Protec Pacific Pty Ltd v Steuler Industriewerke GmbH

[2007] VSC 312

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
BUILDING CASES LIST

No. 7268  of 2007

PROTEC PACIFIC PTY LTD	Plaintiff
(ACN 009 534 552)
v
STEULER INDUSTRIEWERKE GmbH	Defendant
(ACN 083 733 966)

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JUDGE:	HABERSBERGER J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	24 August 2007
DATE OF JUDGMENT:	31 August 2007
CASE MAY BE CITED AS:	Protec Pacific Pty Ltd v Steuler Industriewerke GmbH
MEDIUM NEUTRAL CITATION:	[2007] VSC 312

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PRACTICE AND PROCEDURE – Application for summary judgment for defendant – Factual question of which company entered into agreement held to be arguable – Supreme Court (General Civil Procedure) Rules 2005 r 23.01, r 23.03

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P Riordan SC with Mr I Percy	Middletons
For the Defendant	Mr P Cosgrave SC with Mr F Tiernan	Anderson Rice

HIS HONOUR:

1. This is an application by the defendant, Steuler Industriewerke GmbH (“Steuler”), by summons filed 15 August 2007 for orders that:

(a)this proceeding be stayed generally or that there be judgment in its favour, pursuant to r.23.01 of the Supreme Court (General Civil Procedure) Rules 2005 (“the Rules”) and/or the inherent jurisdiction of the Court;

(b)there be judgment for the defendant, pursuant to r.23.03 of the Rules.

1. In its statement of claim, the plaintiff, Protec Pacific Pty Ltd (“Protec”), alleged that:

(a)at all material times it was carrying on business as a wear and corrosion control specialist and that Steuler was a foreign corporation registered in Australia which was in the business of manufacturing, designing, supplying and installing high-density polyethylene (“HDPE”) lining products and systems under the trade name “Bekaplast”;

(b)in July 1998, Protec and BHP Billiton Olympic Dam Corporation Pty Ltd (then known as WMC (Olympic Dam Corporation) Pty Ltd) (“WMC”) entered into an On-Site Service Agreement (“the OSS Agreement”) for the design, supply and installation of HDPE corrosion protection linings for concrete tanks and settlers (“the Building Work”) forming part of WMC’s Olympic Dam expansion project;

(c)in consideration of WMC entering into the OSS Agreement, Protec warranted that the HDPE would have a service life of 20 years when used with the chemicals and under the operating temperatures listed in the Bid Request (“the warranty”);

(d)prior to Protec entering into the OSS Agreement and giving the warranty, Steuler made certain misleading and deceptive representations to Protec in relation to:

(i) the Bekaplast HDPE it supplied,

(ii)the warranty, and

(iii)the Building Work;

(e)Steuler was also negligent in making those representations to Protec;

(f)Protec relied upon those representations in entering into the OSS Agreement and giving the warranty;

(g)Protec carried out the Building Work pursuant to the OSS Agreement from June 1998 until July 1999;

(h)by a counterclaim in proceeding No. 5797 of 2000, WMC claimed damages from Protec for economic loss and rectification costs resulting from alleged defects in the Building Work;

(i)by a deed of settlement dated 31 May 2007 Protec settled WMC’s claim against it for $15 million;  and

(j)Protec suffered the loss and damage constituted by the settlement with WMC as a result of the misleading and deceptive representations, and negligence of Steuler.

1. Steuler submitted that there should be summary judgment for it in respect of Protec’s claim because it was clear in that Protec did not have any claim against Steuler. This assertion was based on the allegation that the party which entered into the OSS Agreement with WMC was not Protec but another related company, Protec Pacific (NSW) Pty Ltd (“Protec NSW”).  What should have been a relatively simple task of identifying which Protec Pacific contracted with WMC was complicated by the fact that although the written contract dated 13 June 1998 named Protec as a party, the ACN number given was that of Protec NSW. 

1. The application by Steuler was supported by an affidavit sworn by its managing director, Mr Michael Steuler.  Numerous documents were exhibited to his affidavit.  Protec relied on an affidavit sworn by its solicitor, Mr Anthony Watson.  Exhibited to that affidavit was an affidavit sworn by him on 31 January 2007 in proceeding No. 5797 of 2000 and an affidavit sworn by Mr Howard Smith, the managing director of Protec, on 12 February 2007 in a 2004 proceeding brought by Protec against Steuler.   That proceeding lapsed because it was not served within time and an application to extend the period of validity for service of the writ on Steuler was refused by Hansen J.[1]  Exhibited to the earlier affidavits of Mr Watson and Mr Smith were further documents relating to the question of which Protec Pacific company entered into the OSS Agreement with WMC.

   [1]Protec Pacific Pty Ltd v Steuler Industriewerke GmbH [2007] VSC 93.

1. Mr Cosgrave SC, who appeared with Mr Tiernan of counsel for Steuler, helpfully submitted that the numerous documents on which they relied to show that the OSS Agreement was entered into by Protec NSW, and not Protec, fell into three broad categories.  This meant that it was unnecessary to examine in detail all of the documents in each category. 

1. First, there were contractual documents between Protec NSW and WMC including the July 1997 contract for the design, supply, packaging and installation of the HDPE lining material of the tanks and ponds.  Subsequently, in March or April 1998 that contract was split into two – a purchase order covering the design, fabrication, testing, packaging and shipping of the lining, and the OSS Agreement.  A revised purchase order dated 10 April 1998 was issued to Protec NSW in respect of the first of those contracts.

1. Secondly, there were the purchase orders and associated documents issued by Protec NSW to Steuler in the period between July and October 1997.  The third category of documents consisted of those relating to the payments made by WMC to Protec NSW between September 1997 and May 1998.

1. Mr Cosgrave submitted that, apart from the written contract dated 13 June 1998 which was equivocal because of the use of Protec NSW’s ACN number, the only other document possibly lending support to Protec’s claim was a facsimile dated 15 June 1998 in which Mr Smith apparently wrote to WMC confirming acceptance of the award of the contract by “Protec Pacific Pty Ltd”.  Mr Cosgrave submitted, however, that as the only party to discover a copy of this document in proceeding No. 5797 of 2000 was Protec, there was no evidence that it had ever been sent by Protec to WMC.  There was, however, a third document which was a letter dated 13 June 1998 from WMC accepting the contractor’s price and awarding the contract to it, and forwarding copies of the contract document to it.  This letter was addressed to Protec.

1. Counsel for Steuler referred to the corporate history of the two companies in the Protec Pacific group.  At all material times, Protec NSW was registered as Protec Pacific (NSW) Pty Ltd.  On the other hand, between 6 October 1982 and 5 July 1993 Protec was known as Protec Pacific Pty Ltd, from 6 July 1993 to 4 May 1998, it was known as Protec Pacific (Tas) Pty Ltd and on 5 May 1998 it changed its name back to Protec Pacific Pty Ltd.  The principal place of business of Protec between 1 March 1991 and 30 December 1997 was in Burnie, Tasmania.  On 31 December 1997, it changed its principal place of business to an address in New South Wales, which was also the registered office and principal place of business of Protec NSW.

1. Mr Cosgrave also referred to the subsequent agreements made between Mr Smith and Steuler.  On 12 November 1999, Mr Smith and Steuler entered into two written agreements.  The first agreement was a share sale agreement whereby Mr Smith agreed to sell, or grant options to sell, to Steuler 50% of his shares in Protec, although subsequently Steuler only purchased 12.5% of the shares.  Mr Smith also agreed that he would arrange for Mr Michael Steuler, the managing director of Steuler, to be appointed a director of Protec;  that he would delete the reference to "Protec" in the name of Protec NSW and not seek to incorporate any other company utilising the name "Protec";  and that any plant and equipment used by Protec in its business and which had, in the past, been owned by Protec NSW would be transferred to Protec for the sum of one dollar.  Further, the parties acknowledged that "all trading activities of the business will be operated by Protec Pacific Pty Ltd and have been effectively since 1 July 1998."  The second agreement was a shareholders agreement which provided, among other things, that, unless otherwise agreed, Protec would exclusively work with Steuler in Australia and New Zealand, and that Steuler would exclusively use Protec for the installation of all of its products in those countries, and that Mr Smith and Steuler would each be entitled to appoint one director to the Board of Protec.

1. According to an affidavit by Mr Smith, the negotiations, which resulted in the two agreements being executed in November 1999, had commenced in about January 1998.  He said that the agreement was that Steuler would purchase a stake in Protec's business effective from 1 July 1998, so that it could receive dividends from that financial year.

1. Mr Cosgrave submitted that, in the absence of any novation of the OSS Agreement, these 1999 agreements could not bear upon or affect the issue of which Protec  Pacific company had been the contracting party with WMC.  They were, after all, executed in November 1999, which was approximately five months after Protec left the Olympic Dam site.  Mr Cosgrave submitted that the 1999 agreements merely dealt with a sale of shares in Protec by Mr Smith to Steuler and with the basis upon which those shares would be held and with how the business of Protec would be conducted in the future.  Not even the acknowledgement by the parties that “all trading activities of the business” had been “effectively” operated by Protec since 1 July 1998 could, he submitted, affect or determine the issue of which Protec Pacific company entered into the OSS Agreement.  Moreover, Mr Cosgrave noted, that there was no evidence from Mr Smith that he had made the OSS Agreement with WMC on behalf of Protec.

1. Thus, counsel for Steuler submitted that the evidence before the Court showed overwhelmingly that it was not Protec but Protec NSW which was the contracting party with WMC.  They further submitted that in those circumstances it was clear that Steuler had a good defence and that it should not be put to the trouble of defending a futile proceeding.

1. Mr Riordan SC, who appeared with Mr Percy for Protec, submitted that there were four separate grounds on which the application should fail.  First, Mr Riordan submitted that, even accepting, for the purposes of this argument, that all of the dealings before June 1998 were between WMC and Protec NSW and Steuler and Protec NSW, this did not support the claim that the OSS Agreement was also made by Protec NSW.  He referred to the inclusion of Protec’s name as the contracting party in the written agreement itself and in the facsimile dated 15 June 1998 and to the signing by Mr Smith of that facsimile “for and on behalf of Protec Pacific Pty Ltd”.  The only contrary indicator was, he submitted, the weak argument based on the use of the wrong ACN number.

1. Mr Riordan further submitted that Steuler’s argument ignored the most powerful factual indications in favour of the conclusion that it was Protec and not Protec NSW which entered into the OSS Agreement.  The evidence of Mr Smith, supported by the accounts of Protec and Protec NSW, was that in the financial year ended 30 June 1998, Protec NSW had $3,818,852 worth of sales, of which $1,096,000 was received from WMC, and Protec had $300,000 worth of sales, none of which was received from WMC, whereas in the financial year ended 30 June 1999 Protec NSW had $142,000 worth of sales none of which was received from WMC, and Protec had $12,300,000 worth of sales, of which $3,543,825 was received from WMC.  Mr Riordan submitted that the evidence showed that, from January 1998, Mr Smith and Steuler were discussing arrangements for Steuler to buy into Protec Pacific and that it was therefore agreed that it would be Protec which was to become the principal trading entity for the Protec Pacific business (thus leading to Protec entering into the OSS Agreement) and that this was what the parties specifically acknowledged in the November 1999 agreements.  Mr Riordan also asked rhetorically why Mr Smith would be sharing some $3.54 million with Steuler if it was not Protec which had entered into the contract.

1. In reply, Mr Cosgrave submitted that this evidence was not admissible because it related to the subsequent conduct of the parties.  It is well established, in my opinion, that subsequent conduct may be relied upon to establish the existence of a contract[2] but not for the purpose of construing the terms of a contract.[3]  Although it will be a matter for further debate, I was not persuaded that evidence relating to which of two companies was the contracting party necessarily falls into the second impermissible category.

   [2]See, for example, Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 78 per Griffith CJ, with whom O’Connor J agreed; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 669 per Griffith CJ and at 672 per Isaacs J; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 547-548 at 550 per Gleeson CJ, with whom Hope and Mahoney JJA agreed.

   [3]See, for example, Inglis v John Buttery & Co (1878) 3 App Cas 552 at 572 per Lord O’Hagan; Maynard v Goode (1926) 37 CLR 529 at 538 per Isaacs J.

1. The second ground advanced by Protec was that, in the above circumstances, even if it was Protec NSW which entered into the OSS Agreement, it did so as agent for its undisclosed principal, Protec, which would mean that Protec was liable to WMC for any breach of the OSS Agreement.

1. Thirdly, Mr Riordan submitted that as both Protec and Steuler had always conducted themselves on the basis that it was Protec which was the contracting party, Steuler would be estopped from asserting to the contrary.  Not only had Steuler entered into the 1999 agreements in which it acknowledged that all business from 1 July 1998 was conducted by Protec, it had as a shareholder of Protec reaped the financial benefit of WMC paying to Protec in excess of $3.54 million for the work performed at the Olympic Dam.  Also, in proceeding No. 5797 of 2000 Steuler had accepted that Protec, and not Protec NSW, was the proper party.[4]  Further, Mr Riordan submitted that because this application had been brought prematurely, prior to the delivery of a defence and reply, the exact way in which the estoppel argument might be pleaded had not been definitively established.

   [4]See Protec Pacific Pty Ltd v WMC (Olympic Dam Corporation) Pty Ltd [No. 2] [2007] VSC 152.

1. Finally, Mr Riordan submitted that, even if it was held that it was Protec NSW which entered into the OSS Agreement, it was still possible for Protec to succeed in this claim against Steuler.  What Protec had to establish, he submitted, was that by reason of the misleading and deceptive conduct of Steuler, Protec became liable to WMC for $15 million.  This was a causation question, which should be determined at trial after all the evidence had been heard rather than on a summary application.

1. Mr Riordan submitted that this point had effectively already been determined against Steuler by Hansen J in his judgment referred to above. Although it was not strictly necessary for his Honour to do so, he did deal with the application in that case by Steuler for a stay of proceeding or judgment under r.23.01, alternatively a striking out of the endorsement under r.23.02. Hansen J said that:

In my view, the relief sought in the summons should be refused. I have regard to everything that counsel for Steuler said, but ultimately I am not satisfied that the proceeding brought by Protec is so lacking in tenability as to allow an order summarily dismissing it under r 23.01. Assuming, without deciding, that (a) the relevant contracting party was Protec (NSW); (b) that the alleged statements were made to either Protec (NSW) or Protec; (c) that in making such statements Steuler breached a duty of care to either Protec (NSW) or Protec; and (d) that the statements induced Protec (NSW) to enter into the relevant contracts, in my view it cannot be said that Protec’s claim that it has suffered loss by reason of these premises is bound in law to fail.[5]

[5]Protec Pacific Pty Ltd v Steuler Industriewerke GmbH [2007] VSC 93 at [60].

1. There was no dispute between the parties as to the appropriate tests to be applied on an application such as this. Thus, the traditional statement of when a court can summarily determine a proceeding by, for example, staying the proceeding or a claim in the proceeding, under r.23.01, on the ground that it does not disclose a cause of action has been expressed in a variety of ways. In General Steel Industries Inc v Commissioner for Railways (NSW),[6] Barwick CJ summarised past approaches.  His Honour said:

The test to be applied has been variously expressed;  “so obviously untenable that it cannot possibly succeed”;  “manifestly groundless”;  “so manifestly faulty that it does not admit of argument”;  “discloses a case which the Court is satisfied cannot succeed”;  “under no possibility can there be a good cause of action”;  “be manifest that to allow them' (the pleadings) 'to stand would involve useless expense”... so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed;  or “so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument”;  “so to speak apparent at a glance”.

[6](1964) 112 CLR 125 at 129

1. In considering this application I have borne in mind the words of Dixon J, as he then was, in Dey v Victorian Railway Commissioners[7]:

A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner …   But once it appears that there is a real question to be determined whether of fact or law and that the right of the parties depend upon it, then it is not competent for the Court to dismiss the action …  [U]nder cover of the inherent jurisdiction to stop abuse of process litigants are not to be deprived of the right to submit real and genuine controversies to the determination of the courts by the due procedure appropriate for the purpose.

I have also taken into account the observation by Barwick CJ in General Steel[8] that:

It is essential that great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal.

[7](1948) 78 CLR 62 at 91-92.

[8](1964) 112 CLR 125 at 130.

1. In my opinion, Steuler’s application must fail.  I consider that there is a very real factual argument that it was Protec, and not Protec NSW, which entered into the OSS Agreement, as stated in the written agreement dated 13 June 1998, the letter of the same date and the facsimile dated 15 June 1998.  It seems to me that it is arguable that the material put forward by Steuler is not inconsistent with the conclusion that there was a change in the relationship between WMC and the Protec Pacific group after May 1998 which resulted in Protec replacing Protec NSW as the contracting party.  In the circumstances, it is probably not appropriate to say anything further about the first ground advanced by Protec in opposition to Steuler’s application.

1. However, although it is not strictly necessary, I also add that, in my opinion, each of Protec’s other three grounds would have been a sufficient basis for denying Steuler judgment at this stage,  as none of them could be described as “hopeless”.

1. Accordingly, I consider that Steuler’s summons filed 15 August 2007 must be dismissed.

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