Fuji Xerox New Zealand Limited v Heidelberg Graphic Equipment Limited [2012] NZHC 2539 (2 October 2012)

Last Updated: 23 October 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-00614 [2012] NZHC 2539

BETWEEN FUJI XEROX NEW ZEALAND LIMITED First Plaintiff

AND FUJI XEROX FINANCE LIMITED Second Plaintiff

AND HEIDELBERG GRAPHIC EQUIPMENT LIMITED

Defendant

Hearing: 30 May 2012

Counsel: M R Crotty and B J Curry for Defendant Applicants

G Bogiatto for First and Second Plaintiff Respondents

Judgment: 2 October 2012

_{JUDGMENT OF WINKELMANN J}

This judgment was delivered by me on 2 October 2012 at 2.00 pm pursuant to

Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

George Bogiatto, Auckland

_{Russell McVeagh, Auckland}

FUJI XEROX & FUJI FINANCE LTD V HEIDELBERG GRAPHIC EQUIPMENT LTD HC AK CIV-2012-404-

00614 [2 October 2012]

[1] A contractual dispute has arisen between the plaintiffs and defendant (Heidelberg) in connection with the purchase by one of the plaintiffs of a digital die cutting KAMA ProCut53 machine, (the KAMA machine). This is a finishing machine used in the digital printing industry.

[2] It is alleged that the machine supplied by Heidelberg was defective. The plaintiffs bring claims against Heidelberg under the Fair Trading Act 1986, (alleging misleading and deceptive conduct), the Contractual Remedies Act 1979 (alleging misrepresentations induced entry into the contract) and under the Sale of Goods Act

1908 (alleging misrepresentations concerning the features and performance of the

KAMA machine).

[3] Heidelberg relies on a number of exclusion clauses and clauses purporting to limit liability, contained in a written contract between Heidelberg and the first plaintiff. Heidelberg denies the factual allegations as to the performance of the KAMA machine, but more fundamentally for the purposes of these applications, it says that the comprehensive exclusions set out in the terms which form part of the agreement mean that the statement of claim discloses no reasonable arguable cause of action against Heidelberg, and none of the causes of action in the statement of claim can succeed against Heidelberg.

[4] It seeks summary judgment against the plaintiffs, or in the alternative, to strike out the plaintiffs’ claims.

Claim as pleaded

[5] The plaintiffs plead their claim against Heidelberg as follows. The second plaintiff, Fuji Finance, had supplied Finishing on Demand with photocopying equipment in the past. Finishing on Demand needed to acquire a die cutting machine in order to expand its business and sought Fuji Finance’s assistance in doing so. Although neither Fuji Finance, nor the first plaintiff, Fuji Xerox, are suppliers of mechanical finishing equipment of the type sought, they wanted to help Finishing on Demand acquire a die cutting machine by facilitating and financing the purchase.

[6] Heidelberg is a provider of Heidelberg printing equipment and the New Zealand agent for sales and servicing of the KAMA brand of die cutting equipment. On 7 December 2010 representatives of Fuji Finance, Fuji Xerox, Finishing on Demand and Heidelberg met to discuss the possibility of Finishing on Demand obtaining a KAMA brand die cutting machine. At that first meeting, Fuji Xerox says that it disclosed a number of matters to Heidelberg including:

1. Fuji Finance provided financial arrangements to customers of Fuji Xerox to finance purchase of both Fuji Xerox and third party equipment.

2. Finishing on Demand was an existing customer of Fuji Finance.

Finishing on Demand was interested in obtaining a short run and quick turnaround digital die cutting machine suitable for a specialised packaging application.

3. Fuji Xerox’s and Fuji Finance’s interest in the proposed purchase of equipment from Heidelberg would be solely to assist Finishing on Demand with finance for the purchase of the equipment - Finishing on Demand would be the end user.

4. The specifications of the equipment would need to meet the requirements of Finishing on Demand, including a “two pull foiling mechanism”.

5. Any agreement to purchase the equipment would be entered into with Fuji Xerox, and Fuji Finance would then enter into a financing transaction to enable Finishing on Demand to purchase the equipment on terms to be agreed.

6. Heidelberg would be required to provide servicing of the equipment by KAMA trained engineers in New Zealand, and to provide spare parts in New Zealand.

7. Any warranty provided by Heidelberg for the supply of any equipment would need to be extended for the benefit of Finishing on Demand.

[7] The plaintiffs allege that a representative of Heidelberg, Mr Werner, presented information at that meeting both in respect of the KAMA machine and also in respect of another Heidelberg digital die cutting machine, the KAMA ProCut74. This information included a video clip of a KAMA ProCut74, and a catalogue of the type of products able to be produced by both the KAMA machine and the ProCut74 model. Mr Werner represented that the KAMA machine was identical in all respects (with the same features and specifications) to the ProCut74, save for the paper width able to be processed by each machine. In particular he said that the KAMA machine had a two pull foiling mechanism. He also represented that KAMA trained support servicing engineers were available in New Zealand, and that spare parts were either located at Heidelberg’s regional centre, or in Singapore, and parts from Singapore were available on overnight supply. Mr Werner said there was an unused KAMA machine available from England with a two foil pulling unit fitted, as shown in the brochure and the video clip, and it would be available at a discounted price if a decision was made prior to Christmas 2010 to purchase it.

[8] A subsequent meeting took place on 15 December 2010. Fuji Xerox and Fuji Finance say that at that meeting they reiterated the particular requirements that they and Finishing on Demand had in respect of any proposed transaction. In addition they said that the KAMA machine had to have fitted a hot foiling system with two motors for winding, a motorised pressure control and air blowing system for separation of foil for short run quick turn around digital printing and fully automatic die cutting functions.

[9] Heidelberg representatives confirmed that they understood that the plaintiffs were merely acting as financiers for the purchase of any equipment and that Finishing on Demand was to be the end user. They also understood that any warranty provided would extend for the benefit of Finishing on Demand and reconfirmed that the machine had the specifications demonstrated in the brochure and the video clip and in particular that it had a hot foiling system. The plaintiffs say

that they each relied on the representations made by the defendant at the two meetings in proceeding with their part of the transaction. An agreement for the sale and purchase of the KAMA machine (“the agreement”) was concluded on 22

December 2010.

[10] On 3 February 2011, Fuji Finance paid the defendant an initial deposit of

$21,275 and on 31 May 2011, the balance of the purchase price, $404,225. The

KAMA machine was delivered to the premises of Finishing on Demand in May

2011. In the period of time between May and December 2011, the KAMA machine allegedly suffered from many operational failures and defects, failing to operate reliably and consistently. From 11 December 2011, it is said that the machine ceased to function altogether.

[11] The plaintiffs allege Heidelberg breached the agreement by:

(i) Failing to maintain in New Zealand or in Singapore sufficient spare parts available on overnight courier delivery to remedy any breakdowns or defects in the KAMA machine.

(ii) Failing to provide KAMA trained engineers in New Zealand to remedy any defects and breakdowns of the KAMA.

(iii) Failing to comply with the terms of the warranty contained in the agreement as extended to Finishing on Demand.

(iv) Failing to supply a KAMA machine with a hot foiling system with two motors for winding, a motorised pressure control system and an air blowing system for separation of foil, as agreed at the meeting.

[12] Finishing on Demand rejected the KAMA machine and cancelled the ownership plan agreement it had entered into with Fuji Finance. Fuji Finance accepted the cancellation of the ownership plan agreement. Fuji Xerox subsequently rejected the KAMA machine and requested Heidelberg to uplift it from the premises

of Finishing on Demand and to refund the purchase price. The purchase price has not been refunded.

Causes of action

[13] The first cause of action pleaded is that Heidelberg engaged in conduct that was misleading or deceptive or likely to mislead or deceive Fuji Xerox, and because of that conduct, Fuji Xerox has suffered loss or damage.

[14] The second cause of action is under the Contractual Remedies Act. Fuji Xerox allege that misrepresentations were made as to the features of the KAMA machine, and as to the support available in respect of it and that Fuji Xerox was induced to enter into the agreement by these misrepresentations.

[15] The third cause of action is for breach of the Sale of Goods Act. Fuji Xerox alleges that because of the meetings in which the proposed use of the KAMA machine, and Finishing on Demand’s particular requirements were explained, there were (pursuant to s 16 of the Sale of Goods Act) implied conditions that the KAMA machine would be reasonably fit for purpose, and would be of merchantable quality. There was also an implied warranty or condition as to the quality or fitness of the KAMA machine for the particular purposes outlined. It is alleged that in breach of the implied statutory conditions and warranties the KAMA was not reasonably fit for purpose, was not of merchantable quality and the warranties or conditions as to quality or fitness for the particular purpose were breached by Heidelberg. In all of the first three causes of action a refund of the purchase price is sought together with interest.

[16] In the fourth and final cause of action, Fuji Finance brings a claim under the Fair Trading Act. Fuji Finance alleges that Heidelberg engaged in conduct that was misleading or deceptive or likely to mislead or deceive Fuji Xerox and that it is a consequence of that conduct that Finishing on Demand has cancelled the ownership plan. Because of that cancellation Fuji Finance has suffered loss or damage in the sum of $149,356.25 which is the loss of income stream arising from the ownership plan agreement.

Grounds for summary judgment/strike out application

[17] In support of this application for summary judgment or strike out of Fuji

Xerox’s claims, Heidelberg argues:

(i) That any claim against it under the agreement for had to be made within 14 days of installation.

(ii) That the sale was not a sale by description and therefore the warranties relied upon in the Sale of Goods Act do not apply.

(iii) In relation to the Contractual Remedies Act claim, the terms of the agreement were sufficiently clear to exclude Heidelberg’s liability for any misrepresentations made, and it is fair and reasonable that these terms are conclusive between the parties on that point.

(iv) In relation to the claims brought under the Fair Trading Act for misleading and deceptive conduct, the terms of the agreement were sufficient to deprive the conduct of any misleading or deceptive quality or to break any causal connection between the alleged misrepresentation and the alleged loss. It is fair and reasonable the agreement be conclusive in the circumstances.

[18] With regards to the claim by Fuji Finance, Heidelberg says that Fuji Finance was not a party to the agreement for sale and purchase of the KAMA machine, and there has been no assignment of the agreement to them. It therefore has no claim. It also says there is no causal connection between the action of Heidelberg and losses of Fuji Finance, and finally the losses claimed by Fuji Finance are expectation losses not claimable under the Fair Trading Act.

Legal principles

Strike out

[19] Rule 15.1 of the High Court Rules makes provision for orders striking out all or part of a pleading. In this case the defendants invoke r 15.1(1)(a) (no reasonably arguable cause of action). Rule 15.1 states:

15.1 Dismissing or staying all or part of proceeding

(1) The court may strike out all or part of a pleading if it—

(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or

(b) is likely to cause prejudice or delay; or

(c) is frivolous or vexatious; or

(d) is otherwise an abuse of the process of the court.

(2) If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.

(3) Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.

(4) This rule does not affect the court's inherent jurisdiction.

[20] The established criteria for striking out were summarised by the Court of Appeal in Attorney-General v Prince,1 and endorsed by the Supreme Court in Couch v Attorney-General,2 per Elias CJ and Anderson J. For these purposes the relevant principles are:

a) Pleaded facts, whether or not admitted, are assumed to be true. This does not extend to pleaded allegations which are entirely speculative and without foundation.

b) The cause of action for defence must be clearly untenable. In Couch

_{Elias CJ and Anderson J, at [33], said: “It is inappropriate to strike}

1 _{Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267.}

2 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].

out a claim summarily unless the court can be certain that it cannot

succeed.”

c) The jurisdiction is to be exercised sparingly, and only in clear cases.

This reflects the Court’s reluctance to terminate a claim or defence

short of trial.

4. The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.
   

[21] Strike out applications usually proceed on the basis of the pleadings alone. It is permissible, however, to refer to extrinsic material such as affidavits and documents provided that that material is undisputed and is not inconsistent with the pleadings.3

Summary Judgment

[22] The proper approach to a defendant’s application for summary judgment was

described as follows by Elias CJ:

[64] The defendant bears the onus of satisfying the Court that none of the claims can succeed. It is not necessary for the plaintiff to put up evidence at all although, if the defendant supplies evidence which would satisfy the Court that the claim cannot succeed, a plaintiff will usually have to respond with credible evidence of its own. Even then it is perhaps unhelpful to describe the effect as one where an onus is transferred. At the end of the day, the Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment made by the Court on interlocutory application is not one to be arrived at on a fine balance of the available evidence, such as is appropriate at trial.

(Emphasis added)

[23] The critical issue therefore is whether any of the claims can succeed. In assessing this it is necessary to take into account that the plaintiffs can amend their

_{pleading to remedy defects.}4

3 _{Attorney-General v McVeagh [1995] 1 NZLR 558, at 566.}

4 Nandro Homes Ltd v Datt HC Auckland CIV-2008-404-6676, 16 March 2009.

First ground for application for summary judgment/strike out

[24] Heidelberg says that clause 9(f) of the agreement is a complete answer to all of the plaintiffs’ claims. Clause 9 has the heading “Exclusion” and clause 9(f) provides:

It shall be a condition precedent to the making of any claim against Heidelberg whether by action, arbitration or otherwise that written notice of such claim shall have been given to Heidelberg by the buyer within 14 days of installation. If the buyer fails to give such notice all claims shall be deemed to be waived and absolutely barred.

[25] Heidelberg says that, since these claims were brought more than 14 days after installation, the claims are deemed to be “waived and absolutely barred”. The difficulty with this argument is that the contract stipulates that the warranty is to continue for a period of 12 months. It must be arguable that clause 9(f) is to be construed so as not to apply to warranty claims since an unenforceable warranty is not a warranty at all. It is possible to observe at the outset therefore that this clause cannot be a complete answer to all the claims.

Sale of Goods Act

[26] Section 16 of the Sale of Goods Act contains the following warranties:

16 Implied conditions as to quality or fitness

Subject to the provisions of this Act and of any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:

(a) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he is the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose:

Provided that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose:

(b) Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality:

Provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed:

(c) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade:

(d) An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith.

[27] Heidelberg says that the s 16(b) warranty claim cannot apply as the sale was not a sale by description. It relies on clause 2(a) of the agreement which stipulates:

Any description of the goods is given by way of identification only and the use of such description does not constitute this contract a sale by description.

[28] As Heidelberg contends, it is possible to exclude the statutory warranties provided for in s 16,5 but as with any exclusion clause clear words are needed.6

Clause 2(a) does not clearly state that the s 16(b) warranty is excluded. An available reading of clause 2(a) is that any description in the written contract is used by way of identification only, so that the exchanges which occurred at the meetings and which are relied upon by the plaintiffs, would not be caught by the clause.

[29] A further argument Heidelberg makes in relation to the Sale of Goods Act claims, is that all of the s 16 implied terms are excluded by clauses in the agreement, and in particular relies upon clause 9 of the contract. Clause 9 provides:

9. Exclusions

(a) Since there are many variables such as operator’s skill, goods maintenance, the nature of the printed product, the ink, paper and other materials used, ambient conditions are the specific manner in which the Buyer uses the goods, the parties agree that except as set out in the warranty attached (if any) Heidelberg cannot and does not make and representation, statement of act, promise of warranty of any kind or nature express or implied with respect to the goods, the speed at which the Buyer will be able to operate the goods or the

5 _{Sale of Goods Act 1908, s 56.}

6 DHL International Ltd v Richmond Ltd [1993] 3 NZLR 10 (CA).

amount of waste produced or volume or quality of production that the Buyer will be able to achieve with the goods. If the goods are secondhand the Buyer acknowledges that it is his/her responsibility to satisfy himself/herself before use by safety checks or otherwise that the goods are in a safe operating condition. All other warranties, guarantees and assurances of any kind are to the maximum extent permitted by law, excluded.

(b) if the goods are subject to the Consumer Guarantees Act 1993 but are acquired by the Buyer for business purposes, the Buyer agrees that the Consumer Guarantees Act 1993 shall not apply to this Contract.

(c) Nothing in this Contract is intended to have the effect of contracting out of the Consumer Guarantees Act 1993, except as permitted by that Act.

(d) If Heidelberg is liable under this Contract for any defective of faulty goods, its liability is limited at its option to:

(1) In the case of supply of goods, the replacement of the goods or the supply of equivalent goods, the payment of the costs of replacing the goods or acquiring equivalent goods, the payment of the costs of having the goods repaired, or the repair of the goods; or

(2) In the case of services, the supply of the services again or the payment of the costs of having those services supplied again.

(e) To the extent permitted by law and subject only to any express conditions contained herein Heidelberg shall under no circumstances be liable in any way whatsoever to the buyer for any form of loss damage or expenses sustained or incurred by the Buyer or any other party in consequence of or resulting directly or indirectly out of the supply of goods or services by Heidelberg, any breach of Heidelberg of any contract incorporating these conditions or the negligence of Heidelberg.

[30] Relevant to this argument is the contractual warranty. On the front sheet of the warranty is described as follows:

Twelve (12) months of warranty is included in the price.

[31] Also relevant is Clause 8 of the contract’s terms and conditions which provides:

(a) The warranty (if any) specified on the contract will commence on the date Heidelberg informs the buyer pursuant to Clause 7(a) that the goods have been installed and will continue for the warranty term specified on this contract. “(The Warranty Period)”.

(b) Heidelberg will during the warranty period at its option and at its sole responsibility repair or replace free of charge all components

and parts which in the opinion of Heidelberg, but not otherwise, are within the warranty period found to be of faulty manufacture or contain faulty materials and when in the opinion of Heidelberg mechanical adjustments other than operator adjustments are required Heidelberg will carry out such adjustments. Labour costs involved outside of normal time are payable by the buyer. Engineer’s travelling time and expenses are also payable by the buyer unless the goods are located with a fifty kilometre radius of Heidelberg’s offices in Auckland, Wellington or Christchurch. The buyer will comply with all reasonable requests of Heidelberg and its service engineers regarding the machinery, or the buyers property, to minimise the risk of damage to the machinery and will make the machinery available to Heidelberg and its service engineers at such times as requested by Heidelberg.

(c) This warranty will not apply where:

i) the machine is not installed by Heidelberg or be persons approved in writing by Heidelberg

ii) the buyer has failed to carry out routine maintenance procedures

iii) the machine has been operated by unqualified staff

iv) in the opinion of Heidelberg, the damage is caused by the faulty operation of the machine or failure to operate in accordance with the manufacturer’s specifications

v) repairs have been carried out by any person or persons not authorised in writing by Heidelberg

vi) the machinery is not stopped immediately the defect becomes apparent or any attempt is made to restart the machinery before the repair has been carried out

(d) This warranty excludes typical consumable items and without limiting the same shall include such items as bulbs, fuses, insulators, oil, lamps etc, and the cost of any labour (including travel time) to fit such consumable items.

(e) If in the opinion of Heidelberg the machine cannot be repaired, Heidelberg may at its option replace the machine with a like machine or refund to the buyer the purchase price of the machine.

(f) Heidelberg shall under no circumstances be liable in anyway whatsoever to the buyer for any form of loss damage or expense sustained or incurred by the buyer or any other party in consequence of or resulting directly or indirectly out of the sale of the machinery or the supply of services to the buyer.

(g) Corrosion of parts/components will not be covered by this warranty. (h) If the goods are second-hand the warranty provided by this Clause 8

shall not apply.

[32] Analysis of these three contractual provisions reveals there are difficulties with Heidelberg’s argument based on clause 9. The contract expressly provides that there is a 12 month warranty for the goods, but does not state the content of that warranty. Clause 8 provides some indication as to the extent of the warranty, by identifying remedies available to Fuji Xerox for breach, but there is nothing in those provisions inconsistent with the s 16 warranties. It is therefore arguable that s 16 provides content to the express contractual warranty. If the implied warranties form part of the expressed 12 month contractual warranty, then the exclusion clause has no effect on Fuji Xerox’s case. I note that Fuji Xerox’s argument gains further support from the omission of the Sale of Goods Act 1908 from the excluded statutory provisions listed in clause 9.

[33] Finally, in relation to this cause of action Heidelberg argues that clauses 1 and

15 of the terms and conditions, when read together, provide a complete answer to the claim. These clauses provide:

1. Continuity

(a) The Contract forms the basis on which Heidelberg supplies and sells Goods to the Buyer. Each such supply and sale shall be affected pursuant to the terms of this Contract (unless in any specific case agreed otherwise in writing). Any invoice or other document evidencing or describing any Goods is incorporated into and forms part of the contract.

15. Statements or representations not to be relied on

(a) Statements or representations of any kind and however made regarding performance, measurements, power consumption, etc and whether contained in drawings, catalogues advertisements, or otherwise are indicative only and shall not be binding upon Heidelberg or in any way form part of this Contract unless expressly stated so in writing by Heidelberg.

(b) This agreement and its attachments constitute the entire arrangement between Heidelberg and the Buyer and replace, supersede and merge all prior discussions, agreements or understanding between the parties. Any conditions contained in the Buyer’s purchase order shall not be binding on Heidelberg and shall not form part of the Contract.

(c) No variation of these terms & conditions is binding unless made in writing and signed by a duly authorized officer of Heidelberg.

[34] These two clauses, it is argued, constitute an “entire agreement” provision such that all other discussions, agreements or understandings between the parties not expressly recorded in the agreement are excluded. Again this argument has the difficulty that the contract expressly provides for a warranty, and there is, at best, from Heidelberg’s perspective, an uncertainty as to the content of that warranty. That is an issue for trial.

[35] For these reasons Heidelberg has not established that Fuji Xerox’s claim

under the Sale of goods Act cannot succeed.

Contractual Remedies Act

[36] Fuji Xerox claims that it entered into the agreement in reliance on false representations made on behalf of Heidelberg. Heidelberg says that even if it did make false representations (which it denies) the terms of the agreement expressly exclude Heidelberg’s liability for those representations by means of clause 15.

[37] Section 4(1) of the Contractual Remedies Act provides:

(1) If a contract, or any other document, contains a provision purporting to preclude a Court from inquiring into or determining the question—

(a) Whether a statement, promise, or undertaking was made or given, either in words or by conduct, in connection with or in the course of negotiations leading to the making of the contract; or

(b) Whether, if it was so made or given, it constituted a representation or a term of the contract; or

(c) Whether, if it was a representation, it was relied on—

the Court shall not, in any proceedings in relation to the contract, be precluded by that provision from inquiring into and determining any such question unless the Court considers that it is fair and reasonable that the provision should be conclusive between the parties, having regard to all the circumstances of the case, including the subject-matter and value of the transaction, the respective bargaining strengths of the parties, and the question whether any party was represented or advised by a solicitor at the time of the negotiations or at any other relevant time.

[38] In the present case Heidelberg relies on the terms that state:

(a) Heidelberg makes no representation, statement of act, promise or warranty of any kind or nature, express or implied with respect to the KAMA machine (clause 9(a), 15(a)).

(b) All warranties, guarantees or assurances of any kind, are to the maximum extent permitted by law, excluded (clause 9(a), 9(e)).

(c) Statements or representations of any kind and however made regarding performance, measurements, power consumption etc are indicative only and not binding on Heidelberg and do not form part of the agreement unless specifically stated so in writing by Heidelberg (clause 9(a), 15(a)).

(d) The agreement constitutes the entire agreement between Heidelberg and Fuji Xerox and replaces, supersedes and merges all prior discussions, agreements or understandings between Heidelberg and Fuji Xerox (clause 15(b)).

(e) No variation of any terms of the agreement is binding unless made in writing and signed by a duly authorised officer of Heidelberg.

[39] Heidelberg relies upon PAE (New Zealand) v Brosnahan7 where the Court of Appeal held that, in the circumstances, it was fair and reasonable for an entire agreement clause to be conclusive between the parties. In this case Heidelberg argues that it is fair and reasonable that the agreement and all of its terms be conclusive between the parties having regard to the circumstances of the case. It

_says:

The agreement is a comprehensive written agreement entered into between

_{two sophisticated and experienced commercial parties.}

7 PAE (New Zealand) v Brosnahan [2009] NZCA 611, [2010] 9 NZBLC 102, 862 at [16]-[25].

There was no disparity in bargaining power between Fuji Xerox and

Heidelberg and indeed Fuji Xerox has a larger operation in New Zealand than

_Heidelberg.

Fuji Xerox is financially aware, and is familiar with the sale of machinery

_{subject to terms and conditions.}

Fuji Xerox is familiar with the printing industry and its business involves the

_{sale of printing machinery to its customers.}

Fuji Xerox should have known the way in which and the terms on which

_{printing machinery is sold to customers in New Zealand.}

Fuji Xerox was in possession of the agreement for five days before it was signed and had sufficient opportunity to read and consider the terms of the

_{agreement and to seek legal advice if it chose to do so.}

[40] The agreement recited a number of detailed warranties, but these did not extend to the subject matter that PAE relied upon at trial. These provisions were accompanied by an “entire agreement” clause. Brosnahan was a very different case to the present - the party attempting to step around the entire agreement clause was the party which had both stipulated for and drafted the clause. Moreover, the case went to trial and all the evidence was before the Judge when making the determination that the misrepresentation claim under s 6 of the Contractual Remedies Act was precluded by the entire agreement clause.

[41] I note that in this case Fuji Xerox disputes that the parties were on an equal footing because Heidelberg was an expert in cutting machines whereas it had absolutely no knowledge of such machinery. Fuji Xerox will argue that the purchase of specialist machines in a specialised area is an obvious case where imbalance in bargaining can arise and that an imbalance of knowledge and expertise caused Fuji Xerox to act in total reliance on Heidelberg.

[42] I am not persuaded that it is possible at this interlocutory stage for the Court to say that the claim under the Contractual Remedies Act is clearly untenable or cannot succeed. Whether something is fair and reasonable is a question which is to be decided in all the circumstances of the case. It is an issue for trial whether it is fair and reasonable to enforce a clause or clauses which purport to exclude liability for misrepresentations as to the capabilities and functionalities of the KAMA machine which were, on the plaintiffs’ case, clearly stipulated as essential for them.

Fair Trading Act

[43] Fuji Xerox claims that the representations allegedly made by Heidelberg were misleading or deceptive, or likely to mislead or deceive. Heidelberg relies on clauses 9 and 15 as excluding all liability for misleading or deceptive conduct. Although it acknowledges that as a general rule it is not possible to “contract out” of the Fair Trading Act, as to do so would undermine the consumer protection policy of the legislation, it says that the Courts have recognised that this is not an absolute rule. It says that consumer protection legislation has less force in the context of commercial transactions involving substantial commercial parties.

[44] Heidelberg argues that the agreement deprives the conduct of its misleading or deceptive quality. Heidelberg says the terms are sufficient for that purpose because Fuji Xerox agreed to purchase the KAMA machine on the terms as set out in the agreement, and the agreement clearly states that Heidelberg cannot and does not make any representations as to goods other than as specifically listed in the agreement. The agreement excludes all representations, no matter how the representations may have been made, and Fuji Xerox expressly agrees that any statements or representations contained in drawings, catalogues, advertisements or otherwise do not form part of the agreement. The nature of the exclusion clauses relied upon by Heidelberg go beyond that of a standard boiler plate acknowledgment or non-reliance clause and in particular, Heidelberg says that by signing the agreement Fuji Xerox acknowledged that Heidelberg could not and did not make any representations regarding performance measurements and the power consumption of the KAMA machine and the speed at which the KAMA machine could be operated.

[45] Heidelberg relies upon the Court of Appeal decision in David v TFAC Limited,8 in which the Court of Appeal acknowledged, (citing Kewside Pty Ltd v Warman International Ltd 9) that the contractual arrangement between two parties may defeat a claim under the Fair Trading Act where a clause or clauses in the contract either deprives the conduct of its misleading or deceptive quality or breaks the causal connection between conduct and loss.

[46] On the wording of the clause it is arguable that clause 15 is not sufficient to exclude representations which were as to the essential functionality of the product being supplied, as opposed to its performance. Equally it is arguable that it was not sufficient to exclude any representations as to the level of service which was available to support the purchase of such a valuable asset.

[47] The same points can be made in respect of the alternative argument that the terms were such as to break the causal connection between any alleged misrepresentation made by Heidelberg prior to entering into the agreement and any alleged loss suffered by Fuji Xerox.

[48] For these reasons it cannot be said that this claim cannot succeed. I also consider that these are issues properly resolved at trial, when all of the evidence is before the Court.

Claim by Fuji Finance

[49] The second plaintiff, Fuji Finance, alleges misleading and deceptive conduct by Heidelberg in breach of the Fair Trading Act. It claims damages of $149,256.25, for loss it says arose from early cancellation of the ownership plan agreement with Finishing on Demand. Heidelberg applies for summary judgment and/or to strike out this claim on the grounds there is no reasonably arguable cause of action because first, the loss was not caused by the conduct of Heidelberg, and secondly, the loss

_{claimed is an expectation loss unrecoverable under the Fair Trading Act.}

8 _{David v TFAC Limited [2009] NZCA 44, [2009] 3 NZLR 239 at [63].}

9 Kewside Pty Ltd v Warman International Ltd [1990] FCA 7, (1990) ATPR 46-059.

[50] As to the first point, Heidelberg relies on s 43 of the Act and the decision in Goldsboro v Walker,10 as authority for the proposition that there must be a clear nexus between the conduct alleged and the loss or damage. It says that there is no such causal connection in this case as the loss caused to Fuji Finance was caused by Finishing on Demand’s decision to cancel the ownership agreement rather than by any representations made by Heidelberg. It also says that in a commercial

transaction of this sort, the Court should be reluctant to disturb the risk allocation settled by Heidelberg and Fuji Finance, when it was decided that it was Fuji Xerox that should be the contracting party.

[51] As to the second point, it is contended that the loss of income stream claimed by Fuji Finance is the income it expected to make as a result of the Ownership Plan Agreement with Finishing on Demand. The Fair Trading Act does not impose obligation to make good a plaintiff’s failure to obtained expected future benefits, simply because that expectation was created or contributed to by a misleading statement.

[52] Fuji Finance says that it relied upon the representations made by Heidelberg in entering into the agreement with Finishing on Demand for the ownership plan. Heidelberg was made aware of this background in its discussions with Fuji Finance in December 2010. The loss sustained by Fuji Finance was therefore caused by the representations made by Heidelberg. The subsequent decision by Finishing on Demand to cancel the ownership plan agreement was merely one component of the circumstances giving rise to the loss, and was in any event, a direct consequence of the misrepresentation.

[53] Again the defences raised by Heidelberg are not clear cut, and should properly be considered with the benefit of the evidence at trial. On Fuji Finance’s case, it relied on alleged misrepresentations in deciding to enter into the Ownership Plan Agreement. Given that it involved itself in these meetings, this cannot be said

_{to be an improbable account. Fuji Finance need not establish that its reliance on}

10 Goldsboro v Walker [1993] 1 NZLR 394 CA at 401.

those misrepresentations was the only cause of its loss, only that it was an effective cause.11

[54] As to the issue in relation to the claim for expectation loss, it is true that expectation losses are not usually recoverable, because s 43(1) does not give a representatee a right to enforce a representation which is misleading.12 Compensable loss is that caused by the making of the misrepresentation, not by the failure to perform or deliver on the representation. However, this defect in the pleading is simply cured by re-pleading. Mr Bogiatto has said that the plaintiffs intend to file an amended statement of claim to tidy up what is undoubtedly, at present, a poorly articulated pleading. When they do so, they can correct this defect.

Result

[55] For these reasons Heidelberg’s applications for summary judgment and/or strike out are dismissed.

[56] I note that there was an argument as to the admissibility of evidence as to post contract dealings between the parties. As I did not regard this evidence as relevant, I have not had to resolve the issue of admissibility.

[57] I ask that the registry allocate a 30 minute conference in the week beginning

15 October 2012 for the purpose of attending to issues for the first case management conference.

11 _{Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492.}

12 Cox & Coxon Limited v Leipst [1999] 2 NZLR 15 at 26.