Davidson International Co v Langton Machinery Pty Ltd No. DCCIV-00-1200

DAVIDSON INTERNATIONAL CO v LANGTON MACHINERY PTY LTD
[2003] SADC 15
Judge David
Civil

The plaintiff was a company situated in Florida in the United States of America which at all material times carried on the business of supplying retail cosmetic and beauty products. From about 1987 the plaintiff sold cosmetic and beauty products to the defendant for distribution in Australia. The plaintiff now claims a number of invoices have remained unpaid for cosmetic goods which were supplied to the defendant and that the plaintiff was also entitled to interest upon those unpaid invoices and a certain amount of interest upon invoices that were paid late. As the case unfolded much of the plaintiff’s claim was not disputed. There was a dispute about one invoice and a dispute about the methodology of calculating the interest.
By way of counterclaim the defendant claims damages for breach of contract in that it is alleged that the plaintiff and the defendant entered into an agreement whereby the plaintiff would sell a particular product manufactured by a firm known as “Roberts” to the defendant. It is alleged that this agreement between the parties included the specific term that the “Roberts” product (which was a gel) was to be supplied to the defendant exclusively and to nobody else in Australia. After this arrangement had continued for a number of years, approximately from 1989 to 1996, it was discovered that the manufacturers themselves supplied that particular product directly to another party in Australia. As a result of that the defendant now claims that the plaintiff was in breach of contract and that in losing that exclusive right to sell the “Roberts” product the defendant has suffered damages.
The Plaintiff’s Claim
It is agreed between the parties that there are unpaid invoices owing by the defendant to the plaintiff in the sum of US$10,493.48. It is also agreed that a number of invoices were paid late and the appropriate interest owed by the defendant to the plaintiff in relation to those late payments is US$1,840.49. There is disagreement as to whether an amount of US$1,602.65 has been paid or not. The defendant claims that it has been paid and the plaintiff says that it has not. As the evidence unfolded it is clear in my view that that amount was paid and I need do no more than refer to Exhibits D13 and D14 which are bank statements which indicate to me quite clearly that that amount has been paid. I therefore find that US$10,493.48 has as yet not been paid by the defendant to the plaintiff.
There is a dispute about the methodology of calculating interest on that amount. The plaintiff argues that for each invoice an agreed rate of 1.5% should be calculated up until the date of the issuing of proceedings and that there should then be a further order as to interest on the total amount of that judgment. The defendant argues that the interest of the agreed amount of 1.5% should be imposed on each amount owing on the date that it became due until the 30^th January 2003 and that should be a final calculation as to interest in the matter. In other words there should not be interest imposed upon interest. In my view the defendant’s method is the correct one and on the calculations using that method there is no dispute that the total amount of the plaintiff’s claim is US$24,448.61.
Counterclaim
In support of its counterclaim the defendant called Heather Langton and Rex Langton. They both gave evidence of the history of the company and their dealings with the plaintiff. The defendant also called one expert witness namely Brian Michael Sander and through him tendered a valuation (Exhibit D18) which gave his opinion as to the annual loss to the plaintiff’s business by virtue of the fact that as a result of the breach of contract they lost the business of “Roberts”.
Heather Langton gave evidence that she has been a beauty therapist for well over 30 years. She has also been involved in the importation of beauty products within the industry. Most of those products are professional products that beauty therapists use in their salons. She gave evidence that there was a period of time in the late 80’s when she started importing beauty products from the United States. She met the plaintiff through an advertisement in a United Kingdom journal and eventually met him in New York. That was in the late 80’s. Through the plaintiff they began dealing with two products namely a substance known as “Roberts” gel which is the subject of this action and another substance called “Gena” products. The defendant company first imported “Gena” products through the plaintiff and from there was then introduced to “Roberts” gel. They had never heard of that product before. She gave evidence that they were approached by the plaintiff to import the “Roberts” products into Australia and they agreed to do so. She was of the view that they had an exclusive agency to import and retail and sell the “Roberts” gel throughout Australia and she gave evidence that she would never have been involved in that importation if it were not for that factor of exclusivity.
The dealings with the “Gena” products eventually ceased but the parties carried on with the importation of the “Roberts” gel. On the topic of whether there was an agreement as to whether the defendant were going to be the sole distributors of the “Roberts” gel Ms Langton gave the following evidence (page 23):-
"QThe situation was that when you were with Mr Davidson, did you have any discussions with him about a sole arrangement, or was that something that was discussed with your husband.
AHe indicated to us that we would be the Australian importer. We would be the sole distributor for Australia.
QDid he say that to you.
AWhen we met him and sat down and had conversations with him, he indicated that we would be the only one that he would be distributing to, and that we would be the sole – and he had exclusive rights with Roberts and he had control of who got the products.
QNow, they were meetings which took place where.
AThat would have been when we were overseas.
QHow long were you in New York for.
AWould have been at least a week.
QHow long did you see Mr Davidson during that time.
AProbably most days.
QIs that the occasion that you are referring to; when these discussions took place.
AWhile we were there, we focused on business, talking about business and what we would do with the products and we were keen to promote it and sell it.
QIn your presence, there was discussion about the right to have sole representation in Australia.
AI can recollect that we were definitely talking about us being able to distribute Australia exclusively. I can’t remember the time, the day, but I know that did come up because that is something that we would indicate with any company importing a product, that we have to have exclusive rights, otherwise we wouldn’t take it on.
QSo you can’t be specific when it was during that week in New York.
AYes.
HIS HONOUR
QCan you remember making that clear to Mr Davidson, that you wouldn’t take it on unless you had exclusive rights.
AWe would have –
QThis is what is worrying me. Can you actually recall that happening.
AYes, that would have happened before we even went to America, because we had already started to import product, and that would have been made clear to him over, you know, before we went ahead and brought all the products in. We have importing rights to other products and we have contracts on all of them, because it is too risky for an Australian company to import something unknown.
QI accept all that, but was there in sort of written contract or can you point to something which established that it was a prerequisite to you taking this on, that you would have exclusive rights.
AOkay. This would have been the initial letter to say that we got it and we would have reinforced that in conversations because we were looking to do trade shows two or three times a year, and you are looking at 12 to 14,000 a trade show and out of your office four or five days, the head office, and you just wouldn’t do it unless you were exclusive because you could get to the trade show and find four or five people were selling the same product.
XN
QThat was a matter that was in your husband’s domain more than yours.
AHe was involved in the actual importing. I’m involved in the marketing, sales, trade shows etc.”
Ms Langton then gave evidence of dealing with the product which was imported through the plaintiff. They promoted the product at their own expense and figures were provided from Ms Langton as to the yield to their business from that product (Exhibit D4). As I understand the evidence this arrangement started in 1989 and was completed in 1996 when it was discovered that somebody else in Australia was distributing “Roberts” gel. A protest was made to the plaintiff when that was discovered. As a result of that he came to Australia but his dealings were mainly with Mr Rex Langton. I will deal with that aspect of the case when I come to his evidence.
Rex Paul Langton gave evidence that he is the husband of Helen Langton and with his wife was involved in the beauty industry. He gave evidence that he was referred to Mr Davidson, the plaintiff, by Gena Laboratories in Dallas, Texas and began trading and importing “Gena” products through the plaintiff. When doing that he learnt from the plaintiff that there were other products that could be imported, in particular, products manufactured by the Roberts Group. Eventually there was an arrangement whereby the plaintiff would sell the “Roberts” products to the defendant who would distribute them in Australia. That ceased in about 1996. In 1989 and 1991 he received two price lists for products that were supplied by Mr Davidson (Exhibits D7 and D8). On top of those price lists were the words “exclusive export reps:”. He then gave evidence about the question of having exclusive distribution rights over “Roberts” products. I set out the following passage (page 63):-
"QDid you have discussions with Mr Davidson about sole agency in relation to the Roberts products.
AIn our discussions in 1989, when Mr Davidson came to Adelaide – and he did come in 1989 – he saw our showrooms in Adelaide and the products that we were offering. I did discuss that with him – my wife and I – that we needed to ensure that we – we needed to protect our agencies – in the year of 1989 as well, which was the infringement on the trade show in question, we had got a letter from the principal in America confirming our sole agency for that product – namely, the Gena product. In the discussions which we had with him, when he was here at that time and generally in 1992 in New York when we met him, we discussed the situation of a sole agency and we are now talking about memories of discussions in hindsight. We did, at every time and from all of the correspondence, telexes and faxes, price lists et cetera, we were clearly under the impression, from him, that he was representing manufacturers in America for which he had the sole exclusive rights and, as such, was passing those rights on to us to sell in Australia.”
He then gave evidence that at a trade show in Sydney in 1996 he became aware that another person was selling “Roberts” products at that show. There then followed correspondence between he and the plaintiff whereby he complained about that fact (Exhibits D9 and D11). In response to those two faxes that were sent the plaintiff replied (Exhibit D10). It is clear from those faxes that the defendant was hostile at finding that a competitor was selling the “Roberts” products in Australia and on the defendant’s case that supports the contention that there must have been an agreement as to exclusivity. In his reply (Exhibit D10) it is clear that the plaintiff asserts that the “Roberts” company themselves supplied directly to competitors in Australia and it had nothing to do with the plaintiff.
In cross-examination it was put that after the alleged breach was discovered in October of 1996 the defendant ordered three more shipments of “Roberts” goods from the plaintiff. Mr Langton agreed with that proposition but said that it was to finish off commitments he had made to people to whom he was supplying those goods. After that the relationship between the parties finished and litigation commenced in relation to the non‑payment of a number of invoices.
The defendant also called Brian Michael Sander who tendered a valuation (Exhibit D18). The opinion given in that Exhibit is that the loss of the exclusive distribution rights of “Roberts” gel amounts to a loss of US$8,000.00 gross per annum to the defendant’s business. In other words from the time that the sole agency was lost the defendant company will be US$8,000.00 per year worse off. For exactly how long this would last appears to be unknown. As a result of my final decision in relation to the counterclaim it is unnecessary to consider Mr Sander’s evidence any further.
In relation to the counterclaim the defendant himself gave evidence and no other witnesses were called. He was the owner of the defendant company and still is. It is an export company which represents various manufacturers in export sales. He has been doing that type of business for 40 years. In the 1980’s he sold products for Gena Laboratories and the Roberts Group. He gave evidence that he first started dealing with the defendant in the latter part of 1987 and originally sold them “Gena” products. He started selling “Roberts” products around about 1989. On the question of whether there was any discussion about exclusivity with the defendant he gave the following evidence (page 126):-
"QDid you have discussions with Mr Langton or Mrs Langton about an exclusive agency regarding Roberts’ products.
AWe never had a discussion about exclusivity. I can qualify that by saying I’m sure they must have asked something about previous lines but we never granted any exclusivity because we had no right to do so.
QOn some of your price lists you say ‘exclusive export distributor’.
AYes.
QWhat do you mean by that.
AWe put that on many different price lists for many manufactures and we also did not put it on many of the other price lists from the same company. What ‘exclusive’ meant in that type of situation, when we took on a line – I’ll use Roberts Group as an example and gels, we told our customers, in this case Langton, we only handle gel of this nature, we do not handle competing lines. It had nothing to do with exclusive. Langton knew this. There was discussions on the telephone about this. I wish I had the record but I’m also sure there was discussion in writing telling him that there was no exclusive distributorship available at that particular time.
QDid you say that there might be something in the future.
AYes, I did. I said if we could outline a program where there would be a minimal number of orders per year, there would be a specific volume that they could reach, and with payments coming properly and on time we would approach the manufacturer and explain what is happening. If the volume was sufficient the manufacturer would have a contract drawn up legally between the manufacturer, in this case it would have been Langton and ourselves. It would absolutely be spelt out as to exclusivity.
HIS HONOUR
QThe manufacturer was Roberts; is that right.
AYes.
QYou were his agent to provide products to distributors; is that right.
AYes.
QLet’s deal with Roberts.
AWith Roberts that’s exactly what we did.
QYou say that ‘exclusivity’ meant that you would take on Roberts’ products and nobody else’s of a like product; is that right.
AThat’s correct.
QYou then sold that to the distributor Langton.
AYes.
QAnd Roberts knew that.
ARoberts knew that and everybody we dealt with throughout the world – and this was extensively – knew the same thing. Just putting the word ‘exclusive’ on some of our prices does not mean that we are granting exclusivity to anybody.
XN
QDid Roberts use other distributors in the United States.
AYes – I do not know really Roberts’ business but the way businesses are run in the United States, the manufacturers sell to many, many dealers and those people in turn sold Roberts’ products.
HIS HONOUR
QWhen you were the agent for Roberts to sell their products to distributors, were you the only person they went through. Would they sell to distributors direct.
AYou are thinking of export? Domestically we had nothing to do with this.
QNo, export.
AExport I cannot say for sure. But most likely they sold to whomever they wished in the United States. It was standard procedure.
QDid you sell Roberts’ products in countries other than Australia.
AYes.
XN
QDid you sell Roberts’ productions to anyone –
AStill do.
QJust in relation to Australia, did you sell Roberts’ products to anyone other than Langton.
AIn Australia?
QYes.
AAbsolutely not.
HIS HONOUR
QBut you could have.
AI could have. I tell anyone that I do anything to increase the business. Langton knew that well. We never bridged that statement. That does not mean they had exclusivity. That just means from us we would not sell through anybody else.
QDid you promise him that.
ANo, I just simply said ‘I will not sell to anyone else.”
He then gave evidence that over the period from 1989 to 1996 the defendant company was often late in the payment of the products supplied. He said in evidence that he learnt that the “Roberts” company had been shipping directly to Australia their gel product to another party. He said that he was told that by Rex Langton. He explained the fax of the 10^th October 1996 (Exhibit D10) as him being sympathetic because of what “Roberts” did. He gave evidence that he had nothing to do with selling to anybody other than the defendant and he could not control what “Roberts” did.
In cross-examination it was put to him that he first learnt of “Roberts” supplying to another distributor within Australia from “Roberts” and not from the defendant. He denied that and said that he learnt that from the defendant and then questioned “Roberts” about it. He also emphasised in cross-examination that it would be poor business to have an exclusive dealership with Mr Langton when in fact not a lot of the product was being sold by Mr Langton. He also explained that Mr Langton was very tardy in paying his debts. He also emphasised in cross-examination that the words “exclusive export rep: Davidson International” which was on the top of his company’s letterhead (Exhibit P1 page 79) meant that his company exclusively exported one line of product. It was not meant to mean and did not mean that they only supplied to one distributor.
Having observed all witnesses very carefully I make the following findings:
1.From a period between 1989 and 1996 there was a continuing arrangement between both parties that the plaintiff supply to the defendant the product known as “Roberts” gel for distribution in Australia.
2.In the course of the negotiations (the evidence of which is very vague on both sides) the plaintiff promised to supply the defendant only with that product and nobody else in Australia.
3.There is insufficient evidence to find that the plaintiff guaranteed the defendant that nobody else in Australia would be supplied with that product. In particular there is no evidence of a guarantee that the manufacturer would not supply any other person in Australia.
4.The arrangement between the parties was completely vague and uncertain as to how long this arrangement was to last.
5.The manufacturer himself imported “Roberts” gel to another party for distribution and I accept that the plaintiff had no part in that decision.

As a result of the above findings of fact I find that there has been no breach by the plaintiff of a contract between the parties guaranteeing that no other person would distribute “Roberts” products in Australia at the time. I therefore dismiss the counterclaim.
There will be judgment for the plaintiff in the sum of US$24,448.61 and the counterclaim is dismissed.

[2003] SADC 15

21 February 2003