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[2018] QCA 353
This case was an appeal against a refusal to grant summary judgment on a claim. The dispute concerned an agreement for the supply of goods which contained a retention of title clause. The plaintiff contended that it was entitled to sue for the price of the goods invoiced, rather than damages, either on the basis of the Sale of Goods Act 1923 (NSW), or by reason of the agreement. The Court of Appeal rejected the Sale of Goods Act argument because the retention of title clause meant that title to the goods had not passed to the respondent, and because the obligation to pay was not made “irrespective of delivery” (per s 51 of the Act). The Court also found that the contractual argument would take a trial to resolve. Accordingly, there was no error in the primary judge’s refusal to grant summary judgment.
Holmes CJ and Philippides JA and Henry J
18 December 2018
Background
Garmin Australasia Pty Ltd (“Garmin”) and B & K Holdings Pty Ltd (“B&K”) entered into a ‘Dealer Agreement’, under which B&K was to deal in Garmin products. [2]. Garmin alleged that it sold, delivered and invoiced products to B&K in early 2017, with an invoiced amount of $1,100,000. [5]. It pleaded that B&K had breached its obligations under the agreement by failing to pay the invoiced amounts on the due dates. [5].
Garmin brought an action for the price of the goods against B&K. At first instance, Garmin applied for summary judgment on its claim, on the basis that B&K had made admissions as to the existence of the agreement and its failure to pay. Alternatively, Garmin sought to strike out parts of B&K’s defence. [1]. The primary judge, Mullins J, declined to grant summary judgment. or to strike out the relevant parts of the defence, on the basis that it was “a matter of inference” that other contractual agreements existed but had not been disclosed or pleaded. [13]. Garmin appealed against the primary judge’s dismissal of its application. [1].
The error in the primary judge’s decision
The Court of Appeal (per Holmes CJ, with Philippides JA and Henry J agreeing) considered that the primary judge had erred in drawing the inference that there must have been some further agreements. The basis for the inference seems to have been that the termination date for the agreement had passed. However, at the time of the product orders, it had not. [19]. The question now was whether Garmin would have been entitled to summary judgment if the primary judge had not erred. [19].
Was Garmin entitled to summary judgment on its claim for debt?
The general rule is that a seller’s remedy for a breach of a contract of sale is damages (see Ledger v Cleveland Nominees Pty Ltd [2001] WASCA 269). [20]. However, Garmin contended that it was entitled to claim the invoiced amounts as a debt instead – either on the basis of the Sale of Goods Act 1923 (NSW), or because it was given a contractual right to sue in debt. [20], [33].
Sale of Goods Act argument
The Sale of Goods Act provided in s 51 (‘Action for Price’):
“(1) When under a contract of sale the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against the buyer for the price of the goods.
(2) Where under a contract of sale the price is payable on a day certain irrespective of delivery, and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in the goods has not passed, and the goods have not been appropriated to the contract.” (Underlining added for emphasis.)
Holmes CJ found that the Dealer Agreement met the Act’s definition of a “contract of sale”. [22]—[23], [29]. However, a complication in this case was that the agreement contained a retention of tile clause, which provided that “[u]ntil Dealer [B&K Holdings] has paid for the Products in full … property in the Products remains with Garmin”. [6]. Despite this, B&K still had a right to sell the goods, provided it held the proceeds of sale on trust and accounted to Garmin for them. [22].
As to s 51(1), the question was whether title to the goods would ever have “passed to the buyer” absent B&K paying for them. Holmes CJ considered that the agreement contemplated the “passing of title direct to the ultimate purchaser”. [28]. Because the agreement in this case “contemplated that title would never pass to the buyer”, s 51(1) of the Act would not permit an action for the price of the goods. [29].
As to s 51(2), the question was whether the agreement provided that the obligation to pay was fixed “on a day certain irrespective of delivery”. Her Honour noted that the agreement linked the amount to be paid to the timing of payment “in relation to the delivery day”. Accordingly, the price was not payable on “a day certain irrespective of delivery”. Garmin was “unable to bring itself within s 51(2)”. [30].
Contractual argument
Her Honour noted that parties can reach their own agreement as to when a price is payable and may be recovered as a debt, irrespective of the Sale of Good Act provisions (citing Joinery Manufactures Ltd (1951) 82 CLR 621). [31]. However, no express term of the agreement in this case provided for recovery of the price in advance of the property passing. The question was whether this was impliedly agreed. [39]. Her Honour considered that answering that question would necessitate a “consideration of extrinsic evidence of the surrounding circumstances in order to ascertain the commercial purpose of the contract”. [40]. On that basis, it “could not be said that there was no need for a trial of this action”.
Conclusion
Having failed to establish its Sale of Goods Act argument, or its contractual argument without the need for a trial, her Honour concluded that summary judgment ought not be granted. [40]–[41].
W Isdale