PIHA Pty Ltd v Vinidex Tubemakers Pty Ltd

REASONS FOR DECISION ON MOTION FOR TRANSFER OF PROCEEDINGS AND FOR SECURITY FOR COSTS

Background to these Proceedings 1 On 3 February 1999 PIHA Pty Ltd (PIHA) filed an application seeking a declaration that pipeliner material supplied to it by Vinidex Tubemakers Pty Ltd (Vinidex) under contract was not in accordance with that contract, damages at common law and damages pursuant to s 82 of the Trade Practices Act 1974 (Cth). There is also a claim for an order under s 87(1A) of the Trade Practices Act that Vinidex indemnify PIHA for losses caused to it arising out of the supply of polyethylene pipe by PIHA. 2 The application was accompanied by a statement of claim in which it is said that Vinidex is a trading corporation and the supplier of polyethylene product in trade or commerce. It is asserted that by a contract dated 20 May 1998 PIHA agreed with Transfield Pty Ltd to supply and install polyethylene liner of Grade PE80C for use inside a steel slurry pipeline associated with the Century Zinc project in North Queensland. The slurry pipeline is to transport mined material from the Century mine site to the Karumba Port, a distance in excess of 300 kilometres. Transfield was the main contractor for the project which is being constructed for Pasminco Century Mine Ltd. 3 It is said that by an agreement in writing Vinidex agreed to supply 304,000 metres of high density polyethylene pipe of Grade PE80C to PIHA for the purpose of lining the pipeline. The agreement was contained in letters of 21 May 1998 and 22 May 1998 from PIHA to Vinidex and from Vinidex to PIHA respectively, together with PIHA's purchase order 14856 of 23 May 1998. PIHA says it was an express term of the contract that the supply of the pipeliner would be in accordance with its standard terms and conditions. Terms and conditions of the master contract for the Century Zinc project between Pasminco and Transfield were incorporated where not otherwise inconsistent with the terms and conditions of the contract between PIHA and Vinidex. Moreover it is said to have been an express term of the contract that Vinidex would provide PIHA with a comprehensive quality assurance package and plan suitable for the supply of polyethylene pipe of Grade PE80C for the purpose of lining a slurry pipeline. 4 PIHA's standard terms and conditions at the time provided, inter alia, that the law of Western Australia would be the proper law governing the order for goods and that the parties accepted and submitted to the jurisdiction of the courts of Western Australia. They also contained a warranty by the supplier that the goods would conform with the description and specifications in the order and that they would be of good merchantable quality and fit for the known purpose for which they were supplied. The quality assurance plan provided by Vinidex to PIHA in late May 1998 adopted what turned out to be superceded Australian standards. The relevant applicable standards were said to require polyethylene to pass a "notch fracture" toughness test. Vinidex is said to have breached the contract by failing to provide a suitable quality assurance plan for the supply of the pipe. Between July 1998 and October 1998 it is alleged Vinidex, in breach of the contract, supplied polyethylene pipe which was of a lower strength, grade and quality than Grade PE80C, did not have the performance characteristics of that grade, was unsuitable for the Century Zinc slurry pipeline and was not in accordance with the relevant Australian Standard as it did not meet the requirements of a notch fracture test. 5 Referring back to the letters and purchase order constituting the contract, it is pleaded in the statement of claim that Vinidex, by its statement that the pipeliner was of Grade PE80C in its letter of 22 May 1998 and by its conduct in supplying the pipeliner, represented that it was of a particular standard, quality and grade and had the performance characteristics of polyethylene Grade PE80C. In reliance on these alleged representations PIHA says that it accepted delivery of the product and between August 1998 and November 1998 lined about 120 kilometres of the slurry pipeline with the material supplied. 6 Because of the inadequacies of the pipeliner PIHA says it was obliged to remove it and replace it with a suitable polyethylene liner. The representations made in the contract document and by the actual supply of the polyethylene are said to have been false in respect of the strength, grade, quality and performance characteristics of the product and its unsuitability to line the Century Zinc slurry pipeline. 7 PIHA asserts that it has suffered loss and damage as a result of Vinidex's representations. 8 Vinidex filed a conditional notice of appearance on 17 February and on the same day filed a motion seeking security for costs from PIHA and for an order that the application be removed from the Western Australian District Registry of the Federal Court to the Brisbane District Registry. The motion was amended on its return day to seek transfer of the action to the Supreme Court of Queensland. An order for removal to the Federal Court's Brisbane Registry was sought in the alternative.