BETWEEN : AQUA TECHNICS (WA) PTY LTD (ACN 008 905 888)

QBE HOLDINGS (AUSTRALIA) PTY LTD formerly known as QBE INSURANCE LTD (ACN 000 157 899)

JARDINE LLOYD THOMPSON PTY LTD formerly known as JARDINE INSURANCE BROKERS PTY LTD (ACN 009 098 964)

Practice and procedure - Amendment of claim - Overseas third party - Turns on own facts

First Third Party : Mr R L Le Miere QC & Dr S E Ivey

Beck v Value Capital Ltd (No 2) [1974] 3 All ER 442; [1975] 1 WLR 6

Distillers Co (Bio­Chemicals) Ltd v Thompson [1971] AC 458; 1 All ER 694

Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431

George Monro Limited v American Cyanamid and Chemical Corporation [1944] 1 KB 432

Hart v Robinson Helicopter Co Inc & Ors, unreported; SCt of WA (White M); 5 September 1988

ICI Australia Operations v Kidde­Graviner Ltd [1999] WASCA 65

Johnson v Taylor Brothers & Company Ltd [1920] AC 144

National Commercial Bank v Wimbourne (1979) 11 NSWLR 156

Regie National des Usines Renault SA v Zhang [2002] HCA 10; (2002) 76 ALJR 551

1 Aqua Technics Pty Ltd (the plaintiff) is a manufacturer of swimming pools. It is alleged that over a period there were defects in its swimming pools. Aqua Technics says that if there were defects they were caused by faulty fibreglass gun rovings it purchased from Summit Chemicals, the first defendant. Summit Chemicals seeks to pass on the claim to the manufacturer of the gun rovings, a Spanish company, the first third party, Vetrotex Espana SA ("Vetrotex") and the Australian agent of Vetrotex, RF Services Pty Ltd (now known as Saint-Gobain RF Pty Ltd), the second third party.

2 Summit Chemicals wishes to amend its statement of claim in the third party proceedings. This application is stoutly resisted on various grounds. The resolution of the application turns on the construction of the third party notice:

"The Defendant claims against you to be indemnified against the Plaintiff's claim and the costs of the action, on the grounds that you were the manufacturer and supplier of the Vetrotex Fibre Glass Gun Rovings to the Defendant that the Plaintiff claims has caused swimming pools that it supplied to its customers to blister and need replacement. The Vetrotex Fibre Glass Gun Rovings were supplied to the Plaintiff by the Defendant in the condition that it was supplied by you to the Defendant. The Plaintiff alleges that the Vetrotex Fibre Glass Gun Rovings were contaminated and thereby not fit for purpose, or of merchantable quality. The contamination that the Plaintiff allege relates to the moisture content of the Vetrotex Fibre Glass Gun Rovings. The Defendant queried the moisture content of the Vetrotex Fibre Glass Gun Rovings with your Australian Agent, RF Services Pty Ltd ('RF') when the Vetrotex Fibre Glass Gun Rovings were received in December 1996, and when further batches of the Vetrotex Fibre Glass Gun Rovings were received from you in subsequent months. RF advised the Defendant that it had consulted with you and that the Vetrotex Fibre Glass Gun Rovings were suitable to sell to, inter alia, the Plaintiff. The Defendant's claim against you will be based upon your breach of the terms of sale of the Vetrotex Fibre Glass Gun Rovings to the Defendant, and in particular concerning the merchantable quality and fitness for purpose of the Vetrotex Fibre Glass Gun Rovings. Further the Defendant claims you are in breach of your duty of care, and the terms of the Australian Trade Practices Act. If the Plaintiff's contention that the moisture content of the Vetrotex Fibre Glass Gun Rovings has caused it to suffer loss then you are liable to indemnify and/or pay damages to the Defendant in an amount equal to any amount which the Defendant may be found liable to pay to the Plaintiff, plus costs."

3 In due course a conditional appearance entered to the third party notice by Vetrotex became unconditional on 11 August 1999.

4 On 2 September 1999 Summit Chemicals served a statement of claim on Vetrotex Espana SA and, on 22 October 1999, Vetrotex served a defence.

Summit Chemicals' proposed statement of claim

5 Summit Chemicals' proposed statement of claim follows discovery. The proposed statement of claim pleads issues against a new third party Mr Laurence Alan Beston who was at all material times a director and agent of RF Services Pty Ltd.

"8. Between July 1996 and April 1997 by contracts made between Vetrotex Espana and the first defendant, Vetrotex Espana agreed to sell by the description 'Antistatic Gun Rovings' and the first defendant agreed to buy from Vetrotex Espana certain quantities of P292S.

The first defendant purchased the P292S from Vetrotex Espana by oral and written purchase orders to R F Services. R F Services then provided the purchase order to Vetrotex Espana. Vetrotex Espana supplied the P292S on a CIF basis to the first defendant by delivering the P292S by ship to Fremantle, together with Vetrotex Espana invoices and delivery documentation. The following are the relevant first defendant's purchase orders and Vetrotex Espana invoice numbers relating to the P292S which was supplied by the first defendant to the plaintiff pursuant to those agreements set out in the plaintiff's statement of claim. ...

13. The P292S supplied by Vetrotex Espana to the first defendant was defective in that:

13.1 when the rovings were used to create a fibreglass product by combining the rovings with resin using an applicator gun:

13.1.1 immediately upon the fibreglass strand leaving the rovings cheese it unbundled into filaments;

13.1.2 the combination of resin and fibreglass formed clumps rather than a smooth layer on the surface on which it was sprayed;

13.1.3 air became entrapped within the resin and fibreglass that could not be removed with rolling;

13.2 it contained excessive water; and

13.3 it caused damage to the swimming pools manufactured by the plaintiff. Defects may be inferred from the water content of the P292S and the fact that damage occurred when it was used to manufacture swimming pools.

17. By reason of the matters pleaded in paragraphs 2, 3, 4, 5, 6, 9, 10 and 11 Vetrotex Espana owed the plaintiff a duty to exercise reasonable care to avoid manufacturing and supplying fibreglass rovings that might cause damage when used in the manufacture of swimming pools and to advise the first defendant on the unsuitability of the rovings for that purpose."

7 Vetrotex Espana SA ("Vetrotex") is a foreign company incorporated in Spain. It is part of the Saint-Gobain group, which manufactures and produces glass reinforcement worldwide. It does not submit to the jurisdiction of the Supreme Court in regard to the application to amend the statement of claim and opposes the application to amend on three grounds:

(c) failure to provide adequate particulars to allow it to defend the proceedings.

8 Although affidavit evidence was put before me as to the difficulty and inconvenience of defending the amended claim, I am unpersuaded that this aspect is sufficiently weighty to otherwise refuse the application to amend the pleadings especially when the application has been brought about following discovery.

9 Summit Chemicals accepts that the third party notice sets out the four corners for any amended statement of claim.

10 Vetrotex argues that proposed par 8 results in new causes of action by referring to new contracts. It submits there is no jurisdiction to amend or plead these cases in the absence of the leave given to issue proceedings against the foreign defendant: O 10. R F Services Pty Ltd, I interpose, claims that it is the agent of Vetrotex, a matter which Vetrotex denies.

11 The starting point for consideration on the question of jurisdiction is Marlborough Harbour Board v Charter Travel Co Ltd (1989) 18 NSWLR 223 per Hope J at 230:

"In the same way a foreign defendant who has submitted to the jurisdiction of the court to try one case against it will not be taken to have submitted to the jurisdiction of the court to try all other cases which may be brought against it by the same party, including cases raised by amendment."

12 In this case, Hope J (Clarke and Meagher JJA agreeing) concluded at 233:

"The amended claim is a claim founded on or directly arising out of the same subject matter as the original cross-claim, and justice requires that it be tried at the same time as the original cross-claim. I accordingly consider that it was proper to allow the amendment."

13 There is considerable discussion in Marlborough Harbour Board v Charter Travel Co Ltd and also in some of the cases which are referred to as to the extent to which separate claims are distinct causes of action.

14 Vetrotex argues that leave should not be granted under O 10 for further proceedings to be brought against it. In fact, such leave has not been sought. The issue becomes relevant in the consideration of the claims being advanced in the proposed statement of claim. Some of the arguments have considerable substance if the question of leave to issue proceedings under O 10 becomes live.

15 However, on my construction of the third party notice, claims for contracts numbered 5 to 8 in the schedule to par 8 are within the third party notice. Claims of defect on account of the moisture content of the fibreglass gun rovings supplied under those contracts are also within the third party notice. Neither are new claims. It is then unnecessary to rule on an application for leave under O 10, especially when such an application is not foreshadowed, let alone before me.

16 The third party notice incorporates, by reference, Aqua Technics' statement of claim.

17 As I read the notice, the contamination that the Aqua Technics alleges, relates to Vetrotex fibreglass gun rovings first received in December 1996 and thereafter received in subsequent months. Proposed par 8 extends back to July 1996 and in so doing exceeds the four corners of the third party notice in respect of the first three contracts. The proposed statement of claim is dated December 2002. Any claims prior to that time are barred, so an amendment would be ineffective: Morgan v Banning (1999) 20 WAR 474. The contracts were CIF contracts complete at the ships' rail in Valencia.

18 The statement of claim by Aqua Technics against Summit Chemicals is based on a number of contracts for gun rovings alleged to have been purchased by the Aqua Technics from January 1997. The gun rovings referred to in the third party notice are those which were supplied by Summit Chemicals to Aqua Technics. Paragraph 12 of the proposed statement of claim pleads:

"In reliance upon the Representation, the defendant sold to its customers, including the plaintiff the October 1996 shipment of P292S, and subsequent shipments of P292S which had moisture contents similar to those of the October 1996 shipment."

19 I am inclined to think that further particularisation is required to better identify the gun rovings, the subject of the representation, and the contract with the gun rovings supplied to Aqua Technics.

20 The third party notice related solely to an allegation of moisture content. Paragraph 13 of the proposed statement of claim pleads:

"The P292S supplied by Vetrotex Espana to the first defendant was defective in that;

13.1 when the rovings were used to create a fibreglass product by combining the rovings with resin using an applicator gun:

13.1.1 immediately upon the fibreglass strand leaving the rovings cheese it unbundled into filaments;

13.1.2 the combination of resin and fibreglass formed clumps rather than a smooth layer on the surface on which it was sprayed;

13.1.3 air became entrapped within the resin and fibreglass that could not be removed with rolling;

13.2 it contained excessive water; and

13.3 it caused damage to the swimming pools manufactured by the plaintiff. Defects may be inferred from the water content of the P292S and the fact that damage occurred when it was used to manufacture swimming pools."

21 Only par 13.2 refers directly to moisture content. While the balance of matters in par 13.1 may be a result of excessive moisture, that is not clear. Paragraph 13.1 is therefore also beyond the third party notice. Paragraph 13.3 pleads a form of res ipsa loquitur which is a plea sufficiently removed from the third party notice as to constitute a new claim.

22 On one view, the defendant's claim is in tort or contract and the matters sought to be pleaded are simply particulars. However, the circumstances of this case require a different answer because the third party notice is limited to damage caused by moisture. The submission to jurisdiction is to meet this allegation. Unless the third party notice is amended, the new claims cannot stand.

The pleading of the Sale of Goods (Vienna Convention) Act 1986

23 The Vienna Convention has the force of law in Western Australia. "Obligations of the Seller" are contained in Chap II of Pt III, Schedule 1. Article 35 appears in Section II of the chapter. The remedies are set out in Section III and specify that the buyer may exercise the rights provided (in the articles set out) and claim damages: Article 45.

24 The third party notice bases the breach of the terms of sale of the gun rovings to Summit Chemicals (the defendant) and in particular alleges that the fibre glass gun rovings were contaminated and thereby not fit for purpose or of merchantable quality. This is wide enough to encompass the claim under the Sale of Goods (Vienna Convention) Act. There is a difference between the Sale of Goods Act 1986 upon which the original claim was based, and the Sale of Goods (Vienna Convention) Act 1986. The former implies conditions of merchantable quality and fitness for purpose into a contract, while the latter imposes like obligations on a seller. However, I consider that both are encompassed within the third party notice and the pleading of the Vienna Convention does not raise a new claim. As there has been submission to the third party notice the claim is within jurisdiction.

25 Vetrotex has put before me a considerable amount of evidence concerning the general conditions of sale said to be part of the Vetrotex Espana Customer Acceptance Standards and incorporated into the contracts. In due course this evidence may be decisive. However, at this stage it provides insufficient reason to refuse an application to amend the pleadings.

26 The tidiest way of proceeding is to refuse leave to amend the third party statement of claim in the form proposed by the minute dated 10 December 2002, but give leave to Summit Chemicals to re-plead within 21 days an amended third party statement of claim in accordance with this judgment.

27 Any amendment should not include contracts entered into prior to December 1996 and may not expand the defects alleged beyond moisture content.

28 I propose to reserve the costs of this application.