It is 21 June 2022. A new client named Bonita Scott has come to see you. Scott is the sole director of a corporation called Long Way To the Shop Pty Ltd. The company supplies and services vending machines in the Brisbane area in Queensland. Over the past two weeks, Scott has been moving the business into a new premises at 48 Black St Fairfield. The registered address of the company has remained, for past 12 years (and for the time being) at the previous business address at 3 Rock St Acacia Ridge. Scott says that her administrative assistant delivered some documents to her at her home at 15 Jailbreak St Ashgrove yesterday on 20 June 2022. The documents had been collected by the assistant from mail delivered at the previous business address in Acacia Ridge. The assistant said that she thought they looked important and so made an urgent personal delivery of them to Scott’s home. The postage date on the envelope was 7 June 2022. The first document is a Claim. The Claim, in the approved form, states that it was filed in the Queensland District Court on 5 November 2020 and has the court’s seal. It names Scott’s company as defendant and 3 plaintiffs each claiming between $158,000 and $560,000 in damages. It includes the relevant notice to the defendant. The second document is a Statement of Claim and provides further detail about the claims. The Statement of Claim is reproduced below:
Scott says that this is the first that she has heard of these allegations. She says that her company has sold and serviced many vending machines over the past 12 years since the company was established. She says that her assistant had done a quick check for her that morning of the company’s electronic records and found what she believed to be copies of a service report and invoice by her company for Williams dated 2 July 2015. The service report indicates that a full check of the machine’s main components was undertaken by a qualified electrician employed by the company at the time. The invoice is for a replacement power supply. No records of the sale of the original machine to Williams from November 2014 could be found in the company’s database, nor could any email correspondence with Williams regarding the sale be found in the electronic archive of the company’s main sales email account from that time period. Scott believes that some of that information may be in a backup of the company’s historical pre-2015 data stored at the company’s place of business. She is deeply concerned about what these proceedings will mean for her business and wishes to contest the matter.
Explain what steps should be taken and what initial arguments should be made on behalf of Scott’s company to challenge the pursuit of the claims, assessing the originating process, relevant preliminary matters, and the inclusion of multiple parties and causes of action in the one proceeding.
The matter is proceeding and we are drafting a Defence. Further investigations have revealed the following information:
The name of the electrician who undertook the check of the vending machine was one Mal Young. Young worked for Long Way to the Shop Pty Ltd between 2012 to 2016. He is now believed to be living in Western Australia although his home address is unknown. The notes that he wrote on the service report (2 July 2015) indicate that there was a failure of the power supply of the machine. The invoice that he issued on the same date on behalf of the company includes some details including the installation of a replacement power supply component described as a “DDDDC1976 AC/DC Vending Machine Power Supply”.
DDDDC is a code for products manufactured in Shenzhen, China by a company of the same name (DDDDC Co.). Such products are not approved for distribution in Australia due to the fact that they appear not to have been tested against the relevant Australian electrical safety standards. Australia and China are parties to a service of process Convention.
Long Way to the Shop Pty Ltd purchased all of its electrical replacement components for its vending machines during the period between 2010 to 2017 from an importer, distributor and wholesaler business called “Backinblack”. Backinblack is the business name of a partnership between David Evans and Christopher Slade. Both partners live and work in Brisbane. Scott located a copy of the contract between Long Way to the Shop Pty Ltd and the importers/wholesalers for the supply of products during that period and it includes a clause for the delivery by the wholesaler to Long Way to the Shop of “50 H-Bells AC/DC power supply units or equivalent”. H-Bells is a popular and widely distributed brand of the electrical power component manufactured in Korea by Ushukmi Ltd and is the preferred choice for replacement parts for refurbishing machines for Scott’s company. She says that there were no other agreements for purchase of any other electrical components of that type
during that period. A check of the company’s stock against the relevant invoices reveal that it is likely one of the deliveries from Backinblack in 2014 included at least four DDDDC units instead of the H-Bells one’s agreed upon.
The manufacturer of the vending machine is High Voltage Australia Pty Ltd. The Australian company has a registered address in Brisbane and 2 directors who also live in Brisbane. Long Way to the Shop has an ongoing arrangement with High Voltage Australia since 2010 for exclusive sale of their vending machines in Queensland. Under the agreement, High Voltage also gives approval to Long Way to the Shop to undertake repairs and maintenance on such machines on behalf of the manufacturer in the case of faults that occur within the manufacturer’s warranty period.
Long Way to the Shop also has a policy of insurance for public liability with insurance company Moneytorque TRE Ltd. The policy covers Long Way to the Shop for personal and property damage caused to third parties or members of the public. It doesn’t cover faulty workmanship or deliberate use of defective materials or equipment in such work by the policy-holder. Moneytorque TRE Ltd has a registered address in Sydney and a board of directors that live in various States of Australia including 3 in Queensland.
Provide an outline that indicates:a) the causes of action that Scott’s company may have against any of the parties;
b) whether we should include those parties (or any others) in the current proceeding and how they may be so included, and
c) how one should serve each of the following parties with the relevant court documents: – Clifford Williams
– Mal Young- DDDDC Co.- Backinblack- Moneytorque TRE Ltd.
Pleadings have now closed. The proceeding is between TNT Group, Power Up Arcades and Williams as plaintiffs and Long Way to the Shop, Moneytorque TRE, David Evans and Christopher Slade as defendants. In Long Way to the Shop’s Defence it now admits the facts mentioned in paragraphs 1-5 and 10-14 of the original Statement of Claim, and denies paragraphs 6-9 and 15-17. The key issues in dispute relate to: 1) the cause of the fire, 2) whether the power supply was installed incorrectly by Young as an employee of Long Way to the Shop, 3) whether the power supply unit which was installed to the machine complied with the relevant Queensland electrical safety standards.
We are considering the following information in relation to the matter:
a) The maintenance log-book for the machine for the period in question kept by Williams (the owner of the vending machine). We believe the log-book will likely show whether any work was undertaken on the machine by other parties in the period prior to the fire.
b) An audio recording held by the director of TNT Group. The recording is of a settlement negotiation meeting between TNT Group (as owner of the fire-damaged shop) and their Melbourne-based insurer, HtH Insurance, regarding a disputed insurance claim in relation to the fire. There is a suspicion that the recording may contain admissions regarding other possible causes of the fire.
c) A two-page internal written report on the causes of the fire produced by an investigator and a team of lawyers employed by HtH Insurance (TNT Group’s Melbourne-based insurer) in 2015 and held by the insurer. The report contains a combination of factual findings and legal analysis concerning the matter. It was discussed at an internal meeting of the insurer and was the basis for the insurer’s refusal to indemnify TNT Group against the fire damage. It is held by HtH insurance.
d) A copy of Young’s electrical work licence record that Scott downloaded from an official Queensland public website. It shows that he was licenced in Queensland between 2009 and 2018 and that there were no complaints made against his work.
e) Various tests may be conducted on power supply units to determine compliance with the Australian standard regarding the likelihood of material surrounding the unit igniting when an electrical fault occurs. Two other DDDDC brand power supply units the same model as the one in question are held in Long Way to the Shop’s warehouse. The DDDDC units are not otherwise readily accessible in Australia. At the moment, tests have not been conducted on those units, but it is possible for information to be derived in this way regarding their compliance with the standard. Scott said she considered disposing of these units when she discovered them at the business as they were not of the same standard as the H-Bells units that she had in stock and she did not want the potentially dangerous units being installed in other machines by any of her employees. Instead, she has brought them in to our office for our advice on what to do with them.
For each of the items, provide advice indicating whether any of the parties to the proceeding has a duty to disclose it and the likelihood of the information in question being obtained according to any relevant provisions of the UCPR.
After proceeding to trial, judgment was delivered. The District Court found in favour of the plaintiffs for damages arising from the fire in the following amounts:
TNT Group, $90,000Power Up Arcades, $330,570 Williams, $8000
The court determined that the respective contribution to each set of damages as between the defendants was 70% for Long Way to the Shop and 30% for Evans and Slade. Moneytorque TRE was
held liable to fully indemnify Long Way to the Shop under the insurance contract for Long Way to the Shop’s share of any damages payable to TNT Group and to Power Up Arcades. However the contract of insurance was held not to cover the damages payable by Long Way to the Shop to Williams.
During the course of the proceedings, the following also occurred:
– The court twice allowed amendments to Williams’ pleading in relation to misleading and deceptive conduct against Long Way to the Shop. Significant costs were incurred as a result of the amendment applications and the court eventually struck out that part of the claim and disallowed any further amendment. It appeared that there was no factual basis for Williams to pursue the misleading and deceptive conduct claim.
– Just before trial, an article appearing in a financial periodical indicated that Moneytorque TRE is one of a number of insurance companies that are on the verge of insolvency due to overexposure to bad risk. Further investigation now reveals that the company has begun selling some of its assets to other companies associated with the directors at below market value.
– On 18 November 2022, one month prior to trial, on Scott’s instruction, we made an offer pursuant to Chapter 9 Part 5 of the UCPR on behalf of Long Way to the Shop to fully settle the matter with TNT Group for $100,000. TNT Group rejected the offer in writing. We sent another offer to settle this same matter two weeks later on 2 December 2022 under Chapter 9 Part 5 for $120,000 which was again rejected by TNT Group.
– During trial, we believe that the judge erred in permitting a piece of evidence to be adduced regarding the cause of the damage to Power Up Arcades that had not formerly been disclosed by any of the parties to the proceedings.
What submissions you would make to the court with regard to the appropriate orders as to costs and what other measures do you recommend to protect the interests of Scott’s company?
Whether there would be an avenue to appeal the judgment and what advantage there would be for Scott’s company in doing so?