New South Wales Court of Appeal CITATION : Mukherjee v Equipmed Pty Limited [2003] NSWCA 248 HEARING DATE(S) : 26 August 2003 JUDGMENT DATE : 26 August 2003 JUDGMENT OF : Meagher JA at 23; Santow JA at 24; Tobias JA at 1 DECISION : 1. Appeal allowed; 2. Set aside the judgment of Judge Balla; 3. Order that judgment be entered for the respondent in the sum of $108,464.09; 4. Order that the appellant pay the respondent's costs of the proceedings before Judge Balla but that there be no order as to the costs of the appeal CATCHWORDS : CONTRACT - Breach due to refusal to accepts goods subject to the contract - Whether trial judge correctly assessed damages for loss of profit - ND LEGISLATION CITED : s52 - Trade Practices Act 1974 s52 - Sales of Goods Act 1923 PARTIES : Dr G Mukherjee & 1 Ors Equipmed Pty Limited FILE NUMBER(S) : CA 40027/03 COUNSEL : A: Mr McInnes QC / M Campbell R: G White SOLICITORS : A: Dominic Stamfords, Sydney R: The Law Firm of Solari's, Cronulla LOWER COURT District Court JURISDICTION : LOWER COURT DC 9561/03 FILE NUMBER(S) : LOWER COURT Balla J JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40027/03 MEAGHER JA SANTOW JA TOBIAS JA 26 AUGUST 2003 DR G MUKHERJEE & 1 ORS v EQUIPMED PTY LIMITED Judgment 1 TOBIAS JA: In this matter the respondent, Equipmed Pty Limited, brought an action for damages against the appellants, Doctors Mukherjee and Bhatia, in the District Court of New South Wales for breach of two contracts entered into by the parties, whereby the respondent agreed to sell and the appellants agreed to purchase two pieces of medical equipment, being a Polamar multi laser machine and a Moulmax machine, for a total price of $224,950. 2 The main issue in the proceedings before her Honour Judge Balla concerned a defence raised by the appellants, in which it was asserted that the contract was subject to certain conditions precedent which had not been fulfilled and which therefore entitled them to refuse to accept the goods and/or that the appellants were entitled to rescind the contract as a consequence of conduct on the part of the respondent which was misleading or likely to mislead in contravention of s 52 of the Trade Practices Act 1974. 3 It would appear that the main thrust of the proceedings were concerned with these defences and that the majority of the evidence and the time spent at the hearing related to the appellant seeking to prove those defences and the respondent seeking to resist them. 4 In a judgment delivered by her Honour on 19 December 2002 she found in favour of the respondent with respect to the defences to which I have referred. Accordingly, her Honour determined that the appellants had wrongly failed to accept the goods the subject of the contract as a consequence whereof they were in breach of the contracts and were liable in damages to the respondent. 5 At the hearing the respondent claimed damages pursuant to a provision of the contracts which provided as follows: "Any goods returned will be subject to a thirty per cent restocking fee". 6 This stocking fee of thirty per cent of the purchase price was the sum of $67,485. The statement of claim which had been filed alleged the refusal of the respondents to accept delivery of the goods and their refusal to pay the purchase price thereof. As a result of these breaches of each contract it was alleged that the respondent had suffered loss and it therefore claimed damages. Paragraph 5 of the statement of claim provided, so far as is relevant, as follows: "The plaintiff claims the following: (a) 30 per cent of the contract purchase price in the sum of $67,485; (b) Damages". 7 Her Honour construed the restocking provision of the contract to which I have referred upon the basis that it only operated if in fact goods had been delivered and thereafter were returned. In the present case delivery of the goods had been refused by the respondents as a consequence whereof she held that as the goods had not been delivered they could not have been returned. Accordingly the provision of the contracts upon which the respondent relied for its claim under sub-paragraph (a) of [5] of the statement of claim did not apply. 8 Her Honour then turned to s 52 of the Sales of Goods Act 1923 and determined that as there was no available market for the goods in question within the meaning of s 52(3), the relevant measure of the respondent's damage should be determined in accordance with s 52(2). That sub-section provides as follows "The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer's breach of contract". 9 Her Honour then determined that she would accept the evidence of the respondent that there had been a loss of profit of $112,014. She accordingly assessed damages against the appellant in that sum and entered judgment accordingly. It is against that judgment that the appellants appeal to this Court. 10 It was submitted by the appellants that, firstly, her Honour was in error in accepting that the loss of profit sustained by the respondent was $112,014 because on the evidence of Mr Brian Marshall, upon which her Honour relied, that was the gross profit from the two sales calculated by taking the total price of the two contracts of $224,950 and deducting the total cost to the respondent of obtaining the goods of $112,964 (excluding freight and GST). 11 It was submitted that her Honour erred in so doing because if the respondent was entitled to damages measured by its lost profit from the sales, if it was only entitled to recover its net profit and not its gross profit therefrom. 12 The second submission advanced on behalf of the appellants was that as there was no evidence as to what the respondent's net profit was, there should be judgment for the appellants upon the basis that the respondent had not proved that it had sustained any loss. This was particularly so as the respondent's case before the primary judge was that its damages should be limited to the restocking fee of thirty per cent of the contract price being $67,485 which was applicable only if the goods had been returned which her Honour had found they had not. 13 In paragraph 13 of the statement of Mr Brian Marshall of 29 April 2002 which was admitted without objection into evidence, this was said: "The plaintiff has claimed in these proceedings a loss of profit estimated at 30 per cent of the contract price in the total sum of $67,485 together with damages, interest and costs. The actual loss to the plaintiff for the defendant's breach of contract is, in effect, in excess of the sum claimed". 14 Mr Marshall then went on in the same paragraph to set out the gross profit on the sale of $112,014 to which I have already referred and the manner in which that was calculated. 15 In the course of his evidence in chief Mr Marshall was asked the following question in clarification of [13] of his statement: "Q. Mr Marshall, just by way of clarification, paragraph 13 there, would you just explain to the Court where the figure that the plaintiff seeks, namely, $67,485 comes from? A. It's about 75 per cent of the actual cost of running and restocking this sort of equipment". 16 No objection was taken by the appellants to this question and there was no cross-examination of Mr Marshall to challenge his evidence that the $67,485 constituted 75% of the actual cost of running and restocking the goods the subject of the contracts for sale. 17 In my opinion it is clear that this evidence constitutes evidence of the actual cost or expense to the respondent which resulted from the non-acceptance by the appellants of the subject goods. It was submitted by senior counsel for the appellant that this was not a true measure of the respondent's loss but was merely the restocking fee the recovery of which her Honour had rejected and in respect of which there had been no notice of contention seeking to assert that her Honour's interpretation of the restocking provision in the contracts was in error. 18 However, what her Honour rejected was the application of that particular provision of the contract in circumstances where there had been no delivery of the goods and, therefore, no return of them. The reference by Mr Marshall to a "restocking fee" was, in my opinion, simply a shorthand description of what he had estimated was the cost or part of the cost of having to retain in stock the goods the subject of the contracts due to their non-acceptance by the appellants and to maintain them until such time as they could be resold as ultimately they were. 19 Given that that evidence was not subject to any challenge, in my opinion it formed an evidentiary basis upon which her Honour could have determined the damage which the respondent had sustained as a consequence of the appellants' breach of the contracts. Of course, over and above the consequential expenses incurred by the respondent due to the appellants' refusal to accept delivery of the goods the subject of the contracts, the respondent could have also claimed loss of net profits had such profits been proven. However, as I have already indicated there was no evidence which would support a finding as to what those profits were. 20 Accordingly, in my opinion the respondent is confined in any claim for damages to the damage or loss which it can actually prove and the only damage so proved was the cost of "running and restocking" the goods. Mr Marshall's evidence established that 75% of that cost was $67,485. One hundred percent would therefore be $89,980. 21 As I have already indicated, her Honour erred in awarding the respondent $112,964 which was a gross and not net profit figure. Accordingly, her Honour's judgment in that sum should be set aside. For that judgment there should be substituted the sum of $108,464.09 being $89,980 representing 100% of the cost or expenses incurred by the respondent as a consequence of the refusal of the appellants to accept the subject goods together with interest which the parties by agreement have calculated up to today in the sum of $18,484.09. 22 Accordingly, I propose the following orders: (1) Appeal allowed. (2) Set aside the judgment of Judge Balla. (3) Order that judgment be entered for the respondent in the sum of $108,464.09. (4) Order that the appellant pay the respondent's costs of the proceedings before Judge Balla but that there be no order as to the costs of the appeal. 23 MEAGHER JA: I agree. 24 SANTOW JA: I agree. 25 MEAGHER JA: The orders of the Court therefore are the orders proposed by Mr Justice Tobias. ******* Last Modified: 09/15/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.