oR BG ak x IN THE HIGH COURT OF AUSTRALIA TED CENTRAL PRESS PTY. LIMIT. REASONS FOR JUDGMENT Li-12-0 . — J. 3 Gonrley, Gost. Print, 'Merb. on.Thursday, 10th Tunes 1954 ens nt SPAY LOTR YUN, F924 BALMORAL PUBLISHING COMPANY PIY. LIMITED Vv. CENTRAL PRESS PTY. LIMITED ORDER Appeal dismissed with costs. See BALMORAL PUBLISHING COMPANY PTY. LIMITED ve CENTRAL PRESS PIY. LIMITED DIXON C.J. WEBB J. FULTAGAR J. SUDGMENT Tayion Y. BALMORAL PUBLISHING COMPANY PTY. LIMITED ve CENTRAL PRESS PTY. LIMITED DIXON C.J. FUTTAGAR J. RIT J. JUDGMENT TAYLOR Je This is an appeal from an order of the Full Court of the Supreme Court of New South Wales dismissing an appeal from a judgment directed to be entered by Kinsella J. in a commercial cause in which the present appellant was the defendant and the respondent was the plaintiff. The learned trial judge found a verdict for the plaintiff in the sum of £568.17. 6 and a verdict for the defendant, as upon a cross action in the sum of £62.16. 3 and, in the result, he directed judgment for the plaintiff for £5064 1. 3. The dispute between the parties was concerned with a transaction which took place between them in 1951. At the beginning of that year the appellant obtained from the respondent an oral quotation for the printing and supply of a quantity of "gift calendars" and on 19th January 4954 the appellant wrote to the respondent in the following terms: "We have pleasure in confirming your telephone quotation for the following - Fifteen thousand (15,000) Gift Calendars size 8" x 5%" mounted, backed, with calendar tab attached, with ribbon and ribbon hanger, @ 10%d per unit, het. Terms: 30 days. These goods will not be packed with envelopes. Would you please have thé above goods packed in 41 gross lots sorted, i.e.,-1 of each design, and have the same ready for delivery to our warehouse - 2- on or before the middle of dune 1951. We thank you for meeting us in the revised price for the above which has'enabled us to continue our happy relationship with your company. SAMPLES We would appreciate your preparing for us, as soon as possible 50 séts of samples for our agents throughout Australia". In pursuance of the contract evidenced by this letter the respondent, early in July 1951, delivered to the appellant fifty-six gross of calendars in part satisfaction of the contract goods. Almost immediately the respondent was met with complaints by the appellant concerning the condition of the calendars. Following these complaints - which, apparently, were not thought by the respondent to be very substantial - Mr. Carson of the respondent company undertook to take the parcel back and have the defective calendars rectified. This was done, but after re-delivery there were further complaints. At a later stage the suggestion was made that the respondent should arrange to have the defective calendars retouched with waterproof paint. This course was adopted butit did not settle the dispute. The retouching was said to "Look bad" and there were said to be dirty marks on the calendars. These and other complaints appear to have been the subject of discussion between the parties for some little time. A second delivery consisting of forty gross of calendars took place in August. Similar complaints were made concerning this parcel and the parties continued their discussions on this subject during that and the succeeding month, It is claimed by the appellant that in the latter month a new arrangement was made by the parties which had the effect of defining, or re-defining, their respective rights and liabilities at that time, but before proceeding to discuss what then took place it is material to refer, at least in a general way, to some of the antecedent events. The calendars were intended for disposal through the wholesale and retail trade during the ensuing Christmas season and in August the appellant expressed its concern about the delay which had occurred and the effect of this upon its ability to make sufficiently prompt deliveries to its own customers. But before the 24th September 1951, which is one of the critical dates in the case, the appellant examined the calendars individually and filled its outstanding orders by the delivery of calendars selected from the bulk of those delivered up to that time. Prior to the lastmentioned date at least 14,500 calendars had been delivered to the appellant and it was from this general bulk that the appellant selected calendars for delivery to its customers, The number of calendars so appropriated by the appellant was approximately thirty gross and in the absence of any other countervailing circumstances it would appear to be indisputable that by the middle of September the appellant had become liable to pay to the respondent the contract price for the total number of calendars, delivered by it. This proposition the appellant was prepared to concede. But there were, it is maintained, other special circumstances which preclude this conclusion. The appropriation of calendars by the appellant in the manner briefly described is said to have been made at the suggestion of the respondent and in pursuance of an arrangement between the parties which had the effect of rendering the appellant liable to pay for the calendars so appropriated and of leaving him free to reject the balance in the event of the defects/ mich complaints had been made not being rectified. There is some evidence that during the period when discussions were taking place concerning the appellant's complaints and before it could be said that the goods in question had been accepted the appellant raised with the respondent the question of filling pressing orders from its customers by the delivery _ 4 = of calendars selected generally from the bulk already delivered to the appellant. There is, of course, no doubt that the parties were free to agree not only that such a course should be pursued but also that the question of the rejection or aoceptance of the balance of the goods should remain in abeyance. If an agreement having this effect was made then the appellant became liable to pay for the calendars selected from the bulk of the goods delivered but did not at that stage become liable to pay for the balances But although his attention was directed to this point the learned trial judge did not find that any such agreement was made. Apparently his Honour was not impressed by the evidence of Mr. Sydenham, a representative of the appellant, and his evidence was the only evidence in the case upon which such a finding could be Made. This witness said that early in August he told Mr. W. Adams, a representative of the respondent, that the appellant was obliged to get its interstate shipments away as quickly as it could otherwise it would have the other side of its business snowballing. He added that he asked Adams to hasten up the re-sorting of the calendars whereupon, according to Sydenham, Adams suggested that the respondent itself might sort some of them out and execute the outstanding orders. Sydenham said that he eventually agreed to do that and he carried on and spent a few weeks sorting them and then despatched selected calendars to fill the outstanding orders. Adams, however, said that he aia not, prior to the 25th September, take part in any discussions concerning the complaints which had been made about the calendars. He does not appear to have been expressly cross-examined as to the terms of the conversation deposed to by Sydenham but the general effect of his evidence is that he did not take part in any conversation which could form the basis of a finding that such an agreement as that alleged was in fact made. Another witness Mr. Linton, who is the managing director of the appellant company, said that a day or two before 24th September 1951, he spoke to Adams on the telephone and told him that the appellant had been compelled to utilise some of the calendars against its outstanding orders and, further, that the appellant.» would have to hold the re@porident liable in respect of any damage resulting from the defective condition of any calendars which had been sent out. The learned trial judge did not expressly find that no such agreement was made but it is clear that, upon the view of the facts acceptable to hin, he concluded that the appellant "by its acceptance and resale of a substantial number of the calendars", had lost its right to reject any of the goods. Upon the evidence it was open to his Honour so to find or, on the contrary and on the strength of Sydenham's evidence, to find that an agreement of the nature previously referred to was made. But his Honour's view is not only justifiable but to me appears to be the only justifiable conclusion if Sydenham's evidence is not wholly acceptable. Accordingly in considering the events of the 24th, 25th and 26th September 1951, and the subsequent related events, it must be borne in mind that the appellant had prior to the first of these dates already become liable to pay for the goods then delivered. On 24th September 1951, however, the appellant wrote to the respondent in the following terms: "Referring to your quotation dated 27th November, 1950, for 15,000 Gift Calendars @ 10%d per unit, and our confirmation letter accepting such contract dated 19th January, 1951, we now regret to inform you that we cannot accept this line of merchandise Oring to the bad quality and extremely bad appearance e finished unit. We confirm our telephone instructions to your Mr. Carson requesting him to send for these calendars at once as they are cluttering up our packing room and causing us serious inconvenience. This decision was arrived at to-day after putting on special labour to sort these calendars into two -6- categories - passable and rejects, After four hours work by such sorter we were informed, after handling 5 gross of this line, that no more than four units were passed. We have endeavoured to reduce your loss on this order by taking the maximum to fulfil our orders but this morning's experience has conveyed to us the futility of our efforts. " Some orders have been executed and if the chemical reaction which your Mr. Carson informed us on the phone to-day is still taking place, and if the goods do not open to our customers' entire satisfaction we must hold you responsible for such loss. fe shall keep you advised as to thé result of such Calendars which have been delivered. We much regrét having been forced to take this action and wotild advise that we have suffered a heavy financial loss in having to cancel all sales under this heading". The immediate result of this letter was that on the following day a conference took place between representatives of the parties. At this conference the basis of an agreement was reached and on the 26th September 1951 the appellant wrote purporting to confirm the arrangements made. This letter is in the following terms: "We desire to confirm the arrangements made between your good selves and our Mr. Ralph Sydenham on the subject of resorting and repacking the calendars made by you for us. . Under separate cover we are forwarding a sample each of the *"Rose*® and 'Windmill' designs, and it is desired to specifically point out to you that we will not accept delivery of any calendars below the standard of 'FACE PRESENTATION' of these samples. Should any calendar below the standard of the samples appear in your 'resorted' delivery to us, we reserve the right to cancel our complete order™ There is some variance between the evidence of the various witnesses as to what was agreed upon at the conference and, since the appellant subsequently purported to reject the whole of the undisposed balance of the calendars, it is perhaps desirable to refer to the finding of the learned trial judge on this point. Referring to the conference his Honour says: "Mr. W. Adams, Mr. H, Adams; and Mr. Carson, came to the defendant's premises and another conference took place. As a result, the parties jointly selected two calendars of the designs 'roses' and 'windmill', as being of satisfactory standard, Mr. Sydenham signed them for identification and the parties agreed that those in the bulk which were of that standard should be accepted by the defendant and that the defendant might reject all that fell below it". -7- Subsequently his Honour, speaking of this conference, said: "The parties thereupon conferred and re-cast their contract. On 25th September they made a new agreement in respect of the calendars then in dispute, which was that anew standard of quality defined by two signed samples, one of 'roses' and the other of 'windmills' should be mutually accepted, that the defendant would be bound to accept all calendars which were of that standard and would be entitled to reject all which fell below it. This agreement covered the whole of the calendars except the 556 dozen which the defendant had already accepted and 750 calendars which the plaintiff had withdrawn", In fact, it was the respondent which on this occasion undertook the task of examining the calendars and they were removed to its premises for this purpose. During the course of this examination the respondent withdrew some 750 calendars which, it was prepared to concede, were below the agreed standard. Thereafter on the 28th September the balance was returned to the appellant's premises where they were subjected to a further examination by Sydenham. Immediately the appellant strongly objected to their condition and intimated to the respondent that it rejected them all on the ground that they did not conform to the agreed standard, The condition of the balance of the calendars at this stage was the subject of an express finding by his Honour. He had, he said, examined them with care and compared them with the signed copies and had come to the conclusion that 15% of the 'rose' and 'windmill!' designs, which constituted half the quantity of the calendars delivered, did not conform to the agreed standard. As a consequence of his Honour's finding as to the terms of the agreement made on the 25th September 1951 it was held that the appellant was entitled to reject only 15% of the calendars and that he was bound to pay for the remaining 85% or approximately 9,250 in addition, of course, to the 30 gross approximately which the appellant had previously resold. - 8 - : Upon these findings a problem immediately presents itself, If the appellant is entitled to say upon the evidence that it did not at any time accept the balance of the calendars, it is difficult to see how it beoame liable for the contract price and this must be so whether the ultimate rejection of the goods was justified under the terms of the contract or wrongful. If justified, the respondent would have no claim at all upon the appellant whilst if wrongful the respondent's claim would be limited to damages for non-acceptance. But wehave already expressed the view that the appellant before the 24th September had beoome liable to pay for all of the goods which had been delivered before that date, and.accordingly the vital matter for consideration is the precise effect of the arrangement which was thereafter made. In particular it ds essential to determine whether it operated to extinguish the pre-existing liability of the appellant and substitute an entirely new agreement with respect to the balance of the calendars or whether it merely operated to modify that liability in some respect. Counsel for the appellant forcefully contended that an entirely new agreement was substituted. Under this agreement, he contended, the balance of the calendars was to be taken back, resorted and defective calendars withdrawn and the ultimate balance redelivered to the appellant whereupon the latter was to be at liberty to reject the whole of the goods if it should be found ~ that they did not in bulk conform to the agreed standard. In effect such an arrangement would be to substitute an entirely new agreement for the sale and purchase of the balance of the calendars redelivered. From what has already been said it appears the learned trial judge was prepared 'to find that a new agreement was made between the parties. But as also appears his Honour concluded that the right of - 9 = rejection which accrued to the appellant as a result of the new arrangement was not a right to reject the whole of the goods if they were defective in part, but merely a right to reject individual calendars which were defective. This finding was attacked as unreal and artificial. Such an arrangement throwing upon the purchaser, as it would, the onus of examining every calendar for the purpose of accepting or rejecting them individually, might well be regarded as improbable in a commercial dealing. But it should be remembered that the arrangement, whatever its precise effect, was not, and was not intended to be an original agreement for the sale and purchase of goods. It was an arrangement made between business people for the purpose of settling their outstanding differences with respect to goods delivered under an existing contract and we should not be disposed to think that the parties intended to rescind their earlier agreement so far as it remained unperformed or to substitute for it another and different agreement for the sale of the balance of the goods. Rather, it seems, they were concerned with the adjustment of matters in dispute. There seems no doubt that the respondent did agree that the calendars, or at least some of them, should be returned to its premises for the purpose of resorting. According to the evidence on this point given by W. Re Adams, he said at the conference on the 25th September that if the appellant would send back the calendars bearing the "rose" design the respondent would "sort the retouched calendars out and remove them", and intimated that if the appellant wished it the balance would be made up with a reprint. Carson's version was to some extent different; according to him there was a good deal of discussion about the defects of the oalendars and then Sydenham said that he would not accept one retouched calendar whereupon Adams said: "Well Mr. Sydenham any that - 10 - you don't want we will take backs Any you reject we will take back and reprint in time for your Christmas trade". This suggestion was not entirely acceptable to Sydenham who, according to Carson, then said he could not take responsibility for such an arrangement and that it would have to be a matter for Mr. Linton. Sydenham on the other hand said that he told the respondent's representatives that, he would not accept delivery of the balance of the calendars then in the appellant's hands and that the calendars would have to be taken back and resorted. He further claims that he said that he would send samples round and that the calendars would have to be up to those specifications otherwise he would not take delivery of them and would cancel the order. When asked if he said anything about what would happen if any calendar was below the standard he answered in the affirmative and said that he had written it in the letter of the 26th and thereupon added that he did not know if he had actually said that at the conference but he added: "I wrote it in my letter of instructions". Thereafter the following passage appears in the transcript: _ "HIS HONOUR: Q.° I just want to understand this. This letter starts off by saying: We desire to confirm thé arrangements made between your good selves and our Mr. Ralph Sydenham on the subject of re-sorting and re-packing the calendars made by you for us. Then, in your last paragraph, it says: Should any calendar below the standard of the samples appear in your re~sorted delivery we reserve the right to cancel our: complete orders Correct me if I am wrong, but I gather from the evidence that you gave just now, that that last paragraph was not actually mentioned in the discussion between you and the representatives of Central Press? ~ A. I do not think it was word for word, but it was clearly understood. Qe I gathered that you said a few moments ago you did not actually mention that to them, but you put it in the letter? A. Yes, that is right. 'Q. Would that be correct? A. Yes. - 4 - MR. MOFFITT: Q. So far as the other matters are concerned, you also say in your letter: Under separate cover, we forward a sample each of the *Roses® and "Windmill® designs and it is desired to specifically point out to you that we will not accept delivery of any calendars below the standard of face presentation of these samples. You say that that was specifically mentioned? A. That was quite clearly understood. Q. Clearly mentioned, and not dissented from? A. Yes, without a doubt." The only other evidence on the point is that contained. in an affidavit which was filed in support of an application to transfer the action to the commercial causes list and the contents of the letter of the 26th September. Both were strongly relied upon by the appellant to establish the making of an agreement in the terms contended for by it. But it is quite clear that the contents of the affidavit are not sufficient to establish the making of any such agreement and it is equally clear that no such agreement can be inferred from the letter of the 26th September and the events which followed it. His Honour, however, did find that an agreement was made though not in the terms asserted by the appellant. That finding, it seems, rests rather upon an acceptance of the evidence called on behalf of the respondent. - In these circumstances we fail to see how this Court can accept the appellant's invitation to substitute for the finding of his Honour a finding based on the evidence of Sydenham, that a new agreement in the terms asserted by the appellant, was made. Indeed, even if we were free to accept Sydenham's evidence implicitly and,accordingly ,to act upon it no such finding could be made. That evidence is, in or opinion, quite inadequate to support such a finding. Perhaps the strongest criticism which was made of his Honour's finding is based on the conception that he accepted the view that the agreement of the 24th September provided, in effect, for a delivery de novo - 12 - after some resorting and withdrawal of defective calendars by the respondent. To find that the parties intended to make an entirely new agreement of this description and, as part of it, to limit the right of rejection to individual calendars which were defective was at the least, so it was contended, commercially improbable. — But this criticism loses its force if the arrangement is viewed as one designed to settle outstanding differences and if the gist of the arrangement was that calendars not conforming to the agreed standard should be withdrawn. If this was the true position then the rights of the parties cannot be ascertained by a consideration only of what occurred on and after the 25th September but must be ascertained by reference also to the terms of the original contract and to what had ocourred pursuant thereto before that date. Such a view is not, we think, fundamentally inconsistent with that which his Honour took; indeed, in substance it is virtually the view which his Honour took and leads to the result at which he arrived. On this view the appellant became bound to pay for the balance of the calendars but, after the 25th September 1951, its obligation was reduced to a liability to pay for those calendars which did in fact conform to the agreed standard. In essence, as we have already said, this seems to be the view which upon the evidence commended itself to the learned trial judge and also to some extent to the Full Court and we can see no reason for departing from it. Accordingly we are of the opinion that the appeal should be dismissed.