Ecmoho (Hong Kong) Pty Ltd v AU Future Health Pty Ltd
[2016] VCC 1987
•22 December 2016
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-16-00870
| ECMOHO (HONG KONG) PTY LTD | Plaintiff |
| V | |
| AU FUTURE HEALTH PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 & 8 December 2016 | |
DATE OF JUDGMENT: | 22 December 2016 | |
CASE MAY BE CITED AS: | Ecmoho (Hong Kong) Pty Ltd v AU Future Health Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 1987 | |
REASONS FOR JUDGMENT
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Subject: CONTRACT
Catchwords: CIF contract for sale of goods; unjust enrichment; delivery of part of shipment, only, when plaintiff had paid the entire price; buyer entitled to recover part of price referable to undelivered portion; further contract for sale pf goods unperformed by either party; no obligation on seller to despatch on delivery where requirement for payment of 30% of price 3 business days prior to despatch not complied with; whether modification of first contract by second contract merely varied first contract or created a new contract.
Legislation Cited: Section 15 of the Goods Act 1958
Cases Cited:Jones v Dunkel (1959) 101 CLR 298; Mt Bruce Mining Pty Ltd v Right Prospecting Pty Ltd (2015) 256 CLR 104; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; Saleh v Romanous (2010) 79 NSWLR 453; DTR Nominees Pty Ltd v Mona Homes (1978) 138 CLR 423; Trevilyan v Donaldson [1997] SASC 6502; Liristis v Wallville [2001] NSWSC 428; Coefficiency Pty Ltd v Workforce International Pty Ltd [2005] NSWCA 300; Larratt v Bankers and Traders Insurance Co Ltd (1941) 41 SR (NSW) 215; Ettridge v Vermin Board of the District of Murat Bay [1928] SASR 124, 128-9; Striker Resources NL v Australian Goldfields NL (in liq) [2006] WASC 153; Findlay & Co Stockbrokers (Underwriters) Pty Ltd v Carminco Gold & Resources Ltd [2007] FCA 573; BP Australia Pty Ltd v Myran Pty Ltd [2004] FCAFC 163; Tallerman & Company Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93; Roxborough v Rothmans of Pall Mall Australia Ltd (2001) CLR 516
Judgment: Judgment for Ecmoho on its claim for the sum of $104,755.20. Defendant’s counterclaim dismissed. Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D. Laidlaw | Mark Morgan |
| For the Defendant | Mr N. Wood | Darrer Muir Fleiter |
HIS HONOUR:
Background
1 The plaintiff is a company incorporated in Hong Kong. The defendant is incorporated in Australia. Ecmoho (Hong Kong) Pty Ltd (“Ecmoho”) placed an order with AU Future Health Pty Ltd (“AU”) dated 9 September 2015 for some 19 pallets of product consisting of 7,680 units of Suisse Oral Chlorophyll Plum Flavour 500 millilitres and some 6,912 units of Suisse Oral Collagen 500 millilitres. The total price was $AU200,217.60.
2 Delivery was to be made at Hong Kong Airport, with the goods to be despatched within three working days from the receipt of 30 per cent deposit into AU’s bank account. The balance, namely, $140,152.32 was “payable within two days of the receipt of the Bill of Lading, not including Saturdays and Sundays”. The “Bill of Lading” referred to was in fact an Air Waybill.
3 According to Ms Zhang, who gave evidence on behalf of Ecmoho, it sighted the Bill of Lading (or Air Waybill) on 14 September 2015, with the balance of the purchase price being paid on 18 September, that is, outside the time stipulated in the relevant contract.
4 This contract, both in its Chinese original and in translation, together with the relevant Air Waybill, is to be found at Court Book tabs 8 and 9. This earlier agreement has been fully performed and no relief is sought with respect to it.
5 The first agreement directly relevant to this proceeding arose out of an order by Ecmoho placed on AU dated 15 September 2015 for delivery of some 13,824 Suisse Liquid Collagen bottles each of 500 millilitres for a total price of $239,155.20. The time for despatch was stated “before 22nd September 2015”. As to payment, it was stipulated “Full payment is required before goods are despatched”. (Court Book (“CB”) Tab 10)
6 The shipment was to consist of some 18 pallets. Ecmoho made payment in full but by 24 September it had not received any delivery. This was immediately prior to one or more national festivals in China. The delay caused difficulty for Ecmoho such that it could not receive and warehouse the product in Hong Kong.
7 Ms Zhang of Ecmoho communicated with a representative of AU identified only as “David” by the electronic system “QQ”. Ms Zhang was assured that the 18 pallets were “flying…tomorrow”, that is, 25 September.
8 Because of the problems associated with the late delivery, Ecmoho directed that delivery be made to Shanghai rather than Hong Kong. In fact, 10 of the 18 pallets were delivered to Shanghai. Ms Zhang sent an email to “David” on 28 September stating inter alia:
“When I communicated with you in (sic) Thursday, I could not have emphasised more that if we could deliver the goods before the festive season, there would be no issues at all. If not, I will suffer a penalty of 120% for the delayed portion here”. (CB Tab 14)
9 On 24 September, Ecmoho placed a further order with AU which included two items, one being an order for 22,272 units of Suisse Oral Collagen 500 millilitres bottles for a total price of $AU389,760. The second item on the order referred to the outstanding balance of the first order of Suisse Oral Collagen, some 13,824 units with a charge of $2,764.80. This charge was levied despite the full price having been paid because of the additional cost of delivery of these items to Shanghai rather than Hong Kong fixed at 20 cents per unit. The total price on the second order, namely, the price for the 29 pallets and the supplementary charge for delivery of the first shipment to Shanghai rather than Hong Kong was $AU392,524.80. (CB Tab 12)
10 The order included the following statement:
“The balance of goods payment is due to the 13824 bottles from the last batch of order sent to Shanghai which is the difference above the collagen liquid CIF to Hong Kong Airport price.”
11 Despatch of the 29 pallets was to occur “within three working days from the receipt of the 30 per cent deposit into [AU’s] bank account. Delivery was to be made after [AU] has received full payment from [Ecmoho]”.
12 None of the payments referred to in the second order has been made. No goods have been despatched or delivered.
13 It appears AU has refused to despatch or deliver any product under the second order until the payment of the $2,764.80 supplementary charge of the first shipment relative to the Shanghai delivery.
These proceedings
Plaintiff’s Amended Statement of Claim
14 The Amended Statement of Claim filed on behalf of Ecmoho referred to its order on 15 September 2015 for 13,824 units of Suisse Liquid Collagen and payment of the price for those items in the sum of $239,155.20 on 17 September. It complained that only some 7,680 units were delivered, a deficiency of some 6,144 units. Ecmoho is said to have suffered loss and damage by reason of the short delivery on the basis that it would have sold the goods “at the unit price of $18.90 had they been delivered in accordance with the contract”, representing sales of $116,121.60.
15 Alternatively, it was said that the consideration for payment of $106,291.20 by Ecmoho for the undelivered 6,144 units had completely failed and AU “has had and received the sum of $106,291.20 to the use of” Ecmoho.
Defence and counterclaim
16 In its defence and counterclaim, AU alleged that Ecmoho breached its obligations under the first agreement as varied by failing to pay the additional 20 cents per unit for product delivered under its terms and thereby suffered a loss of $2,764.80. It said that the terms of the second agreement made 24 September 2015 provided for the purchase of the additional units of product on 29 pallets and for Ecmoho to pay AU an additional amount of 20 cents per unit for the product delivered under the first agreement “by reason of the shipping destination being changed from Hong Kong to Shanghai”.
17 It was a term of the second agreement, it was said, that Ecmoho would pay AU for the amounts owing under the second agreement “prior to the goods being shipped”. It was said that Ecmoho failed to pay the $392,524.80 payable under the second agreement and, accordingly, on or about 16 December 2015, AU sold the relevant product for $322,944, leading to a loss of some $69,580.80.
18 Alternatively, it was said Ecmoho’s failure to pay AU for the goods under the second agreement prior to shipment entailed a repudiation by Ecmoho which AU accepted by reselling the goods for $322,944. It was said that AU suffered a loss of $69,580.80 by reason of the repudiation. It sought to set off these amounts against any liability it might have to Ecmoho and sought damages of $69,580.80 by way of counterclaim.
Plaintiff’s contentions
19 Mr Laidlaw, counsel for the plaintiff, submitted that relative to the first agreement, since his client had paid $239,155.20 being the full price, it was “entitled to have the defendant perform the agreement by despatching the goods before 22 September 2015”. Mr Laidlaw noted that there was no evidence as to precisely what it was that led to delay and delivery or how the “variation” of the first agreement came to be negotiated. He said:
“The defendant alleges at paragraph 11(c) [of the defence and counterclaim] that there was a term that the plaintiff would pay these costs [that is, the additional freight charge] prior to the goods under the First Contract being shipped”.
20 He said that AU led no evidence on the point “and the court is left to construe the correct meaning of the second contract”. He also noted that at paragraph 10(b) of the defence and counterclaim it is alleged that “the obligation to pay the additional shipping costs is said to arise out of the second agreement”.
21 He noted that whilst the second agreement did deal with additional shipping costs under the first contract, it did not “provide for an existing or future obligation on [AU] to effect delivery of the remaining eight pallets of goods”.
22 Mr Laidlaw noted that 10 pallets were despatched by AU on 24 September 2015. He continued:
“Whilst this was the source of [Ecmoho’s] complaint, the conduct of [AU] in unilaterally doing so is contrary to a term existing as pleaded at 11(c) – for, in the circumstances AU has despatched a significant portion of the goods without first receiving the additional shipping costs. No explanation on this inconsistency is advanced by [AU].”
23 As to the second agreement, he noted the statement referring to the additional freight charge which was stated to apply to goods that had been “sent”.
24 According to Mr Laidlaw, the reference in clause 11(c) of the defence and counterclaim to a term of the second agreement whereby:
“(c) [Ecmoho] would pay [AU] for the amount owing under the Second Agreement prior to the goods being shipped to [Ecmoho]”
was ambiguous.
25 He said that a request for Further and Better Particulars did not elucidate what “goods” were referred to in the alleged term.
26 Mr Laidlaw referred to AU’s failure to call “David” as a witness. He submitted that an adverse inference as provided for in Jones v Dunkel (1959) 101 CLR 298 should be drawn against AU.
27 According to Mr Laidlaw, insofar as AU seeks to recover $2,674.80, this was:
“…inconsistent with the first agreement, the discussions regarding delivery, the express notation on the defendant’s own agreement to the effect that the goods had been sent to Shanghai and their own conduct in send[ing] part without the payment it says it was entitled to receive in full.”
28 Further, he said that there was an attempt on the part of AU to recover costs of freight for goods that had not been consigned.
29 According to Mr Laidlaw, apart from repudiating the second agreement as was alleged by AU, Ecmoho was the victim of a repudiation by AU in that it failed “to deliver” and wrongly asserted it was entitled to refuse to perform the first agreement pursuant to its terms “when it was not so entitled”.
30 He referred to the evidence of Ms Zhang, who said that for Ecmoho mutual trust and the ability to have reliable and timely supply was crucial. Representations were made that the 18 pallets would arrive on 25 September and the second agreement was entered into on that basis with Ecmoho agreeing to meet the increased cost. He said:
“It [is] inherently probable that a modest sum of $2,700 would then be agreed to be paid at a later occasion. This is the clear effect of the QQ chat and also the second agreement”.
31 He submitted that since AU had delivered only 7,680 units, it was not entitled to seek payment on the basis of having delivered 13,824 units.
32 Mr Laidlaw said that his client had lost “expectation damages” on the basis that there was a standing arrangement for supply to a customer of the relevant products in a pack of three for $US40. He said this equates to $US13.33 per unit, “of which 6,144 units were not delivered”.
Defendant’s contentions
33 Mr Wood on behalf of the defendant counterclaimant AU, referred first to the general principles as to the construction of a commercial agreement exemplified in the High Court’s recent decision in Mt Bruce Mining Pty Ltd v Right Prospecting Pty Ltd (2015) 256 CLR 104 at [46]-[52].
34 He submitted that where written agreements are entered into, the effect is to replace earlier oral agreements. He referred to Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 at [35].
35 As to repudiation, he submitted “repudiation occurs when a party evinces an intention no longer to be bound by a contract, or to fulfil it only in a manner substantially and consistent with his or her obligations. He referred to Saleh v Romanous (2010) 79 NSWLR 453 at [74].
36 Where there is ambiguity as to the proper construction of a contract and there is a dispute as to their meaning, he submitted a party’s bona fide insistence on a particular interpretation may not constitute repudiation and an intention to repudiate should not be limited to a party for asserting a wrong view of a contract which he believes to be correct but would be willing to accept an authoritative exposition of the correct interpretation. He referred to DTR Nominees Pty Ltd v Mona Homes (1978) 138 CLR 423, 432.
37 He noted that where repudiation takes place, a right to elect to terminate the contract accrues to the innocent party and, “Communication of an election to terminate is essential. An unequivocal response to the breach indicating that the contract is at an end, is required”. He referred to Trevilyan v Donaldson [1997] SASC 6502; Liristis v Wallville [2001] NSWSC 428 at [57]; Coefficiency Pty Ltd v Workforce International Pty Ltd [2005] NSWCA 300 at [26]-[27]. He said that upon communication of an election, the termination is prospective from the communication and not retroactive to the time of the breach. He referred to Larratt v Bankers and Traders Insurance Co Ltd (1941) 41 SR (NSW) 215, 226.
38 He submitted, rights accrued to a party prior to the termination remained enforceable. He referred to Ettridge v Vermin Board of the District of Murat Bay [1928] SASR 124, 128-9; Striker Resources NL v Australian Goldfields NL (in liq) [2006] WASC 153 at [171].
39 Where a contract was terminated, money paid prior to the determination may be recoverable as restitution for unjust enrichment. He referred to Findlay & Co Stockbrokers (Underwriters) Pty Ltd v Carminco Gold & Resources Ltd [2007] FCA 573 at [86]-[87]; BP Australia Pty Ltd v Myran Pty Ltd [2004] FCAFC 163 at [38(m)].
40 Mr Wood said that the first agreement unequivocally stated that full payment was to be made before the despatch of goods. He continued:
“The Second Agreement did not, clearly or at all, vary that clause. A reasonable businessperson, having regard to both instruments, would conclude that the variations reflected in the Varied First Agreement were limited to two matters: the price of the goods (an increase from $7.30 per bottle to $7.50 per bottle); and the location to which the goods were to be delivered (Shanghai rather than Hong Kong). A reasonable bystander, having regard to both instruments, would not conclude that the parties agreed to vary the First Contract by abandoning the ‘full payment” clause of the First Agreement.”
41 He submitted, a consideration of extrinsic material was supportive of this view. Against the background of the earlier agreement where Ecmoho had made late payment, it should be concluded that the introduction of a full payment clause in what has been described as the first agreement was in response to that. He submitted there was nothing in the exchange on “QQ” between Ms Zhang and David to change this.
42 Accordingly, in light of the variation to the first agreement effected by the second agreement, the delivery of 10 pallets rather than 18 pallets ought not be regarded as a breach of the first agreement as varied.
43 Mr Wood conceded that there would be an unjust enrichment of AU if it retained payment for 18 pallets of goods from the first agreement having delivered 10 only. He said:
“The Plaintiff is entitled to restitutionary relief…in the amount of $104,755.20. The amount is calculated as follows. The Plaintiff paid $106,291.20 for 6,144 bottles ($17.30 per bottle) that it did not receive. However, the Plaintiff never paid the extra $1,536 owing under the Varied First Agreement ($0.20 cents per bottle) for the 7,680 bottles that it did receive on 25 September 2015. $106,291.20 minus $1,536 equals $104,755.20.”
44 Mr Wood submitted that AU did not breach the varied first agreement and therefore did not repudiate it. Even if it did breach the varied first agreement by not delivering the remaining 6,144 bottles before receiving the outstanding payment of $2,764.80 from Ecmoho, he said it did not follow that AU repudiated the varied first agreement because the position which it took was taken bona fide even if it were found to be wrong. He submitted an allegation that AU repudiated the second agreement because it repudiated the varied first agreement and should be rejected.
45 He said, further, there was no evidence that Ecmoho purported to exercise any right to terminate the second agreement before it had an accrued obligation to pay AU under the second agreement. This arose, he said, under clause 4 of the second agreement. He said that a record of a “we chat” conversation between the parties as late as 10 December 2015 indicated that Ecmoho regarded the second agreement as still on foot and not terminated. He said the second agreement was not terminated until a later date when AU accepted Ecmoho’s repudiation and began selling the bottles to third parties.
46 Therefore, he submitted, Ecmoho was in breach of the second agreement by not paying any amount to AU. He said that AU suffered damages as follows:
“Expectation damages in the amount of $69,580.80. [AU] expected to receive $392,524.80 from [Ecmoho] under the Second Agreement. [AU] mitigated its losses by selling the 22,272 bottles the subject of the Second Agreement to third parties at a reduced price in December 2015/January 2016 and received $322,944.00. $392,524.80 minus $322,944.00 equals $69,580.80.”
Conclusions
47 The narrative above shows that when AU failed to deliver the full 18 pallets of product before 22 September 2015, as stipulated in the second contract. Then, despite a promise by its representative “David” via the “QQ” system, that all 18 pallets were “flying” on the night of 24 September, it delivered only 10 of the 18 on 25 September. All was in breach of the term of the first contract.
48 The case was argued on the footing that the contracts between the parties were governed by Victorian law. Section 15 of the Goods Act 1958 provides as follows:
“Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract.”
49 It was submitted on behalf of the plaintiff that time should be regarded as “of the essence” of the first contract. In light of s15, this submission is hard to accept. The presumption which it creates is that stipulations as to time are not of the essence. My attention was drawn to an underlining of the words “prior to 22 September 2015” in the first contract. However, the document in question is a translation. As counsel observed in the course of the trial, translation is an art rather than a science.
50 It would be unwise to place too much reliance on matters such as this, which may be artefacts of translation rather than true representations of the emphases in the original language version. Ultimately, however, it does not matter because the plaintiff accepted and did not reject the shipment of 10 pallets. Moreover, it continued to press for the balance, at least in the short run, and made arrangements to vary the contract.
51 The plaintiff thereby elected to affirm the contract even if the stipulation as to delivery prior to 22 September made time of the essence of the contract. If time were of the essence, the time provisions were waived by the election to affirm.
52 Mr Wood submitted, correctly, that AU’s breach of the first agreement was effectively cured by the terms of the second agreement which provided for the delivery, not only of some 29 pallets of collagen product to Shanghai, but also for payment of the balance of 8 pallets of the consignment provided for in the first contract where payment of $2,768.80, which represented an additional charge by way of freight of 20 cents per unit. Or, as the translation of the contract puts it, “which is the difference above the collagen liquid CIF to Hong Kong Airport price”.
53 The result now is that the second contract remains wholly unperformed. Ecmoho has not paid the total price of $392,524.80. AU has not despatched the 29 pallets or the outstanding 8 pallets from the first consignment. Until negotiations broke down in December 2015, each party seemed to require the other party to go first. The international element rendered the normal resolution of these sorts of tensions in sales contracts, namely, payment simultaneous with delivery, impracticable.
54 In Tallerman & Company Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 in the context of a dispute as to the relative jurisdiction of the Supreme Courts of Victoria and New South Wales, an initial contract was made in Victoria. There were further negotiations which arguably modified the contractual relations between the parties. One of the questions which the court had to consider was whether the modifications – to use a neutral term – were variations of the original contract which was made in Victoria or constituted a new contract made in New South Wales.
55 Dixon CJ and Fullagar J held that the negotiations created neither a varied contract nor a new contract but a mere accord executory. Williams and Kitto JJ held that a new contract had been made in New South Wales and Taylor J held that the correspondence between the parties created either an accord executory or a variation to the original contract and not a new contract.
56 Speaking of the later correspondence and the contention that it constituted a new contract which discharged the old one, Dixon CJ and Fullagar J said:
“It is impossible, in our opinion, to maintain that a new and independent contract was made in New South Wales in 1952. The two material letters are unintelligible without reference to the original contracts of May and August 1951, and it seems almost absurd to say that those contracts were being rescinded and replaced by a new and different contract of the sale of bullets.” (1957) 98 CLR 93, 113.
57 Taylor J said of contracting parties in these circumstances:
“They may, of course, rescind the earlier agreement altogether, and this may be done either expressly or by implication, but the determining factor must always be the intention of the parties as disclosed by the later agreement. Variation, of course, may involve partial rescission as is pointed out in Salmond and Williams on Contracts, 2nd ed (1945), pp488, 489, but ‘Partial rescission…does not completely destroy the contractual relation between the parties. It merely modifies that relation by cutting out part of the rights and obligations involved therein, with or without the substitution of new rights and obligations in their place. Partial rescission is not the extinction of the contract but the variation of it’.”
Hence it is said ‘a contract may be varied (1) by way of partial rescission without substitution of new terms in place of those rescinded; or (2) by way of partial rescission with the substitution of new terms for those rescinded; or (3) by the addition of new terms without any partial rescission at all.’ These passages, in my view, correctly state the accepted view of the manner in which an agreement by way of variation operates.” ((1957) 98 CLR 93, 144)
58 Here, as Dixon CJ and Fullagar J observed in Tallerman’s case, the second contract insofar as it deals with the additional freight charge is unintelligible save by reference to the first contract. It operated as a variation and not as a rescission.
59 According to AU, the combined effect was that the whole of the amount shown as the total price on the second contract, namely, $392,524.80 was payable before despatch. It seems incorrect to say that the payment terms under the first contract are automatically picked up and repeated in the absence of inconsistent payment terms in the second contract, as was submitted on behalf of AU.
60 The second contract does make express and inconsistent provisions as to the payment of the price. Paragraph 2.2 headed “Time of despatch” provides: “Within three working days from the receipt of the 30 per cent deposit into [AU’s] bank account”. This provision, albeit under the heading “Time of despatch”, requires payment of the 30 per cent deposit three working days before despatch. Clause 2.2 under the heading “Method of delivery” provides: “After [AU] has received full payment from [Ecmoho]” a nominated agent for AU would deliver the goods to Shanghai to Ecmoho on behalf of AU. The charge for the 29 pallets and the supplemental charge for the additional freight relative to the first contract all appear in tabular form in a column headed “Total price”. The “bottom line” of which is $392,524.80. The second contract therefore provides for both amounts forming part of this “bottom line” or total price to be subject to the same rules as to payment.
61 There is nothing in the contract which provides for the two components to be subject to different regimes as to payment.
62 In my view, there is no ambiguity in these contractual arrangements which would justify resort to any extrinsic materials to form the basis for giving any different construction to the contract than its text indicates. It follows that Ecmoho is in default of the second agreement.
63 Paragraph 12 of AU’s defence and counterclaim alleges that Ecmoho “failed and/or refused to pay to the Defendant the amount of $392,524.80 owing under the Second Agreement.”
64 In a supplementary submission made at my request, Mr Wood on behalf of AU stated:
“AU Future contends, and contended at the hearing, that the failure of Ecmoho to make any payment (whether 30 per cent or 100 per cent of the $392,524.80) constituted a breach of the Second Agreement. Indeed, it was the failure of Ecmoho to make any payment that amounted to a serious breach, which entitled AU Future to terminate the Second Agreement, and which entitles AU Future to expectation damages for breach.”
65 As the quotation from the counterclaim indicates, AU has pleaded its case on the basis that the same payment terms applied under the second agreement as under the first, namely payment in full before dispatch. In light of the express terms of the second agreement and clause 2.2 which I have quoted, I cannot accept this. Mr Laidlaw correctly observed that the counterclaim merely:
“recites the obligation to pay the agree [sic] price for the goods. Both the Second Agreement and the pleading are silent as to any time stipulation. Accordingly, at the hearing, the matter was not in issue and not responded to by the plaintiff. No such term therefore can or ought be admitted by the plaintiff now.”
66 The term which Mr Laidlaw contended could not be “admitted by the plaintiff” was that the price was due immediately on the conclusion of the contract provided the seller was ready and willing to deliver the goods, referring to Atiyah The Sale of Goods 6th ed 171. With respect, this contention fails to allow for the fact that the contract makes express provision as to when payment is to occur as to 30 per cent of the price, namely three working days before dispatch. Mr Laidlaw also observed that no evidence was led as to the readiness and willingness of the plaintiff to deliver at any time. I agree in the circumstances that no term such as described by Professor Atiyah should be found here, both in light of the pleaded terms of the counterclaim and the lack of evidence.
67 Mr Laidlaw correctly observed that by operation of s15 of the Goods Act 1958 this stipulation as to time ought not be regarded as “of the essence” of the second contact.
68 Mr Wood in his supplementary submission continued:
“However, whether Ecmoho had to pay (a) “full payment” of $392,524.80 or (b) to make that payment in stages of 30% initially and then the balance of 70% at a later time is academic. That is because it is a common position between the parties that Ecmoho made no payment at all to AU Future under the Second Agreement at any time. Accordingly, AU Future contends that Ecmoho breached the Second Agreement.”
69 In AU’s counterclaim, clause 11(c) pleaded that Ecmoho was obliged to pay AU for the amount owing under the second agreement prior to the goods being shipped to the plaintiff. In its amended reply and defence to counterclaim, Ecmoho denied the term requiring payment in full prior to shipping on the basis that this term pertained only to the 29 pallets of goods and not to the supplementary freight payment relative to the first agreement. For reasons already given, I do not accept that this distinction is validly made.
70 The problem which I now face is that as I construe the second contract it includes a payment term which is at odds with the pleaded position of both parties. In a memorandum to counsel following the conclusion of trial, I drew attention to the anomalous state of the pleadings just described in light of the express terms of the second agreement. Neither party has sought to amend the pleadings. There are authorities which entitle a court to proceed in a manner inconsistent with the pleadings where the parties have conducted a proceeding in that manner. Here, the parties conducted the proceeding in accordance with the pleaded cases. Therefore, I can see no justification for simply ignoring the pleadings and making a finding, for instance, that even with time not being of the essence the continued failure of Ecmoho to make the 30 per cent payment prior to dispatch could be regarded as repudiatory.
71 The provisions of the second contract mean I must reject the case made by AU that, in the events that occurred, Ecmoho was obliged to pay the full price as distinct from 30 per cent of the price. This was Mr Laidlaw’s submission on behalf of Ecmoho.
72 AU’s pleaded counterclaim seeking loss of bargain damages relative to the second contract must therefore fail and be dismissed.
73 As to the plaintiff’s claim the delivery under the first contract was 6,144 units short, I accept the evidence, which was effectively uncontested, that as part of the second agreement there was a revised term for the payment of 20 cents per unit additional to the original price to secure delivery of the 6,144 units to Shanghai. Once that agreement was made, the initial breach of the first agreement was waived by agreement. If the obligation to pay this additional freight charge is regarded as arising under the first agreement as part of the “CIF” term, the obligation was to make payment before dispatch, which has not occurred. This provision was a condition precedent to performance by AU. If, more appropriately, it is to be regarded as arising under the second agreement, then for reasons already explained the obligation has not been performed either.
74 According to the counterclaim, the failure to pay the whole $392,524.80 constitutes a repudiation by Ecmoho of the second agreement. Ecmoho did not admit the non-payment, though in the circumstances that must be regarded as having been proven at trial. It said further that the obligation to pay the additional freight “did not relate to [AU’s] obligation to deliver the goods under the first agreement”. This last proposition seems, with respect, correct, but it does not seem to be an answer to an allegation that the second agreement had been repudiated. I cannot accept the repudiation alleged at paragraph 15 of the counterclaim. It moves from the premise that there was an obligation to pay the whole $392,524.80 “prior to shipping”, which is incorrect for the reasons already explained.
75 Ecmoho’s claim for loss of bargain damages proceeds upon the footing that it was entitled to receive delivery of the missing 6,144 units from the first contract without payment of the additional freight charge. The arguments on this point are finely balanced. The additional freight charge represented the cost of a modification to the contract, namely delivery to Shanghai rather than Hong Kong, which was done at Ecmoho’s request. Yet the need for this modification was caused solely by AU’s failure to make timely delivery. I conclude, nevertheless, that putting the price for the second shipment of goods, the 29 pallets, and the additional freight price together in the second contract subjected them to the same regime as to payment. Accordingly, there was an obligation to pay the extra freight charge prior to dispatch of the 29 pallets. On the other hand, the second contract did not, with respect to the missing units, refer to them as units of number or weight.
76 With some hesitation I conclude that there is no obligation under the contract as varied to dispatch the additional 6,144 units from the first contract unless and until 30 per cent of the whole $392,524.80 was paid.
77 In those circumstances the plaintiff’s primary claim must fail.
78 This leaves its fall-back claim by way of restitution relative to the unjust enrichment of AU which occurred as a result of its having been paid for the entire cargo under the first contract. Ecmoho’s claim was for $106,291.20. Mr Wood noted, however, that Ecmoho never paid the extra $1,536 owing under the varied first agreement, representing 20 per cent per unit of the goods which were delivered under the first contract. The result therefore is that the restitutionary claim of Ecmoho should succeed in the amount of $104,755.20. In my view this amount is properly recoverable on the basis of a failure of consideration of a distinct and severable portion of the entire contract, in accordance with the decision of the High Court of Australia in Roxborough v Rothmans of Pall Mall Australia Ltd (2001) CLR 516.
Disposition
79 There should be judgment for Ecmoho on its claim for the sum of $104,755.20. AU’s counterclaim is dismissed. I will reserve the question of costs.
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