Quenchy Crusta Sales Pty Ltd v Logi-Tech Pty Ltd and Ors No. Scciv-00-252

QUENCHY CRUSTA SALES PTY LTD v LOGI-TECH PTY LTD
[2003] SASC 74
Miscellaneous appeal

PERRY J. This is an appeal from an order of a Master dismissing an application by a third party to strike out the third party statement of claim (“the TPSC”).
The plaintiff, Quenchy Crusta Sales Pty Ltd (“Quenchy”) sues Logi-Tech Pty Ltd (“Logi-Tech”) and Sharp Corporation of Australia Pty Ltd (“Sharp”). The claim arises out of the purchase by Quenchy from Logi-Tech in February 1999 of thirty “Notebook computers” made by Sharp.
In the proceedings, Quenchy claims damages and other relief pursuant to the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 with respect to alleged misleading and deceptive representations, together with damages for breach of contract, for negligent misstatement and for breach of warranty under the Manufacturers Warranties Act 1974.
Quenchy distributes its products through what it describes as a network of franchised owner/driver trucks. It developed computer software for use with computers to be carried by the drivers of the trucks, enabling the drivers at the point of sale to accept and process orders and deliveries, the information being downloaded at Quenchy’s head office.
Quenchy alleges that it made it clear to both defendants that the computers to be supplied “had to be suitable for mobile use by the drivers in and out of the truck cabins, rear of the trucks and to and from points of sale”. Although the precise allegations as to representations alleged to have been made by Sharp and Logi-Tech differ a little in detail, the substance of the alleged representations are the same. Broadly speaking, Quenchy asserts that both defendants represented that the computers would be suitable for the intended use, more particularly “mobile use”.
Quenchy alleges that the Notebook computers proved to be unsuitable for mobile use and were prone to frequent breakdown.
In its defence, Logi-Tech denies liability to Quenchy and denies most of the material allegations alleged against it. Further, it alleges that Quenchy “relied at all times on the advice of their independent consultants Neutex Pty Ltd (“Neutex”) and Mr Phillip Craig of Neutex”. By application made on 18 July 2002, Logi-Tech sought, inter alia, leave to join Neutex as a third party. A Master granted the application. On 21 August 2002, Logi-Tech issued a third party notice with an attached statement of claim to which Neutex entered an appearance on 10 September 2002.
On 9 October 2002, Neutex issued an application seeking an order that the TPSC be struck out. The application was supported by an affidavit of Mr Meredith, which in turn exhibited certain correspondence which had passed between the solicitors for Neutex and the solicitors for Logi-Tech.
In that correspondence, the solicitors for Neutex complained as to the adequacy of the pleading in the third party statement of claim. In particular, the solicitors for Neutex asserted in the correspondence that none of the claims advanced against Neutex could, on the pleaded facts, be made out, with the possible exception of a claim for misrepresentation, as to which they suggested that even that claim might not be supported by a plea of sufficient material facts.
Following that correspondence and subsequent discussions between the solicitors for Logi-Tech and Neutex, Logi-Tech put forward an amended statement of claim which was intended to address some of the concerns which had been expressed by Neutex.
However, Neutex resolved to maintain its application to strike out the TPSC (in its amended form), and their application to that end was argued before a Master. After hearing argument, the Master delivered written reasons for holding that the proposed amended TPSC complied with the rules as to pleading, and was otherwise a “proper and adequate pleading”. He proceeded to dismiss Neutex’s application and gave leave to Logi-Tech to file and serve the amended statement of claim.
It is from that decision that Neutex appeals.
In its amended notice of appeal, Neutex advances the following complaints:
“1.The learned Master erred in law in finding that the third defendant had pleaded a claim for:
1.1    indemnity; or
1.2    contribution
2.The learned master erred in law in finding that the first defendant’s claim complied with all the requirements of Rule 46A.04 either as to:
2.1    an alleged misrepresentation; or
2.2    a contract of indemnity.”
The reference to SCR r 46A.04 is in error for two reasons.
That rule applies to statements of claim in personal injury cases, which this is not. SCR r 46A.03 is the current rule dealing with the contents of statements of claim in other cases. But that is not of application, as the whole of SCR r 46A applies only to actions commenced on and after 3 June 2000. This action was commenced on 17 March 2000, and accordingly, no direction to the contrary having been given by the court, the rules as to the contents of the pleadings are as set out in SCR r 46.
For reasons which will appear, this does not affect the outcome of the appeal.
In order to understand Neutex’s complaints, it is necessary to refer to the pleas advanced in the third party notice and the TPSC.
The third party notice asserts the following claim:
“The first defendant [Logi-Tech] claims against you to be indemnified against the plaintiff’s claim and the costs of action to the extent that the first defendant is found liable to the plaintiff and to such extent as the court may deem just and equitable on the grounds that:
1.As a result of the allegations contained in the attached Third Party Statement of Claim;
2.As a result of the allegations contained in the Summons and Amended Statement of Claim annexed hereto.”
There are some obvious difficulties associated with a plea in that form.
An indemnity is different from contribution. If a claim to indemnity is made out, this would cover the total liability of Logi-Tech to Quenchy. The words “to such extent as the court may deem just and equitable”, however, are suggestive of a claim for contribution, although a claim for contribution is not expressly asserted.
As for paragraph 2, allegations contained in the Summons and Amended Statement of Claim operate only between the plaintiff and the defendant, and could not support a claim against Neutex as third party.
Turning to the amended TPSC, after referring to Quenchy’s claim against Logi-Tech and the nature of Logi-Tech’s defence, the following factual matters are then pleaded:
“9.Prior to the agreement [contract of sale] Quenchy were provided by Logi-Tech with a demonstration Notebook computer and printer for a period of one week, and had the offer of a longer demonstration period.
10.The only relevant pre contractual discussions between Logi-Tech, Quenchy and Neutex were as follows:
(a)     in or about January of 1999 Phillip Craig attended at Logi-Tech’s offices and stated that he had seen the Sharp notebook computer on the internet, that he had attempted to purchase the notebook computers directly from Sharp, that Sharp had declined to sell directly, that Sharp referred to him to a list of retailers;
(b)    Mr Craig made enquiries of Logi-Tech as to whether Logi-Tech had stock of the notebook computers, and/or whether Logi-Tech were able to supply the notebook computers;
(c)    that on or about late January or early February Neutex (by Phillip Craig) informed Mr Hill of Logi-Tech that it, Neutex, expected Logi-Tech to pay it a sum of money;
(d)    that following the meeting referred to in the previous sub-paragraph Mr Peter Hill, then of Logi-Tech, met with Mr Phillip Craig and Mr Goldsworthy of Quenchy at Quenchy’s premises at Dry Creek;
(e)    at the said meeting Mr Goldsworthy said words to the effect that Quenchy liked the product and had made their minds up about the product, and demonstrated a sample software program that Quenchy intended to run on the computers. Mr Hill advised that there was a three year return to base warranty;
(f)     Mr Hill offered Mr Phillip Craig the opportunity to have the notebooks on a further demonstration period prior to purchase, however Mr Craig declined because of their tight scheduling to install the system;
(g)    Mr Goldsworthy then provided Mr Hill with a quotation from a company called Streamline and said words to the effect ‘we’d like to do business with you. Can you beat this?’; and
(h)    neither Quenchy or Mr Craig went into any detail about the particular use that the goods were to be put or how they were to be used by Quenchy, other than that the computers needed to be capable of running the demonstrated sample software and that the computers needed to be portable.”
In paragraph 11, Logi-Tech pleads that to the extent that it made further representations [these are not identified], which is denied, “or that Logi-Tech is liable to the plaintiff, whether in contract, misrepresentation, statute or otherwise”, “Neutex is the cause of any loss suffered by Quenchy”.
This allegation is particularised in a series of following sub-paragraphs which assert that Neutex independently made “recommendations” to Quenchy to purchase the Sharp computers; that Quenchy relied on Neutex’s “representations” [the transition from recommendation to representation is not explained]; that Logi-Tech simply supplied goods to Quenchy which Quenchy had ordered on the basis of “recommendations” made by Neutex; that Neutex did not advise Logi-Tech as to facts which might have led Logi-Tech to question the suitability of the goods for purchase; and that Neutex in its capacity as consultant to Quenchy should have advised Quenchy that the goods could not be used in the manner intended, and should have raised with Logi-Tech any queries that it or Quenchy had in respect of the suitability of the goods.
It is further alleged against Neutex that it should have drawn to Logi-Tech’s attention any facts that could cause Logi-Tech to question whether the goods were suitable for their intended use, and should have during the trial period have formed a “proper opinion” about the suitability of the computer for its intended use.
Pausing there, the difficulty with the pleadings to which I have so far referred is that facts are not asserted which make clear any cause of action as between Logi-Tech and Neutex. To suggest, for example, that Quenchy relied on Neutex’s representations does not identify a basis upon which either an indemnity or contribution could be sought by Logi-Tech as against Neutex. The same applies to the allegation that Neutex should have advised Quenchy that the goods could not be used in the manner intended.
Insofar as it is alleged that Neutex in some way failed to advise Logi-Tech of certain matters, the basis upon which such a failure is asserted to be actionable should be pleaded eg whether in contract or otherwise.
Following paragraphs of the TPSC, commencing with paragraph 12 of the amended third party statement of claim, allege various representations and warranties made or given by Neutex to Logi-Tech. Those assertions are particularised in the following way:
“12.Neutex represented and warranted to Logi-Tech that:
12.1it (on behalf of Quenchy) was seeking supply of the computers from Logi-Tech only because Sharp would not supply computers directly to Quenchy;
12.2it was only dealing with Logi-Tech because it was unable to secure a supply to Quenchy of the computers from Sharp directly;
12.3that based on its recommendations Quenchy had already made up its mind to purchase the Sharp computers;
12.4that, by reason of holding itself out as an expert in computer hardware and software advice that neither Quenchy nor it needed advice from Logi-Tech as to the suitability of the goods;
12.5that, by a combination of silence and by holding itself out as an expert in computer hardware and software advice, and by Quenchy having taken the computers for a trial period and rejected the offer of a further trial period, that all reasonable enquiries had been made to determine the suitability of the goods; and
12.6that by reason of the foregoing Neutex was satisfied as to the suitability of the goods for their intended use.
Particulars to paragraph 12
Logi-Tech repeats paragraphs 5 to 11 above.”
As for the attempt to give buoyancy to the pleas in 12.1 to 12.6 by reference to paragraphs 5 to 11, paragraphs 5 to 11 do not identify a factual basis upon which one can identify clearly what “representations” or “warranties” are alleged to have been made by Neutex to Logi-Tech, as opposed to representations by Neutex to Quenchy. That is with the qualification that I suppose some sort of representation by silence might be drawn out of a combination of the allegations in 12.5 and 11.5.
Paragraph 13 of the amended TPSC alleges a contract. It is in the following terms:
“13.In or about late January 1999 or early February 1999 Logi-Tech and Neutex entered into a contract for the provision of consultancy services by Neutex to Logi-Tech, which contract was partly oral and partly in writing (‘Neutex Contract’).
Particulars
13.1 Insofar as the Neutex Contract was in writing it is represented by invoice number 204 from Neutex Pty Ltd to Logi-Tech.
13.2 Insofar as the Neutex Contract was oral, it was made as a consequence of discussions between Peter Hill and Phil Craig (of Logi-Tech and Neutex respectively) whereby Craig, in consideration for Neutex having introduced Quenchy to Logi-Tech as a customer, and on the basis that Neutex had provided the recommendation to Quenchy to buy the notebook computers, which Mr Hill of Logi-Tech accepted, sought payment of $1,400 from Logi-Tech.
13.3 Logi-Tech paid to Neutex the sum of $1,400 on 4 February 1999 by cheque number 012341.
14.It was an implied term of the Neutex Contract that Neutex, in seeking to be paid the monies that it was paid, was responsible for any advice it may have given to Quenchy in connection with the purchase of the notebook computers.
15.If the Court finds that the notebook computers were not suitable for the use to which Quenchy put the computers, as claimed by Quenchy in the statement of claim, and if Quenchy succeeds against Logi-Tech in its claim as pleaded, then Logi-Tech claims it is entitled, by virtue of the Neutex Contract, to be indemnified by Neutex from and against any successful claim of Quenchy.”
The so-called “Neutex Contract” is not satisfactorily pleaded. Insofar as it is alleged to have been partly oral, it is said that to have been made “as a consequence of” the discussions referred to between Peter Hill and Phil Craig. However, particulars of the time and place should be set out, together with a statement of the effect of the discussions: see SCR r 46.05(1). Furthermore, nowhere are the terms of the contract set out, except as to the plea in paragraph 14, which alleges an implied term.
However, the facts upon which the implication is said to arise are not pleaded, as they should be. If it is suggested that such a term might be inferred from the fact that Neutex sought and was paid $1,400, that fact standing alone could not possibly sustain the implication alleged.
Furthermore, to plead that Neutex “was responsible for any advice it may have given to Quenchy” does not identify a cause of action as between Logi-Tech and Neutex. It follows that the plea in paragraph 15 that “by virtue of the Neutex Contract” Logi-Tech claims to be entitled to be indemnified by Neutex from any successful claim of Quenchy as against Logi-Tech, is unsupported by any allegations which could provide a basis for any such entitlement.
Paragraph 16 is poorly worded. The word “whereby”, which introduces it, does not seem to be linked with any particular preceding allegation. It may be intended to carry the meaning of the expression “in the premises”. As such, it would probably be unexceptional, provided that the liability which is asserted in paragraph 16 clearly arises upon a properly identified and particularised factual and legal basis in the preceding paragraphs.
Standing back for one moment from the detail of the pleading, if Logi-Tech seeks a true indemnity from Neutex with respect to any amount for which Logi-Tech may be liable to Quenchy, this should be made clear, and facts alleged which clearly identify a cause of action which, if proved, would entitle Logi-Tech to such an indemnity.
On the other hand, if Logi-Tech claims contribution with respect to any amount for which Logi-Tech may be held liable to Quenchy, this should be expressly pleaded. An entitlement to contribution in such circumstances could normally arise only by statute, in which case the statute and the specific relief sought pursuant to it should be indicated: SCR r 46.10(1).
Furthermore, an indemnity is different from a claim in damages. A claim for damages against Neutex for breach of contract, breach of warranty, for negligence, or for misrepresentation may be assessed by reference to an amount payable by Logi-Tech to Quenchy, but in such a case, the claim is for damages. Such a claim is strictly not a claim for an indemnity, even if the quantum of damages might equal Logi-Tech’s liability to Quenchy: see Westpac Banking Corporation v P & O Containers Ltd and Anor.[1]
[1] (1991) 30 FCR 320.
For the above reasons, the amended TPSC is seriously defective.
I allow the appeal and order that the amended TPSC be struck out.
I would allow Logi-Tech one further opportunity to file a satisfactory pleading in its place.
JUDGMENT CITATIONS
LISTED IN ORDER OF APPEARANCE IN JUDGMENT
1. (1991) 30 FCR 320.

[2003] SASC 74

19 March 2003