John Austin Limited v CTrack Limited
[2014] NZHC 2687
•31 October 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-5105 [2014] NZHC 2687
BETWEEN JOHN AUSTIN LIMITED
Plaintiff
AND
CTRACK LIMITED First Defendant
RENT PLUS LIMITED Second Defendant
Hearing: 28 October 2014 Appearances:
G Wilkin for plaintiff
P M Hunter for second defendantJudgment:
31 October 2014
JUDGMENT OF LANG J
[on application by second defendant for summary judgment and/or strike out]
This judgment was delivered by me on 31 October 2014 at 11 am, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
JOHN AUSTIN LTD v CTRACK LTD [2014] NZHC 2687 [31 October 2014]
[1] The plaintiff in this proceeding, John Austin Limited (John Austin), is an agricultural contractor operating more than 60 vehicles, including tractors and combine harvesters.
[2] In 2009 and 2010, John Austin acquired a digital tracking system designed to assist in the management of its vehicle fleet. John Austin alleges that the system subsequently failed, and that it has been forced to acquire another tracking system in its place. In this proceeding it seeks to recover its consequential losses from the defendants.
[3] The second defendant, Rent Plus Limited (“Rent Plus”) has applied for an order granting it summary judgment against the plaintiff. In the alternative, it seeks an order striking out John Austin’s claims against it on the basis that they are not legally tenable. John Austin opposes both applications.
Relevant principles
Defendant’s application for summary judgment
[4] The principles that the Court must apply in this context are now well established through cases such Attorney-General v Jones1 and Westpac Banking Corporation v MM Kembla Ltd.2 In the latter case Elias CJ said:
[64] The defendant bears the onus of satisfying the Court that none of the claims can succeed. It is not necessary for the plaintiff to put up evidence at all although, if the defendant supplies evidence which would satisfy the Court that the claim cannot succeed, a plaintiff will usually have to respond with credible evidence of its own. Even then it is perhaps unhelpful to describe the effect as one where an onus is transferred. At the end of the day, the Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment made by the Court on interlocutory application is not one to be arrived at on a fine balance of the available evidence, such as is appropriate at trial.
[5] The critical issue is therefore whether any of the plaintiff’s claims can succeed. If any reach that threshold, all of the claims must be permitted to proceed to trial.
Defendant’s application for strike out
[6] The principles to be applied in strike out applications are similarly well established through cases such as Attorney-General v Prince & Gardner3 and Attorney-General v McVeagh.4 In short, the discretion to strike out a plaintiff’s claim is one that is sparingly exercised and usually only in the clearest of cases. The Court must proceed on the basis that the facts pleaded in the statement of claim are true, and may only refer to extrinsic evidence where it is uncontroversial and does
not contradict the pleadings. Where a pleading is found to be deficient, the Court must take into account any ability by the plaintiff to amend the pleadings so as to introduce an arguable cause of action.
[7] In the present case I propose to consider first the defendant’s application for summary judgment. If it succeeds, it will not be necessary to consider the alternative application for strike out.
The contractual framework
[8] In order to understand the issues that the application for summary judgment raises, it is necessary to set out the contractual framework between the parties in some detail.
The contractual relationship between Rent Plus and CTrack
[9] CTrack formerly operated under the auspices of Minorplanet New Zealand Pty Limited (“Minorplanet”). Minorplanet produced data collection units and software that performed the functions required by John Austin. Rent Plus is a financier specialising in financing the acquisition of commercial equipment by entities such as John Austin.
[10] The relationship between Rent Plus and Minorplanet was governed by a Supplier Relationship Agreement that the parties signed in 2002. The recitals to the agreement record as follows:
A. From time to time [Minorplanet] intends to request [Rent Plus] to purchase Equipment for the purpose of renting to Customers.
B. The parties wish to regulate the basis on which the Equipment will be supplied and rented.
[11] The definitions section of the Supplier Relationship Agreement defined “Equipment” as being “equipment purchased or proposed to be purchased (as the case may be) by [Rent Plus] from [Minorplanet] for renting or leasing to a Customer under a Rental Agreement.” The term “Rental Agreement” was defined as “an agreement for the rental or leasing of Equipment entered into between [Rent Plus] and a Customer”.
[12] The Supplier Relationship Agreement also contained several warranties by Minorplanet regarding the equipment that it was to sell to Rent Plus for the purpose of on-leasing to customers. These included a warranty that the equipment would be of merchantable quality, and fit for the purpose for which it was supplied. Minorplanet also agreed to indemnify Rent Plus in respect of any “loss, damage or liability suffered or incurred by Rent Plus” arising directly or indirectly from the breach of any warranty that Minorplanet gave under the agreement.
The contractual relationship between John Austin and Minorplanet
[13] The contractual relationship between John Austin and Minorplanet was governed in the first instance by a document headed “Hardware and Software Rental Order & Terms of Trade” dated 30 September 2009. Under this document, Minorplanet ostensibly agreed to supply, install and provide service support for the tracking system. The document recorded the monthly rental that John Austin would be required to pay for the system.
[14] Two other documents were attached to the Hardware and Software Rental Order & Terms of Trade. The first was a schedule describing the support services that Minorplanet would provide to John Austin. The second was a Software Licence Agreement, which prescribed the terms on which John Austin could use the software that operated the tracking system. This referred to a “Hardware Rental Agreement” that should also have been attached to the order form. The documents exhibited in evidence do not, however, include a copy of that document.
The contractual relationship between Rent Plus and John Austin
[15] The contractual relationship between Rent Plus and John Austin began with the execution of two documents on or about 11 November 2009. These were a Master Rental Agreement under which the general terms of trade between Rent Plus and John Austin were set out, and a Rental Schedule identifying the equipment that John Austin was to rent from Rent Plus.
[16] The evidence demonstrates that the arrangements between the three parties comprised several components. Minorplanet first obtained confirmation that the customer, in this case John Austin, was prepared to rent equipment for a specified period and price. Minorplanet then forwarded the proposal to Rent Plus, which in turn sought approval for the transaction from its own financier. Once that was forthcoming, John Austin executed the Master Rental Agreement and the Rental Schedule under which it agreed to rent the equipment from Rent Plus. Rent Plus then purchased the tracking equipment from Minorplanet, and made it available to John Austin. Minorplanet installed the equipment, and subsequently provided John Austin with service support in respect of it. In practical terms, it is likely that Rent Plus was never in possession of the equipment. Rather, it would have remained in the possession of Minorplant until it was installed in John Austin’s vehicles.
The transactions proceed
[17] The transaction duly proceeded on or about 17 November 2009. On that date, Rent Plus purchased 68 data collection units (DCUs) from Minorplanet for the sum of $249,211.69 including GST. It then commenced renting those units and the associated software to John Austin for 48 months at the rental specified in both the Hardware and Software Rental Order and the Rental Schedule.
[18] A second transaction occurred approximately a year later, when John Austin acquired five further DCUs. It signed another Rental Schedule on 6 November 2010 in which it agreed to rent these units from Rent Plus. Rent Plus purchased the units from Minor Planet on or about 19 November 2010 for the sum $13,670.65 including GST. It then rented the DCUs to John Austin for a period of 36 months, with rental being payable in the sum of $494.50 including GST per month. As part of this
transaction, Minorplanet entered into a second Hardware and Software Rental Order with John Austin. This was in exactly the same terms as the first Hardware and Software Rental Order, and was accompanied by a Software Licence Agreement in identical terms to those contained in the Software Licence Agreement relating to the first transaction. The Hardware and Software Rental Order was also accompanied on this occasion by a document headed “Terms of Trade – Rental”. This set out the terms on which John Austin was to use the hardware that it was to rent under the arrangement.
The claims against Rent Plus
[19] In the latest iteration of its statement of claim, John Austin advances the following claims against Rent Plus:
64. At all material times the agreements referred to in paragraphs 54 and
61 herein were part of a tripartite contractual arrangement entered into between the plaintiff, Minor Planet and the second defendant, such
that any representations made by Minor Planet bound the second
defendant. The plaintiff further says that the second defendant was at all times aware of and responsible for the proper working and
functioning of the DCUs and associated software.
65.By renting the DCUs and associated software to the plaintiff the second defendant agreed to rent to the plaintiff DCUs and associated software that operated in a way specified by Minor Planet, and as represented to the plaintiff by Minor Planet.
66.Both the original agreement and the additional agreements required the second defendant to provide equipment as described and represented by Minor Planet in terms of function and performance of that equipment and associated software.
67. The second defendant failed to do so.
68.The second defendant also failed to remedy defects with the equipment and associated software, or insure that such defects were remedied by the first defendant.
[20] These pleadings suggest that John Austin advances its claim against Rent Plus on two fronts. First, it alleges that Rent Plus was under a contractual obligation to ensure that the DCUs and associated software that it rented to John Austin were in “proper working and functioning” order. Secondly, Rent Plus was under an obligation to ensure that the DCUs and associated software operated in the manner specified and represented to the plaintiff by Minorplanet. The statement of claim
does not allege that Rent Plus made any representations about the equipment to John Austin at any stage before it agreed to enter into the rental arrangement with John Austin.
The claim based on breach of contractual obligation
[21] As counsel for John Austin acknowledged during argument, the Master Rental Agreement and the two Rental Schedules that John Austin entered into with Rent Plus did not contain any warranties by Rent Plus regarding the quality or fitness for purpose of the equipment that John Austin was to rent from Rent Plus. Rather, they contained numerous clauses specifically excluding Rent Plus from any liability to John Austin for defects in the operation of the hardware and software.
[22] All three documents contained the following acknowledgement:
IMPORTANT ACKNOWLEDGEMENTS BY THE RENTER –
GUARANTORS ALSO TAKE NOTE
The Renter:
…
·acknowledges that Rent Plus will not give any warranties, conditions or guarantees in relation to the Equipment and the obligations of the Renter to pay rental and other monies under this Agreement will apply irrespective of the condition, quality, fitness for purpose or operability of or any defect or failure in the Equipment.
[23] In addition, the Master Rental Agreement contained the following provisions:
2.4Your obligation to pay Rentals and other moneys under this Agreement is absolute and unconditional and no withholding deduction or set off for any reason (including because of any counterclaim or otherwise) is permitted. Without limitation, your payment obligations will continue notwithstanding, for any reason, any partial or total failure to operate by, defect in, breakdown, unsuitability, loss, theft or destruction of, or accident or damage to the Equipment or any default referable to the service or maintenance of the Equipment or anything else. If you are required by law to make any deduction or withholding from any money paid or payable by you to us, you will pay such additional amount to us as may be necessary to ensure that after the making that deduction or withholding, we receive and obtain (free from any liability in respect of any such deduction or withholding) an amount equal to what we would have received and retained had no deduction or withholding been required or made.
…
3.2You acknowledge that: (a) you have examined the Equipment before accepting it and satisfied yourself as to its condition quality and suitability for your purposes: (b) we have given no representation, guarantee or warranty regarding the description, quality, fitness, safety or suitability of the Equipment: (c) no agreement or representation has been made which will entitle you to acquire title
…
8. Exclusion of Warranties
8.1To the full extent permitted by law, all implied terms, conditions, guarantees and warranties in your favour are excluded.
8.2We are not liable for any damage injury or loss to any person or property arising from the possession operation [and] use of all Equipment.
8.3Our liability under or in connection with this Agreement for any reason is excluded or, if cannot be excluded, limited to the maximum extent permitted by law. To the extent permitted by law, we shall not be liable under any circumstances for any consequential, indirect or economic loss: To the extent permitted by law, should we be totally unable (by law) to exclude our liability, our maximum liability for any reason shall be, at our option: (a) the replacement or cost of replacement or re-supply of the relevant Equipment or services with the same or equivalent Equipment or services: or (b) the repair or cost of repair of the relevant Equipment.
…
11. Software
11.1 If the acquisition of any software (“Software”) has been funded by us under this Agreement: (a) you hold the benefit of any licence or user rights in relation to the Software in trust for us: (b) you may enjoy the benefit of the licence or user rights during the Term: (c) we make no representation and give no warranty or guarantee in relation to the Software or as to the terms or existence of any software licence: (d) you cannot refuse to pay Rentals or make any other claim should the Software be defective or unsuitable: and (e)you must return the Software to us with the Equipment at the expiration or earlier termination of this Agreement.
…
9.8This agreement will apply to any Rental Schedule that you sign unless we require you to sign a different form of Master Rental Agreement before entering into any further Rental Schedule. This Agreement replaces any previous Master Rental Agreement (and any previous rental agreement of any kind).
[24] Counsel for John Austin contends that his client, Minorplanet and Rent Plus were parties to a “tripartite” contractual relationship. He submits that this means Rent Plus is subject to the same contractual obligations to John Austin as Minorplanet. The Master Rental Agreement is the only document, however, that purports to have an effect beyond the document itself. It contains a provision5 that imports all of its terms into any Rental Schedule that John Austin and Rent Plus might subsequently enter into. There is no similar provision in any document, however, that imports the terms of the contract between Minorplanet and John Austin
into the Master Rental Agreement. Indeed, it seems that Rent Plus was unaware of the existence of the Hardware and Software Rental Order forms that Minorplanet and John Austin signed until after this proceeding had commenced. The contractual arrangement between John Austin and Rent Plus therefore stands alone and quite separate from that between John Austin and Minorplanet.
[25] Moreover, as counsel for John Austin properly acknowledged, the contractual relationship between John Austin and Rent Plus did not attract any statutory safeguards such as those contained in the Consumer Guarantees Act 1993. As a result, it was necessary for any warranties by Rent Plus regarding the quality or fitness for purpose of the equipment to be contained in the contract. No such warranties exist. Rather, all three contractual documents between Rent Plus and John Austin expressly exclude Rent Plus from any liability in relation to the defective operation of both the hardware and the software.
[26] Faced with this difficulty, counsel for John Austin sought to argue that the Court could imply a term into the contract under which Rent Plus provided a warranty of the type pleaded. The obvious difficulty with this argument is that such a term is not necessary to give the contract business efficacy, and it would also conflict with several express provisions in the documents. The Court would therefore have no justification for implying the term into the contract.6
[27] It follows that the claim based on breach of contract must inevitably fail.
5 Clause 9.8.
6 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (PC) at 283.
The claim based on misrepresentation
[28] As I understand the position, this aspect of John Austin’s claim relies upon representations allegedly made by Minorplanet in brochures that Minorplanet gave to John Austin before it entered into the contractual arrangement with Rent Plus. John Austin again seeks to attribute liability in respect of these representations to Rent Plus by virtue of the tri-partite nature of the contractual relationship between the three parties.
[29] The documents make it clear, however, that Rent Plus did not accept any responsibility for representations that Minorplanet may have made before John Austin entered into the contractual arrangement with Rent Plus. The Master Rental Agreement and the two Rental Schedules contained the following clause:
IMPORTANT ACKNOWLEDGEMENTS BY THE RENTER –
GUARANTORS ALSO TO TAKE NOTE
The Renter:
·acknowledges that the Agreement is with Rent Plus and not any vendor (where a vendor is involved the vendor is Rent Plus’ agent for limited purposes only and has no authority to make any representations or statements on behalf of Rent Plus or to agree to any modifications to any Rent Plus documents).
· …
[30] In addition, the Master Rental Agreement contained the following provisions:
THE PARTIES AGREE:
…
Our Discretion: We may, in our absolute discretion, accept or reject any such request. Our discretion will not be affected if you pre-pay any moneys or take delivery of any Equipment. The vendor is not our agent, nor are we the vendor’s agent. Both we and the vendor operate independently and neither have authority to bind the other or make representations on behalf of the other.
…
3.2You acknowledge that: (a) you have examined the Equipment before accepting it and satisfied yourself as to its condition quality and suitability for your purposes: (b) we have given no representation, guarantee or warranty regarding the description, quality, fitness, safety or suitability of the Equipment: (c) no agreement or representation
has been made which will entitle you to acquire title to the Equipment at any time: (d) any representation or warranty made by the vendor is not binding on us and is a matter as between you and the vendor…
3.3Representations: You represent that …(b) Own Skill: in deciding to rent the Equipment you have relied entirely on your own skill and judgment and not on any advice, information, representations or warranties from us or from any person acting, or purporting to act, on our behalf; (c) We have no knowledge: you have not made known to us any specific requirements or purpose for which the Equipment will be used and you have not received, and/or do not rely on, any representation, condition, guarantee, warranty or undertaking from us, or from any person acting, or purporting to act on our behalf …
…
26. Whole Agreement
This Agreement together with each Rental Schedule, the Fees, Charges and Interest Schedule and any Variation Schedule constitutes the whole agreement between the parties and no reparation made by either party, whether express or implied, shall form part of this Agreement. In no case shall we be liable for any statement or representation made or purported to be made to you by us or on our behalf unless it has been included in this Agreement as an express term.
[31] In order to overcome the obvious hurdle imposed by these provisions, counsel for John Austin endeavoured to submit that his client was entitled to rely on s 4(1) of the Contractual Remedies Act 1979. Section 4(1) provides as follows:
4 Statements during negotiations for a contract
(1) If a contract, or any other document, contains a provision purporting to preclude a Court from inquiring into or determining the question—
(a) whether a statement, promise, or undertaking was made or given, either in words or by conduct, in connection with or in the course of negotiations leading to the making of the contract; or
(b) whether, if it was so made or given, it constituted a representation or a term of the contract; or
(c) whether, if it was a representation, it was relied on—
the court shall not, in any proceedings in relation to the contract, be precluded by that provision from inquiring into and determining any such question unless the court considers that it is fair and reasonable that the provision should be conclusive between the parties, having regard to all the circumstances of the case, including the subject-matter and value of the transaction, the respective bargaining strengths of the parties, and the question whether any party was represented or advised by a solicitor at the time of the negotiations or at any other relevant time.
[32] Mr Wilkin relied in this context on the approach taken by Winkelmann J in Fuji Xerox New Zealand Ltd v Heidelberg Graphic Equipment Ltd.7 He submitted that it is not possible for the Court at this interlocutory stage to say that John Austin’s argument is clearly untenable and cannot succeed. He contended that the issue of whether or not exclusion clauses of the type contained in the contractual documents are fair and reasonable in terms of s 4(1) can only be determined at trial
when the Court will be aware of all the facts.
[33] I am not necessarily persuaded that s 4(1) applies in the present case, because none of the terms of the Master Rental Agreement set out above purport to exclude the Court from enquiring into the matters set out in s 4(1)(a) to (c). Even if the section applies, however, I consider that the circumstances of the present case permit the Court to determine at this point whether it is fair and reasonable for Rent Plus to rely on the contractual terms that exclude its liability for any representations made by Minorplanet.
[34] The starting point is the role that the parties played in this transaction. Rent Plus had nothing to do with the original discussions between John Austin and Minorplanet, or with the manufacture, installation and ongoing maintenance of the equipment and software. Minorplanet was solely responsible for all of these matters. Rent Plus did not become involved in the transaction until Minorplanet asked it whether it would be prepared to fund it by renting the equipment to John Austin. Furthermore, Rent Plus had no means of knowing whether any representations that Minorplanet may have made to John Austin were correct. They related to technical issues falling solely within the expertise of Minorplanet. In addition, Minorplanet provided John Austin with limited warranties in relation to the operation of both the hardware and software in the Terms of Trade – Rental document and the Software Licence Agreements that it entered into with John Austin.
[35] Given Minorplanet’s familiarity with the tracking system and the fact that it was the entity that dealt with John Austin when that company agreed to acquire the
system, it is understandable that Rent Plus should not wish to be liable in respect of
7 Fuji Xerox New Zealand Ltd v Heidelberg Graphic Equipment Ltd [2012] NZHC 2539 at [42].
any representations Minorplanet may have made to John Austin regarding the quality and capability of the system. These factors also persuade me that it is fair and reasonable that Rent Plus should be permitted to rely upon the exclusion clauses contained in the Master Rental Agreement and the two Rental Schedules.
[36] It follows that this aspect of John Austin’s claim must also fail.
Result
[37] I enter summary judgment in favour of Rent Plus against John Austin.
Costs
[38] Rent Plus is entitled to costs against John Austin on a Category 2B basis, together with disbursements as fixed by the Registrar.
Lang J
Solicitors:
Brent Kelly & Associates, Te Awamutu
Simpson Western, AucklandCounsel:
G Wilkin, Hamilton
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