BETWEEN : SWANZONE PTY LTD (IN LIQ) (ACN 105 890 337)

PROSPERITY DEVELOPMENT (AUST) PTY LTD (ACN 105 890 337)

Practice and procedure - Application for summary judgment by plaintiff - Moneys owing under contract - Whether triable issue - Turns on own facts

Sale of Goods Act 1895 (WA), s 14(ii)

Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18

Eng Mee Yong v Letchumanan [1980] AC 33

Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87

Scaffidi Nominees Pty Ltd v Scaffidi & Anor, unreported; FCt SCt of WA; Library No 960588; 11 October 1996

Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598

White v Johnston (1886) 8 ALT 53

Anglo-Italian Bank v Davies (1878) 38 LT 197

Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VicLawRp 47; [1947] VLR 332

Bernstein v Pamson Motors (Golden Green) Ltd [1987] 2 All ER 220

Engineering Plastics Ltd v J Mercer & Sons Ltd [1985] 2 NZLR 72

Field v Commissioner for Railways for New South Wales [1957] HCA 92; (1957) 99 CLR 285

Grant v Australian Knitting Mills Ltd [1936] AC 85

Hardy & Co v Hillerns and Fowler [1923] 2 KB 490

Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365

Jacob v Booth's Distillery Co (1901) 85 LT 262

Kwel Tek Chao & Ors v British Traders and Shippers Ltd [1954] 1 All ER 779

Lewkowski v Bergalin Pty Ltd, unreported; FCt SCt of WA; Library No 7675, 26 May 1989

Morgan & Son Ltd v S Martin Johnson & Co Ltd [1949] 1 KB 107

Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109

Simaan General Contracting Co v Pilkington Glass Ltd [1987] 1 All ER 345

State Bank of Victoria v Parry [1989] WAR 240

Whitehall Holdings Pty Ltd & Ors v Custom Credit Corp Ltd, unreported; FCt SCt of WA; Library No 9189; 13 December 1991

1 MASTER NEWNES: This is an application for summary judgment under O 14 of the Rules of the Supreme Court in which the plaintiff seeks judgment in the sum of $317,000 and interest, pursuant to an agreement made between the plaintiff and the defendant.

2 On 3 September 2003 the plaintiff and the defendant entered into a written agreement by which the plaintiff agreed to sell, and the defendant agreed to purchase, certain furniture listed in an annexure to the agreement for the total sum of $374,447. The annexure lists more than 800 items of furniture, of various types.

3 The agreement provided that an amount of $3,407 was to be paid by the defendant on the signing of the agreement and the balance of the purchase price was to be paid by an instalment of $34,040 on or before 30 September 2003 and a further instalment of $337,000 on or before 2 March 2004.

4 Prior to the agreement the plaintiff was trading from premises in Catalano Circuit in Canning Vale. The furniture was located at those premises. On 3 September 2003 the defendant took a sublease of the premises from the plaintiff and thereby took possession of the furniture. The defendant apparently thereafter conducted a retail furniture business from the premises.

5 The defendant paid the sum of $3,407 on 2 September 2003 and a further sum of $20,000 on 20 January 2004. It has not paid the balance of the purchase price of $317,000 and the plaintiff has brought this action to recover that sum and interest on it.

6 On 18 December 2003 an order of this Court was made winding up the plaintiff and the current action is brought by the liquidators.

7 The defendant contended on this application that the plaintiff was not entitled to judgment as the defendant had a counterclaim for a sum greater than that claimed by the plaintiff and the defendant was entitled to set off the amount of the counterclaim against the sum claimed by the plaintiff.

8 The material terms of the agreement are as follows:

"2.3 Subject to clause 2.4, the Furniture Stock is sold in the condition as inspected by the Buyer prior to entering into this Contract and the Seller represents and warrants that the Seller has good title to the Furniture Stock.

2.4 It is acknowledged by the parties that some Furniture Stock could not be inspected prior to entering into this contract due to its packaging and other reasons. This stock must be of merchantable quality failing which the Buyer may return the stock not of merchantable quality and the Seller shall refund to the Seller [sic, Buyer] that portion of the purchase price that is properly attributable to the rejected Furniture Stock.

2.5 The Purchaser acknowledges that except as expressly provided in this Contract, no warranty or representation of any sort is or has been given or made by the Seller or any agent of the Seller with respect to the Furniture Stock or any part thereof and any implied warranty, other than any warranty implied by statute law, is hereby negatived."

9 The defendant's counterclaim was said to arise by virtue of cl 2.4 of the agreement.

10 A director of the defendant, Sun Xiu Lian ("Madam Sun"), has sworn affidavits dated 15 September 2004 and 4 November 2004 in opposition to the plaintiff's application for summary judgment.

11 According to Madam Sun, in late September 2003 she informed the managing director of the plaintiff, Mr Yen, of complaints from customers who had bought furniture from the defendant. Madam Sun says that in or about October 2003 she informed Mr Yen that substantial amounts of the furniture, including sofa lounges, beds and mattresses, were defective and not of merchantable quality and that they were rejected by the defendant. Mr Yen told her that there would be no difficulty in the defendant returning the stock as the plaintiff had had problems with defective furniture stock and the plaintiff had declined to pay some of the manufacturers of that stock.

12 Madam Sun says that she subsequently complained again to Mr Yen that the defective stock was affecting the defendant's business and must be removed as it was taking up a lot of the defendant's warehouse and showroom space. Madam Sun says that in the period October to December 2003 she "continuously complained" to Mr Yen about defective stock and was informed by Mr Yen that there were disputes among the plaintiff's shareholders and that he would attend to the return of the defective stock as soon as those shareholders' disputes were resolved.

13 According to Madam Sun, Mr Yen informed her in about December 2003 that the plaintiff may be wound up due to unresolved disputes among the shareholders and that any issue the defendant may have with the defective stock would need to be addressed to the liquidators. Madam Sun says in about January 2004 she was informed by Mr Yen that the liquidators would deal with the problems with the defective stock.

14 Madam Sun says that in about January 2004 she had a meeting with Mr Francis, one of the liquidators, and complained to him about the defective stock. According to Madam Sun, she told Mr Francis that the defective stock must be removed as it was occupying substantial areas of the defendant's business premises and affecting the defendant's business.

15 By a letter dated 1 February 2004, Madam Sun wrote to the liquidators saying that a substantial portion of the furniture stock was not of merchantable quality and seeking a refund in respect of that stock. Madam Sun also demanded that the plaintiff remove the rejected stock, failing which a storage fee would be charged to the plaintiff.

16 There has since been extensive correspondence between the liquidators and the defendant about the matter, a good deal of it on a "without prejudice" basis. It has not been possible for the parties to resolve the matter.

17 According to Madam Sun, the defendant has received many complaints from customers who purchased furniture from it. Annexed to Madam Sun's affidavit of 4 November 2004 are copies of letters from three customers complaining about defects in furniture purchased from the defendant. There is also annexed to that affidavit a copy of a letter from the president of Fu Yu Furniture Factory in Shenzhen People's Republic of China, apparently one of the manufacturers of the furniture, in which it is acknowledged that there have been quality problems with some of the furniture it has manufactured and, in particular, problems with colours of the sofa lounges fading. It is not, however, apparent from the affidavit to which items of furniture purchased by the defendant that letter relates nor is it apparent to what extent the defective stock to which Madam Sun has referred consists of goods manufactured by the Fu Yu Furniture Factory.

18 Madam Sun says that the defendant pays rental outgoings and business outgoings of about $311,546 per year in respect of the defendant's business premises at Canning Vale. According to Madam Sun, the defective furniture stock occupies most of the storage and display area of the premises and has done so since September 2003. As a result the defendant has suffered a loss of business income estimated at a gross figure of $1,100,000. The defendant also claims storage fees of $1000 per day for the furniture stock which it says it has rejected.

19 The principles applicable to an application of this sort are well known. The overall legal burden of persuading the Court that the claim is a good one and that the plaintiff is entitled to judgment rests throughout on the plaintiff. But once the plaintiff discharges the initial onus of satisfying the Court that in respect of its claim it would, upon the evidence adduced by it, be entitled to judgment, there is an evidentiary onus on the defendant to satisfy the Court that there is a triable issue or dispute between the parties or that for some other reason there ought to be a trial: Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18 at 23; Scaffidi Nominees Pty Ltd v Scaffidi & Anor, unreported; FCt SCt of WA; Library No 960588; 11 October 1996.

20 It is clear that the power to order summary judgment must be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87. The need for exceptional caution is nowhere more important than where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact: Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598. It was never intended that when the facts are in dispute, actions should be disposed of summarily: White v Johnston (1886) 8 ALT 53. But the Court is not bound to accept uncritically as raising a dispute of fact calling for further investigation every statement in an affidavit, however equivocal, lacking in precision or inconsistent with contemporary documents or other statements by the deponent: Eng Mee Yong v Letchumanan [1980] AC 331 at 341.

21 The plaintiff relied on a number of grounds in support of its application but I think it can be disposed of without canvassing all of those grounds.

22 As I have said, it was not in issue that the defendant entered into the written agreement and that the sum of $317,000 payable by the defendant under the terms of that agreement remains unpaid. The defendant says that under cl 2.4 of the agreement it is, and has for some time been, entitled to return stock to the value of some $170,000 but the plaintiff has not accepted the return of that stock. The defendant says that the plaintiff's failure to relieve the defendant of that stock has caused the defendant to suffer a loss of income estimated at some $1,100,000 and the plaintiff has incurred a debt to the defendant by way of storage charges of $1,000 per day since September 2003. The defendant counterclaims against the plaintiff in respect of those claims and says that it is entitled to set off the amount of the counterclaim against the balance of $317,000 claimed by the plaintiff.

23 I should note in passing that there is no explanation in the affidavit of the manner in which the alleged loss of income of $1.1m has been calculated. Madam Sun merely asserts that as a result of the allegedly defective stock taking up most of the defendant's storage and display area since September 2003, the defendant has suffered losses of that magnitude. Moreover, it is not explained why arrangements could not have been made to store the stock elsewhere to avoid continuing losses. It is also not apparent on what legal basis the storage fee is claimed, although in the course of argument it seemed to be put forward as a head of damages.

24 In any event, in my view the defendant has not established that there is any triable issue.

25 In order to found a case based on cl 2.4 of the agreement it is necessary for the defendant to show that the furniture it says was not of merchantable quality was furniture that it had not been able to inspect prior to entering into the contract. In fact, as I pointed out to counsel for the defendant during the course of argument, the defendant had not adduced any evidence to suggest that the furniture of which complaint is made was furniture that the defendant had not been able to inspect prior to entering into the contract. Indeed there was not even evidence as to the types or amount of furniture (if any) the defendant had not been able to inspect prior to entering into the contract. No explanation was offered for the absence of any evidence directed to establish the requirements of cl 2.4 of the agreement. Whether or not the defendant had been able to inspect the furniture about which it complains prior to entering into the contract was clearly a matter within the defendant's knowledge. If it were the case that the defendant had not been able to inspect the furniture in question prior to entering into the contract there was no apparent reason that the defendant could not readily have deposed to that.

26 In my view, in the absence of any evidence to suggest that the furniture concerned came within cl 2.4, being furniture that the defendant had been unable to inspect prior to the contract, the defence and counterclaim contended for by the defendant is not maintainable.

27 On this application Counsel for the defendant did not, either in his written outline of submissions or in the course of argument, rely on the implied condition of merchantable quality in s 14(ii) of the Sale of Goods Act. The defendant relied solely on cl 2.4 of the agreement.

28 In its defence in the action, however, the defendant pleads, in the alternative to cl 2.4 of the agreement, that the plaintiff was in breach of s 14(ii) of the Sale of Goods Act 1895 (WA) in that it supplied to the defendant goods not of merchantable quality. The defendant alleges, by way of particulars, that the rejected furniture stock "generally has gross size differentials to the Australian standard and not of Australian market merchantable quality ... the lounges returned too low back, shallow seats, fading colours and are not of standard Australian sizes ... similar problems and complaints with bedding and mattresses supplied by the plaintiff, ie Bedding [sic] and mattress are not of standard Australian sizes".

29 I should note that the affidavit evidence of the defendant did not condescend to any detail in respect of the alleged defects in the furniture and the allegations of unmerchantable quality were couched in the most general terms. As to the matters pleaded in the defence, in her affidavit of 15 September 2004 Madam Sun simply refers to the defence and counterclaim and says, "I hereby verify the facts contained in the defence and counterclaim".

30 It does not seem that s 14(ii) of the Act has room for operation in light of the terms of the contract. Save as to that falling within cl 2.4, it was expressly agreed by cl 2.3 of the agreement that the defendant took the furniture in the condition it was in when inspected by the defendant. I should also say that there was no evidence that the furniture of which the defendant took possession was not then in the same condition as when it was inspected by the defendant prior to the agreement.

31 In any event, it was not contended on behalf of the defendant that the plaintiff was "a seller who deals in goods of that description" within the meaning of the Act. Save that it appears the defendant acquired all of the plaintiff's stock and took over the plaintiff's business premises for the purpose of conducting its own retail furniture business, the circumstances of the sale were not explored in the evidence. It was also not contended that the furniture was "bought by description" within the meaning of s 14(ii) of the Act and on the evidence it is not apparent that it was.

32 On the evidence, I am satisfied that the defendant has no defence to the plaintiff's claim and that the plaintiff is entitled to judgment for the sum of $317,000 and interest on that sum.

33 I will hear the parties on the precise form of the orders.