New South Wales Supreme Court CITATION : Mourched v Michaelis Bayley (Aust) Pty Limited [2006] NSWSC 72 HEARING DATE(S) : 20 February 2006 JUDGMENT DATE : 3 March 2006 JURISDICTION : Common Law Division JUDGMENT OF : Associate Justice Malpass at 1 DECISION : The judgment and orders made by the Magistrate are set aside; I will hear submissions from the parties as to what should now happen with the proceedings; the defendant is to pay the costs of the summons and the costs of the proceedings in the Local Court; if so entitled, the defendant is to have a certificate under the Suitors' Fund Act 1951. CATCHWORDS : Sale of pharmacy - supplier sues new owner for goods ordered prior to completion of sale - finding that the goods were ordered at the institution or instigation of new owner - no evidence to support findings - appeal allowed. PARTIES : Terry Mourched (Plaintiff) Michaelis Bayley (Aust) Pty Limited FILE NUMBER(S) : SC 12519/05 COUNSEL : Mr S A Gregory (Plaintiff) Mr P Collins (Solicitor) (Defendant) SOLICITORS : NRG Legal (Plaintiff) Peter A Collins & Associates (Defendant) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 2505/04 LOWER COURT JUDICIAL OFFICER : Price LCM - 8 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Associate Justice Malpass 3 March 2006 12519 of 2005 Terry Mourched v Michaelis Bayley (Aust) Pty Limited JUDGMENT 1 His Honour: The defendant is a supplier of shoes ("Homyped"). During 2003, it supplied shoes to a pharmacy known as Pike's Day & Night Pharmacy (the pharmacy) at Burwood. 2 Leon Braude was a registered pharmacist. Prior to 17 November 2003, he was the owner of the pharmacy. He ceased to play any part in the management of the pharmacy when the plaintiff came to be employed as the registered pharmacist (it appears that he was a doctor who resided in Victoria). This took place from at least March 2003. 3 In May 2002, Gary Braude applied for a credit account with the defendant. He appeared to be the person in charge of the pharmacy. From March 2003, Kathy Pellegrino (the manager) was the manager of the pharmacy and had dealings with the defendant. As another employee of the pharmacy, the plaintiff was answerable to her. He was not involved in decisions concerning the ordering, the acceptance of delivery, or the payment of accounts. 4 On 23 July 2003, the manager ordered stock from the defendant for delivery during August – September and on 2 December 2003 (the July orders). 5 On 8 August 2003, the defendant delivered part of the July order. The goods were returned to the defendant. 6 At the time, Ms Muhlbauer was the national sales manager and Ms Gleeson was a sales representative for the defendant. These persons had communications with the manager. 7 In August 2003 (following the return of the goods), the manager informed the defendant's representative that the pharmacy was being sold, the owner did not want to accept any additional stock, there was a request to delay delivery of the order until completion of the sale and the representative for the defendant requested to be told as soon as the pharmacy was sold. 8 The plaintiff and Leon Braude entered into a deed of agreement for the sale of business (the deed) for the purchase by the plaintiff of the pharmacy. The deed was made on 28 August 2003. The purchase price embraced also assets (including stock). The deed contemplated a stocktake which had relevance to the ultimate purchase price. There was delay in the completion of the sale (inter alia, there was a problem in obtaining the consent of the lessor). 9 In September 2003, there was an abortive attempt at further delivery of the order. Further conversation took place. Further request was made to hold off delivery and it was said that there would be a re-order of the goods in the new owner's name after completion. Again, there was a request to be notified as soon as the sale was finalised. 10 Subsequent to the deed, the plaintiff expended money on, inter alia, improvements to the pharmacy premises and on 24 September 2003, the business name of the pharmacy was changed (it was registered in the name of the plaintiff). 11 In September and October 2003, there was further communication between the manager and Ms Muhlbauer. On 27 October 2003, the manager requested Ms Muhlbauer to send the July order stock as it was now needed as soon as possible. 12 On 28 October 2003, there was a delivery of stock at a price of $6,692.12 (the first delivery). An invoice had been sent with the delivery of the goods in August 2003. It was sent again with this October delivery. The invoice was to and said to be delivered to "Pike's Pharmacy G Braude" (FP1). 13 On 12 November 2003, Ms Gleeson came to the pharmacy. She saw some of the delivered goods on sale. An arrangement was made for the delivery of the balance of the stock that had been ordered in July. 14 The stocktake took place on 14 November 2003. It included certain of the July order stock that had been delivered in October 2003. 15 On or about 14 November 2003, there was a further delivery of stock for a price of $5,806.90 (the second delivery). An invoice was sent with the delivery. It was dated 13 November 2003. Again, the invoice was to and said to be delivered to "Pike's Pharmacy G Braude" (FP2). 16 On 17 November 2003, settlement of the purchase took place and the plaintiff acquired legal title to the pharmacy business and the assets. The plaintiff ceased to be an employee and commenced to carry on the pharmacy business. On that day, he also applied for a credit account with the defendant. 17 Subsequent to 17 November 2003, there have been further orders and delivery of stock. The plaintiff has made payment in respect of these deliveries. 18 In January 2004, the defendant issued a statement. It bore the name "G Braude". It was in respect to the July 2003 orders. The sum claimed was $12,834.34. It did not refer to the orders and deliveries made subsequent to 17 November 2003 (even though none of those deliveries had then been paid for). 19 On 30 January 2004, Leon Braude became bankrupt. He lodged a statement of affairs (which admitted a debt to the defendant in the sum of $12,834.34). 20 Later in 2004, invoices in respect of this sum were sent by the defendant (FP3 and FP4). The invoices were to and said to be delivered to "Pikes Day & Night Pharmacy Terry Mourched". These were for the same stock delivered in respect of the July order (the first and second delivery). 21 On 4 March 2004, the defendant commenced proceedings in the Local Court to recover the sum of $12,834.34 (the claim came to be restricted to the first and second deliveries). Initially, the claim was framed in contract only. Later, the process was amended to add an alternative count of unjust enrichment (in respect of part of the goods – the second delivery). 22 A hearing took place before Price LCM. His Honour delivered judgment on 17 May 2005. He found in favour of the defendant. The decision was based on the count framed in contract. His Honour did not address the unjust enrichment claim. 23 On 14 June 2005, the plaintiff filed a summons in this court. The summons brings a challenge to the decision of the Magistrate. It is founded on error of law. 24 The hearing of the appeal took place on 20 February 2006. The legal representatives for the parties have prepared written submissions which were supplemented by oral argument. 25 The issue raised for determination in this appeal is whether or not there was evidence to support either findings of fact or facts inferred by the Magistrate. 26 The judgment contained, inter alia, the following:- A stock take of merchandise in the Pharmacy commenced at 6 am on Friday 14th November, 2003 and completed some 7½ hours later. For purposes of these proceedings the merchandise the stock the subject of these proceedings did not figure or were not accounted for in that physical stock take. … … … Invoices identified as FP3 and FP4 annexed to the Ex 5 the statement of Mr. Palazzo, whilst dated 28th October, 2003 and 13th November, 2003 show, inter alia as Delivery and Invoicing to the Pharmacy Terry Mourched. Given the earlier return of stock pending the sale of the Pharmacy the plaintiff company had to have had advice that the invoice was to be to Terry Mourched, irrespective of the effective take over date of 17th November, 2003. What is quite clear from M/s Pellegrino's statement, her evidence is that she was under instructions to quote "run down the stock". That no doubt, impacted upon her rejection of the plaintiff's delivery of stock in September, 2003. She clearly had discussions with the Plaintiff Company, specifically M/s Mahlbauer [sic] regarding the imminent sale of the business, both have a recollection of that or those conversations and the tenor of their respective recollections does not differ significantly. More importantly the re-activated delivery is at the instigation of M/s Pellegrino and to a lesser extent the concerns in the Plaintiffs camp about the returned stock held awaiting delivery. The formal credit facility by the defendant was not faxed until 17th November, 2003 yet the invoice documents earlier referred to show his name in both delivery instructions and invoicing. That information could only have come from the defendant Pharmacy. … … … It would be a specific finding of fact in this matter that the initial order of M/s Pellegrino to the Plaintiff Company could only have been and construed to have been at the instigation or on instruction from the then Pharmacist. The court also finds that the same employee was under instructions that stock was to be quote "run down" and again the court accepts that her rejection of the delivery was entirely consistent with this instruction. It was a component of the stock rejection that the Plaintiff had to have been on notice that the Sale of the Pharmacy was afoot and equally that the return was on the basis of understanding that the Plaintiff would be advised of the Sale. The court can construe the instruction/request to re-deliver the ordered stock in October, 2003 as nothing other than an expressed or implied acceptance that the Sale had been effected. Why else would the call have been made? It is not difficult to conclude that the settlement date was in a state of flux anticipated to have been 1st October, 2003 and yet finally transpiring to be 17th November, 2003. Against that factual background the court accepts that the instructions to deliver had to have been at the behest of the present owner of the Pharmacy the defendant and the court would find in favour of the Plaintiff. 27 The Magistrate had before him a considerable volume of material (largely, this may be found in the affidavit of Graeme Jolly filed 21 October 2005 and the annexures thereto). 28 The evidence included statements and oral evidence from a number of witnesses. The defendant relied on Mr Palazzo (a director), Ms Muhlbauer and Ms Gleeson. The plaintiff relied on his own evidence and that of the manager. 29 There was cross-examination of witnesses. To the extent that there was conflict, no express findings were made on reliability and credibility. 30 The judgment of his Honour contains a number of errors. In dealing with this material, I bear in mind that it is not error alone that justifies the disturbing of his decision. There must be no evidence to support a relevant finding. 31 I now return to the judgment itself. It was erroneous to find that the stock (which was the subject of the July orders) did not figure or was not accounted for in the stocktake. It is common ground that there was stock from the first delivery. 32 There was error in the Magistrate's dealing with the invoices identified as FP3 and FP4. He has misunderstood the evidence. These documents were not issued in October and November 2003. They came into being in 2004, well after the completion of the sale had taken place. The invoices that were issued in 2003 were FP1 and FP2 and were to, inter alia, "G Braude". The Magistrate seems to have erroneously inferred from FP3 and FP4 that "advice" came from the pharmacy prior to 17 November 2003 that the invoices were to be directed to the plaintiff. 33 What was found in the penultimate paragraph of the judgment is somewhat unclear. There is reference to "the initial order of M/s Pellegrino" and an observation that it could only have been and construed to have been at the instigation or on instruction from the then pharmacist. The paragraph later contains the sentence The court can construe the instruction/request to re-deliver the ordered stock in October, 2003 as nothing other than an expressed or implied acceptance that the Sale had been effected. 34 Whatever was done by those observations may be the subject of conjecture. Whatever it was, like the earlier observations, it was also crucial to the result in the proceedings. This is made manifest by the final paragraph of the judgment. 35 The evidence from the plaintiff was that at no time prior to 17 November 2003, did he instruct the manager in relation to general stock (including Homyped stock). He was a paid employee answerable to the manager. The evidence of the manager was that all stock ordered by her prior to 17 November 2003 from Homyped was ordered for and on behalf of the Braudes. Further evidence was that at no time prior to 17 November 2003, was the plaintiff involved in decisions relating to the ordering of general pharmacy stock (including Homyped stock). There was no evidence from any of the witnesses called by the defendant to the effect that the defendant had been told by the plaintiff or the manager prior to 17 November 2003, that the sale had been completed, or of any "advice" that the orders made prior thereto were being re-ordered or made on behalf of the plaintiff and should be invoiced to him. 36 In my view, the plaintiff has discharged the onus borne by him in this case (that there was error in point of law that justified the disturbing of the decision). In my view, the Magistrate made findings which were not supported by evidence. These findings were the support for his ultimate decision. 37 The judgment and orders made by the Magistrate are set aside. I will hear submissions from the parties as to what should now happen with the proceedings. The defendant is to pay the costs of the summons and the costs of the proceedings in the Local Court. If so entitled, it is to have a certificate under the Suitors' Fund Act 1951. ********** 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.