DMS Shipping & Trading Co Limited v Butler & Ors [1995] QSC 160

TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director. S!?.te Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION SHEPHERDSON J Writ No 1024 of 1995 DMS SHIPPING AND TRADING CO LTD and LUKE BUTLER and COMMERCIAL TRADING FINANCE PTY LIMITED and LIONHEART ASIA LIMITED BRISBANE .• DATE 10/08/95 JUDGMENT ! REVISED COPIES iSSUED I i State Reporting Bureau I 'l ) ·, - ;' Date _, ::i / '::;, / ½ ::i Plaintiff First Defendant Second Defendant Third Defendant .Jth Floor, The Law Courts. George Street. Brisbane. Q. 4000 Telephone: (07) 227 4360. Facsimile: (07) 227 5532 -- 1 of 13 -- 100895 Tl/LG M/T 5275/95 (Sheperdson J) SHEPHERDS0N J: I dismiss the application against the third defendant. I give the third defendant leave to defend this action conditional upon it paying into this Court on or before 21 August 1995, the Australian equivalent of $US162,500. And three: if the said sum be not paid into Court within the specified time then the plaintiff be at liberty to sign judgment against the third defendant in the Australian equivalent of the sum of $US162,500 together with interest thereon at 10 per cent per annum from 17 March 1995 to date of judgment and costs to be taxed. I certify the action is one which ought to be tried speedily. I publish my reasons. I think in the circumstances the costs of 4 August 1995 are reserved. You can see from my reasons what I think of the defence. It is just enough to get you there. I think in the circumstances the bringing of the application was well justified and I am not going to give you costs. The only other matter is the matter of directions for pre- trial procedures. I have certified the action is one that ought to be tried speedily. 1. In the event that the third defendant complies with the condition of payment into Court, the plaintiff is to deliver its consolidated statement of claim by 22 August 1995. 2 JUDGMENT 10 20 0 C) 30 () 40 0 50 60 -- 2 of 13 -- 100895 Tl/LG M/T 5275/95 (Sheperdson J) 2. The defendants are to deliver their defence and counter claim, if any, within seven days of delivery of the statement of claim. 3. The plaintiff is to deliver its reply and answer, if any, to the defence and counter claim, if any, within three days of delivery of the defence and counter claim, if any. I further order that the time for signing the certificate of ( , readiness be shortened to seven days from the date of delivery \ ! by the other side. 3 JUDGMENT 10 20 30 40 50 60 -- 3 of 13 -- IJ.c:,'1,e:, IN THE SUPREME COURT OF QUEENSLAND Brisbane Before the Hon. Mr Justice Shepherdson [DMS Shipping v. Butler & Ors] BETWEEN: DMS SIITPPING & TRADING CO LIMITED AND: LUKE BUTLER AND: COMMERCIAL TRADING & FINANCE PTY LTD AND: LIONHEART ASIA LIMITED JUDGMENT - SHEPHERDSON J. Judgment delivered 10 August 1995 No. 1024 of 1995 Plaintiff First Defendant Second Defendant Third Defendant CATCHWORDS: Summruy Judgment - Order 18 - question of law - conditional leave to defend granted- Paclantic Financing Co Inc v. Moscow Narodny Bank (1983) 1 W.LR. 1063 applied Counsel: Doyle for the Plaintiff O'Neill for the Third Defendant Solicitors: Clayton Utz for the Plaintiff Michael Kenny of Strathpine for the Third Defendant Hearing date: 4 August 1995 -- 4 of 13 -- IN THE SUPREME COURT OF QUEENSLAND Brisbane Before the Hon. Mr Justice Shepherdson [DMS Shipping v. Butler & Ors] BETWEEN: AND: AND: AND: DMS SIDPPING & TRADING CO LIMITED LUKE BUTLER COMMERCIAL TRADING & FINANCE PTY LTD LIONHEART ASIA LIMITED JUDGMENT - SHEPHERDSON J. Judgment delivered 10 August 1995 No. 1024 of 1995 Plaintiff First Defendant Second Defendant Third Defendant The plaintiff has applied for summary judgment under 0.18 against the above-named third defendant only. Alternatively, if leave to defend is given, it seeks that such leave be on certain conditions and further that preparation for trial take place on an expedited timetable and that the action be certified for speedy hearing. The material read before me by both sides shows that the following essential facts are not in issue: -- 5 of 13 -- I L___ _ 2 (a) The plaintiff, a Russian company with its address in Vladivostok, entered into a contract with the third defendant whereby the plaintiff was to buy and the third defendant was to sell to the plaintiff 100,000 tonnes of sugar. (b) In accordance with the contract the plaintiff paid the third defendant a deposit of five percent with respect to the proposed first shipment under the contract. That deposit was US$162,500. (c) The contract is at an end; the plaintiff has demanded return of the deposit and has been met by the third defendant asserting that it was entitled to terminate the contract as a result of the plaintiffs breaches and to forfeit the deposit. (d) The thir.d defendant has not refunded the deposit. The dispute before me centres on each side's contention that the other was in breach of the contract. The applicant plaintiffs submission is that the defendant was contractually obliged to submit what the contract called "proof of product" and failed to do so. The third defendant asserts that it was entitled to terminate the contract because the plaintiff did not and was not able to arrange the letter of credit required by the contract. Mr Doyle for the plaintiff submitted that the contract, m article 12 headed "CONTRACT PROCEDURES" provided a clear programme which was to be followed by the parties. Article 12 reads: "12.1 -- Buyer issues draft copy contract for negotiation and acceptance by the seller. 12.2 Seller returns signed copy of contract to buyer confirms that the seller accepts all conditions and clauses laid down in contract, along with complete banking information. If seller requires amendments seller must present for buyer's consideration and negotiation such amendments for mutual agreement. Facsimile copies be deemed legal and binding. 12.3 Buyer and seller sign the sales contract prepared by the seller and buyer submits payment of 5% deposit. 0 (~) (~) C) -- 6 of 13 -- ( ) 3 12.4 Seller submits 'proof of product'. 12.5 Buyer provides K.T.T. of L.C. for payment of 95% balance due and payable on arrival of sugar - Vladivostok or other agreed port. 12.6 Shipments commence as per schedule and seller issues insurance and documents. 12.7 Within 3 days of arrival of each shipment buyer to deposit balance of 95% to seller's bank account as per 12.5 above. 12.8 Delivery and shipment commence as per contract." Mr Doyle's point is a short one and it is this - as a pure question of law the contract between the parties on its proper construction obliged the defendant to submit proof of product as required by Article 12.4 and to do this before the plaintiff became obliged in terms of Article 12.5 to provide a letter of credit for the payment of the balance 95% for each shipment of sugar. He has submitted that the contract between the parties shows a scheme which supports his basic submission before me. That scheme is:. 1. The sugar must satisfy certain criteria - see Article 1 headed "Product and Specifications". 2. The sugar is to be shipped in certain minimum loads (Article 5). 3. The first shipment is to begin between 21 and 30 days after the plaintiff puts up ·a 5% deposit and a letter of credit - Article 6. I pause to say that Mr Doyle recognises that this provision in Article 6 at first blush tends to support the defendant's contention but he submits that when it is read with other provisions and particularly Article 12 it is clear that it does not. 4. That payment is to be on a shipment by shipment basis - Article 10.1. 5. The contract procedures provided for are as set outin Article 12. -- 7 of 13 -- 4 I have already set this out in detail. He has submitted that between payment of the 5 percent deposit (Article 12.3) and provision of the letter of credit by (apparently) some type of telegraphic transfer for payment of the 95 percent balance, the third defendant as seller was obliged by Article 12.4 to submit "proof of product". Mr Doyle has submitted that the construction for which he contends is the only sensible construction to be given.to Article 12 and furthermore it is a sensible commercial approach. The third defendant, by its director Luke Butler who resides at Kalinga; Brisbane has, in paragraph 22 of his affidavit filed on 20 July 1995, sworn: "The term 'Proof of Product' in the contract refers to a certificate or other proof from an independent authority that the supplier had the product and the capacity to supply the product in the amount and quality specified in the contract." The material before me shows that the plaintiff, by facsimile transmission, sent to Luke Butler on 1 January 1995 (see ex. NTlO), asked to be sent "as soon as possible two kgs of sugar for analysis by DHL". It was on this same day, l January 1995, that the deposit was paid to the third defendant's-bank account in Hong Kong. The contract had been made on 15 December 1994. - An affidavit by Butler concedes that a request was made for the shipment of a two kilogram sam:ple, but Butler has sworn that the issue of proof of product was not raised until March 1995 and that he continuously pointed out to Captain Tarabrin who was the plaintiff's representative, that there was no provision for this in the contract. In paragraph 21 of his affidavit he refers to certain clauses in the contract to which it is unnecessary for me to refer. In Fancourt v. Mercantile ·credits Ltd (1983) 154 C.L.R. the High Court of Australia reiterated that "the power to order summary or final judgment is one that should be exercised C) C) C) -- --------··---- -- 8 of 13 -- ( ('· / 5 with great care and should never be exercised unless it is clear that there is no real question to be tried". The ultimate question to be .decided in this case is one of law and if I decide that it is a serious point of law then I ought not to decide it but should decline to order summary judgment(see Theseus Exploration NL v. Foyster (1972) 126 C.L.R. 507 at p.515 and 523). While the construction for which Mr Butler on behalf of the third defendant contends is one which I find unattractive, nevertheless I do not believe that I should prevent him frorn arguing this matter at a trial of the action. I therefore propose to give the defendant leave to defend. I have not considered the third defendant's submissions that the plaintiff breached a fundamental term in respect of its failure to provide the letter of credit. This is a matter which will be dealt with at the trial. It is unnecessary also to address Mr Doyle's argument that such a submission by the third defendant fails. I turn then to the matter of whether or not the leave to defend should be conditional. Order 18 rule 6 gives me a wide discretion. Mr Doyle has submitted that such leave should be conditional upon there being paid into court the whole of the disputed sum. He has relied particularly on a decision of Webster J in Paclantic Financing Co Inc & Ors v. Moscow Narodny Bank Ltd (1983) 1 W.L.R. 1063, and especially the following passage at pp.1068-9: " It is now trite law that leave to defend may, and perhaps even should normally, be made conditional when the defence is "shadowy." The discretion . also arises when "there is something suspicious in the defendant's mode of presenting his case," (see Bramwell B. in Lloyd's Banking Co. v. Ogle (1876) 1 Ex.D. 262, 264); where the court "is ... left with a real doubt. about the · defendant's good faith, and would like to protect the plaintiff . . ." (see Fie/drank Ltd. v. Stein [1961] 1 W.L.R. .1287, 1289, per Devlin L.J.); and where "the case is almost one in which summary judgment should be ordered": see Davies L.J. in Ionian Bank Ltd v. Couvreur [1969] 1 W.L.R. 781, 788. As to the question whether leave should be conditional upon· paying the sum· claimed or part of it into court there is now the authority of the House of -- 9 of 13 -- 6 Lords in Y 01-l,e (M. V.) Motors v. Edwards [1982] 1· W.L.R. 444, per Lord Diplock, at p.449: '(i) Where a defendant seeks to avoid or limit a financial condition by reason of his own impecuniosity _the onus is upon the defendant to put sufficient and proper evidence before the court. He should make full and frank disclosure . : . (iii) A.defendant cannot complain because a financial condition is difficult for him to fulfil. He can complain only when a financial condition is imposed which it is impossible for him to fulfil and that impossibility was known or should have been known to the court by reason of the evide~ce placed before it.' [His Lordship considered the triable issues and arguable defences in the light of the principles and continued:] In the result, in my judgment the defence as -a whole can be described as no.more than shadowy; it does not seem to me that two shadows are any more substantial than one, and I would make the same order in this case whether· one, ·two, three or four of the grounds of defence were properly to be described as shadowy. Moreover in my view there are many things which are suspicious in the defendant's mode of presenting his case, for instance the inconsistent ways in which he has put his case from time to time on more than one substantial issue, and his failure at any time prior to argument by his counsel to state clearly and concisely what his defence is. For many reasons, which I need not , . recite in. view of comments I have already made, I am left with real doubts about Mr Wong's good faith. Finally, the case is, in my view, almost one in which summary judgment should be ordered." The decision of Webster J was affirmed by the Court of Appeal m (1984) 1 W.L.R. 930. Mr Doyle has relied on the following matters to support his submission in respect of the form of conditional leave: (a) There is no evidence of any hardship being caused to the third defendant if ordered to pay the whole sum. (b) Although the third defendant has asserted it has suffered a loss no evidence of such loss is adduced. (c) There is a need to protect the plaintiff - the material shows that there is no company by the name of the third defendant registered in Australia as either an Australian (~) 0 0 -- 10 of 13 -- ( 7 company or a foreign company recognised in the Australian jurisdiction ·and the plaintiff is a Russian based company. ( d) The construction which the third defendant places upon "proof of product" is of doubtful validity - Mr Doyle described it as "a highly questionable reading of the contract". (e) Despite persistent demands by the plaintiff for return of the money and some explanation as to why it was not being refunded nothing was forthcoming until affidavits were filed in this application for summary judgment. Reque'sts were made for return of the inoney on 17 March 1995, 30 March 1995 and 5 April 1995 and on 30 May 1995 (see ex. AJDl) and 21 June 1995 requests were made for an explanation as to what had occurred with the money (see ex. AJD2). (f) The affidavit of Butler filed on 20 July 1995 appears inconsistent with the third defendant's earlier correspondence. On 6 Match 1995 Butler signed a letter from the third defendant to the plaintiff asking it to· "please bear with me for another 'couple of days . . .". On 8 March 1995 the third defendant sent the plaintiff a letter commencing, "Thank you for your patience". It now says (by Butler) that it was offering the plaintiff indulgences and this claim appears to be inconsistent with the above letters of 6 and 8 March 1995. (g) Butler's contention that the plaintiff first raised the issue of proof of product after March 1995 appears to be false - I have already referred to ex. NTl0, being the facsimile transmission sent to Butler on 1 January 1995. On the view which I take of the material before me, to adopt the above words of Baron Bramwell "There is something suspicious in the defendant's mode of presenting his case". The third defendant had not delivered any defence before the hearing before me on -- 11 of 13 -- 8 4 August 1995. On that day it filed by leave an affidavit of Luke Butler to which was exhibited its proposed defence and counterclaim. The specially endorsed writ called for a defence within 10 days after the time limited for appearance. The appearance was entered on 20 June 1995 and although I do not know the date of service on the third defendant the proposed defence is very much out of time. I am satisfied this is a case where leave to defend should be given on the basis that the ~ird defendant pays into this Court on or before 21 August 1995 the Australian equivalent of US$162,500 and that if that condition be not fulfilled then the plaintiff is to be at liberty to sign against the third defendant in the n'-, ___ J Australian equivalent of US$162,500 plus interest thereon at ten percent per annum from 17 March 1995 to date of judgment. Further, in my view this is a matter which ought to be tried speedily. The evidence satisfies me that the plaintiff is out of pocket to the tune of US$162,500 and this fact is not disputed. It is exposed to a liability in Russia for very high interest rates which are accruing at approximately US$65,000 per month. Given the piecemeal manner in which the third C) defendant has presented its defence and failed to file any defence within the stipulated time Q it does seem that there is probably a real risk that even if the plaintiff is ultimately successful in this action against the third defendant it will either not be entitled to recover the rate of interest it is contractually bound to pay or, if it does, that the third defendant will not be good to pay this sum. It is also trite to say that the parties are exposed to the volatility of international exchange rates. In the result then the following are the orders I make: 1. Application against third defendant dismissed; 0 -- 12 of 13 -- 9 2. I give the third defendant leave to defend this action conditional upon it paying into this Court on or before 21 August 1995 the Australian equivalent ofUS$162,500; and 3. If the said sum be not paid into Court within the specified time then the plaintiff be at liberty to sign judgment against the third defendant in the Australian equivalent of the sum of US$ 162,500 together with interest thereon at ten percent per annum from 17 March 1995 to date of judgment and costs to be taxed. 4. I certify the action is one which ought to be tried speedily. I shall hear from the parties on costs of the hearing on 4 August 1995; also as to the form of directions for procedures pretrial and as to disposal of this summons against the first and second defendants. -- 13 of 13 --