Ballast Stone Estate Wines v Wine Solutions Australia PL (No 2)

[2007] SADC 134

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

BALLAST STONE ESTATE WINES v WINE SOLUTIONS AUSTRALIA PL (NO 2)

[2007] SADC 134

Judgment of His Honour Judge Tilmouth

18 December 2007

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - PARTIES - GENERAL PRINCIPLES

Assessment of damages for breach of contract - turns on its own facts.

Hadley v Baxendale 1854 9 Exch 341, 156 ER 145; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, applied.

BALLAST STONE ESTATE WINES v WINE SOLUTIONS AUSTRALIA PL (NO 2)
[2007] SADC 134

1. The Court delivered judgment in this matter on 6 December 2007[1], when it made orders dismissing claims under several heads of alleged damage, raised on the counterclaim by Wine Solutions.

   [1] [2007] SADC 129

2. Judgment was entered in its favour however, on the “samples claim” for damages to be assessed. These have since been agreed between the parties at $962, plus interest of $96.29.  Judgment will be entered under that head accordingly, for $1058.29.

3. Proceedings were also adjourned for an assessment of damages in relation to the finding that Ballast Stone ought to have given three months notice of termination of the distribution agreement between the parties.  That notice was given on 10 November 2004, so the relevant period is from that date until 10 February 2005.

4. In support of the claim under this head of damages, Wine Solutions focused upon the documents in exhibit P6, especially document 33.  These comprise a series of invoices over the period from 6 July 2004 to 25 October 2004, showing the numbers of cases of wine supplied to it by Ballast Stone Estate Wines.  It is agreed the gross margins per case were $40 on Ballast Stone and $18.20 on Stone Mason Wines.  Counsel produced no calculations indicating what the measure of damage might be or as to how they should be calculated.

5. The period under review spans nearly thirteen weeks by the calendar, but it is only fair to round it down to twelve to allow for holidays in that period. This is generous to Wine Solutions.  Average sales of wines, so far as the invoices inform, were fifty two cases per week of Stone Mason and thirty one cases of Ballast Stone.  There were fifty six free sample cases of Stone Mason and twenty two Ballast Stone so far as one can tell from the invoices, that must be deducted as no margins applied to them.  On a purely arithmetic basis, this approach produces sums of $11,356.80 and $14,880, less $1,019.20 and $880 respectively, by way of gross margins to be expected on the sale of both wines.  The “gross” total is therefore $24,337.60.

6. Ordinarily, an assessment of damages would be calculated on the premise of putting Wine Solutions in the same position it would be, had the contract been performed, that is to say had it been duly given three months notice of termination.  It is the measure of what “may reasonably be supposed to have been in the contemplation to the parties, at the time they made the contract, as the probable result of the breach of it”: Hadley v Baxendale.[2] 

   [2] (1854) 9 Exch 341: 156 ER 154 at 354 and 151 respectively.

7. So far as this assessment goes, no evidence was produced showing what actual net profits were on the sale of these wines, what the associated costs of sale and distribution were, what differences there were (if any) between such costs of the respective lines, or for that matter whether the company traded at a profit or a loss.  No profit and loss statements or balance sheets were adduced into evidence.  No expert accounting report was tendered, attempting to estimate the actual losses flowing from the proven breach.  No evidence of what the company might or might not have done, had it been given due notice, or of efforts to mitigate loss, was forthcoming.  All this places the Court at a disadvantageous position in endeavouring to make a principled assessment of damages.

8. Mr Strawbridge submitted simply that the Court was entitled to take a “broad-axe approach”.  Of course, the lack of evidence does not necessarily relieve the Court of making any assessment at all, but it can only assess losses within the confines of the proof that is provided.  Therefore, in the absence of evidence directed to the actual profit properly calculated, it becomes necessary for the Court to wield a “broad-axe” and attempt to estimate damages at best it can in the light of the evidence that was actually placed before the Court: Commonwealth v Amann Aviation Pty Ltd.[3]Mason CJ and Dawson J said in that case:[4]

   The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can.  Indeed, in Jones v Schiffmann Menzies J went so far as to say that the "assessment of damages ... does sometimes, of necessity involve what is guess work rather than estimation". Where precise evidence is not available the court must do the best it can.  And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages. 

   [3] (1991) 174 CLR 64 at 83, 125 (per Deane J)

   [4]    At 83, footnotes  omitted.

9. There is no evidence suggesting that the November through February period would be any better or any worse trading wise, than the period for which invoices are available.  Based on the tenuous assumption that the average figures represent a fair estimate the projected sales over the three months in question, produces the “raw” figure of  $10,337.60 and $14,000 calculated above. From there, assessing the proper measure of damages, becomes essentially guess work.  There is no evidence Wine Solutions is insolvent or trading at a loss, one way or the other. 

10. Common sense dictates that there would be sales and overhead costs, particularly in the case of Ballast Stone Wine range.  Expenses would probably have been less on the Stone Mason range, because that was simply a matter of supplying to Sip ‘N Save under the established arrangements.  In all the circumstances, the best the Court can do is to estimate that one third of the net sales was the measure of net profit on the Stone Mason wines, which is $3,445.83 of the gross figure.  As to the Ballast Stone sales, more marketing and therefore more costs must have been entailed, such that 25% of gross sales is the best estimate of net profit on that line.  That yields a figure of $3,500.  Both parties were agreed the Court should ignore any question of taxation in relation to this assessment.

11. Accordingly, as rough justice as it may be, the Court awards $6,945.83 by way of damages under the loss of profits claim flowing from the proven breach of the distribution agreement.  Judgment for Wine Solutions on the “samples claim” will be entered for an additional $1,058.29.  As Ballast Stone has a judgment already for $80,349.39, it is probably best that these should be set off against that sum, and the stay ordered by the Master removed.  The parties should be heard on the question of interest, set-off, the stay, costs, and if it arises, questions relating to the disposition of monies held as security for costs.