New South Wales Supreme Court CITATION : DEGBANE Pty Limited & Anor v GWANE HOLDINGS Pty Limited [2006] NSWSC 921 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 6 September 2006 JUDGMENT DATE : 14 September 2006 JURISDICTION : COMMON LAW - Administrative Law List JUDGMENT OF : Associate Justice Malpass DECISION : The judgment and orders made by the Local Court on 18 August 2005 are set aside. The matter is remitted to the Local Court for determination according to law. Costs are reserved. CATCHWORDS : Appeal and Cross-appeal - legal error and inconsistency - departure from issues ventilated by the parties - failure to make findings. Degbane Pty Limited (ACN 002 768 998) (Plaintiff) PARTIES : Neal John Crisford (Plaintiff) Gwane Holdings Pty Limited (ACN 002 590 409) (Defendant) FILE NUMBER(S) : SC 14267 of 2005 COUNSEL : Ms N. Obrart (Plaintiffs) Mr A Gemmell (Defendant) SOLICITORS : Kathleen Chiu, Solicitor of Joe Ryan Solicitor (Plaintiffs Richard A Reading of Oliver Campbell Solicitors (Defendant) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 928 of 2004 LOWER COURT JUDICIAL OFFICER : Schurr LCM LOWER COURT DATE OF DECISION : 18 August 2005 LOWER COURT MEDIUM NEUTRAL CITATION : Degbane Pty Limited v Gwane Holdings Pty Limited IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST Associate Justice MALPASS 14 September 2006 14267 of 2005 – DEGBANE Pty Limited & Anor v GWANE HOLDINGS Pty Limited; JUDGMENT 1 These proceedings involve an appeal from a reserved decision of Her Honour Schurr LCM, delivered on 18 August 2005. 2 The hearing occupied 2 days before the Magistrate (27/7/2005 and 28/7/2005). Prior to that hearing, there had been an unsuccessful arbitration. 3 There are two plaintiffs. The first plaintiff is the owner of the land upon which the Crisford Synergy Winery is located. The second plaintiff is a principal of the first plaintiff. He was the holder of the vigneron's licence. The claims advanced on behalf of them are put in the alternative. The defendant is a winemaker. It's wines are sold under the "Piggs Peake" label. 4 Merlot grapes grown at the Crisford Synergy Winery were supplied to the defendant in the years 2000,2001,2002, & 2003. Wine using those grapes was made and bottled for each of those years. 5 At the hearing before the Magistrate, the plaintiffs relied on a Fourth Further Amended Liquidated Statement of Claim. Despite its presentation as a liquidated statement of claim, largely it purported to propound a claim for damages. 6 The damages were claimed on the basis of alleged breach of agreement. One allegation of breach was that of failure or refusal to supply 33% of the whole of the Bottled Stock produced from the grapes for each of the 4 years. Another allegation of breach was that of failure to account for grapes supplied to the defendant in 2002 and 2003. The process allowed a setoff in the sum of $2,709. 7 During the hearing, the defendant put the allegations of breach in issue and also pleaded a failure to mitigate loss. 8 There was also a minor claim (in the order of $500) concerning the use of a winemaker tank and wine barrels. A claim for reasonable remuneration was made for the use of these goods between April 2001 & April 2004. 9 The Magistrate dismissed the claim relating to the wine vat. She concluded that there was no evidence of an agreement or contract that the defendant was to pay for the use of it. 10 In relation to the other claims, she awarded total damages in the sum of $24,197.00. Further, she allowed interest on this sum from the date of the Statement of Claim (it was filed on 20 November 2003). The parties were ordered to pay their own costs. 11 In her reasons for decision, the Magistrate only refers to " the plaintiff ". The judgment that was entered awards such damages to the plaintiff. No finding and/or determination was made in relation to the question of which of the two plaintiffs was entitled to the damages. 12 It is helpful at this stage to have regard to the structure of what are expressed to be the reasons for decision (the judgment). 13 The judgment commences with what appears under the heading of "Plaintiffs' Case". This section of the judgment contains the following:- " 1. The business relationship between the parties commenced in February 2000 and related to the winemaking industry in the Hunter Valley. The Plaintiff claims damages for breach of a contract said to have been entered into in 2000 whereby the Defendant agreed to process the Plaintiff's grapes into wine and in return, the Plaintiff was entitled to 33% of the bottled wine made from the grapes. Mr Willan, the witness for the Defendant conceded in cross-examination on 28 July 2005 that the agreement was that the Defendant would release to the Plaintiff 33% of the bottled wine in return for receiving the grapes. 2. A total of 20.28 tonnes of grapes were delivered to the Defendant during the period 2000 to 2003: Exhibit 1, (various annexures). An unusual feature of this case was that over the period of three years the Plaintiff collected virtually no wine (24 Dozen bottles) and certainly no money from the Defendant in exchange for the grapes delivered. 3. In summary, the Plaintiff accuses the Defendant of failing to "supply" the wine and the Defendant accuses the Plaintiff of failing to come and collect it. " 14 I should digress at this point to observe that there were two alternative limbs to the plaintiff's allegations ("failure" or "refuse" to supply). 15 This section of the judgment is followed by a section which is headed "Was there a breach". In that section the observation was made that there was no evidence that the defendant "refused" to supply the wine. This section contained, inter alia, the following:- "8. The Defendant informed the Plaintiff each time the wine was bottled, and the Plaintiff failed to take steps to come and collect it. The Defendant argued that the Plaintiff's failure to travel the one and a half kilometres from the Plaintiff's vineyard to the Defendant's winery in time to collect the 2000 and 2001 vintages before they were sold defeated his claim against the Defendant. " 16 The question of breach of the obligation to "supply" bottled wine was not further pursued (inter alia, there were no express findings). 17 The next two sections of the judgment are headed "Consequences of a breach..". Largely, these sections deal with what was seen as the alternative bases for relief ("Payment for Bottled Wine" or "Payment for Grapes Delivered". 18 The next section is headed "Defendant's Case". It contains observations on the question of failure to mitigate loss. 19 That section was followed by a section under the heading "The Terms of the Contract – Blending the Wine" (some of the bottled wine was blended). This section dealt only with a question of whether or not agreement had been reached on the matter of blending grapes from other vineyards in the bottled product. It did not express any finding on the question of precisely what had to be done by the defendant to effect performance of the obligation to supply the bottled wine. 20 This section was followed by further sections having the headings: . "Contract Negations", . "Use of the Wine Tank" . "The Winemaking Agreements" 21 The crucial observations appear under the heading "DECISION". Paragrah 35 thereof is in the following terms: "35. I am satisfied that there was an oral agreement between the Plaintiff and the Defendant's winemaker, entered into some time after the letter of September 2001, for the Defendant to pay the Plaintiff for the grapes received. The Plaintiff appears to have abandoned the agreement to be paid with a proportion of bottled wine with his December 2002 Invoice. I accept in accordance with the evidence of Mr Drayton that the appropriate value for the grapes delivered is $1600 per tonne. I am not satisfied that the Plaintiff failed to mitigate any damages relating to his delivery of the grapes. I set off against the value of the grapes delivered in 2000 the value of the 288 bottles of wine collected by the Plaintiff, at the value of $10 per bottle." This section also contains the following: "36. Damages are awarded fpr 4.79 tonnes of grapes at $1600 per tonne [$7,669], less the value at $10 per bottle of the 288 bottles collected by the Plaintiff [2,880]. The total amount of damages is $4,789. …. 38. Damages are awarded for 4.33 tonnes of grapes delivered at $1600 per tonne. The total amount is $6,928. …. 40. Damages are awarded by way of payment for 7.8 tonnes of grapes delivered at $1600 per tonne, being $12,480." Paragraph 36 relates to the 2000 vintage. Paragraph 38 relates to the 2001 vintage and paragraph 40 relates to the 2002 vintage. 22 The Magistrate declined to award damages in respect to the 2003 vintage. Paragraph 41 of the reasons is as follows: "41. The grapes were delivered in February 2003. The Plaintiff commenced proceedings in November 2003, before the vintage was bottled. The Defendant appeared to agree that if the 2000 contract was still in force that the Plaintiff was entitled to 33% of the wine bottled. I am not satisfied that it was a term of the contract the wine could not be blended, and I note that there was no evidence that the Plaintiff directed that the 2003 vintage should not be blended. There was no evidence that the wine was not available for collection by the Plaintiff. In relation to the 2003 vintage, it is open to the Plaintiff is able (sic) to collect the 33% of the bottled wine produced. I decline to award damages." 23 The plaintiffs rely on 9 grounds of appeal. The cross appeal contains 3 grounds. In this case, it is unnecessary to give detailed consideration to the various grounds. Unfortunately, it is one of those cases where the allowing of relief was inevitable. It suffices to mention just certain of the problems. The judgment was replete with error and inconsistency and the approach taken to determine the claim represented a departure from what had been litigated by the parties. 24 Both the plaintiffs and the defendant are unhappy with the judgment. Whilst it is usually rare to find consensus on matters of grounds of appeal, in this case the defendant accepts that the Magistrate erred as alleged in the plaintiffs' first 3 grounds of appeal. 25 The parties agree that the Magistrate erred in finding that there was an oral agreement entered into some time after a letter of September 2001. It was common ground before the Magistrate that an agreement to supply bottled wine subsisted for the 2000-2003 vintages. 26 The parties agree that the Magistrate erred in finding that the plaintiff abandoned the agreement to be paid with a proportion of bottled wine. The nub of the dispute between the parties concerned, at least primarily, an issue of breach of the alleged contractual arrangement to supply bottled wine. The parties did not ventilate an issue of abandonment. In making the finding, the Magistrate went on a venture of her own. Apart from error in point of law as such, in her application of the principles of abandonment there was also denial of procedural fairness. 27 On the abandonment question, two further comments may be made. In paragraph 34 of the judgment, she merely observed that it was arguable that in December 2002, the plaintiff had abandoned the agreement. By paragraph 35, she had moved to the position of observing that it appeared that the plaintiff had abandoned that agreement. Although the purported abandonment did not take place until December 2002, she still dealt with the claims made in respect of the 2000 and 2001 vintages on the basis of such abandonment. 28 The parties agree that the Magistrate erred in quantifying the plaintiffs' measure of damage on a per tonne basis. There was common ground before the Magistrate that any damages should be assessed in relation to bottle price (in respect of bottles not supplied.) 29 As a consequence, she came to allow damages on a basis that was not litigated by the parties. I should add that what she did also fell outside the ambit of the pleadings (although the process only claimed relief for account for the vintages 2002 and 2003, allowance for grape price was made for the vintages 2000 – 2002). Curiously, although the grape price approach was taken in dealing with vintages prior to 2003, the claim for 2003 appears to have been dealt with on the basis that the agreement to supply bottles was still on foot. 30 In addition to these matters, a basic problem thrown up by the manner of the conduct of the proceedings had been the failure to sufficiently define the terms of the contract and thus the issues that were in contest between the parties. What would constitute performance of the obligation to supply was never crystallised and it was left undetermined by the Magistrate. In these circumstances, no meaningful ultimate finding on breach and/or mitigation of damage (if applicable) could be made. Perhaps it is not surprising that she did not fully address the task of dealing with the question of breach. 31 For completeness, I mention that the plaintiff challenges findings made in paragraph 41 (inter alia, on the basis that they were made without supporting evidence). However, for present purposes it is unnecessary to pursue these considerations. Likewise it is unnecessary to specially consider other matters (including grounds relating to interest and costs). 32 There was also initially A challenge to the decision concerning the wine vat. Later, it was said that because of the smallness of the amount in issue, this ground was not being pursued. It might also be observed that a pursuit of the ground did have its problems. 33 In the light of the history of such a case, the court is always reluctant to take a course that commits the parties to further litigation. Despite that reluctance, the court is left with no alternative. As was said during the hearing of the appeal, the parties may be well advised to look closer at the question of compromise (apart from the matter of disproportionality of costs, there are also considerations such as physical proximity and presence in the same industry). 34 During submissions, I did also mention to Counsel that if the matter was to be remitted for further hearing it may be in the best interests of the parties to ensure that there is a careful definition of the issues. 35 The judgment and orders made by the Local Court on 18 August 2005 are set aside. The matter is remitted to the Local Court for determination according to law. Costs are reserved. ************ 18/09/2006 - Incorrect File Number recorded on the coversheet - Paragraph(s) Coversheet DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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