Yici Pty Ltd v Sun Wah Marine Products (HK) Co Ltd
[2009] WASC 324
•10 NOVEMBER 2009
YICI PTY LTD -v- SUN WAH MARINE PRODUCTS (HK) CO LTD [2009] WASC 324
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2009] WASC 324 | |
| 10/11/2009 | |||
| Case No: | CIV:1382/2009 | 13 OCTOBER 2009 | |
| Coram: | MARTIN CJ | 13/10/09 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | YICI PTY LTD (ACN 008 842 484) SUN WAH MARINE PRODUCTS (HK) CO LTD |
Catchwords: | Procedure Application for summary judgment Whether application complied with O 59 r 9 Rules of the Supreme Court 1935 (WA) Whether affidavit complied with O 14 r 2 Rules of the Supreme Court 1935 (WA) Arguable defence Turns on own facts |
Legislation: | Rules of the Supreme Court 1935 (WA), O 14 r 2, O 59 r 9 |
Case References: | Auspac Trade International Pty Ltd v Victorian Dairy Industry Authority (Unreported, Supreme Court of Victoria, 30 June 1993) Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52 D. Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10 Hanak v Green [1958] 2 QB 9 Queensland Nickel Pty Ltd v Francis Loyola Hennessy (Unreported, Supreme Court of Queensland, OS93 of 1993/T158 of 1993, 9 September 1994) |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
SUN WAH MARINE PRODUCTS (HK) CO LTD
Defendant
Catchwords:
Procedure - Application for summary judgment - Whether application complied with O 59 r 9 Rules of the Supreme Court 1935 (WA) - Whether affidavit complied with O 14 r 2 Rules of the Supreme Court 1935 (WA) - Arguable defence - Turns on own facts
Legislation:
Rules of the Supreme Court 1935 (WA), O 14 r 2, O 59 r 9
Result:
Application dismissed
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr M J McPhee
Defendant : Mr S C Wong
Solicitors:
Plaintiff : M J McPhee Barrister & Solicitor
Defendant : Lex Legal
Case(s) referred to in judgment(s):
Auspac Trade International Pty Ltd v Victorian Dairy Industry Authority (Unreported, Supreme Court of Victoria, 30 June 1993)
Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52
D. Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10
Hanak v Green [1958] 2 QB 9
Queensland Nickel Pty Ltd v Francis Loyola Hennessy (Unreported, Supreme Court of Queensland, OS93 of 1993/T158 of 1993, 9 September 1994)
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1 MARTIN CJ: The plaintiff, Yici Pty Ltd (Yici), applies for summary judgment in proceedings which it has brought against the defendant, Sun Wah Marine Products (HK) Co Ltd (Sun Wah). The plaintiff's claim is for the price of canned abalone sold to the defendant and judgment is sought in respect of the amounts due under the contracts for the sale of that abalone.
2 The facts upon which the plaintiff relies for its application for judgment are provided by the affidavit of Craig Oswyn Kelly sworn 6 August 2009. Mr Kelly deposes that he is a director of Yici, which was formerly known as Yaosan International Pty Ltd. For many years Yici carried on business as a selling agent for marine products of Western Australia into Asia and one of the clients was Sun Wah.
3 One of the major products sold by Yici was abalone and that took two forms. The first was wild roei abalone and the second was farmed abalone which is farmed on marine farms in various parts of Australia. All of that abalone, both wild and farmed, was canned at a processing firm, Dover Fisheries, in Adelaide, South Australia. The usual process, according to Mr Kelly, was that Yici would gather product from divers for wild abalone and also from the farmers, and ship that product to Adelaide. The abalone would then be canned by Dover Fisheries and from there shipped to Hong Kong.
4 Mr Kelly deposes to the fact that Yici has dealt with Sun Wah for more than 10 years in relation to wild abalone and that prior to the transactions in question there had never been any difficulty in that trade which was based on trust between the principals at Sun Wah, Mr Kelly and another principal at Yici, Mr Gordon Yao. Usually shipments were made and the price paid for those shipments was received without difficulty. However, as Mr Kelly deposes, in the course of 2006 the plaintiff began to receive complaints from Sun Wah about the quality of the product which had been shipped. The complaints were informal and, according to Mr Kelly, seemed to relate to the weight of the product and the finish (in the sense of the presentation of the abalone in the can). There were discussions about those complaints. In the course of those discussions there was a message sent to the plaintiff to the effect that if the product did not change its appearance, it might be sent back by Sun Wah.
5 The plaintiff's claim relates to abalone shipped in July 2006 and January 2007, the subject of two invoices. The first shipment, in July 2006, was in respect of farmed abalone for which an invoice in an amount
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- of $37,920 was rendered. The second shipment was in respect of 580 cartons of canned roei abalone shipped in January 2007 for which the price of $387,600 is claimed. In each case the amounts claimed are in United States dollars.
6 Mr Kelly goes on to state that complaints from Sun Wah arose very soon after delivery of the second shipment and that there was an emphatic refusal by Sun Wah to pay for the product sent. He further asserts that when the complaints began, Yici offered to take redelivery of the goods. He asserts that Sun Wah refused to redeliver the goods, but instead proceeded to sell the goods and retain the proceeds of sale. He refers to documents which identify the sales that were made and the amounts received by Sun Wah from the sale of the product. He also attaches correspondence between Yici's solicitors and the Sun Wah's solicitors and asserts:
… there is no defence to the Plaintiff's claim, or alternatively, no defence save and except any detailed and verified damage relating to the sales, which are the subject of this action.
7 Sun Wah opposes the application for summary judgment and relies upon the affidavit of Mr Joe Lau sworn 15 September 2009 for that purpose. In proceedings for summary judgment it is obviously not appropriate for the court to resolve disputed issues of fact. Rather, the question is whether the defendant has shown reason why leave to defend should be granted having regard to the assertions made in the affidavit material. In general though, unless those assertions are glaringly improbable, the course usually taken by the court will be to grant leave to defend so that any disputed questions of fact can be determined at a trial (if such resolution is necessary to resolve the claim).
8 Mr Lau states that he is the general manager of the dried marine products department of Sun Wah. Sun Wah is a company incorporated in Hong Kong which sells seafood products as a wholesaler in Hong Kong, Macau and China. About 40% to 50% of the revenue of Sun Wah is derived from sales of canned abalone. About 5% to 10% of Sun Wah's revenue was derived from canned abalone supplied by Yici.
9 Mr Lau deposes that around the end of 2005 Sun Wah first began receiving complaints from its customers about the canned abalone supplied by Yici. The allegations from customers were to the effect that the abalone was underweight, that the abalone had not been cleaned properly and that the fringes were too soft. Mr Lau relayed those complaints to Mr Yao at Yici and Mr Yao advised that he would check
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- with the production factory. Mr Lau says that he did not hear back from him. Orders continued to be placed with the plaintiff because of the high demand for abalone product. However, throughout the early part of 2006, according to Mr Lau, many of Sun Wah's customers continued to cancel or reduce orders of canned abalone because of the problems with poor quality and the product being underweight.
10 Mr Lau says it is difficult for him to say exactly how many sales were lost because of those problems. There is very little paperwork because business is done in the field, but he estimates that from early 2005 to mid-2006 over 100 customers cancelled their orders which ranged from a few thousand to millions of Hong Kong dollars. Because of these problems, in mid-2006 Sun Wah stopped ordering abalone from Yici.
11 According to Mr Lau, a representative from Yici came to Hong Kong to inspect the canned abalone at the end of 2006. He says that a random sample of cans was opened and weighed and the stock weighed less than the weight on the packaging. Further, he says that owing to the defects he wanted a refund of the purchase price and offered to return the goods. He said that the Yici representative told him that Yici was unable to accept the return of the goods. There is therefore an issue of fact between the parties as to whether or not Sun Wah offered to return the goods.
12 Mr Lau asserts that the representative of Sun Wah suggested as a solution the supply of a new batch of canned abalone in respect of which there would be a guarantee that there would be no problems with weight or the quality of goods. Sun Wah would then be able to sell the new batch so as to recoup any losses that it suffered from the previous batch. That is said by Mr Lau to have given rise to the second shipment the subject of these proceedings, namely, the 580 cartons of roei abalone that were dispatched in January 2007.
13 Mr Lau deposes that that batch was delivered to Sun Wah's warehouse in Hong Kong in February 2007. He went to the warehouse and conducted a random inspection of four cans and found, according to him, that every can was defective in that the abalone was underweight, irregular in size, was very poorly cleaned, had black or broken edges and was too soft. He also discovered that the abalone was underweight which he ascertained by weighing the contents of the can on a set of scales.
14 He deposes that between February and March 2007 there was an exchange of emails with Mr Kelly of Yici and it was agreed that there would be a meeting in March 2007 in Hong Kong. That meeting occurred
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- on 6 March 2007 when Mr Kelly and Mr Yao inspected the stock at Sun Wah's warehouse together with Mr William Lin of Austrade Hong Kong. Mr Lau deposes that a random sample of cans was selected covering all defective batches and that the random sample showed that the goods were underweight and of poor quality. He says that Mr Kelly admitted these things, after which there were without prejudice talks to resolve the problem.
15 It seems from correspondence exchanged between solicitors for the parties a little later, that in May 2007 solicitors acting on behalf of Sun Wah asserted that they were holding the goods for return to Yici. For one reason or another that did not happen and Sun Wah proceeded to sell the goods for amounts that are suggested by the annexures to the affidavit of Mr Kelly. Mr Lau asserts that those prices were lower than usual, but nevertheless Sun Wah used its best efforts to get the highest prices based on the reduced quality. It has only been possible to sell some of the cans, as a result of which there are still 95 cartons of abalone remaining unsold from the batch delivered in February 2007, according to Mr Lau.
16 There are four reasons why this application for summary judgment must be dismissed. The first is the failure of the plaintiff to comply with O 59 r 9 of the Rules of the Supreme Court 1935 (WA). That rule requires:
(1) No order shall be made on an application in chambers unless the application was filed with a memorandum stating:
(a) that the parties have conferred to try to resolve the matters giving rise to the application; and
(b) the matters that remain in issue between the parties.
(2) The Court may waive the operation of paragraph (1) in a case of urgency or for other good reason.
17 There are a number of important aspects of that rule. The first is that its terms are imperative. The expression 'shall' is used to connote that it is an obligation with which a party must comply if an order is to be made on an application in Chambers. The second observation is that the circumstances in which the court may waive the operation of the rule are constrained to cases of urgency or cases in which there are other good reasons for waiving compliance.
18 Whether or not there is good reason in any particular case will depend upon the particular facts and circumstances of the case viewed in
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- the light of the evident purpose which is served by the rule. That purpose is a very important purpose. It arises from the fact that experience prior to the introduction of the rule was to the effect that litigants in this court could find themselves exposed to unnecessary expense and delay as a consequence of avoidable interlocutory disputes.
19 The purpose and object of the rule is to avoid parties to proceedings in the court losing time and money as a consequence of interlocutory disputes that might be either avoided or narrowed as a consequence of the conferral which is required by the rule. Another important purpose served by the rule is to avoid the dissipation of the limited resources of the court on interlocutory disputes which might be either avoided or narrowed by reason of the conferral required by the rule. It is therefore a rule of considerable importance to the administration of justice and the circumstances in which the court will waive the operation of the rule will necessarily be confined by the public interest in the achievement of important objectives to which I have referred.
20 In this case there was a memorandum of conferral filed in support of the application for summary judgment. It asserted wrongly that there had been conferral by reason of correspondence exhibited to the affidavit of Mr Kelly. Four letters are said to have constituted such conferral. They are annexures L1 - L4 of that affidavit.
21 Turning to those annexures, letter L1 is a letter from the solicitors for the plaintiff dated 27 July 2009 which makes no reference whatever to the application which has been made for summary judgment. It is therefore impossible for that letter to form any part of the process of conferral required by O 59 r 9. The second letter referred to is a letter from Sun Wah's solicitors to the plaintiff's solicitors dated 31 July 2009. It also makes no reference to any application for summary judgment and is therefore irrelevant.
22 The third letter relied upon is a letter from the plaintiff's solicitors to Sun Wah's solicitors dated 31 July 2009 which is mostly concerned with assertions with respect to the inadequacy of the pleaded defence and which contains only two paragraphs dealing with the application which has been made for summary judgment. They are:
Absent, such separation, I believe my instructions will be to apply for Summary Judgment.
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- Given the time constraints in relation to such an Application, I would be obliged if you would let me have a substantive response, for consideration, to the point made in this letter, within the next two to three days.
23 The fourth letter referred to in the memorandum of conferral was a letter from the solicitors for Sun Wah to the solicitors for the plaintiff dated 5 August 2009 which responded to a number of the assertions made with respect to the inadequacy of the defence and sought clarification of the basis upon which application would be made for summary judgment given that the facts were in dispute. The letter referred to the defence of equitable set-off and asserted that the plaintiff was not entitled to the contract price because it had failed to perform the contract.
24 Two days after that letter was sent these proceedings were commenced. It is plain therefore that the assertion in the memorandum of conferral that there had been conferral is quite wrong. All that had happened was that a letter had been sent in which brief reference was made to the prospect of an application for summary judgment being made. The defendant's solicitors responded by denying any entitlement to make such an application.
25 Previous decisions in this court have made clear that the process of conferral mandated by O 59 r 9 is not satisfied merely by the exchange of correspondence, but requires conferral in the sense which that expression is used in the rule, namely, discussion between persons who have authority to resolve the interlocutory dispute which might otherwise be pursued by way of application in Chambers. Plainly that did not occur in this case.
26 The question therefore is whether the court should nevertheless waive the operation of the requirement because of urgency or other good reason. It is not suggested that there was a case of urgency. When one looks for what might amount to 'other good reason', counsel for the plaintiff, who was apparently the solicitor with charge of the matter, stated candidly to the court that it just did not enter his mind to undertake conferral as required by O 59 r 9. He says that was because of the history of prior negotiations between the parties going back to 2007. That was, of course, prior to any suggestion of an application for summary judgment, and did not relate to any such application.
27 The fact that compliance with the rule did not enter the mind of the legal representative of the party falls manifestly short of anything that could possibly amount to good reason within the meaning of O 59 r 9. I conclude that there is no basis under the terms of the rule upon which the
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- court could waive compliance with the rule which, as I have noted earlier, is expressed in imperative and mandatory terms. That is the first reason why, in my view, the application has to be dismissed. The important objectives that underpin O 59 r 9 will not be lightly sacrificed by the court by a readiness to waive compliance with O 59 r 9.
28 The second reason why the application must be dismissed arises from the requirements of O 14 r 2 of the Rules of the Supreme Court and, in particular, the requirement that an application for summary judgment must be supported by an affidavit in which the deponent states that in his or her belief there is no defence to the claim or part thereof or no defence except as to the amount of any damages claimed.
29 In the present case Mr Kelly's affidavit is somewhat ambiguous in that regard because the paragraph to which I have earlier referred starts by asserting that there is no defence, but goes on to concede in the alternative, as I read it, that there may be a defence arising from damage as a consequence of the sales the subject of the action.
30 That seems to me to connote the prospect that there may be an abatement of the price due under the contracts for the sale of the abalone as a consequence of the defective quality of the goods supplied. However, Yici provides no basis upon which the court could identify the amount to be abated. Rather, the plaintiff says that that is the responsibility of Sun Wah. That proposition, with respect, seems to me to overlook the fact that Yici's claim is for summary judgment for the price due under the contracts for sale.
31 In order to sustain summary judgment on that basis under O 14 r 2 it would be necessary to support the application with an affidavit stating that in the belief of the deponent there is no defence to the claim for the price because that is the claim for which judgment is sought. The statement of Mr Kelly's belief does not satisfy that requirement and therefore does not satisfy the requirements of O 14 r 2. That is the second reason why this application must be dismissed.
32 The third reason why the application must be dismissed is that, as I have mentioned, the claim is for judgment in respect of the price said to be due under the contracts for the sale of the goods. The affidavit filed by Mr Lau raises at least an arguable issue to the effect that the goods supplied under the two batches the subject of the claim were defective. It is therefore arguable that the contract had not been performed by the
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- plaintiff, as a consequence of which the plaintiff was not entitled to the price in respect of which judgment is sought.
33 That is sufficient to dispose of the claim for judgment of the price due under the contracts. It may be that there is some lesser sum due as a consequence of the sale of the goods by the defendant, but the plaintiff provides no basis upon which that amount could be ascertained and, in any event, Sun Wah asserts that any sum due in that regard is the subject of the defence of equitable set-off which gives rise to the fourth reason why, in my view, the application must be dismissed.
34 Sun Wah asserts that it has suffered damage to its business, its goodwill and reputation as a consequence of previous defective shipments and that it is entitled to set off the loss which it has suffered by reason of that damage against any money due as a result of the last two shipments. Yici says that it cannot set off those damages because they are damages arising from separate transactions, being earlier transactions between the two parties.
35 It seems to me that it is at least arguable that Yici's argument takes an overly narrow view of the availability of the defence of equitable set-off. In this case the evidence establishes quite clearly that the parties were in an ongoing trading relationship of some years' duration. It would be unreal and artificial to compartmentalise that relationship into particular shipments or transactions. Rather, the damage which the defendant says it has suffered by reason of the defective quality of earlier shipments is connected to and related to the later shipments which are the subject of these proceedings in the way described in the affidavit evidence of Mr Lau.
36 There are a number of cases that establish that in circumstances like this, it is at least arguable that the defence of equitable set-off is available to provide a defence to the plaintiff's claim. Amongst the authorities to which I would refer in that regard are the cases of Hanak v Green [1958] 2 QB 9; D. Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10; Queensland Nickel Pty Ltd v Francis Loyola Hennessy (Unreported, Supreme Court of Queensland, OS93 of 1993/T158 of 1993, 9 September 1994), Auspac Trade International Pty Ltd v Victorian Dairy Industry Authority (Unreported, Supreme Court of Victoria, 30 June 1993) and more recently in this court the decision of E M Heenan J in Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52.
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37 For these four separate and independent reasons it seems to me that the plaintiff's application for summary judgment must be dismissed. However, as I indicated to counsel during argument, it seems to me from the affidavit material that has been filed that there may be a point in time at which it could be said with confidence that there is a minimum or irreducible amount which is due from the defendant to the plaintiff as a result of Sun Wah's sale of at least part of the two consignments which are the subject of these proceedings.
38 That point has not yet been reached, and it may never be reached, but it seems to me that there is a prospect that once discovery has taken place it might be possible for the plaintiff to use that discovery to make good the proposition that there is at least some portion of its claim which is not the subject of equitable set-off or any other defence. That portion would reflect at least some part of the value of the goods which had been received by Sun Wah and on-sold to its customers.
39 So it seems to me that notwithstanding my decision to dismiss this application for summary judgment, I should do so without prejudice to the plaintiff's capacity to renew such an application at some later point in time. Whether or not it does so will, of course, depend on a judgment which it must make having regard to the stage that the proceedings have reached.
40 In that context I suggested to both counsel it was my view that the appropriate course to follow in this case is to enter this matter into the Commercial and Managed Cases List to be managed by me. In that regard I will endeavour to press the matter to a trial or other resolution as expeditiously and efficiently as possible and it may be that in that circumstance the plaintiff might take the view that further time spent in interlocutory proceedings is not justified.
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