Axiam Engineering Limited v JB Sales International Limited HC Wanganui CIV 2009-483-349
[2010] NZHC 709
•14 May 2010
IN THE HIGH COURT OF NEW ZEALAND WANGANUI REGISTRY
CIV-2009-483-349
BETWEEN AXIAM ENGINEERING LIMITED Plaintiff
ANDJB SALES INTERNATIONAL LIMITED Defendant
Hearing: 5 May 2010
Appearances: E.J. Unsworth - Counsel for Plaintiff
J.M. Trotman - Counsel for Defendant
Judgment: 14 May 2010 at 12.30 pm
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
This judgment was delivered by Associate Judge Gendall on 14 May 2010 at 2.30 pm pursuant to r 11.5 of the High Court Rules.
Solicitors: Horsley Christie, Solicitors, PO Box 655, Wanganui
DG Law, Soilcitors, PO Box 14081, Panmure, Auckland
AXIAM ENGINEERING LIMITED V JB SALES INTERNATIONAL LIMITED HC WANG CIV-2009-483-
349 14 May 2010
Introduction
[1] There are currently two applications before the Court. The plaintiff seeks summary judgment against the defendant for breach of an agreement for supply of excavator couplers. In particular, it claims that it is owed $159,099.83 by the defendant for supplied couplers, and seeks $285,998.05 in consequential loss based on the defendant’s purported cancellation of, or failure to perform, the agreement.
[2] The application is opposed by the defendant, who argues that it did not breach the contract because it was entitled to reject couplers that did not meet specifications. It also contends that it never purported to repudiate the agreement, but that production was put on hold to enable the plaintiff to resolve supply issues. In addition, the defendant claims that it is entitled to a set-off because the plaintiff breached the contract by failing to supply couplers in accordance with the agreement.
[3] The second application is one for transfer of venue by the defendant. In reliance on r 5.1 of the High Court Rules, the defendant seeks a transfer of this proceeding to the Auckland Registry of this Court if the plaintiff’s application for summary judgment is unsuccessful.
Background
[4] The plaintiff is a manufacturer of specialist technical steel castings and machining and carries on business in Wanganui. The defendant is a retailer and manufacturer of multi-hitch excavator couplers and other excavator attachments. It operates its business from Auckland. In late 2006, the plaintiff and the defendant entered into an oral agreement whereby the plaintiff was to manufacture the defendant’s multi-hitch excavator couplers. The couplers were to be of two sizes - 14 tonnes and 21 tonnes - and were to be designed by the defendant. The parties initially agreed that the plaintiff would supply 50 couplers per week.
[5] On 20 February 2007, the plaintiff received the pattern for the 14 tonne coupler. However, during March and April 2007, the defendant made extensive changes to the coupler design, and the finalised 14 tonne production pattern was not provided to the plaintiff until 25 June 2007. The production pattern for the 21 tonne coupler was delivered in August 2007, but an issue with the design of the coupler
meant that the plaintiff was required to create modifications by “machining down”
the width of the jaw.
[6] On 28 June 2007, the plaintiff advised that it could produce 40 couplers a week from 16 July 2007 and 50 couplers a week from August 2007. However, on 24
July 2007, the plaintiff notified the defendant that it was only producing six to eight couplers a day. On 25 July 2007, the plaintiff adopted a new delivery timeline of 40 couplers a week from 31 July 2007 and 50 couplers a week from 14 September
2007.
[7] On 14 August 2007, production was put on hold for “design changes”. According to the plaintiff, production was put on hold again on 11 October 2007 because of design issues with the 21 tonne coupler.
[8] On 5 October 2007, the defendant reduced its orders for the period up to 2
November 2007 to 30 couplers per week, and to 40 couplers a week thereafter. The defendant also decided to engage another foundry to produce its 30 tonne couplers.
[9] On 2 November 2007, a Supply Agreement (the S. Ag) was signed. The S. Ag was for a period of two years, commencing on 8 October 2007, and could be terminated with two months’ notice. The terms of the S. Ag were that the couplers were built to the defendant’s design, and the plaintiff warranted that the goods were made to agreed quality and were of A5 material. Where units were supplied outside of the “detailed quality specification requirements”, they would be “credited and re- supplied to ensure full volumes” were met. The S. Ag does not provide any information as to what these “detailed quality specification requirements” were. There was a presumption of ability to supply for the first 30 units ordered per week.
[10] On 14 November 2007, the defendant reduced its order to 15 per week.
[11] On 19 November 2007, the defendant rejected 23 couplers due to poor quality. The plaintiff apparently accepted that the units were not acceptable.
[12] In December 2007, the defendant advised the plaintiff that a 14 tonne coupler and a 21 tonne coupler had failed. The 21 tonne coupler was subsequently tested by SGS New Zealand Ltd, whose failure analysis report found that the causes of the failure could include both the design and the material used in the manufacture of the coupler. Production of further couplers was put on hold.
[13] In February 2008, the defendant advised the plaintiff that it had engaged another foundry to produce couplers to replace the plaintiff’s supplied couplers.
[14] The plaintiff now claims that the defendant has breached the S. Ag by failing to pay for supplied couplers and by discontinuing the S. Ag. The defendant, on the other hand, claims that it is not required to pay for couplers that did not meet the quality specifications, and that the plaintiff failed to supply the required numbers of couplers.
Principles
[15] The present summary judgment application is brought pursuant to r 12.2(1) High Court Rules which provides:
12.2 Judgment when there is no defence or when no cause of action can succeed
(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[16] The principles for summary judgment applications have been recently summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd [2008] NZCA 187:
[26] The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1; (1986) 1 PRNZ 183 (CA), at p 3; p
185. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ
66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [1979] 3 WLR 373 (PC), at p 341; p 381. In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[17] Before me, the defendant referred also to MacLean v Stewart (1997) 11
PRNZ 66 (CA), where the Court considered in that case that it could not be said that there was an undisputed sum in a building dispute where an expert’s affidavit raised considerable disquiet about the respondents’ quality of workmanship. The Court concluded in MacLean that the matters in dispute could not properly be resolved summarily.
Counsel’s Arguments and My Decision
[18] The plaintiff submits that this case is a simple one. It is argued that, while the plaintiff says it honoured the key terms of the S. Ag and made a number of substantial investments in reliance on the agreement, the defendant breached the S. Ag by failing to pay the plaintiff for the couplers, and by failing to continue performing the agreement or to cancel the agreement pursuant to its terms. The plaintiff has manufactured 281 couplers pursuant to the S. Ag, which it says were of sufficient quality and “met or exceeded” the A5 standard. It argues that the defendant seeks to blame the plaintiff for the coupler failures, although independent evidence shows that the failures were caused by design faults. The plaintiff claims that it is owed $159,099.83 by the defendant for supplied couplers and also seeks
$285,998.05 in consequential loss, based on the defendant’s decision to
“discontinue” the S. Ag.
[19] In response, the defendant disputes that it breached the S. Ag. Instead, it argues that it is entitled to $214,136.68 credit for any couplers that were supplied “outside of the contract specifications”. It submits that it validly rejected 68 14 tonne couplers and 85 20 tonne couplers, on the basis that these were not made to the agreed quality and were not made of A5 material. The S. Ag provided that any goods outside of the “detailed quality specification requirements” would be credited and re- supplied to ensure full volumes as provided for in the agreement were met. The defendant also disputes that it ever purported to cancel the S. Ag, but submits that the agreement was put on hold to enable the plaintiff to resolve issues with supply. It further claims that it has a set-off which equals or exceeds the plaintiff’s claim, based on the plaintiff’s breaches of the S. Ag.
Did the couplers comply with the quality specification requirements?
[20] The defendant makes reference to reports on the couplers by Metal Test Limited, which were prepared on behalf of the plaintiff, and a report by SGS New Zealand Limited, which was commissioned by the defendant. It submits that the reports agree on one key point, namely that the samples that were tested did not meet the requirements of A5 steel, which was specified in the S. Ag. For example, the Metal Test report dated 17 October 2007 established that the material “conformed to the A5 specification in all respects, except that the carbon content was slightly high at 0.35%”. The SGS report dated 8 January 2008 noted that the coupler only had
1.04% manganese, which meant that it was A2 grade and of lower tensile strength.
Seven of 18 14 tonne couplers that were tested failed to meet the A5 specification requirements.
[21] Further reports by Metal Test concluded that the “A5 melt did not conform to the requirements of this A5 specification, the carbon and manganese contents being above the maximum limits”, and that the results revealed a tensile strength greater than the standard maximum. A Metal Test report of four damaged couplers and two undamaged couplers revealed that all had carbon levels which were higher than the A5 specifications; that two of the damaged couplers showed manganese results above the A5 specification limit of 1.60%; that two of the damaged couplers had tensile strengths that exceeded A5 specifications; and that two of the damaged couplers had elongation levels below the threshold set by the A5 specifications.
[22] The plaintiff argues that the change in the grade of steel in fact made the product “better”. It refers to a report by Metal Test, which concluded that the results “meet or exceed the chemical requirements of ... A5 steel”, and submits that the defendant “conveniently blurred the point”. The defendant, however, contends that A5 grade steel was an essential requirement to ensure that the product would have the strength and elasticity needed. It points to a Metal Test report dated 25
November 2008, where it is noted that increased strength and thus hardness of the steel results in the product becoming brittle.
[23] In addition, the defendant submits that the couplers were rejected for a number of other defects. Between 16 and 23 November 2007, the defendant rejected
40 couplers because it considered them to be of unacceptable quality. This was apparently acknowledged by the plaintiff. Three couplers were rejected in October because of alleged areas of porosity, and an additional 26 couplers were rejected because the castings were “severely cold lapped”, and there was “sand burn” and porosity. Eight couplers were rejected between December and February on the basis that they had failed in the field. The remainder of the couplers were rejected because of what the defendant perceived to be a serious risk of failure, following the failures in the field and tests carried out on the failed couplers. The report relied upon by the defendant here refers to “sub standard casting” and the chemical composition of the casting.
[24] In reply, the plaintiff submits that any defects were “cosmetic” and did not cause the failures. It argues that the defendant’s position is not credible, given that the couplers were being delivered and on-sold up until November/December 2007, when the defendant started rejecting them on “cosmetic grounds”. Given that the
S. Ag did not specify any “detailed quality specifications”, the plaintiff submits that these were set by supply and acceptance, and that the defendant here has merely looked for an excuse to extract itself from the S. Ag. The defendant submits that it is not correct that it had previously accepted couplers with similar quality issues, as numerous other couplers had been rejected prior to November/December 2007.
[25] In my view, the defendant has a reasonably arguable defence to the plaintiff’s allegation that it breached the S. Ag by failing to pay for supplied couplers. There is sufficient evidence for the purposes of this application to support the defendant’s claim that it was arguably under no obligation to pay for the couplers because they failed to comply with the terms of the S. Ag. Although the nature of the “detailed quality specifications” required by the S. Ag is somewhat unclear, in my view it would not be appropriate to determine whether the couplers were of acceptable quality without a full hearing. Moreover, it seems to be clearly accepted that a number of couplers did not comply with the requirement of A5 steel, and there is conflicting expert evidence on what the consequences of this might be. There is therefore a substantial factual dispute as to whether the defendant breached the S. Ag.
[26] Another argument that was advanced by the plaintiff here was to the effect that the parties had agreed on a particular testing mechanism, the “jaw test”, that was to be the definitive test for determining fitness for purpose of the products manufactured. It is unnecessary for me to consider this matter in any great detail, save as to note that the defendant disputes that the results of the jaw test were meant to be conclusive, and that it is not possible to determine the conflicting evidence before the Court with respect to this issue summarily.
Causes of failure
[27] The plaintiff submits that the coupler failures were due to the defendant’s design and not the plaintiff’s manufacture. The defendant disputes this, but in any event contends that this matter is irrelevant to the issue of whether the defendant is entitled to a credit for goods supplied “outside of specifications”. In my view, there is some substance in the defendant’s argument on this point. Given that it is arguable that the defendant was entitled to reject the couplers on grounds of quality, it may well be immaterial whether these quality concerns in fact led to the failures.
[28] In any event, however, it appears that there is a substantial dispute as to whether the causes of the failures were rooted in the design or in the manufacture of
the couplers. The SGS report identified a number of possible causes for the failure, which included both design and also inadequate material selection or strength. A report by Transport Technology Ltd concluded that the design of the couplers was to blame. There is also a report from Creatrix Engineering, which states that the couplers failed because the plaintiff used the wrong material or process. Much of this evidence, however, could not be said to be independent expert evidence.
Delay
[29] The issue here is whether the defendant has an arguable defence to the plaintiff’s claim that it failed to cancel the S. Ag pursuant to its terms and simply discontinued performance of it. On this, the defendant refers specifically to the S. Ag, which provides that:
Product or supply run out is set at 1 months supply over current purchase order submitted to Axiam. Based on 15 of each full unit per week this run out will become 120 full sets of 14T units and 120 full sets of 21T units.
JB Sales recognizes Axiam as the preferred supplier for the listed units at these quantities for the period of the supply agreement, ie. at a min. The first 30 ordered in any week of the 14 and 21 tonne will be ordered on Axiam on the presumption of ability to supply as per the agreement.
[30] It follows that the first 15 14 tonne couplers per week and the first 15 21 tonne couplers per week were to be ordered on the presumption of ability to supply. The defendant submits that the plaintiff however was unable to supply the number of couplers ordered in accordance with the S. Ag. The plaintiff in turn argues that the delays in supply were due to changes the defendant made to the design. It argues that the defendant took several months to resolve its final design, which delayed the plaintiff’s ability to “ramp up” production. It says that the production patterns were only provided to it on 25 June 2007 and 1 August 2007, and that it was again asked to put production on hold in August 2007.
[31] According to the defendant, no changes were made to the design of the 14 tonne coupler after 3 July 2007, but the plaintiff still failed to deliver the required number of couplers from 24 July 2007. In particular, the defendant claims that the plaintiff delivered only:
o 10 couplers, although at least 30 had been ordered, between 24 July and
31 July;
o 6 couplers for an order of 15 for the week ended 17 August;
o 12 couplers for an order of 18 for the week ended 24 August;
o 6 couplers for an order of 20 for the week ended 31 August;
onone for the week ended 7 September 2007, although 20 had been ordered;
o9 couplers in total for the remaining weeks of September, for an order of 25 per week;
o 51 couplers instead of 85 in October;
o 41 couplers instead of 80 in November.
[32] In terms of the 21 tonne couplers, the defendant submits that the plaintiff should have been able to supply 40 couplers per week from 16 July 2007. The plaintiff argues that it discovered a problem with the fitting of the 21 tonne parts on
13 July 2007, but the defendant submits that the required change was only minor and should not have caused a delay. A delivery timeframe sent by the plaintiff to the defendant on 25 July 2007 provided for 12 21 tonne couplers to be supplied to the defendant for the period 1 August to 9 August 2007, yet only two 21 tonne couplers were supplied.
[33] It appears that production was put on hold on 14 August 2007 and recommenced on 3 September 2007 due to design changes. The defendant says that the agreed timeframe provided for 50 21 tonne couplers a week from 8 September
2007, and that, instead of 72 couplers, the plaintiff only supplied 9 couplers in total in the month of September. It further claims that the plaintiff supplied only 64 21 tonne couplers for an order of 85 in October, and 34 couplers for an order of 80 in November. It is submitted that the reason for the plaintiff’s failure to supply during the period from September to December 2007 cannot be attributed to the defendant, as any design issues that could have delayed production of the 21 tonne couplers were resolved by early September 2007. The plaintiff refers however to another design issue with the 21 tonne coupler on 11 October 2007, but the defendant contends that this matter in fact related to the 30 tonne coupler.
[34] Most importantly, however, the defendant submits that it never repudiated the S. Ag, but simply required an assurance that the plaintiff had an acceptable production capability and process before resuming the trading relationship. The defendant also argues that it never asked the plaintiff to stop production, but that it was the plaintiff who decided to discontinue the supply of couplers in December
2007. Reference is here made to an email from the plaintiff, which advised the defendant that supply would be put on hold until the plaintiff could draft a testing schedule. The plaintiff submits that the defendant is trying to create a “smokescreen” by claiming that the plaintiff failed to deliver agreed numbers of couplers within
agreed times, although the delay in production was in fact caused by the defendant, who failed to supply the production patterns on time and initiated several design changes.
[35] All of this alone points out quite starkly the considerable evidential disputes and conflicts between the parties here. Clearly these issues confirm that these are not matters that can be determined on an application for summary judgment. The issue of whether the delays were caused by the plaintiff or the defendant is the subject of strongly disputed evidence, and it is unclear whether the defendant repudiated or failed to perform the S. Ag. Production was discontinued in December
2007, apparently at the plaintiff’s initiative. In any event, at this point there is enough before the Court to suggest it is arguable that the defendant was entitled to put the S. Ag on hold until the plaintiff could provide couplers of adequate quality.
[36] It follows that these issues need to be determined at trial and the plaintiffs present summary judgment application therefore must fail.
Set-off
[37] Notwithstanding this conclusion, before me the defendant raised a further defence of set-off. On this, the defendant submitted that it is entitled to set off losses which it says it sustained as a result of the plaintiff’s failure to supply couplers as agreed. In particular, it claims $214,136.68 for defective couplers, $119,823.75 for production of new patterns it says were required, $216,979.02 for losses on a discontinued order from a Korean manufacturer, $180,000.00 for future coupler replacements and other, still to be quantified losses.
[38] However, given the conclusion I have reached above that for summary judgment purposes it is arguable that the defendant did not breach the S. Ag, there is no need here to determine the defendant’s further argument that it has an arguable claim in set-off.
Transfer of venue
[39] I turn now to consider the second application before the Court. This is an application by the defendant which contends that these proceedings should be transferred to the Auckland Registry of this Court because this is the Court nearest to the principal place of business of the defendant. Rule 5.1(1)(a) High Court Rules provides as a starting point that the proper registry of the Court is the one nearest to the residence or principal place of business of the defendant. However, despite this, r
5.1(1)(a) provision, if the place where the cause of action is sued on, or a material part of it, arose nearer to the place of residence of the plaintiff than to the place of residence of the defendant, the proper registry is to be the registry nearest to the residence of the plaintiff: r 5.1(2). For the purposes of r 5.1, nothing turns on the terminological choice of the word “reside”, as a company “resides” at the place of its head office: Qantas Airways Ltd v The Domain Name Co Ltd (1999) 13 PRNZ 198 at [6]-[8]. Moreover, a Judge may order that a proceeding be transferred if it appears that a different registry of the Court would be more convenient to the parties: r
5.1(5).
[40] In the present case, the plaintiff’s head office and business operation is in Wanganui and the defendants in Auckland. And here, the defendant submits that the proceedings have been commenced in the wrong Court, in that the cause of action – or a material part thereof – did not arise in a place closer to where the plaintiff resides, being Wanganui rather than Auckland where the defendant resides. Accordingly, the defendant contends these proceedings should have been commenced in Auckland. The term “cause of action” as used in r 5.1 was defined by McGechan J in National Bank of NZ Ltd v Glennie (1999) 6 PRNZ 292 at 294 in the following way:
A cause of action is an assembly of facts which entitles a plaintiff to relief (including discretionary relief). The meaning of "part" of a cause of action is self-evident accordingly. However, the mere circumstance of being "part" of a cause of action will not suffice in itself. The policy in r 107 is to exclude merely trivial parts, conferring rights only where the part cause of action concerned is "material". The distinction is one of degree, looking to relative significance in the context of the particular claim. In a r 107 context, the assessment is to be made on the basis of the statement of claim, as filed. One looks to the allegations, in so far as components of the cause of action, as so made, to determine such "materiality".
[41] In Hornby Cold Stores Ltd v NZ Apple & Pear Marketing Board (1991) 4
PRNZ 60, Holland J stated:
For myself, I would conclude that every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment sought in the proceedings, is a material part of the cause of action.
[42] The defendant submits that the place of creation of the contract is more important than the place of the breach. It refers to J A Redpath & Sons Ltd v Melville Ford & Co Ltd [1950] NZLR 362, where a divided Court of Appeal reinstated the first instance Court’s decision that the correct location was the place of creation of the contract, and not the place of non-payment. It does not appear to be disputed by the plaintiff that both the oral agreement and the written S. Ag were entered into in
Auckland. The plaintiff does argue, however, that the basic terms of the agreement were agreed in Wanganui.
[43] In addition, the defendant relies on the fact that Auckland was the place of delivery, referring to The Golden Horseshoe Dredging Co (Ltd) v Anderson (1903)
22 NZLR 773 (CA), where the location of the cause of a action was the place of performance of the contract. The defendant also refers to Snow Rainger Ltd v Dereck van Splunteren Ltd [1952] NZLR 841, where the deciding factor was the place where the goods were ordered which, in the present case, was Auckland. The place of payment was not sufficiently material because there was no special stipulation for payment at a particular place.
[44] All the cases before me relied upon by the defendant are summarised in Tag Corp v Paper Sales (NZ) Ltd (1990) 2 PRNZ 440. In that case, the Court noted that there was conflicting authority on whether the place of payment was a material part of the cause of action. In AIC Retail Finance Ltd v Savill [1986] 2 NZLR 679, for example, the place where payments were to be made was specified in the contract and was held to be the determinative factor. Having set out the relevant authorities, the Court in Tag Corp v Paper Sales (NZ) Ltd noted as follows:
A number of the authorities to which reference has been made, were decided well before the era of electronic banking where instantaneous transfers occur without human agency. What is alleged is that the human agency was the decision not to increase the automatic payment. Other than that, earlier authorities as to the place of payment may now be of lesser relevance.
[45] Despite these observations, the Court in that case found that it was crucial that the cause of action was not complete until the defendant notified the plaintiff in Wellington of its refusal to pay and its bank account in Lower Hutt was not credited with the additional rental payments. The other major factor was that the parties had arranged and received payment at Lower Hutt for a number of years, although there was no express stipulation as to the place of payment in the contract. The Court accordingly concluded that the defendant had failed to show that no material part of the cause of action arose nearer to the Wellington Court.
[46] In Sirocco Area Leases Ltd v Buchanan HC AK CIV-2007-404-6514, 26
May 2008, the Court was required to determine an application for transfer in relation to a cause of action for failure to pay monies due under an agreement for sale and purchase. The case concerned the sum to be paid following settlement. Although the agreement did not expressly provide for the place of payment, it was arguable that the purchaser was under an obligation to pay the moneys to the trust account of the
vendor’s solicitor, as this was the mode of payment that was stipulated in respect of settlement funds. Asher J further noted, however, that there was a presumption that a debtor must seek out its creditor and pay the creditor at the creditor’s place of business (at [60]). Reference was made to Stratford County Council v Miller [1913]
32 NZLR 862, where it was held that:
... if there was no stipulation in the contract as to the place of payment, as it is the duty of the debtor to seek its creditor, a material part of the cause of action will arise in the district in which the creditor carries on business and from which he sends the goods.
[47] Referring to the effect that the “modern electronic age” may have on the validity of this position, Asher J continued at [65]:
... It is true that electronic banking permits a debtor to make a payment from any part of the world in a process not having anything in particular to do with the plaintiff’s residence. It is carried out by the depression of keys on the keyboard of a computer, which may be in Auckland, Wellington or London. Debtors no longer invariably pay by cheque sent by mail to a particular address, and seldom deliver a cheque or cash to a creditor’s address.
[66] However, payment by cheque sent to the creditor’s address remains a significant, if declining, mode of payment. While it is correct that the creditor’s place of residence is a much less important aspect of the payment process today than it was, it is still a factor, and if electronic banking is for some reason not available it remains the place where payment is made. The obligation to pay at the creditor’s address still makes up part of the essential facts that make up a claim. Whether it is sufficiently material in a given case to cross the r 113(2) jurisdictional threshold will depend on the particular facts.
[48] Thus, in that case, although there was no evidence of how payments were to be made, the Court was satisfied that the place of payment was Auckland, relying on the reference in the contract to the settlement sum being paid to the vendor’s solicitors’ trust account in Auckland, in combination with the general rule that a debtor must pay to its creditor’s address.
[49] In the case before me, the plaintiff submits that the cause of action arose in Wanganui, as this was the place where the terms of trade were agreed upon, where the production occurred and where a number of critical meetings were held between the parties. Moreover, the plaintiff says that its invoices were paid in Wanganui. There is no evidence before me, however, as to the mode of payment, and there is no term in the S. Ag specifying the place of payment.
[50] It must be noted here that the defendant’s application must fail if “some material part” of the cause of action arose in Wanganui. In New Zealand Home Bonds Ltd v Sovereign Financial Services Ltd HC Christchurch CP59/00, 22 August
2000 at [22], the Court considered that it could not undertake a balancing exercise to determine whether there was jurisdiction under r 5.1(2). It is, however, permissible to combine aspects of the cause of action in considering whether a sufficient degree of materiality is achieved: Sirocco Area Leases Ltd v Buchanan at [68]. In that case, the place of payment in combination with the fact that the contract was entered into in the same place was sufficient to establish jurisdiction.
[51] Before me it was not suggested for the plaintiff that the oral agreement or the written S. Ag were entered into or formed in Wanganui. Moreover, performance of the agreement by the plaintiff – an issue that is relevant in terms of the defendant’s argument that there was never a breach of contract – might be said to be located at least in part in Auckland, where deliveries reached their final destination. Before me, neither the defendant nor the plaintiff advanced any real argument as to whether the place of the defendant’s alleged failure to perform was Auckland or Wanganui. It may be that it was the former, as this was the place where the goods were rejected and the defendant refrained from placing further orders. Alternatively, the breach of contract might be said to have taken place in Wanganui, as the place where orders would have been received and payments made.
[52] On balance, although I consider this to be a somewhat marginal case, I am satisfied that a sufficient degree of materiality is present here to establish jurisdiction under r 5.1(2). As noted in Sirocco Area Leases Ltd v Buchanan, the obligation to pay at the creditor’s address still makes up part of the essential facts of a claim. Although the S. Ag does not specify the place of payment, it was not disputed by the defendant that payments had been made in Wanganui for the duration of the parties’ trading relationship. In addition, it appears to me that at least part of the plaintiff’s cause of action will require proof of certain terms that the plaintiff says were agreed upon in Wanganui, which may include matters such as quality specifications of the couplers or timing requirements. In these circumstances, I consider that a material part of the cause of action arose in Wanganui.
[53] The defendant however went on to submit further that Auckland is the more convenient location in terms of r 5.1(5) because all of the defendant’s witnesses and expert witnesses reside in Auckland, and the majority of the defective couplers are stored in Auckland. In response, the plaintiff argues that the list of witnesses, however, is not yet finalised, and that it would therefore be premature to determine the convenience of the location based on the number of witnesses residing in Auckland.
[54] I agree that an “anticipatory counting of the witnesses’ heads” would not be appropriate here: Sirocco Area Leases Ltd v Buchanan at [74]. In addition, the fact that most of the couplers are stored in Auckland may be outweighed by the plaintiff’s factory and operations are located in Wanganui. In my view, therefore, the considerations of convenience are fairly balanced, and the bias in favour of preferring the Court closest to the plaintiff’s residence remains. The defendant of course still has the option of bringing an application at a later stage in the proceeding pursuant to r 10.1, which provides for change of venue if the proceeding can be more conveniently or more fairly tried at another Court.
[55] For the reasons I have outlined above, the defendant’s application for transfer is dismissed.
Result
[56] As I have noted at [36] above, the plaintiff’s summary judgment application is dismissed.
[57] In addition, the defendant’s application to transfer this proceeding to the
Auckland Registry of this Court is also dismissed.
[58] As to costs, each party here has been partly successful and partly unsuccessful in bringing and opposing the applications before the Court. In my view costs should lie where they fall. There are to be no orders made as to costs.
‘Associate Judge D.I. Gendall’
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