New South Wales
Medium Neutral Citation:
Premium Green Batts v McTaggart  NSWSC 838
02 August 2011
Judgment for plaintiff against first defendant in the sum of $2,803,143.24. First defendant to pay plaintiff's costs on solicitor and client basis.
CONTRACT - contract for supply of insulation batts - failure by purchaser to perform obligations under supply contract - enforcement of guarantee and indemnity given by director of purchaser - claim made out - failure of defences - damages awarded in accordance with terms of guarantee.
Civil Procedure Act 2005 (NSW)
Premium Green Batts Pty Limited (Plaintiff)
Trevor Shane McTaggart (First Defendant)
Tarek Bhatti (Second Defendant)
J Horowitz (Plaintiff)
Trevor McTaggart (Self Represented) (First Defendant)
Swaab Attorneys (Plaintiff)
Trevor McTaggart (Self Represented) (First Defendant)
Judgment (ex tempore)
1HIS HONOUR: The plaintiff (PGB) imported glass wool installation batts from China and sold them in Australia. One of its customers (for all I know, its only customer) was a company called Aussie Home Saver Pty Ltd (AHS). PGB's case is that it agreed to sell, and AHS agreed to buy, a substantial quantity of batts, but that AHS has not paid for what was agreed to be sold to it. PGB says, further, that the first defendant (Mr McTaggart) guaranteed the liabilities of AHS to PGB, and agreed to indemnify it against loss.
2In these proceedings, so far as they remain to be decided, PGB claims an amount of about $2.5 million, plus interest, from Mr McTaggart pursuant to what PGB says is his guarantee and indemnity.
The sale contract and guarantee
3PGB provided a quotation to AHS on 20 October 2009, for the sale of 100 containers of batts per month (the batts being of a specified kind) delivered to Melbourne, for a period of three months. The payment terms stipulated in the quotation were for a deposit of five percent on order and for payment per container 14 days after delivery. On the same day, PGB sent AHS a proposed delivery schedule for the containers to which I have referred. The delivery schedule was later revised, but nothing I think turns on this.
4On 28 October 2009, AHS gave PGB its purchase order for the supply of the containers (100 per month for a period of three months) in accordance with the quotation. The purchase order was expressed to be "strictly per quote reference" (and there followed the precise reference given on the quotation of 20 October 2009).
5On the same date, AHS applied for a credit account. That application was signed by Mr McTaggart. He was then, and at all material times has been, a director of AHS.
6Immediately above his signature, Mr McTaggart certified to the truth and correctness of the information that was given in the document, and as to his authority to make the application on behalf of AHS. He said also that he had "read and understood the terms and conditions of trade" that PGB had furnished, and acknowledged that they were part of, and to be read in conjunction with, the application. He agreed further to be bound by them.
7At the conclusion, in bold italicised print and immediately above the signature of Mr McTaggart, the following words appear:
"I agree that if I am a director or a shareholder (owning at least 15 percent of the shares) of the buyer I shall be personally liable for the performance of the buyer's obligations under this contract."
8There is no doubt that a contract was formed by offer and acceptance through the mechanism that I have just described.
The terms and conditions
9The terms and conditions that I have referred to stated, in clause 4.4 that:
Time for payment for the goods shall be of the essence and will be stated on the invoice or any other forms. If no time is stated, then payment shall be due fourteen (14) days following the delivery date of the goods.
10Clause 13.3 of the terms and conditions stated:
If the buyer defaults in payment of any invoice when due, the buyer shall indemnify Premium Green Batts from and against all costs and disbursements incurred by Premium Green Batts in pursuing the debt including legal costs on a solicitor and own client basis ...
The guarantee and indemnity
11On 11 October 2009, Mr McTaggart, and another director, executed a document described as "Personal/Director's Guarantee and Indemnity". This document was executed after the contract for supply had been made but, on the evidence, before deliveries had commenced. The introductory words stated that the guarantees and indemnities were given "n consideration of [PGB] at the request of the Guarantor... supplying and continuing to supply goods and/or services ...". The description of the buyer was left blank but as a matter of construction it was obviously AHS. If any point had been taken that no buyer was specified, that could have been cured either as a matter of construction or by rectification. The document stated, in clauses 1 and 2, that the guarantor would:
1. GUARANTEE the due and punctual payment to Premium Green Batts of all moneys which are now owing to Premium Green Batts by the Buyer and all further sums of money from time to time owing to Premium Green Batts by the Buyer in respect of goods and services supplied or to be supplied by Premium Green Batts to the Buyer or any other liability of the Buyer to Premium Green Batts, and the due observance and performance by the Buyer of all its obligations contained or implied in any contract with Premium Green Batts. If for any reason the Buyer does not pay any amount owing to Premium Green Batts the Guarantor will immediately on demand pay the relevant amount to World Oyster.
2. HOLD HARMLESS AND INDEMNIFY Premium Green Batts on demand as a separate obligation against any liability (including but not limited to damages, costs, losses and legal fees (as defined hereunder in paragraph (b) hereof) incurred by, or assessed against, Premium Green Batts in connection with:
(a) the supply of goods and/or services to the Buyer; or
(b) the recovery of moneys owing to Premium Green Batts by the Buyer including the enforcement of this Guarantee and Indemnity, and including but not limited to Premium Green Batts' nominees costs of collection and legal costs calculated on a solicitor and own client basis; or
(c) moneys paid by Premium Green Batts with the Buyer's consent in settlement of a dispute that arises or results from a dispute between, Premium Green Batts, the Buyer, and a third party or any combination thereof, over the supply of goods and/or services by Premium Green Batts to the Buyer.
12For greater precaution, the document stated that it was "executed as a deed".
13The case that PGB brings claims against Mr McTaggart, pursuant to his guarantee, for:
(1) the cost of goods sold and delivered, and for other charges incurred by PGB on account of AHS; and
(2) damages for breach of contract in respect of containers of batts that were procured to fulfil the contract between PGB and AHS, but which were not delivered.
14The issues raised by Mr McTaggart's defence, apart from putting PGB to proof of the ingredients of its cause of action, are that:
(1) the contract between PGB and AHS was varied in a way that had the effect of reducing the liability of AHS; and
(2) ownership of the batts never passed to AHS in any event.
15The plaintiff's evidence (which was relevantly unchallenged) satisfies me that it invoiced AHS for the deposit, and for so many of the containers of batts as were either delivered to AHS or made available for AHS to collect at Melbourne Port. It satisfies me, further, that in respect of containers of batts that were made available for collection at Melbourne Port but not collected, PGB incurred storage costs and other costs (both to the Melbourne Port Authority and to the shipping company) as detailed in its calculation of its claim, to which I will turn in a moment.
16Finally, as to the claim in respect of unliquidated damages for breach of contract, the evidence (again, relevantly unchallenged) satisfies me that PGB did lose profits on the goods that were not taken, the profit being calculated as the margin between the price payable by PGB for those goods to the supplier in China and the price for them payable by AHS to PGB.
17The evidence satisfies me also that, apart from about $75,000 on account of the five percent deposit, AHS has not made any payments to PGB, either for the rest of the deposit, or for such goods as were sold and delivered to it.
18It follows, subject to consideration of the defences to which I have referred, that PGB has made good the elements of its cause of action, and that it is entitled to succeed unless one of those defences suggests otherwise.
The defences fail
19The second defence - that property never passed to AHS - is one that I do not understand. The question is not whether, on the terms of the contract, property in the goods passed to AHS, but, rather, whether a contract for sale was made and whether it was performed or breached. In the ordinary way, the fact that this aspect of the defence was not addressed in submissions would confirm my understanding of its legal irrelevance. However, in this case, Mr McTaggart represented himself, and I do not draw any inference from the fact that this aspect of the defence was not addressed in submissions.
20I turn to the suggested variation to the contract. The difficulty with that is that in my view it is not supported by the evidence. It is common ground that a meeting occurred between Mr Azzopardi and Mr Xenos of PGB, and Mr McTaggart, in Melbourne on 16 February 2010. It is common ground that there was discussed at the meeting a proposal for AHS to reduce, and ultimately satisfy, its debt to PGB. Even taking Mr McTaggart's oral evidence as to that meeting at face value, (and putting to one side the fact that his oral evidence is in some ways inconsistent with the unchallenged affidavit evidence of Messers Azzopardi and Xenos), it does not amount to proof of an agreement to vary the terms of the sale contract. On Mr McTaggart's own evidence, it is clear that there was an agreement to negotiate a repayment plan, and that although elements of a proposed plan were discussed, there was no acceptance of a concluded position.
21That this is so is confirmed by an email sent by Mr McTaggart to, among others, Messers Azzopardi and Xenos the following day. There is no suggestion in that email that any concluded variation had been negotiated and agreed.
22Further, as Mr McTaggart conceded, AHS did not make any payment at all to PGB after the alleged variation was made.
23Thus, at the level of fact, I conclude that the defence relating to variation has not been made good.
Quantum of PGB's claim
24I said earlier that the evidence satisfied me as to the quantification of the components of PGB's claim. The first component is $23,752.50 remaining owing on the deposit. The second component is $1,243,623.87 for goods actually invoiced and sold but not paid for. I note that credit is included within that quantification for the resale of some of the goods once it was plain that AHS could not take them, nor pay for them.
25The next component is storage and disposal costs, incurred to Melbourne Port Authority and the shipping company. That is quantified at $432,473.
26The total of those amounts is $1,699,849.37.
27The claim for damages, being the difference between the amount payable by PGB to its supplier in China and the amount payable by AHS to PGB, is $844,734.76.
28I am satisfied that each of those elements is proved to the requisite standard.
29I should mention that in final submissions, Mr McTaggart raised a number of points based on matters that had not been pleaded. He noted that the deal (if I can call it that) between PGB and AHS was underpinned by the Commonwealth Government home insulation scheme, and that this scheme was first suspended and then stopped shortly after the discussions of 16 February 2010. That may very well explain why it is that AHS found itself in the position that it could not pay, but it does not seem to me to provide any defence.
30Mr McTaggart suggested that PGB had put its case together "very skillfully". I am not sure what this means except (as I have said) that every element of its cause of action is proved.
31Mr McTaggart raised questions as to whether PGB contracted with AHS knowing that AHS could not pay, and queried how PGB could continue to trade when not even the full five percent deposit had been paid. The only matter that is proved is that the full deposit had not been paid. The knowledge asserted is not otherwise made good. In any event, those things do not seem to me to provide a defence.
32Mr McTaggart raised a number of other issues, but since they were not pleaded and they are not supported by any evidence, I will not go to them in these reasons. It is sufficient to say that even if it were open to Mr McTaggart to rely upon the further matters that I have just summarised, when they were not pleaded, they do not seem to me to offer any suggestion of a defence to the claim.
33PGB claims interest. It has produced a printout of a spreadsheet calculating interest in accordance with s 100 of the Civil Procedure Act 2005 (NSW). The contents of that schedule are agreed. It follows from the schedule that the total of the amount payable under the guarantee, together with interest to today's date, is $2,803,143.24.
34I referred earlier to the fact that the form of guarantee and indemnity included both a guarantee in respect of amounts payable by AHS to PGB (Clause 1) and an indemnity in favour of PGB for any liability (including for breach of contract) that AHS might have to PGB "in connection with...the supply of goods and/or services" to it (Clause 2).
35I am satisfied that on the proper construction of that document, the liability that Mr McTaggart undertook pursuant to it included not only a liability to pay the guaranteed sums due under the contract for sale by AHS to PGB, but also such other losses as PGB sustained "in connection with" the supply of goods pursuant to that contract for sale. Thus, I am satisfied that Mr McTaggart's liability under the guarantee and indemnity extends to all the ingredients of PGB's claim. It is accordingly unnecessary to consider whether (for example) the claim for storage charges and the like is properly recovered pursuant to the indemnity or pursuant to the guarantee.
36For the reasons that I have given, and at the risk of repetition, I am satisfied that PGB has made good its claim for judgment and that the defences have not been made good.
37The final matter to be discussed is the question of costs. As will be seen from Clause 2 of the guarantee and indemnity, and indeed from the terms of conditions of the guaranteed contract of sale, there is a liability to pay costs on a solicitor and own client basis. PGB asks that any costs awarded in its favour be assessed on that basis. That is its contractual entitlement.
38For those reasons I direct entry of judgment for the plaintiff against the first defendant in the sum of $2,803,143.24. I order the first defendant to pay the plaintiff's costs of the proceedings and I order that those costs be assessed on a solicitor and own client basis.
39I direct that the exhibits be retained.
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Decision last updated: 22 August 2011
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