Sangain Pty Limited v Italform Pty Limited [2009] NSWSC 74 | Case summary | Zoe

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Sangain Pty Limited v Italform Pty Limited [2009] NSWSC 74 | Case summary | Zoe

[11]

REIN J: This is an application by the plaintiff Sangain Pty Limited ("Sangain") for adoption of a Referee's report. The application is opposed by the defendant, Italform Pty Limited ("Italform").
Sangain entered into a contract for the purchase of two tower cranes manufactured by an Italian company FMGRUSPL ("FMG"), one for the price of $767,000 and one for a price of $787,000, for a total, therefore, of $1,554,000.
Sangain was a craneage contractor and was endeavouring to obtain a contract with Karimbla Pty Ltd ("Karimbla") which was constructing a large development at Rhodes. It was Sangain's case that in entering into the contract for purchase of the two cranes ("the crane contract") Italform's managing director, Mr Antonio Foini ("Foini"), represented to Sangain's managing director Mr Sanna ("Sanna") that the cranes to be built to a height suitable for the Rhodes contract could be delivered within eight weeks of the date of acceptance by Sangain of the crane contract.
The cranes were not delivered within eight weeks of the date of acceptance and when delivered were not, in Sangain's case, in a form capable of use.
Karimbla, in July 2006 (i.e. four months after the crane contract was formed), terminated the craneage contract and Sangain, having paid for the two cranes, was left with unusable cranes (or parts of cranes) and a lost craneage contract with damages imposed by Karimbla.
The learned Referee Mr Robert Hunter QC concluded that: (1) the representations or assurances, as the Referee describes them, alleged by Sangain to have been made to it by Italform on several occasions before 23 March 2006 were in fact made; (2) that there was no basis for the representations; (3) that Sangain relied on the representations in entering into the crane contract (and the craneage contract, as did Karimbla): see [1], [2] and [7] of the report, the assurances having induced a belief on the part of Sanna that Italform "would provide cranes suitable for the Rhodes project within eight weeks": see [71] of the report. (4) that Italform engaged in misleading and deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth) ("TPA") and s 42 of the Fair Trading Act 1987 (NSW) ("FTA"); (5) that the crane contract was entered into on 23 March 2006 by exchange of a quotation from Italform and a letter from Sangain; (6) that the crane contract did not contain Italform standard terms and conditions; (7) that the specifications for the cranes ordered by Sangain were provided by Foini; (8) that the dimensions of the cranes were varied by agreement recorded on 26 May 2006, and that these did not extend the time needed for completion of the cranes; (9) that the written contract required delivery of the cranes within 90 - 150 days of order: see [75] of the report; (10) that the contract required erection of the cranes by Italform: see [79] of the report; (11) that not all parts and manuals in appropriate form necessary for erection and functioning of the cranes were ever delivered by Italform: see [117] - [120] of the report; and (12) that Sangain's damages for breach of s 52 of the TPA and s 47 of the FTA was $1,929,204 exclusive of GST.
The Referee rejected Sangain's case that there was a collateral contract or promissory representation that the cranes would be delivered within eight weeks as this was inconsistent with the express terms of the contract. He rejected a case of estoppel from reliance on the written terms of the contact because that case had not been pleaded: see [74] of the report. He rejected Sangain's claim for expectation losses - an additional $350,000 was claimed - but said that if he was wrong in that conclusion or Sangain was permitted to advance a claim of promissory estoppel he would limit the loss of profits to a 60 week craneage contract as calculated in what was Exhibit Q before him. He also rejected a case based upon promissory estoppel saying that it was not pleaded and he was not prepared to make a finding that the representation was made. He held that, were Sangain entitled to succeed in its promissory representation case, loss of profits from the lost craneage contract be as set out in a schedule to the report: see [138] of the report.
The Referee found that Italform and Foini had engaged in misleading and deceptive conduct by representing that the cranes could be delivered within eight weeks and there was no dispute as to how damages should be calculated except for three items which the Referee resolved favourably to Sangain: see [129] of the report.
The Referee found that the representations made were made not only to Sangain but also to Karimbla which would not have awarded the contract to Sangain had the true position in relation to delivery time been stated: see [1] - [7] of the report.
Mr F Corsaro SC and Ms F Clark appeared for Sangain at the reference and before me on the motion. Mr D Ryan SC with Mr F Salama appeared on the motion. Mr Ryan did not appear in the reference but Italform was there represented by Senior Counsel. The reference ran for six days.
The entire dispute (rather than specific limited issues) was referred to the Referee.
The Referee at [138] - [140] of his report noted that "[138] I have seen no utility in providing a separate assessment of any discrete damages in contract beyond Schedule [B] to this report particularly in view of my finding that damages would not extend to loss of profits beyond that contemplated craneage contract with Karinbla which had been lost prior to the expiration of the delivery time under the conditions of the contract. [139] Since the conclusion of the hearing I have received several chronologies which have included events dependent upon matters not in evidence - mainly going to the question of mitigation. In view of the findings I have made I see no utility in giving leave to open the respective cases of the parties to admit any further material. [140] In my view, Sangain is entitled to damages in the sum of $1,929,204 ex GST as summarised in Schedule 4 to this report and as particularised in Schedule 3."

[12]

The defendant's opposition to adoption of the report is essentially that since the Referee concluded that contractually Italform had up to 150 days to deliver the cranes, his conclusion that Sangain relied on representations made prior to the date of acceptance of the quote was quite inconsistent and was left unexplained. As part of its argument Mr Ryan relied on the proposition that: (1) misleading and deceptive conduct has to be viewed objectively; and (2) that even if Sanna did believe subjectively that the cranes would be delivered within eight weeks (and Mr Ryan accepted that the Referee had found that and that his finding could not be challenged) that belief was not objectively reasonable since if Sanna knew that the quotation provided by Italform referred to "90/150" days delivery that must have lead a reasonable person to recognise that the previous nascent representation could no longer be relied on. Mr Ryan referred me to the High Court decision in Parkdale Custom Built Furniture Pty Limited v Puxu Pty Limited (1982) 149 CLR 191 at 98, Campomar Sociedad Limitada v Nike International Ltd [2000] HCA 12 in relation to the need for an objective frame of reference when considering a class of consumers. (3) He also referred to Full Federal Court's decision in Sutton v A.J. Thomson Pty Limited (1987) 73 ALR 233 at 239-241 dealing with the need for an objective consideration of whether or not a representation was calculated to induce the representee to enter into a contract (although the Court did note that the respective positions of the parties had to be taken into account). Like Sutton v A.J. Thomson Pty Limited, the present is a case of representation to one person, not to consumers generally, and he submitted that the receipt of the invoice containing the "90/150 days" delivery period ought objectively to have been read by the Referee as depriving the earlier representation of an eight week delivery period of any force.
There was no disagreement as to the principles to be applied by the Court in its approach to the question of whether or not the report should be adopted which principles have been helpfully summarised by McDougall J in Chocolate Factory Apartments v Westpoint Finance [2005] NSWSC 784 at [6] - [7].
There was no dispute that a cause of action based on s 52 of the TPA is a statutory remedy wholly independent of claims in tort or contract: see Brown v Jam Factory Pty Limited (1981) 53 FLR 340 at 348 per Fox J and see Frith v Gold Coast Mineral Springs Pty Limited (1983) 47 ALR 547.
The fact that a contractual remedy is denied to a plaintiff cannot be determinative of whether a remedy is available under s 52. If a person were aware that a contractual term would preclude a claim in contract that might be relevant as a matter of fact to whether he continued to rely on a previous representation but I do not think it must follow of necessity that recognition by a representee that the contract contained a promise in different terms or inconsistent with what has been stated previously necessarily undoes the effect of the prior representation. The question of whether a clause in the contract has undone the effect of a representation has been considered in a number of cases dealing with disclaimers and exclusion clauses in contracts: see Miller's Annotated Trade Practices Act, 28th ed (2007) Thomson Law Book at paragraph 1.5.2.75. As was said by Burchett J in Poseidon Limited & Anor v Adelaide Petroleum NL & Ors [1992] ATPR 41-164 at 40,235: "[w]here there is belief in the good faith of represented intentions, there may be the less concern about the letter of a contract."
Sanna believed (and was accepted by the Referee as believing) that delivery would be made within eight weeks (and Karimbla, on the Referee's finding, did as well). Whether there has been reliance on a representation and whether such reliance has caused loss is a question of fact: see Wardley Australia Limited v Western Australia (1992) 175 CLR 514 at 525 per Mason CJ referring to the discussion in March v SE and MH Stramare Pty Limited (1991) 171 CLR 506 on the common sense concept of causation. I am not persuaded that the Referee fell into error by proceeding on the basis that the representations made prior to 23 March continued to have effect when Sangain advised, on 23 March, acceptance of the quotation sent to it by Italform. In my view it as open to the Referee to reach that conclusion and in any event no argument to that contrary was advanced by Italform (see Tabs 3 and 5 of Exhibit 1 which contain the defendant's written submissions and it was not suggested that oral submissions before the Referee went further on that point). As Mr Corsaro submitted, Italform, not having advanced before the Referee such an argument, ought not be permitted to now do so, it having clearly fastened its colours to a case that the representation (and similar subsequent representations) was never made. Italform did state in its submissions to the Referee that reliance was an issue but never addressed the issue at all and did not put any argument of the kind now advanced. In my view Italform cannot legitimately attack the report for failing to deal with an issue that that was not ventilated before the Referee and the Referee's conclusion that there was reliance in entering into the craneage contract and the crane contract bespoke no error of law or failure to consider evidence.
This conclusion disposes of the matter and leads to adoption of the report but I should record my views on two other matters. First Mr Ryan accepted that the Referee's findings were that Italform had breached its contract even assuming a 150 day delivery period. Sangain therefore is entitled to damages for that breach. Mr Ryan accepted that this was so but argued that the matter should be referred back to the Referee for determination of quantum of damages including determination of mitigation. In this context Mr Ryan argued that it just could not be the case that all of the parts of the cranes were only worth their scrap metal value. In part this argument centred on whether the Referee had, as it were, hived off the damages issue and the mitigation issue. I have set out [138] of the report which Mr Ryan relies on in this regard. I do not read the Referee as having hived off the question of damages, but rather he has refused to entertain submissions based on material not lead before him. He concluded, based on the evidence before, him that Italform's mitigation argument was "hollow" and it is not suggested that was not a view he was entitled to take. The effect of [138] is to draw attention to the fact that he did not need to enter into consideration of Sangain's claim for lost profits because he did not regard that as available and hence that the amount of damages to which Sangain would be entitled in contract would be the same as that under s 52 of the TPA.
Sangain did run before me an argument that if I were to hold that the Referee's report was wrong to conclude that Sangain was entitled to the amount determined by the Referee under s 52 of the TPA then the Referee fell into error in rejecting the claim based on promissory representation. Mr Corsaro accepted that if a claim in contract would yield the same result as the TPA claim (albeit without the lost profit claim) there would be no opposition by Sangain to adoption of the report.
The Referee did not address the question of the damages to which Sangain was entitled by reason of breach of the crane contract (save in relation to the loss of profits claim). I raised with the parties the fact that he made findings of fact, which, assuming a contractual delivery period of "90/150" days, established breach. Apart from the question of mitigation of damages and the loss of profits claim there appeared to be no dispute that the findings established breach of contract or that the damage would be the same as that found by the Referee i.e. $1,929,204 exclusive of GST.
If the claim were one based on breach of contract for failure to deliver after the date that Karimbla terminated the craneage contract, loss of profits would not be causally related to the breach. So far as mitigation is concerned it is clear that the Referee was not persuaded that Sangain failed to mitigate. The onus of establishing a failure to mitigate lay upon Italform: see Watts v Rake (1962) 108 CLR 158 at 159 (per Dixon CJ, Menzies and Windeyer JJ), TCN Channel 9 Pty Limited v Hayden Enterprises Pty Limited (1989) 16 NSWLR 130 at 158F (per Hope JA with whom Preistley JA and Meagher JA agreed) and Burns v M.A.N. Automotive (Aust) Pty Limited (1986) 161 CLR 653 at 677 (per Brennan J).
In my view Italform should have lead all the evidence it wished to rely on in respect of mitigation at the reference. It appears that it did present, through an expert (Mr Whitten), evidence on this topic. It would not be appropriate to permit any further exploration of that topic. However, as I mentioned to counsel, consideration does need to be given as to whether upon payment of the sum found to be due ($1,929,204 exclusive of GST) the parts of the cranes held by Sangain should be handed over to Italform for it to do what it wishes with it. I gave the parties an opportunity to reach agreement on this but they were unable to do so.
I will hear arguments on that limited question and the question of costs. Conclusion
It follows, in my view, that the report should be adopted and that there should be judgment for Sangain in the amount of $1,929,204 exclusive of GST, but I will invite the parties to bring in short minutes of order after I have dealt with the question of the parts and the costs.