Devito & Devito v Salena Estate Wines Pty Ltd - [2004] SADC 156

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
DEVITO & DEVITO v SALENA ESTATE WINES PTY LTD
Judgment of His Honour Judge Clayton
10 November 2004
CONTRACTS
Plaintiffs delivered grapes to the defendant. Dispute as to terms of contract. Plaintiffs asserted a contract of sale. Defendant asserted a contract to make wine for the plaintiffs for a fee.
HELD: Contract of sale, terms of which were that the defendant would pay $700 per tonne for the grapes by the end of September 2001. Defendants' assertion that the grapes were delivered on consignment and the plaintiffs were obliged to pay production costs of processing the grapes, a storage fee and profit margin rejected.
Judgment in favour of plaintiffs for $414,757 plus interest from 1 October 2001.
Wine Grapes Industry Act 1991 s 6, referred to.

DEVITO & DEVITO v SALENA ESTATE WINES PTY LTD
[2004] SADC 156

This case relates to grapes that were delivered by the plaintiffs to the defendant in March or April 2001. The plaintiffs claim $700 per tonne for the grapes as the price of goods sold and delivered to the defendant. The total price of the grapes alleged to have been sold was $414,757.
There is no documentation which evidences the contract asserted by the plaintiffs. The oral evidence relied upon by the plaintiffs in support of a contract of sale at a price of $700 per tonne is contained in five lines of the transcript of evidence.
The defendant acknowledged that the plaintiffs delivered the grapes and that there was a contract between the plaintiffs and the defendant. There is however a dispute between the parties as to the terms of the contract on which the grapes were delivered. The defendant’s case was that there was no sale of grapes by the plaintiffs to the defendant, but there was a contract pursuant to which the plaintiffs delivered the grapes and the defendant agreed to process the grapes into wine, store the wine and sell the wine on the plaintiffs’ behalf. The defendant asserted that it did not have to make any payment to the plaintiffs for the grapes until such time as the wine had been sold. The defendant also disputed that the plaintiffs were entitled to a price of $700 per tonne for the grapes.
The male plaintiff gave evidence that in 2001 a winery with which he had a contract in previous years changed hands and no longer required his grapes. He learnt that the defendant could be interested and telephoned Mr Franchitto, the managing director of the defendant. The five lines of transcript upon which the plaintiffs’ claim depends are the following:
“I rang him just asking if he was interested in taking grapes, you know, told him what I had and he said he was interested in the shiraz, and if we had trouble with the other varieties he could take them and pay me $700 a tonne and pay me in September or October.”
Mr Devito said that the conversation took four or five minutes.
In the case of the shiraz grapes there was an admitted contract for the sale of grapes at a fixed price which has been paid. The shiraz grapes do not form part of this claim.
On the plaintiffs’ case the property in the grapes had passed to the defendant and so the wine which was made belonged to the defendant. The defendant’s case was that property in the grapes did not pass and the wine remained the property of the plaintiffs.
Like the plaintiffs’ case, the defendant’s case also depended on an oral agreement. The dispute between the parties related to the terms of the agreement.
The defendant’s case was that the plaintiffs suggested a consignment arrangement and that it was part of the general discussions and also partly implied that the defendant could deduct processing costs, storage costs and a profit margin from the proceeds of sale if and when the defendant sold the wine on the plaintiffs’ behalf. The defendant’s case depended upon the evidence of Mr Franchitto. He said that Mr Devito contacted him and the sale of shiraz was agreed at $800 per tonne. Mr Franchitto’s evidence as to the progress of negotiations from there was that Mr Devito made a separate telephone call and:
"QWhat did he say in that telephone call.
AThat he’s asked whether we were interested in any other grapes and to which at that stage, we weren’t interested in any more fruit as we were only still a relatively small winery at that stage, and he said whether we were interested in any merlot. At that stage we’d had a fill and so I said I really wasn’t interested.
QWhat did he say then.
AWell then the offer came across whether we’d like to perhaps take them and crush the fruit, and sell it, turn it into wine and sell it and then pay him once we’d sold the fruit.
QSo that was Tony’s idea.
AYes.
QWhat did you say to that process.
AWell we agree with that, we thought that was fair enough. I mean we had some processing space and rather than you know, let his grapes either hang on the vine or whatever, we’ll take them in and see what we could do with them.”
As to processing costs, storage fees and profit, Mr Franchitto’s evidence was:
"QDid you have a discussion about deducting your processing costs from your sale proceeds.
AWell we discussed like we had - you know there would be costs involved in having to take out costs for processing and that, and obviously making a margin, a profit margin on the wines and some - and possible storage fees depending on the amount of time we’d have to hold it and see how long it took to sell the wine.
QDid you specifically talk about those costs.
AThey were briefly mentioned, yes. I mean not in great detail.
QDid you give an example to Tony Devito about what he might get.
AIt was implied that we did - if we could sell wine for around the $2 a litre mark, he’d end up getting about his $700 a ton.
HIS HONOUR
QWhy was that implied.
AIt was an example so if we could sell it for around $2 a litre after taking costs and margin production costs and a margin out for us, that we could return $700 a ton.
QThere was discussion to that effect was there.
AIt was a brief comment on my part, because he would have asked if there was no - there was never any pricing set down.”
I accept the submission of counsel for the defendant that resolution of the case does not necessarily involve the acceptance of one witness in preference to the other.
It is remarkable that a contract involving a significant amount of money should be made in such a perfunctory way; but that seems to be the way things work in the grape industry. The plaintiff had been a fruit grower for many years. Although his business involved comparatively large sums of money he never allowed himself to become burdened with paperwork. The defendant is a comparatively new winery and in 2001 was in the midst of a period of rapid growth. It was a contract based on mutual trust.
The question is, what were the terms of the contract? Was there a contract for the sale of grapes at a fixed price of $700 per tonne payable in September 2001 or was there a contract pursuant to which the defendant agreed to process the grapes into wine, store the wine and sell the wine on the plaintiffs’ behalf? There is no dispute the grapes were delivered and there is no dispute as to the quantities of the different varieties. There were 363.11 tonnes of merlot, 182.48 tonnes of cabernet sauvignon and 46.92 tonnes of petit verdot.
Mr Devito denied that he ever suggested that the defendant should take grapes on consignment. He denied that he suggested that the defendant take the grapes, crush them and see if it could sell the grapes on his behalf. Mr Devito said that the topics of processing costs and storage fees were never mentioned.
The plaintiffs’ claim that there was a fixed contract for the sale of grapes at $700 per tonne to be paid in September 2001 was said by the plaintiffs to be corroborated by a conversation between Mr and Mrs Devito and Mr Franchitto at the defendant’s winery on 18 March 2002 when Mr Devito and his wife called in following a dental appointment in Loxton. Mr Devito said, “You just asked him when we were going to get paid for the grapes and he said he’d try and finalise it at the end of June”. That statement is relied upon as an admission that the debt was owed.
Mr Devito also said that when payment was not paid in June 2002 as promised he made other approaches over the telephone and that Mr Franchitto then promised payment in September 2002. That is said to constitute another admission by the defendant.
Mrs Devito, who was present at the conversation on 18 March 2002, was not called to give evidence.
Mr Franchitto agreed that he had a meeting with Mr Devito in March 2002 but denies that he made any promise to pay. Mr Franchitto’s evidence of the March 2002 discussion was as follows:
“He came over - discussed how the grapes that he supplied to us there, this is the consignment stuff, not the shiraz, but the other ones, how we were progressing with the selling of the wine, and we therefore informed him that we obviously knew we had sold some of the Merlot earlier on, we just had Merlot to sell and we still had the cabernet and the petit verdot and we still hadn’t sold that and the prices were sort of going down by the day basically for demand for that, and it wasn’t looking that good there.”
I do not accept that evidence. The plaintiffs were pressing for payment. If Mr Franchitto had advised Mr Devito that the defendant had sold some of the merlot, it can be assumed that Mr Devito would have required payment of the proceeds of the sale immediately, but that did not happen.
I prefer the evidence of Mr Devito. I find that on 18 March 2002 Mr Devito and Mr Franchitto had the discussion which is referred to in the evidence of Mr Devito.
When payment was not made in September 2002 Mr Devito approached his solicitor and winding up proceedings were commenced against the defendant.
If on 18 March 2002 Mr Franchitto had the conversation with the Devito’s which is referred to in the evidence of Mr Franchitto set out above, it is unlikely that the plaintiffs would have proceeded to commence winding up proceedings which assumed that the debt was payable. If Mr Devito had been told what Mr Franchitto says he was told, the plaintiffs had no reason to assume that the debt was payable at that time.
The winding up proceedings resulted in the defendant producing a document, which became Exhibit D2. The document is headed “Salena Estate and Tony Devito 2000 Vintage Joint Crush Venture” and purports to give a summary of the transaction. The heading of the document incorrectly refers to the year 2000. In the document a deduction was made for storage costs for 29 months. 29 months was the period from March 2000 (not 2001 when the contract was made) until September 2002. It seems that the person who prepared Exhibit D2 incorrectly assumed that the contract was made in the year 2000 rather than 2001. Exhibit D2 is not a primary record, but is a summary prepared from information extracted from other documents.
In Exhibit D2 the defendant claims a credit for processing costs at the rate of 70 cents per litre and storage costs at the rate of 15 cents per litre per month. Exhibit D2 does not claim any additional profit. That claim came later.
Exhibit D2 is based upon an assumed yield of 720 litres of wine per tonne of grapes. The document does not refer to the actual yield. The document shows a return to Mr Devito of $700 per tonne for the merlot grapes which had been delivered, not a price per litre for the wine sold.
Exhibit D2 is the first documentary evidence of an arrangement such as that contended for by the defendant, namely, that the plaintiffs delivered grapes which the defendant processed for a fee (70 cents per litre) and storage costs.
Following delivery, the grapes were processed and turned into wine. The evidence as to the actual quantity of wine produced was less than satisfactory. On the plaintiffs’ case it does not matter how much wine was produced because the plaintiffs were entitled to a fixed price of $700 per tonne based on the tonnage of grapes delivered. However, on the defendant’s case, the plaintiffs owned the wine and were entitled to the value of the wine. The volume of wine actually produced for the plaintiffs would, on the defendant’s case, be important.
In calculations put forward by the defendant, such as Exhibit D2, the defendant assumed a yield of 720 litres of wine per tonne from the plaintiffs’ grapes. However, Exhibit D8 establishes that in the case of Riverland cabernet sauvignon the actual yield achieved by the defendant in 2001 was 754.19 litres per tonne, in the case of petit verdot from the Riverland the actual yield was 761.87 litres of wine per tonne of grapes and in the case of merlot the actual yield was 777.17 litres of wine per tonne of grapes.
Summaries, such as Exhibit D2, which were based upon the assumed yield of 720 litres per tonne, were not accurate and minimised the return to the plaintiffs. As I have mentioned, this would be of no consequence if the plaintiffs’ case were accepted. However, if the defendant’s case were accepted a proper accounting of the number of litres of wine produced would need to be carried out.
Exhibit D2 reports that the 363.11 tonnes of merlot made 261,439 litres of wine (363.11 x an assumed 720 litres per tonne). On the other hand, page 3 of Exhibit D1 indicates that the crushing of the plaintiffs’ merlot grapes actually produced 284,733 litres of wine. Alternatively, if the actual yield of 777.17 litres per tonne were used, 363.11 tonnes of merlot would have produced 282,198 litres. At $2.00 per litre the difference of more than 20,000 litres could amount to a significant sum.
In the case of the cabernet sauvignon grapes, Exhibit D2 reports that 182.48 tonnes of grapes produced 131,386 litres of wine. The same figure is set out on page 11 of Exhibit D1. That figure is the product of 182.48 tonnes of grapes multiplied by the assumed yield of 720 litres per tonne. If the actual yield from Exhibit D8 is applied to that tonnage the actual yield of cabernet sauvignon wine would have been 137,624 litres, that is, about 6,238 litres more than was assumed.
In the case of the petit verdot 46.92 tonnes of grapes with an actual yield of 761.87 litres per tonne would have produced 35,746 litres of wine, whereas the assumed yield at 720 litres shown in Exhibit D2 was only 33,782 litres.
If nothing else these calculations illustrate that the defendant has not accounted accurately for the actual volume of wine which it made from the plaintiffs’ grapes. If the plaintiffs’ case was accepted, the discrepancy in the volume of wine produced would be inconsequential. However, if the defendant’s case is accepted the defendant should account for the actual volume of wine produced, not an assumed volume.
There are other disputes that would arise if the defendant’s case were to be accepted. In addition to the issue about the volume of wine produced, there are questions as to the entitlement to and quantum of production costs, the entitlement to storage costs, and the claim for a profit margin. The defendant’s case also raises questions such as the defendant’s obligation to account for the wine produced and the proceeds of the wine sold, the defendant’s entitlement to blend the plaintiffs’ wine with other wine, the defendant’s entitlement to bottle the plaintiffs’ wine, the price that should be paid to the plaintiffs for wine that was bottled, and the obligation to account for sales of bottled wine. More fundamentally, one would have expected an ongoing dialogue between the plaintiffs and defendant about the management of an asset worth hundreds of thousands of dollars.
Mr Franchitto agreed that from the very beginning he blended Mr Devito’s wine with other wine. There had been no discussion about the defendant’s right to do that.
All the facts point to a situation in which the defendant treated the wine as its own. For example, a large quantity of merlot was sold by the defendant to Orlando Wyndham Group Pty Ltd in May 2001 and the defendant received almost $400,000 for the proportion of the consignment that had been made from the plaintiffs’ grapes.
The sale of merlot to Orlando Wyndham Group Pty Ltd is important. The defendant sold 323,645 litres of merlot wine to Orlando. A large proportion of that wine had been made from the plaintiffs’ grapes. The defendant never discussed the sale with the plaintiffs prior to the transaction. The defendant never made any attempt to account to Devito for the proceeds of sale until November 2002 after Mr Devito had threatened winding up proceedings. Up until that time the defendant had conducted itself as if it had been the unconditional owner of the wine. It treated the proceeds of the sale to Orlando as its own money. None of its conduct was consistent with the wine being held on consignment for someone else. The total consideration, including GST, for the merlot wine sold to Orlando Windham Group Pty Ltd was $625,735. On the defendant’s case, wine that was owned by Devito resulted in a payment of almost $400,000 to the defendant.
Even if the defendant’s full claim of 70 cents per litre for processing was justified, there would have been a balance of almost $200,000 due to the plaintiffs out of the moneys paid to the defendant by Orlando. Mr Franchitto said the defendant was holding that money to cover the cost of processing the other grape varieties. Even if that was the case, one would have expected the defendant to have notified the plaintiffs of the sale to Orlando Wyndham Group Pty Ltd. It is unlikely that the plaintiffs would have allowed the defendant to retain about $200,000 of their money for 18 months.
Mr Franchitto was unable to explain how the Orlando transaction was accounted for in the books of the defendant at the end of the June 2001 financial year. The defendant did not account to the plaintiffs for the transaction as at 30 June 2001.
In January 2003 the defendant blended a quantity of merlot with shiraz for sale to the Danish market. Exhibit D1, pages 9 and 10, refer to two parcels of 240,000 litres and 48,000 litres which were sold at 96 cents per litre. Mr Franchitto said that the Danish buyers ended up taking 72,000 litres of the blended wine and the defendant was left with the balance. A discrepancy between Mr Franchitto’s evidence and the tax invoices relating to the transaction is unexplained. Mr Franchitto was asked how much of the 72,000 litres was attributed to the plaintiffs’ grapes. He said, “it’s about 30%. It was about 60,000 litres”. His answer does not make sense and cannot be reconciled with other evidence. What is important is that the sale to the Danish buyer is an example of the defendant dealing with the wine made from the plaintiffs’ grapes. Again, the defendant did not consult the plaintiffs about the blending or sale of wine which the defendant asserts was the property of the plaintiffs.
Mr Franchitto’s evidence about the cabernet sauvignon wine made from Devito grapes is also less than satisfactory. Exhibit D2 suggests that the grapes produced 131,386 litres of wine. As I have mentioned, if one used the actual yield for cabernet instead of an assumed 720 litres per tonne, the volume of cabernet sauvignon wine produced from the plaintiffs’ grapes would have been greater. Some of the cabernet sauvignon made from Devito grapes was bottled and sold to Dan Murphy as “cleanskins”. The defendant has credited Devito with 75 cents a litre for that cabernet sauvignon wine. That was a price that Mr Franchitto unilaterally determined to pay the plaintiffs. Mr Franchitto did not consult Mr Devito about the price. It may be that the parties were not communicating very well at that time, but the defendant’s conduct in bottling the cabernet sauvignon and selling it to Dan Murphy was consistent with the defendant treating the wine as its own, rather than the defendant holding the wine on consignment for the plaintiffs. If the cabernet sauvignon wine was held on consignment the defendant should have accounted for the actual proceeds of the sale to Dan Murphy, not the sum of 75 cents per litre. The explanation from Mr Franchitto for dealing with the wine in that way was “we are trying to get some sort of return for him as much as possible....”.

The defendant was invited to explain the Danish transaction and the Dan Murphy transaction, but never did.
Mr Franchitto gave evidence that in November 2003 the defendant received an offer of about 70 cents a litre from a broker for an overseas client for cabernet sauvignon. The offer was relayed to Mr Devito through his solicitor who said “do what you like with it, it’s not ours”.
Like many of the documents produced at the trial by the defendant, page 11 of Exhibit D1 is a summary produced for the purpose of the case. It is not a source document. Like other documents it mixes assumed and actual figures. The defendant must have records which show the actual yield from the plaintiffs’ grapes, but the original records were never produced. If the defendant was holding the wine produced from the plaintiffs’ grapes on consignment, one would have expected the defendant to have notified the plaintiffs of the actual yield at the time the wine was made in about April 2001.
The end result with respect to the cabernet sauvignon grapes, on the defendant’s case, is interesting. The plaintiffs delivered 182.48 tonnes of cabernet. The defendant charged $91,970 production costs on 131,386 litres at 75 cents per litre, and a storage fee of $68,977. As I have mentioned the defendant used the wine for the Dan Murphy order. The value placed on the Devito cabernet sauvignon wine by the defendant at 75 cents per litre was $98,539. The defendant’s total charges with respect to the cabernet sauvignon grapes were $160,947. On the defendant’s case, the net result, as shown on page 16 of Exhibit D1, is that the plaintiffs provided the cabernet sauvignon grapes, but after the sale of the wine owes $62,408 to the defendant.
On the defendant’s case the end result with the petit verdot is that the defendant claims $41,889 for the production and storage costs on 33,782 litres of wine which remains to be sold. The defendant has possession of the wine.
The defendant has claimed production costs of 70 cents per litre. The charge was first shown in Exhibit D2. Mr Devito denies that he agreed to pay any sum for production costs. Even if Mr Devito did agree to pay production costs there is no evidence that 70 cents per litre was agreed as the amount to be paid. Accordingly, if the plaintiffs were obliged to pay production costs, they would only be obliged to pay reasonable production costs.
A witness, Mr Semmler, gave evidence that he charges $270 per tonne for processing grapes, but that fee includes 18 months storage. Another witness, Mr Byrne, gave evidence that if you look at middle of the range or lower end crushing facilities, processing costs of around 35 cents per litre could be expected, but if you look at larger wineries the cost is likely to be between 20 and 25 cents per litre.
I find that the charge of 70 cents per litre claimed by the defendant was never agreed and would not have been a reasonable processing fee. On the basis of the evidence of Mr Byrne, I find that a reasonable charge for processing the grapes, if the defendant was entitled to a processing fee, would not have exceeded 35 cents.
If the defendant’s case was accepted, that is that there was a contract to process grapes, there would still be an amount due to the plaintiffs. The defendant had offered $54,673 at the commencement of the trial, but that offer is clearly inadequate. Some basic adjustments would have to be made. First, the yield should be adjusted to reflect the actual yield rather than an assumed yield calculated at 720 litres per tonne. Secondly, the processing costs should be reduced to 35 cents per litre. Thirdly, the claim for a profit margin should be disallowed.
I find that the plaintiffs never agreed to a profit margin. There is no evidence that a profit margin is usual. The defendant’s claim for profit appears to be an afterthought subsequent to the preparation of Exhibit D2 in November 2002.
So far as the cabernet sauvignon is concerned there would have to be an accounting in respect of the Dan Murphy sales.
There would also have to be a delivery up of the petit verdot wine.
If the defendant’s interpretation of the contract is correct, many of the essential terms of the contract were never discussed. They included fundamental matters such as the steps that should be made to sell the wine, and the blending and bottling of the wine. The defendant’s own evidence fell a long way short of establishing a workable contract.
If there was a contract such as that contended for by the defendant, there would still be a debt owing to the plaintiff. If the likely actual yield of wine is used rather than an assumed yield, a production fee of 35 cents is allowed (rather than the 70 cents claimed by the defendant), and the profit claim of the defendant is disallowed, the amount due to the plaintiffs would be much greater than the sum of $54,673 which was offered by the defendant at the commencement of the trial. The defendant would also be required to account for the profit on the sale of the bottles of cabernet sauvignon wine to Dan Murphy and to deliver up the petit verdot wine, although the defendant would have to give credit for the storage of the petit verdot wine.
The defendant claims that its case is supported by Exhibit D9 (a list of grower payments due at 1 July 2001) and Exhibit D14 (the grower summary of the 2001 vintage). The submission of counsel was that the list of grower payments due at 1 July 2001, namely, $404,000 coincides with an entry in the financial statements of the company. An analysis of the exhibits does not support that submission. The Devito transaction is not shown in the 2001 accounts of the defendant at all. Whether it was a contract of sale or a contract for services it was a transaction entered into by the company which should have been recorded in the defendant’s 2001 accounts. Because of the defendant’s failure to deal with the transaction at all the defendant’s accounts take the matter nowhere.
Exhibit D14 is the grower summary. The document was printed on 5 August 2004. It was not a contemporaneous business record. It does record the purchase of shiraz from Devito and there is a line in the document for “Devito 02 Devito Enterprises” alongside which no purchases are shown. The existence of that entry was not explained. The transaction which is the subject of this action is different from other grape purchases by the defendant in 2001 in that, on the plaintiffs’ case, the purchase price of the grapes was not payable by the defendant until the end of September 2001.
The defendant did not produce at the trial any primary accounting documents that record the alleged processing contract.
I do not accept the submission that Exhibits D9 and D14 support the defendant’s case.
I have set out Mr Devito’s evidence. He was not shaken in cross-examination. Mr Devito gave no reason to disbelieve his evidence. It is consistent with the objective facts.
Counsel for the defendant referred to the plaintiffs’ Statement of Claim filed on 6 March 2003. Paragraph 3 is consistent with the straight sale alleged by the plaintiffs. However, paragraph 4 alleges:
“In relation to the Cabernet Sauvignon, Merlot and Petit Verdot the principal officer of the Defendant advised the male plaintiff that his Company would take the grapes and crush them and sell them and try and achieve as high a price as possible for the grapes. He indicated that the price which the Plaintiffs could expect to be paid would be $700 per tonne but not until September 2001. Pursuant to the Wine Grapes Industry Act, 1991, the Defendant was obliged to pay the Plaintiffs as to one third of the purchase price at the date of delivery, a further third by the 30^th of June in the year of delivery and the balance on the 30^th of September in the year of delivery.”
No explanation was offered for the way in which paragraph 4 of the Statement of Claim was worded.
Paragraph 4 of the Statement of Claim is inconsistent with the contractual terms for which the plaintiffs now contend. It does not allege a firm commitment to pay a fixed price of $700 per tonne for the grapes in any event. The allegation that the defendant “indicated the price which the Plaintiffs could expect to be paid would be $700 per tonne” falls short of an allegation of a firm commitment. On the other hand, paragraph 4 does not support the defendant’s claim for processing costs, storage and profit.
So far as the plaintiffs’ failure to call Mrs Devito is concerned, counsel for the defendant submitted that I should not assume that Mrs Devito would have corroborated the evidence of her husband. That may be correct, but it does not follow that I should not accept the evidence of Mr Devito if there are other reasons why his evidence should be accepted.
Notwithstanding the inconsistent wording in paragraph 4 of the Statement of Claim, I accept the oral evidence of Mr Devito as to the terms of the contract and the subsequent discussions about payment.
I find that there was a contract for the sale of grapes as opposed to a contract to process grapes and make wine. Such a contract is consistent with the evidence of Mr Devito and is consistent with the conduct of the defendant from March 2001 up until the time when the winding up proceedings were threatened. In particular, after the grapes had been delivered to the defendant by the plaintiffs, the defendant did not consult the plaintiffs with respect to winemaking, storage, the sale of the wine, the price of the wine, the blending of the wine, the bottling of the wine, or any of the considerations which would have arisen if the defendant had contracted to make wine for the plaintiffs from the plaintiff’s grapes.
If the wine was to remain the plaintiffs’ wine one would have expected the plaintiffs to have had some involvement in matters such as blending the wine with wine owned by other persons. The plaintiffs would not have wanted to prejudice the quality of their wine by blending it with an inferior product. The fact that the defendant did not consult the plaintiffs about such matters is significant, particularly in light of the sale to Orlando Wyndham Group Pty Ltd in May 2001. There was no attempt for about 18 months to account for a transaction involving hundreds of thousands of dollars.
In making these findings I reject the evidence of Mr Franchitto. He was not a good witness. He was argumentative and evasive. His evidence in cross-examination on the important issues was vague. He said that after the shiraz grapes had been delivered “he [Mr Devito] rang me again after we’d taken his grapes and asked if we were interested in taking any merlot from him. This is the original thing” and that “I believe petit verdot and cabernet followed on shortly after from there”. When pressed about the conversation he said “I don’t know his exact words..... because I haven’t got a photographic memory from back four years ago” and said “there was no specific figures mentioned” and “we discussed costs and to make a profit margin. We never discussed actual costs in dollar terms or actual margins in dollar terms if that’s what you.....”.
Most significantly, up until the winding up proceedings were threatened the conduct of the defendant was inconsistent with a consignment and processing contract.
If the wine was proving difficult to sell, as Mr Franchitto claims it was, one would have expected him to have seriously discussed the problem and the options with Mr Devito. I find that he never did that. If he had kept the plaintiffs informed one would have expected Mr Devito to have insisted upon immediate payment of the plaintiffs’ share of the moneys received from Orlando Wyndham Group Pty Ltd.
What is telling is that the defendant never gave the plaintiffs any accounting for the wine which it claims to have sold on their behalf or was holding on their behalf until after the winding up was threatened. Nor did the defendant provide any invoice or other documentation claiming production costs or storage fees until after winding up proceedings were threatened.
There are no contemporaneous business records which establish that the defendant treated the plaintiffs as debtors in respect of processing costs or storage fees. If the plaintiffs were obliged to pay processing charges and storage costs to the defendant in any event, one would have expected an invoice to have been rendered by the defendant to the plaintiffs at the time the work was carried out and/or at the end of the 2002 tax year.
I do not regard the summaries generated by the defendant after winding up proceedings had been threatened as corroborative of the defendant’s case. Many of the documents were clearly prepared for the purpose of this case to support the defence. They are not the records of the defendant’s business and are self-serving. The defendant has not produced the source records which should have been available.
Counsel for the defendant criticised the plaintiffs because of their delay in pursuing the claim. I think any delay is explained by Mr Devito’s evidence. Mr Devito described himself as a fruit grower. He has worked on a block at Waikerie for many years, originally with citrus, but now with grapes. He gave his evidence in a straightforward matter-of-fact fashion. His evidence was not shaken by a thorough cross-examination. He gave no reason to not accept his evidence. Mr Devito gave the impression that the delay in pursuing the debt was typical of the way in which he does business. Also, on the plaintiffs’ case, the debt was not payable until the end of September 2001 and any delay in pursuing the defendant was no more than a matter of months. There was an agreed term that payment did not have to be made until the end of September 2001 rather than in three instalments as required by the Wine Grapes Industry Act 1991. Whether such a term was enforceable or not, it does explain the delay in pursuing payment Any delay in payment did not become apparent to the plaintiffs until September 2001.
I find that it was a term of the contract for sale that the defendant would pay for the grapes by the end of September 2001. In fact, the Act required part payment to be made sooner than that, but a term that required payment by the end of September is consistent with Mr Devito’s evidence and the plaintiffs’ claim.
I find that it was a term of the contract that the defendant would pay a price of $700 per tonne for the grapes. That term is established by Mr Devito’s evidence and is in part corroborated by the fact that $700 was the price allowed by the defendant in Exhibit D2 for the grapes that made the wine sold to Orlando Wyndham Group Pty Ltd (271.44 tonnes at $700 per tonne, is $190,008). The defendant sold Orlando wine for $2.00 per litre, not grapes at a price per tonne.
None of the objective facts support the arrangement contended for by the defendant.
Accordingly, I find that the parties entered into a contract in the terms asserted by the plaintiffs. I find that the defendant is liable to pay the plaintiffs $700 per tonne for 363.11 tonnes of merlot, 182.48 tonnes of cabernet sauvignon, and 46.92 tonnes of petit verdot, that is a total of 592.51 tonnes at $700 per tonne, namely, $414,757.
I find that it was a term of the contract that payment would be made by 30 September 2001. The defendant is liable to pay interest from that time. I will hear counsel as to interest.
There will be judgment in favour of the plaintiffs in the sum of $414,757, plus interest.