TERS v SHANTILAL BROS (AUSTRALIA) PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL SHELLER, POWELL and STEIN JJA 11 March 1998, 19 March 1998 [1998] NSWCA 224 CONTRACT — no contract — failure to agree upon price Summary of Facts The plaintiff began proceedings by way of statement of liquidated claim to recover $32,458.60 from the defendants. This amount was alleged to be the amount outstanding of the price for goods sold and delivered. A Mr Tang had approached the defendants to sell a quantity of umbrellas held by the plaintiffs. Mr Tang and the defendants agreed upon a price of $1.25 per umbrella and completed a purchase order to that effect. Mr Gohil, the plaintiff's managing director, was not prepared to sell the umbrellas at that price and altered the price on the purchase order to $22.20 per dozen. There was no evidence that this change in price was ever communicated to the defendants. On 23 April 1986 the umbrellas were delivered and Mr Tang prepared an invoice No 1292 recording the price as $1.25 each which he issued to the defendants on 29 April. The plaintiffs prepared another invoice No 1298 addressed to Mr Tang for "Interest" of $26,064. This amount is the difference between the sale price at $22.20 per dozen and the sale price at $1.25 each. The defendants drew three post dated cheques for payment of the amount owed at the price of $1.25 per umbrella. On 29 July 1986 Mr Gohil wrote to the defendants requesting payment for both invoices No 1298 and 1292. At some point the plaintiffs sent a further invoice also numbered 1292 to the defendants recording the sale price as $22.20 per dozen and statement referring to this invoice alone in support of its claim. At Trial His Honour Judge Mahoney QC gave a verdict in favour of the plaintiffs of $71,329.28 made up of $32,458.60 for the balance owing on the alleged sale and $38,870.68 for interest. This judgement rested upon the finding that a contract had been made at the higher price. HELD: 1. The plaintiff's entitlement to recover the balance of the price of the goods depended upon there being a contract for sale under which property had passed and the defendants had refused or neglected to pay: s51(1) Sale of Goods Act 1923. 2. There was no evidence that the parties had ever agreed upon a total price of $54,300 or $80,364 and his Honour's findings did not resolve this issue. 3. There was no contract between the parties because there was no agreement on the price to be paid. His Honour erred in his conclusion that a contract had been made at the price of $80,364. Sheller JA In 1986 the respondent, Shantilal Bros (Australia) Pty Ltd, began proceedings in the District Court by a statement of liquidated claim to recover $32,458.60 from three defendants, Abed Hammoud and the appellants, George Ters and Michael Ters, all trading as PDX Agency Imports Co (PDX). This sum was alleged to be the balance of the price due for goods sold and delivered by the plaintiff to the defendants, full particulars of which were delivered by the plaintiff to the defendants in a letter of 29 July 1986. 2 UNREPORTED JUDGMENTS The uncontested factual background to this claim was that on 23 April 1986 Kenny Tang visited PDX's trading premises with some sample umbrellas. The defendant, Mr Hammoud, on behalf of PDX, completed a purchase order No 000154 dated 23 April 1986 in the amount of $54,300 for 43,440 umbrellas at a price of $1.25 each. Whoever wrote out the purchase order wrote under the name of the respondent "Invoice No 1292". Mr Tang took the purchase order to Mr Gohil, the respondent's managing director. Mr Gohil was apparently not prepared to sell the umbrellas for that price. He altered the purchase order by striking out in the column headed "each" "1.25" and in the column headed "total" "54,300" and substituting "Price 22.20 doz 80,364". Mr Gohil's evidence was that at no time did he speak to the defendants about changing the price from $54,300 to an amount over $80,000. He did speak to Mr Tang and perhaps instructed or intended Mr Tang to pass the information on. There is no evidence that Mr Tang ever did this. He was not called as a witness. Mr Hammoud and Mr Michael Ters gave evidence and said that they were not approached by Mr Tang or anybody else to indicate that the cost of the umbrellas was not $1.25 each. At 5 pm on the afternoon of 23 April the umbrellas were delivered to PDX. At some time Mr Tang prepared an invoice dated 24 April 1986 No 1292 on the respondent's printed form of invoice and addressed to Mr Hammoud at PDX. The invoice appears to have been signed by Mr Tang on behalf of the respondent and has a notation on it that it was received by the defendants on 29 April 1986. It was for 2,500 dozen (30,000) ladies umbrellas at $1.25 each, $37,500, and 1,120 dozen (13,440 pcs) mens umbrellas at $1.25 each, $16,800, making a total of $54,300. This described the goods that were delivered. Also in evidence was another invoice No 1298 on the respondent's form addressed to Mr Tang, 20 Dale Street, Fairfield, for "Interest", $26,064, which amount was the difference between $54,300 and $80,364. The defendants drew three post-dated cheques each for $18,100 in favour of the respondent. The proceeds of one of those cheques was credited to the respondent's bank account on 15 May 1986. On 29 July 1986 Mr Gohil, on behalf of the respondent, wrote to Mr Hammoud in part as follows: "Re: Invoice No 000154 dated 23-4-86 Against the captioned indent, we delivered to you 724 Ctns (2500 doz Ladies Umbrellas and 1120 doz Mens Umbrellas), as per our Invoice Nos: 1292 and 1298. Against the Invoice No 1298, we have received your payments as follows:- Invoice amount 16-6-86 $23200.00 $26064.00 14-7-86 1305.00 - 24505.00 $24505.00 $ 1559.00 Balance remaining for the payment of the captioned Invoice $A1559.00. Against the Invoice No 1292, we have received your payment as follows:- Invoice amount 15-5-86 $18100.00 $54300.00 URJ TERS v SHANTILAL BROS (AUSTRALIA) PTY LTD (Sheller JA) 3 - 18100.00 $36200.00 Amount remaining for payment if $36200.00 + $1559.00 = $37759.00." The number in the heading "000154" and the date "23 April 1986" was the number and date of the purchase order sent by Mr Hammoud to the respondent. The invoice amounts in the letter correspond with the invoices Nos 1298 and 1292 already referred to. At some point the respondent sent an invoice to Mr Hammoud also No 1292 and dated 24 April 1986 in which the same quantities of the same goods were referred to but at a unit price of $22.20 per dozen and therefore an amount of $55,500 for the ladies umbrellas and $24,864 for the mens umbrellas making a total of $80,364. On 15 August 1986 the respondent sent a statement to PDX referring to this invoice alone in support of its claim to a balance amount of $35,458.60. This was the first reference in the documentary material to the invoice No 1292 for $80,364. On 7 April 1988 the defendants' solicitors filed a notice of grounds of defence verified by Mr Hammoud. The grounds of defence were as follows: "1. During April, 1986 the Defendants purchased a quantity of umbrellas from Mr Kenny Tang. 2. Subsequently, the said Kenny Tang held himself out as a Principal of the plaintiff and as being authorised to collect payment for the sale of such goods. 3. The Defendants made full payment to the said Kenny Tang for the purchase of such goods. 4. No notice had been received by the Defendants that the said Kenny Tang was not empowered to receive money on behalf of the Plaintiff. 5. Kenny Tang had ostensible authority to receive money on behalf of the Plaintiff. 6. The Defendants deny that they are indebted to the Plaintiff as alleged or otherwise." Apparently, the defendants sought no greater particularity of the respondent's claim and the respondent took no exception to the notice of grounds of defence. The defendants also filed a third party notice against Mr Tang claiming contribution towards or indemnity for any verdict recovered against them by the respondent in the action for the following reasons: "1. During April, 1986 the Defendants purchased a quantity of umbrellas from the Third Party. 2. The Third Party subsequently held himself out as a principal of the Plaintiff and as being authorised to collect payment for sale of such goods. 3. The Defendants made full payment to the Third Party for the purchase of such goods. 4. The Plaintiff has now sued the Defendants claiming that the Defendants owe the Plaintiff the sum of $32,458.60 in respect of the sale of the aforesaid goods." His Honour Judge Mahoney QC heard the proceedings in March 1995 and delivered judgment on 21 April 1995. In the result his Honour gave a verdict and judgment in favour of the respondent against the appellants, that is to say the second and third defendants, in the sum of $71,329.28. This sum constituted $32,458.60 for the balance owing for the goods alleged to have been sold, and $38,870.68 for interest. From this judgment the appellants now appeal. 4 UNREPORTED JUDGMENTS The respondent's entitlement to recover the balance of the price of the goods depended, to summarise the effect of s1(1), of the Sale of Goods Act 1923, upon there being a contract of sale under which the property in the goods had passed to the defendants and a neglect or refusal by the defendants to pay for the goods according to the terms of the contract. While it might fairly be said that the grounds of defence were not directed to deny the existence of a contract or put in issue its terms, particularly the agreed price, but rather to the claim that full payment had been made by payment to Mr Tang, at the hearing the case was not so conducted. At the beginning of his reasons for judgment the trial Judge under the heading "The Pleadings" said that the defendants alleged the sale price was not $80,364, but $54,300. The trouble was that the evidence, or at least the trial Judge's findings, did not resolve that issue. On the one hand, the defendants said, and his Honour found, that they offered to pay $54,300 for the umbrellas. On the other hand, the respondent said, and his Honour found, that the respondent did not accept that offer. There was no finding and no evidence that the respondent made any counter offer. A price was never agreed. On its face there is something to be said for the view that invoice No 1292 for $54,300 signed by Mr Tang and handed to the defendants on 29 April 1986 evidenced the agreed price for the umbrellas because Mr Gohil quoted that very invoice to support the respondent's claim in the letter of 29 July 1986. The other invoice quoted, No 1298, was not addressed to the defendants and was for "Interest" which the respondent has, apart from that letter, never claimed. The letter of 29 July 1986 was the respondent's particulars of its claim to recover the balance of the price. However, the trial Judge found that the invoice No 1292 for $54,300 was prepared by or at the dictation of Mr Tang without the authorisation of Mr Gohil or anyone else with the authority to bind the respondent. That finding means that there is no evidence that Mr Gohil or the respondent ever agreed to sell the goods for $54,300. There is no evidence that the defendants ever agreed to the higher price. Accordingly, no price was agreed, there was no contract and the claim as formulated was bound to fail. The result might have been otherwise if it could be shown that the change of price was communicated to the defendants before they dealt with the goods thereby supporting an argument that in dealing with the goods they accepted a counter offer. But the evidence is that at all times until 29 July 1986 so far as they knew the goods had been delivered to them pursuant to their purchase order nominating a price of $54,300. With all respect to the trial Judge, I do not think that the way in which he was able to conclude that a contract of sale had been made at the price of $80,364 can be accepted or is right. After referring to the way in which the defendants' dealt on this occasion with Mr Tang his Honour said: "The result, unfortunately for them, of the way they were prepared to deal with Mr Tang and to accept a consignment of goods on their understanding of his assurances, is that they have accepted and sold the consignment without bothering to obtain the actual price from the owner of the goods. It follows that they are obliged to pay such price as I accept the plaintiff placed on the goods when it accepted the defendants' offer to purchase them." The error in this is that it acknowledges that the defendants made an offer to purchase the goods. The only offer they made was to purchase them at $54,300. That offer put them under no obligation unless it was accepted, which, on his Honour's findings, it was not. No counter offer was made. In the result, there was no offer which was accepted and, hence, no contract. URJ TERS v SHANTILAL BROS (AUSTRALIA) PTY LTD (Stein JA) 5 Mr Evatt, who appeared for the respondent, argued, but I think faintly, that the announcement to Mr Tang of the amended price was, on some basis of an agency arrangement between Mr Tang as agent and the defendants as principals, a counter offer to the defendants. However, there was no suggestion by anybody that Mr Tang had any authority which made the communication of an offer to him the communication of an offer to the defendants. Indeed Mr Gohil seemed to accept that Mr Tang was a "commission agent" for the respondent. In the result, the appeal must be allowed and an order made giving a verdict and judgment for the defendants. This is unfortunate particularly after a lapse of nearly twelve years since the transaction took place. However, it flows from a failure, at least by the respondent and its advisers, to understand what the issues were so as to formulate a claim to recover from the defendants the value of the goods which they received and them presumably disposed of. I would propose the following orders: 1. Appeal allowed; 2. Set aside the verdict and judgment and the order for costs of Mahoney DCJ made on 21 April 1995; 3. In lieu thereof, verdict and judgment for the second and third defendants; 4. The respondent to pay the appellants' costs of the hearing in the District Court and of this appeal but to have a certificate under the Suitors Fund Act 1951, if so qualified. Powell JA I agree with Sheller JA Stein JA I agree with Sheller JA 1. Appeal allowed; 2. Set aside the verdict and judgment and the order for costs of Mahoney DCJ made on 21 April 1995; 3. In lieu thereof, verdict and judgment for the second and_ third defendants; 4. The respondent to pay the appellants' costs of the hearing in the District Court and of this appeal but to have a certificate under the Suitors Fund Act 1951, if so qualified Counsel for the appellant: TG R Parker Solicitors for the appellant: Rambrakha Jenkins Counsel for the respondent: C Evatt/M Rollinson Solicitors for the respondent: Coustas & Co