Brambles Australia Limited Trading As CHEP Australia v Tatale Pty Limited & Anor

Brambles Australia Limited Trading As CHEP Australia v Tatale Pty Limited & Anor - [2006] NSWSC 640 - NSWSC 2006 case summary — Zoe

[28]

[5] Between 2000 and 2003 the plaintiff communicated with the defendants and their solicitors in an attempt to recover possession of the CHEP pallets that were on the defendants' premises. That process included the plaintiff providing to the defendants copies of the terms of hire between the plaintiff and its customers. Although some CHEP pallets were recovered, the plaintiff commenced District Court proceedings in detinue and conversion claiming damages for the loss of hiring fees in respect of those pallets that were not recovered. The District Court proceedings were summarily dismissed but such order was set aside on appeal: Brambles Australia Ltd t/as CHEP Australia v Tatale Pty Ltd & Anor [2004] NSWCA 232. [6] The plaintiff commenced these proceedings against the defendants by Summons filed on 6 July 2005 for delivery up of the pallets and damages. On 9 September 2005 an order was made removing the District Court proceedings into this Court together with an order that the removed proceedings be tried at the same time as these proceedings. [7] The defendants filed a Commercial List Response, a First Cross-Claim Cross-Summons and a Commercial List Cross-Claim Statement on 4 October 2005. On 9 November 2005 the plaintiff filed a Notice of Motion seeking orders that various paragraphs of the Cross-Summons and the List Response be struck out. After case management, that Motion was listed for hearing before me on 24 February 2006. Mr Coles QC, leading Mr P Russell of counsel, appeared for the plaintiff/applicant on the Motion and Mr Garnsey QC, leading Mr J Redmond, appeared for the defendants/respondents to the Motion. For ease of identification I shall refer to the parties as the plaintiff and defendants rather than cross-defendant and cross-claimant. [8] On 24 February 2006 I formed the view that there were flaws in the pleadings and that it was necessary for the defendants to re-plead. I ordered the defendants to provide drafts of the proposed pleadings to the plaintiff by 17 March 2006 and re-listed the Motion on 24 March 2006. The defendants provided a draft First Cross-Claim Amended Cross-Summons (the Pleading) to the plaintiff and on 24 March 2006 the plaintiff opposed leave being granted for the filing of the Pleading. There are some corresponding paragraphs in the Commercial List Response filed on 4 October 2006 but the only document with which I am dealing in this judgment is the Pleading. The appearances on 24 March 2006 were the same as on 24 February 2006. [9] Practice Note SC Eq 3 (the Practice Note) governs the conduct of proceedings in the Commercial List. There is provision for contentions to be set out in summary form. Contentions should avoid formality, state the allegations made with adequate particulars and identify the legal grounds for the relief claimed (pars 8, 9 & 12). Notwithstanding the avoidance of formality, the pleading should make clear the allegations of fact on which reliance is placed to seek the relief claimed. This requirement is to ensure that each party knows the case made against it and sets the ambit within which pre-trial procedures such as discovery will proceed. The pleadings also define the limits within which the trial will be conducted. The Motion 3 This further application was heard on 9 June 2006 when Mr JJ Garnsey QC, leading Mr JP Redmond of counsel, appeared for the defendants/applicants on the Motion and Mr B Coles QC, leading Mr PT Russell of counsel, appeared for the plaintiff/respondent to the Motion. The evidence 4 On this occasion the defendants relied on the affidavit evidence of Ian Kalaf, solicitor for the defendants, relating to the defendants' contracts with their suppliers. That evidence suggests that at trial it will be the defendants' cases that: (a) they purchase stock from agents of growers, distributors, importers, exporters, and any other party selling dry goods (in the case of the first defendant) or wet goods (in the case of the second defendant) and/or related products; (b) they hold the goods as bailees; (c) they account to the suppliers on proceeds arising from the sale to third parties; (d) property in the goods does not pass until the suppliers have been paid; (e) they indemnify the suppliers in connection with the supply of the goods; (f) they are liable for damage to the goods until title has passed; (g) the goods are stored separately; and (h) the suppliers have a number of remedies for a failure to pay the purchase price. Mr Kalaf has reviewed the defendants' contracts with their suppliers and gave evidence that there are no conditions reflecting clause 4(d) of the plaintiff's Standard Terms and Conditions for hire (the Standard Terms) preserving the plaintiff's right to immediate possession of the CHEP pallets. 5 Mr Kalaf also gave evidence in relation to: (a) the cycle of distribution of wooden pallets containing products supplied to the defendants to the loading dock in the warehouse and return; and (b) in the case of the second defendant, the cycle of distribution of wooden pallets in respect of wet goods to be stored in the cool room. The defendants' suppliers apparently use two types of pallets, CHEP pallets or Loscam pallets. In the case of the first defendant approximately 57 suppliers use the former and 43 use the latter. In the case of the second defendant 10 suppliers use the former and 20 use the latter (although this may increase to 30 using the former). 6 The cycle of distribution of the pallets to the loading dock in the warehouses includes the following: (a) the stock is delivered on the pallets; (b) the pallets are then transported by forklift to a prepared vacant area of shelving reserved for that particular product; (c) when the existing stock is sold the empty pallets are transported back to a holding bay reserved for either CHEP pallets or Loscam pallets for collection/exchange; (d) at the next delivery the defendants exchange the empty pallets for an equal number of pallets with goods on them; (e) the defendants provide exchange dockets recording the number of pallets received and the number of pallets returned, however it appears that on occasions these dockets are not required; and (f) the period of the cycle is determined by the frequency of the sales of the goods delivered but usually ranges between 14 and 30 days. 7 The cycle in respect of wet goods to be stored in the second defendant's cool room is much the same except that when the goods are delivered on the pallets, they are transported by forklift to an area outside the cool room and the fresh produce is then carried by hand into the cool room and stored on Loscam pallets. Once the fresh produce is unloaded into the cool room the empty pallets are returned to the loading bay for exchange in the same manner referred to above. No written records are made of the pallets added to the pallets in the holding bays. Similarly there are no written records of the identities of the suppliers of the pallets held in the holding bay. It is apparent that temporary records in the form of exchange dockets are kept in respect of particular deliveries until the number of exchanged pallets equals the number of pallets received. If the number of pallets delivered with stock on them is greater than the number of empty pallets collected on exchange, the record would disclose the difference so that on the next occasion of a delivery from that same supplier, there would be a record of the number of pallets which had to be collected to make up the shortfall. Once those additional exchanged pallets are collected the defendants usually discard that record. 8 The defendants also relied upon a folder of material (Ex A) claimed to include their contracts with their suppliers. This material is referred to later in relation to paragraphs 14 to 16 of the pleading. I will refer to the defendants/cross-claimants as "the defendants" and the plaintiff/cross defendants as "the plaintiff" to avoid the confusion that has found its way into the pleading.

[29]

Structure of the pleading 9 The structure of the pleading includes the heading "Preliminary Factual Matters" which includes the following new claim in relation to the parties: 2. The Cross-Defendant is and was at all material times duly incorporated and hired and supplied and held itself out as a hirer and supplier of CHEP pallets to prospective customers and to its existing customers for the purpose of transportation of goods in trade and commerce in Australia by those customers to other persons or corporations until those goods reached a wholesaler distributor or consumer. 10 There is a new claim in relation to "The custom and usage of the trade" as follows: 9. It is and was at all material times the fact that in relation to the supply and delivery of groceries or frozen goods by manufacturers or suppliers of those goods such as the Cross-Claimants' Suppliers to distributors such as Tatale and Venasti it was and is the notorious and settled custom practice and and (sic) usage of the trade and the Cross-Defendant knows and at all materials times knew it was and is the notorious and settled custom practice and usage of the trade that: 9.1 for those goods to be supplied and delivered on pallets including CHEP Pallets, and 9.2 for manufacturers or suppliers including the Cross-Claimants' Suppliers to part with possession of the pallets, including CHEP pallets, and to deliver and supply goods packed on the pallets, including CHEP pallets, delivered to the persons or corporations, including wholesalers and distributors such as Tatale and Venasti; and 9.3 for those goods to be stored on and to remain on the pallets, including CHEP pallets, until the pallets reached a wholesaler, distributor or a consumer and for those pallets not to be available for return or be returned in the ordinary course of trade to the person or company who delivered the pallets to the wholesaler or distributor or for return to the Cross-Defendant until the goods had been unloaded or unpacked from the pallets in the ordinary course of trade by a wholesaler or distributor; and 9.4 for those pallets once the goods thereon had been unloaded or unpacked to be returned to the person or company who or which delivered the pallets to the wholesaler or distributor. Contracts with suppliers 11 One of the problems with the previous pleading was the very general nature of the claims made in respect of the contracts the defendants were alleging they entered into with their suppliers and lack of any properly pleaded basis upon which it was claimed that the plaintiff had knowledge of the terms of those contracts. The defendants have sought to rectify those deficiencies in paragraphs 14 to 16 as follows: 14. The contracts for the supply of groceries and frozen goods between the Cross-Claimants and their respective Cross-Claimants' Suppliers (the " Supply Contracts ") contain and at all material times contained terms and conditions to the following effect: (1) In the case of all the Cross-Claimants' Suppliers or substantially all suppliers, terms to the following effect: (a) that the goods would be supplied and delivered on pallets, and (b) Tatale and Venasti were entitled to quiet possession of the pallets until the groceries or frozen foods thereon were unpacked or delivered in the ordinary course of trade; (c) that Tatale and Venasti were permitted to store the pallets on their respective premises until the pallets were unpacked or delivered in the ordinary course of trade; (d) that Tatale and Venasti were obliged to return the pallets to the respective Cross-Claimants' Suppliers in exchange for deliveries of equal numbers of pallets containing groceries or frozen foods as the case may be; and (e) that Tatale and Venasti were authorised to use and retain and store goods supplied and delivered on the pallets on which they were supplied and delivered until those goods were unpacked and sold and distributed by Tatale and Venasti in the ordinary course of trade. (2) In the case of a substantial number of the Cross-Claimants' Suppliers one or more terms to the following effect: (a) that title to and property in the goods supplied and delivered would remain in and with the supplier until the goods were paid for in full by Tatale or Venasti as the case may be; (b) that Tatale or Venasti as the case may be would keep the goods supplied separately from other goods and not dispose of them until they were paid for in full; (c) that Tatale or Venasti as the case may be would hold gods (sic) supplied and delivered on trust for or on account of the supplier and not dispose of the goods. (d) Further, and alternatively, that Tatale or Venasti as the case may be would keep the goods supplied separately from other goods on the pallets on which they were delivered and not dispose of them until they were paid for in full.

[32]

Further, and alternatively to paragraph 15 above, the Cross-Claimants 16.1 repeat the facts and matters pleaded in paragraphs 5, 7, 8, 9 and 13 above, and 16.2 further say a substantial number of the Cross-Claimants' Suppliers including the suppliers referred to in paragraph 16.2 (sic) above were and are manufacturers and suppliers of groceries and frozen goods throughout Australia marketed, advertised and sold under and by reference to house marks brands and trade marks known to the trade and the public throughout Australia, and 16.3 further say that those Cross-Claimants' Suppliers supplied and delivered goods upon standard terms and conditions including terms and conditions to the effect pleaded in paragraph 14 above, and that it was and is the custom usage and practice of the btrade (sic) so to do, and 16.4 further say that the Cross-Defendant was recklessly indifferent to the existence and content and the effect or substantial effect of the terms and conditions of the respective Supply Contracts with Tatale or Venasti as the case may be pleaded in paragraph 14 above, and 16.5 further says (sic) that by reason of the facts and matters pleaded in paragraphs 16.1 and 16.4 above, the Cross-Defendant knew and knows and should be taken to and be deemed to have known and know the effect or substantial effect of the terms and conditions of the respective Supply Contracts with Tatale or Venasti as the case may be pleaded in paragraph 14 above. 12 One of the problems identified in the Brambles judgment in relation to the previous draft pleading was the lack of specificity resulting from the extensive use of cross-referencing. The defendants have maintained the use of cross-referencing throughout the proposed pleading and this has brought further complaint from the plaintiff because it is clear that some of the cross-referencing is incorrect. A fairly obvious example of this is paragraph 16.2 that cross-refers to itself. Another example is the reference in the particulars to paragraph 14 which refers to the "terms pleaded in paragraphs 13(1) and (2)". There are no paragraphs 13(1) and (2) and it seems fairly obvious that this reference should have been to paragraphs 14(1) and (2).

[37]

This letter is to authorise (the defendants) to receive our goods on Chep pallets . Industrial Sugar Mills … only uses Chep pallets to deliver their goods on. The pallets remain the property of Industrial Sugar Mills and must be exchanged one for one at the time of delivery, as it is our responsibility to return them to Chep. (Industrial Sugar Mills 14/9/2005). 15 It may be that at trial some of these documents do not establish the alleged contractual terms in paragraph 14 of the proposed pleading, however I am satisfied that the defendants have rectified the problem identified in the Brambles judgment. There are suppliers identified and there are some alleged terms identified in the documents in Exhibit A. The Schedule does not identify the dates of the alleged contracts and I am of the view that the plaintiff is entitled to know the dates upon which it is alleged the defendants entered into these contracts because of the claim that the plaintiff was aware of the terms of those contracts. The defendants are to provide an amended Schedule to the plaintiff that includes the dates of the contracts. 16 Paragraphs 15 and 16 of the pleading contend that the plaintiff was aware of the terms and conditions of the contracts between the defendants and their suppliers. Paragraph 16.1 refers back to paragraphs 5, 7, 8, 9 and 13 of the pleading. I do not accept that it is appropriate to refer back to paragraphs 5, 7 and 8 in paragraph 16.1. Those paragraphs do not contain any matters upon which it could be alleged the plaintiff was aware of the terms of the defendants' contracts with their suppliers. The reference to paragraph 9 is in a different category because it alleges that the plaintiff knew of the matters by reason of them being "notorious and settled custom practice and usage". The reference to paragraph 13 is also permissible because it makes a claim by reference to paragraph 9. 17 Accordingly paragraphs 14, 15 and 16 are allowed with the exclusion of references to paragraphs 5, 7 and 8 in paragraph 16.1.

[38]

Implied Statutory Warranties 18 The defendants make the following claims in respect of the implied statutory warranties: THE CROSS-CLAIMANTS' CLAIM AND RELIEF AVAILABLE TO THE CROSS-CLAIMANTS BY REASON OF THE IMPLIED WARRANTES (sic) UNDER SECTION 69 OF THE TRADE PRACTICES ACT Implied Statutory Warranties Of Quiet Possession in the contracts between The Cross-Defendant and the Cross-Claimants' Suppliers 17. The customers of the Cross-Defendant including a substantial number of the Cross-Claimants' Suppliers at all material times acquired one or more CHEP pallets which were not available at the time of acquisition for purchase from the Cross-Defendant or any other Supplier from time to time and which were of a value which did not exceed $40,000. 18. The customers of the Cross-Defendant including a substantial number of the Cross-Claimants' Suppliers acquire and acquired those pallets as consumers within the provisions of section 4B of the Trade Practices Act 1974 of the Commonwealth of Australia ("TPA"). 19. By reason of the facts and matters pleaded in paragraphs 3 to 10, 17 and 18 above, pursuant to TPA section 69 (1)(b), there was and is implied in each contract of hire and supply of the CHEP pallets between the Cross-Defendant as a corporation supplying goods by way of hire and its customers including a substantial number of the Cross-Claimants' Suppliers, an implied warranty that the customer will enjoy quiet possession of the CHEP pallets except so far as it may lawfully be disturbed by the Cross-Defendant, or by another person who is entitled to the benefit of any charge or encumbrance disclosed or known to the customer before the contract was or is made. 20. Alternatively to paragraph 19, the Cross-Claimants for the purposes of TPA section 69 (3): 20.1 repeats (sic) paragraphs 3 to 11, 17 and 18 above and say that in each such contract between the Cross-Defendant as a corporation supplying goods by way of hire and its customers as hirers including a substantial number of the Cross-Defendants' (sic) Suppliers, it appears that the Cross-Defendant should transfer to its customers as hirers only such title as it as the corporation supplying by ay (sic) of hire might have for the purposes of that hire, and 20.2 paragraphs 3 to 11, 17 and 18 above and say in those circumstances in each such contract between the Cross-Defendant as a corporation supplying goods by way of hire and its customers as hirers including a substantial number of the Cross-Defendants' (sic) Suppliers, it is to be inferred from the circumstances of the contract an intention that the Cross-Defendant should transfer to its customers as hirers only such title as it as the corporation supplying by ay (sic) of hire might have for the purposes of that hire, and 20.3 by reason of the facts and matters p[leaded (sic) in sub-paragraphs 20.1 and 20.2 above pursuant to TPA section 69(3), there was and is implied in each contract of hire and supply of the CHEP pallets between the Cross-Defendant and its customers including a substantial number of the Cross-Claimants' Suppliers an implied warranty that the Cross-Defendant and anyone claiming through the Cross-Defendant (otherwise than under a charge or encumbrance disclosed or known to its customers before the contract of hire and supply of the CHEP pallets was made) will not disturb the customer's quiet possession of the pallets. Particulars The title appearing to be transferred or inferred to be intended to be transferred by the Cross-Defendant was and is a possessory title to the CHEP pallets. 21. Clauses 1.1, 2(c)(3), 4(a), 4(d) and 10 of the Standard Conditions between the Cross-Defendant and its customers including the Cross-Claimants' Suppliers for the hire of CHEP pallets purports to exclude, restrict or modify, and have and at all material times had, the effect of excluding, restricting or modifying the liability of the Cross-Defendant to compensate or indemnify the customers including the Cross-Claimants' Suppliers that may arise under Division 2 of Part 5 of the TPA, and the right of the customers including the Cross-Claimants' Suppliers to claim compensation or indemnity, namely the implied warranty pleaded in paragraph 19 above, or alternatively, the implied warranty pleaded in paragraph 20 above, and are and was were (sic) at all material times void. Particulars The Cross-Claimants rely on the true construction of TPA s69 and TPA s68 and clauses 1.1, 2(3), 4(a), 4(d) and 10 and clause 10 (sic) of the Standard Conditions. Those clauses they (sic) are and were void, to the extent that those clauses upon their true construction purport to enable the Cross-Defendant to terminate the hire of CHEP pallets by customers and the use by customers in the normal course of trade (inter alia as pleaded in paragraphs 5, 6, 7, 9, and 10 above) for the purposes of their respective businesses, and to retake possessio (sic) from the customers or anyone dealing with customers, during or irrespective of the hire, or irrespective of the obligations of customers (such as the Cross-Claimants' Suppliers) to persons or corporations supplied by those customers (such as the Cross-Claimants). 22. By reason of the facts and matters pleaded in paragraphs 17 to 21 above, the Cross-Defendant was obliged to its customers and bound not to disturb the quiet possession of its customers including a substantial number of the Cross-Claimants Suppliers of the CHEP pallets including the use and disposition of the CHEP pallets in and for the purposes of the transactions pleaded in paragraphs 5. 6. 7. 9 and 10 above. Implied Statutory Warranties Of Quiet Possession in the Supply Contracts between the Cross-Claimants' Suppliers and the Cross-Claimants 23. The Cross-Claimants repeat the facts on matters pleaded in paragraphs 3 to 10 above. 24. At all material times those groceries and frozen foods were delivered and supplied and are delivered and supplied by the Cross-Claimants' Suppliers to Tatale and Venasti on pallets including CHEP pallets pursuant to the Supply Contracts between Tatale and Venasti and their respective Cross-Claimants' Suppliers upon inter alia and including the terms and conditions of the Supply Contracts pleaded in paragraph 14 above. Tatale and Venasti thereby acquired CHEP pallets from the Cross-Claimants' Suppliers which were not available at the time of acquisition for purchase from any supplier and Tatale and Venasti acquired the pallets otherwise than by way of purchase and the pallets were of a value not exceeding $40,000 in the case of any one supply from any one particular supplier and Tatale and Venasti acquired the pallets as consumers under TPA section 4B. 25. By reason of the facts and matters pleaded in paragraphs 3 to 10, 23 and 24 above, pursuant to TPA section 69(1)(b), there was and is implied in each of the Supply Contracts between the Cross-Claimants' Suppliers as corporations supplying goods and their respective customers, an implied warranty that the Cross-Claimants will enjoy quiet possession of the CHEP pallets except so far as it may lawfully be disturbed by the Cross-Claimants' Suppliers, or by another person who is entitled to the benefit of any charge or encumbrance disclosed or known to the Cross-Claimants before each Supply Contact was or is made.

[49]

23 It was the last paragraph of this extract that was relied upon which itself relied upon the decision in Henry Berry & Co Pty Ltd v Rushton [1937] St R Qd 109. Henchman J (with whom Webb J agreed) said at 119: When the plaintiff was not in actual possession, but relies upon his right to possession, he must recover on the strength of his title, and the defendant may, under a plea of not guilty or not possessed, show that the plaintiff has no right to immediate possession, because that right is in some other person. 24 Henchman J also said at 121: But whatever be the true legal position as to this difficult question of setting up the jus tertii, Clark and Lindsell (p. 241) agree with Salmond and Halsbury in accepting Gordon v Harper … as authority for the conclusion that, in cases of bailment for a term, the bailor has no right of possession and cannot sue in trespass or conversion until the contract is determined. 25 Mr Coles submitted that this authority does not assist the defendants because there is no pleading that the hiring contracts for CHEP pallets were for a particular term. It was submitted that even if leave were to be granted to plead this point it would be necessary to plead with some specificity the identity of the persons who hold the pallets and the term of the bailments alleged to be in existence. It was also submitted that to do that, the defendants have to confront clause 4(d) of the Standard Terms. It was submitted that there is no bailment for a term. Rather it is for a term at will with the plaintiff's own customers in whose possession the pallets may be found. It was submitted that the claim is utterly and fatally flawed and leave should not be granted in respect of the alleged implied statutory warranty pursuant to s 69(1)(b) of the TPA. 26 If the defendants are able to establish that: (a) there were terms and conditions between them and their suppliers that entitled them to the quiet possession of the pallets; (b) the plaintiff was aware of those terms and conditions; and (c) the plaintiff allowed its customers to part with possession of the pallets for them to be utilised in the manner described, then the defendants may be able to establish that the plaintiff is not entitled to demand return of the pallets from the defendants until the performance of the contract between the defendants and the suppliers is completed. The jus tertii submissions seem prime facie to have some difficulties (see, Pollock & Wright Possession in the Common Law at 92-3) but much will depend upon the facts proved at trial.

[51]

(i) the supplier; … will not disturb the consumer's quiet possession of the goods. 29 The plaintiff submitted that the following matters are relevant in respect of this claim: (a) the expression "supply" in the TPA can include supply by way of lease or hire, however, the warranty in s 69(3) only applies where there is a "transfer of title"; (b) therefore, the warranty can only apply to a contract of hire where the contract also involves a transfer of title, such as in the case of a hire-purchase contract; and (c) the plaintiff's contracts with its customers are contracts of hire only that do not involve a transfer of title. The plaintiff submitted that in those circumstances, even if s 69(3) is capable of applying to a contract of hire, it cannot apply to the plaintiff's contracts as it does not appear from the Standard Terms that there was an intention that the plaintiff should transfer "only such title as it or a third party may have". 30 Paragraph 20.1 of the pleading includes the claim that "it appears that the Cross-Defendant should transfer to its customers as hirers only such title as it as the corporation supplying by ay (sic) of hire might have for the purposes of that hire". The plaintiff submitted that in this claim the defendants depart from the statutory wording and it is therefore confusing, embarrassing and likely to cause delay in the proceedings. 31 The defendants submitted that on the proper construction of s 69(3) of the TPA the word "title" in relation to goods includes possession and the right to possession, immediate or otherwise. The particulars to paragraph 20 claim that the title "appearing to be transferred" is "a possessory title". 32 The subsection makes clear that for the warranty to be implied, the contract (or the circumstances of the contract) for the supply of goods must infer "an intention that the supplier should transfer only such title" as the supplier may have. Section 69(3) is not applicable to the circumstances of this case. It is clear both from the contract and the circumstances of the contract for hire that there is no intention to "transfer" any title in the goods to the plaintiff's customers. This is not a hire purchase contract. Clause 4(d) of the Standard Terms makes it abundantly clear that the right to immediate possession remains at all times with the plaintiff. I am satisfied that it is inappropriate to burden the plaintiff with these claims. They will not be allowed. Section 68(2) of the TPA 33 It was submitted that paragraph 21 of the pleading alleges that clauses 1.1, 2(c)(3), 4(a), 4(d) and 10 of the plaintiff's Standard Terms are void as they purport to exclude or restrict or modify the warranties in s 69. Section 68(2) of the TPA provides that "a term of a contract shall not be taken to exclude, restrict or modify the application of a provision … unless the term does so expressly or is inconsistent with that provision or section". It is submitted that the pleading does not articulate clearly, or at all, how the plaintiff's Standard Terms purport to expressly exclude, restrict or modify the warranties or in what way the plaintiff's Standard Terms are inconsistent with those warranties. It was further submitted that it is evident on the face of the Standard Terms that they do not expressly exclude the warranties nor is there anything inconsistent between the Standard Terms and s 69. It was submitted that in any event clause 10 of the Standard Terms provides that the plaintiff accepts liability for all warranties implied under the TPA. 34 Whether clause 4(d) of the Standard Terms falls foul of s 68(2) of the TPA in relation to the implied warranty pursuant to s 69(1)(b) of the TPA will be a matter for the trial judge. I intend to allow this aspect of the pleading to remain. 35 There are some peculiarities to this pleading, one of which is found in paragraph 29. That is a claim that the plaintiff's demands on the defendants for the delivery up of the pallets are in breach of the contracts between the plaintiff and its customers. The only connection with the defendants is that many of the plaintiff's customers are the defendants' suppliers. It is difficult to understand how this claim can be made by the defendants when they are not parties to the contracts it is claimed are breached. However, I assume that the defendants intend to rely on this aspect of the claim as relevant to the discretionary injunctive relief sought. I will allow it at this stage but it may be that when further particulars are sought the claim may be vulnerable to summary relief. Interference with contracts 36 Paragraph 30 of the pleading claims that the plaintiff is interfering with the defendants' contractual relations with their suppliers by demanding from the defendants the return of the plaintiff's pallets. It is submitted that leave should not be granted in respect of this paragraph because it is doomed to fail. The basis of that submission is that: (1) the defendants have not identified any basis for qualifying the plaintiff's right to immediate possession of the pallets; and (2) it cannot be an inducement to breach of contract for the plaintiff to exercise its legal right to retake possession of goods to which it has an immediate right to possession; Edwin Hill & Partners v First National Finance Corp plc [1988] 3 All ER 801; Zhu v Treasurer of NSW (2004) 218 CLR 530 at 578-582 [138]-[145]. It was submitted that it would be extraordinary if the defendants and their suppliers could, by a contract to which the plaintiff was not a party, affect the plaintiff's right to immediate possession of its property. 37 The plaintiff submitted that the tort of interfering with contractual relations will not be made out where party A enforces a covenant imposing a valid restraint upon party B entering into or performing a contract with party C. This is because there is "no element of impropriety, or of reliance upon some power or some influence independent of lawful authority" Zhu at 580-1 [140], 584-5 [151]; James v Commonwealth (1939) 62 CLR 339 at 373. 38 The Standard Terms preclude the plaintiff's customers from parting with possession of the pallets except in certain circumstances (cl 2(c)). The customer is entitled to part with possession of the pallets if the customer keeps written or electronic records identifying: (a) the name and address of the person in possession of the pallets; (b) the date of the change of possession; (c) the quantity and type of pallets; and (d) the terms (if any) in which the customer parted with possession. The customer is obliged to ensure that the terms on which it parted with possession are "at all times subordinate to and will be overridden" by the Standard Terms (cl 2(c)(3)). 39 It was submitted that clause 2(c)(3) of the Standard Terms prevented the defendants from entering into contracts with the plaintiff's customers, in the terms pleaded in paragraph 14 of the pleading. It was the plaintiff's customers, rather than the defendants, that were constrained by clause 2(c)(3) of the Standard Terms. I am not satisfied that I should refuse leave to pursue this aspect of the defendants' claims. As I have said in relation to other aspects of the pleading, much will depend upon the facts proved at trial, particularly what is proved in relation to: (a) the terms of the contracts with the suppliers; (b) the plaintiff's knowledge of those terms; and (c) the plaintiff's conduct in relation to its customers parting with possession in the light of that knowledge. Estoppel 40 The estoppel claim is now pleaded as follows: 33. The Cross-Claimants repeat the facts and matters pleaded in paragraphs 2 to 10, and 13 to 16 above, and says (sic) that the Cross-Defendant: 33.1 by the hiring (sic) CHEP pallets as pleaded in paragraphs 2, 5, 6 and 8, in the circumstances of the custom and usage of the trade as pleaded in paragraph 9 and the Cross-Claimants' terms and conditions of their agreements with their respective suppliers as pleaded in paragraphs 14, 33.2 by permitting CHEP pallets to circulate and be used in the ordinary course of trade as pleaded in paragraph 9 33.3 with the knowledge or with reckless indifference pleaded in paragraphs 9, 13, 15 and 16, and

[55]

By reason of the facts and matters pleaded in paragraphs 33 to 35 above, the Cross-Defendant is estopped and prevented: 36.1 from denying that Tatale and Venasti were and are entitled to quiet possession of the pallets until the groceries or frozen foods thereon were and are unpacked or delivered in the ordinary course of trade; 36.2 from denying that Tatale and Venasti were and are permitted to store the pallets on their respective premises until the pallets wereand (sic) are unpacked or delivered in the ordinary course of trade; 36.3 from denying that Tatale and Venasti were and are authorised to use and retain and store goods supplied and delivered on the pallets on which they were supplied and delivered until those goods were and are unpacked and sold and distributed by Tatale and Venasti in the ordinary course of trade and thereupon to return those pallets to the Cross-Claimants' Suppliers; and 36.4 from asserting any right to immediate possession of CHEP pallets in the possession of Tatale or Venasti or to the return of those pallets to the Cross-Defendant inconsistebt (sic) with 36.1, 36,2 or 36,3 (sic) above. 41 Once again, the pleader has confused the Cross-Claimant and the Cross-Defendant, this time in paragraph 35. It would appear that the two references in that paragraph to "Cross-Defendants' Suppliers" should be "Cross-Claimants' Suppliers". 42 The defendants claim that the plaintiff is estopped from denying that they are entitled to quiet possession of the CHEP pallets on the bases set out in paragraphs 33-36. The plaintiff submitted that those facts, if proved, could not amount to a clear and unequivocal (or any) representation in the terms pleaded in paragraph 33: Legione v Hateley (1983) 152 CLR 406 at 435-437. It was submitted that the fact that the plaintiff hires pallets on the Standard Terms and knows that they are used for delivery of goods cannot amount to a clear and unequivocal representation by the plaintiff that it will not seek to recover them or that the defendants have a right as against all the world, including the plaintiff, to retain them until the goods stored on them are unpacked. It was submitted that the only representation actually made by the plaintiff to the defendants is contained on the CHEP pallets namely that they "always remain the property of CHEP". It was submitted that there was a further problem with the estoppel claim because it appears from the pleading (paragraphs 14 and 34) that any inducement in the defendants was by the defendants' suppliers who promised that the defendants were entitled to retain possession of the pallets, rather than any representation made by the plaintiff. 43 The evidence on the Motion establishes that since November 2000 the plaintiff has been demanding the return of the pallets. It was submitted that the Court should not grant leave to the defendants to file a pleading that contains allegations of fact that are untenable in light of the incontrovertible evidence. Finally it was submitted that there was nothing pleaded to support a contention that the proper remedial response would be to absolve the defendants indefinitely from any obligation ever to return the plaintiff's property. This is not the minimum equity to do justice: Crabb v Arun District Council [1976] Ch 179 at 198; Commonwealth v Verwayen (1990) 170 CLR 394. 44 The defendants are not making a claim that they are entitled to keep the pallets indefinitely. The claim is that the plaintiff knew the defendants' suppliers were parting with possession in the manner pleaded and promising the defendants they would enjoy quiet possession of the pallets until they were returned to the suppliers. The defendants claim that the plaintiff stood by and allowed its customers to make those promises to the defendants and it is now estopped from demanding delivery up from them. Much will depend upon the proof of the matters pleaded in paragraphs 9, 15 and 16 and the nature of that evidence. I have some sympathy with the plaintiff's submission in respect of the nature of the representation but, as I said, it will depend upon the facts as proved. I am satisfied that the defendants are entitled at this pleading stage to maintain this estoppel claim. Unconscionability claim 45 The unconscionability claim is now pleaded as follows: 37. Tatale and Venasti repeat the facts and matters pleaded in paragraphs 3 to 8, 9, 10 and 11, 14, and 17 to 31 above, and say that: 37.1 by reason of the hire by the Cross-Defendant of CHEP pallets to the Cross-Claimants Suppliers upon the Cross-Defendant's Standard Conditions pleaded in paragraph 8, 10 and 11 above, and 37.2 by reason of the custom and usage of the trade and the conduct of the Cross-Claimants' Suppliers pleaded in paragraphs 5, 7and 9 above, and the obligations of the Cross-Claimants to the Cross-Claimants' Suppliers in respect of CHEP pallets pleaded in paragraph 14 above, and 37.3 by reason of the demands and claims of the Cross-Defendant to the Cross-Claimants for the immediate delivery up and return of CHEP Pallets in the possession of the Cross-Claimants and each of them and supplied to the Cross-Claimants by its customers including a substantial number of the Cross-Claimants' Suppliers pleaded in paragraohs (sic) 28, 29 and 30 above, Tatale and Venasti were at all material times and are in a position of special disadvantage in relation to the Cross-Defendant's assertion of a right to immediate possession of and its demands and claims for the immediate delivery up and return of CHEP Pallets in the possession of the Cross-Claimants.

[56]

Further, Tatale and Venasti: 38.1 repeat the facts and matters as to the knowledge or or (sic) reckless indifference of the Cross-Defendant pleaded in paragraphs 9, 13, 15 and 16, and say that their position of special disadvantage was at all material times known or ought to have been known to known or ought to have been known (sic) by the Cross-Defendant, and 38.2 repeat the facts and matters pleaded as to the implied warranties in paragraphs 17 to 31 above, and 38.3 repeat the facts and matters pleaded as to estoppel in paragraphs 33 to 36 above, and say that by reason of those facts and matters and the facts and matters pleaded in paragraph 37 above it is unconscientious and unconscionable for the Cross-Defendant to be allowed to depart from the representations pleaded in paragraph 33 above and the assumptions pleaded in paragraph 34 above and to be permitted to assert any right to the immediate delivery up and return of CHEP Pallets in the possession of the Cross-Claimants and each of them supplied to the Cross-Claimants by its customers including a substantial number of the Cross-Claimants' Suppliers. 46 The defendants plead that they are in a position of special disadvantage. It was submitted that the defendants have not pleaded that they suffer from, and do not in fact suffer from, a constitutional disadvantage in the sense of illness, ignorance, inexperience, impaired faculties, financial need or other circumstances that effect their ability to conserve and protect their own interests: Blomley v Ryan (1956) 99 CLR 362 per Kitto J at 415; ACCC v C G Berbatis Holdings Pty Limited (2003) 214 CLR 51, per Gleeson CJ at 62 [5] and Gummow and Hayne JJ at 76 [55]. It is submitted that the unconscionability claim appears to be based on an alleged situational disadvantage arising from the cost that may be incurred in unpacking the goods and having to replace the pallets that are returned to the plaintiff together with a possible damages claim from suppliers because the defendants are unable to fulfil their obligation of returning the plaintiff's pallets to the supplier. It is submitted that the defendants' claims that they are specially disadvantaged are untenable. 47 It is also submitted that the pleading indicates (paragraph 14) that the defendants have obtained contractual promises from their suppliers that they are entitled to possession of the pallets. In those circumstances, it is submitted that the defendants have protected themselves against the plaintiff's claim for return of its property by contract because they will have a claim against the suppliers in respect of any loss they will suffer by reason of the plaintiff taking possession of its pallets. The plaintiff submitted that the defendants could have protected themselves by entering into a hire agreement with the plaintiff; or hiring or purchasing another person's pallets; or not accepting the plaintiff's pallets from suppliers and/or unpacking goods off the plaintiff's pallets at the time of delivery. It was submitted that the facts pleaded do not establish that the defendants are under a special disadvantage in any dealings with the plaintiff. It was submitted that these claims amount to no more than "an inconvenience" to the defendants. It is submitted therefore that this claim of unconscionability is doomed to fail. 48 The defendants' claims include a contention that the plaintiff did not place any numbers or other identifying mark on the pallets to allow it to track the chain of possession of the pallets. It is claimed that the plaintiff knew that its customers would part with possession and that it did not require and/or enforce compliance with clause 2(c)(3) of its Standard Terms. It is claimed that the plaintiff represented, by its conduct, that the defendants would be entitled to enjoy quiet possession of the pallets for the purpose of compliance with their contracts with their suppliers. It appears to be alleged that by reason of the defendants having entered into contracts with their suppliers which require the return of the pallets to those suppliers the plaintiff would be exploiting the special disadvantage in which the defendants are placed, that is, if they are unable to return the pallets to the suppliers they will lose their business. These commercial circumstances may not amount to a special disadvantage, but that will be a matter for the trial judge. I intend to allow this pleading.

[68]

Tatale and Venasti repeat the facts and matters pleaded in paragraphs 3 to 8, 9, 10 and 11, 14, 15 and 16 above, and say that: 50.1 by reason of the hire by the Cross-Defendant of CHEP pallets to the Cross-Claimants Suppliers upon the Cross-Defendant's Standard Conditions pleaded in paragraph 8, 10 and 11 above, and 50.2 by reason of the custom and usage of the trade and the conduct of the Cross-Claimants' Suppliers pleaded in paragraphs 5, 7 and 9 above, and the obligations of the Cross-Claimants to the Cross-Claimants' Suppliers in respect of CHEP pallets under the Supply Contracts pleaded in paragraph 14 above, and 50.3 by reason of the Cross-Defendant's knowledge of those obligations as pleaded in paragraph 15, or alternatively paragraph 16 above and of the custom and usage of the trade as pleaded in paragraphs 9 and 13 above it was at all material times and is reasonably foreseeable by the Cross-Defendant that Tatale and Veansti, as companies to which the Cross-Defendant's customers, namely a substantial number of the Cross-Claimants' Suppliers, supplied goods on CHEP pallets for sale by wholesale and distribution, would suffer and were vulnerable to suffer loss by acts or omissions of the Cross-Defendant in relation to the following matters: 50.4 the ability of Tatale and Venasti as wholesalers and distributors receiving goods on CHEP pallets to carry on their respective businesses by storing and holding goods stored on CHEP pallets supplied by or purchased from the Cross-Claimants' Suppliers being customers of the Cross-Defendant; 50.5 the storage and holding of goods by Tatale and Venasti as wholesalers and distributors stored on CHEP pallets supplied by and purchased from the Cross-Claimants' Suppliers being customers of the Cross-Defendant; 50.6 the ability of Tatale and Venasti as wholesalers and distributors Tatale and Venasti to comply with their obligations to the Cross-Claimants' Suppliers being customers of the Cross-Defendant in relation to the exchange and return of CHEP pallets; 50.7 the compliance by Tatale and Venasti as wholesalers and distributors with their obligations to the Cross-Claimants Suppliers being customers of the Cross-Defendant in relation to the exchange and return of CHEP pallets; 50.8 the ability of Tatale and Venasti as wholesalers and distributors receiving goods supplied on CHEP pallets to determine whether they could or should return CHEP pallets to the Cross-Defendant or to the Cross-Claimants' Suppliers; 50.9 the return of CHEP pallets to the Cross-Defendant or to the Cross-Claimants' Suppliers or to any other person or corporation claiming to be entitled thereto; 50.10 the ability of Tatale and Venasti as wholesalers and distributors receiving goods supplied on CHEP pallets to determine whether the Cross-Defendant had a right to immediate possession of CHEP pallets received from the Cross-Claimants' Suppliers or other suppliers, or from any other person or corporation.

[70]

By reason of the facts and matters pleaded in paragraphs 50 and 51 above at all material times the Cross-Defendant was under a duty of care to Tatale and Venasti and each of them: 52.1 To warn Tatale and Venasti that they were not entitled to receive from their respective suppliers delivery of and that they were not entitled to retain CHEP Pallets on which goods were packed until those goods were unpacked in the normal course of trade or to return unpacked CHEP pallets to their suppliers who had provided those pallets. 52.2 To warn Tatale and Venasti that if they received from their respective suppliers delivery of and retained CHEP pallets which goods were packed until those goods were unpacked in the normal course of trade the Cross-Defendant considered itself entitled to and would demand and procure delivery up of those pallets unless Tatale and Venasti hired those pallets from the Cross-Defendant. 52.3 To take reasonable steps to ensure that suppliers of goods on CHEP pallets to Tatale and Venasti warned Tatale and Venasti that they were not entitled to receive from their respective suppliers delivery of and to retain CHEP pallets on which goods were packed until those goods were unpacked in the normal course of trade or to return unpacked CHEP pallets to their suppliers who had provided those pallets. 52.4 To take reasonable steps to prevent suppliers of goods on CHEP pallets to Tatale and Venasti from supplying goods on CHEP pallets on terms that the pallets be retained until those goods were unpacked in the normal course of trade and that unpacked CHEP pallets be retuned to the suppliers of those pallets. 52.5 To take reasonable steps to prevent suppliers of goods on CHEP pallets to Tatale and Venasti from supplying goods packed on CHEP pallets except on terms that the recipients should immediately unpack those goods and return the pallets to the Cross-Defendant or hire those pallets from the Cross-Defendant. 54 The defendants claim that the plaintiff negligently failed to warn them that they were not entitled to quiet possession of the pallets received from their suppliers. It is submitted that there is no representation by or on behalf of the plaintiff causing any alleged economic loss and that inasmuch as it is pleaded in paragraph 33 that the plaintiff has made representations, the defendants do not plead that the plaintiff knew or ought to have known that the defendants would rely upon those representations. It was also submitted that there was no alleged damage to any property, the consequence of which causes the defendants' economic loss and it is not alleged that the CHEP pallets are in any way defective. 55 It was submitted that a duty of care could not be imposed in this case because it would create an indeterminate liability on the plaintiff's part and it would impair the legitimate pursuit by the plaintiff of its own commercial interest. It was submitted that it cannot be said that any of the alleged acts or omissions of the plaintiff have caused the defendants any loss or damage. All the plaintiff has done was to make demands on the defendants for the delivery up of the pallets in respect of which it is the true owner. 56 As I indicated in the Brambles judgment it was not clear from the former draft pleading on what basis it was or could be claimed that the defendants "did not have the power to protect themselves". I said: [37] … Although there are circumstances in which the law recognises a duty of care, such that will permit the recovery of pure economic loss, such claims present peculiar difficulty: Perre & Ors v Apand Pty Ltd (1999) 198 CLR 180 per Gleeson CJ at 192; Woolcock Street Investments Pty Ltd v CDG Pty Ltd & Anor (2004) 216 CLR 515, per Gleeson CJ, Gummow, Hayne & Heydon JJ at 529. In determining whether a duty exists of liability for pure economic loss, it is relevant to consider the principles concerned with reasonable foreseeability of loss, indeterminacy of liability, autonomy of the individual, vulnerability to risk and its magnitude and the defendant's knowledge of the risk and its magnitude: Perre v Appand per McHugh J at 220 [105].

[71]

[39] … It is not clear from the Pleading on what basis it is alleged that the defendants could not protect themselves. As Mr Coles QC submitted, it was not clear why it was not possible for the defendants to protect themselves by having in place their own hiring arrangement of pallets, or having a storage system that did not depend upon utilising the property of another, the plaintiff's pallets, without fee. That of course may be a matter for trial but the problem with the Pleading is that it does not set out the basis upon which it is claimed that the defendants are vulnerable. That seems to me to be an essential aspect to this claim and should have been properly pleaded. 57 The defendants have rectified their failure to plead the basis of their alleged vulnerability. The defendants claim that if they were to give the pallets to the plaintiff whilst under a contractual obligation to give them to their suppliers, their livelihood would be destroyed or diminished because the suppliers would refuse to deal with them any further. It is not so much a matter of the defendants purchasing their own pallets upon which to store goods (or hiring those pallets) but rather the vulnerable position in which they find themselves (with the acquiescence of the plaintiff) that in refusing to return the pallets to the suppliers they will suffer economic loss - the loss of the business and/or commercial relationship with their suppliers. 58 Although this may seem a little far-fetched, there are complicated aspects to the use of pallets in the industry and, as I have said before in relation to the other claims made by the defendants, much will depend upon the facts as proved at trial. Notwithstanding the cautious words of the High Court in Perre v Apand in relation to this category of case it is appropriate to allow the claim to go forward at this pleading stage. Orders 59 I grant leave to the defendants to file an Amended Cross-Summons and an Amended Commercial List Cross-Claim Statement in the form approved in the Practice Note, subject to:

At a glance

Court

Decision date

Before

Source

Judgment (76 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (10)