Phil & Teds Most Excellent Buggy Company Limited v Out 'n' About ATP Limited
[2016] NZHC 71
•3 February 2016
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-11571 [2015] NZHC 71
BETWEEN PHIL & TEDS MOST EXCELLENT
BUGGY COMPANY LIMITED Plaintiff
AND
OUT 'N' ABOUT ATP LIMITED Defendant
Hearing: 4 June 2015 Counsel:
T D Gee and O D Tapper for the Plaintiff
B Cash and J Ruddell for the DefendantJudgment:
3 February 2016
JUDGMENT OF ASSOCIATE JUDGE SMITH
Introduction .......................................................................................................................................... 2
Background........................................................................................................................................... 3
The disputes between the parties ........................................................................................................ 4
ONA’s defence and counterclaim ........................................................................................................ 7
Plaintiffs’ applications for summary judgment – legal principles.................................................... 9
Summary judgment principles ........................................................................................................... 9
The issues ............................................................................................................................................ 10
Issue 1: Is it reasonably arguable for ONA that it is entitled to recover a sum in excess of
£25,000 from Phil & Teds on ONA’s claim in respect of the February 2014 commissions? If so,
is that sum the £50,400 claimed by ONA, or some lower figure? ................................................... 11
Issue 2: On the true construction of each of the 2004 agreement, the 2008 agreement, the 2011 agreement and the 2012 sales agreement, is it reasonably arguable for ONA that, as between ONA and Phil & Teds, responsibility for meeting third party product liability claims was intended to lie with Phil & Teds? ...................................................................................................... 14
The parties’ submissions .................................................................................................................... 19
Issue 3: Is it reasonably arguable for ONA that it is entitled to recover from Phil & Teds all or part of the amounts paid by it in settlement of the third party product liability claims: ............ 37
(a) as payments made by ONA in the mistaken belief that it was legally required to make the
PHIL & TEDS MOST EXCELLENT BUGGY COMPANY LIMITED v OUT 'N' ABOUT ATP LIMITED [2015] NZHC 71 [3 February 2016]
payments, and where the making of the payments unjustly conferred a corresponding benefit on
Phil & Teds?........................................................................................................................................ 37
Issue 3: Is it reasonably arguable for ONA that it is entitled to recover from Phil & Teds all or part of the amounts paid by it in settlement of the third party product liability claims: ............ 40
(b) under s 17 of the Law Reform Act 1936? ................................................................................ 40
Issue 3: Is it reasonably arguable for ONA that it is entitled to recover from Phil & Teds all or part of the amounts paid by it in settlement of the third party product liability claims: ............ 42
(c) in equity, on the basis that ONA has discharged a disproportionate share of a common or co-ordinate liability owed by it and Phil & Teds to the claimants?................................................ 42
Issue 4: Is it reasonably arguable for ONA that it conferred a benefit on Phil & Teds by paying the increased liability insurance premiums between 2012 and 2014, and that it is entitled to recover the premium increases (£121,012) from Phil & Teds? ....................................................... 44
Issue 5: Is it reasonably arguable for ONA that it is entitled to set-off the amounts it is arguably entitled to recover on its counterclaims, against any amount for which Phil & Teds’ would otherwise be entitled to summary judgment? .................................................................................. 46
Issue 6: If and to the extent the answer to issue (3) or issue (4) is “yes” but the answer to issue
(5) is “no”:........................................................................................................................................... 47 (a) should the Court exercise its discretion against the entry of summary judgment; or ........ 47
(b) should any summary judgment entered for Phil & Teds be stayed pending the hearing of
one or more of ONA’s counterclaims? .............................................................................................. 47
Orders ................................................................................................................................................. 47
Introduction
[1] The plaintiff, Phil & Teds Most Excellent Buggy Company Ltd (Phil & Teds), applies for summary judgment for various amounts said to be owing to it following the termination in early 2014 of its sales and distribution arrangements with the defendant (ONA).
[2] Phil & Teds is a New Zealand company which designs and manufactures pushchairs, buggies, and related products for small children.
[3] Until early 2014, ONA was Phil & Teds’ exclusive United Kingdom (UK) distributer and sales representative. Phil & Teds would supply products to ONA in the UK, and ONA would sell the products to retailers in that country and receive a commission on the sales. Under the most recent sales representation agreement, ONA received all proceeds of sale made by it in the UK, and Phil & Teds would invoice ONA for the weekly sales amounts less a 14 per cent commission. In
practice ONA, having sold the products in the UK, would remit to Phil & Teds 86 per cent of the wholesale price of the products to ONA.
[4] When the distributor/sales representative arrangements came to an end in early 2014, there were outstanding claims on both sides. The parties were unable to resolve those claims, and in December 2014 Phil & Teds commenced the present proceeding.
[5] Phil & Teds’ application for summary judgment is opposed by ONA, and ONA has filed a detailed statement of defence and counterclaim setting out various amounts which it says it is entitled to set-off against Phil & Teds’ claims. It has also filed an application for a stay of execution of any judgment Phil & Teds might obtain.
Background
[6] ONA had operated as Phil & Teds’ exclusive UK distributor from around
2003. There were no fewer than five agreements entered into by the parties over the years since then. There was an exclusive distribution agreement effective from 1
November 2004 (the 2004 agreement), a replacement distribution agreement made in October 2008 (the 2008 agreement), a third distribution agreement made (to replace the October 2008 agreement) in September 2011 (the 2011 agreement), and two agreements which came into effect on 1 November 2012. The first of the 2012 agreements was a sales representation agreement (the 2012 sales agreement), and the second was an agreement (the fulfilment agreement) under which ONA undertook to provide logistics services for Phil & Teds in the UK, including receiving inbound stock, product warehousing, and dispatch in response to customer orders.
[7] Either party was entitled to give one month’s notice to terminate the fulfilment agreement. Under the 2012 sales agreement, Phil & Teds was entitled to give notice terminating the agreement if ONA had not achieved a specific target sales figure in the preceding year.
[8] By November 2013, ONA had come to the view that the fulfilment agreement was not profitable for it. It gave one month’s notice terminating the fulfilment
agreement on 1 November 2013. Whether or not in retaliation, Phil & Teds then gave notice to terminate the 2012 sales agreement. (It was entitled to do that, as ONA’s sales in the preceding year had not reached the minimum level under the
2012 sales agreement). Phil & Ted’s termination notice was given on
4 November 2013, and was to be effective from 2 December 2013.
[9] Neither party has challenged the validity of the other’s termination notice.
[10] A meeting between representatives of the parties took place on
11 November 2013, with a view to reaching agreement on how the commercial arrangements between the parties would be brought to an orderly conclusion. ONA contends that a “transition agreement” was reached at the meeting, under which ONA was entitled to continue to sell Phil & Teds’ products until the end of February
2014. Phil & Teds deny that any transition agreement was reached as alleged, but it accepts that the question of whether or not such an agreement was reached is not suitable for determination on a summary judgment application.
[11] ONA continued to sell Phil & Teds’ products in the UK between
2 December 2013 and 31 January 2014, and Phil & Teds continued to send invoices for those sales, in each case crediting ONA with the 14 per cent commission on the sales.
[12] From 1 February 2014, ONA found that it was unable to process orders that it had obtained in the UK, because Phil & Teds had cut off ONA’s access to the internet portal used by the parties for processing sales. That was the end of the parties’ commercial relationship. From 1 February 2014 onwards, Phil & Teds have sold their products in the UK either directly or through another distributor.
The disputes between the parties
[13] In its statement of claim, Phil & Teds claimed that ONA had failed to pay
£ 672,279.34, being the total amount invoiced by Phil & Teds to ONA between
24 November 2013 and 31 January 2014, less ONA’s 14 per cent commission on sales. Phil & Teds acknowledged that it owed ONA £404,200 under the fulfilment agreement, and that that sum should be set off against the £672,279.34 owing to it
for product supplies. Setting off the amount owing under the fulfilment agreement produced a net claim figure of £268,079.34.
[14] As an alternative claim in its first cause of action, Phil & Teds claimed that
£64,600 should be added to the £268,079.34, because the £672,279.34 invoiced to ONA gave ONA a credit for commission on sales made by it after 2 December 2013 which Phil & Teds now says should not have been given. It says that ONA was not entitled to commission on sales of products made by it after the effective termination date of the 2012 sales agreement.
[15] In the event, it is not necessary to consider the claim for the £64,600, as
Phil & Teds accepts that the question of whether commission was payable after 2
December 2013 is not suitable for determination on a summary judgment application.
[16] ONA raises two substantial disputes in its statement of defence and counterclaim. First, it says that over the years it acted as Phil & Teds UK sales representative, it or its insurer paid out on a total of 35 product liability claims made by consumers in the UK who suffered personal injury as a result of their use of Phil & Teds’ products. The alleged injuries were mainly finger injuries said to have been suffered in the hinges of buggies when folding or unfolding them.
[17] The first of these injuries which resulted in claims settled by ONA or its insurer, is said to have occurred on 24 April 2007, and the last on 16 December 2013. ONA says that, between itself and its insurer, a total of £355,376.69 was paid to settle the product liability claims (including claimants’ costs and defence costs, and payments made to the National Health Service.) In addition, ONA says that as a result of these product liability claims, its insurers increased its product liability insurance premiums by a total of £121,012 in the period 2012 – 2014.
[18] The total spent by ONA on the product liability claims and the additional insurance premiums is £476,388.69.
[19] ONA now says that settlement of the product liability claims was in fact Phil & Teds’ responsibility under the various distribution or sales representation agreements that were in place at material times. It says that it only settled the claims because it had the mistaken belief, encouraged by Phil & Teds, that it was liable to do so. ONA now seeks to recover from Phil & Teds the sums it says it mistakenly paid, together with the insurance premium increases it says it would not have been charged if Phil & Teds had accepted responsibility for the claims.
[20] Phil & Teds says that the product liability claims were quite correctly paid by ONA, and that it had no responsibility for them. In respect of the 2012 sales agreement in particular, it says that the commission rate of 14 per cent was agreed at that level on the express basis that ONA would meet the product liability claims.
[21] ONA’s second claim is a claim for lost profits on the commission it says it would have earned in February 2014 if it had been able to continue selling Phil & Teds’ products until 28 February 2014 (in accordance with the alleged transition agreement). It alleges that if it had been able to continue selling until the end of February 2014 it would have made an additional profit of £50,400.
[22] Phil & Teds contends that this claim is grossly excessive. It says that when regard is had to historical sales figures, the claim, even if it were to succeed, could not exceed £25,000. Phil & Teds invites the Court to enter summary judgment for it on the basis that that is the highest figure ONA might arguably recover if it were to succeed with this claim at trial.
[23] A number of other claims have been made by the parties which need not concern us for the purposes of the summary judgment application. They have either been agreed, or Phil & Teds accepts that they are not suitable for determination on a summary judgment application.
[24] The result of the various agreements on the individual claims is that the parties agree for the purposes of the summary judgment application that if Phil & Teds succeeds on the two disputes described above (i.e. if it shows that ONA has no reasonably arguable defence based on its settlement of the product liability
claims, and has no reasonably arguable basis for recovering more than £25,000 on the February 2014 commissions issue), it will be entitled to judgment in the sum of
£171,665.60. If on the other hand the Court considers it reasonably arguable for ONA that it is entitled to set off the amounts it claims in respect of the product liability settlements, there would arguably be a net figure of over £300,000 owing by Phil & Teds to ONA. In those circumstances Phil & Teds’ summary judgment application would properly be refused.
ONA’s defence and counterclaim
The February 2014 commissions claim
[25] ONA’s claims in respect of the February 2014 commission are set out in its third cause of action on its counterclaim. It relies on the alleged transition agreement of 11 November 2013, saying that it was agreed as part of the transition agreement that ONA would continue as sales agent for Phil & Teds, on the same terms as the
2012 sales agreement, until 28 February 2014. It pleads that it was entitled to commission at the rate of 14 per cent on all sales it made until 28 February 2014.
[26] ONA then pleads that Phil & Teds acted in breach of the transition agreement, inter alia by refusing ONA access to Phil & Teds’ online order portal on
3 February 2014. That resulted in ONA being unable to make sales between
3 February 2014 and 28 February 2014. ONA’s claim for damages of £50,400 is based on commission at the rate of 14 per cent for sales it says it would have made in that period, calculated on the basis of the average of sales for the 12 preceding months.
The product liability settlements claim
[27] ONA pleads three alternative bases for recovery of the £476,388.69 relating to the public liability claims. Common to each is the contention that settlement of the product liability claims was the responsibility of Phil & Teds.
[28] In the first of its counterclaim causes of action relating to the product liability settlements, ONA says that by settling the personal injury claims it conferred a
benefit on Phil & Teds, by discharging Phil & Teds’ liability to the claimants. ONA says that it conferred that benefit on Phil & Teds in the mistaken belief that Phil & Teds was entitled to be indemnified in respect of such claims by ONA under the distribution and sales agreements. It contends that Phil & Teds was not so entitled where the injuries were a result of Phil & Teds’:
(1)negligence in breaching a duty of care owed to those using its products; and
(2)breaches of safety standards and regulations, which formed part of an agreed specification for the products supplied by Phil & Teds.
[29] ONA says that it only discovered its mistake (in settling the product liability claims) in or around November 2013.
[30] In its second (alternative) counterclaim in respect of the product liability settlements, ONA seeks an order that it be completely indemnified by Phil & Teds as a joint or several tortfeasor under s 17(1)(c) of the Law Reform Act 1936.
[31] ONA’s third alternative cause of action in respect of the product liability settlements asks for an order directing Phil & Teds to make an equitable contribution to the liability assumed by ONA. ONA pleads that Phil & Teds was under a coordinate or common obligation with it, of the same nature and extent, in that both parties were liable for the personal injuries under the provisions of sch 1 of the Consumer Protection Act 1987 (UK). ONA says that Phil & Teds is liable under this statute as the producer/manufacturer of the allegedly defective products, and ONA is liable as the importer. Having paid a disproportionate share of the joint liability under the statute, ONA says that it is entitled in equity to contribution from Phil & Teds.
Plaintiffs’ applications for summary judgment – legal principles
Summary judgment principles
[32] The principles to be applied in considering an application for summary judgment have been clearly established through decisions of the Court of Appeal such as Pemberton v Chappell, Grant v NZMC Ltd and Westpac Banking Corporation v M M Kembla New Zealand Ltd.1 The following broad principles are to be applied:
(a) The plaintiff must satisfy the Court that the defendant has no arguable defence to the claim brought against it. The issue is whether there is a real question to be tried.
(b)It is generally not possible to determine disputed issues of fact based on affidavit evidence alone, particularly when issues of credibility arise. Issues of law, even though they may be complex, can, however, be determined in an application for summary judgment.
(c) Although the Court should adopt a robust approach, summary judgment may be inappropriate where the ultimate determination turns on a judgment that can only properly be reached after a full hearing of all the evidence.
[33] In Pemberton v Chappell, the Court of Appeal held:2
Where the defence raises questions of fact upon which the outcome of the case may turn it will not often be right to enter summary judgment. There may however be cases in which the Court can be confident – that is to say, satisfied – that the defendant’s statements as to matters of fact are baseless. The need to scrutinise affidavits, to see that they pass the threshold of credibility, is referred to in Eng Mee Yong v Letchumanan.
[34] In Eng Mee Yong, the Privy Council said:3
1 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3; Grant v NZMC Ltd [1989] 1 NZLR 8 (CA);
Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
2 Pemberton v Chappell, above n 1, per Somers J.
3 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341.
Although in the normal way it is not appropriate for a Judge to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements made by the same deponent, or inherently improbable in itself it may be.
[35] With those principles in mind I turn to consider the issues in this case.
The issues
[36] The following issues fall to be determined:
(1)Is it reasonably arguable for ONA that it is entitled to recover a sum in excess of £25,000 from Phil & Teds on ONA’s claim in respect of the February 2014 commissions? If so, is that sum the £50,400 claimed by ONA or some lower figure?
(2)On the true construction of each of the 2004 agreement, the 2008 agreement, the 2011 agreement and the 2012 sales agreement, is it reasonably arguable for ONA that, as between ONA and Phil & Teds, responsibility for meeting third party product liability claims was intended to lie with Phil & Teds?
(3)Is it reasonably arguable for ONA that it is entitled to recover from Phil & Teds all or part of the amounts paid by it in settlement of the third party product liability claims:
(a) as payments made by ONA in the mistaken belief that it was legally required to make the payments, and where the making of the payments unjustly conferred a corresponding benefit on Phil & Teds; or
(b) under s 17 of the Law Reform Act 1936; or
(c) in equity, on the basis that ONA has discharged a disproportionate share of a common or coordinate liability owed by it and Phil & Teds to the claimants?
(4)Is it reasonably arguable for ONA that it conferred a benefit on Phil & Teds by paying the increased liability insurance premiums between 2012 and 2014, and that it is entitled to recover the premium increases (£121,012) from Phil & Teds?
(5)Is it reasonably arguable for ONA that it is entitled to set off the amounts it is arguably entitled to recover on its counterclaims, against any amount for which Phil & Teds’ would otherwise be entitled to summary judgment?
(6)If and to the extent the answer to issue (3) or issue (4) is “yes” but the answer to issue (5) is “no”:
(a) should the Court exercise its discretion against the entry of summary judgment; or
(b)should any summary judgment entered for Phil & Teds be stayed pending the hearing of one or more of ONA’s counterclaims?
Issue 1: Is it reasonably arguable for ONA that it is entitled to recover a sum in excess of £25,000 from Phil & Teds on ONA’s claim in respect of the February
2014 commissions? If so, is that sum the £50,400 claimed by ONA, or some lower figure?
Phil & Teds’ position
[37] Phil & Teds submits that the claim for £50,400 is grossly excessive.
[38] A director of Phil & Teds, Mr Cutfield, has provided figures for ONA’s sales revenue for the period January 2010-January 2014. The revenue figures for January and February in 2011 and 2012 were very similar. The figures for January and
February 2013 were again similar, but they were down by over £100,000 from the figures for those months in the preceding two years (Mr Cutfield says that the sharp decline in the 2013 figures was one of the reasons the relationship between ONA and Phil & Teds came to an end).
[39] The figure for January 2014 showed another substantial fall: sales were approximately £168,000 below the January 2013 figure.
[40] Mr Cutfield expresses the view that sales revenue in February 2014 would have been around the same as that for January 2014. He refers to actual UK sales achieved by Phil & Teds in February 2014, which were down even further from the January 2014 sales achieved by ONA. Mr Cutfield contends that, at very best for ONA, February 2014 sales would not have exceeded £180,000. At the contract rate of 14 per cent, the commission on those sales would have been £25,000.
ONA’s position
[41] Mr Fensom, the managing director of ONA, takes issue with Mr Cutfield’s analysis. He says that sales in any given month are affected by many different variables, such as promotional periods, products being out of stock and so on. He says that when the sales figures for a particular month are low, it is often the case that the subsequent month’s sales are higher because customers would be re- stocking.
[42] Mr Fensom also points out that the sales figures used by Mr Cutfield are based on goods invoiced by ONA, and invoices would only have been rendered once the goods had been dispatched from ONA’s warehouse in the UK. Shipping of some orders could have been delayed for a variety of reasons, including products being out of stock or customers’ accounts being on hold. In such cases, orders placed in one month would not actually be delivered (and therefore invoiced) until the following month, even though the orders had been taken. Low sales figures in a particular month therefore did not necessarily mean that business had been quiet in that month.
[43] As for the sales made by Phil & Teds in February 2014, Mr Fensom says that
ONA’s figure would have been much higher had it been allowed to continue selling
in that month. He says that ONA’s sales representatives took many orders during February 2014 which they could not process. He suggests that Phil & Ted’s own ability to fulfil orders in February 2014 would likely have been severely hampered due to it having moved its operations to a third party logistics provider who was less experienced than ONA.
[44] Mr Fensom rejects any suggestion that ONA made or could have made savings in direct selling costs because it was unable to make sales in February 2014. He says that ONA had committed to selling until the end of February 2014. The commitments included arranging an extension of a lease until 28 February 2014, and maintaining a fixed cost-base to support sales (including keeping a sales representative in place to take orders) until the end of February 2014.
Discussion and conclusions
[45] In my view, there is insufficient evidence before the Court for me to find that ONA has no arguable case that profits lost by it as a result of being unable to sell Phil & Teds’ products in February 2014 exceeded £25,000. Looking at the sales figures produced by Mr Cutfield, I note that there were significant fluctuations in sales from month to month in 2013 (for example, sales were as high as £531,275 in March 2013, but down to £178,401 in August 2013. The sales figure climbed again to £380,700 in October 2013 and it was £268,321 in December 2013. I note too that February sales in 2010 exceeded January sales in that year by over £100,000. Detailed evidence, which is not presently before the Court, may assist in resolving whether the issue of lost revenue in February 2014 is best approached by taking an average of the monthly figures over the preceding twelve months (ONA’s position), or whether Mr Cutfield is right and the February 2014 revenue figure would have been closer to the figure achieved by ONA in January 2014.
[46] I appreciate that in seeking summary judgment based on a maximum claim figure of £25,000 Phil & Teds considers that it is conceding (for summary judgment purposes) the most advantageous position for ONA. But the figure of £25,000 is a purely arbitrary figure, and I do not consider that there is sufficient evidence before the Court for me to conclude that ONA may not be able to make out its claim to a
higher figure. Nor am I able to conclude, to the standard required for the entry of summary judgment, that any particular figure between Phil & Teds £25,000 and ONA’s £50,400 is a maximum beyond which ONA could not reasonably be expected to succeed with this claim.
[47] I accordingly find for ONA on this issue.
Issue 2: On the true construction of each of the 2004 agreement, the 2008 agreement, the 2011 agreement and the 2012 sales agreement, is it reasonably arguable for ONA that, as between ONA and Phil & Teds, responsibility for meeting third party product liability claims was intended to lie with Phil & Teds?
[48] Each of the agreements is relevant to at least one of the 35 product liability claims settled by ONA and/or its insurer. Settlements relating to products supplied by Phil & Teds to ONA under the 2004 agreement totalled 137,952.80,4 and settlements governed by the 2008 agreement totalled £182,260.19.5 Settlements relating to products supplied by Phil & Teds to ONA under the 2011 agreement totalled £25,986.70, although there were two additional settlements, arising out of accidents which occurred in October 2011, where it is unclear if the products were
sold by Phil & Teds to ONA under the 2008 agreement or the 2011 agreement. The total paid under those two settlements was £8,024.70.
[49] Only two the 35 settlements arose out of claimed defects in products supplied by Phil & Teds to ONA under the 2012 sales agreement. The total amount paid by ONA to settle these claims was £7,177.
(a) Relevant provisions of the 2004 agreement
[50] The 2004 agreement contained the following cl 9:
9 Warranties and liability
9.1 Subject as provided in this agreement Phil & Teds warrants to the
Distributor that:
4 Second affidavit of Mr Fensom, exhibit AF 2, at [13].
5 Second affidavit of Mr Fensom, exhibit AF 2, at [10].
9.1.1all products supplied under this agreement will be of satisfactory quality and will comply with any specification agreed for them;
…
9.2In the event of any breach of Phil & Teds’ warranty in cl 9.1.1 (whether by reason of defective materials, production faults or otherwise) Phil & Teds’ liability shall be limited to:
9.2.1 replacement of the Products in question; or
9.2.2 at Phil & Teds’ option, repayment of the price (where this
has been paid).
9.3Notwithstanding anything to the contrary in this agreement, Phil & Teds shall not be liable to [ONA] by reason of any representation or implied warranty, condition or other term or any duty at common law, or under the express terms of this agreement, for any consequential loss or damage (whether for loss of profit or otherwise and whether occasioned by the negligence of Phil & Teds or its employees or agents or otherwise) arising out of or in connection with any act or omission of Phil & Teds relating to the manufacture or supply of the Products, their resale by [ONA] or their use by any customer.
9.4At all times, [ONA] shall maintain, with a reputable insurer, suitable public and product liability insurance for an amount not less than
£1,000,000 covering the Products and their sale in the Territory.
[51] Under cl 3.3, each order for products made by ONA was deemed to constitute a separate contract.
(b) Relevant provisions of the 2008 agreement
[52] Again, the 2008 agreement provided at cl 3.3 that each order placed by ONA
would constitute a separate contract.
[53] Phil & Teds’ standard conditions of sale were to apply, except where they were inconsistent with the 2008 agreement. Those conditions (as they applied at the date of the 2008 agreement) were attached as Schedule 4 to the 2008 agreement. Relevant to the present dispute, cls 6 and 15 of Phil & Teds’ conditions of sale materially provided:
6. Limitations
… [Phil & Teds] liability shall be limited to the amount (excluding taxes)
invoiced to [ONA] for the goods. In no circumstances shall [Phil & Teds] be
liable for any consequential losses where suffered by [ONA] and/or any third party directly or indirectly as a result of using any of [Phil & Teds’] products. All other warranties, including implied warranties as to merchantability or fitness for purpose are expressly disclaimed to the extent permitted by law … Any liability of [Phil & Teds] shall be determined under the laws of New Zealand …
15. Indemnity
[ONA] will indemnify and hold [Phil & Teds] harmless from any claims or losses including legal fees, arising out of any acts or omissions by [ONA] in connection with [Phil & Teds’] products, or representation or warranty given by [ONA] to whomsoever, or allegedly given, whether such representation is oral, written, express or implied.
[54] Clause 9 of the 2008 agreement was similar, but not identical, to the corresponding provision in the 2004 agreement. Clause 9 of the 2008 agreement provided:
9. Warranties, liability and indemnity
9.1 Warranties: Subject to the other terms of this Agreement
[Phil & Teds] warrants to [ONA] that:
(a) all Products supplied under this Agreement will comply with any specification agreed in writing for them for the period set out in that specification;
…
9.2No other warranties: Each party acknowledges that, in entering into this Agreement, it does not do so in reliance on any representation, warranty, term or condition except as expressly provided in this Agreement, and any conditions, warranties or other terms implied by statute or common law are excluded from this Agreement to the fullest extent permitted by Law.
9.3Remedies for breach: In the event of any breach of [Phil & Teds’] warranty in clause 9.1(a) (whether by reason of defective materials, production faults or otherwise) [Phil & Teds’] liability shall be limited to, at [Phil & Teds’] option:
(a) replacement of the Products in question; or
(b) repayment of the price for the Products in question (where this has been paid)
In the event of a product recall resulting from a Product defect (as determined by [Phil & Teds]) [Phil & Teds] shall pay for the direct and reasonable external costs incurred by [ONA] as a result of such a recall, and [ONA] shall seek at all times to minimise such direct costs.
…
9.5 Exclusions: In no event will [Phil & Teds] be liable (whether in contract, tort, negligence or in any other way) to [ONA] for:
(a) loss of revenue or profit, loss of anticipated savings, loss of goodwill or opportunity, loss of production, loss or corruption of data or wasted management or staff time; or
(b) loss, damage, cost or expense of any kind whatsoever that is indirect, consequential, or of a special nature,
arising, directly or indirectly, out of this Agreement or its termination for whatever reason even if [Phil & Teds] had been advised of the possibility of such damages, and even if such loss, damage, cost or expense was reasonably foreseeable by [Phil & Teds].
9.6 Indemnity: [ONA] will at all times indemnify and keep indemnified [Phil & Teds] and its officers, servants and agents from and against any and all liability, losses, damages, costs and expenses of any nature whatsoever awarded against, incurred or suffered by them, whether direct or consequential (including, but without limitation, any economic loss or other loss of profits, business opportunity, data or goodwill), arising out of or resulting from:
(a) [ONA’s] non-performance or breach of any of its obligations under this Agreement; or
(b) the resale of any Products or their use by any customer. unless such claims, losses, damages, costs or expenses arise directly as a
result of any breach of the warranties made by [Phil & Teds] clause 9.1(a).
9.7 Insurance: [ONA] shall maintain, with a reputable insurer, suitable public and product liability insurance for an amount not less than equivalent GBP1m covering the Products and their sale in the Territory.
9.8 Exception: None of the exclusions or limitations set out in this Agreement will have the effect of limiting or excluding any form of liability where such liability cannot be so limited or excluded under applicable law.
(c) Relevant provisions of the 2011 agreement
[55] The provisions of the 2011 agreement were materially similar to corresponding provisions in the 2008 agreement. Clauses 9.1, 9.2, 9.7 and 9.8 in the “Warranties liability and indemnity” clause were the same, but the wording of clauses 9.3, 9.5 and 9.6 introduced some changes. Clause 9.3 read:
9. Warranties, liability and indemnity
…
9.3 Remedies for breach: In the event of any breach of [Phil & Teds’]
warranty in clause 9.1(a) (whether by reason of defective materials,
production faults or otherwise) [Phil & Teds’] liability shall be limited to, at
[Phil & Teds’] option:
(a) replacement of the defective parts of the Products in question; where it is relatively cost effective to have the product repaired, or replacement of the Product; or
(b) repayment of the price for the Products in question (where this has been paid)
In the event of a product recall resulting from a Product defect (as determined by [Phil & Teds]) [Phil & Teds] shall pay for the direct and reasonable, pre-agreed external and incremental costs incurred by [ONA] from conducting the recall pursuant to clause 6.4, and [ONA] shall seek at all times to minimise such direct costs.
[56] Clause 9.5 of the 2011 agreement was almost identical to the corresponding clause 9.5 in the 2008 agreement. The only difference was that the wording “… arising, directly or indirectly out of this Agreement or termination…” in the latter part of cl 9.5 of the 2008 agreement, was changed to “… arising, directly or indirectly, out of this clause 9, any part of this Agreement or its termination …” (emphasis added).
[57] The proviso to the indemnity clause 9.6 (under which ONA was not obliged to indemnify Phil & Teds where a claim, loss, damage, cost or expense arose directly out of a breach by Phil & Teds of its cl 9.1(a) warranty) was not carried forward into the 2011 agreement. Otherwise, cl 9.6 in the 2011 agreement was identical to the same clause in the 2008 agreement.
[58] Again, Phil & Teds’ conditions of sale were deemed to apply to the extent that they were not inconsistent with terms in the body of the 2011 agreement. The same clauses 6 and 15 which were included in the 2008 agreement were included in the conditions which were annexed to and formed part of the 2011 agreement.
(d) Relevant provisions of the 2012 sales agreement
[59] There were substantial changes in the drafting of the 2012 sales agreement. It included the following provisions:
3 SALE OF PRODUCTS
…
3.4 In part consideration for [Phil & Teds] paying to [ONA] the commission margin as defined in Clause 4, [ONA] indemnifies [Phil & Teds] and its officers and employees from and against any and all liability, losses, damages, costs and expenses awarded against, incurred or suffered by them, whether direct or consequential, arising from the resale of any Products during the term of this agreement or their use by any customer, unless such claims, losses, damages, costs or expenses arise directly as a result of [Phil & Teds] failing to supply in accordance with any specification agreed in writing for them for the period set out in that specification.
[60] Under cl 1.2, any references in the agreement to “writing” or related expressions were deemed to include references to facsimile transmissions, emails or comparable means of communication.
[61] Under cl 3.17, Phil & Teds assumed responsibility for after-sales customer care activity in the territory, including service requests and warranty processing and the provision of product and technical information advice to customers and consumers. Phil & Teds also assumed responsibility to undertake any necessary investigation of product-related issues, including product quality or regulatory issues. However any communication involving a potential product liability issue was to be immediately “diverted” to ONA in accordance with a protocol agreed between Phil & Teds and ONA.
[62] Clause 4 provided for ONA’s 14 per cent commission. Clause 4.5 provided:
4.5 The commission credits contemplated hereby shall be the sole and exclusive consideration to be paid by [Phil & Teds] to [ONA] for [ONA’s] services hereunder, and [ONA] shall have no right to reimbursement for any expenses incurred in [ONA’s] performance of its obligations hereunder.
The parties’ submissions
Phil & Teds
[63] Phil & Teds submits that, throughout their contractual relationship, the parties intended that ONA would assume all product liability risk for Phil & Teds’ products sold by ONA. Mr Gee relies on the exclusion and indemnity clauses in the 2008 agreement and the 2011 agreement (cls 9.5 and 9.6), and on ONA’s responsibility to
ensure against public and product liability (cl 9.7 of those agreements). Mr Gee also relies on the limitation of liability set out at cl 6 of Phil & Teds’ Conditions of Sale which were incorporated in the 2008 agreement and the 2011 agreement.
[64] In respect of the 2012 sales agreement, Mr Gee points to the indemnity provision at cl 3.4 and the claims process set out at cl 3.17. He notes that although the 2012 sales agreement was entered into after 30 of the 35 product liability claims had been settled by ONA, ONA did not attempt to include any provision relating to those claims in the 2012 sales agreement. On the contrary, Phil & Teds says that Mr Fensom specifically asked for ONA to retain the public liability/product liability
risk going forward, and negotiated a higher commission as a result.6
[65] Phil & Teds also relies on Mr Fensom’s statement in his first affidavit that his understanding during the relationship with Phil & Teds was that the effect of the various clauses was the same. In particular, the statement that ONA believed that the clauses required ONA to indemnify Phil & Teds in respect of personal injury claims caused to customers even if those injuries were caused by defective or negligent manufacture or design of Phil & Teds’ buggies.
[66] Mr Gee also refers to the fact that when (in December 2012) Phil & Teds questioned ONA’s process for handling product liability claims, ONA responded that all such claims must be handled by ONA only. ONA’s response was that it could not change its process of claim handling without re-discussing the contractual agreement and the “hold harmless” provisions.
[67] In general terms, Phil & Teds submits that it is clear that the parties intended to allocate the risk of public liability claims to ONA, and believed that they had done so.
[68] In response to ONA’s contentions that the indemnity clauses as drafted do not apply because they are not wide enough to cover negligence on Phil & Teds’ part, or
6 Phil & Teds relies on Mr Cutfield’s evidence, an email from Mr Fensom dated 10 September
2012, and that part of cl 3.4 of the 2012 sales agreement which provides: “In part consideration for [Phil & Teds] paying to [ONA] the commission margin … [ONA] indemnifies [Phil & Teds]
… from and against any and all liability … unless such claims … arise directly of [Phil & Teds]
failing to supply in accordance with any specification agreed in writing …”.
do not apply because Phil & Teds’ products were in breach of an agreed “specification”, Phil & Teds submits that (i) the indemnity clauses are comprehensive, and (ii) that there were no “specifications agreed in writing”.
ONA
[69] Mr Cash submits that the 2008 agreement only required indemnification for loss caused by products sold by Phil & Teds under that agreement – it did not apply to earlier sales governed by the 2004 agreement. There was no indemnity provision in the 2004 agreement, and clear wording would have been required for the indemnity in the 2008 agreement to apply retrospectively. There is no such clear wording.
[70] While there were specific indemnities given by ONA in the 2008 agreement, the 2011 agreement, and the 2012 sales agreement, those agreements contained an express exception for claims that arose as a result of a product being in breach of any specification agreed in writing. Whether or not there was compliance with any such specification, and if not whether the non-compliance caused injury, are not issues which are suitable for determination on a summary judgment application. The only issue is whether there is a fairly arguable case that there were specifications agreed in writing, and, there is a factual dispute about that. In those circumstances the question of the existence or otherwise of agreed written specifications is also unsuitable for determination on a summary judgment application.
[71] The 2008 agreement, the 2011 agreement, and the 2012 sales agreement did not require a stand-alone signed written agreement. Under the 2012 sales agreement, “writing” was deemed to include an email (or a comparable means of communication). Mr Cash submits that the same meaning is implicit in the 2008 agreement and the 2011 agreement.
[72] ONA says that there was a sufficient agreement in writing, which referenced the relevant UK standards which each product was required to meet. He refers to the purchase order forms used by ONA, which identified the products purchased by reference to particular UK specifications, and to email confirmations and testing certificates provided by Phil & Teds which ONA says stated the specifications.
While Mr Cutfield says that to the best of his knowledge no specifications were ever agreed in writing, ONA contends that Mr Cutfield had only a limited involvement with ONA, and was not involved with day-to-day matters.
[73] Mr Cash refers to the fact that the contracts were performed in the context of a long-standing relationship between the parties, and against the background of a particular statutory regime in the UK detailing product safety standards. In those circumstances he submits that a technical approach to the interpretation of the indemnity provisions would be inappropriate. More generally, he submits that the question of whether there were agreed written specifications, sufficient to exclude the operation of the indemnity in Phil & Teds’ favour, is a matter which cannot be resolved without the parties having discovery and the evidence being tested at trial.
[74] Referring specifically to products sold after October 2008, Mr Cash submits that the indemnities in the three agreements are general and boilerplate in form. None of them expressly applies to the situation where Phil & Teds’ liability to a third party has arisen as a result of its own negligence. In those circumstances, Mr Cash submits that the indemnity provisions should be construed contra proferentem, and in accordance with the general principle that such clauses are unlikely to have been intended to cover a party’s own negligence, particularly if there are other forms of
liability to which the clause could relate.7 For negligence to be covered, clear and
unambiguous language must be used.8
[75] Mr Cash submits that the language used in this case is neither clear nor unambiguous, and there are other forms of liability (i.e. other than for negligence) to which the clause could relate-for example, late delivery of products, damaged products, and strict liabilities to consumers under the Consumer Protection Act 1987
(UK).
7 Citing Westpac Banking Corporation v M M Kembla NZ Ltd, above n 1.
8 Citing Lewison The Interpretation of Contracts (5 ed, London 2011) at [12.15] and Airwork (NZ) Ltd v Vertical Palmerston North Ltd [1999] 1 NZLR 641 (CA) at 652, and Armitage v Church [2010] NZCCLR 28 at [33].
Discussion and conclusions on issue (2)
The claims governed by the 2004 agreement
[76] I do not need to resolve the question of whether there existed an agreed specification in writing for these products. That is because the cl 9.1.1 warranty in the 2004 agreement included a warranty that the products would be of satisfactory quality. I do not understand Phil & Teds to be disputing that factual issues over the quality of the goods supplied will be matters for trial, and are not suitable for determination on a summary judgment application. I accordingly proceed on the basis that Phil & Teds may have been in breach of the cl 9.1.1 warranty.
[77] Clause 9.2 limits the quantum of Phil & Teds’ liability in the event of breach of the warranty in cl 9.1.1 to replacement of the products or, at Phil & Teds’ option, repayment of the price (if it has been paid). In my view the clause was intended to cap Phil & Teds’ liability in all circumstances covered by cl 9.1.1, i.e. in any situation where products supplied by Phil & Teds were not “of satisfactory quality”, or failed to comply with an agreed specification. The clause was not concerned with the particular legal “route” ONA might take to make a claim against Phil & Teds (e.g. breach of the cl 9.1.1 warranty itself, or a claim for contribution in respect of liability incurred by ONA to some third party).
[78] That view is reinforced by cls 9.3 and 9.4. Clause 9.3 is concerned with claims by ONA against Phil & Teds for “any consequential loss or damage”, and the ambit of that expression was clearly intended to be wide – the use of the words “or otherwise” following the various examples of consequential loss or damage which are set out in parentheses after that expression, makes that plain. The last words of cl
9.3, precluding claims against Phil & Teds arising out of or connected with the use of the products by ONA’s customers, confirm that ONA’s “consequential loss or damage” might take the form of ONA incurring a liability to a third party user of the products (i.e. the situation with which we are now concerned).
[79] The product liability claims have clearly arisen out of (or are connected with) alleged acts or omissions of Phil & Teds relating to the manufacture or supply of the (allegedly defective) products, and clause 9.3 expressly extends to cover
circumstances where the liability has been occasioned by Phil & Teds’ negligence. On the plain language of cl 9.3, I conclude that the sums which ONA now seeks to recover are within the expression “consequential loss or damage” as used in the clause. To the extent the products may have been defective in terms of the Consumer Protection Act 1987 (UK), they were clearly of “unsatisfactory quality” in terms of the cl 9.1.1 warranty, and liability was limited, by the express terms of the agreement, in accordance with cl 9.2.
[80] Mr Cash submits that the losses in this case are not indirect or consequential, but the direct consequences of Phil & Teds’ own acts, and that cl 9.3 does not protect Phil & Teds from direct losses caused as a result of its own fault. He characterises the relevant loss as the loss suffered by the person who has used the product, that being a loss which is “direct” in the sense of having flowed naturally from Phil & Teds’ breach.
[81] I cannot accept that submission. Clauses 9.2 and 9.3 were concerned with limiting the kinds of claims which ONA might bring against Phil & Teds, and were therefore concerned with ONA’s loss, not the loss of some third party. ONA’s loss consisted in the incurring of liabilities to the third party claimants (and therefore suffering a loss of taxable profits if the third party claims were tax-deductible, or a loss of anticipated savings if they were not).
[82] Clause 9.4 required ONA to maintain product liability insurance cover of up to £1,000,000 covering the products and their sale in the UK. I think that clause confirms that the parties contemplated that ONA would assume responsibility for any product liability claims which might be brought against it in the Territory. It is difficult to see why an obligation to insure against such claims would have been imposed on ONA if the parties intended that Phil & Teds would have responsibility for meeting them.
[83] On the wording of the 2004 agreement, then, I conclude that it is not reasonably arguable for ONA that Phil & Teds was intended to have responsibility for meeting product liability claims made by third parties against ONA, in respect of products supplied by Phil & Teds under the 2004 agreement. Whether a different
view might emerge from a consideration of the background circumstances against which the 2004 agreement was negotiated, is a topic to which I return below.
The claims governed by the 2008 agreement
[84] Clause 9.3, dealing with remedies for breach, was in substantially the same terms as cl 9.2 of the 2004 agreement. In the event of any breach of Phil & Teds’ warranty in cl 9.1(a) of the 2008 agreement (which provided that all products supplied under the agreement would comply with any specification agreed in writing for them, for the period set out in that specification), Phil & Teds’ liability was limited to replacement of the product or repayment of the price for the product if the price had been paid.
[85] Clause 9.5 set out a broadly worded exclusion clause, limiting Phil & Teds’ liability to ONA for, among other things, “loss, damage, cost or expense of any kind whatsoever that is indirect, consequential, or of a special nature”, arising directly or indirectly out of the agreement for whatever reason. On its face, cl 9.5 appears to be wide enough to exclude any liability Phil & Teds might otherwise have had to ONA. In this case, the payment of the product liability claims by ONA would be within the expression “loss, damage, cost or expense of any kind whatsoever”, and it appears also to be “indirect”, or “consequential” (the loss, damage, cost or expense has arisen indirectly out of the 2008 agreement, which was solely concerned with ONA on- selling Phil & Teds’ products).
[86] On the face of it, then, recovery of the product liability settlements appears to be precluded by cl 9.5 of the 2008 agreement.
[87] That view is supported by cl 6 of Phil & Teds’ terms and conditions, which was incorporated into the 2008 agreement by cl 3.11. Condition 6 provided that Phil & Teds’ liability was to be limited to the amount (excluding taxes) invoiced to ONA for the goods. The clause went on to provide that in no circumstances was Phil & Teds to be liable “for any consequential losses where suffered by [ONA] and/or any third party directly or indirectly as a result of using any of [Phil & Teds’] products”.
[88] On its face, the product liability settlements claim now made by ONA appears to be a claim for “consequential losses” arising directly or indirectly as a result of the use of Phil & Teds’ products, and is covered by cl 6.
[89] The clause 9.5 exclusion did not contain any exception covering the situation where products supplied by Phil & Teds did not comply with any agreed written specification. There is such an exception in the 2008 agreement, but it is in cl 9.6. Under cl 9.6, ONA agreed to indemnify Phil & Teds against any and all liability, losses, damages, costs and expenses of any nature whatsoever awarded against, incurred, or suffered by Phil & Teds, whether direct or consequential, arising out of or resulting from…“(b) the re-sale of any Products or their use by any customer”, but the indemnity did not apply in respect of claims, losses, damages, costs or expenses which arose directly as a result of any breach of Phil & Teds’ cl 9.1(a) warranty.
[90] Why does that exception appear in the cl 9.6 indemnity but not in the cl 9.5 exclusion of liability for consequential losses? I think the answer is that cl 9.5 and cl 9.6 were directed to two different situations. Clause 9.5 was concerned solely with claims by ONA against Phil & Teds, and cl 9.6 solely with claims by third parties against Phil & Teds.
[91] As I read it, cl 9 had the following structure. If there was breach of an agreed written specification, Phil & Teds would replace the defective product (or refund the purchase price for the product if the price had been paid). Beyond that cl 9.5, read with cl 6 of Phil & Teds’ terms and conditions, was intended to provide that Phil & Teds would have no further liability to ONA. In respect of claims against Phil & Teds made by parties other than ONA, Phil & Teds was entitled to look to ONA for indemnity, but not if the third party claim arose directly as a result of breach by Phil & Teds of its cl 9.1(a) warranty.
[92] As with the 2004 agreement, that view is consistent with cl 9.7, which obliged ONA to maintain suitable public and product liability insurance for an amount no less than £1,000,000, covering the products and their sale in the UK. If the parties intended that Phil & Teds should have responsibility for product liability
claims made against ONA in the Territory, it is difficult to see the point of imposing an obligation on ONA to insure against them.
[93] On that reading of the 2008 agreement, the existence or otherwise of an agreed written specification for the products which are said to have been defective cannot affect the position. Failure by Phil & Teds to comply with any such specification would have precluded Phil & Teds from looking to ONA for indemnity in respect of third party claims made against Phil & Teds, but that is not the situation with which we are now concerned. Claims by ONA against Phil & Teds were intended to be governed by cl 9.2 (Phil & Teds to replace products or refund purchase price in event of failure to meet cl 9.1(a)), cl 9.5 of the agreement, and cl 6 of the fourth schedule to the agreement (i.e. cl 6 of Phil & Teds’ terms and conditions).
[94] Clause 9.2 does not apply, because the claim now made by ONA is not a claim under the cl 9.1(a) warranty for replacement of the products or a refund of the price paid for them. The claims are, however, caught by cl 9.5 and cl 6 of Phil & Teds’ terms and conditions, as claims for loss, damage, cost or expenses arising indirectly out of the agreement (cl 9.5), which are consequential losses suffered by ONA indirectly as a result of ONA or a third party using Phil & Teds’ products (cl 6 of the terms and conditions). (I see nothing in the relevant part of cl 6 which is inconsistent with the 2008 agreement and would require that part to give way to terms set out in the body of the agreement).
[95] Mr Cash makes a similar argument on the ambit of the exclusion clause (cl 9.5) under the 2008 agreement as he makes on cl 9.4 of the 2004 agreement. He submits that the relevant loss here is direct loss, not indirect or consequential loss, and direct loss is not covered by cl 9.5. Mr Cash also refers to cl 9.4, under which the parties agreed that Phil & Teds’ liability to ONA (whether in contract, tort, negligence or in any other way) arising out of all claims under the agreement or relating to the products, would not exceed the lower of (a) the amounts actually paid by ONA to Phil & Teds under the agreement in the 12 month period before the date the liability first arose, and (b) the sum of US$3,000,000. Mr Cash says it was
[164] In summary, I do not see any reasonably arguable basis on which ONA could recover the £121,012 claimed under this head on its unjust enrichment cause of action. (The claim is not included in ONA’s contribution claims under the Law Reform Act 1936 and in equity). The answer on issue (4), then, is “no”.
Issue 5: Is it reasonably arguable for ONA that it is entitled to set-off the amounts it is arguably entitled to recover on its counterclaims, against any amount for which Phil & Teds’ would otherwise be entitled to summary judgment?
[165] As I understand it, Phil & Teds does not dispute that ONA is entitled in equity to set off any arguable claims it has in respect of the loss of the February 2014 commissions. On issue (1) above, I have found that ONA’s claims under this head are arguable to the full extent claimed. Phil & Teds’ claim figure of £171,665.60 allowed for a set-off of £25,000 on this issue, but that figure needs to be increased to the full sum claimed in respect of the February 2014 commissions.
[166] The effect of the higher set-off on issue (1) is that the amount of any summary judgment to which Phil & Teds may be entitled will be reduced by
£25,400, to £146,265.60.
[167] I have also held that ONA has an arguable claim in respect of its settlement of third party product liability claims made in respect of products supplied under the
2012 sales agreement. The amount of this counterclaim is £7,177.
[168] Mr Cash submits that ONA is entitled in equity to set this sum off against the
£146,265.60 for which Phil & Teds would otherwise be entitled to summary judgment. He submits that the counterclaim “so affects [Phil & Teds’] claim that it would be unjust to allow [Phil & Teds] to have judgment without bringing (this cross-claim) to account” (citing the decision of the Court of Appeal in Grant v NZMC Ltd).32
[169] In my view there is sufficient “linkage”, or interdependence, between the
£7,177 counterclaim and Phil & Teds’ claim for unpaid invoices. Phil & Teds’ claim for unpaid invoices is a claim for money due under the 2012 sales agreement (as extended by the transition agreement), and the £7,177 counterclaim is concerned with product supplied by Phil & Teds under the same agreement (while earlier agreements provided that each accepted order would constitute a separate contract,
that provision was not carried forward into the 2012 sales agreement).
32 Grant v NZMC Ltd above n 1, at [12].
[170] The evidence shows that ONA and Phil & Teds appear to have been operating a “running account”, with commissions and sums payable by Phil & Teds under the fulfilment agreement (for example) being set off against amounts invoiced by Phil & Teds. In those circumstances I think it would be unsafe to conclude, on the limited evidence available at this stage, that a similar arrangement would not have applied in respect of a cross-claim of the sort with which I am presently concerned. I therefore conclude that it is or may be arguable for ONA that the claim and cross- claim are sufficiently linked, and that the claimed set-off under the 2012 sales agreement must be regarded as arguable.
[171] The amount for which Phil & Teds is entitled to summary judgment will accordingly be further reduced, by £7,177, to the sum of £139,088.60.
Issue 6: If and to the extent the answer to issue (3) or issue (4) is “yes” but the answer to issue (5) is “no”:
(a)should the Court exercise its discretion against the entry of summary judgment; or
(b)should any summary judgment entered for Phil & Teds be stayed pending the hearing of one or more of ONA’s counterclaims?
[172] I see no reason why summary judgment should not be entered for the
£139,088.60 referred to in para [172] of this judgment. There will be an order accordingly.
[173] There is no basis on which that judgment should be stayed. To the extent I have held ONA’s claims to be arguable, those arguable claims have been the subject of set-offs which I have allowed. ONA’s stay application is accordingly refused.
Orders
[174] Phil & Teds is entitled to costs in the ordinary way, assessed on a 2B basis. Phil & Teds claims interest at the Judicature Act rate of 5 per cent per annum, calculated from 31 January 2014, being the date when it says the 2012 sales agreement (and the alleged transition agreement) came to an end. I can see no
reason why I should not exercise my discretion in favour of such an award of interest, on the basis that I have found that Phil & Teds has been kept out of its money (i.e. the £139,088.60 for which I now enter judgment) for a period running from about that time. However I note that ONA continued selling Phil & Teds’ products, until the end of January 2014, and it may be that some products sold by ONA were not invoiced until February 2014. In those circumstances I will award interest on the amount for which judgment is to be entered at the rate of 5 per cent per annum, calculated from 1 March 2014.
[175] I make the following orders:
(1) Entering summary judgment for Phil & Teds in the sum of
GBP139,088.60.
(2)Entering summary judgment for Phil & Teds for interest on that sum, at the rate of 5 per cent per annum under s 87 of the Judicature Act
1908, from 1 March 2014 to the date of this judgment.
(3)Costs are awarded to Phil & Teds on a 2B basis, together with disbursements as fixed by the registrar.
(4) ONA’s application for a stay of the judgment is refused.
Solicitors:
Minter Ellison Rudd Watts, Wellington for the plaintiff
Bell Gully, Auckland for the defendant
Associate Judge Smith