New South Wales Supreme Court CITATION : Thriving Enterprises Pty Ltd v South Pacific Food Trader Pty Ltd [2008] NSWSC 919 HEARING DATE(S) : 4 September 2008 JUDGMENT DATE : 11 September 2008 JUDGMENT OF : Malpass AsJ DECISION : Orders made by Quinn LCM on 30 January 2008 set aside; matter remitted to Local Court for determination according to law; defendant to pay the costs of appeal; if so entitled to have a Certificate under Suitors' Fund Act 1951; exhibit returned. CATCHWORDS : COMMON LAW - appeal from Local Court - alleged misdirection - sale of goods - were issues raised - acceptance and loss of right of rejection LEGISLATION CITED : Sale of Goods Act 1923 CATEGORY : Principal judgment Coulton v Holcombe (1986) 162 CLR 1 CASES CITED : Fogarty v Creasey [2002] NSWCA 318 Suttor v Gundowda Pty Limited (1950) 81 CLR 418 PARTIES : Thriving Enterprises Pty Limited (Plaintiff) South Pacific Food Trader Pty Limited (Defendant) FILE NUMBER(S) : SC 10844/08 COUNSEL : R I Bellamy (Plaintiff) A Jamieson (Defendant) SOLICITORS : Access Business Lawyers (Plaintiff) Wood Marshall Williams (Defendant) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 10709/05 LOWER COURT JUDICIAL OFFICER : Quinn LCM LOWER COURT DATE OF DECISION : 30 January 2008 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Associate Justice Malpass Thursday 11 September 2008 10844/08 Thriving Enterprises Pty Ltd v South Pacific Food Trader Pty Ltd JUDGMENT 1 HIS HONOUR: The plaintiff was the supplier of food packaging film. The defendant placed a purchase order for film of a certain specification. Subsequently, film was supplied by the plaintiff to the defendant. The film supplied did not meet the specification. The plaintiff contended that there was an intervening oral variation of the purchase order (concerning the specification). There was an attempt by the defendant to use the film. Certain of it was used in relation to one of the defendant's products (a chocolate almond product). The defendant refused to pay for the goods. 2 The plaintiff brought proceedings in the Local Court in September 2005. An Amended Statement of Claim was filed on 18 October 2005. This was the pleading relied on by the plaintiff at the hearing. The claim was founded on alleged non-payment of film supplied pursuant to the varied purchase order. The process did not allege an acceptance of the film by the defendant. 3 The proceedings were defended. The defendant put in issue, inter alia, the alleged variation. No cross-claim was filed. 4 The proceedings went to a defended hearing. Judgment was delivered by the Magistrate (Quinn LCM) on 30 January 2008. 5 By Summons filed on 27 February 2008, the plaintiff brings an appeal against the decision alleging error in point of law. 6 The Magistrate approached her task in the following manner: "Both parties agree that there was a contract between them for the supply of packaging film. The following are the issues for consideration. What was the contract between the parties? Was there a variation to it? If the answer to that question is 'yes' and the film provided by the plaintiff was in accordance with the variation, then the plaintiff must succeed if the film was of merchantable quality. If the answer is 'no' the defendant must succeed. The question for consideration then is whether the plaintiff can claim payment for any film used by the defendant. As there is no dispute that a contract exists between the parties, the plaintiff has the onus to satisfy the Court on the balance of probabilities that the original contract was varied in the terms it states." 7 Her Honour then considered the evidence led by both parties. She accepted the evidence of Mr Wachjo (for the defendant) and rejected the evidence of Mr Lin (for the plaintiff). This led her to the conclusion that she was not satisfied on the balance of probabilities that the contract was varied. 8 Having reached that decision, she then considered an alternative claim for quantum meruit (a claim that had not been pleaded). She refused relief on that basis because of the contractual relationship existing between the parties (see Coshott v Lenin [2007] NSWCA 153). 9 The hearing of the appeal took place on 4 September 2008. The parties made both written and oral submissions. The written submissions could be described as akin to two ships passing in the night. In substance, the plaintiff was contending that the Magistrate had failed to deal with issues. The defendant was contending that the case had been determined on questions of fact and that there was no error of law available to the plaintiff. 10 The plaintiff relied on one ground of appeal only. It is in the following terms: "The learned Magistrate erred in failing to find that the Defendant had accepted delivery of the food packaging film and had utilised all of the choc almond film in its production process." 11 What is involved is an allegation of misdirection as to issues. It was said to be erroneous on the part of the Magistrate to conclude that the defendant must succeed if the answer to the question of variation was "no". 12 It is said that the Magistrate overlooked the provisions of s 16 of the Sale of Goods Act 1923 ("the Act"). It is further said that if she had adverted to the provisions of that section, she should have found that there was an acceptance of part of the film and that as a consequence the defendant had lost the right to reject the goods and its rights were restricted to a claim for damages based on breach of warranty. 13 It is somewhat unclear as to whether or not she did deal with the matter of acceptance. The plaintiff contends that she may have done so by implication. However, it is clear that she did not put her mind to the provisions of s 16 of the Act. This may be because they were not mentioned by the parties. 14 There was no dispute between the parties as to the applicable legal principles. The real issue in this Court was whether or not the ground of appeal was open to the plaintiff. 15 If no finding as to the question of acceptance has been made, it would seem to appear from the material placed before the Local Court that there was an arguable issue as to that question which may have led to a finding that the defendant had lost the right to reject the film. There was no dispute that the Magistrate should have considered the application of the provisions of s 16 of the Act, if the application of those provisions was in issue before her. 16 The issue of whether or not the question was agitated in the Local Court is shrouded in uncertainty. 17 Submissions were made orally to the Magistrate. There were no written submissions by the plaintiff. The transcript of the oral submissions is not before this Court. Mr Lancaster (the solicitor for the plaintiff) argued the case for it in the Local Court. Mr Jamieson of counsel appeared for the defendant. 18 In this Court, Mr Jamieson again appeared for the defendant. Mr Bellamy of counsel appeared for the plaintiff. He was not being instructed by Mr Lancaster. 19 A short adjournment was granted to allow discussion to be had with Mr Lancaster. The discussion produced an inconclusive result. The Court was told that the understanding had by Mr Lancaster was that he raised a question of acceptance. It seems that he may not have raised the matter in the context of s 16 of the Act. Mr Jamieson has no recollection of the matter of acceptance being raised in oral submissions before the Magistrate and his understanding is that if it was raised it was done in relation to the question of quantum meruit. 20 As earlier said, the issues raised by the ground of appeal were not pleaded in the Amended Statement of Claim. There may be debate as to whether or not pleading of them was required in it. Perhaps it was a matter that should have been raised by way of reply. However, a question of utilisation of the film by the defendant was raised in the document headed "Plaintiff's Summary" (which was placed before the Magistrate and during oral argument). It was also a matter that received consideration by the Magistrate in her judgment. 21 It is not unusual, particularly in the Local Court, for there to be a departure from the pleadings and a ventilation of other issues during a hearing. A trial can expand or contract without an amendment to the pleadings (see paragraph 37, Fogarty v Creasey [2002] NSWCA 318). 22 It appears that a Statement of Agreed Facts and Issues may have been prepared by the plaintiff. There was uncertainty as to whether or not it had been placed before the Magistrate. A purported tender of a copy of that document was later withdrawn. 23 Whatever be the position before the Magistrate, it seems to me that the dictates of justice require that the plaintiff be allowed to ventilate its ground of appeal and that the appeal be allowed. It seems to me that the taking of this course accords with what was said in Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 and Coulton v Holcombe (1986) 162 CLR 1. The evidence concerning the question of acceptance has been adduced, and, at least largely, it was placed before the Court by Mr Wachjo. It does not seem to be a case in which the defendant may have been in a position to lead further evidence which would possibly have prevented the appeal point from succeeding. 24 Accordingly, the orders made by the Magistrate on 30 January 2008 are set aside. The matter is remitted to the Local Court for determination according to law. The defendant is to pay the costs of the appeal, and, if so entitled, it is to have a Certificate under the Suitors' Fund Act 1951. The exhibit may be returned. ********** 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.