King v Dressta Asia Pacific Ptd Ltd

[2012] NZHC 1781

IN THE HIGH COURT OF NEW ZEALAND GISBORNE REGISTRY

CIV-2011-416-184 [2012] NZHC 1781

BETWEEN  PHILIP MAURICE KING Plaintiff

ANDDRESSTA ASIA PACIFIC PTE LTD Defendant

Hearing:         27 March 2012

Counsel:         G Jones for Defendant

A Simperingham and C McIlroy for Plaintiff

Judgment:      20 July 2012

RESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON (Summary Judgment)

This judgment was delivered by me on 20 July 2012 at 12 pm pursuant to

Rule 11.5 of the High Court Rules Registrar/Deputy Registrar Date ..........................

Solicitors:

Woodward Chrisp, P O Box 347, Gisborne

Lane Neave, P O Box 13149, Christchurch

KING V DRESSTA ASIA PACIFIC PTE LTD HC GIS CIV-2011-416-184 [20 July 2012]

Introduction

[1]      The defendant, Dressta Asia Pacific Pte Ltd, applies for summary judgment dismissing  the  claim  for  damages  of  NZ$162,902.17  and  US$92,500  that  the plaintiff, Mr Philip King, has brought against it.  The application is made in reliance on High Court Rule 12.2(2) which states:

The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.

[2]      The application is opposed. Mr King contends that he has a good arguable case on the two causes of action set out in his statement of claim filed on 13

September 2011 and that he should be permitted to have them determined by trial.

[3]      It is not in dispute that the onus is on Dressta to demonstrate that neither of Mr King’s causes of action can succeed. Dressta contends that it has a complete and incontrovertible defence to both.

[4]      Mr King himself initially sought summary judgment on his claim, but he has withdrawn his application. Confronted with Dressta’s opposition, he is content to accept that there is a dispute on the facts that rules out summary judgment on his application.

Background

[5]      Mr King purchased a new TD-25M bulldozer from Dressta in March 2005. The parties agreed verbally on a purchase price of US$415,000 including costs, to be paid by way of a deposit of US$50,000 and the balance upon receipt of a pro forma invoice. The bulldozer was delivered in January 2006.

[6]      Following delivery Mr King experienced problems with the bulldozer.  The problems have continued, and Mr King says the bulldozer has proved unsuitable for the heavy clearance and forestry work he intended to use it for.  Mr King now seeks to pursue relief by invoking the statutory warranty in s 16 of the Sale of Goods Act and in reliance on the pre-contractual statement that he maintains Dressta’s salesman

made as to suitability for his intended purpose. Accordingly, Mr King’s statement of

claim sets out two causes of action:

(a)      the first alleges breach of a term of the oral contract of sale as to fitness for purpose and merchantable quality, implied pursuant to s 16; and

(b)the second alleges that he was induced to enter into the contract by Dressta’s misrepresenting the suitability of the bulldozer for the purpose for which he intended to use it.

[7]      Dressta does not accept that it has any liability for the ongoing problems with the bulldozer’s performance.  It seeks dismissal of Mr King’s claim summarily.  The grounds of its summary judgment application are brief.   They refer (without particularity) to the grounds in the affidavit evidence filed in support.   In similar fashion, they import the grounds set out in Dressta’s notice of opposition to Mr King’s (now defunct) application for summary judgment.   Broadly speaking these grounds come down to two contentions. First, that Mr King’s first cause of action cannot succeed as Dressta made no representation as to suitability for purpose that could  amount  to  anything  more  than  a  non-actionable  expression  of  opinion. Secondly  that,  in  any  event,  its  standard  warranty is  part  of  Mr  King’s  verbal contract as it was agreed to in the pre-contract negotiations that took place in March

2005.  The standard warranty contains liability exclusions that extinguish any right

Mr King may have to rely on either of his causes of action.

[8]      In its evidence, Dressta maintains that its sales representative told Mr King, during the March 2005 negotiations, that “the standard 12 month warranty would be provided”.   It makes no claim to have explained the purport of the terms of the standard warranty.  Nor, it suggests, was it asked to do so; Mr King simply accepted that his entitlement was to a warranty on Dressta’s standard terms.

[9]      In January 2006, when the bulldozer was delivered, Mr King signed Dressta’s standard warranty certificate. The certificate provides a 12 month warranty for the replacement or repair of any part or parts of the bulldozer that fail. The certificate’s

text also contains the following clause, which excludes Mr King from relying on any representations or other warranties, including the statutory warranties implied by the Sale of Goods Act 1908:

This warranty is in lieu of all other representations or warranties, expressed or  implied,  including  without  limitation,  implied  warranties  or merchantability and fitness for a particular use or purpose in any event, we shall  not  be liable or responsible for  any indirect, special, incidental  or consequential  damages  (including  without  limitation,  any  loss  or  use  of profit) whether arising or claimed under contract, tort (including negligence or strict liability) or other theories.

[10]     Mr King’s position is that the standard warranty was not part of his verbal contract.  The warranty certificate was provided belatedly and not until delivery of the bulldozer.   He contends that the standard warranty certificate afforded no additional entitlement to repair or replacement that he was not already contractually entitled to in March 2005 when the verbal agreement was made.  He argues that in March 2005 he was given a simple verbal warranty.  Though freely acknowledging that he signed the warranty certificate in January 2006, Mr King contends he was not told that it contained anything different to what he was told when the verbal contract was made.  He says that:

(a)      During  the  pre-purchase  negotiations  he  was  told  by  Dressta’s salesman that the bulldozer was suitable for the hard clearance work that he intended to use it for, and that the bulldozer came with a 12 month warranty that would simply “cover the cost of any service and repairs” that the bulldozer required. There was no indication that this simple warranty was intended to contain liability exclusions and no discussion to the effect “that Dressta wished to limit or exclude its liability for faults... that were not covered by this express warranty”.

(b)When the bulldozer was delivered the exclusion clause was not drawn to his attention and he understood that the certificate merely recorded the simple verbal warranty agreed to in the original oral negotiations. He does not recall reading any limitation clause.

[11]     The overarching issue for determination is whether Dressta has demonstrated that  each  cause  of  action  in  Mr  King’s  statement  of  claim  cannot  succeed.   A defendant is entitled to summary judgment only if the plaintiff’s claim is so hopeless that there is “no real question to be tried”.[1]

[1] E & E Developments Ltd v Housing New Zealand Ltd [2012] NZCA 7 at [10].

[12]     The onus is on Dressta to prove that both causes of action cannot succeed.

Issues

[13]     Whether or not there is a real question to be tried turns on Dressta’s standard

warranty and whether:

(a)       the warranty’s liability exclusions are part of Mr King’s contract with

Dressta; and

(b)if they are, whether Dressta is nevertheless arguably disentitled to the benefit   of   the   liability   exclusions   by   reason   of   its   alleged representation or other conduct.

[14]     It is common ground that Dressta must show that the standard warranty is part of the contract, and that it therefore has the benefit of the warranty’s liability exclusions.  Even if Dressta succeeds in showing that the standard warranty is part of the contract, it must also show that it is not disentitled, for any reason, to the benefit of the liability exclusions.

Parties’ submissions

[15]     At the hearing, counsel for Dressta acknowledged that there was possibly a representation as to suitability and a simple 12 month repair warranty, as Mr King

deposes.

[16]     Therefore counsel did not rely on the twofold grounds of the application. While reserving Dressta’s right to argue those grounds should Mr King’s claim go to trial, counsel submitted that there is an altogether different, though obvious, reason why Mr King’s causes of action cannot succeed and his claim should be disposed of summarily.  The reason, counsel submits, is that if Mr King’s version of events is correct and the standard warranty terms were not incorporated in the verbal contract at the outset, such terms must constitute an agreed variation. Counsel contends that the variation was freely agreed to, as evidenced by Mr King’s signing the warranty certificate. The variation was also supported by fresh consideration as set out in the warranty certificate’s covenant to replace or repair any parts of the bulldozer that fail in the initial 12 month period. Mr King can therefore have no claim against Dressta under either of his causes of action.

[17]     I pause to note that counsel for Dressta queried whether Dressta actually needs  to  show  there  was  fresh  consideration  in  order  to  establish  a  binding variation.[2]   Counsel freely conceded that the query was raised more in passing than in argument.   He confirmed that Dressta accepts, at least for present purposes, it must show that it did indeed give fresh consideration for Mr King’s agreement to be bound by the terms of liability exclusion.   Counsel’s concession was made on the express basis that he left the question of such need for consideration for argument at trial (should trial be necessary).  For the present, however, his submission rests on

the argument that there was fresh consideration, provided by the terms of the certificate itself. I proceed on that basis.

[2] The suggestion that “it may even be that consideration is not necessary for a variation” is discussed by John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand (4th ed, LexisNexis Wellington, 2012) at 18 and 137.

[18]     Counsel for Mr King raised no objection to what is seemingly a fresh ground for Dressta’s application.   Responsibly, he was content to respond to it. Though noting that Mr King might have difficulty disavowing that he signed the warranty certificate willingly, counsel did not go so far as to concede that Mr King has no

grounds to resile from the liability exclusions set out in the certificate. Instead, he

submitted that such difficulty can be of no consequence, emphasising a technical argument about consideration, as follows:

(a)      The covenant to replace or repair in the standard warranty certificate that Dressta relies on was already promised in the simple verbal warranty originally agreed to.

(b)The covenant is not, therefore, fresh consideration and contrary to Dressta’s own submissions, it has failed to make out that there was a freely agreed variation supported by fresh consideration.

[19]     Counsel for Dressta submits, to the contrary, that there can be no argument that the standard warranty’s covenant to repair and replace parts does not amount to fresh consideration as:

(a)      Though the simple verbal warranty (as alleged by Mr King) gave him the benefit of 12 months of repairs, its terms are otherwise so vague or imprecise as to render the warranty wholly unenforceable, and the Court must ignore it or set it aside.

(b)The covenant in the signed standard warranty therefore does afford a material benefit by way of an unequivocal and binding promise to repair and replace that is not otherwise available to Mr King.

Discussion/decision

Fresh consideration?

[20]     Materially,  counsel  for  Dressta  does  not  dispute  that  the  simple  verbal warranty  is  essentially  the  same,  or  offers  essentially  the  same  benefit,  as  the covenant in the standard warranty certificate.  Such a term has clarity and, as counsel for Mr King submits, it appears on its face to offer Mr King essentially the same benefit as that set out in the standard warranty.

[21]     Counsel for Dressta’s submission turns rather on there being other terms in the initial verbal warranty that are vague and imprecise, so as to render the benefit unenforceable.

[22]     In the light of Mr King’s evidence that there was a simple verbal warranty, unqualified by any suggestion of limitations as to liability for representations or exclusions of the warranties implied under the Sale of Goods Act, I cannot safely conclude that Dressta’s submission is right.

[23]     There is force in Counsel for Mr King’s submission that there is nothing

imprecise about a simple warranty to “cover the cost of any service and repairs” for

12 months as alleged by Mr King.  Arguably, a stand-alone term to that effect is not too vague and imprecise to be enforceable.

[24]     The submission that the terms of the alleged verbal warranty are otherwise vague and imprecise, so as to render the warranty wholly unenforceable, pre- supposes that the warranty contains other terms. That supposition is conclusory and is  not  what  Mr  King  alleges.  If  there  were  other  terms,  that  will  have  to  be established in evidence. Moreover, such terms may well be unenforceable by reason of vagueness, but that does not necessarily mean that the term containing a clear promise of repair will be rendered unenforceable.

[25]     There is also an inherent contradiction in Dressta’s submissions.  On the one hand, Dressta acknowledges that I must proceed on the basis that it is arguable (as Mr King contends) that the original contract came with the simple, clear verbal warranty.  On the other hand, Dressta submits that such a warranty must be set aside because  its  terms  were  otherwise  so  imprecise  as  to  be  unenforceable.    In  my opinion, these two propositions are incompatible.

[26]     Given  these  findings,  and  the  concessions  Dressta’s  counsel  made  in argument, the conclusion is inevitable.   I must accept that Dressta has failed to demonstrate that Mr King’s claim cannot possibly succeed.  Mr King has an arguable case that the standard warranty offered him no fresh consideration in exchange for

his  alleged  agreement  to  the  terms  of  liability  exclusion  and  that  the  standard

warranty may not constitute a binding variation to the parties’ verbal agreement.

[27]     The contrary argument is an issue for another day.  Though I need not deal with it further, I add a brief comment on the topic of the necessity for consideration. I do so, however, without wishing to be seen as expressing a view of either of counsel’s limited submissions.   Rather, I simply wish to assist their further consideration.  The words of Baragwanath J in Antons Trawling Co Ltd v Smith are

apposite:[3]

The importance of consideration is a valuable signal that the parties intend to be bound by their agreement, rather an end in itself.  Where the parties who have  already  made  such  intention  to  be  bound  clear  by  entering  legal relations have acted upon an agreement to a variation, in the absence of policy reasons to the contrary they should be bound by their agreement.

[3] [2003] 2 NZLR 23 at [93].

[28]     Mr  King’s  signing  the  warranty  might  ordinarily  be  determinative  of intention and be cast as his acting upon an agreement to a variation. But here there are evidential allegations that in March 2005,  Dressta explained the terms of a simple warranty, without mentioning liability exclusions.  There is also an evidential allegation that in January 2006, when Mr King signed the standard warranty certificate, Dressta’s representative did not draw its liability exclusions to his attention.  There are unanswered questions about the combined effect of these acts and omissions on his intention to be bound by the terms set out in the standard warranty certificate.   Their combined effect, he appears to suggest, was to misrepresent what Dressta was offering by way of warranty.  Whether the combined effect goes to his intention, or amounts to misrepresentation, is a live issue that warrants further submission and is a further reason for caution when dealing with this summary judgment application.

[29]     As  the Privy Council  cautioned  in  Jones  v Attorney-General,[4]   the Court should not discount even a “theoretical possibility” that would provide support for

[4] [2004] 1 NZLR 433 at [10].

the plaintiff’s claim that might be open to the tribunal of fact on the evidence.  The

Board also emphasised that the decision to give summary judgment for a defendant involves an exacting test, and “rightly so since it is a serious thing to stop a plaintiff bring his claim to trial unless it is quite clearly hopeless”.[5]

Other reasons to disentitle Dressta to benefit of exclusions?

[5] At [10].

[30]     I now turn to the second and narrow issue.   At issue again concerns the combined  effect  of  Dressta’s  March  2005  alleged  representation  (that  it  would provide a simple warranty) and it’s silence in January 2006 at the time of delivery (it’s failure to explain the terms of the standard warranty certificate).

[31]     The issue is whether the combined effect constitutes a misrepresentation and if  so  whether  the  misrepresentation  disentitles  Dressta  to  rely  on  the  standard warranty certificate’s liability exclusions.  The issue was not fully argued and, in any event, does not need to be resolved ahead of trial because of the findings already made on the topic of consideration.

[32]     It is sufficient to note the parties’ positions.   Mr King’s position is that it would be a draconian result if he is deprived, by reason of a warranty that was itself misrepresented, of the right to a remedy on the topic of suitability for purpose (that is, whether there was breach of a statutory implied term or a misrepresentation as to suitability).   On the other hand, Dressta’s position is that this is not a case of a disentitling misrepresentation.   Instead, it is simply a case of buyer who willingly agreed to the terms of the standard warranty and its liability exclusions.

[33]     Both arguments point to the line of authority that “in the absence of fraud, and whether or not a document has been signed, an exclusion clause will not operate if its effect has been misrepresented.”[6]   The possibility that misrepresentation may be

[6] John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand (4th ed, LexisNexis

found notwithstanding the plaintiff signed a document containing liability exclusions

is illustrated in Curtis v Chemical Cleaning & Dyeing Co, a decision of the English

Court of Appeal.  Lord Denning explained: [7]

[7] At 808 – 809.

In my opinion any behaviour, by words or conduct, is sufficient to be a misrepresentation  if  it  is  such  as  to  mislead  the  other  party  about  the existence or extent of the exemption. If it conveys a false impression, that is enough. If the false impression is created knowingly, it is a fraudulent misrepresentation; if it is created unwittingly, it is an innocent misrepresentation; but either is sufficient to disentitle the creator of it to the benefit of the exemption.

...

When one party puts forward a printed form for signature, failure by him to draw attention to the existence or extent of the exemption clause may in some circumstances convey the impression that there is no exemption at all, or at any rate not so wide an exemption as that which is in fact contained in the document.

[34]     In addition, silence can constitute misrepresentation if it has the effect of distorting a prior positive representation.   In Thompson v Vincent, the Court of Appeal explained that “there is a duty to disclose where silence materially distorts a positive representation”.[8]

[8] [2001] 3 NZLR 355 at [61] also Oakes v Turquand and Harding (1867) LR 2 HL 325.

[35]  Whether Dressta created a misleading impression amounting to a misrepresentation (as per the Curtis v Chemical Cleaning & Dyeing Co or Thompson v Vincent decisions) or whether Dressta’s position is more cogent, turns in part on disputed findings of fact that cannot be resolved in the present contrast.   In any event, the issue requires further submission and must await trial.

Conclusion

[36]     The result is that this application for summary judgement must fail.  Mr King has an arguable case which would benefit from a full hearing in the context of a trial. Dressta’s application for summary judgment is dismissed accordingly.

[37]     I  reserve  costs  in  the  usual  way in  keeping  with  the  Court  of Appeal’s

decision in Philpott v NZI.[9]

[9] Philpott v NZI Bank Ltd (1990) ANZ ConvR 242; (1989) 1 NZ ConvC 190,246.

[38]     The Registrar is requested to allocate an initial telephone case management conference.

Associate Judge Sargisson

Wellington, 2012) at 242.