POBJIE AGENCIES v VINIDEX TUBEMAKERS [2000] NSWCA 105

Reported Decision : [2000] Aust Contract R 90-112

New South Wales Court of Appeal

CITATION : POBJIE AGENCIES v VINIDEX TUBEMAKERS [2000] NSWCA 105 FILE NUMBER(S) : CA 40730/98 HEARING DATE(S) : 18 April 2000 JUDGMENT DATE : 18 April 2000

PARTIES : POBJIE AGENCIES PTY LTD & ANOR v VINIDEX TUBEMAKERS PTY LTD JUDGMENT OF : Mason P at 1; Meagher JA at 45; Handley JA at 46

LOWER COURT JURISDICTION : Commercial Division LOWER COURT CD 50249/96 FILE NUMBER(S) : LOWER COURT Hunter J JUDICIAL OFFICER :

COUNSEL : D F Jackson QC/R W Tregenza (Appellant) D E Grieve QC/ R D Marshall (Respondent) SOLICITORS : Watson Stafford (Appellant) Sacks Australian International (Respondent) CATCHWORDS : Contract of indemnity - implied contract - tacit understanding or agreement with contractual intent - Trade Practices Act s75B and s82 - objectively false claims for credit - liability of an officer - (ND) DECISION : Appeal dismissed with costs.

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40730/98

MASON P MEAGHER JA HANDLEY JA

Tuesday 18 April 2000

POBJIE AGENCIES PTY LIMITED & ANOR v VINIDEX TUBEMAKERS PTY LIMITED JUDGMENT 1 MASON P: The first ground in this appeal turns on the legal interpretation to be placed upon a course of dealings between business entities. The primary facts are no longer in dispute, if they ever were. 2 The respondent, Vinidex Tubemakers Pty Limited ("VT"), manufactures and supplies a product called a vinyl profile (the product) which is used for cladding houses. 3 The appellant, Pobjie Agencies Pty Limited ("PA") and VT entered into a written contract on 14 August 1991 ("the PA Agreement"). That Agreement set the framework for subsequent individual contracts for the manufacture and supply of the product by VT to PA. Thus, it set out procedures for orders, acceptance of orders, variation of specifications, warranties, etcetera. VT reserved the right to review prices at any time, although some procedures were stipulated. PA committed itself to order at least 35 tonnes of the product each month and for certain breaches of that obligation liquidated damages were payable, calculated according to a formula. The Agreement included a document called Terms and Conditions of Sale, addressing in greater detail the conditions to be included in any particular contract for sale of goods formed upon the acceptance of a particular order. That document stipulated that all payments should be made within 30 days after invoice, while reserving VT's right to require payment earlier. VT was entitled to vary these terms and conditions at its absolute discretion. 4 Thereafter individual batches of particular types of the product were ordered on behalf of PA and supplied by VT. There was a delivery docket followed by an invoice. Details of debits and credits were entered up in monthly statements and in a running account. On occasions, warranty claims were made by PA upon VT and resulted in credits, if they were accepted. PA used the product (a) in the course of its own business as an installation contractor of cladding for houses, and (b) as a manufacturer of cladding which it on-sold. 5 The managing director of PA was Mr T W Pobjie. One of the employees of PA, Mr Wicks, dealt with VT on a day to day basis, placing orders for the product or instructing persons to do so. Usually orders were in writing although sometimes the written order confirmed an oral order. 6 On 21 November 1991, PA made a formal application for credit facilities, using VT's application form. Details of fixed property owned by PA were supplied along with trade references. Only after approval was given were any goods supplied on credit. In the five years of trading that followed, transactions totalled millions of dollars. Initially $100,000 credit was made available. In early 1992 this was increased to $500,000. 7 In 1992 those controlling PA set up another company to be the wholesale arm of the business. It was Insulboard Distributors and Wholesalers Pty Limited ("Insulboard"). There were common shareholders and directors, both companies being family companies of Mr Pobjie, who became the managing director of Insulboard, as well as PA. Insulboard commenced business on 1 July 1992. Apparently PA supplied cladding to Insulboard and Insulboard manufactured the insulation backing and did other work on the cladding. Insulboard then sold this manufactured cladding by wholesale. 8 After Insulboard came on the scene in July 1992, Mr Wicks, who became the general manager of that company, continued to be responsible for placing orders with VT. He mostly used the Insulboard letterhead. Sometimes the PA letterhead was used. VT continued to raise its delivery dockets, invoices and statements against PA, although deliveries were made to Insulboard's premises when they became separate premises (if they were not made directly to the ultimate purchaser). The running account continued as before, although Insulboard cheques were used to reduce the debt from 1992 onwards. 9 On 22 June 1994 a new Agreement was signed, this time between VT and Insulboard. The earlier Agreement was the obvious template. Many of the clauses are identical. Some, however, were different, including those relating to the term (duration), territorial scope, subcontracting and exclusive dealing. The new Agreement ("the Insulboard Agreement") contained no provision for minimum orders and no provision for payment of liquidated damages by the purchaser. Like its predecessor, the Insulboard Agreement expressed itself as the whole agreement between its two parties. However, like its predecessor, it was in the nature of a framework for individual dealings in the sense that I have already used the term. The schedules to the Insulboard Agreement were left blank, which meant that there was no pricing formula. The executed Agreement did not have annexed to it VT's Standard Terms and Conditions despite a recital contemplating that this would occur. 10 After the execution of the Insulboard Agreement, dealings continued as before. In Hunter J's words: After the execution of Insulboard Agreement the performance of the Agreement was indistinguishable in practice from the circumstances of supply under the Pobjie Agencies' Agreement after 1 July 1992, namely orders continued to be placed by Wicks or at his direction on the letterhead of Insulboard except, as I have mentioned, for the few instances where the order was placed on Pobjie Agencies' letterhead. The credit account of Pobjie Agencies has remained operative. Invoices continued to be rendered by Vinidex on Pobjie Agencies in respect of all cladding supplied on credit. Monthly statements, delivery dockets in respect of that cladding were also submitted by Vinidex to Pobjie Agencies. The payments continued to be made by cheques of Insulboard. No credit account was ever opened or operated upon by Insulboard with Vinidex. I think with respect to the findings of the referee, which in my view defied challenge, it is clear that Pobjie Agencies, Pobjie and Insulboard were aware that the cladding was being supplied on the credit account of Pobjie Agencies and that the supply of the cladding on credit would only be countenanced by Vinidex upon the basis of Pobjie Agencies' liability for payment of the cladding so supplied under its credit account with Vinidex. I think it is clear from the findings of the referee that Pobjie Agencies knew that was the only basis upon which Vinidex would supply its cladding on credit. 11 On 6 August 1996 VT served on PA a notice of demand pursuant to the Corporations Law, claiming the outstanding balance of the account which then stood at $549,409.48. The debt was disputed and this led to the commencement of the present proceedings. VT filed a summons in the Commercial Division. Various cross-claims ensued. The matter was sent to a referee in May 1997. As matters stood at the time of the reference, VT had sued PA, Insulboard, Mr Pobjie and Mr Wicks. VT claimed against PA for goods sold and delivered. There was a plethora of additional and alternative claims against the two companies and the two individuals invoking contract, the Trade Practices Act, the Fair Trading Act, estoppel, unjust enrichment, fraudulent misrepresentation, passing off and infringement of trade marks. 12 This appeal is only concerned with the claims against PA based on contract and estoppel that were ultimately upheld by Hunter J, and the claim against Mr Pobjie based ultimately on the Trade Practices Act that was upheld by his Honour. 13 After a six-day hearing the referee provided his report on 17 February 1998. There were contested proceedings for the adoption of the report. During those proceedings, VT sought and was granted leave to amend its summons by adding a new contractual basis for recovery against PA. A new paragraph was added to the summons in the following terms: 16A: Further and in the alternative it was agreed between the plaintiff and the first and second defendants that in consideration of the plaintiffs supplying profile to the second defendant on credit, the first defendant would be liable for payment until such time as a credit application by the second defendant was submitted to and approved by the plaintiff. 14 The particulars to that amended pleading made it plain that VT was relying upon an implied contract, and set out a number of factual bases said to support the implied contract. 15 In seeking that amendment, VT was relying on the facts already found by the referee. However the matter was sent back for a further hearing to enable the parties to adduce fresh evidence if they desired, and that further hearing resulted in a supplementary report from the referee. 16 When the proceedings returned to the Supreme Court, Hunter J found that goods were sold and delivered to Insulboard during the currency of the Insulboard Agreement, and judgment was entered accordingly against that company in the sum of $676,060.08. No party to the appeal challenges this order. 17 Hunter J also found that PA was liable under a primary liability in the nature of an indemnity as pleaded in para 16A. Alternative findings to similar effect were made in reliance upon the principle of conventional estoppel. Judgment was entered against PA in the sum of $985,553.41. 18 The difference in the judgments awarded against the two companies stems from the fact that PA was found liable to pay additional amounts based on the reversal of wrongly-claimed credits and on liabilities arising under the Trade Practices Act, and because statutory interest was awarded only against PA. In the appeal the appellants do not seek to overturn the findings against PA relating to the wrongly-claimed credits or the Trade Practices Act claim against PA. The only matter put in issue by PA is PA's liability under the implied indemnity, alternatively estoppel, in the sum equivalent to Insulboard's indebtedness for goods sold and delivered to it, although invoiced to PA. 19 Hunter J awarded judgement against PA based on the findings of the referee as to the primary facts, albeit that the referee stopped short in his supplementary report of finding an agreement in the terms of para 16A of the summons. The referee recorded his view that the facts were not inconsistent with the existence of such an Agreement, although he appeared to be troubled by the absence of oral evidence explicitly supporting such agreement. His final word was that it may be inferred that such an agreement existed, but that that consideration was more appropriately a matter for the Court. 20 It is submitted that Hunter J erred in finding an implied contract to the effect that PA agreed to be responsible for the payment of cladding supplied on credit by VT to Insulboard after 22 June 1994. The appellants contend that there is insufficient evidence of a tacit understanding with contractual intent. 21 In my view there was ample evidence of a tacit agreement and Hunter J was correct to find that such agreement existed. I agree generally with his reasons. I refer in particular to the following: (a) Not all post-June 1994 orders were on Insulboard forms. But, whichever entity ordered from VT, VT continued after June 1994 its earlier practice of addressing delivery dockets, invoices and monthly statements to PA and debiting PA's credit account accordingly.