Evans v Monroe
[2005] WADC 188
•5 OCTOBER 2005
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: EVANS -v- MONROE [2005] WADC 188
CORAM: GROVES DCJ
HEARD: 19 SEPTEMBER 2005
DELIVERED : 5 OCTOBER 2005
FILE NO/S: CIV 2200 of 2004
BETWEEN: GLYN EVANS
Plaintiff
AND
VAN VINCENT MONROE
Defendant
Catchwords:
Assessment of damages - Judgment in default of defence - Money had and received - Loss of profit - Turns on own facts
Legislation:
Nil
Result:
Damages assessed at $62,932.15
Representation:
Counsel:
Plaintiff: In person
Defendant: In person
Solicitors:
Plaintiff: In person
Defendant: In person
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Nil
GROVES DCJ: Judgment in default of defence was entered on 25 January 2005 when it was adjudged that the defendant do pay the plaintiff's damages to be assessed and costs to be taxed.
The action now comes before the Court for assessment of damages. On the hearing both the plaintiff and defendant appeared in person. Each gave evidence on oath and they were the only witnesses. Through the plaintiff a number of documents were tendered to which reference will be made in these reasons.
The plaintiff's claim
At all material times the defendant was the manufacturer of a beef jerky product known as Roadkill ("the product"). In July 2001 the plaintiff was appointed by the defendant and the defendant's then business partner, Tony Elmes, as a distributor of the product. The appointment was made orally as were the terms of the distributorship arrangement. It was a term of the arrangement, which the defendant did not dispute, that the plaintiff would pay for stock in advance. Payment would be made by way of depositing moneys into the defendant's bank account thereby enabling the defendant to purchase raw materials to make and package the product and to send the product to the plaintiff for sale to the plaintiff's retail customers. It was also a term of the arrangement, again not disputed by the defendant, that as between manufacturer and distributors they would not poach each others customers. This it was said by the plaintiff enabled distributors of the product to build up a territory of their own clients. Customer lists were provided by each distributor to the defendant as manufacturer.
In mid‑2003 the defendant informed the plaintiff that another distributor, Ron Lean, was selling his customer list as he was no longer going to distribute the product. In July 2003 the plaintiff purchased from Mr Lean his customer list for $5,000.
At about the same time the defendant offered the plaintiff his own customer list as he said that he wanted to concentrate on increasing the manufacturing side of the business. In October 2003 the plaintiff paid the defendant $18,810 for the defendant's customer list. By purchasing these customer lists the arrangement was that the plaintiff would exclusively supply those customers with the product thereby increasing his volume of sales. Furthermore it was a condition of purchase of the customer lists that any enquiries received by the defendant from those customers would be passed on to the plaintiff to respond to such enquiries for stock from those customers.
From commencement of the business relationship in July 2001 it is undisputed that the plaintiff and defendant worked well with each other to slowly build the business. The plaintiff kept precise records of payments to the defendant's bank account, quantities of the product received and sales to his customers. As at 1 July 2003 the ledger balance was all square, ie for the money paid in advance the plaintiff had received the full quantity of product ordered from the defendant. However, thereafter the supply of product by the defendant fell into arrears of the amounts advanced by the plaintiff.
The plaintiff had many discussions with the defendant about short deliveries of stock. The defendant acknowledged that he was in arrears. An arrangement was made whereby the defendant would supply 500 bags of product each week without charge until the shortfall was made up.
The situation was reflected in a facsimile sent by the defendant to the plaintiff which bears the date 15 February 2004. That facsimile stated, so far as is relevant, as follows:
"From: Vince Monroe (ROADKILL)
To: Glyn Evans
Subject: Product back‑order/Money owed
1.Glyn, We need to come to an immediate arrangement with the backorder of bags and payments to myself as this has gotten out of hand in both directions. I have consulted various business owners around WA to discuss our current situation (no names mentioned). All agree I need to keep better records than I do! I'll ware that! But they have also stated that there is noway I can supply the amount of bags owed all at once and not receive any money in my current situation, the same thing I have been saying for the last two weeks. I have experienced numerous problems throughout the duration of Roadkill, some you know of some you don't. I understand that none of this is of your concern other than receiving the product but we have developed a working relationship since we started. Sometimes there had to be some give and take but we got through it as we both share a common goal and that is the growth and success of Road kill. I truly wish we can come to an amicable arrangement by 10AM tomorrow morning (no later) as Road kill can not go on as it is without serious changes in its current structure, Which will affect the both of us on a long term basis. We have worked to hard and shared too much to let this happen.
2.In the two and half years that you have been with Roadkill you have been more than fair but I two have been fair, I feel that it is necessary to show you what I have done to help Yourself and others in the successful sale of the product.
a.The GST was successfully taken off the product (one year of time/effort and three thousand dollars)
b.Meat has gone up on average of 2.50 per kilo and will rise again shortly (madcow in the US)
c.Labels have doubled in cost
d.Products needed to make the marinade have gone up 20 percent
e.I have spent hundreds of hours making sure that all Distributors had a fair go of selling their product and trouble‑shot any problems that occurred which took myself away from the making of the product and in turn put more people on to take my place. I.E. money lost! And during this time frame I raised the price of the product just 10 cents two years ago which does not even come close to covering the above price hikes! In summary I have given a lot and all I want to do is come to an arrangement with the back‑order of bags and receive money due per our original agreement.
f.My proposal is that I will supply you with 2400 bags of product and charge you for 1900, this allows your steady flow to supply your customers and I have a steady flow of cash to reorder products needed. 500 bags extra I can maintain but with the current operation of machines I could not supply you anymore than that anyway. You received 2150 bags last week and I need to be paid for the 1900 By Tuesday morning to reorder meat.
g.Now this is the part I don't like: If we cannot come to an agreement by 10AM tomorrow morning (16/02/04). Due to financial reasons (both parties) I will not be able to supply the product. This ultimatum has been forced upon myself by your consistent demand of product owed and no money received (2150 bags last week). I will not let this business die for the sake of a few bags. And it will!
3.I sincerely want to get back on track and put this gut‑wrenching situation in the closet. I will endeavour to work myself to exhaustion to clear this back‑order! I tried to call about 4PM today but it rang off.
Very Respectfully,
Vince"
The plaintiff agreed to the shortfall being made up in the manner proposed by the defendant. That arrangement worked satisfactorily for some weeks until the defendant fell behind again in supplying the product. The consequence of the lack of supply of the product was not only that the plaintiff was out of pocket for the moneys paid in advance but also he was not able to supply his customers with the product and was thereby losing the profit which he would otherwise have made on supplying to his customers. On the defendant's tax invoice to the plaintiff dated 27 March 2004 the defendant wrote:
"2900 bags sent as of 02/04/04 – 1000 extra to go off backlog, I have now sent 2900 extra bags I need a total."
It is apparent and the defendant acknowledged the fact in evidence that he did not have from his records immediately at hand any idea as to the extent of the shortfall. Nevertheless the plaintiff continued to pay moneys in advance and the defendant continued to supply less product than was paid for. From 27 February 2004 to 26 June 2004 the balance in the plaintiff's favour increased from $15,771.05 to $26,330.10. In a facsimile dated 15 July 2004 to the plaintiff the defendant totally disagreed that he was "$20,000 behind in product", requested that the plaintiff provide "proper documentation" and stated that he would need to "… take the time to go through every transaction for the past 12 months … ".
There followed numerous telephone conversations as between the parties. In one such conversation on 9 August 2004 it was the plaintiff's evidence that the defendant told him that "… he was closing up shop, that he had run out of money and was not producing stock, that he had sacked all staff and gone belly up". Nevertheless on 11, 12, 18 and 25 August the plaintiff deposited further funds into the defendant's bank account and received in dribs and drabs further product. The last product received by the plaintiff from the defendant was on 2 September 2004 when 570 bags of product were received. Because the plaintiff did not continue to forward payments in advance the defendant did not supply product to him.
The plaintiff sought legal advice on 20 September 2004. His solicitors by post and email notified the defendant of the plaintiff's claim. By reason of the defendant's failure to provide stock to the plaintiff, the plaintiff necessarily endeavoured to make arrangements to obtain supplies of similar product from another manufacturer. The situation was aggravated when on 22 September 2004 the plaintiff became aware that the defendant was supplying directly to one of his customers, namely Glengarry Tavern. The plaintiff had an order from the tavern for stock but was unable to supply. There followed further correspondence from the plaintiff's solicitors to the defendant and subsequently the commencement of these proceedings.
The defendant's position
The defendant saw fit not to file a defence to the claim and allowed judgment in default to be entered against him.
In his evidence he contended that the plaintiff was in breach of their agreement because he did not continue to send money in advance for purchase of stock. Without receiving money in advance he was not able to purchase raw materials to manufacture the product. Thus he was not able to continue with supply of product to the plaintiff. He contended that in the circumstances he did not owe the plaintiff anything. He acknowledged that he had no running record as to the correlation of orders paid for against product supplied. He was not able to provide any documentation to the Court which reconciled payments received against product supplied. He apparently did have a MYOB computer programme and was learning it but had not run out any reconciliation. He said that whilst he was aware that there was a backlog of supply and that he had sought to make up that backlog he did not know until after the event the extent of that backlog. He said that he was "… not aware that I was 5000 behind again and then it was 8000 and that was crippling to the business". It is apparent also from the correspondence to which reference has been made earlier in these reasons that the defendant's financial circumstances were at best precarious. His business was dependant upon and was being propped up by the regular payments in advance from the plaintiff. As to the substantial sum received by the defendant from the plaintiff over and above the product actually supplied he said that had all been spent in obtaining raw materials, paying staff and other expenses of the business.
In the circumstances I find the defendant to be disingenuous so far as his contention that he does not owe the plaintiff anything is concerned. His attitude was that the situation was all of the plaintiff's own making – he failed to keep on paying funds in advance which would have served to prop up the defendant's business. The reality was that the defendant had not supplied product to the orders paid for. He did not make up the shortfall when he had agreed to do so. The shortfall continued to grow until the plaintiff could no longer afford to make payments. It was through the defendant's incompetence that the situation came to exist. It was the defendant who was in default so far as the arrangement was concerned. Furthermore, the defendant was dishonest in going behind the plaintiff's back and supplying product for the Glengarry Tavern. In all, the defendant lacks credibility – nothing he said in his evidence and submissions could be relied upon.
The simple fact is that the defendant has had and received the money for stock to be supplied and that there is a substantial shortfall in the quantity of product supplied to the plaintiff. Furthermore, the capital expenditure to purchase the customer lists was rendered worthless as a result of the defendant's failure to supply and the plaintiff has lost profits on product which he would have sold.
The plaintiff's records
To his credit the plaintiff has been meticulous in his record keeping. The records give a complete picture from day one of moneys paid by him to the defendant's bank account, orders placed for stock, amount of stock supplied, sales of stock to customers, cost of stock and profits received. Files containing original documentation were tendered (Exhibits 2A, 2B and 2C). From that original documentation the plaintiff had prepared on a monthly basis from July 2003 to September 2004 a reconciliation of moneys deposited against product received with copies of supporting documentation attached (Exhibit 1). The statements indicate that as at 1 July 2003 a nil balance through to 2 September 2004 where there is a $19,092.40 credit in favour of the plaintiff. That is the plaintiff had paid $19,092.40 for stock which was never supplied. The plaintiff also kept in two exercise books as a Register of Sales to customers (Exhibits 3A and 3B). The Registers detail every customer sale, invoice numbers, quantity supplied, date, amount, name of customer and date paid. It is readily apparent that as a consequence of the failure of the defendant to supply product that the plaintiff's business was financially impacted to his detriment.
Given the contemporanity and completeness of the plaintiff's records I have no hesitation in accepting the plaintiff's calculations in this respect. He was meticulous in his record keeping and I found him to be a completely credible witness.
Assessment of damages
The plaintiff is entitled to recover the sum of $19,092.40 being money had and received by the defendant for stock which was not supplied. That amount equates to a total of 8,364 bags of product which was not supplied. The plaintiff's profit margin on each bag was 48 cents. The plaintiff's loss of profit on sales of 8,364 bags of product x 48 cents = $4,014.72.
The plaintiff is also entitled by way of damages to recover the capital loss incurred consequential upon the payments which he made to purchase the customer lists of Ron Lean and the defendant. Those two amounts are $5,000 and $18,810. The total loss under this head is $23,810.
The plaintiff also makes a claim for loss of earnings being the loss of profit which he would have made from the date when the defendant discontinued supply of product to him to the present date. Although the plaintiff was able to source another supplier it is apparent from the records that he has not been able to recover the volume of sales which he previously had achieved. A reconciliation of volumes of sales made from the Register of Sales (Exhibit 3A and 3B) discloses that for the period 1 July 2003 to 30 June 2004 a total of 107,587 bags were sold. For the period 1 July 2004 to 30 June 2005 a total of 60,189 bags were sold. That is a difference of 47,398 bags which equates to a loss of sale of 911 bags per week over the full year.
The plaintiff is his affidavit in support of a hearing for assessment of costs and damages sworn 18 May 2005 has modestly claimed a loss of earnings totalling 500 bags per week from September 2004 to April 2005. It was the plaintiff's evidence that this loss is still continuing. Accordingly, on the basis of the information before the Court, a loss of earnings for the period 1 September 2004 to 19 September 2005 (55 weeks) of 500 bags per week will be allowed. The loss of profit on each bag is 48 cents. 55 weeks x 500 bags = 27,500 bags at 48 cents per bag = $13,200.
The plaintiff in the endorsement of claim on his writ also claimed interest pursuant to s 32 of the Supreme Court Act 1935 as amended. Interest will be allowed on all items except loss of earnings (which has been accumulating) from the date of issue of the writ, viz 28 September 2004.
In summation the following amounts will be allowed by way of damages and interest:
Moneys had and received $19,092.40
Loss of profit on 8,364 bags $ 4,014.72
Customer list from Anron International $ 5,000.00
Customer list from defendant $ 18,810.00
$46,917.12
Interest – 12 months at 6 per cent $ 2,815.03
Loss of earnings $ 13,200.00
$62,932.15
Accordingly, I will order that judgment be entered in the following terms:
1.Judgment for the plaintiff in the sum of $62,932.15
2.The defendant pay the plaintiff's costs to be taxed including any reserved costs and reasonable out of pocket expenses incurred.
0
0
1