Laminex (Aust) Pty Limited v Coe Manufacturing Co & 2 Ors. [1999] NSWCA 370 | Case summary

1 MEAGHER JA: This is an appeal brought by Laminex (Australia) Pty Limited against orders made by James J in the Common Law Division. In certain proceedings the plaintiff, the present appellant, sought leave, pursuant to Part10 rule 2 of the Supreme Court Rules, to proceed against all three defendants in the proceedings. These three defendants are the present respondents viz. Coe Manufacturing Company, Reliance Electric Industrial Company and Reliance Electric Company. There was also a fourth defendant, Reliance Automation Pty Limited but no reason existed to seek leave to proceed against it. That leave was refused and the notice of motion seeking it was dismissed with costs. In the proceedings, the defendants filed a notice of motion seeking to set aside service of the plaintiff's amended statement of claim, or alternatively staying proceedings based on it. His Honour found substantially for the defendants: he set aside service of the amended statement of claim insofar as it contained paras 23-30 and paras 38-45; and he stayed proceedings on the balance of the document conditionally. 2 The plaintiff (appellant) is a company incorporated in New South Wales and carries on business here. It manufactures medium-density pineboard. The first respondent, Coe Manufacturing Company, is a company which was incorporated in, and carries on business in, the United States of America, or more accurately, in the State of Oregon. It sells its goods and services worldwide for use in the forest products industry. 3 The appellant and the first respondent had dealings with one another over a number of years. In about 1980 the first respondent supplied the appellant with a medium density fibreboard forming line, which was used by the appellant at its premises in Wagga Wagga (New South Wales), for manufacturing medium density fibreboard panels. The forming line included a press. In 1991 the appellant was considering how the performance of the press and the loader could be improved, and consulted the first respondent. Out of that encounter a contract eventually emerged. 4 I shall not set out in detail all of the contact between the parties. Suffice it to say that nearly the whole of 1991 and 1992 was occupied by the appellant, either orally or in writing, communicating its desire for the first respondent to supply new "systems" and by the first respondent instructing its delegate to supply that system to the appellant. 5 Things came to a head when on 21 December 1992 the first respondent sent a fax to the appellant enclosing a "revised quotation". It commenced: "This is a REVISED FORM proposal from WASHINGTON IRON WORKS, a division of the Coe Manufacturing Company ("Seller"), for the supply of the parts, equipment and engineering as described and quoted in the following paragraphs. The price will hold firm as quoted, with no escalation if this proposal is accepted prior to February 19, 1993. 1. DESCRIPTION - Five primarily electrical/control related jobs are offered and described below. Each has been reviewed at length with the Buyer's agents and the Seller believes the scope of work and the results that are expected are well understood by both parties. Each job is described in the following paragraphs and the work quoted in Paragraph 8 of this proposal." 6 The five "jobs" were then described. Paragraph three of the quotation read: "SHIPMENT - Seller can have the purchased equipment and documentation ready for shipment to Buyer 14 to 16 weeks after receipt of order and down payment, contingent upon prompt receipt of all necessary information and approvals from the Buyer. It should be noted that the time required for the Buyer to complete the required programming, once the documentation has been delivered, will be significant and must be considered in scheduling the installation and start up of this work. Shipment shall be F.O.B Portland, Oregon, USA, with the exception of the nuclear source. Title and risk of loss shall pass to Buyer upon delivery to Carrier. The nuclear device will be shipped freight prepaid by the manufacturer of the device, who is experienced in the handling and export of such devices. The costs incurred in shipping the nuclear device are estimated to be about US$9,500 Delivered Duty Unpaid. Seller's actual expenses will be billed at cost." 7 Paragraph 4 of the quotation read: " INSTALLATION AND START UP - The extent of the field work involved in the installation of the above items is generally known, but the actual time that it will take can not be accurately estimated because of the unanticipated delays inherent in working with older, existing equipment. Rather than burden the basic project with the risks of the worst start up conditions, it is the Seller's custom to handle start-up services on a Time and Material basis under a separate order. The services of installation supervisors and engineers are NOT included in the quoted prices but will be made available as required. Charges for such services will be based upon Seller's rate schedule in effect at the time service is rendered, plus reasonable travel and living expenses which will be billed at Seller's cost. Purchase of this service is necessary to keep the equipment warranties in full effect. For budgeting purposes it can be assumed the rate for Seller's personnel will be US$550 per day, plus reasonable travel and living expenses. This rate must be held because the personnel to be assigned are key members of the Seller's staff. The nuclear gauge specialist will bill at the rate of about US$1600 per day portal to portal, including travel and living expenses. These services will be billed at costs." 8 Paragraph 6 was in these terms: "INTERPRETATION - The following provisions shall apply to the interpretation and enforcement of the provisions of this Proposal: A. This proposal supersedes all prior understandings, transactions and communications of Buyer and Seller with respect to the matters referred to herein. Without limiting the generality of the foregoing, SELLER'S only warranties of the goods sold under this proposal are those set forth in the attached general condition, which are by reference incorporated herein as though set forth in full in the proposal. B. No amendment or modification of the terms of the Proposal shall be binding upon Seller unless in writing and signed at Seller's home offices by its General manager. Without limiting the generality of the foregoing, BUYER'S ACCEPTANCE OF THIS PROPOSAL IS LIMITED TO THE TERMS OF THIS PROPOSAL, AND SELLER SHALL NOT BE BOUND BY ANY ISSUE OF ANY PURCHASER ORDERS OR OTHER SUBSEQUENT INSTRUMENT RECEIVED BY SELLER FROM BUYER THAT ARE ADDITIONAL TO OR DIFFERENT FROM THE TERMS OF THIS PROPOSAL UNLESS SO SIGNED ON BEHALF OF SELLER. C. The Seller reserves the right to make technical modifications or improvements during the period of design and manufacture. Such changes will not alter the basic functioning nor the established criteria for the project." 9 Paragraph 7 dealt with what the First Respondent was pleased to call "Guarantees" and was in the following term: GUARANTEES - Seller guarantees that the equipment and services offered will result in the operation and performance described, provided certain conditions are met. These conditions include the requirement that the Seller's instructions for installation, modification and programming are followed and that the existing equipment with which the new supply interfaces is in good condition and operates in a consistent manner as originally designed. Also that the Seller's field service representatives are engaged on the job as described in Paragraph 3 above. The Seller has no control over the condition or operation of the plant or the existing primary equipment, and therefore can make no guarantees as to time and cost savings, thickness tolerances and the like beyond those specifics stated in the above paragraphs describing each specific job." 10 Paragraphs 8,9 and 10, which are of considerable importance, are as follows: "8. TERMS AND CONDITIONS OF SALE - The attached "General Conditions for Sale" of Washington Iron Works Boardline Equipment shall govern the terms and conditions of this sale and are specifically made an integral part of this proposal. 9. PRICE - The price of the equipment to be supplied by Seller in accordance with the proposal is: A. One (1) lot of parts, materials and engineering to complete the five jobs described in paragraphs 1A through 1E above: Price, FOB Portland, OR, USA US$ 318,000 B. DEDUCT for removing Item 1C "Mat Weight Display and Control System" from the scope of supply: Price, DEDUCT US$ 74,400 These proposal prices are subject to adjustment as herein provided. Buyer agrees to pay all sales, excise, use or similar taxes or import duties due as a result of this sale and to indemnify and hold harmless the Seller for all or other amounts that are due or may become due. 10. PAYMENT - The Total Purchase Price shall be paid as follows: A. A down payment of twenty five percent (25%) of the Purchase Price shall be paid to Seller on the date a formal purchase order is delivered to Seller. B. Within three (3) weeks of date of down payment the Purchaser shall open an irrevocable letter of credit from the balance of the contract amount confirmed at a first class US Bank Payable in US Dollars issued in the name of Coe Export Corporation, 609 Bank Street, Painesville, Ohio 44077. Partial payment against partial shipments permitted. Payment upon shipment against the letter of credit for the balance of outstanding funds shall be made upon presentation of a "Clean Bill of Lading" and a "Commercials Invoice." Letter of credit shall be established for five (5) months longer than longest specified shipment time and will be extended if necessary. C. Seventy per cent (70%) of the Purchase Price shall be paid to Seller upon shipment of equipment materials, documentation and/or engineering, F.O.B Manufacturing Point. D. The final five per cent (5%) payment on the contract shall be released 15 calender days after start-up. Seller to notify bank of such start-up within two (2) working days of said event and authorize payment in writing upon the completion of the15 day period. Under any circumstances, final release of the balance due on the order shall be made no later than 90 days after shipment. E. In the event of change in the Total Purchase Prices occurring payable thereafter shall be increased or decreased to reflect such change." 11 It will be observed from Paragraph 8 that there has been the incorporation of the first respondent's "General Conditions of Sale". They were set out in an accompanying document and I shall now set out paragraphs 1, 3 and 5 of the General Conditions: "1. SELLER warrants that all goods delivered under this order will confirm to the requirements of this order including the descriptions, specifications and drawings, as attached to the Contract documents as signed by BUYER and will be free from defects in material and workmanship. This warranty is limited to defects appearing and stated in written claims made within one year following date of start-up (ie first operation) or eighteen months following the date of final delivery, whichever comes first, and is conditional upon normal use, maintenance and service of the warranted goods and upon written notice being given to SELLER promptly after BUYER'S discovery of a breach of this warranty. In full discharge of this warranty SELLER shall or replace non-conforming or defective goods, free of charge, FOB SELLER's plant. The provisions of this paragraph shall apply to all such replacements and repaired goods. 2. (Deleted). 3. The foregoing warranty does not cover and SELLER makes no warranty with respect to: (a) Failure or damage due to negligence other than that of SELLER accident abuse, improper installation (other than installations made by SELLER) or improper operation: (b) Goods which have been in any repaired, altered or tampered with by anyone other than an authorized representative of SELLER. (c) Goods damaged in shipment or otherwise without the fault of SELLER. 4. (Deleted). 5. THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES WRITTEN OR ORAL EXPRESS OR IMPLIED INCLUDING BUT NOT LIMITED TO ANY WARRANTY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE." 12 Paragraph 9, of the general conditions, which is somewhat restrictive of the right which would otherwise be the purchaser's (ie the appellant's) read, insofar as relevant: "9.1 ANY ACTION BY BUYER AGAINST SELLER FOR ANY BREACH OF ANY OBLIGATION UNDER PARAGRAPH 1 OR PARAGRAPH 5 HEREOF OR OTHERWISE ARISING IN CONNECTION WITH THE EQUIPMENT OR GOODS PROVIDED TO BUYER HEREUNDER MUST BE COMMENCED NO LATER THAN TWO YEARS FOLLOWING SELLER'S FINAL DELIVERY OF THE EQUIPMENT TO BUYER OR 90 DAYS AFTER THE EXPIRATION OF THE WARRANTY PERIOD SET FORTH IN PARAGRAPH 1 HEREOF WHICHEVER DATE IS LATER. 9.2. In any action arising under this proposal of any resulting agreement, SELLER shall in no event be liable for any incidental, contingent, special or consequential damages, including but not limited to, loss of profits or revenue, loss of use of any item or services to be furnished hereunder, cost of capital, cost of substitute items, facilities or services down-time costs or any claims of BUYER'S customers nor shall SELLER have any liability to BUYER OR TO ANY THIRD PARTY FOR DAMAGES OF ANY CHARACTER, EXCEPT AS PROVIDED IN paragraph 5, for any defect in the design manufacture, installation or operation of any equipment or other goods furnished hereunder whether any such claimed liability is based on contract, tort, (including negligence) or otherwise. The provisions of this paragraph are without prejudice to the provisions of Paragraph 1." 13 And what is perhaps the most important condition of all, paragraph 11.3 of the General Condition, provides: "The terms, conditions and covenants herein shall be governed by the laws of the State of Oregon and venue shall be in Multnomah County, Oregon for any actions arising hereunder." 14 On 29 December 1992 the appellant sent a fax to the first respondent, the second paragraph of which said: "With this in mind, please accept this as formal acceptance of our proposal (3456-PR-92-R1) against which we now issue our purchase order number 7755 with delivery expected 2/4/93 or sooner. A formal order document will be despatched immediately along with the necessary deposit monies, however, I would ask you to progress the necessary arrangements upon receipt of this Fax. In order to expedite the earliest delivery possible." 15 On 6 January 1993 the appellant telegraphically transferred A$118,427.37 to the first respondent. This was a down payment of 25% of the purchase price (see para 10Aof the first respondent's revised quotation (supra)). 16 On 21 January 1993 the first respondent sent another fax to the appellant, two paragraphs of which were in the following terms: "First, we want to thank you for the order of the press upgrade work presented in our quotation 3456-PR-92 R1 of December 21, 1992. We have received the down payment and are considering your FAX of December 29, 1992, with the purchase order number it contained, (7755) as sufficient commitment on your part for us to proceed with the work. Our accountants, however, are anxious to complete the formalities of this order and would appreciate receiving a formal purchaser order as soon as possible. This, and the opening of the letter of Credit, are matters that need to be completed in the near future. Is there anything we can do to help in finalizing these steps?" 17 On 25 January 1993, the appellant caused a letter of credit to be opened in favour of the first respondent for US$239,100 which, it was accepted, was the balance of the purchase price. About ten days later it sent a fax to the first respondent saying: "Find following - Our order for the control upgrades. Quote No: 3456-PR-92: and Laminex specifications. A letter of credit has been raised in your favour." 18 The "order" in this fax is dated 27 January 1993, when the "goods" are described as "supply of parts, equipment and engineering as per your proposal 3456-PR-92-R1 and Laminex specifications, terms and conditions attached." Specifications were indeed attached, but, presumably by hazard, terms and conditions were not. From subsequent correspondence it seems clear that the first respondent was under the impression that the composite phrase "Stipulations, terms and conditions" was a grandiose phrase for the specifications. For the appellant, "specifications" was one thing, "terms and conditions" quite another. 19 A reading of the documents which I have endeavoured to summarize would suggest that the contract between the appellant and the first respondent - and everyone agrees that there was such a contract - probably consisted, as James J found, of the fax containing an offer from the first respondent to the appellant of 21 December 1992 and its acceptance by the appellant in its fax of 29 December 1992. 20 The only serious argument as to the nature of the contract pursued by the appellant, both at first instance and on appeal, involved the alleged incorporation of the appellant's standard "terms and conditions" by its fax to the first respondent of 27 January 1993. It is difficult to take this argument seriously when those "terms and conditions" were never drawn to the first respondent's attention. 21 The appellant had no contractual relationships with the second, third or fourth respondents. However, the first respondent did, as far as the second and third respondent are concerned. Pursuant to such contracts they were obliged to supply software (and possibly other computer equipment) in aid of the press and loader. The appellant submitted (and I see no evidence to the contrary) that the installation of the goods (together with the software) showed that the first respondent's goods (or at least their installation) were defective, as a result of which the appellant's plant could not operate at all between 25 October 1993 and 17 November 1993, and only at a reduced capacity between the latter date and July 1994. By reason of this loss of production the appellant, so it is said, suffered loss of profits totally nearly A$7m. 22 It was these facts which led to the current litigation. The appellant filed a statement of claim in the New South Wales Supreme Court on 16 October 1995. On the same day the appellant commenced proceedings in the United States, in a Circuit Court of the State of Oregon for the County of Maltnomah. None of the respondents has filed an appearance in the New South Wales proceedings. Each of them has filed an appearance in the Oregon proceedings. The appellant's proceedings in Oregon have, or its application has, against the opposition of all respondents, been dismissed without prejudice to the validity of its claims and without prejudice to Laminex "refiling its complaint at any time in Oregon or another US Court". However, on 25 July 1996, two sets of proceedings, one by the first respondent, and one by the other respondents, were initiated in Oregon claiming a declaration that the only proper venue for the hearing of the disputes between the parties was Multnomah County and an injunction restraining the appellant from further prosecuting claims arising out of the same facts in Courts of Australia. In December 1996 each set of proceedings was dismissed, the former on the ground that 'another action is pending in Australia between the same parties for the same cause", the latter on the ground that the Courts of Oregon had no jurisdiction over the appellant. The first respondent has appealed; the other respondents have not. 23 It is now convenient to examine the structure of the appellant's statement of claim (in its amended form). The core of it, although relegated to near the end of the document, is contained in paragraphs 38-45. It alleges a contract between the appellant and the first respondent, express and implied warranties that the goods sold pursuant to that contract were of merchantable quality and were reasonably fit for the purpose for which they were acquired, breaches of those warranties and damages flowing from those breeches. 24 Another cause of action was alleged in paragraphs 23-30. This was breach of sections 71 and 74 of the Trade Practices Act, which imply warranties to substantially the same effect as those set out in the contract: viz. warranties of merchantable quality and fitness for their purpose for which they were acquired. It is not easy to see why there should be this duplication. 25 Another group of paragraphs is 31-37, which allege breaches of ss 52,53(a), 53(aa) and 51A of the Trade Practices Act. These sections all deal with misrepresentations. In the present case the alleged misrepresentations are, in effect, that the goods were of merchantable quality and fit for their purpose; thus adding yet another head of duplication. 26 A fourth cause of action is pleaded in paragraphs 18-22. It is in tort against the second, third and fourth respondents. It alleges that the first respondent requested the other respondents to supply it with software to be used in upgrading the appellant's plant, whereby they became subject to a duty to the appellant to exercise reasonable care in providing software for use in the appellant's plant, a duty which they breached. Two comments should be made as to this cause of action: first, that once more it involves a measure of duplication: it alleges in effect that the software supplied to the first respondent and thus sold to the appellant was not of merchantable quality. Secondly, his Honour said of the fourth respondent: "The inclusion of Reliance Australia as a defendant was merely an attempt to lend some spurious Australian colour to the proceedings against the Reliance defendants. There were scant references to Reliance Australia, as distinct from the Reliance defendants, in the evidence and there was no evidence that Reliance Australia, as distinct from the Reliance defendants, had committed any tort." 27 Those remarks are, in my opinion, entirely accurate. 28 The fifth and final cause of action (although the first pleaded) was a cause of action in tort against the first respondent (para7): it alleges that the first respondent became subject to a duty of care in providing advice and assistance to the appellant in improving that company's forming line by modifying and upgrading its plant and equipment, and that the first respondent committed a breach of that duty of care. 29 It is necessary to examine a little further the nature of the contract between the appellant and the first respondent. It consisted, as I have said (and as his Honour found) of a faxed offer from the first respondent on 21 December 1992 and an acceptance of that offer. In determining the proper law of the contract, one has an offer emanating from Oregon and an acceptance received in Oregon. One therefore has a contract made in Oregon. Moreover, on the part of the first respondent, it was to be wholly performed in Oregon. Paragraph 3 of the quotation provided that shipment of the goods would be F.O.B. Portland, Oregon, USA and that title and risk would pass to the buyer on delivery of the goods to the carrier. As far as the appellant was concerned, it was its duty to ensure that the first respondent was paid in Oregon. Thus, on both sides, the contract had to be wholly performed in Oregon. Those facts alone would compel a finding that the proper law of the contract was the law of Oregon. If one adds to these the additional fact that paragraph 11.3 of the general conditions for sale provides "The terms, conditions and covenants herein shall be governed by the laws of the State of Oregon", the position is even clearer. I might add that I assume that the usual term "proper law" is what is meant by the expression "governing law" in Part 10 r.2 of the Supreme Court Rules. The next question is whether the contract may accurately be described as a contract of sale. The alternative view, and one which was embraced by learned senior counsel for the Appellant, was that it was a contract for sale-and-installation. Again and again the contract provides that "The buyer will be responsible for the installation"; it is true that the contract also provides that the first respondent (the seller) will make its personnel available if required for work involved in the installation, but pursuant to separate further contracts. The appellant's contention must therefore be rejected. 30 It is against this background that one must consider the current litigation. The appellant sought leave pursuant to Part 10.r.2 of the Supreme Court Rules to proceed on its amended statement of claim against the first, second and third respondents. The respondents by their notice of motion claimed, amongst other relief, an order staying the principal proceedings on the ground that the Supreme Court of New South Wales was clearly an inappropriate forum for the trial of the proceedings. In effect, his Honour found for the present respondents on both applications. I might respectfully add that in my view his Honour was correct in all respects. Indeed, once it was conceded, as it had to be , that the proper law of the contract was the law of Oregon, the dismissal of the appellant's application was decided. After that result the judge had to accede to grant the relief sought by the respondents, lest there be two concurrent sets of proceedings, one in New South Wales and one in Oregon, a monstrum horrendum. 31 In the process of reaching their ultimate results, however, it is necessary to consider the claims made by the appellant under the Trade Practices Act. These claims fall into two groups. First, there are the claims under the statutorily implied warranties considered in ss.71 and 74. In regard to these one must note the provisions of s.67. which says: "Conflict of laws 67.Where (a) the proper law of a contract for the supply by a corporation of goods or services to a consumer would, but for a term that it should be the law of some other country or a term to the like effect, be the law of any part of Australia; or (b) a contract for the supply by a corporation of goods or services to a consumer contains a term that purports to substitute, or has the effect of substituting, provisions of the law of some other country or not a State or Territory for all or any of the provisions of this Division; this Division applies to the contract notwithstanding that term." 32 No problem arises under paragraph (a), because the law of Oregon is the proper law of the contract, whether one relies on the express provision of the contract or not. I cannot see but that, however, paragraph (b) does create a problem: the contract between the parties does not permit the operation of "this Division" in that it impliedly excludes ss71 and 74. The second group consists of allegations made under s.52 and other sections in Part 5 Division 1 of the Act. It was suggested by the respondents that there were exactly equivalent provisions to the Trade Practices Act in Oregon law. In this regard both the Oregon Uniform Commercial Code and the Oregon Unlawful Trade Practices Act were prayed in aid. However, the comparison is not precise. For example, there is in Oregon no equivalent of s.51A of the Trade Practices Act. Moreover, it is possible to exclude the Oregon warranties by statute, and, from the appellants' point of view, what is worse it is possible according to the law of Oregon to exclude by contract the provisions of the Australian legislation. Both results have been effected by Paragraph 6 of the contract between the parties. To make matters even worse still, paragraph 9 of the contract imports a two year limitation on all actions brought by the buyer against the seller. 33 In these circumstances, whilst I am in general agreement with the orders of James J, which are in favour of the respondents, I should amend them slightly. His Honour imposed a condition on the stay which he granted to the following effect "Conditionally upon the first defendant in any fresh proceedings brought by the plaintiff in the United States not seeking to rely on paragraph 9.1 of the general conditions of sale." 34 I should repeat that condition, but also add a condition that the respondents should permit the claims now made in paragraphs 23-37 (both inclusive) be tried on their merits. 35 I am therefore of the view that the following orders should be made: 1. The second order made by James J on 19 December 1997 be altered by the addition of the following words: "and also conditionally on the defendants permitting the claims made by the plaintiffs in paragraphs 23-37 (both inclusive) be tried on their merits". 2. Appeal otherwise dismissed. 3. The appellants to pay the respondent's costs. 36 STEIN JA: I agree with Meagher JA with one exception. 37 I do not see that s 67 of the Trade Practices Act 1974 (TPA) has any application to the subject contract. Section 67(b) applies to a contract for the supply of goods or services by a corporation to a consumer, where such contract contains a term which purports to substitute the law of some other country for any provision in Division 2, eg. the warranties contained in ss 71 and 74 of the Act. 38 Section 4 of the TPA defines 'corporation' as, relevantly, a trading corporation formed within the limits of Australia. Accordingly, one must read s 67(b) to mean that where an Australian corporation supplies goods or services to a consumer, the terms of the contract cannot substitute provisions of any country outside Australia inconsistent with those in Division 2. In the event that a contract does so purport to do, the Division applies notwithstanding. 39 Thus understood, it is plain that the contract with which we are concerned was not within s 67(b). 40 As to the claim made under ss 51A and 52 of the TPA, clearly s 67 does not apply, since those provisions are in Division 1 and not in Division 2. 41 Accordingly, I see no reason to add any further conditions to the orders made by James J. I would dismiss the appeal with costs. 42 COLE AJA: I agree with Meagher JA.

Laminex (Aust) Pty Limited v Coe Manufacturing Co & 2 Ors.

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Judgment (12 paragraphs)

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