Local Court New South Wales Medium Neutral Citation: Camnet Finance Pty Ltd v Australian Workstation Manufacturers Pty Ltd [2017] NSWLC 13 Hearing dates: 5 July 2017 Decision date: 25 July 2017 Jurisdiction: Civil Before: Assessor Olischlager Decision: Verdict for the first and second defendant. Verdict for the cross defendant. Catchwords: CONTRACTS - rental agreement - failure of consideration - Australian Consumer Law - acceptable quality - fitness for purpose - sale of goods by sample. Legislation Cited: Australian Consumer Law (Cth), ss 54, 55, 57 Cases Cited: Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344 BHP Coal Ltd and Ors v O & K Orenstein & Koppel AG [2008] QSC 141 David Securities Pty Ltd v Commonwealth Bank [1992] HCA 48; (1992) 66 ALJR 768 Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942] UKHL 4 Category: Principal judgment Parties: Camnet Finance Pty Ltd (plaintiff/cross defendant) Australian Workstation Manufacturers Pty Ltd (first defendant/first cross claimant) Anthony Scotts (second defendant/second cross claimant) Representation: Counsel: J Burnett (for the plaintiff/cross defendant) L McAuley (for the defendants/cross claimants) Solicitors: Sarvass Ciappara Lawyers (for the plaintiff/cross defendant) Mobile Legal Service Pty Ltd (for the defendants/cross claimants) File Number(s): 2017/0009803 Judgment 1. Camnet Finance Pty Ltd (Camnet) operates a business supplying office equipment under lease arrangements. Australian Workplace Manufacturers Pty Ltd (AWM), the first defendant, is a company which operates a business designing and manufacturing office furniture. Mr Scotts, the second defendant, is a director of AWM. 2. On 9 March 2016 Camnet and AWM entered into a rental agreement under which Camnet supplied a Cube Pro Duo 3D Printer to AWM. The rental period was for three years and AWM agreed to make monthly payments of $148.50 (inclusive of GST). Mr Scotts agreed to guarantee the obligations of AWM under the rental agreement. 3. Camnet supplied the printer to AWM in March 2016 and issued invoices for each monthly instalment from March 2016 to February 2017. No payments were made by AWM. Camnet exercised its right to terminate the rental agreement for non-payment by way of a termination notice dated 16 February 2017. Camnet has taken possession of the 3D Printer and brings these proceedings seeking to recover the sum of $5,196.39 which has been calculated as the amount due under the rental agreement. 4. AWM does not dispute the calculation of the recovery amount under the rental agreement, however, it disputes liability on the basis that the 3D printer supplied by the plaintiff is not capable of producing commercial quality prints. AWM asserts that there has been a complete failure of consideration and that it received no benefit under the contract. AWM has filed a cross claim seeking damages in the sum of $9,500 for loss of productivity as a result of breaches under the Australian Consumer Law. In particular, AWM asserts that the goods are not fit for purpose and are not of acceptable quality. Factual issues 1. There are two factual issues to be resolved. Firstly, whether AWM was induced to rent the Cube Pro Duo printer by representations made by Camnet and, secondly, whether the printer provided to AWM was capable of providing prints according to the sample provided by Mr Holland and performing according to its specifications. 2. In relation to the first issue Mr Max Holland, the account manager of Camnet, attended the premises of AWM In either February or March 2016 and met with Ms Katerina Ali of AWM and offered to provide the services of the plaintiff. Mr Holland states that during that meeting he stated that Camnet "provide photocopying and printing solutions to businesses". Mr Holland states that Ms Ali indicated that AWM was "looking to by a Cube Pro Duo 3D printer". Mr Holland states that he subsequently supplied a sample print and a brochure of the Cube Pro Duo. Mr Holland states that the sample print was produced by a Cube Pro Duo 3D printer located at Camnet's showroom. 3. Ms Ali gives evidence of the meeting with Mr Holland. She states that based on the quality of the sample print and the information contained in the brochure Ms Ali states that AWM decided to enter into the rental contract with Camnet. 4. The brochure provided by Mr Holland is headed "Camnet Copier/Printer Solutions CubePro 3D Printer Consumer Solutions Business". The brochure describes the Cube Pro Duo 3D printer as a "Professional 3D Printer for large, multi-color, multi-material prints for schools, office & business". Under the heading of Software Compatibility it states "File types supported: .STL". 5. Mr Daniel Foo an industrial designer with AWM also attended the meeting with Mr Holland. He states that during the meeting AWM showed Mr Holland samples of what was being printed by AWM on its smaller 3D Printer. Mr Foo states that Mr Holland returned the following day with samples of what the Cube Pro Duo could produce. He states that the sample was high quality and very detailed. 6. Ms Thein, an industrial designer employed by AWM, states that in February 2016 AWM was looking to obtain a new 3D Printer that had a capacity to produce larger size prints. She states that AWM had identified the Cube Pro Duo 3D Printer through its own internet research as one which might suit the needs of AWM. Ms Thein gives evidence that AWM uses STL files to print 3D images. 7. AWM submits that Mr Holland made representations regarding the suitability of the Cube Pro Duo to meet the needs of AWM. In particular, AWM submits that it relied on the brochure and samples provided that indicated that the Cube Pro could produce large quality prints from STL files. Camnet submits that AWM made the decision to rent the Cube Pro Duo based on its own internet research and that AWM elected to proceed with rental agreement with Camnet based on a cheaper pricing. 8. Factually, the Court is satisfied that the AWM did rely on representations contained in Camnet's brochure regarding the features and capabilities of the Cube Pro Duo and the samples provided by Mr Holland. While the brochure and samples did not constitute the sole basis for the decision by AWM to proceed, they were a material part of the decision making process. I accept the submissions put forward on behalf of AWM that had they already made a decision to rent the Cube Pro Duo from their own independent internet research then a meeting with Mr Holland and the provision of samples and a brochure would have been unnecessary. Had the decision been made by AWM to rent the Cube Pro Duo prior to the meeting with Mr Holland, all that would have been required from Camnet was a quote for a rental arrangement. 9. In relation to the second issue, AWM asserts that during the period of March to April 2016 it was unable to produce any commercial quality prints from the Cube Pro Duo supplied by Camnet under the rental agreement. Ms Thein gives evidence on behalf of AWM regarding the attempts to use the printer. On 23 March 2016 the printer consumable arrived. Ms Thein requested Mr Foo to load an STL file to generate the execution file for the Cube Pro. She states that when the print was finished the print was of poor quality. Ms Thein contacted a Camnet technician who attended AWM's office. The technician indicated that too much glue had been used. The technician left prior to a further print being performed. Ms Thein states that when a further print was performed the printer displayed a message "filament error" and then stalled. 10. A Camnet technician attended approximately 2-3 days later and advised that the disposal canister was set too high and the print head was coming into contact with the canister. The technician re-ran the print and left before it had finished. Ms Thein states that the printer again stalled with the same "filament error" message displayed. 11. A Camnet technician again attended. At that time the technician identified the files used by AWM were at fault. Ms Thein used a different STL file to print. She states that the printer overheated and the object has burn marks and is unfinished. 12. On 7 April 2016 Camnet advised that it would arrange for a temporary replacement printer. Ms Thein states that a replacement was delivered on 14 April 2016. She states that it appeared not to be a new printer as the outside had cosmetic flaws and the printer bed had scratch marks. On 18 April consumable were delivered for the replacement printer. 13. Ms Thien states that the prints from the replacement printer were of poor quality. The model was hollow and edges broke off. The original printer was returned several weeks later. Ms Thein states that the printer continued to display the same "filament error" message. Ms Thein contacted Camnet Service and a technician requested that the file be sent to him to check. 14. Ms Thien states that in the absence of a resolution of the technical issues AWM proposed to return the printer to Camnet in August 2016. This proposal was rejected. 15. In September 2016 Camnet advised that the file had been tested on another printer called a Makerbot and were of the opinion that the file was to blame. In October 2016 Camnet provided a file which was used to create the detailed building sample provided by Mr Holland prior to the rental agreement being entered into. Ms Thien states that she attempted to print the sample, however, it failed to start. The printer indicated that there was not enough material to complete the print even though the printer cartridge had been changed. Ms Thien states she contacted Camnet and was advised to reduce the scale of the model to be printed. Ms Thein states that the reduced model would have taken approximately 30 hour to produce. 16. Mr Atto, an Information Technology specialist employed by Camnet, gives evidence that he installed the Cube Pro Duo 3D printer at the premises of AWM and that he tested the printer to ensure that it was working and ready for use. Mr Atto gives evidence that shortly after installation he attended AWM's premises in response to complaints regarding the quality of the printing. He states that the printer was working to specifications and there was no error code. Mr Atto states that he attended again on 23 March 2016 and discovered a problem due to incorrect cartridge installation.Mr Atto states that he attended AWM's premises on further occasions due to complaints and did not find any fault. 17. Mr Inglis, the General Manager of Camnet, gives evidence that in an attempt to resolve the issues with AWM he referred a file from AWM to Mr Steve Curtis of Makerbot Replicator Mini. In an email dated 16 September 2016 Mr Curtis states that he achieved similar results using a different printer being the Makerbot. The email from Mr Curtis is to the effect that the cause of the poor quality printing is due to the file rather than the printer. 18. It is clear from the evidence of both parties that AWM experienced difficulties with the Cube Pro Duo printer from the outset. Those difficulties continued throughout the period of the rental agreement. Although Camnet technicians attended AWM's premises they failed to test the printer by producing a print on site. I am satisfied that AWM was unable to use the printer for their commercial needs at any stage. I am also satisfied that the inability to use the printer was not due to an issue with the files used by AWM. The fact that AWM were able to continue using the same files with its original printer is strong evidence against the proposition that there was something defective with the STL files used by AWM. The true cause of the printer being unable to produce commercial quality prints is uncertain. The evidence is insufficient to determine whether it was due to the printer being defective or incompatible with the files used by AWM or some other reason. Camnet's claim 1. It is clear that upon Camnet terminating the agreement it is entitled, under the terms of the rental agreement, to claim the Recoverable Amount determined in accordance with Clause 13.2 of the Rental Agreement. That includes rental instalments due and owing not paid in the sum of $1,894.29, the sum of rental payments for the balance of the rental term at a discounted rate being $3,218.13. Under clauses 4.3 and 21.1 of the agreement Camnet is also entitled to recover interest on the unpaid amounts which is calculated at $83.97 as at 3 April 2017. Total failure of consideration 1. AWM's defence of the claim is based upon there being a total failure of consideration on the part of Camnet as the benefit bargained for by the AWM was never achieved. AWM elected not to make payments due under the agreement on the basis that the Cube Pro Duo printer was unable to provide commercial quality prints. 2. A claim of total failure of consideration is not, of itself, a defence to the entitlement of the plaintiff to recover money under an agreement. Historically, a claim of total failure of consideration gives rise to a separate claim of a debt based on moneys had and received. In this instance, the moneys have not been paid by AWM, however, the Court is prepared to deal with the claim of total failure of consideration in the context of a right of set off under section 21 of the Civil Procedure Act 2005. In practical terms AWM seeks to set off the plaintiff's right to recover moneys due under the agreement against its right to recover in equal measure that amount as a debt due for money had and received. While the Camnet might have a contractual right to sue for the recoverable amount under the claim AWM asserts that its right to retain that money is conditional upon its performance of its obligations under the contract. AWM asserts that Camnet has wholly failed to perform its obligations and is therefore not entitled to retain money under the contract. 3. The law of contract generally involves an exchange of mutual promises between parties. Where one party has performed their promise by payment of money and the other party has not performed their promise then the law will allow the recovery of money paid by the first party. The right to recover money paid for total failure of consideration will only arise after the discharge of the contract and where the failure of consideration is total. 4. The notion of total failure of consideration requires a consideration of whether what was promised was received. In David Securities Pty Ltd v Commonwealth Bank [1992] HCA 48; (1992) 66 ALJR 768 at 779 the High Court stated: … the notion of total failure of consideration now looks to the benefit bargained for by the plaintiff rather than any benefit which might have been received in fact. 1. In Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942] UKHL 4 Viscount Simon LC stated that when assessing whether there has been a total failure of consideration it is the performance of the promise that is relevant: [It] is generally speaking not the promise… but the performance of the promise. The money was paid to secure performance and if performance fails the inducement which brought about the payment is not fulfilled. 1. In Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344 the High Court approved Viscount Simon's statement. The High Court was dealing with a claim for restitution by a plaintiff of her fare for a 14 day pleasure cruise which ended on the tenth day when the ship sank. The High Court held that the failure of performance must be complete. Mason CJ at [12] stated: If the incomplete performance results in the innocent party receiving and retaining any substantial part of the benefit expected under the contract, there will not be a total failure of consideration. 1. The question of what was bargained for requires interpretation of the terms of the contract and a consideration of the nature of the contract. Camnet submit that they performed their obligations by supplying a printer that was not defective and worked to specifications. AWM submit that they did not receive a printer that was capable of producing large prints from STL files. 2. I am satisfied that having regard to the nature of the contract there was a total failure of consideration on the part of Camnet. 3. The nature of the agreement between Camnet and AWM is a rental agreement and it is clear that Camnet can only retain monthly rental instalments if they perform their obligations by supplying equipment to AWM as required by the contract. 4. In my view, the proper construction of the contract between the parties the obligation to be performed by Camnet was not simply the supply of a Cube Pro Duo 3D printer. It was the supply of a printer which would be capable of being used and providing benefits to AWM in producing large commercial quality 3D prints from STL files. In that regard it is worth noting that Camnet does not merely hold itself out to be a financial service provider. It holds itself out to be the provider of business solutions. In the rental agreement under the heading "Ten Points You Need to Know" point 8 states: If you require the equipment for any special or particular purposes you should write down these requirements and send them to us as soon as possible. We are not responsible if the equipment cannot do something that you did not inform us about. 1. AWM informed Camnet prior to the agreement of the intended purpose of the equipment. The corollary of point 8 is that if Camnet is informed of the particular purpose then it will be responsible for providing equipment that will meet that purpose. 2. While it is not necessary to have regard to extrinsic evidence it is worth noting that Mr Holland introduced himself to officers of AWM by stating "We provide photocopying and printing solutions to businesses" and the brochure produced by Camnet identifies describes the business as "Copier/Printer Solutions". 3. It is clear that AWM entered into an agreement for the purpose of achieving a business solution to print commercial quality large 3D prints. While the precise cause of the failure is not clear from the evidence, it is clear that AWM did not achieve the objective of printing commercial quality large 3D prints. The basis for payment of rent under the agreement failed and AWM did not receive the benefits of the agreement. In the circumstances, I am satisfied that there was a total failure of consideration. 4. AWM is entitled to set off against the Camnet's contractual claim its right to recover money payable on the basis of there being a total failure of consideration. 5. As there is no primary debt owed by AWM there is no liability on the part of AWM's guarantor, Mr Scott. The Court will enter a verdict in favour of both defendants. Cross claim 1. AWM has filed a cross claim seeking to recover damages against Camnet. AWM states that it relied on representations made prior to entering into the contract. AWM does not particularise any statement made by Mr Holland nor does the evidence of AWM's employees present at the meetings give a first person account of what was said. In any event, AWM warranted under clause 5.1(b) of the rental agreement that it did not rely on any conduct or statement made by Camnet or person acting on behalf of Camnet when entering into the agreement. 2. The evidence of AWM, at its highest, is that the sample print provided by Mr Holland at the second meeting could not be reproduced by AWM. However, AWM has failed to establish that the print sample produced was not, in fact, one which was capable of being produced by a Cube Pro Duo 3D printer. The second possible misrepresentation is said to be contained in Camnet's brochure relating to the Cube Pro Duo 3D printer capabilities to produce large prints from STL files. Again this was not specifically particularised in the pleadings. As noted previously, the parties have failed to provide evidence to establish whether the failure of the Cube Pro Duo Printer supplied to AWM was due to a defect in the printer or an issue of compatibility or perhaps some other reason. The cross claimant has failed to establish that any representation made was false. 3. The cross claimant also relies on provisions of the Australian Consumer Law (ACL). The cross claimant states that the printer provided by Camnet was not fit for the disclosed purpose, not of acceptable quality and failed to match the sample provided. Section 54 contains a guarantee as to acceptable quality, section 55 contains a guarantee as to fitness for any disclosed purpose and section 57 contains a guarantee relating to the supply of goods by sample or demonstration. 4. AWM has failed to establish that the printer provided was of unacceptable quality or not fit for purpose. Whereas the question of total failure of consideration focuses on the benefit that the party paying expects to receive and AWM has shown that it received no benefit, a breach of the ACL requires AWM to discharge the evidentiary burden to show that the goods were either of unacceptable quality or not fit for a specific purpose. As previously stated, the evidence is simply insufficient for the Court to form a view that there was a defect in the printer or that the printer was incapable of printing large commercial quality prints. 5. In relation to the guarantee as to the supply of goods by sample or demonstration section 57 is in the following terms: If: (a) a person supplies, in trade or commerce, goods to a consumer by reference to a sample or demonstration model; and (b) the supply does not occur by way of sale by auction; There is a guarantee that: (c) the goods correspond with the sample or demonstration model in quality, state or condition; and (d) the goods are supplied by reference to a sample – the consumer will have a reasonable opportunity to compare the goods with the sample, and (e) the goods are free from any defect that: (i) would not be apparent on reasonable examination of the sample or demonstration model; and (ii) would cause the goods not to be of acceptable quality. 1. In my view the supply of the Cube Pro Duo 3D printer to AWM was not a sale by sample or demonstration model. It is clear from the language of section 57 that the guarantee provided by a supplier is that the goods supplied will match any sample or demonstration model shown to the consumer. In the present case no demonstration model printer was shown to AWM. The reference to "sample" in section 57 is a reference to some smaller part of the whole of the goods supplied. In the present case, while the parties refer to a sample image printed by Camnet the sample is something produced by the goods rather than being part of the goods supplied. Section 57 does not have application in the present circumstances. Even if the Court was incorrect in its view of the scope of section 57 AWM has failed to provide evidence to establish that the Cube Pro Duo is not capable of printing the example provided by Mr Holland. 2. AWM has failed to establish any breach of the ACL that would give rise to a claim for damages. Even if a breach had been established I agree with the submissions made on behalf of Camnet that no compensable loss has been established on the part of AWM. 3. AWM claim damages based on "wasted time" expended by employees dealing with the Cube Pro printing issues calculated at 47.5 hours at $200 per hour. There is no evidence put forward by AWM to show that it has lost profit or any business opportunities as a result of its inability to use the Cube Pro Duo printer. Nor has AWM show that it incurred any other cost through employing other staff or resources in order to maintain its profit level or to meet business demands. The evidence indicates that AWM was able to maintain its business operations by relying on its original printers. 4. In BHP Coal Ltd v O & K Orenstein & Koppel AG [2008] QSC 141 McMurdo J considered a claim for damages for loss of use of machinery in a mining operation where the mining company was able to redeploy resources in a manner that maintained operations. It was unable to prove a specific loss of profit arising from the deprivation of the machinery. McMurdo J stated: In particular it is a matter for a plaintiff to prove that there was such a significant disruption, that there was a likely impact upon its profit, although not in a way "susceptible to very clear proof". In the present case, where it is not proved that there was, as Mr Ellery described it some "back filling", there is no proof of "significant" disruption in this sense. Thus for the non-salaried employees, the impact upon the mine's resources as a whole is not shown to have had the likely effect of inhibiting the mine's operations. In my view proof of such a likely impact is necessary. It is not simply a matter of saying that the plaintiffs should recover as if they had incurred an incremental cost by engaging outsiders to do the same work. 1. AWM has failed to show that it experienced a disruption to its business that would have impacted upon its profit. Accordingly, the cross claim fails. The Court will enter a verdict for the cross defendant. Assessor Olischlager Small Claims Division 25 July 2017 ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 August 2017