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  4. Brisbane Quality Roofing Pty Ltd v Metroll Queensland Pty Limited - [2001] QDC 186

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Brisbane Quality Roofing Pty Ltd v Metroll Queensland Pty Limited[2001] QDC 186

Brisbane Quality Roofing Pty Ltd v Metroll Queensland Pty Limited[2001] QDC 186

DISTRICT COURT OF QUEENSLAND

CITATION:

Brisbane Quality Roofing Pty Ltd v. Metroll Queensland Pty Limited [2001] QDC 186

PARTIES:

BRISBANE QUALITY ROOFING Plaintiff

PTY LTD ACN 090 801 488

And

METROLL QUEENSLANDDefendant

PTY LIMITED ACN 010 035 266

And

METROLL QUEENSLAND PTYPlaintiff by Counterclaim

LIMITED ACN 010 035 266

And

BRISBANE QUALITY ROOFINGFirst Defendant by Counterclaim

PTY LTD ACN 090 801 488

And

FRANK NICHOLAS COPSecond Defendant by Counterclaim

FILE NO/S:

D1233 of 2001

DIVISION:

District Court

PROCEEDING:

Application

ORIGINATING COURT:

Brisbane

DELIVERED ON:

23 August 2001

DELIVERED AT:

Brisbane

HEARING DATE:

21 August 2001

JUDGE:

Judge Robin Q.C.

ORDER:

 

CATCHWORDS:

Uniform Civil Procedure Rules r 171, r 292, r 293, r 294 – Summary judgment sought by defendant both on plaintiff’s claim and its counterclaim – plaintiff buyer of goods claimed damages under Trade Practices Act (Cth) 1974 s. 82, Fair Trading Act 1989 s. 99 and Sale of Goods Act 1896 s. 54 for breach of warranties of fitness and of merchantable quality – defendant seller counterclaimed for price of the goods – goods were roofing materials fixed by plaintiff in various buildings – contest as to whether those in two buildings only were defective – defendant held entitled to judgment for price of other goods – plaintiff’s claims under Trade Practices Act, Fair Trading Act and in negligence struck out because no damage was shown – contract and Sale of Goods Act claims to proceed.

Guarantee – summary judgment refused upon guarantee by a director of company indebtedness – guarantee to pay “on demand” – not shown that conversation relied on as demand was with guarantor as such, rather than as representing the company.

COUNSEL:

Mr Lilley for the Defendant/Plaintiff by Counterclaim

Mr Skoien for the Plaintiff/Defendants by Counterclaim

SOLICITORS:

Hemming & Hart for the Defendant/Plaintiff by Counterclaim

Cop & Co. for the Plaintiff/Defendants by Counterclaim

REASONS FOR JUDGMENT

  1. [1]
    The defendant, Metroll Queensland Pty Limited (“Metroll”) applies for summary judgment in its favour upon the plaintiff’s claim under Rule 293 of the UCPR and for summary judgment against the plaintiff and Mr Cop on its counterclaim (now set out in a Further Amended Defence and Counterclaim) under Rule 292.
  1. [2]
    The application was filed on 2 August 2001 and accordingly is to be decided under the new form of chapter 9 Part 2 Division 2 of the UCPR which came into effect upon gazettal on 13 July 2001:

‘292  Summary judgment for plaintiff

‘(1) A plaintiff may, at any time after a defendant files a notice of intention to defend, apply to the court under this part for judgment against the defendant.

‘(2) If the court is satisfied that –

  1. (a)
    the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim; and
  1. (b)
    there is no need for a trial of the claim or the part of the claim;

the court may give judgment for the plaintiff against the defendant for all or the part of the plaintiff’s claim and may make any other order the court considers appropriate.

‘293  Summary judgment for defendant

‘(1) A defendant may, at any time after filing a notice of intention to defend, apply to the court under this part for judgment against a plaintiff.

‘(2) If the court is satisfied –

  1. (a)
    the plaintiff has no real prospect of succeeding on all or a part of the plaintiff’s claim; and
  1. (b)
    there is no need for a trial of the claim or the part of the claim;

the court may give judgment for the defendant against the plaintiff for all or the part of the plaintiff’s claim and may make any other order the court considers appropriate.

‘294  Claims not disposed of

‘(1) The making of orders under this part that does not dispose of all claims in issue in a proceeding does not prevent the continuation of any part of the proceeding not disposed of by the orders.

‘(2) A second or later application under this part may be made with the court’s leave.’

  1. [3]
    I accept Mr Skoien’s submission that nothing in these new rules does away with the cautious approach traditionally applied when summary judgment is sought, as confirmed in Fancourt v. Mercantile Credits Ltd (1983) 154 CLR 87, 99. He referred me to Muir J’s statement in relation to the original UCPR in Re Estate of Andrej Urbancic (2000) QSC 170, 9 June 2000 that it must be clear there is no real question to be tried: “the principles expressed in such cases apply to applications under r.293.”
  1. [4]
    The plaintiff’s claim may be seen as a pre-emptive one. It seeks damages to the full extent of the court’s monetary jurisdiction in respect of goods agreed to be supplied by Metroll in or about December last year and then supplied through a three-month period. The plaintiff pleads both implied terms and representations that the goods supplied would be of merchantable quality and fit for the purpose for which they were supplied. The goods, which were roofing materials, are claimed to have been deficient in both respects, with particulars given as follows:

“(a) The colour of the goods faded;

  1. (b)
    There is colour variation between the sheets;
  1. (c)
    The goods rusted;
  1. (d)
    There is too great a variation in thickness within  the sheets;
  1. (e)
    There is too great a variation in thickness between the sheets.”

The plaintiff claims that in supplying goods having those deficiencies, Metroll is in breach of:

  1. (a)
    the Trade Practices Act 1974 (Cth) – Sections 52, 71, 74B and 74D.
  1. (b)
    Section 17 of the Sale of Goods Act 1896;
  1. (c)
    Section 38 of the Fair Trading Act 1989; and
  1. (d)
    The implied terms of the parties’ agreement.
  1. [5]
    The plaintiff’s claims for damages (or compensation) depend on “breach of contract”, s. 82 of the Trade Practices Act, s. 54 of the Sale of Goods Act and s. 99 of the Fair Trading Act; there is also a claim based in negligence (supplementing the particulars already given by assertions of failures to design, manufacture, test, inspect and give the plaintiff warnings of the risk of failure of the goods) – about which little was heard.
  1. [6]
    Metroll ‘s defence is a relatively complex document. It disputes the applicability of various statutory warranties invoked by the plaintiff, and denies breaches of them if they should apply. It asserts the goods “were purchased pursuant to contracts for the sale of specified articles under trade names” (“the plaintiff only dealt with the defendant as a supplier of BHP’s product”); Metroll pleads that the underlying agreement was a written one made in or about April 2000 by it and Mr Cop, whereby it agreed to sell roofing materials on credit to the plaintiff. A signed Credit Account Application is in evidence. I consider there is a triable issue as to whether its terms and those of the annexed standard conditions apply to each of the separate purchases.
  1. [7]
    Metroll’s counterclaim, in respect of which I gave leave to amend an erroneous reference in paragraph 1 to “paragraph 3” of the defence (which should have been to paragraph 2) is for $134,666.13 being the price of the goods supplied under dozens of invoices, plus interest at a contractual rate from 30 January 2001. The invoices are shown by affidavit evidence to run from 22 December 2000 to 15 March 2001. Mr Thomson deposes to orders having been given by the plaintiff over a period running a few days before the start and finish of the invoice dates. He exhibits many written orders.
  1. [8]
    Mr Thomson’s affidavit separates out written purchase orders, “screen enquiries from Metroll’s computer in relation to those orders” and invoices relating to materials supplied for lot 19 Oasis Drive, Clontarf on the one hand, and Kremzow Road, Brendale, on the other. Written purchase orders and invoices in respect of materials supplied to other sites were collected separately. The explanation for this discrimination lies in particulars given by the plaintiff of its loss and damage in its letter of 17 April 2001 in terms of “the need of the plaintiff to replace the defective goods installed at lot 19 Oasis Drive, Clontarf ... and Kremzow Road, Brendale ... the plaintiff will ask the court to assess the exact loss and damage suffered by the plaintiff. The defective goods were delivered to Lot 19 Oasis Drive, Clontarf ... and Kremzow Road, Brendale ...”. This letter is important in confining the plaintiff’s case. It has made no complaint regarding any other goods. Mr Thomson (Metroll’s general manager) says no complaints whatsoever were communicated until the claim and statement of claim (filed 19 March 2001) was served on Metroll.
  1. [9]
    A few days before, an important conversation, from the point of view of whether judgment is available against Mr Cop upon his guarantee, as sought in the counterclaim, occurred between him and Shirley Anstead, then Metroll’s credit manager. She had been pursuing the plaintiff by communications with Kevin Dent from 8 March 2001 seeking payment of its outstanding account. When payments allegedly foreshadowed by Mr Dent did not eventuate and she could not make contact with him, she had the plaintiff’s credit account “placed on hold” and:

“5. On 15 March 2001. I telephoned Mr Cop. I told him that Metroll had been promised money from Assured Roofing for funds that were expected to be received by Assured Roofing on 14 March, 2001 and that I had not been able to contact Mr Dent further regarding this payment. I told Mr Cop that the credit account of Assured Roofing had been placed on hold and that Metroll was insisting that full payment of the account be made. Mr Cop told me that he was expecting to receive further funds today and that he would look into the account of Metroll and telephone me.”

(The plaintiff’s trading name is Assured Roofing.)

  1. [10]
    The following day, according to Ms Anstead, when Mr Cop telephoned:

“I provided to Mr Cop the bank account details of Metroll and he told me that he would have the money deposited directly into the account and would call me after lunch to confirm that this had been done.”

No payment whatever has been forthcoming.

  1. [11]
    Mr Cop’s affidavit is an interesting one, sworn and filed on 13 August 2001:

“1. I am a Director of the Plaintiff and am duly authorised to make this affidavit.

  1. I am the Principal of Cop and Co, Lawyers and have been a Solicitor for 8 years.
  1. I have read the plaintiff’s Claim and Statement of Claim and the Affidavit of Stephen William Reed and, to the best of my knowledge and from an examination of the all the plaintiff records and documents and from conversations with the appropriate person, I verily believe that the contents thereof are true and correct.
  1. On or about 9 March, 2001, Alex Arena and Kevin Leonard Dent were escorted from the plaintiff’s premises.
  1. At the same time, my co-director, Stephen William Reed, informed me that he had inspected the jobs at Brendale and Clontarf. He informed me that he had found evidence that the goods at the jobs were defective.
  1. Bearing that in mind, in any subsequent conversations I had with Metroll, I was very careful not to compromise any Claim the plaintiff had against Metroll.
  1. Further, I was very careful in my conversations with Metroll’s employees not to admit that any debt was owing by the plaintiff to Metroll. This was because the plaintiff needed more time to make investigations as to:-
  1. Whether the goods were actually ordered and delivered to the plaintiff.
  1. Whether the goods were actually ordered personally by Arena and Dent.
  1. The extent to which the plaintiff had suffered loss and damage due to being provided with defective goods by Metroll.
  1. Further, in any conversations I had with Shirley Anstead, Shirley Anstead did not demand from either the plaintiff or myself (personally) any money for any overdue account or otherwise.
  1. I, and the plaintiff, would like the opportunity to present the plaintiff’s Claim and Defence to the Counterclaim at Trial.
  1. The plaintiff’s pleadings, to the extent that they do not reflect the contents of my Affidavit or the Affidavit of Stephen William Reed, will be amended in the near future to reflect the contents of these Affidavits.
  1. To the extent that there is any deficiency in any of the plaintiff’s pleadings, the pleading will amended to remedy any such deficiency.
  1. All the facts and circumstances herein deposed to are within my own knowledge save such as are deposed to from information only and my means of knowledge and sources of information appear on the face of this my Affidavit.”
  1. [12]
    There is an intravening tension within paragraph 7. There are in evidence many written orders on Assured Roofing stationery, and it seems indisputable that the plaintiff has accepted the goods supplied; its claim depends on its now bearing responsibility for deficiencies in them.
  1. [13]
    Although an appearance slip handed up at the hearing showed Cop and Co instructing Mr Skoien, all documents filed in the court for the plaintiff and Mr Cop appear to have been prepared and filed by the plaintiff company, including their joint notice of intention to defend the counterclaim and defence.
  1. [14]
    Mr Arena and Mr Dent have supplied affidavits to Metroll tending to support the defence and counterclaim and confirming that neither of them has received any complaint regarding roofing at 19 Oasis Court Clontarf (they being the persons who would ordinarily hear of any such complaint) prior to termination of their employment with the plaintiff on 12 March 2001. (As to the premises at Kremzow Road, owned by CSR Building Materials (PGH), Mr Sanderson’s affidavit shows that his employer, Roof & Building Service (Qld) Pty Ltd was engaged to do renovations and accepted quotations provided by the plaintiff to supply roofing materials and labour, the only complaints in respect of which related to the labour component and have been attended to by the plaintiff.)
  1. [15]
    The only evidence of anything wrong with roofing materials comes from Mr Reed, who, as a director of the plaintiff, is hardly a disinterested expert. He appears to have taken no interest whatever in the roofing materials used at the two jobs in question until as late as on or about 9 March 2001. He is a registered builder. He says:

“Neither my Co-Director nor I have mentioned any of the defects found by me to the plaintiff’s customers nor the owners of the premises where the jobs were carried out.”

He says that the cost to the plaintiff to complete those jobs was $105,966.72, that the more economical way of proceeding now would be to replace the whole roof at each of the two sites under consideration, which would cost $121,861.72. Mr Reed makes a number of additional points:

  1. The signature reporting to be his on the plaintiff’s credit account application to Metroll dated 13 April 2000 is not his;
  1. Arena and Dent were not employees of the plaintiff and lacked authority to bind it in contract or to order goods from Metroll;
  1. They have misappropriated resources from the plaintiff and defrauded it, these matters having been reported to police;
  1. Arena and Dent are lying, and it is in their interests to see the plaintiff wound up “so that the investigations into (their) criminal actions ... would cease”;
  1. the plaintiff has not received invoices for the goods from Metroll;
  1. “the plaintiff would find it economically erroneous and prejudicial to obtain similar goods from another supplier and replace the goods and then wait a long period of time before extracting payment from Metroll”.
  1. [16]
    As to the last, it was common ground that, subject to a 2.5% retention amount, the plaintiff has been paid in full for all work and materials supplied by it at Oasis Court and Kremzow Road. The plaintiff has thus received every benefit it expected in relation to the impugned (and the other) goods without paying any part of the price. Although Metroll’s standard terms and conditions referred to in the credit account application impugned by Mr Reed contains a reservation of title provision, for all practical purposes, the roofing materials have become part of the realty and can be removed only if the consent of the respective owners is forthcoming.
  1. [17]
    Whether or not Messrs Dent or Arena are correct in swearing that from approximately July 2000, the plaintiff experienced cash flow problems and difficulties in paying creditors in accordance with the terms of their invoices, as amplified in paragraphs 12 and 13 (Dent) and 4 and 5 (Arena) respectively of their affidavits (Mr Reed deposes: “I do not think a true word ever came from the lips of Arena”), the plaintiff’s performance appears to exhibit hallmarks of a debtor unwilling or unable to meet obligations, and casting about for some justification. However, on a summary judgment application, the court is not entitled to proceed on impression. The court can do nothing to assist the present applicant unless satisfied of the conditions listed in paragraphs (a) and (b) in Rule 292 (2) and Rule 293 (2), as the case may be.
  1. [18]
    I accept Mr Lilley’s argument on behalf of Metroll that the plaintiff is unable to show any loss or damage. There is no claim, complaint or dissatisfaction in evidence from anyone other than the plaintiff itself. There is no claim for declaratory relief or anything similar which might protect the plaintiff against future claims. I agree with Mr Lilley that the plaintiff has no prospect of succeeding, as things presently appear, in relation to its claims under the Trade Practices Act or the Fair Trading Act or its claim in negligence. The suffering of loss and damage is an essential element of a claim in negligence, likewise of a claim under s. 82 of the Trade Practices Act or under s. 99 of the Fair Trading Act. As to the claims based on the Acts, the plaintiff faces the additional hurdle of an apparent inability to demonstrate it is a “consumer”, given that it acquired the relevant materials from Metroll for re-supply. See the definition of “consumer” in s. 4B of the Trade Practices Act, which is picked up in sections 71, 74B and 74D. In my opinion there is no need for a trial in respect of those claims, which ought to be removed from the proceeding. I think it would be wrong to achieve that by a judgment in favour of Metroll, which might give an appearance of an adjudication on the merits and unfairly embarrass the plaintiff if, in the future, it faces claims from any building owner or superior contractor. Rule 293(2) appears wide enough to permit the striking out of the parts of its statement of claim now adjudged inappropriate.
  1. [19]
    Mr Lilley’s argument continued that, at best, the plaintiff is left with a claim for breach of contract but can prove no damage. This overlooks the Sale of Goods Act considerations, which, as will be seen, pose a real difficulty for Metroll. Metroll must accept, for purposes of this application, that the contentions of the statement of claim as to merchantability of the goods and fitness for the intended purpose, which Mr Reed deposes to, may be made good.
  1. [20]
    So far as the contract claim is concerned, a plaintiff who fails to establish damages may obtain nominal damages, and perhaps substantial costs. See Hanflex Pty Ltd v N S Hope & Associates (1990) 2 Qd R 218. The plaintiff in Ray Teese Pty Ltd v Syntex Australia Limited (1998) 1 Qd R 104 had less success on costs when it recovered nominal damages of one dollar. In Hanflex nominal damages were fixed at ten dollars. I did not understand Metroll to be inviting the court to award a judgment against it for ten dollars, one dollar or any other sum (which I would think would have to be accompanied by an order for costs in the plaintiff’s favour). The plaintiff wishes to have a trial and an opportunity then to establish damages. It is unattractive to say there is “need” for a trial where the issues may be limited to the amount to be fixed for nominal damages and the incidence of costs. At a trial the evidence may be very different from what has so far been adduced. The Sale of Goods Act aspect, about to be discussed, provides a context in which it would be inappropriate to give any judgment at this stage on the contractual damages claim, or, indeed, to strike out that claim.
  1. [21]
    The Sale of Goods Act 1896 provides as follows:

“Implied conditions as to quality or fitness

  1. Subject to the provisions of this Act and of any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows –
  1. (a)
    when the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description which it is in the course of the seller’s business to supply (whether the seller is the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose;
  1. (b)
    however, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose;
  1. (c)
    when goods are bought by description from a seller who deals in goods of that description (whether the seller is the manufacturer or not) there is an implied condition that the goods shall be of merchantable quality;
  1. (d)
    however, if the buyer has examined the goods, there is no implied condition as regards defects which such examination ought to have revealed;
  1. (e)
    an implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade, if the usage is such as to bind both parties to the contract;
  1. (f)
    an express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith.

Remedy for breach of warranty

54.(1) When there is a breach of warranty by the seller, or when the buyer elects, or is compelled, to treat a breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but the buyer may –

  1. (a)
    set up against the seller the breach of warranty in diminution or extinction of the price; or
  2. (b)
    maintain an action against the seller for damages for the breach of warranty.
  1. (2)
    The measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty.
  1. (3)
    In the case of breach of warranty of quality such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value which they would have had if they had answered to the warranty.
  1. (4)
    The fact that the buyer has set up the breach of warranty in diminution or extinction of the prices does not prevent the buyer from maintaining an action for the same breach of warranty if the buyer has suffered further damage.”
  1. [22]
    Metroll’s pleaded case is that paragraphs (b) and (d) of s. 17 apply, but on this application, it must be taken that the plaintiff is able to establish the application of paragraphs (a) and (c). Section 54 (1) is plainly applicable, given the impracticality of the goods being returned to Metroll. The judgments in Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd (1968) 121 CLR 584 provide useful explication of s. 54 (1). See 593 ff (per Barwick CJ and Menzies J), 601 ff (Kitto J), 610 ff (Windeyer J) and 625 ff (Owen J). The section offers the buyer (here, the plaintiff) but not the seller, an election. In that unusual case from New South Wales, which was to do with sale of goods by a “floor plan”, the warranty in issue was that of quiet possession (see s. 15 (2) of the Queensland Act); a majority of the High Court considered this brought in s. 54(1). The seller had seized the goods from the buyer within the period allowed for payment and never received or claimed payment for them. The buyer sued for damages for breach of warranty.
  1. [23]
    For present purposes, the most pertinent judgments in Healing are those of Kitto J and Owen J, who with Windeyer J constitute the majority of the court. Kitto J said at 601-603:

“What s. 54 (1) does (in its application to a breach of a warranty of quiet possession) is to give the buyer an option either to maintain an action against the seller for (and therefore to recover in full) the damages caused to him by the breach or to wait until he is sued for the price and then to set up the breach of warranty in diminution or extinction of the price. If he elects to sue the seller for damages, as he may do either in a separate action or by way of cross action when sued for the price, his damages must be measured by the loss directly and naturally resulting in the ordinary course of events from the breach; for s. 54 (2) so provides. There is nothing in the Act to entitle the seller to set up the price in diminution or extinction of the damages. By allowing the buyer, if he chooses, to defend an action for the price of proving how much less the goods were worth to him by reason of the plaintiff’s breach of warranty and to have the verdict lessened on that account, s. 54 (1) merely allows a procedural concession, and one which, as the leading case of Mondel v. Steel (1) clearly shows, the law has come to concede for the sake of convenience. That the breach of warranty does not itself work a reduction or extinguishment of the buyer’s liability for the price is necessarily involved in the proposition which s. 54 (1) establishes – indeed takes as its basic assumption –that if the buyer prefers to sue on the cause of action for breach of warranty and recover the full amount of his loss he is fee to do so: Davis v. Hedges (2); Bow, McLauchlan & Co.Ltd. v. The “Camosun” (3).

...

That is what the buyer in the present case did choose to do. It chose a course which exhausted its option, in the sense that if it recovers a verdict for compensatory damages its cause of action for the breach of warranty will be exhausted and its damages will no longer be capable of being set up against the defendant in diminution or extinction of the price. But the decision of the learned trial judge meant that the plaintiff was not at liberty to exercise its option in this way. It was refused a verdict for compensatory damages and was left with no right to recover its damages save by setting them up in diminution or extinction of the price if and when the defendant should sue for it. This seems to be completely inconsistent with s. 54 and unsustainable.

...

The Plaintiff owed the price before the conversion and owed it no less thereafter. Even if the defendant had sued for the price and the plaintiff had elected to set up the breach of the covenant for quiet possession the set-off would have been the act of the Court, done upon the footing that the whole price was owing. The expression in s. 54, “in diminution or extinction of the price”, means only, of course, “so as to reduce the verdict for the price either to a lower figure or to nil”. The point is that not until the moment of verdict in the action for the price would there have been an diminution or extinction. The act of conversion did not itself diminish or extinguish the price.”

  1. [24]
    Owen J said at 625-7:

“ It was not suggested by either party that the defendant’s tortious acts had operated to put an end to the contracts of sale and it was rightly conceded by the defendant that if the plaintiff, notwithstanding the seizure and conversion of its goods, remained liable to pay the defendant the price for them, their value could be recovered by way of damages. For the defendant however, it was submitted that notwithstanding the fact that the contracts remained on foot, the effect of ss. 17(2) and 54(1) of the Sale of Goods Act was, in the circumstances of the case, to extinguish the price payable by the plaintiff for the goods since it was agreed that the amount of the price was equivalent to the value of the goods by sway of damages.

...

By s. 54(4), the fact that the buyer has set up the breach of warranty in diminution or extinction of the price does not prevent him from maintaining an action for the same breach of warranty if he has suffered damage in excess of the amount of that price.

...

I have no doubt, therefore, that the defendant by its wrongful seizure and disposal of the plaintiff’s goods committed breaches of the warranties of quiet possession implied by s. 17(2) in the contracts of sale.

The next step then must be to examine the terms of s. 54(1) and apply them to the facts of this case. The subsection, as it seems to me, clearly provides that if the seller of goods commits a breach of his warranty of quiet possession, the buyer has an option to take one or other of two alternative courses. On the one hand, he may, if sued for the price, set up against the seller the breach of warranty in diminution or extinction of that price and, if the damage resulting from the breach of warranty exceeds the amount of the price, he may maintain an action to recover the amount of that excess by way of damages. On the other hand, he may take the alternative course for which s. 54(1) (b) provides and sue for damages for the breach of warranty. If he adopts the second of these alternatives, he will recover whatever damage he has suffered and will remain liable for the price but, except to the extent which s. 54(4) allows, he cannot pursue both the remedies for which the section provides. They are, as the learned editor of Benjamin on Sale, 8th ed. (1950), said, at p. 991, “not cumulative but alternative”.

The position in this case is a somewhat curious one. It is the buyer, the plaintiff, which is claiming that it is still liable to pay the price and that it is for that reason entitled to recover the value of the goods as part of its damages, and it is the seller, the defendant, which is insisting that it would be unable to recover the price if it brought  an action against the plaintiff for it. In the events that have happened I am of opinion that the plaintiff’s contention must succeed. The defendant’s seizure and conversion of the plaintiff’s goods was a breach of the warranty for a quiet enjoyment. The plaintiff thereupon became entitled to sue in conversion or, if it had thought fit, it could have framed its action in contract and sued to recover damages for breach of warranty. It chose to sue in conversion but it could not, of course, by suing in tort recover more by way of compensatory damages than could have been recovered had it sued for breach of contract. In each case those damages would be measured by the extent of its loss. The plaintiff here took what is, in substance, the course for which s. 54(1)(b) provides and, having done so, it remains liable to pay the price. It is therefore entitled to recover in the present action compensatory damages representing the value of the goods. If at some future time the defendant sues it for the price, the plaintiff will not, by virtue of s. 54(1)(a), be entitled to set up in diminution or extinction of that price the damages it recovers in this action. Whether it would be able to plead by way of set off to an action for the price that it had recovered judgment in the present action against the defendant, which judgment had not been satisfied, is not a matter which arises here and I express no opinion on the point.”

  1. [25]
    A question arises whether the plaintiff, by being the first party to court and suing for damages far exceeding the purchase price has exhausted its right of election in s. 54(1) and thus left itself without a defence to Metroll’s counterclaim for the price. The concluding portion in each of the judgments quoted indicates to me that the buyer’s ability to insist on diminution or extinction of the price may continue until the matter of payment or discharge of the payment obligation is finally determined: clearly, it is not exhausted simply because the plaintiff begins a damages claim. In Healing at 593 Barwick CJ and Menzies J said:

“the statutory provision does ... afford the buyer protection against the seller in an action for the price even to the point of its extinction where the damages recoverable for breach of warranty equal or exceed the price. Not, of course, by an automatic extinguishment of the liability to pay the price but by the provision of the means whereby the buyer can ensure that the vendor does not recover the price where the damages for the breach of warranty exceed or equal the price.”

  1. [26]
    Here, the plaintiff asserts breaches of warranty. Its claims cannot be characterised as inarguable. They are not yet ready for trial, but there is a “need” within the meaning of the UCPR for a trial. This conclusion has twin consequences: Metroll has failed to establish it ought to have judgment against the plaintiff on the plaintiff’s claim under Rule 293 – and there is an insuperable barrier against Metroll’s obtaining judgment for the price under Rule 293 while the plaintiff’s claim remains unresolved.
  1. [27]
    It does not follow that Metroll is entitled to no relief under Rule 293 in the special circumstances of this case. Although Mr Skoein made a concession at the court’s invitation during the argument that, subject to arithmetical errors, the plaintiff raised no issue regarding the quantum of the counterclaim, Mr Lilley at another stage recalled a case he had argued before me in which there had been reference to s. 54(1). My associate’s researches quickly identified this matter as Wagners Concrete v De Martin & Gasparini Pty Ltd, 3239 of 1997 7 October 1997. Copies of the State Reporting Bureau transcript of my reasons were obtained and distributed, but there was no opportunity for leisurely consideration of them.
  1. [28]
    My inclination is to proceed in this matter in accordance with Wagners Concrete. Just as this matter concerns numerous separate supplies of goods, it concerned multiple supplies of ready mixed concrete to a number of different sites. Mr Lilley’s client which was the plaintiff conceded that some of its deliveries failed to meet relevant contract specifications, but it disputed the quantum of the defendant’s claim for the cost of rectifying its work; it offered (and the court accepted) a banker’s guarantee by way of security for the defendant’s counterclaim in the sum of $150,000, as a condition of obtaining summary judgment for the price of the concrete whose quality had not been questioned. After a reference to Healing, the reasons in Wagners Concrete went on:

“It becomes important to identify the particulars of the contract or price which is in issue. My own view is that in the present circumstances, notwithstanding the overriding “contract” for supply at fixed prices to the project, there arose a series of separate transactions or “contracts”, as the defendant required deliveries of concrete of particular descriptions in particular quantities for purposes of the project. It seems to be common ground that the plaintiff makes no claim in this action for the price of the deliveries of 12 April 1996. I am unable to accept that claims such as the performance back-charges, or the claim for failure to coordinate vehicles on site, and problems with the slump tests possibly not having been done, amount to set-offs under section 54(1) or under the general law. It is my opinion the plaintiff ought not to have to wait until the defendant’s position is clarified.

...

(Reference was then made to the offer of security.)

Mr Lilley was unable to draw my attention to any other case in which a Judge had been persuaded to grant summary judgment on such a basis. I am able see the attraction of it. The sum is not adequate to cover the full claims of the defendant. Those are escalating in a rather alarming way. Ninety-five thousand dollars remaining of exhibit G has been doubled, thanks to the addition of claims sworn to by Mr Macchion. Those claims in particular are for the most part speculative and not established or even asserted with the degree of particularity which I think is requisite in defence of an application like this. I am not persuaded that the defendant has shown any claim to a set-off in the sense of something arising out of any particular one of the discrete claims which go to make up the plaintiff’s claim.

...

The matter has been conducted in such a way that there was no descent into the detail which might have linked some part of the “performance back-charges” to any particular invoice amount included in the charge. The figures are such that I would think that aspect de minimis, in any event. The defendant is in the position of asserting a counterclaim, more or less credible in different aspects; the $26,594.47 seems clear, it also seems likely that some part of the $95,000 remaining balance of exhibit G will be established, and other items may be as swell. Traditionally the Courts have approached such a situation on the basis that the defendant shouldn’t have to pay the plaintiff until its own claims are worked out. I suppose underlying that is a concern of the Court that money paid to the plaintiff may be lost forever. The present case is very different from that. It is not suggested that either side is impecunious. The banker’s guarantee arrangement suggested by Mr Lilley would cover the bulk of the defendant’s claims, although not all of what seemed to me somewhat overblown claims in total. The defendant shows that it is out of pocket by reason of matters that might be sheeted home to the plaintiff, only to a limited extent. In my opinion arguments could be made both ways in respect to items such as the “overheads” and management and administration expenses.

...

The result is that the application is successful, but not to the extent that the $26,594.47 is included. The judgment which the plaintiff will be granted liberty to enter will be stayed until the provision by the plaintiff, in a form satisfactory to the Court such that it will remain in control of it, of a banker’s guarantee.”

  1. [29]
    The point is that a set-off against price, statutory or otherwise, was allowed on a “separate contract by separate contract” basis, and unavailable to the defendant there in respect of the prices payable for goods the subject of a particular contract where no claim of breach of warranty or condition was made. In my view, a just outcome here calls for the same approach. If the plaintiff’s pleading in paragraph 2 in referring to an oral agreement of December 2000 in respect of all of the goods is intended to set up a single agreement, which is contrary to Metroll’s pleading, I would unhesitatingly reject the plaintiff’s version. There is no evidence whatever to support it and a wealth of evidence of independent orders (which may well have been placed against the background of some overall arrangement – I would think more likely the one asserted by Metroll).
  1. [30]
    This does not appear to me to be a case for any kind of stay or security arrangement. It was incontrovertible in Wagners Concrete that the buyer had a good claim to some extent. What the present plaintiff puts up, at this stage, is much more shadowy.
  1. [31]
    I accept that my approach, which appears to entitle Metroll to judgment against the plaintiff on the counterclaim to the extent of the aggregate of prices of goods supplied to sites other than Oasis Court and Kremzow Road, involves a departure from the basis on which the hearing of the application took place. I have already requested Counsel to supply details of what they claim is the aggregate of the Oasis Court and Kremzow Road invoices, and I will hear them on any issues which these reasons might have generated. It may be that Metroll prefers to go to trial on the whole of its claim rather than obtain a partial judgment, for example.
  1. [32]
    The remaining issue is whether Metroll is entitled to any judgment against Mr Cop, as the second defendant by counterclaim and sued upon a guarantee.
  1. [33]
    Mr Cop in his pleading says:-

“The second defendant by counterclaim asserts:-

  1. a.
    The second defendant by counterclaim did not enter into any agreement with the plaintiff by counterclaim.
  1. b.
    Further or in the alternative, it was a condition precedent or it was otherwise a requirement that, before any agreement form between the second defendant by counterclaim and the plaintiff by counterclaim, both the directors of the first defendant by counterclaim:-
  1. I.
    Be a party to such an agreement;
  1. II.
    Be a party to such an agreement;
  1. III.
    Be bound by such an agreement.
  1. c.
    The director of the first defendant by counterclaim, Stephen William Reed, did not:-
  1. I.
    Enter into any agreement with the plaintiff by counterclaim;
  1. II.
    Sign any documentation formalising or evidencing such an agreement; and/or,
  1. III.
    Become bound by such an agreement.
  1. d.
    Further, or in the alternative, if the second defendant by counterclaim and the plaintiff by counterclaim did seek to enter into an agreement (which is denied), an agreement did not and could not form between the second defendant by counterclaim and the plaintiff by counterclaim as there was not any consideration moving from either of those parties.
  1. e.
    Further, or in the alternative, if the second defendant did enter into an agreement with the plaintiff by counterclaim (which is denied), then such an agreement is void or voidable or otherwise unenforceable as the second defendant by counterclaim did not sign any necessary note or memorandum or any other document as required by section 56 of the Property Law Act, 1974 (Qld).
  1. f.
    Further, or in the alternative, if the second defendant did enter into an agreement with the plaintiff by counterclaim (which is denied), the plaintiff by counterclaim did not make any demand on the second defendant by counterclaim. Accordingly, the plaintiff by counterclaim’s Counterclaim is unenforceable or otherwise not maintainable.”
  1. [34]
    Paragraphs b. and c. above clearly have a potential to demonstrate a “triable issue”, but no evidence was forthcoming from Mr Cop in support. Submissions were made regarding paragraph f., which is important because the document sued upon obliges the guarantors to pay to Metroll “on demand” all monies then owing by the “Customer”. Thus, a demand independent of the institution of proceedings must be established because “no cause of action arises until the demand is made.” See O'Donovan & Phillips, the Modern Contract of Guarantee (3rd) 487 – a demand is “a prerequisite to the bringing of an action to recover the debt.”  The demand relied on here is said to have been made by Miss Anstead in her telephone conversation with Mr Cop on 15 March 2001. Mr Lilley asserted, without any supporting authority, that a demand could be made orally. While that may be so in principle, the assumption generally seems to be that a demand on a guarantor will be in writing: ibid 490ff; the Laws of Australia (LBC) 8.6.143. In practical terms, the making (and terms) of a demand will be more clearly established if there is a document.
  1. [35]
    The factor which makes it clear to me that Mr Cop should not be held liable to judgment upon the guarantee at this stage is that, in the state of the evidence, I am quite unsatisfied on the balance of probabilities that the conversation between Miss Anstead and Mr Cop related to him as a guarantor, rather than as a representative of the plaintiff company. While the drawing of distinctions between an individual’s capacities may be silly in some circumstances, in the context of guarantees sought to be taken from or enforced against company directors, the cases show the distinctions may be crucial. This may be so where there is any question about the significance of the director’s signature on the instrument of guarantee (see National Commercial Banking Corp of Australia v. Cheung (1983) 1 ACLC 1,326) and at the stage of the making of a necessary demand. Both O'Donovan and Phillips and Laws of Australia cite Canadian Petrofina Ltd v. Motormart Ltd (1969) 7 DLR (3rd) 330. In the leading judgment, Campbell CJ. said at 335:-

“The appeal of the Clark brothers from the judgment recovered against them as guarantors is on a slightly different basis. Neither in the pleadings nor in the evidence is there an indication that any demand was ever made upon them to honour their undertaking as guarantors. All communications which they received were sent to them (so far as the evidence indicates) as officials and representatives of the principal debtor Motormart Ltd. On the hearing of the appeal, counsel for the respondent requested permission to tender evidence showing that a demand has been made on the guarantors. As such evidence, if it existed, would obviously have been available at the trial, a Court of Appeal could not properly receive it, and the request was therefore refused. The pleadings and evidence being silent as to the making of demand on the sureties, the question arises, on which party lies the onus of alleging and proving demand, or absence of demand, as the case may be?”

and at 337:-

“There can be no question that the Clark brothers had actual notice of their company’s default. But all notices and demands had been addressed to them as officers of the company, and none to them as guarantors is in evidence. The terms of the guarantee imply that they were to have such notice or demand as guarantors, and the authorities make it clear that their collateral liability does not arise until the giving of such notice and demand on them as guarantors. The onus is on the plaintiff to allege and prove the notice or demand.

…..

The Clark appellants should succeed in their appeal against liability as guarantors…”

  1. [36]
    Metroll’s application for judgment against Mr Cop under rule 293 fails. As at present advised, I hold its application under that rule against the plaintiff succeeds to the extent indicated above and to the extent of interest at the contract rate on judgment amount, as to which I would appreciate having the parties’ calculations.
  1. [37]
    As to Metroll’s application under rule 292, although discussion occurred of the possibility of including in any judgment it might obtain on the Trade Practices Act, Fair Trading Act and negligence claims, a reservation of the plaintiff’s entitlement to pursue such claims should completed causes of action arise, and although Mr Lilley offered undertakings from Metroll not to plead any estoppel from any such judgment in its favour now or in the future, it occurs to me it may be preferable to avoid complications along those lines by acting under rule 171(1) to strike out parts of the statement of claim. The closing words of rule 293(2) invite such a course. The parties are invited to make submissions.
  1. [38]
    This is a matter which, in my opinion, ought not be allowed to drag on. Metroll’s invoices have been outstanding for a long time now, and the sooner it is determined whether or not there is justification for withholding payment, the better. The issues do not appear complex. I would be inclined to treat favourably an application by any party for a “speedy trial”.
  1. [39]
    Metroll’s evidence included some to show that if the goods were defective BHP would save the plaintiff harmless under its product warranty. This was doubtless intended to demonstrate that the plaintiff not only had suffered no loss or damage to date, but faced none in the future. At a trial such considerations may be more potent, but (without casting any aspersions against that particular manufacturer) on a summary judgment application, I consider there is insufficient certainty about them.
Close

Editorial Notes

  • Published Case Name:

    Brisbane Quality Roofing Pty Ltd v Metroll Queensland Pty Limited

  • Shortened Case Name:

    Brisbane Quality Roofing Pty Ltd v Metroll Queensland Pty Limited

  • MNC:

    [2001] QDC 186

  • Court:

    QDC

  • Judge(s):

    Robin DCJ

  • Date:

    23 Aug 2001

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Canadian Petrofina Ltd v Motormart Ltd (1969) 7 DLR (3rd) 330
2 citations
Jump To
Cite 1 - (1969) 7 DLR (3rd) 330
Cite 2 - (1969) 7 DLR (3rd) 330
Estate of Andrej Urbancic [2000] QSC 170
1 citation
Jump To
Cite 1 - [2000] QSC 170
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
1 citation
Jump To
Cite 1 - (1983) 154 CLR 87
Hanflex Pty Ltd v NS Hope & Associates[1990] 2 Qd R 218; [1989] QSCFC 51
1 citation
Jump To
Cite 1 - [1990] 2 Qd R 218
Healing (Sales) Pty Ltd v Inglis Electric Pty Ltd (1968) 121 CLR 584
4 citations
Jump To
Cite 1 - (1968) 121 CLR 584
Cite 2 - (1968) 121 CLR 584
Cite 3 - (1968) 121 CLR 584
Cite 4 - (1968) 121 CLR 584
National Commercial Banking Corporation of Australia Ltd. v Cheung & Anor. (1983) 1 ACLC 1,326
1 citation
Jump To
Cite 1 - (1983) 1 ACLC 1,326
Syntex Australia Limited v Ray Teese Pty Limited[1998] 1 Qd R 104; [1996] QCA 259
1 citation
Jump To
Cite 1 - [1998] 1 Qd R 104
Wagners Concrete Pty Ltd v De Martin & Gasparini Pty Ltd [1997] QDC 291
1 citation
Jump To
Cite 1 - [1997] QDC 291

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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