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Court of Appeal of New Zealand |
Last Updated: 25 June 2014
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IN THE COURT OF APPEAL OF NEW ZEALAND
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BETWEEN
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Appellant |
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AND
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Respondent |
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Hearing: |
21 May 2014 |
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Court: |
Randerson, Winkelmann, Lang JJ |
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Counsel: |
S J Corlett for Appellant
M D Pascariu and E I D Fox for Respondent |
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Judgment: |
JUDGMENT OF THE COURT
____________________________________________________________________
REASONS OF THE COURT
(Given by Winkelmann J)
[1] The appellant Sociedad Agricola Topagri Ltda (Topagri), sold equipment supplied by the respondent, BBC Technologies Ltd (BBC), in Chile from 2006 to 2011. A dispute arose as to the amount owed by Topagri to BBC for some of the equipment, and ultimately BBC issued proceedings in respect of the amount it said was due to it. Associate Judge Osborne granted BBC summary judgment against Topagri in the sum of US$144,001.10 in relation to products supplied by it in the years 2009 and 2010.[1] All amounts in the proceedings are expressed in US dollars. We adopt the same approach for the purposes of this judgment.
[2] Topagri appeals the grant of summary judgment on two principal grounds. First, that the Associate Judge erred in finding that Topagri had no arguable defence to the claim. Topagri says there were factual disputes as to the extent of its liability for 2009/2010 product which could not properly be resolved at summary judgment stage. Secondly, Topagri contends that the Associate Judge erred in finding that Topagri’s pleaded set-off/counterclaim did not provide an arguable defence to BBC’s claim.
Narrative of events relevant to issues on appeal
[3] BBC is a manufacturer and supplier of equipment used in fruit production and processing. In 2006 BBC and Topagri entered into a written distributor’s agreement under which Topagri agreed to distribute BBC’s equipment in Chile on a commission basis. Although the distributor’s agreement came to an end on 11 January 2008, BBC continued to supply equipment to Topagri for distribution to its customers. There was no written contract but it is common ground that those supplies occurred on the following basis:
(a) Topagri would place purchase orders for equipment with BBC for the upcoming Chilean fruit harvest season (November to February each year). The orders would record the technical characteristics of the equipment that Topagri wished to supply its clients, the recommended retail price to be charged to Topagri’s clients, and the price BBC was to sell the product to Topagri.
(b) If the purchase order was accepted by BBC, it would supply the equipment to Topagri. A customs invoice would be issued setting out the detail of the products supplied and the price to be paid by Topagri to BBC. Generally the price was at a discount of 20% of the recommended retail price.
(c) Topagri was not required to pay the purchase price until the end of the Chilean fruit harvest season for which the equipment was supplied.
[4] On occasion, equipment was also supplied by BBC to Topagri on the basis that it was rented to third parties. The basis on which such transactions were conducted was one of the issues before the Associate Judge, and we come to this issue shortly.
[5] During the course of 2011 BBC and Topagri were in active discussion about the amounts owed to BBC by Topagri, and by the beginning of the 2011/2012 season the parties’ trading relationship had broken down over this issue.
[6] In the statement of claim BBC alleges that $882,300 remains outstanding in respect of supplies by BBC to Topagri in respect of 11 transactions in the 2009/2010 season. BBC’s application for summary judgment was only for part of this amount. In his affidavit in support of the application, Mr Geoffrey Furniss, a director of BBC, explained:
...BBC is seeking judgment only for that part of its claim, being US$344,145.86 which is acknowledged as due and owing by Topagri according to its own calculation.
This “acknowledgment” of debt BBC relied upon was a spreadsheet prepared by Mr Baumelou, Topagri’s owner, and provided to BBC in June of 2011. We refer to this initial spreadsheet as “the Spreadsheet” in this judgment.
[7] In his evidence filed in opposition to the application for summary judgment, Mr Baumelou disputed that even this portion of the debt was owing. He said that the Spreadsheet provided by him was based on incomplete and outdated information. He provided a revised spreadsheet which showed BBC was indebted to Topagri for $526,298.11.
[8] At the hearing before the Associate Judge, BBC acknowledged that there was an arguable defence in respect of a further portion of the claim. The Associate Judge made further deductions to the extent of BBC’s concessions and granted summary judgment for $144,001.10. He found all other disputes raised by Topagri as to the amount outstanding to be without evidential foundation or improbable. He found that the prices for the equipment for the 2009–2010 orders were correctly stated by BBC. He rejected the defence based upon a set-off and/or counterclaim as weak and lacking in detail and any evidentiary underpinning.
Relevant principles
[9] The applicable principles in summary judgment are not at issue, and are as summarised by this Court in Krukziener v Hanover Finance Limited:[2]
(a) The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried.[3]
(b) The onus is on the plaintiff, but where the plaintiff’s evidence is sufficient to show that there is no defence, the defendant will have to respond if the application is to be defeated.[4]
(c) The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example, where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable.[5]
(d) In the end, the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.[6]
First ground of appeal: arguable defence as to amounts outstanding
[10] Topagri argues that there were disputes of fact which could not be properly resolved within the context of a summary judgment. It says that the evidence before the Court contained significant areas of dispute and it was therefore premature for the Court to make conclusive findings at the summary judgment stage. Questions of credibility could only be assessed and tested at trial.
(a) Arguable disputes as to entitlement to payment for additional expenses
[11] In written submissions filed in support of the appeal, Topagri argued that it was entitled to reimbursement or credit for additional expenses including freight costs totalling $88,393.08 and that the Associate Judge was wrong to reject this claim on the basis that there was no evidential foundation for it. Topagri pointed to Mr Baumelou’s evidence of an agreement that those amounts should be reimbursed, and that similar amounts had been reimbursed by BBC in the past. Topagri also relied upon the fact that Mr Furniss did not respond to Mr Baumelou’s claim concerning prior reimbursement in his reply affidavit.
[12] During oral argument before us, Mr Corlett conceded that the Spreadsheet originally provided by Topagri had allowed Topagri a credit for all but $5,255.50 of these expenses. Therefore, all but $5,255.50 of the $88,393.08 expenses claimed by Topagri, were excluded from the summary judgment amount. Nevertheless Mr Corlett maintained his appeal point in respect of the $5,255.50.
[13] The Associate Judge addressed the expenses portion of Topagri’s defence. He said that Mr Baumelou’s evidence failed to identify the contractual basis upon which these expenses should be credited to Topagri, and noted that Mr Furniss denied that BBC had agreed to meet the expenses.
[14] The Associate Judge continued:[7]
A factual dispute as to the oral terms of an agreement would normally be unresolvable in a summary judgment context. However, in this case, Topagri has not laid any proper evidential foundation as to its entitlement to reimbursement or credit for expenses. Mr Baumelou does not identify any of the circumstances which would be needed for such an agreement such as identification of the people who reached the agreement, the approximate timing of any such agreement, and its terms. Topagri’s suggestion of an entitlement to reimbursement of expenses is, in this case, a mere assertion and it is to be disregarded on that basis.
[15] We agree with the characterisation of that evidence by the Associate Judge. Mr Baumelou does not lay a proper foundation for the defence. His evidence consisted of no more than the detail contained in his amended spreadsheet and the following statement in his affidavit:
...it was agreed that any costs incurred by Topagri directly arising from the trading relationship, to and including purchase transactions, would be reimbursed by BBC to Topagri. Consistent with such an agreement is the fact that BBC reimbursed Topagri for such costs and expenses from 2005 to 2008.
[16] There is no explanation of the nature of the agreement; for example, what expenses would be reimbursed, and what would not be. There is no detail provided beyond the barest narration in the amended spreadsheet, and no supporting documents, such as invoices, to substantiate the amounts claimed.
[17] We also note that Mr Baumelou’s updated spreadsheet records the $88,393.08 as the figure for “total expenses”. It does not cover only freight as counsel for Topagri argued. These total expenses included amounts with narrations such as “technicians in Canada”. As the Associate Judge observed, there must be serious doubt as to the credibility of a suggestion that BBC was agreeing to meet expenses such as Topagri’s “technicians in Canada” when there was no longer a formal distributorship agreement in place. We therefore agree with the Associate Judge that there was no evidentiary foundation for an arguable defence in relation to expenses.
(b) Arguable dispute as to entitlement for payment for spare parts
[18] Topagri also challenges the Associate Judge’s refusal to deduct an amount of $34,228.85 on account of “spare parts”. The Associate Judge discounted that aspect of the defence on the basis that Mr Baumelou gave no explanation in his affidavit for the deduction for spare parts allowed for in his updated spreadsheet. The Associate Judge also noted that counsel did not address the argument in submissions. He therefore characterised this defence as “bare assertion”. Counsel for Topagri has not improved upon the argument on appeal, squarely grounding his argument upon the spare parts figure included in the updated spreadsheet. Again, we are not satisfied that the Associate Judge erred in his treatment of this aspect of Topagri’s opposition to the application for summary judgment.
(c) Arguable dispute as to allocation of payments
[19] Topagri says that the $889,000 it paid to BBC between 29 November 2010 and 10 June 2011 should have been applied to the transactions at issue. If its repayments are applied in that way, this extinguishes the amount BBC is due. Topagri says it is at least arguable that the repayments should be applied in this way because BBC agreed that purchases were to be paid on a deferred basis and by the end of each season. Topagri’s payments were made at a time the subject transactions would have been required to be paid.
[20] Topagri says that the only evidence as to how its payments were applied by BBC was in a table attached to Mr Furniss’ reply affidavit. If repayments had been applied as alleged, BBC would have documented it and notified Topagri of this.
[21] This is not an argument that was made before the Associate Judge. In the High Court the argument rejected by the Associate Judge was that the 20092010 orders had been paid in full. This new argument is in any case without merit. The law in relation to allocation of payments in a current account situation is that a debtor has the right to allocate a payment toward a particular debt. If the debtor fails to do that at the time of payment, then the right of appropriation passes to the creditor.[8]
[22] The creditor is not bound to make an appropriation immediately. The appropriation can take place “at any time up to the very last moment”.[9] An appropriation does not have to be expressly made. Any action that plainly demonstrates the creditor’s intention will suffice.[10] Where neither debtor nor creditor exercises their respective rights to appropriate payments, and no evidence suggests a contrary intention, the law appropriates the payment to the earliest debt.
[23] There is no evidence to suggest that Topagri directed the payments to be applied to the 2009–2010 orders. The fact that BBC sued to recover amounts outstanding for the 2009–2010 years is evidence from which it can be inferred Topagri’s payments were applied by BBC to its earlier unpaid invoices. Moreover, in his reply affidavit Mr Furniss produced a table showing how the $889,000 of repayments had been allocated between debts. The appropriations were in accordance with those recorded in both Mr Baumelou’s Spreadsheet and amended spreadsheet.
[24] For this reasons, there is no arguable defence arising from how BBC has applied repayments.
(d) Arguable dispute as to purchase/rental price
[25] Topagri also disputed BBC’s quantification of several purchases and retail prices BBC alleged were payable. On appeal Topagri argues the Associate Judge erred in finding that Topagri had not raised an arguable defence in respect of these items.
(i) Items A and I
[26] Items A and I relate to a Soft Sorta machine supplied by BBC and rented out by Topagri in 2009 and 2010. Mr Furniss’ evidence was that the transaction occurred as follows. Topagri placed a buying order with BBC for a Soft Sorta machine at a price of $79,000. This did not include the 20% discount Topagri was entitled to. Therefore when BBC invoiced Topagri confirming the order, the invoice was for $63,200, which included the 20% discount. This same machine was then sold back to BBC at the second-hand value of $14,500. The difference of $48,700 remained outstanding in terms of the initial supply contract.
[27] Mr Furniss’ evidence as to how these prices were fixed was as follows. It was agreed that the equipment for rent was sold to Topagri at 80% of the recommended retail price (rental import price). The equipment was then sold back to BBC by Topagri at the rental import price less 80% of the funds derived from renting the equipment (rental export price).
[28] Mr Baumelou claimed that the transactions related to two Topagri clients and that the price initially charged by BBC was on one occasion $17,200, not $63,200, and on the second occasion $18,000. He said that BBC had agreed the price to Topagri was only the cost of rentals, which was $17,200 and $18,000, in respect of the two transactions. He said that this agreement was confirmed in an email from a BBC employee, Ms Taylor, to him, in which she said “Topagri debt will only be the cost of the rental(s)”. He says therefore that the amount due was $35,200 ($17,200 + $18,000), not $48,700 as claimed by BBC.
[29] We have considered the documentary material put forward by Topagri and Mr Baumelou’s affidavit. We are not satisfied that the Associate Judge erred in his characterisation of the evidence and his rejection of this as the foundation for a defence to the claim. The Associate Judge dealt with this issue as follows:
[77] The evidence filed clearly establishes that the purchase price for this equipment (a Soft Sorta) in the 2009 season was $63,200 and that the sale back to BBC was at $14,500, leaving the amount initially outstanding at $48,700. The $14,500 credit figure was confirmed in writing by Mr Baumelou to Ms Karen Taylor of BBC on 27 July 2011. In his evidence, Mr Baumelou refers to what is plainly an ambiguous email from Ms Taylor two days earlier (25 July 2011) in which there is reference to the $14,500 figure for this item, followed by a statement that “Topagri debt will only be the cost of the rental”. It is clear beyond argument, particularly when Mr Baumelou’s own email of two days later is read, that the agreed $14,500 is to be credited against the purchase price and is not to become the replacement purchase price.
[78] The same analysis applies to Item I later in the table (save that the two Soft Sortas purchased in December 2010 were involved at $65,200 each).
[30] Mr Furniss provided a detailed account of how the transaction was intended to proceed; which was corroborated by contemporaneous documentation. Mr Baumelou’s conflicting account was properly rejected by the Associate Judge as improbable in light of that evidence.
(ii) Purchase price from Item D
[31] Topagri also contends that the Associate Judge erred in resolving the factual dispute in respect of item D. Again we have reviewed the evidence, and we can find no fault with the Associate Judge’s analysis which we set out below:
[86] Item D relates to one Fill by Weight machine. The evidence establishes that the standard discounted price for that item of equipment, as between BBC and Topagri, was $US86,400 (as indicated by other items in Table 1).
.....
[87] Mr Baumelou relies upon the documents produced by BBC in relation to this transaction and, in particular, BBC’s customs invoice. For some reason, BBC’s customs invoice was expressed in New Zealand dollars. That is, of course, contrary to the contractually agreed position between the parties that transactions would be in US currency. Furthermore, the customs invoice stated “$48,150.00”. It appears that BBC cannot explain that an error is involved. Topagri’s own Buying Order identified the net price as $86,400. Mr Baumelou refers to no correspondence or discussion to suggest any negotiated change from the cost of an item which the parties usually exchange at $86,400 for a New Zealand currency figure of $48,150. In his affidavit in opposition, Mr Baumelou does not seek to explain why he took the NZ$48,150 figure on the invoice as the seriously intended cost. Rather, what he did in his affidavit was to simply state that that sum equates to approximately “$35,293.45”. It is that figure which he then took and put in his revised spreadsheets. It is beyond doubt that someone compiling the customs invoice for BBC made an error. The price for that particular Fill By Weight was undoubtedly meant to be for $86,400 as it was for all Fill By Weights through that period.
[32] Again the Associate Judge was entitled to reject Mr Baumelou’s account as implausible and essentially opportunistic in the light of contemporaneous documents.
Second ground of appeal: counterclaim/set-off
[33] Topagri has pleaded a claim against BBC which it says gives rise to a counterclaim and/or a set-off. These claims arise out of steps taken by BBC following Topagri’s failure to pay the amount BBC claimed was due to it at the conclusion of the 2009/2010 fruit season refusing to supply equipment to Topagri for on-supply to Topagri’s clients during the 2011/2012 season and, in some cases, selling directly to those clients. It is therefore necessary at this point to say something of the events surrounding the end of the business relationship between BBC and Topagri.
[34] In November 2010 BBC requested that Topagri make payment of the overdue money. Detailed exchanges of information between BBC and Topagri as to the balance owed by Topagri to BBC then ensued. In August 2011 Mr Furniss sent an email to Mr Baumelou in which he said:
We are unwilling to continue to provide finance to you as an agent and require you to clear your outstanding debt before we can make deliveries of this year’s orders.
[35] On 24 October 2011 Topagri’s lawyers responded. They characterised BBC’s position as arbitrary and disloyal. They said that not only did BBC have no right to claim any payment, BBC’s conduct had caused damage to Topagri “much greater than the payment requested by BBC”. They suggested the execution of a release agreement.
[36] On 27 October 2011 Mr Furniss emailed Topagri requesting immediate payment of US$387,578.39 for past supply of machines and US$100,000 for parts. Mr Furniss said:
As Topagri are not willing to participate in a payment plan, I advise you that [BBC] ceases credit terms to Topagri, and request full payment of all outstanding debt immediately.
For machines you have ordered for the 2011-2012 season, no credit terms are available, and full payment is required .... before delivery will occur.
[37] The relationship had by this time clearly broken down. BBC responded to Topagri’s proposal of a release agreement with its own proposal of a mediation in Chile. That proposal was declined by Topagri.
[38] Mr Furniss says that as the 2011–2012 season was about to commence, BBC advised Chilean customers that it was unable to supply the equipment to Topagri as it could not meet the payment terms. He said that most of those customers chose to deal direct with BBC to purchase the equipment.
[39] Topagri alleges that although there was no written agreement between the parties following the termination of the distributor agreement in 2008, there was nevertheless a supply contract between the parties which contained terms that BBC would supply its product to Topagri on request. In argument Topagri also formulated this as an obligation to give reasonable notice to terminate. Topagri says that BBC was in breach of that term when it failed to supply Topagri’s clients in October 2011. Topagri also argues that BBC was contractually obliged not to compete with Topagri following the termination of the agreement, and not to use Topagri’s customer details. BBC was in breach of this term when it dealt direct with Topagri’s clients and supplied them with equipment.
[40] Topagri relies on the following paragraph in Mr Baumelou’s affidavit as the evidentiary foundation for both of the alleged breaches:
...in clear breach of the agreement that BBC would not deal with Topagri’s clients and without Topagri’s agreement or consent and BBC would supply equipment upon order ... BBC dealt direct with Topagri’s clients and supplied them with this equipment.[11]
[41] Topagri says these claims give rise to a counterclaim, or a set-off sufficient to successfully defend the application for summary judgment. A set-off, either legal or equitable, can provide a good defence to a summary judgment application.[12] So too may a counterclaim, but only if it is so closely connected to the principal claim as to amount to a set-off. In Grant v NZMC Ltd Somers J delivering the judgment of the Court of Appeal said:[13]
The principle is, we think, clear. The defendant may set-off a cross-claim which so affects the plaintiff's claim that it would be unjust to allow the plaintiff to have judgment without bringing the cross-claim to account. The link must be such that the two are in effect interdependent: judgment on one cannot fairly be given without regard to the other: the defendant's claim calls into question or impeaches the plaintiff's demand. It is neither necessary, nor decisive, that claim and cross-claim arise out of the same contract.
[42] The Associate Judge however rejected Topagri’s pleaded counterclaim/set-off as an adequate basis for its defence to the summary judgment application. He made the following findings, first in relation to the obligation to continue to supply:
[37] The allegation of an undertaking to supply equipment upon order is again a bare assertion and is to be disregarded in the context of this summary judgment application. There is the suspicion from the way in which Mr Baumelou has referred to “supply equipment upon order” late in his affidavit, that he may have inferred such a proposition from what he asserts to be a non-competition agreement. That will ultimately be a matter for determination at trial. Commercially, it appears to be an unlikely term when the parties had moved away from a distribution agreement and were simply trading on order by order. As well as failing to provide any detail as to the way in which the alleged agreement came into existence, Mr Baumelou does not explain commercially why BBC would tie itself into such an open-ended, yet committed relationship. If there had been a properly arguable case as to a duty to continue supplying goods as ordered, such would be relevant only to Topagri’s asserted set-off or counterclaim. It could not alter the correct calculation of any balance owing by Topagri to BBC for the goods actually provided.
[43] In relation to the non-solicitation/non-competition agreement, the Associate Judge characterised this evidence as a bare assertion. He said that given the lack of particulars of the allegation it was reasonable that Mr Furniss could not respond further than his categorical denial that such contractual terms existed. The Associate Judge said:
[41] BBC’s reply on these issues therefore comes through Mr Pascariu’s submissions. The unsatisfactory nature of Topagri’s evidence in support of an alleged non-competition undertaking by BBC is reinforced, as Mr Pascariu submitted, by reference to the written distributor’s agreement which the parties had in place between 2005 and 2008 when Topagri was BBC’s distributor. Mr Furniss exhibited the distributor’s agreement which is a comprehensive commercial agreement. In that agreement, the parties specifically dealt with non-competition by clause 16. That provided:
16. Non Competing
The Distributor agrees not to compete in any territories with any competing product(s) for the duration of three months beyond the completion of this Agreement.
[42] The distributor’s agreement contained no clause by which BBC undertook not to compete, either during the term of any relationship or for any period thereafter.
[43] Given the express way in which the parties were to deal with customers during the subsistence of the distributor’s agreement, Topagri’s proposition that BBC accepted in some undefined way a commitment not to compete or to deal with customers after the distributor’s agreement expired, appears weak. As with the suggested term relating to acceptance of orders, a term as to non-competition would have relevance only to the Topagri set-off or counterclaim. It could not affect (other than by way of set-off) the correct calculation of the balance for goods supplied.
[44] Although Mr Corlett has challenged those findings he has not identified any particular defect in the approach of the Associate Judge. We have considered the evidence relied upon by Topagri, and counsel’s submissions. Again however, we find ourselves in complete agreement with the Associate Judge. The evidence offered by Topagri in support of its counterclaim/set-off is scant. Moreover the existence of the terms argued for is implausible in the overall context of the parties’ dealings with each other. We see this as fatal to this aspect of the defence to the application.
[45] We note however that the Associate Judge also saw as fatal Topagri’s failure to provide any evidential foundation on which a Court could conclude that it had suffered either damages or a loss of profit from these alleged breaches. He said:[14]
Topagri has not produced any evidence of relevant profit margins to establish damages, nor has it offered any analysis of profitability on such transactions on which to base an account of profits.
[46] Topagri was not required to provide evidence as to damages or loss of profit at the level of precision which would be required at a substantive hearing of its claim. However Topagri did need to provide evidence sufficient to lend an air of reality to its claim that the alleged breaches caused it loss.[15] We agree with the Associate Judge that it did not do so.
Result
[47] The appeal is dismissed. Topagri must pay BBC’s costs for a standard appeal on a Band A basis with usual disbursements.
Solicitors:
Brookfields, Auckland for Appellant
Minter Ellison
Rudd Watts, Auckland for Respondent
[1] BBC Technologies Ltd v Sociedad Agricola Topagri Ltda [2013] NZHC 1375 [High Court judgment].
[2] Krukziener v Hanover Finance Limited [2008] NZCA 187; (2008) 19 PRNZ 162 at [26].
[3] Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
[4] MacLean v Stewart (1997) 11 PRNZ 66 (CA) at 69.
[5] Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341 and 381.
[6] Bilbie Dymock Corp v Patel (1987) 1 PRNZ 84 (CA) at 86.
[7] High Court judgment, above n 1, at [27].
[8] Cory Bros and Co Ltd v Owners of the Turkish Steamship “Mecca” [1897] AC 286 (HL) at 293.
[9] Seymour v Pickett [1905] 1 KB 715 (CA) at 719.
[10] The Mecca, above n 8, at 294.
[11] The equipment Topagri had ordered to supply to their clients.
[12] Pemberton v Chappell, above n 3, at 4.
[13] Grant v NZMC Ltd [1989] 1 NZLR 8 (CA) at 12–13.
[14] High Court judgment, above n 1, at [75].
[15] Australian Guarantee Corp (NZ) v McBeth [1992] 3 NZLR 54 (CA) at 59.
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URL: http://www.nzlii.org/nz/cases/NZCA/2014/253.html