Sunowe Solar Pty Ltd v Inverter Solar Pty Ltd
[2016] VCC 1818
•30 November 2016
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted Suitable for publication |
AT MELBOURNE
COMMERCIAL DIVISION
GENERAL CASES LIST
Case No. CI-15-05768
| SUNOWE SOLAR PTY LTD | Plaintiff |
| v. | |
| INVERTER SOLAR PTY LTD & ANOR | Defendants |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 November 2016 | |
DATE OF JUDGMENT: | 30 November 2016 | |
CASE MAY BE CITED AS: | Sunowe Solar Pty Ltd v. Inverter Solar Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 1818 | |
REASONS FOR DECISION
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Catchwords: Practice and procedure – Application for leave to withdraw admissions in defence and for summary dismissal of plaintiff’s claim.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M. Symons of Counsel | Madison Branson Lawyers |
| For the Second Defendant | Mr A. Norrie of Counsel | Wang Lawyers Pty Ltd |
HIS HONOUR:
1Sunowe Solar Pty Ltd (“Sunowe”) is a supplier of materials for use in solar panel installations. Inverter Solar Pty Ltd (“Inverter”) was an installer of solar panels. On 8 December 2015, Sunowe issued a writ against Inverter and Xue Shen Li claiming $223,340.20 as the cost of solar panels and associated materials supplied to Inverter between 20 June 2014 and 8 April 2015. Mr Li was sued pursuant to a guarantee dated 20 June 2014, which he executed in favour of Sunowe in respect of Inverter’s obligations.
2Inverter went into liquidation on 13 July 2016 and since then has taken no further part in the proceeding. Inverter’s liquidators indicated that the counterclaim by Inverter dated 1 June 2016 would not be pursued. Between September 2013 and 7 July 2014, Mr Li was the sole director and the principal shareholder of Inverter.
3By summons dated 14 October 2016, Mr Li sought:
a.leave to withdraw admissions made in the defence dated 1 June 2016;
b.summary judgment that Sunowe’s claim against him be dismissed.
4Sunowe was permitted, on the application:
a.to cross-examine Mr Li’s and (before its liquidation) Inverter’s principal solicitor, Gang Wang, on his 3 affidavits sworn in relation to the application;
b.to call a subpoenaed witness, Jason Neo, who had until May 2016 acted as solicitor for Mr Li and Inverter, subject to the supervision of his principal, Mr Gang Wang.
5Paragraphs 8 and 9 of the statement of claim attached to the writ (and repeated in the amended statement of claim dated 12 September 2016), read as follows:
“GUARANTEE
8.By an agreement dated 20 June 2014, the Second Defendant guaranteed to the Plaintiff the due and punctual performance of the obligations of the First Defendant under the Agreement (“Guarantee”).
Particulars
The Guarantee is in writing, and may be inspected at the offices of the Plaintiff’s solicitors during office hours by prior appointment.
9. There were terms of the Guarantee, inter alia, that:
(a)The Second Defendant would guarantee the due and punctual performance of the First Defendant’s obligations to pay the whole debt to the Plaintiff incurred by the First Defendant for the provision by the Plaintiff to the First Defendant of solar panels; and
(b)The Second Defendant’s obligation under the Guarantee would be a principal obligation.
Particulars
The Plaintiff refers to and repeats the particulars subjoined to paragraph 8 hereof”.
6The response by Inverter and Mr Li in the defence dated 1 June 2016 was:
“6. The First and Second Defendants admit paragraphs 8-9 of the statement of claim”.
7However, by his defence to the amended statement of claim dated 7 October 2016, Mr Li put in issue the guarantee, as follows:
“6. With respect to paragraph 8 of the Amended Statement of Claim, the Second Defendant says that on 20 June 2014 he signed a written document entitled “Director’s Guarantee and Indemnity” (the Director’s Guarantee and Indemnity) whereunder he purported to guarantee to the Plaintiff the due and punctual performance of the obligations of the First Defendant under the tax invoice with invoice number 10200, 10202, 10203, 10207, 10211, 10216, 10220, 10224, 10299 and 10231 (the Invoice).
Notwithstanding what was written in the Director’s Guarantee and Indemnity, any consideration provided to the Second Defendant was past consideration given that the solar panels which were the subject of the Invoice had already been supplied and delivered to the First Defendant prior to 20 June 2014. As such, any consideration provided to the Second Defendant in the Director’s Guarantee and Indemnity was not good consideration.
In any event, the First Defendant has paid the Invoice.
The Second Defendant otherwise denies paragraph 8 of the Amended Statement of Claim.
The Second Defendant admits paragraphs 8-9 of the Statement of Claim.6A.With respect to paragraph 9 of the Amended Statement of Claim, the Second Defendant says that in the Director’s Guarantee and Indemnity it was stated that he:
(a)Guaranteed and indicated that he was liable and responsible to the Plaintiff for the due payment by the First Defendant for the costs of the goods supplied to the First Defendant as described in the Invoice.
(b)Covenanted to the Plaintiff the due and punctual payment of the total amount due by the due date as stipulated in the Invoice.
(c)Declared to the Plaintiff that it was at liberty to act as though he was the principal debtor under the written document entitled “Conditions of Sale”.
Notwithstanding what was written in the Director’s Guarantee and Indemnity, any consideration provided to the Second Defendant was past consideration and was therefore not good consideration. In this respect, the Second Defendant refers to and repeats paragraph 6 above.
In any event, the First Defendant has paid the Invoice.
The Second Defendant otherwise denies paragraph 9 of the Amended Statement of Claim.
8Previously, Mr Li had relied upon the matters raised by Inverter in its counterclaim. Inverter had alleged that the solar panels supplied by Sunowe had been defective in many significant respects and, as a consequence, Inverter’s loss and damage was as substantial as Sunowe’s claim.
9When the writ had been served, Inverter and Mr Li had taken no steps to defend the proceeding. A default judgment had been entered and an application was made to set aside judgment. In an affidavit in support of the application, Mr Li only referred, by way of defence to the claim, to the reasons why Inverter said that “the goods purchased were not fit for…purpose”.
10Mr Li stated in the affidavit that, “As part of the negotiations to settle our damages with respect to the damaged goods, I entered into a personal guarantee with the plaintiff to assure the plaintiff that I will pay for the…” The sentence was not completed. Presumably, the next word was intended to be “goods”.
11On 19 May 2016, Her Honour Judge Lewitan set aside the default judgment. On 1 June 2016, Inverter and Mr Li filed their defence and Inverter’s counterclaim.
12Mr Li wishes to now contest Sunowe’s claim against him on the following bases:
a.by way of set off relying on the matters previously pleaded by Inverter in its counterclaim. The amended defence quantifies Inverter’s loss and damage as $231,358.50, which it is said should be set off against Sunowe’s claim for $233,340.20;
b.no consideration was provided for the provision of the guarantee by Mr Li;
c.as a matter of construction, the guarantee only related to the disputed invoices which were owing at that time, and not to any continued supply of goods by Sunowe to Inverter.
13The terms of the guarantee which was signed by Mr Li are as follows:
“ DIRECTOR’S GUARANTEE AND INDEMNITY
To: SUNOWE SOLAR PTY LTD (ABN 55 161 974 983)
of Unit 9, 45 Normanby Road, Notting Hill, Victoria 3168.
In consideration of you agreeing, at my request, to supply to the Buyer the goods described in the accompanying tax invoice with invoice number(s) 10200, 10202, 10203, 10207, 10211, 10216, 10220, 10224, 10229, 10231 (“the invoice”), I the undersigned agree with you as follows:
1.I guarantee and I am liable and responsible to you for the due payment by the Buyer for the costs of the goods supplied to the Buyer as described in the invoice.
2.I hereby covenant with you to duly and punctually pay the total amount due by the due date as stipulated in the invoice.
3.This guarantee is a guarantee to you for the whole debt that is incurred by the Buyer with you in respect of goods supplied to the Buyer.
4.In order to give effect to this guarantee I declare that you are at liberty to act as though I were the principal debtor under the agreement headed “conditions of sale” attached to the invoice.
5.I hereby indemnify you against all losses, damages, costs (including legal costs) and expenses which may be incurred by you by reason of the Buyer’s failure to make payment for the goods supplied by you.
6. This guarantee is irrevocable.
Date: 6/20/2014”.
14The application to withdraw the admissions is opposed on a number of grounds. The primary matter raised before me was that Mr Li, or his lawyers, had simply changed their minds about the basis upon which they wished to defend the claim, and this was not sufficient reason to allow the admissions to be withdrawn.
15On 22 November 2016, I made orders permitting Mr Li to withdraw the admissions. In summary the reasons for the decision were as follows:
a.after hearing oral evidence from Mr Gang Wang and Mr Jason Neo, I am satisfied that:
i.Mr Neo’s instructions from Mr Li were to defend the claim on the basis of the losses to Inverter arising from the supply of defective goods;
ii.when he prepared Mr Li’s affidavit, Mr Neo had not been provided with a copy of the guarantee. From his instructions, and without having seen the document, Mr Neo had assumed that the form of the guarantee would not provide an arguable defence;
iii.Mr Neo had left Mr Wang’s employ before the service of an answering affidavit in the application (by Mr Terry Wang of Sunowe), which exhibited the guarantee;
iv.Mr Gang Wang, and the employee solicitor who assumed day to day responsibility for the matter, had not seen a copy of the guarantee until it was provided by Sunowe’s solicitors on 6 October 2016;
v.during the preparation of the defence to the amended statement of claim, after the liquidation of Inverter, consideration was given for the first time to possible defences based on the terms of the guarantee;
b.in the circumstances, I am satisfied that an adequate explanation has been given as to why the defence contained the admissions concerning the guarantee;
c.unless the admissions are withdrawn, Mr Li may not be able to pursue an arguable defence based upon the proper construction of the guarantee;
d.there is no specific prejudice to Sunowe if Mr Li is now permitted to raise the construction argument;
e.it is arguable that the admissions in the defence would not exclude Mr Li from raising the “construction” issue at trial. Sunowe’s counsel Mr Norrie, very fairly in my view, was not prepared to adopt this argument.
However, the defence had only admitted a guarantee, which Sunowe in its statement of claim stated, guaranteed “the due and punctual performance of the obligations of [Inverter] under the agreement”, and Inverter’s “obligations to pay the whole debt to [Sunowe] incurred by [Inverter] for the provision by [Sunowe] to [Inverter] of solar panels”.
I consider that the admission of this pleading in the defence would not necessarily have precluded an argument being raised at trial as to whether the wording of the guarantee (repeated in the statement of claim) was any broader than the disputed invoices listed in the guarantee;
f.some appreciation that this matter may have been a live issue in the proceeding may be inferred from the addition of the word “continuing” in the amended statement of claim, which pleaded in paragraph 4 that, Inverter “entered into an agreement with [Sunowe] for the continuing provision by [Sunowe] to [Inverter] of solar panels”;
g.notwithstanding the construction argument, Mr Li would still have been able to raise the “set off” arising from the supply of defective panels. The point may have been taken that in the original defence it was pleaded that only Inverter was “entitled to a set off of the invoices…as a result of” Sunowe’s breach of the agreement by supplying defective goods. However, in the circumstances, I consider an amendment would be permitted to allow Mr Li to himself raise the set off;
h.I do not consider that the “lack of consideration” argument raised by Mr Li has a real prospect of success and should not be permitted in any amended defence. If, on a proper construction of the guarantee, it did not provide a guarantee by Mr Li for the future supply of goods to Inverter, then the lack of consideration issue will not arise. If Mr Li fails on the construction argument, it is likely that the fact that Sunowe had bound itself to future supply to Inverter on the basis of the guarantee given by Mr Li, would mean that the lack of consideration argument could not succeed;
i.in these circumstances, justice requires that Mr Li be permitted to raise the construction issue, provided he can do so in the context of a properly articulated and particularised pleading.
16By the application, Mr Li also sought judgment on the basis that the proper construction of the guarantee meant that it would be limited to the listed invoices and could not apply to the later supply of goods by Sunowe to Inverter.
17In my view, there is little merit in this application for the following reasons:
a.until the grant of the application for the withdrawal of the admissions, Mr Li had not asserted that the construction argument was open to him;
b.ultimately, the construction issue is likely to be determined by a close reading of the document and appropriate regard being had to the context in which the guarantee was entered into;
c.Mr Li said that the guarantee arose “as part of the negotiations to settle our differences with respect to the damaged goods”;
d.the evidence of Mr Terry Wang is that Mr Li, or Inverter, needed to execute the guarantee in order to qualify for “export credit insurance”, and because Inverter had “reached its credit limit” with Sunowe. By reason of these matters, it is said that it is clear the guarantee would also relate to the future supply of goods.
18Accordingly, it could not be seriously contended that Sunowe’s construction of the guarantee was “fanciful” and, therefore, had “no real prospect of success”.
19Orders have been made which it is hoped will lead to a trial in March 2017, although it is possible that the matter may return to me in December 2016, if the parties cannot agree on the adequacy of a further amended defence of Mr Li.
20At some stage, I will need to determine the costs of Mr Li’s summons. He has been granted an indulgence in respect of part of his application, and the other part was dismissed. Clearly, he should not get his costs of the summons, whatever the result of the proceeding. I will determine the appropriate costs order, after hearing further submissions, if the matter returns before me in December for a more substantial dispute. Otherwise, the costs issue can be determined by the trial judge.
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Certificate
I certify that these 7 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 30 November 2016.
Dated: 30 November 2016
Carla Cianfaglione
Associate to His Honour Judge Anderson
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