND
PARAMOUNT (WA) LTD (ARBN 102 211 414)
First DefendantBURRUP FERTILISERS PTY LTD (ACN 095 441 151)
Second DefendantBURRUP HOLDINGS PTY LTD (ACN 097 138 353) (Discontinued)
Third DefendantPANKAJ OSWAL
Fourth DefendantVIKAS RAMBAL
Fifth Defendant
Catchwords:
Practice and procedure - Application for summary judgment - Whether there is no serious question to be tried upon any cause of action raised by the plaintiff - Whether there is a disputed question of fact - Whether it is in the interests of justice to dispose of the action summarily - Rules of the Supreme Court 1971 (WA) O 16 - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 16
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff: Mr D R Williams QC & Mr J C Curthoys
First Defendant : No appearance
Second Defendant : Ms P Brown
Third Defendant : No appearance
Fourth Defendant : Mr S J Davis
Fifth Defendant : Mr M L Bennett
Solicitors:
Plaintiff: Christensen Vaughan
First Defendant : No appearance
Second Defendant : Blake Dawson
Third Defendant : No appearance
Fourth Defendant : Maxim Litigation Consultants
Fifth Defendant : Lavan Legal
Case(s) referred to in judgment(s):
Anderson v Effexseven (1998) 10 ANZ Ins Cas 61‑424
Cox v Journeaux (No 2) (1935) 52 CLR 713
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Webster v Lampard (1993) 177 CLR 598
LE MIERE J: The fifth defendant (Rambal) applies for summary judgment with costs pursuant to O 16 r 1(a) of the Rules of the Supreme Court 1971 (WA).
Statement of claim
The first defendant (Paramount) contracted to construct an ammonia plant for the second defendant (Burrup Fertilisers) near Karratha. On or about 23 June 2003 the plaintiff (Paharpur) and Paramount entered into a contract by which Paharpur agreed to design, construct, supply and supervise the installation of two seawater cooling towers for the ammonia plant. Paharpur is a corporation incorporated and carrying on business in India.
The contract price was an amount of $8,074,770, payable by Paramount in a number of instalments so that all but 5% of it was to be paid within 30 days of Paharpur shipping the equipment from India, on the provision of a bill of lading. It was expected that Paharpur would ship the equipment from India in the middle of 2004.
Paharpur pleads that in or about June 2004 Paharpur, Paramount and Burrup Fertilisers made an oral agreement to vary the terms of payment. It was agreed that Paramount would pay the balance of the contract price then owing, less the sum of $4 million on clearance of the equipment by Paramount's inspection agent for dispatch from India to Karratha and would pay the sum of $4 million on a date six months from the last shipment date. Interest was to be paid by Paramount on the outstanding $4 million. Paramount agreed to provide a bill of exchange, accepted by Paramount and Burrup Fertilisers, in the sum of $4 million together with interest, payable to Paharpur 180 days from the date of the last shipment of equipment. Paramount further agreed to secure from the Burrup Trust a guarantee of Paramount's obligations under the contract. That guarantee was subsequently provided by the third defendant (Burrup Holdings) and the fourth defendant (Oswal) in their capacity as trustees of the Burrup Trust. This oral agreement is referred to as the Deferred Payment Agreement.
Paharpur pleads that the Deferred Payment Agreement was made by Rambal on behalf of Paramount and Burrup Fertilisers. Paharpur pleads that Rambal was at all material times the deputy managing director of Burrup Fertilisers.
Paharpur says that on 25 February 2005 it shipped the last of the equipment to Paramount and the sum of $4 million together with interest became payable on 25 August 2005. Paharpur further says that on 16 June 2005 it forwarded to Paramount and Burrup Fertilisers, for acceptance by them, a bill of exchange in the sum of $4 million plus interest. The total sum was expressed in the bill of exchange to be payable 180 days from 25 February 2005 - that is, on 25 August 2005. Paharpur pleads that on or about 20 July 2005 Paramount accepted the bill of exchange but, in breach of the Deferred Payment Agreement, amended the date of the bill of exchange so that it fell due 180 days from 16 July 2005 ‑ that is, 12 January 2006. Paharpur says that on or about 20 July 2005 Burrup Fertilisers co‑accepted the bill of exchange as amended and the bill of exchange was returned by Paramount and Burrup Fertilisers to Paharpur. The bill of exchange as amended bore the notation 'Co‑accepted Burrup Fertilisers Pty Ltd' and was signed by Rambal over the notation 'Director/Secretary'.
Paharpur pleads that Rambal had actual authority, or alternatively apparent authority, to execute the bill of exchange on behalf of Burrup Fertilisers.
Burrup Fertilisers by its defence pleads that Rambal did not have authority to co‑accept the bill of exchange on behalf of Burrup Fertilisers.
Paharpur pleads that on 12 January 2006 the bill of exchange fell due for payment and neither Paramount nor Burrup Fertilisers made payment on the bill of exchange. Paharpur sues Paramount and Burrup Fertilisers on the bill of exchange.
Paharpur pleads that by providing the bill of exchange Rambal represented to Paharpur that he was duly authorised by Burrup Fertilisers to execute the bill of exchange on behalf of Burrup Fertilisers. Paharpur says that in reliance on the representation, and induced by it, Paharpur did not take any steps to obtain payment before dispatch of the equipment. Paharpur says that if Rambal did not have Burrup Fertilisers' authority to agree to accept the bill of exchange on its behalf then, by reason of Rambal's lack of authority to agree to accept the bill of exchange on behalf of Burrup Fertilisers, Paharpur has suffered loss in that it does not have an enforceable right to obtain a bill of exchange from Burrup Fertilisers and further that it has suffered loss in that the bill of exchange is void as against Burrup Fertilisers by reason of Rambal's lack of authority. Paharpur also alleges that Rambal represented that he had authority to enter into the Deferred Payment Agreement and, in particular, to agree that Burrup Fertilisers would accept a bill of exchange and that if Rambal lacked such authority then Paharpur has suffered loss in that it does not have an enforceable right to obtain a bill of exchange from Burrup Fertilisers.
Rambal says that he has a good defence on the merits to Paharpur's claims against him. Rambal's written submissions identified five defences. The first is that there is cogent and unanswerable (and unanswered) evidence that the board of Burrup Fertilisers agreed, and authorised Rambal, to enter into the Deferred Payment Agreement and the bill of exchange on behalf of Burrup Fertilisers. The second defence is that Burrup Fertilisers does not deny that Rambal had authority to enter into the Deferred Payment Agreement, on behalf of Burrup Fertilisers. The third defence is, in effect, that if Burrup Fertilisers does deny that Rambal had authority to enter into the Deferred Payment Agreement, and Paharpur does not have an enforceable right to obtain a bill of exchange from Burrup Fertilisers, no loss flows from that. The fourth defence is a variation of the third defence. It is that if Rambal lacked authority to commit Burrup Fertilisers to co‑accept the bill of exchange there is no loss to Paharpur because Paharpur still has a valid claim against Burrup Fertilisers under the Deferred Payment Agreement for an order that Burrup Fertilisers provide a bill of exchange and Paharpur has a valid claim against Burrup Fertilisers pursuant to the Deed of Novation. The fifth defence was not pressed and I need not refer to it further.
Summary judgment - legal principles
Order 16 r 1 provides that the court may enter judgment for the defendant if it is 'satisfied that the action is frivolous or vexatious, that the defendant has a good defence on the merits, or that the action should be disposed of summarily or without pleadings'. The 'legal onus is, and remains on the defendant to show that there is no serious question to be tried upon any cause of action raised by the plaintiff': Anderson v Effexseven (1998) 10 ANZ Ins Cas 61‑424, 74,757 (WASCFC). The power to order summary judgment 'should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried': Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, 99. A plaintiff is not to be deprived by means of a summary procedure, of the opportunity of litigating his case in the ordinary way if there is any chance that he may be able to provide evidence, which, if accepted, will have the result that his claim will succeed. A 'litigant is entitled to submit for determination according to the due course of procedure a claim which he believes he can establish, although its foundation may in fact be slender': Cox v Journeaux (No 2) (1935) 52 CLR 713, 720, Dixon J. It will never be appropriate to dismiss a proceeding where the ultimate resolution of the case will depend upon facts which are in dispute.
Fifth defendant's first defence
Rambal's case is that there is 'cogent and unanswerable and unanswered' evidence that the board of Burrup Fertilisers agreed and authorised Rambal to enter into the Deferred Payment Agreement and the bill of exchange.
At [6(a)] of its defence Burrup Fertilisers pleads:
Vikas Rambal did not have authority to co‑accept the bill of exchange on the behalf of BFPL.
In 2004 the directors of Burrup Fertilisers were Oswal, Rambal, and Andreas Walewski. There are no minutes or written records of any meeting of the board of directors of Burrup Fertilisers that agreed to, or authorised Rambal to, co‑accept the bill of exchange on behalf of Burrup Fertilisers.
On 29 August 2007 Oswal swore an affidavit in opposition to Paharpur's application for summary judgment against Burrup Fertilisers. Oswal was at all material times the managing director and chairman of Burrup Fertilisers. In his affidavit Oswal swears:
As BFPL had engaged SNC Lavalin to construct the Plant, the general mandate for BFPL's officers extended only to dealings with SNC Lavalin. No BFPL officer was ever given general authority to deal directly with SNC Lavalin's subcontractor or any of the end suppliers utilised by that subcontractor.
Further, BFPL's contract with SNC Lavalin entitled BFPL in certain circumstances to seek compensation from SNC Lavalin with respect to issues of delay or defects in the construction of the Plant. There would have been no commercial benefit for BFPL to effectively guarantee the performance of SNC Lavalin's subcontractor in a contract with an end supplier. I would not have agreed to a course of action where BFPL was required to provide this sort of guarantee.
I have caused Basil Lenzo (Lenzo), BFPL's general legal counsel, and Wolfgang Jovanovic (Jovanovic), BFPL's company secretary, to review the minutes of the meetings of the BFPL board for the period between June 2003 and July 2005. This covers the period from the date of the Contract between Paharpur and Paramount up to the amended date of Paharpur's last shipment, which is referred to on the Bill of Exchange. The review was directed to identifying whether any resolutions had been passed by BFPL to specifically authorise Rambal to co‑accept the Bill of Exchange on the behalf of BFPL, or whether any resolutions had been passed that generally authorised Rambal to undertake acts such as signing a bill of exchange on behalf of BFPL in favour of an end supplier of materials for the construction of the Plant.
I have been informed by Lenzo and Jovanovic that they conducted the review described in paragraph 23 herein and that no resolutions were ever passed by BFPL specifically authorising Rambal to co‑accept the Bill of Exchange in favour of Paharpur, or generally authorising Rambal to undertake acts such as signing a bill of exchange on behalf of BFPL in favour of an end supplier of materials for the construction of the Plant [21] ‑ [24].
SNC Lavalin was the head contractor for the construction of the ammonia plant. Paramount was its subcontractor. Paharpur was an end supplier used by Paramount.
On 19 September 2008 Rambal swore an affidavit in support of his application for summary judgment. Rambal says that there were formal and informal meetings of the directors of Burrup Fertilisers - that is, meetings of Oswal, Walewski and himself. Rambal says that he met with Oswal and Walewski on 24 June 2004. Rambal says that he explained to Oswal and Walewski the Deferred Payment Agreement and that Paharpur required that a bill of exchange be signed on behalf of Burrup Fertilisers. Rambal then swears:
I also explained to P Oswal and Mr Walewski that Paharpur wanted the Bill of Exchange with BFPL so that if they got half way through manufacturing the cooling towers and Paramount or SNC Lavalin suffered financial failure, they would still be able to complete the contract with BFPL. P Oswal and I said words to each other to the effect that we agreed that such an arrangement was important for BFPL to ensure that the Project could be completed if SNC Lavalin or Paramount were unable to meet its contractual obligations for any reason, BFPL could step into the shoes of Paramount and demand the contract be performed by Paharpur.
After our discussions P Oswal said to me words to the effect that 'It is a great deal for Paramount that Paharpur will give us what we want without requiring a Bank Guarantee and we should take it'.
P Oswal then told me that he agreed to all of Paharpur's conditions and that I should tell Paharpur to get on with preparing the necessary documents and that Paramount, the Burrup Trust and BFPL agreed to the proposed terms. Mr Walewski said words to the effect that he concurred in this decision.
I recall that P Oswal instructed me to sign the Bill of Exchange as director of BFPL and the Deed of Novation on behalf of BFPL. Accordingly he and I signed the Deed of Novation on behalf of BFPL in P Oswal's office at the same time on or about 20 January 2005. Attached hereto and marked VR23 is a true copy of the Burrup Fertilisers Project Deed of Novation dated 20 January 2005 that was signed by P Oswal and I on behalf of BFPL (Deed of Novation).
As stated above, in this period (late 2004‑mid 2005) P Oswal executed the Paharpur Parent Company Guarantee in favour of Paharpur and that his secretary, Tracey Brabner witnessed his execution of the document.
In or around June 2005 I recall that I received a number of emails from Paharpur regarding the Bill of Exchange, and I also sent a number of replies. I am unable to access any of these emails as they were sent to and from my BFPL email address, to which I have not had access since around 23 April 2006.
I can recall expressly saying to P Oswal words to the effect that Paharpur wanted to see the resolutions of the directors of BFPL consenting to BFPL co‑accepting the bill of Exchange. In response, P Oswal said words to the effect that the directors, being him, Mr Walewski and I had agreed to the Bill of Exchange in April 2004. He said words to the effect that I should tell Paharpur that the directors of BFPL had orally agreed and the written minutes would follow. I recall that I verbally conveyed this message to Paharpur's representative in India.
On or about 16 July 2005 I recall that Vinojit Ambalavaner brought the Bill of Exchange to my office at BFPL. Mr Ambalavaner had already signed the document on behalf of Paramount and affixed the company seal. He asked me to sign it on behalf of BFPL to acknowledge that BFPL co‑accepted the Bill of Exchange. He said that he had amended the document to show that payment was due six months after delivery of the equipment, being 16 July 2005.
P Oswal was in his office next door to mine and I had a brief discussion with P Oswal about the Bill of Exchange and what it provided. P Oswal said words to the effect that he believed that it was consistent with the agreement that we had entered into with Paharpur in June 2004 and so I should proceed on behalf of BFPL to co‑accept it.
In accordance with P Oswal's instruction I signed the Bill of Exchange on behalf of BFPL and handed the document to Mr Ambalavaner who then left the BFPL offices. Attached hereto and marked VR24 is a true copy of the Bill of Exchange that I signed on behalf of BFPL. It was not necessary for P Oswal or Mr Walewski to also sign the Bill of Exchange as the form only required one signature from BFPL. I am familiar with, and identify, the signature of Mr Ambalavaner on that document, in his capacity as Director/Secretary of Paramount [93] - [102].
Rambal's claim that Oswal and Walewski agreed that he should co‑accept the bill of exchange on behalf of Burrup Fertilisers is supported by Walewski. On 18 September 2008 Walewski swore an affidavit in support of Rambal's application for summary judgment. Walewski swears:
In April 2004 Mr Oswal, Mr Rambal and I had a discussion in Burrup's office concerning the Paharpur contract. Mr Oswal asked Mr Rambal to discuss terms with Paharpur and request that they agree to ship the cooling towers to the Plant site before the final payment was made.
Mr Rambal subsequently stated to me and Mr Oswal at a meeting later in April 2004 words to the effect that Paharpur's requirements were that:
35.1interest would have to be paid on the deferred payment;
35.2guarantees were required from Burrup Trust and Mr Oswal;
35.3BFPL and Paramount had to execute a Deed of Novation substituting BFPL for Paramount in the contract; and
35.4BFPL and Paramount would have to execute a Bill of Exchange to ensure payment on the stipulated date.
At this meeting, Mr Oswal said words to the effect that the Burrup Trust would provide a parent company guarantee to Paharpur as security for the monies that were to be deferred. Mr Oswal also said words to the effect that he would agree to the requirement for BFPL to execute a Deed of Novation and Bill of Exchange as requested by Paharpur.
At a subsequent meeting in June or July 2004 attended by Mr Oswal, Mr Rambal and myself, Mr Rambal said words to the effect that Paharpur had agreed to a Deferred Payment Plan on the terms referred to above.
I queried why BFPL should execute the Deed of Novation and Bill of Exchange as Paharpur was Paramount's creditor and a subcontractor to SNCL with which BFPL had a fixed price EPC contract. Mr Oswal responded with words to the effect that it was important not to delay the project if it can be avoided and in any event the Burrup Trust would pay in the unlikely event that Paramount defaulted. I was satisfied on the basis of that explanation that it was in the best interests of BFPL to agree to the Deed of Novation and Bill of Exchange, and the three of us agreed to proceed on that basis [34] ‑ [38].
There is a disputed question of fact. Rambal says that Oswal and Walewski agreed with him that Burrup Fertilisers should co‑accept the bill of exchange and agreed that Rambal should sign the bill of exchange on behalf of Burrup Fertilisers. The affidavit evidence of Walewski and Rambal is not expressly contradicted by Oswal. Oswal swore his affidavit before Rambal and Walewski swore theirs. However, Oswal's affidavit is inconsistent with that of Rambal and Walewski. The effect of Oswal's affidavit is to deny that Rambal had authority to co‑accept the bill of exchange on behalf of Burrup Fertilisers.
Summary judgment should not be entered for Rambal on the basis of the sworn evidence of Rambal and Walewski to the effect that Rambal was authorised by the directors of Burrup Fertilisers to co‑accept the bill of exchange and sign it on behalf of Burrup Fertilisers. Paharpur's primary case is that Burrup Fertilisers is liable on the bill of exchange because Rambal had authority to co‑accept it on behalf of Burrup Fertilisers. In its defence Burrup Fertilisers denies that Rambal had authority to co‑accept the bill of exchange on behalf of Burrup Fertilisers. Paharpur sought summary judgment against Burrup Fertilisers. Burrup Fertilisers resisted the application. In opposition to Paharpur's application for summary judgment against Burrup Fertilisers Oswal swore an affidavit to the effect that Rambal did not have authority to co‑accept the bill of exchange on behalf of Burrup Fertilisers. Paharpur's application for summary judgment against Burrup Fertilisers failed.
There is a conflict in the evidence between Oswal on the one hand and Rambal and Walewski on the other as to whether or not Rambal was given the requisite authority. Rambal relies upon other circumstantial evidence but there is nevertheless a conflict between the three directors of Burrup Fertilisers as to whether or not the directors agreed to Rambal co‑accepting the bill of exchange on behalf of Burrup Fertilisers at the meeting, or meetings, sworn to by Rambal and Walewski. The interests of Paharpur on the one hand and Burrup Fertilisers and Oswal on the other are opposed in this action. Paharpur cannot reasonably be expected to be able to lead any further evidence from Oswal in this application. It is not in the interests of justice that summary judgment be entered for Rambal and subsequently the issue of whether or not Rambal had authority to co‑accept the bill of exchange on behalf of Burrup Fertilisers as between Paharpur and Burrup Fertilisers should proceed to trial.
Rambal's second defence
Rambal submits that Burrup Fertilisers does not deny that Rambal had authority to enter into the Deferred Payment Agreement, including agreeing that Burrup Fertilisers would accept a bill of exchange on behalf of Burrup Fertilisers. Counsel for Rambal submits that, in its defence, Burrup Fertilisers does not admit the allegations by Paharpur that Rambal warranted he had authority to enter into the Deferred Payment Agreement on behalf of Burrup Fertilisers.
Senior counsel for Paharpur makes two replies. First, there may be evidence tendered by other parties that leads to a finding that Rambal did not have authority to enter into the Deferred Payment Agreement on behalf of Burrup Fertilisers notwithstanding that Burrup Fertilisers is not itself at liberty to lead such evidence because it has merely 'not admitted', rather than denied, the allegation. Second, Burrup Fertilisers' defence was filed before Paharpur amended its statement of claim to plead the breach of warranty of authority allegations against Rambal. Burrup Fertilisers has not yet filed its defence in answer to those allegations.
In my view, it cannot be said that Paharpur's claim in relation to breach of warranty of authority to enter into the Deferred Payment Agreement is bound to fail. In all the circumstances, it is not appropriate to enter summary judgment for Rambal on this part of the case.
Rambal's third defence and fourth defence
Rambal's third defence and fourth defence raised the same, or similar, issue and may be considered together.
Rambal says that even if Rambal did not have authority to enter into the Deferred Payment Agreement on behalf of Burrup Fertilisers no loss to Paharpur flows from that. The cause of the loss, if any, can only be the alleged absence of authority in accepting the bill of exchange. Thus, no loss flows from the alleged breach of warranty of authority in relation to the Deferred Payment Agreement and that claim cannot succeed. The fourth defence is that if Rambal lacked authority to co‑accept the bill of exchange on behalf of Burrup Fertilisers there is no loss because Paharpur still has a valid claim against Burrup Fertilisers under the Deferred Payment Agreement, for an order that Burrup Fertilisers provide a bill of exchange and pursuant to the Deed of Novation.
Senior counsel for Paharpur submits that it is no answer to a claim for breach of warranty of authority to say that the plaintiff has other valid claims. The claim for breach of warranty of authority must be looked at in isolation. Those other claims may fail at trial. The court cannot assume for the purposes of an O 16 application that those claims will succeed. To the contrary, the court should assume in considering an O 16 application that the other claims will fail. Senior counsel submits that the position is analogous to an O 14 application where the court must proceed on the basis that all of the matters deposed to in the defendants' affidavit will be accepted at trial: Webster v Lampard (1993) 177 CLR 598, 608.
Paharpur relies upon the statement in Megrah M, Ryder FR and Bueno A, Byles on Bills of Exchange (25th ed, 1983) 67:
By the act of signature the agent represents to the holder that he has the principal's authority to sign and that his signature accordingly is binding upon his principal. If, therefore, the principal is not bound, owing to the absence or excess of authority, the agent will be liable in damages to the holder, whether the representation is fraudulent or innocent.
I accept the submissions on behalf of Paharpur. It is not appropriate to order summary judgment for Rambal on the basis of the third or fourth defences.
Conclusion
Rambal's application for summary judgment against Paharpur is dismissed.
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