BLUE STAR V HEIDELBERG GRAPHIC HC AK CIV 2007-404-2967

BLUE STAR V HEIDELBERG GRAPHIC HC AK CIV 2007-404-2967 2 October 2007IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2007-404-2967BETWEEN BLUE STAR PRINT GROUP (NEW ZEALAND) LIMITED Plaintiff AND HEIDELBERG GRAPHIC EQUIPMENT LIMITED Defendant Hearing: 28 September 2007 Appearances: A R Galbraith QC and C Brick for plaintiff P Hunt and T Clark for defendant Judgment: 2 October 2007JUDGMENT OF ALLAN JIn accordance with r 540(4) I direct that the Registrar endorse this judgment with the delivery time of pm on Tuesday 02 October 2007Solicitors/Counsel : Argalbraith@xtra.co.nz Jones Fee, Auckland greg.jones@jonesfee.com McElroys, PO Box 835 Auckland[1] This is an application by the plaintiff for orders pursuant to r 418: a) directing that a question be determined prior to the trial of the proceeding; and b) formulating that question. [2] Counsel are agreed that the r 418 procedure is appropriate. They differ however, as to the scope of the preliminary question to be determined by the court.The proceeding[3] The plaintiff's business is organised in divisions, one of which, Format Print, is involved in the commercial printing business. It operated a Heidelberg eight colour printing press at premises in Petone, Wellington. On 8 August 2004, a fire occurred in the press. There was significant physical damage and the plaintiff claims to have suffered severe financial losses. [4] The equipment was the subject of a servicing and maintenance contract, known as a Planned Support Agreement (PSA), with the defendant. The plaintiff alleges that the defendant is responsible for losses exceeding $15 million, sustained in the fire, and advances claims against the defendant for breach of contract arising from: a) the defendant's alleged failure to provide preventative maintenance in accordance with the PSA over the life of the contract (first cause of action); or b) the defendant's alleged failure to provide breakdown services in accordance with an emergency call-out on 7 August 2004 (the second cause of action).[5] Alternatively, the plaintiff alleges that the defendant breached the Fair Trading Act by: a) representing it was meeting its obligations under the PSA over the life of the contract when it was not (the third cause of action); or b) representing to Format Print (incorrectly) during the call-out on 7 August 2004, that the presence of oil in the central air unit of the printing press was not a cause for concern, thereby inducing Format Print to continue to operate the machine in unsafe circumstances (the fourth cause of action). [6] The defendant says that clause 13 of the PSA effectively provides a complete answer to the plaintiff's claims. Clause 13 reads as follows:LiabilityThe Customer is advised that under certain laws of New Zealand thereof rights are conferred on certain persons acquiring goods and services, which cannot be excluded or modified. All warranties, conditions or liability (other than any such non-excludable conditions or warranties) in relation to goods or services which might but for this clause be implied herein by law or otherwise are hereby expressly negatived and excluded. Any civil liability of the Company howsoever arising whether by reason of any breach of any such non-excludable condition or warranty which might be implied herein by law or of any duty in tort (including negligence) shall in so far as the same may legally be done be limited at the Company's option, in the case of goods, to the repair or replacement of the goods or the supply of equivalent goods or the payment of the respective cost thereof, and in the case of services, supplying the services again or paying the cost of having the services supplied again, the Company shall not be liable for any indirect or consequential loss whatsoever and howsoever arising. Without limiting the generality of the foregoing, the Company shall not be liable for any loss or damage arising out of delay in delivering goods or providing services hereunder for any reason whatsoever, including but not limited to negligence on the part of the Company its servants or agents, strike, accident, act of God, civil disturbances, civil or military authority, or delay of supplies and spare parts.[7] It is common ground that if clause 13 exempts the defendant from liability, this proceeding will be at an end. The parties agree that it would be beneficial forthe Court to determine a preliminary question; namely, whether clause 13 operates to exempt the defendant from liability to the plaintiff. [8] But that is not the end of the matter. From at least the time of the execution of the PSA through to and beyond the date of the fire, the defendant in the course of undertaking maintenance in respect of the printing press, supplied to the plaintiff a number of service order forms and invoices. Those documents also carry terms and conditions which purport to exclude legal liability which the defendant might otherwise have to the plaintiff, although it appears that the text of the terms and conditions varied slightly from time to time. [9] The defendant says that these terms and conditions must be read alongside clause 13 and that they form part of the contractual provisions coupling the relationship of the parties. The plaintiff denies that, and says the defendant, in seeking to limit its contractual liability to the plaintiff, is confined to reliance on clause 13 of the PSA. The plaintiff contends that the terms and conditions appearing on the service order forms and invoices have no contractual effect at all. [10] The plaintiff's position is that the question for pre-trial determination ought to be confined to the proper interpretation of clause 13 of the PSA. On the other hand, the defendant argues that the pre-trial question formulated pursuant to r 418 ought to encompass as well the legal effect of the terms and conditions appearing on the service order forms and invoices.Rule 418 procedure[11] Rule 418 is couched in rather wider terms than its predecessor, in that it applies to questions of fact or mixed questions of fact and law, as well as to questions of law properly so described, and is available whether or not the decision will dispose of the proceedings. The criteria relevant to the exercise of the discretion conferred by r 418 were usefully summarised by Barker J in Rio Beverages Ltd v The Golden Circle Cannery 14 February 1992 noted at [1992] BCL 569. Those criteria include:a) any overall delay arising in the proceeding by reason of the determination of a pre-trial question; b) the length of the hearing of the preliminary question; c) whether a decision one way or the other would result in the end of the litigation; d) the length of any subsequent hearing, and in particular whether any subsequent hearing time would be shortened by the determination of the preliminary question; and e) a balancing of the advantages to the parties and the public interest in shortening litigation, as against any disadvantages asserted by the defendant. [12] The Court must have regard to the underlying purpose of the rules concerned: namely whether the procedure is likely to expedite a proceeding, saving inconvenience and expense without any countervailing injustice.The present application[13] Counsel are agreed that a ruling as to the proper interpretation of clause 13 as a preliminary question, is appropriate. If that determination is adverse to the plaintiff that will be the end of the proceeding. Counsel believe that a trial on the merits would take about two weeks, so there is a manifest advantage in determining the preliminary question first. [14] It is at this point however, that counsel part company. Mr Galbraith for the plaintiff argues that the better course would be for the Court to determine, as a confined preliminary question, the proper interpretation of clause 13. If that determination favours the plaintiff, then as a second preliminary question the Court should consider whether, and to what extent, the terms and conditions occurring on the service order forms and invoices are of contractual effect, read in the light ofclause 13 of the PSA as earlier interpreted. The advantages claimed by Mr Galbraith for this two stage process are: a) the second stage may never be needed at all if the first question is answered in a manner adverse to the plaintiff; and b) no evidence would be required in respect of the hearing of the first argument, which could accordingly be determined speedily and without any significant delay. But the second argument, he acknowledges, would require the calling of evidence on either side in order to place before the Court the factual matrix underpinning the parties' arguments as to the legal consequence of the terms and conditions appearing on the order forms and invoices. [15] Mr Hunt for the defendant says that it is impracticable to separate the preliminary questions. The defendant's argument will be that the later terms and conditions are to be read alongside, and effectively by way of variation of, clause 13 of the PSA. Evidence will be necessary he argues, not only in relation to the later terms and conditions, but also in respect of the proper interpretation of clause 13 of the PSA. That evidence will largely overlap in the sense that it will apply to both clause 13 and to the later terms and conditions. [16] The defendant proposes to rely in support of its argument as to the proper interpretation of clause 13 upon what Tipping J has termed the " mutual or shared post-contract conduct of the parties": Wholesale Distributors Ltd v Gibbons Holdings Ltd SC 53/2005 30 May 2007. Mr Hunt submits that the Court ought not to proceed to determine the proper interpretation of clause 13 as a first preliminary question without evidence, because that will deprive the defendant of its entitlement to call evidence of "mutual or shared post-contract conduct".Discussion[17] Initially I was attracted to Mr Galbraith's suggestion that the Court ought first to determine the true interpretation of clause 13, leaving over for later determinationa question formulated in respect of the subsequent terms and conditions, if the plaintiff's proceeding survived the first determination. The advantages of that course were that argument on the first question would be confined and the hearing limited in length, and further that an outcome adverse to the plaintiff would bring the proceeding to an end. But ultimately I have reached the view that Mr Hunt's proposal ought to be preferred. That is because: a) it would be somewhat artificial for a Judge to determine the proper meaning of clause 13 and for a (possibly different) Judge later to consider that clause in the light of an argument that the post-contract conduct of the parties bears upon that interpretation. That possibility gives rise to the risk of inconsistent outcomes. b) although Mr Galbraith expressed reservations about the state of the law as to the relevance of post-contract conduct, there is no doubt that as the law currently stands, Mr Hunt is entitled to adduce evidence of post-contract conduct in the context of an argument as to the proper meaning of clause 13 of the PSA. The evidence sought to be adduced by Mr Hunt will be much the same as that already before the Court in affidavit form, relating to the factual matrix surrounding the provision by the defendant to the plaintiff of service order forms and invoices. That being so, there is no discernible advantage in a two-stage approach to the determination of the preliminary questions.Formulation[18] In the event, as I have decided, that the preliminary questions ought to be determined together, counsel were agreed as to the formulation of the appropriate questions. They are as follows: A. Does clause 13 of the Planned Support Agreement have the effect of limiting any liability that the defendant may have to the plaintiff in respect of the matters alleged in the statement of claim to "supplying the services again or paying the cost of having the services supplied again?"B. Did the liability clause contained in the terms and conditions printed on the reverse of the service order form issued between July 2001 and September 2004 form part of the contract between the parties as at the date of the fire? C. Did the liability clause contained in the terms and conditions printed on the reverse of invoices issued to the plaintiff by the defendant in respect of the contract between the parties between July 2001 and August 2004 form part of the contract between the parties as at the date of the fire? D. If the answer to either B or C is 'yes', does the liability clause have the effect of limiting any liability that the defendant may have to the plaintiff in respect of the matters alleged in the statement of claim to "supplying the services again or paying the cost of having the services supplied again?"Next steps[19] It is necessary to fix a timetable for the filing and service of any necessary additional documents prior to the hearing of the r 418 application. The proceeding is listed for further mention in the commercial list at 9.30 am on Friday 19 October 2007. Counsel are to file and serve memoranda prior to that in the usual way. If counsel are able to agree upon a timetable they may file a joint memorandum which may enable timetable directions to be given on the papers without the need for appearances. [20] Costs are reserved. Counsel may file memoranda if they believe that the costs of the present application ought to be dealt with in advance of the hearing of the r 418 application.C J Allan J