Specialised Printing Equipment v de Vries [2003] NSWSC 1168

New South Wales Supreme Court

CITATION : Specialised Printing Equipment v de Vries [2003] NSWSC 1168 HEARING DATE(S) : 24 & 28 July, 5 & 14 August 2003 JUDGMENT DATE : 10 December 2003 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Plaintiff's appeal against rejection of proof of debt dismissed; cross-claim partially successful

CATCHWORDS : CONTRACT - purchase price in Australian dollars to be paid by letter of credit in Great British pounds - effect of fluctuation in exchange rates - whether parties agreed to vary contract by buyer undertaking to procure forward exchange cover for seller - whether, under contract, work done on delivery of goods was installation work - TRADE AND COMMERCE - misleading and deceptive conduct - whether costs of receivership caused by misrepresentations as to plaintiff's claim CASES CITED : Re Bird's Stores Ltd (1931) 37 ALR 94 Re Kentwood Constructions Ltd [1960] 1 WLR 646 Specialised Printing Equipment (Australia) Pty Ltd (P, XD1) PARTIES : Antony Anne de Vries (D1, XC1) ACN 000 080 464 Pty Ltd (in liq) (D2, XC2) Riad Tayeh (D3, XC3) FILE NUMBER(S) : SC 1613/03 COUNSEL : Mr A P Spencer (P) Mr F G Lever SC with Mr J M Miller (D) SOLICITORS : Gadens (P) Gibsons Lawyers (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

WEDNESDAY 10 DECEMBER 2003

1613/03 SPECIALISED PRINTING EQUIPMENT (AUSTRALIA) PTY LTD V ANTONY ANNE DE VRIES & 2 ORS JUDGMENT 1 HIS HONOUR: The first and third defendants are the liquidators of the second defendant, which was previously called Kookaburra Industries Pty Ltd. I shall refer to the company as "Kookaburra" for convenience. This is an appeal by the plaintiff, Specialised Printing Equipment (Australia) Pty Ltd ("SPE"), seeking to reverse their decision as liquidators to reject SPE's claim to prove in the liquidation of Kookaburra. SPE is a person aggrieved by the liquidators' decision, and therefore has a statutory right to appeal to the Court against the decision under s 1321(d), within the time limit specified by reg 5.6.54(2) of the Corporations Regulations. The appeal is by way of a re-hearing de novo (Re Kentwood Constructions Ltd [1960] 1 WLR 646), and the parties are entitled to adduce fresh evidence in support of their contentions (Re Bird's Stores Ltd (1931) 37 ALR 94). 2 The best way to understand SPE's claim against Kookaburra in liquidation is to refer to the proof of debt, rather than SPE's "summons", which is a poorly drafted document. In these reasons for judgment, I shall adopt the definitions used in the proof of debt. 3 I note that the claims set out in the proof of debt were also made, prior to lodgement of that document, in proceedings brought by SPE against Kookaburra in the County Court of Victoria in January 2002. There were negotiations to settle that litigation, but the negotiations failed after the appointment of Neil Singleton and Anthony Sims as receivers of the business and assets of Kookaburra in March 2002, and the appointment of the first and third defendants as voluntary administrators of Kookaburra on about 15 March 2002. The plaintiff would need to obtain leave to proceed against Kookaburra in liquidation, before taking any further steps in the County Court. 4 The proof of debt, dated 17 September 2002, claims $95,628.94, particulars of which are set out in a schedule, which I shall quote in full: "Schedule 1. By agreement dated 20 March 2001 ('the Agreement') between Kookaburra Industries Pty Ltd (in liquidation) ('Kookaburra') and Specialised Printing (Aust) Pty Ltd ('SPE'), SPE agreed to sell and Kookaburra agreed to purchase a Heidelberg Speed Master 5 Colour Press model 72F serial number 521613 ('the Heidelberg 72F'). 2. The Agreement contained, inter alia, the following terms: (a) The price of the Heidelberg 72F was AUD550,000.00 plus GST [in the sum of $55,000] ('the Purchase Price'); (b) Kookaburra would provide to SPE, by way of trade-in, with [sic] a 1976 model Heidelberg SORSZ ('the Trade in Machine') valued at AUD66,000.00 ('the Trade-in Price'); (c) AUD50,000.00 of the Trade-in Price was to be discounted from the Purchase Price at the date of transfer and a further AUD16,000.00 was to be paid to Kookaburra by SPE upon removal of the Trade-in Machine; (d) the Purchase Price was paid by Kookaburra to SPE by a transferable irrevocable documentary letter of credit for the Great British pound equivalent of AUD555,000.00 inclusive of GST ('Letter of Credit') as at the date of negotiation ('the Negotiation Date'); (e) full and clear title to the Heidelberg 72F would pass to Kookaburra's financiers upon negotiation of the Letter of Credit. 3. On or about 6 April 2001, SPE and Kookaburra entered into a variation of the Agreement ('the Variation'). The Variation required Kookaburra to provide forward exchange cover to protect the Letter of Credit from currency fluctuations. 4. The forward exchange cover was to be provided by Kookaburra to SPE for the purpose of securing the value of the Letter of Credit and thereby avoiding SPE's exposure to currency exchange fluctuations. 5. Kookaburra did not obtain the forward exchange cover thereby rendering the Letter of Credit subject to currency exchange fluctuations. 6. On or about 6 April 2001 ('the Provision Date'), Kookaburra provided SPE with an irrevocable documentary Letter of Credit number SD3BM800627 issued by Westpac Banking Corporation on behalf of Kookaburra for 185,869.50 Great British pounds. 7. The equivalent of 185,869.50 Great British pounds on the Provision Date was AUD555,000.00. 8. On 13 May 2001, the Letter of Credit was negotiated by SPE at an exchange rate of AUD0.3649. 9. The value of the Letter of Credit on the Negotiation Date was AUD509,371.06 ('the Negotiated Sum'). 10. The currency exchange rate between the Great British Pound and the Australian Dollar fluctuated from AUD555,000.00 on the Provision Date to AUD509,371.06 on the Negotiation Date. 11. On or about 13 June 2001, SPE delivered to Kookaburra the Heidelberg 72F. 12. In breach of the Agreement and the Variation: (a) SPE suffered a shortfall of AUD45,628.94 ('the Shortfall') on negotiation of the Letter of Credit; and (b) Kookaburra failed to deliver the Trade-in Machine to SPE. 13. Accordingly, Kookaburra is indebted to SPE in the sum of $95,628.94 made up as follows: (a) $45,628.94, being the amount of the Shortfall; and (b) $50,000.00, being the value of the Trade-in Machine." [The proof of debt attached a copy of the Agreement dated 20 March 2001, an invoice dated 15 March 2001, and the Letter of Credit dated 6 April 2001.] 5 By their Notice of Rejection dated 15 November 2002, the liquidators disallowed SPC's claim in full. The Notice of Rejection said: "The grounds for my decision are as follows: (a) As to the claim for $45,628.94, the allegation by SPE that the director of the Company had agreed that the Company would provide forward exchange cover to protect SPE from currency fluctuations, the claim: (i) is not substantiated by any documentary evidence; (ii) is contradicted by documents from both SPE and the Company; (iii) is denied by the director of the Company; and (iv) is not generally consistent with available information concerning negotiations between SPE and the Company. (b) As to the claim for $50,000.00, the Company is entitled to a set off being greater than the amount claimed by SPE which set off relates to the obligation by SPE to pay for commissioning and installation of a Heidelberg Speedmaster HD72F Five Colour Printing Press sold by SPE to the Company. (c) Accordingly, SPE is a net debtor to the Company and not a creditor." 6 The claim by Kookaburra to a set-off in respect of commissioning and installation costs has been reflected in the cross-claim filed in the present proceeding. In its summons, SPE admits that Kookaburra is entitled to a set-off, but only for $23,492.54. The cross-claim also asserts that Kookaburra (in liquidation) is entitled to recover damages from SPE for the latter's misleading and deceptive conduct, by virtue of representations for made by SPE to the receivers. 7 Thus, there are five issues to be determined: (a) Was it a term of the Agreement that Kookaburra would arrange forward exchange cover to protect SPE from its exposure to adverse movement in the Australian/Great Britain Pound exchange rate? (b) If so, what is the loss for which SPE is entitled to prove in the liquidation of Kookaburra? (c) Is SPE entitled to claim $50,000 in the liquidation of Kookaburra due to non-delivery of the Trade-in Machine? (d) Is Kookaburra (in liquidation) entitled under the Agreement to recover commissioning and installation costs and, if so, is it entitled to a set-off for the recoverable amount against any amount recoverable by SPE? (e) Is Kookaburra (in liquidation) entitled to recover damages from SPE for misleading or deceptive conduct by SPE in its representations to Mr Singleton? The witnesses 8 The plaintiff relied on the affidavit and oral evidence of Craig Power, a director of the company. Counsel for Kookaburra attacked Mr Power's evidence, submitting that wherever there was a conflict between his evidence and the evidence given by Kookaburra's witnesses, the latter should be preferred. Generally, and subject what I shall say on specific occasions, I agree with this submission. 9 Mr Power gave me the impression that he was not conscientious in the preparation and presentation of his evidence. It emerged in cross-examination that he had been careless in giving dates in his affidavits. He claimed that mistakes about dates were mistakes by his solicitor, and that he was told by his solicitor that there was no need to check the dates. That is inherently implausible, in circumstances where he was deposing to the truth of the statements in his affidavit, and he admitted that he understood the importance of making an affidavit that was as accurate as possible. Indeed, the plaintiff's solicitor was in court, and was not called to give evidence for the plaintiff confirming Mr Power's unlikely claim about his advice. 10 Gregory Crowe, the financial controller of Kookaburra, gave affidavit and oral evidence, including evidence of conversations with Mr Power. James Elliott, the general manager of Kookaburra, also gave affidavit and oral evidence. I regard both of them as reliable witnesses. Mr Lindroos, the director of Kookaburra with whom Mr Power dealt, was very ill and did not give oral evidence, although I allowed his affidavit to be read. 11 Evidence was also given by Neil Singleton, one of the receivers of Kookaburra, Riad Tayeh, the third defendant and one of the liquidators of Kookaburra, Greg Johnston and Kenneth McDonald, who worked on the installation of the printer that Kookaburra's premises, and Philip Spence and Haydn Lynch, who gave expert opinion evidence for SPE with respect to the reasonableness of installation costs and foreign currency movements respectively. I regarded all of these witnesses as reliable. Forward exchange cover