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- Smart Market Pty Ltd v Norman Enterprises (NS) Pty Ltd[2014] QDC 8
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Smart Market Pty Ltd v Norman Enterprises (NS) Pty Ltd[2014] QDC 8
Smart Market Pty Ltd v Norman Enterprises (NS) Pty Ltd[2014] QDC 8
DISTRICT COURT OF QUEENSLAND
CITATION: | Smart Market P/L t/as Smart Market Communications v Norman Enterprises (NS) P/L t/as Leimo Australia & New Zealand & Anor [2014] QDC 8 |
PARTIES: | SMART MARKET PTY LTD TRADING AS SMART MARKET COMMUNICATIONS v NORMAN ENTERPRISES (NS) PTY LTD TRADING AS LEIMO AUSTRALIA & NEW ZEALAND and BRADLEY PAUL NORMAN |
FILE NO: | 951/13 |
DIVISION: | Civil |
PROCEEDING: | Application for Summary Judgment |
ORIGINATING COURT: | Brisbane |
DELIVERED ON: | 30 January 2014 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 21 November 2013 |
JUDGE: | Butler SC, DCJ |
ORDER: |
|
CATCHWORDS: | CIVIL – APPLICATION – APPLICATION FOR SUMMARY JUDGMENT – APPLICATION FOR ADJOURNMENT – APPLICATION TO FILE AMENDED DEFENCE AND COUNTERCLAIM – COSTS APPLICATION – CONTRACT – where contract was for the provision of services – where plaintiff arranged advertising for first and second defendant – where advertising did not increase sales – if plaintiff liable. |
COUNSEL: | No legal representation for first and second defendants. A Stanton, a solicitor, for the plaintiff. |
SOLICITORS: | No legal representation for first and second defendants. SK Lawyers for the plaintiff. |
- [1]This is an application for summary judgment pursuant to r 292 of the Uniform Civil Procedure Rules 1999 (Qld) (the “UCPR”). The plaintiff seeks judgment against the first and second defendants on the grounds that they are liable for services provided under a 30 day credit agreement and guarantee respectively.
- [2]An amended statement of claim was filed on 21 March 2013 and the defendants filed a defence on 7 June 2013. The defendants now seek leave to amend their defence and to plead a counterclaim.
Application for adjournment
- [3]The second defendant, Mr Norman, is currently residing in the Philippines and was heard on this application by telephone. He was appearing on his own behalf and on behalf of the first defendant, a company of which he is a director.
- [4]The second defendant applied for adjournment of the hearing of the application for 30 days. An adjournment for that length would have coincided with the Christmas vacation of the court, meaning the matter would not be able to be heard until the New Year. The second defendant’s request for an adjournment was first communicated to the court by email on 19 November 2013.
- [5]The plaintiff opposed the adjournment application.
- [6]I heard submissions from the second defendant, Mr Norman, and counsel for the plaintiff. Mr Norman speaking by telephone strongly urged that he wished to address the court in person, saying that he could explain his case more persuasively face to face. He outlined at some length the submissions he wished to make.
- [7]After hearing the argument I refused the application for an adjournment and proceeded to hear the application for summary judgment. In refusing adjournment I had regard to the undoubted impediment suffered by Mr Norman due to his wife having recently given birth and the recent typhoon and earthquake in the region where he resides in the Philippines. However, Mr Norman has been able to forward and receive documentation by email and was able to participate in the hearing by telephone. I also had regard to whether there was any prospect of the defendants being in any better position to advance their case in a month or two. The defendants had received three earlier adjournments and had failed to comply with court imposed time limits in the past.
Summary judgment application
- [8]Under s 292(2) of the UCPR the court must be satisfied before granting summary judgment that the defendants have no real prospect of successfully defending the claim and there is no need for a trial of the claim. The plaintiff bears the onus of establishing each of those limbs of the test.[1]
- [9]The test is to be applied in accordance with the language of the statute. It has been held in relation to the similar section 293 that the words “no real prospect of succeeding” require the court “to see whether there is a realistic as opposed to a fanciful prospect of success”.[2]
- [10]While the overall burden of proof remains with the plaintiff throughout and a defendant does not need to show a complete defence, once a prima facie case has been made out entitling the plaintiff to judgment the evidentiary onus shifts to the defendant.[3]A defendant must satisfy the court there is a reasonable ground for saying there is no amount due and owing and “at least show something more than a colourable basis, and more than mere assertion of a legal consequence.”[4]
- [11]Even so, the court must approach its task keeping in mind that the interest of justice usually require the issues to be investigated at a trial. Members of the High Court in Fancourt v Mercantile Credits expressed the principle as follows:
“The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear there is no real question to be tried.”[5]
Background
- [12]The plaintiff company provides media services for advising on and arranging the placement of television advertising with television broadcasters.
- [13]The plaintiff alleges it entered into a written agreement with the first defendant for the supply of “media placement services”. The agreement purports to be signed on 3 May 2012 by Brad Norman on behalf of the first defendant, Norman Enterprises Pty Ltd as applicant for a “thirty (30) credit account” with Smart Market Pty Ltd. The applicant for the credit account agreed to observe and be bound by the terms and conditions.
- [14]The terms and conditions, insofar as is relevant, are as follows:
“Smart Market Pty Ltd (ABN 5309 7583161) will provide services (principally Advertising) to the Applicant in accordance with the terms and conditions contained herein.
APPLICATION FOR A THIRTY (30) DAY CREDIT ACCOUNT
1.1 Smart Market Pty Ltd will at its discretion provide to the Applicant a Thirty (30) day credit facility to pay Smart Market Pty Ltd for services rendered.
1.2 Any credit facilities granted by Smart Market Pty Ltd can be terminated forthwith at the option of Smart Market Pty Ltd at which time all moneys due and owing for such Advertising Services will become payable.
…
FEES AND SERVICES
3.1 Smart Market Pty Ltd will provide services to The Applicant including Media Planning, Media Buying, Media Reconciliation and Audience Analysis. It is agreed between the parties that all fees for the above services are included in the media costs provided by Smart Market Pty Ltd.
3.2 Smart Market Pty Ltd will provide schedules for approval prior to execution OR book media to approved budgets as agreed between Smart Market Pty Ltd and The Applicant.
3.3 All other services including Creative Concepts, Copywriting, Production of Advertising Materials, Approvals Processing, Traffic/Distribution of Dubs, plus Standard Reporting of Results (Smart Navigator) and any enhanced/non standard results reporting will be pre quoted and agreed between the parties prior to work undertaken.
3.4 After receipt of the media costs from Smart Market Pty Ltd the Applicant must immediately notify Smart Market Pty Ltd should it dispute the quantum of media costs and a failure to do so within Two (2) working days of receipt shall constitute acceptance by the Applicant of the media costs so specified.
PAYMENT
- The Applicant must pay its account in full before the expiration of thirty (30) days after the issue date of the invoice which is issued at the end of the media calendar month.
4.1 Production fees for major items including but not limited to Campaign Concept, Research, TV and Website creation are invoiced on the basis of 50% upfront and remainder on completion of approved jobs. Any variance to this standard practice is to be agreed between the Applicant and Smart Market Pty Ltd.
4.2 Smart Market reserves the right to charge interest on any monies that are owed past the due date at the rate of 2% per month.
DELETE & CHARGE
5.1 If booked media activity has to be cancelled after any media prescribed cancellation deadline a Delete and Charge event may occur. In the event of delete & charge, Smart Market Pty Ltd will invoice the Applicant the full amount of the cancelled media and maintain a credit with the media to be used by the applicant within a limited time.
5.2 Smart Market reserves the right to charge an administration fee to monitor and rebook any Delete & Charge activity.
DEFAULT
- If the Applicant fails to pay any moneys due to Smart Market Pty Ltd or if the Applicant fails to observe or perform any of its obligations under these terms and conditions or if the Applicant breaches the terms and conditions of any other agreement it has with Smart Market Pty Ltd at any time, or if the Applicant commits any act of bankruptcy or insolvency or ceases or threatens to cease carrying on the Applicant’s business, then Smart Market Pty Ltd may in addition to any other rights or remedies it may have:
6.1 require immediate payment of all moneys owing by the applicant to Smart Market Pty Ltd on any account;
6.2 forthwith suspend or cancel at its option the Applicant’s credit account;
6.3 require cash pre-payment before the completion of any further work from the Applicant
6.4 recover from the Applicant all costs relating to any action taken to recover monies from the Applicant. Such costs will include any mercantile agent’s costs relating to any legal costs and disbursements on a solicitor/client basis; and
6.5 cease any further work on behalf of the applicant and terminate any agreement in relation to work not yet completed without incurring any liability thereof.
…
WARRANTY
- Smart Market Pty Ltd shall not, under any circumstances, be liable for any indirect, Incidental, special or Consequential damages (including but not limited to, loss of profit, revenue or business) in any way related to the services provided.“
- [15]The amended statement of claim pleads the agreement in the following terms:
“5. The salient terms of the Agreement are:
- (a)The Plaintiff will provide the Services and the First Defendant was to pay for those services;
- (b)Payment for the services must be made before the expiration of 30 days after the issue date of the invoice which is issued at the end of the media calendar month;
- (c)The Plaintiff may charge interest at 2% per month on any monies owed past the due date; and
- (d)Any costs incurred as a result of the default of the First Defendant will be paid on a solicitor/client basis.
- [16]It is also alleged that on the same date the second defendant entered into and signed a guarantee in writing. The guarantee relevantly reads as follows:
“TO: SMART MARKET PTY LTD (ABN 5309 7583 161)
In consideration of you granting credit to the Applicant referred to above at my/our request, I/we unconditionally personally guarantee the due and punctual payment of all accounts or indebtedness owed from time to time by the Applicant to you or (“Money”) AND AGREE that –
- Any money due under this Guarantee will be payable immediately on written demand signed by any Director or Secretary of Smart Market Pty Ltd or any person properly authorised by Smart Market Pty Ltd.
- You will be entitled to act as if the guarantors below are the principal debtor and each guarantor waives all rights as a surety which may at any time be inconsistent with this obligation.
- This Guarantee is continuing and irrevocable and unlimited in amount.
- The Guarantee remains in force notwithstanding that any marketable security or negotiable instrument in your favour in full or part satisfaction of the Money might still be outstanding in circulation at the time.
- The Guarantee will not be affected by time or other indulgence which may be given by you from time to time.
- Where there is more than one guarantor, each of us is bound jointly and severally and that you are not obliged to make a claim against all the guarantors.
- This Guarantee is not affected by any change in constitution of the Applicant, or by the liquidation, reconstruction, bankruptcy, or the appointment of receiver or administrator affecting any guarantor, or the release or discharge of any guarantor, or the failure by any other intended guarantor to become bound.
- [17]The amended statement of claim pleads the guarantee in the following terms:
“7. The salient terms of the Guarantee are:
- (a)The Guarantee is unconditional and guarantees payment of all money owing by the First Defendant;
- (b)The second Defendant, as guarantor, is treated as a principal debtor; and
- (c)The Guarantee is continuing and unlimited in amount.
- [18]It is alleged that in the period September 2012 to January 2013 the plaintiff at the request of the first defendant supplied services. The evidence identifies two aspects of the services provided. The first involved the plaintiff booking television advertising with broadcasters in accordance with an agreed schedule and invoicing the first defendant monthly. The second aspect involved analysis of the performance of the television commercials using a Smart Navigator data analysis tool. A $2,500.00 fee for this analysis was separately invoiced each month.
- [19]It appears from the invoices exhibited that an overwhelming proportion of the monthly costs related to the placing of television advertising. It is obvious that the plaintiff would have incurred substantial financial obligations to the broadcasting companies who put the respondent’s advertising to air. The plaintiff alleges that the sum invoiced totalled $173,302.80 and the defendant made a number of small partial payments in the amount of $5,000.00 leaving an amount outstanding of $168,302.80.
- [20]The defendants filed a notice of intention to defend and a defence on 7 June 2013 and filed a supporting affidavit on 7 November 2013. The defendants admitted entering into the written agreement and admitted the terms of the agreement pleaded in the amended statement of claim.
- [21]It was further admitted that the second defendant entered into the guarantee as pleaded “subject to the terms of the Agreement”. The second defendants denied the guarantee was unconditional and pleaded it was conditional upon the plaintiff complying with the terms of the agreement.
- [22]It was also admitted that the plaintiff provided services but the defendants denied those services were provided in accordance with the terms of the Agreement.
- [23]Failure to pay the amount demanded in full was admitted but default was denied on the basis that the plaintiff had not complied with the terms of the agreement.
Application to file amended defence and counterclaim
- [24]On 20 November 2013 Mr Norman forwarded to the court by email an amended defence and counterclaim.
- [25]The plaintiff opposes the application to file an amended defence as it is submitted it fails to comply with the requirements of r 382 of the UCPR and purports to withdraw admissions.
- [26]The amended defence does not sufficiently identify the amendments in accordance with r 382. However the primary variations from the original pleading are to clarify how the plaintiff’s “work” is said to be deficient and to seek to withdraw the admission that the services were provided and to substitute an allegation that the plaintiff failed to supply services.
- [27]The defendants allege:
“Moreover, the plaintiff made representations and assurances to the defendants regarding its skill and the positive results it would produce to increase the sales and advertising multiplier of the defendant in a more cost efficient manner. Such representations and assurances served as the primary consideration and purpose for the first and second defendants to enter into the agreement. The ‘services’ referred to thus contemplate the production by the plaintiff of the defendant’s desired results.”[6]
- [28]The defendants also seek leave to file a counterclaim. This is objected to by the plaintiff on the basis it fails to disclose a cause of action.
- [29]Paragraph 8 of the defendant’s pleadings in support of the counterclaim state:
“The plaintiff made misrepresentations of false assurances to the defendant regarding its expertise and ability to bring about the desired results. Consequently, the plaintiff’s gross inability to provide these results amounted to a breach of the contract.”
Consideration
- [30]It emerges from these pleadings and the submissions of Mr Norman that the defendants alleged they acted upon misrepresentations from the plaintiffs in entering into the contract and guarantee. There are also allegations of continued false assurances made after the signing of the contract. It is said that failure of the first defendant to achieve the expected sales improvement and the occurrence of a slump in sales, evidenced a breach of contract.
- [31]It is difficult to identify the legal bases upon which the defendants rely to found their defence and counterclaim. Given that the defendants are currently not legally represented (although they were at the time the original defence was filed) and mindful of the care that needs to be taken before summary judgment is entered, I will now endeavour to identify possible legal bases for the defendants’ claims.
- [32]Central to the defendants argument is an allegation that statements made by the plaintiff’s representatives amounted to misrepresentation. Possible legal consequences of the alleged statements are:
- (a)The statements may form an implied term of the contract;
- (b)The statements may give rise to a collateral contract;
- (c)The statements may constitute misleading or deceptive conduct under the Trade Practices Act 1974 or State legislation;
- (d)The statements may be mere puffery falling short of a statement of fact that can constitute a misrepresentation.
- [33]The alleged misrepresentation is set out in the affidavit of Bradley Paul Norman filed on 7 November 2013:
“8. Nick Allen told me: ‘With our advanced and intelligent system, the Smart Navigator, the sales in the multiplier would be increased substantially. It would reduce your spending and increase your sales.’ I expressed my approval and informed them of my expectation: ‘That would be great. I expect a 30-40% lift in sales in the multiplier.’ They then confidently assured me that they could easily obtain that goal.
- Smart Market convinced me that they were the experts in their field and assured me of how profitable it would be for Leimo to engage them due to their expertise and the effectiveness of Smart Navigator. They boast of how the advertising costs will be self liquidating, and how Smart Navigator makes critical decisions to make advertising more successful. These claims are proudly reflected in their website. …”
- [34]It is apparent the alleged representation is not as to an existing fact but rather as to the predicted future sales success of the defendant’s business if he engaged the plaintiff.
- [35]In my view, the statement should not be characterised as promissory in nature so as to constitute an implied term of the contract between the parties. The Privy Council in BP Refinery Pty Ltd v Hastings Shire Council held that:
“For a term to be implied the following conditions (which may overlap) must be set aside:
- (1)It must be reasonable and equitable;
- (2)It must be necessary to give business efficacy to the contract, so that no term may be implied if the contract is effective without it;
- (3)It must be so obvious that it ‘goes without saying’;
- (4)It must be capable of clear expression; and
- (5)It must not contradict any express term of the contract.”[7]
- [36]It should be noted the written contract entered into between the parties contains the following clause:
“Smart Market Pty Ltd shall not, under any circumstances, be liable for any indirect, incidental, special or consequential damages (including but not limited to, loss of profit, revenue or business) in any way related to the services provided.”
- [37]In my view, to imply achievement of sales success as a term of the contract is not necessary to the business efficacy of the contract, is not sufficiently obvious, cannot be clearly expressed and contradicts a specific term of the written contract quoted above.
- [38]Factors other than advertising will obviously impact on the volume of sales. It is therefore difficult to conceive how a term could be framed so as to incorporate a measure of sales success or failure solely referable to the effectiveness of the plaintiff’s advertising services.
- [39]It is apparent the plaintiff, in placing advertising for the first defendant with broadcasters, was incurring substantial financial liabilities on the instructions of the first defendant. It therefore seems implausible that the plaintiff would have chosen to contract to bear all the risk should the defendants sales not improve. A collateral contract is one in which the consideration for the promisor’s promise is the promisee’s entry into the main contract. A statement must be made with intent to induce entry into the contract, be relied upon and be promissory in nature.[8]However, it must not be inconsistent with the terms of the main contract. The express term of the contract set out above would necessarily give rise to such inconsistency.[9]
- [40]The defendants’ counterclaim alleges breach of contract but is opaque as to how the breach is said to arise. The defendants’ defence and counterclaim do not plead a claim or defence specifying a provision of the Trade Practices Act or similar legislation. In my view leave to file a counterclaim should be refused.
- [41]On the pleadings before the court the first defendant has no real prospect of successfully defending the claim. In reaching this conclusion I considered not only the defendant’s first defence but also had regard to the effect of the amended defence should leave to file be granted.
- [42]The parties entered into a carefully worded written contract in a form prepared by the plaintiff. Mason J said in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales:
“My reluctance to imply a term is the stronger because the contract in this case was not a negotiated contract. The terms were determined by the authority in advance and there is some force in the argument that the Authority looked to Codelfa to shoulder the responsibility for all risks not expressly provided for in the contract. It is a factor which in my view makes it very difficult to conclude that either of the terms sought to be implied is so obvious that it goes without saying.”[10]
- [43]In the present case it could hardly have been the case that the plaintiff intended to enter into a contract where all the risk fell to it in circumstances where the largest proportion of costs was for services engaged from other providers and where factors other than the advertising could impact upon sales.
The guarantee
- [44]The second defendant raises two arguments in respect of the guarantee. He argues firstly that the guarantee was conditional upon the plaintiff complying with the terms of the agreement. That argument must fail. The existence of such a term is inconsistent with the clear terms of the guarantee. In any event, where the first defendant has no prospect of establishing a defence the second defendant’s claim on this basis must also fail.
- [45]Secondly, it is argued by the second defendant that only obligations arising within an initial 30 day credit term were guaranteed. In my view, such an interpretation is not available on any reading of the terms of the guarantee document.
- [46]I conclude the second defendant has no real prospect of successfully defending the claim.
Conclusion
- [47]All the essential elements in the plaintiff’s amended statement of claim are established. Under the agreement between the plaintiff and the first defendant a debt in the sum of $168,302.80 is owed. Under the guarantee given by the second defendant he is treated as a principal debtor. The date of default is 30 January 2013. Pursuant to the agreement interest of 2% a month is payable on monies owing beyond the due date.
- [48]The defendants have no real prospect of successfully defending the claim and there is no need for a trial of the claim. Accordingly I propose to refuse the defendants leave to file an amended defence and counterclaim, and to give summary judgment in favour of the plaintiff. Judgment will be in the sum of $168,302.80 plus interest, as provided for under the agreement, of $40,392.67 calculated from the date of default to the date of judgment.
Costs
- [49]Standard costs should follow in the result. However, the plaintiff additionally seeks costs on an indemnity basis. I heard submissions on that issue. The plaintiff advanced three reasons justifying the award of indemnity costs. Firstly, that the conduct provided for the recovery of costs on a solicitor/client basis should the contracting party fail to pay monies due. Secondly, that the failure to pay and the delay caused by the litigation has had an adverse impact on the plaintiff. Finally, it was submitted the defendants were always bound to fail.
- [50]All those matters are relevant to my consideration but none are determinative. Ultimately an award of indemnity costs is in the discretion of the court. Such an award is exceptional and only made for good reason.[11]
- [51]It is true that I have found that the defendants have no prospect of resisting the claim. The litigation has no doubt had an impact on the plaintiff. However, the defendants are not legally represented. I have heard submissions from Mr Norman on behalf of himself and the first defendant. My assessment is that he is motivated by a genuine sense of grievance that his sales fell rather than improved after he engaged the plaintiff’s services. He appeared to have a genuine, although wrongheaded belief, this provided him with a defence to the claim for payment. As the defendants have lacked legal assistance during much of the progress of this litigation I am not persuaded that they acted in wilful disregard of the law or out of some ulterior motive.
- [52]Indemnity costs may be awarded where a party properly advised should have known it had no chance of success, but where a litigant did not recognise its case was without merit a court may be disinclined to make a special cost order.[12]A court will be more reluctant to make an order for indemnity costs against a litigant in person.[13]
- [53]Weighing all these factors I have concluded I should, in the exercise of my discretion, decline to make an order for costs on an indemnity basis.
Orders
- [54]The orders of the court will be:
- Pursuant to r 292 of the Uniform Civil Procedure Rules 1999 summary judgment is granted in favour of the plaintiff against the first defendant and the second defendant for the amount of $168,302.80 plus interest of $40,392.67 plus costs of the proceeding on a standard basis to be agreed or assessed.
- The first defendant and second defendant pay the plaintiff’s costs of the application heard on 23 October 2013 fixed in the amount of $2,139.50.
Footnotes
[1]ANZ Banking Group Ltd v Barry [1992] 2 Qd R 12 at 19
[2]Swain v Hillman [2001] 1 All ER 91 at 92; Bernstrom v National Australia Bank Limited [2002] QCA 231
[3]Qld Pork Pty Ltd v Lott [2003] QCA 271, per Jones J at [41]
[4]Queensland Truss and Frame Pty Ltd v Grenadier Constructions No. 2 Pty Ltd [1992] 2 Qd R 428
[5] (1983) 154 CLR 87 at 99
[6] Paragraph 2, amended defence of the first defendant
[7] (1977) 180 CLR 266
[8] JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435
[9] See [36]
[10] (1982) 149 CLR 337 at 356
[11]Amos v Monsour Legal Costs Pty Ltd [2008] 1 Qd R 304 at [29].
[12]Macedon Ranges Council v Thompson [2009] VSCA 209 at [15].
[13] [2009] VSCA 209 at [17].