- FUL 169 of 2003
- Supreme Court of Western Australia
- Summit Chemicals Pty Ltd v Vetrotex Espana SA
IMPLIED DUTY TO SUPPLY GOODS FIT FOR THE PURPOSE AND OF MERCHANTABLE QUALITY – OBLIGATIONS SET FORTH IN ART. 35 CISG
An Australian producer of swimming pools bought from another Australian company fibreglass “gun rovings”, which were said to be faulty. The Australian company (hereinafter: “the buyer”) sought to pass on the claim of non-conformity to its supplier, a Spanish manufacturer (hereinafter: “the seller”). The buyer applied to amend its statement of claim against the seller. It sought, inter alia, to introduce a claim for breached of implied obligations pursuant to Australia’s Sales of Goods (Vienna Convention) Act and Art. 35 CISG, namely an implied obligation to supply goods fit for the purpose and of merchantable quality, and an implied obligation that the product was packaged in a manner adequate to preserve and protect it.
At first instance, the court found that the reference in the original notice that the rovings were contaminated was sufficient to allow any claim relying on breaches of an obligation to supply goods for purpose and of merchantable quality, such as the ones based on Art. 35 CISG, and therefore the proposed amendments arose out of the same facts as the original claim. On appeal the Court agreed with this point.
per McKechnie J  WASC 182:
The pleading of the Sale of Goods (Vienna Convention) Act 1986
23 The Vienna Convention has the force of law in Western Australia. "Obligations of the Seller" are contained in Chap II of Pt III, Schedule 1. Article 35 appears in Section II of the chapter. The remedies are set out in Section III and specify that the buyer may exercise the rights provided (in the articles set out) and claim damages: Article 45.
24 The third party notice bases the breach of the terms of sale of the gun rovings to Summit Chemicals (the defendant) and in particular alleges that the fibre glass gun rovings were contaminated and thereby not fit for purpose or of merchantable quality. This is wide enough to encompass the claim under the Sale of Goods (Vienna Convention) Act. There is a difference between the Sale of Goods Act 1986 upon which the original claim was based, and the Sale of Goods (Vienna Convention) Act 1986. The former implies conditions of merchantable quality and fitness for purpose into a contract, while the latter imposes like obligations on a seller. However, I consider that both are encompassed within the third party notice and the pleading of the Vienna Convention does not raise a new claim. As there has been submission to the third party notice the claim is within jurisdiction.
25 Vetrotex has put before me a considerable amount of evidence concerning the general conditions of sale said to be part of the Vetrotex Espana Customer Acceptance Standards and incorporated into the contracts. In due course this evidence may be decisive. However, at this stage it provides insufficient reason to refuse an application to amend the pleadings.
 This is an application for leave to appeal from an interlocutory decision of McKechnie J, dated 19 September 2003, which refused leave to amend the appellant's statement of claim in third party proceedings against the respondent. These third party proceedings are being prosecuted contemporaneously with the principal action.
 A fourth feature in the changes sought to be introduced by the proposed amended third party statement of claim is that, in addition to reliance upon breach of implied terms of merchantable quality and fitness for purpose resulting from the application of s 14 of the Sale of Goods Act 1896, the appellant wishes to plead that there were similar implied obligations together with a further implied obligation to ensure that the product was packaged in a manner adequate to preserve and protect it, resulting from the operation of the Sale of Goods (Vienna Convention) Act 1986 and Art 35 of the United Nations Conventions on Contract for the International Sale of Goods which are also to be relied upon to support the claims for breach of contract, breach of duty of care and for damages under s 82 of the TPA.
 Before McKechnie J the respondent opposed the application for leave to amend the third party statement of claim on three grounds. These were, first, the absence of consent by the respondent to submit to the jurisdiction of the court in respect of the new issues; second, delay by the appellant in making the application for leave to amend; and third, failure to provide adequate particulars to allow the respondent to defend the proceedings.
 His Honour rejected each of those grounds of opposition concluding that claims for relief in respect of alleged defects arising from moisture contact of the fibreglass gun rovings supplied were within the third party notice and that it was therefore unnecessary to consider whether or not the third party notice itself should be amended. That meant that any controversy about the extent to which the respondent had submitted to the jurisdiction of the court, such as had been discussed in Marlborough Harbour Board v Charter Travel Co Ltd (1989) 18 NSWLR 223 did not arise.
 His Honour also concluded (at ) that the reference in the third party notice that the fibreglass gun rovings supplied on consignment were contaminated and thereby not fit for purpose or of merchantable quality was sufficient to allow any claim relying upon breaches of an obligation to supply goods which were fit for the purposes proposed or were of merchantable quality, whether that obligation arose from an implied term in any relevant contract or otherwise. Hence, the third party notice supported the plea in the original third party statement of claim for damages for breach of implied conditions of fitness and merchantable quality arising from s 14 of the Sale of Goods Act and, similarly, the third party notice supported associated claims for breaches of obligations arising from the Sale of Goods (Vienna Convention) Act 1986. His Honour concluded that both were encompassed within the third party notice and that the pleading of the Vienna Convention did not raise a new claim.
 McKechnie J also observed (at ) that the third party notice incorporated, by reference, Aqua Technics' statement of claim. In this regard his Honour was plainly adverting to the reference in the third party notice that the contamination which the plaintiff alleges in the principal action related to the moisture content of the Vetrotex fibreglass gun rovings and that the appellant queried this with the respondent's Australian agent when the product was received in December 1996 and again when further batches of the fibreglass gun rovings were received in subsequent months. While the third party notice incorporates, by reference, the statement of claim in the principal action that does not mean that the appellant's third party claim against the respondent is, in every respect, identical or coterminous with the plaintiff's claim against the defendant, still less that any relevant cause of action by the appellant against the respondent accrues at the same date as the accrual of all or any of the causes of action raised by the plaintiff against the appellant third party claimant. This is a matter of principle but it also appears from the terms of the third party notice itself which includes the passage:
The defendant's claim against you will be based upon your breach of the terms of the sale of the Vetrotex Fibreglass Gun Rovings to the defendant, and in particular concerning the merchantable quality and fitness for the purpose of the Vetrotex Fibreglass Gun Rovings.
This is in accord with the ability of the defendant to make a third party claim under RSC O 19 r 1, not merely when the claimant is entitled to a contribution or indemnity, but also where the claimant is entitled to any relief or remedy relating to, or connected with, the original subject matter of the action and substantially the same as some relief or remedy claimed by the plaintiff or where any question or issue relating to, or connected with, the original subject matter of the action is substantially the same as some question or issue arising between the plaintiff and the defendant.
 Accordingly, while it is true that the plaintiff, Aqua Technics, advances its first claim against the defendant relying on various causes of action alleged to arise from a contract entered into on or about 13 January 1997 (the first of the four consignments of product from the appellant to the plaintiff), that does not mean that the appellant's third party claim against the respondent accrues on the same date or as a result of the same cause of action. Indeed, as the examination of the pleadings already undertaken reveals, there are notable differences in the details of the appellant's third party claim against the respondent as compared to the plaintiff's claim against the appellant. These occur not only in relation to the dates when various representations are alleged to have been made or when other obligations are alleged to have arisen but also in relation to the causes of action being advanced by the two respective claimants.
 Before examining whether or not the proposed amendments involving the proposed introduction of the three contracts for the supply of product by the respondent to the appellant in July 1996 are undertaken, there is a further part of the decision of McKechnie J from which the applicant/appellant seeks leave to appeal. This is his Honour's decision that the amendment to para 13 of the third party statement of claim:
o introduces a new defect beyond the earlier allegations of contamination through excessive moisture or water content; and
o that the proposed para 13.3 pleads a form of res ipsa loquitur which is a plea sufficiently removed from the third party notice as to constitute a new claim,
resulting in his Honour's conclusion that, when exercising the leave which he granted to reamend, no amendment expanding the defects alleged in the product beyond moisture content would be permitted.
 On one reading, para 13 of the proposed third party statement of claim advances three alleged defects in the P 292S, the first being that on use it unbundled into filaments, formed clumps and entrapped air; the second being that it contained excessive water; and the third being that it caused damage to swimming pools manufactured from its use and that this, together with its water content, gives rise to an inference that it was defective. It is at this point that the dual feature of the third party notice, first as an outline of the plaintiff's claim against the appellant, and second in describing the defendant's third party claim against the respondent, becomes significant.
 The third party notice does outline the plaintiff's claim as being an allegation that the fibreglass gun rovings were contaminated and were thereby not fit for the purpose or were not of merchantable quality because of the moisture content. Further, the ultimate claim for "indemnity" proceeds on the basis that an obligation to "indemnify" would arise if the plaintiff's contention that the moisture content of the product has caused it to suffer loss and damage and the defendant (appellant) is found liable to pay to the plaintiff damages so caused. On the other hand, the only reference in the third party notice to the appellant's (defendant's) claim against the respondent is that the appellant's "claim against you will be based upon your breach of the terms of the sale of the Vetrotex Fibreglass Gun Rovings to the defendant, and in particular, concerning the merchantable quality and fitness for the purpose of the Vetrotex fibreglass gun rovings. Further, the defendant claims you are in breach of your duty of care, and the terms of the Australian Trade Practices Act".
 I consider that this formulation is broad enough to support any claim for breach of contract, breach of duty of care, or breach of the provisions of the TPA which the appellant may wish to advance which relates to, or is associated with, alleged obligations by the respondent to provide product of merchantable quality and fitness for the purpose intended for the product, without necessarily confining this to allegations concerning moisture content. So, for example, if the alleged unbundling into filaments of the fibreglass strands, alluded to in sub para 13.1.1 of the proposed amended third party statement of claim, were in fact to be a defect independent of excessive moisture content, I consider that it would be within the scope of the third party notice.
 However, because the plaintiff is not alleging that any such independent defect in the product supplied caused it loss or damage, and because the appellant is seeking no more than an indemnity for any liability which it may be found to have to the plaintiff, such an allegation in the third party statement of claim does not appear to lead anywhere. In other circumstances it might do so if the appellant were seeking relief from the respondent for damages on its own behalf, beyond any liability which the appellant might have to the plaintiff or, possibly, if the plaintiff were ever to amend its statement of claim against the appellant to allege breach of obligations by the appellant in providing a product which was defective for reasons beyond containing excessive moisture content. There is always a possibility that that may yet happen in these proceedings and that, in such an event it would precipitate action by the appellant to make further amendments to the proposed third party statement of claim. It seems to me that those would not be precluded by the terms of the present third party notice subject, always, to the observance of the rule in Weldon v Neal (above) which might then have to be considered in the new context.
 At present, in the light of the submissions made by counsel for the appellant, it seems unlikely that the appellant truly intends, by para 13 of the proposed amended third party statement of claim, to advance a case of defects in the product unrelated to its moisture content. It appears that the current formulation of the pleading is intended only to describe, in more particular detail, the defects and their consequences which follow from the alleged excessive moisture content. If that is so, then some minor redrafting of para 13 to remove this apparent ambiguity should occur and, in that event I can see no objection to this aspect of the proposed amendment. Indeed, it is evident that this is what McKechnie J contemplated in respect of this part of the proposed pleading when his Honour granted leave to reamend on terms.
 These conclusions apply also to the amendment proposed by subpara 13.3 of the proposed re-amended statement of claim which is subject to a similar ambiguity about whether or not the defects alleged arise from, or in association with, the alleged excessive moisture content of the product or because of some other reason. In this regard it is to be noted that his Honour observed that this subparagraph pleads a form of res ipsa loquitur which is a plea sufficiently removed from the third party notice as to constitute a new claim. With respect, I am unable to accept this conclusion. As explained in Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121, the doctrine of res ipsa loquitur is merely descriptive of a method of reasoning by which, in appropriate cases, a prima facie case of negligence may be made out. This proposed plea in subpara 13.3 is no more than notification that the claim for damages in negligence will be advanced, at least in part, by this process of inferential reasoning -- per Gleeson CJ and McHugh J at 133. In fact the appellant does not expressly refer to the doctrine of res ipsa loquitur. The process of inferential reasoning of the existence of a defect because of unsatisfactory consequences arising from the use of the product, in the absence of any other explanation for the occurrence of the problem, may also be a legitimate use of circumstantial evidence in support of the causes of action other than in negligence. A claim for damages for negligence, formulated in the form of a claim for damages for breach of a duty of care, already exists in the third party statement of claim delivered by the appellant on 2 September 1999 (see paras 13 -- 21 and subpara 24.2) and is also expressly mentioned in the third party notice of 2 July 1999. Therefore, subject to the elimination of the ambiguity in para 13.3, which suggests that there may be defects other than moisture content responsible for the alleged damage, I can see no reason to refuse leave to amend to allow the introduction of an allegation substantially as proposed in subpara 13.3, but devoid of that ambiguity.
 On the other hand, if the appellant intends by the proposed para 13, or any part of it, to advance a case that the consignments Vetrotex fibreglass gun rovings were contaminated, and thereby not fit for purpose or were not of merchantable quality, by reason of some defect other than, and independent of, alleged excessive moisture content I would, on the pleadings as they presently stand, refuse leave to make any such amendment. The reason for this refusal is because such an allegation would be irrelevant in a case where the appellant is only seeking indemnity for any liability which it may be found to have to the plaintiff in circumstances where the plaintiff makes no allegation about the unsuitability of the product other than alleged excessive moisture content. I have already concluded that the allegation proposed, if in fact it is intended to advance the existence of a defect of a character other than excessive moisture content, is, in my opinion, within the scope of the third party notice, but it is not relevant, at present, to the appellant's claim for indemnity in respect of the particular case being advanced by the plaintiff. That circumstance might possibly change and if it does the situation could then need to be reconsidered. It follows, therefore, that I consider with respect that McKechnie J was correct in the ultimate conclusion that an amendment, as proposed by para 13 of the minute of amended statement of claim, could not introduce an allegation of the existence of a defect in the product independent of, or unrelated to, the alleged excessive water content of the gun rovings.
Summit Chemicals Pty Ltd v Vetrotex Espana SA
 WASCA 109.
Aqua Technics (WA) Pty Ltd v Summit Chemicals Pty Ltd & Ors
 WASC 182.
Published in original:
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