Gardner Corporation Pty Ltd v Zed Bears Pty Ltd
[2001] WASC 106
GARDNER CORPORATION PTY LTD -v- ZED BEARS PTY LTD & ORS [2001] WASC 106
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASC 106 | |
| Case No: | CIV:1864/1996 | 9 - 11 APRIL 2001 | |
| Coram: | MASTER BREDMEYER | 27/04/01 | |
| 25 | Judgment Part: | 1 of 1 | |
| Result: | Questions determined | ||
| PDF Version |
| Parties: | GARDNER CORPORATION PTY LTD ZED BEARS PTY LTD (ACN 069 020 640) KRISHELL PTY LTD (ACN 069 038 213) RONALD ALEX STENNING JEAN STENNING DENIS ALAN MYERS NOREEN HAZEL MYERS ZED BEARS PTY LTD KRISHELL PTY LTD CHARLES DANIEL GARDNER |
Catchwords: | Contract Assessment of damages for goods supplied and delivered Disputed invoices Interest 5 per cent above the bank's overdraft rate Whether that means simple interest or compound interest |
Legislation: | Nil |
Case References: | Arlington Group Architects Ltd v Attorney General [1998] 2 NZLR 183 Australian Broadcasting Commission v Australasian Performing Arts Association Ltd (1973) 129 CLR 99 Gardner Corporation Pty Ltd v Zed Bears Pty Ltd & Ors, unreported (Steytler J); Library No 990181; 13 April 1999 Jalmoon Pty Ltd (In Liq) v Bow, unreported; SCt of Qld, Court of Appeal; BC 9704231; 5 September 1997 Monarch Airlines Ltd v Air Services Australia & Ors, unreported; FCt of Australia (Ranson J); BC 9701565; 4 April 1997 National Bank of Greece SA v Pinios Shipping Co No 1 [1990] 1 AC 637 R v Connell & Ors (1996) 14 ACLC 32 Tubby Trout Pty Ltd v Sailbay Pty Ltd (1992) 113 ALR 748 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
ZED BEARS PTY LTD (ACN 069 020 640)
First Defendant
KRISHELL PTY LTD (ACN 069 038 213)
Second Defendant
RONALD ALEX STENNING
Third Defendant
JEAN STENNING
Fourth Defendant
DENIS ALAN MYERS
Fifth Defendant
NOREEN HAZEL MYERS
Sixth Defendant
(BY ORIGINAL ACTION)
ZED BEARS PTY LTD
First Plaintiff
(Page 2)
KRISHELL PTY LTD
Second Plaintiff
AND
GARDNER CORPORATION PTY LTD
First Defendant
CHARLES DANIEL GARDNER
Second Defendant
(BY COUNTERCLAIM)
Catchwords:
Contract - Assessment of damages for goods supplied and delivered - Disputed invoices - Interest - 5 per cent above the bank's overdraft rate - Whether that means simple interest or compound interest
Legislation:
Nil
Result:
Questions determined
(Page 3)
Representation:
Original Action
Counsel:
Plaintiff : Dr J T Schoombee
First Defendant : Mr P A Kyle
Second Defendant : Mr P A Kyle
Third Defendant : No appearance
Fourth Defendant : No appearance
Fifth Defendant : Mr P A Kyle
Sixth Defendant : Mr P A Kyle
Solicitors:
Plaintiff : Bruce Havilah & Associates
First Defendant : Kyle & Co
Second Defendant : Kyle & Co
Third Defendant : No appearance
Fourth Defendant : No appearance
Fifth Defendant : Kyle & Co
Sixth Defendant : Kyle & Co
Counterclaim
Counsel:
First Plaintiff : Mr P A Kyle
Second Plaintiff : Mr P A Kyle
First Defendant : Dr J T Schoombee
Second Defendant : Dr J T Schoombee
Solicitors:
First Plaintiff : Kyle & Co
Second Plaintiff : Kyle & Co
First Defendant : Bruce Havilah & Associates
Second Defendant : Bruce Havilah & Associates
(Page 4)
Case(s) referred to in judgment(s):
Alington Group Architects Ltd v Attorney General [1998] 2 NZLR 183
Australian Broadcasting Commission v Australasian Performing Arts Association Ltd (1973) 129 CLR 99
Gardner Corporation Pty Ltd v Zed Bears Pty Ltd & Ors, unreported (Steytler J); Library No 990181; 13 April 1999
Jalmoon Pty Ltd (In Liq) v Bow, unreported; SCt of Qld, Court of Appeal; BC 9704231; 5 September 1997
Monarch Airlines Ltd v Air Services Australia & Ors, unreported; FCt of Australia (Ranson J); BC 9701565; 4 April 1997
Case(s) also cited:
National Bank of Greece SA v Pinios Shipping Co No 1 [1990] 1 AC 637
R v Connell & Ors (1996) 14 ACLC 32
Tubby Trout Pty Ltd v Sailbay Pty Ltd (1992) 113 ALR 748
(Page 5)
1 MASTER BREDMEYER: This is a dispute between a franchisor and its Fremantle based franchisee. The action came on for a lengthy trial before Steytler J in November and December 1998. That trial resulted in a lengthy judgment: Gardner Corporation Pty Ltd v Zed Bears Pty Ltd & Ors, unreported (Steytler J); Library No 990181; 13 April 1999. During the course of that trial it was agreed that certain issues be determined at a later date. The trial Judge made orders in relation to liability and further assessment of damages on 12 August 1999 and in those orders directed that certain matters be determined by a Master. I quote from the first six of those orders:
"1 The action be removed from the expedited list.
2 The Defendants are jointly and severally liable to pay to the Plaintiff the prices charged by the Plaintiff for goods sold and delivered by it to the First and Second Defendants pursuant to the Franchise Agreement dated 14 May 1995 ("the Agreement").
3 The question what amount is so payable including any questions as to what amounts have already been paid in that respect and as to any interest on outstanding amounts which might be payable under the Agreement be referred to a Master for determination.
4 The Defendants are jointly and severally liable to pay to the Plaintiff the amount of any outstanding franchise service fees and advertising levies payable by them under the Agreement up to and including 9 August 1996.
5 The question what amount is so payable, including any questions as to what amounts have already been paid in that respect and as to any interest on outstanding amounts which might be payable under the Agreement be referred to a Master for determination.
6 As from 10 August 1996 and subject to the orders in paragraphs 2 and 4 hereof:
(a) the Fifth and Sixth Defendants are each relieved of his or her obligations as guarantor pursuant to the Franchise Agreement and in relation to the operation of the Fremantle franchise;
(Page 6)
- (b) the Second Defendant is relieved of all its obligations under or pursuant to the Franchise Agreement.
- ... "
2 The matters for determination by a Master came on for hearing before me. Two statements by Mr Charles Daniel Gardner were tendered for the statement and I heard oral evidence from him. Those statements are the supplementary statement signed 21 December 2000, which I marked "P1", the replying statement of Mr Gardner signed 23 February 2001, which I marked "P2". In addition, a bound document of exhibits headed "C Gardner, Evidence and Calculation of Outstanding Moneys Owed 21 December 2000" was tendered and marked "P3". A statement from Mr Ronald Alec Stenning was tendered on behalf of the defendants and he also gave sworn testimony. That statement is headed "Supplementary Statement of Evidence" and is undated, but on the coversheet bears the date February 2001. No other witnesses were heard. During the course of evidence from Mr Gardner and Mr Stenning various documents were tendered in chief and in cross-examination.
3 I consider first the goods sold and delivered by the plaintiff to the defendants. The bulk of these goods supplied to the franchisee as per the plaintiff's invoices are not disputed by the franchisee. The details of the plaintiff's invoices are set out in attachment "B1" of its schedule of damages dated 16 October 1996, found on page 131 of the amended book of pleadings of 21 December 1998 ("the pleadings"). The defendants dispute 21 of those invoices and they are listed at par 9A of their defence. That pleading contains a minor error. It says invoice No 175089 is disputed. No sum is claimed by the plaintiff under this invoice so there can be no dispute over it. Thus 20 invoices are disputed and they are set out in a schedule (Annexure "G") to Mr Gardner's first statement ("P1") and also found in "P3". At the conclusion of evidence, counsel for the plaintiff announced that the plaintiff no longer contested items 2, 11, 12, 17 and 20 in the schedule. The disputed items thus now number 15.
4 Item 1 in the schedule is invoice No 47785, annexure "F1", for $3,512.80. This invoice includes a sum of $1,020.07 for four Panasonic CQ50EN stock. Mr Stenning says that these four radio cassettes were not received and I accept that evidence as correct because it is supported by a credit note No 175099 raised by the plaintiff on 8 May 1995, annexure "F2". This means that the plaintiff should be allowed the full
(Page 7)
- sum of $3,512.80 because the credit of $1,020.07 for the disputed items has already been given by the plaintiff.
5 Item 3 in the schedule is invoice No 27525, annexure "F4", for $29.04 issued on 7 June 1995. I am satisfied on the plaintiff's general evidence of the supply of goods as per the invoices, that these goods were supplied despite Mr Stenning's denial.
6 Items 4, 5, 6, 7, 8, 9 and 10 in the schedule relate to $10 fees for phone connections. For example, item 4, invoice No 24874 (annexure "F5") for $1,380 issued on 30 October 1995, relates to the $10 per phone connection fee for 138 phones sold by the defendant franchisee in the period August/September 1995. These phones were purchased by the franchisee from a supplier, Telstra or Optus, and sold by the franchisee. They were not purchased from the plaintiff. The defendants say that these claims fall outside the plaintiff's pleaded case.
7 The relevant part of the plaintiff's statement of claim is par 3B(a)(ii). To see that sub-par in context, I quote all of 3B(a):
"3B (a) In relation to paragraph 3 e x (1) above, the following fees and moneys are currently outstanding, and owed by the Defendants jointly and severally to the Plaintiff, the Third to Sixth Defendants so owing the moneys as guarantors under the Agreement:
(i) Franchise Services Fees: $13,859.90
(ii) Balance owing for products
sold and supplied as per
invoices: $99,555.38
(iii) Advertising Levy: $12,762.35,
as per the Notice of Demand dated 9 August 1996 and delivered to the First and Second Defendants on the same day."
(Page 8)
- the plaintiff's numerous invoices on a month by month basis between April 1995 and July 1996 in attachment "B1" to the particulars. That attachment is simply a list of several hundred invoices with date, number of invoice and the amount. It is only a search of those particular invoices which would reveal the seven invoices for the $10 telephone charges. Paragraph 9A of the defendants' defence admit that the defendants ordered and received the goods the subject of the plaintiff's invoices particularised in attachment "B1" of the plaintiff's schedule of damages, save and except, and here they number 21 invoices which are the 21 invoices I have referred to and which include the seven telephone invoices which I am concerned with at the moment. The pleaded defence makes a specific mention of the $10 telephone charges in par 3(h)(ii) and (C). I need to refer to that mention in context. The relevant pleading is that Mr Gardner handed Mr Stenning a document entitled "Electronics Franchise" containing certain representations which included one that the plaintiff would charge the franchisee a flat royalty fee of $395 per week, which was not tied to turnover, and only increased or decreased annually, based on CPI plus 2 per cent, and that the franchisee would have to pay that flat royalty fee, and the advertising levy, but no other fees or royalties whatsoever. Contrary to that, the defendants say that the plaintiff charged the franchisee a flat royalty fee of $479.51 per week, plus further fees, royalties or moneys in the form of excessive mark-ups on goods purchased from the plaintiff, sales commissions that were received by the plaintiff from stock suppliers on stock purchased by the defendants and a further sales commission charged to the defendants by the plaintiff of a $10 charge for each and every mobile phone which the defendants connected to a telecommunications carrier through their franchise.
9 Counsel for the plaintiff referred Mr Stenning, in cross-examination, to CDG 36 and 37. CDG 36 is a letter or fax on the plaintiff's letterhead in the following terms:
"RON AND JEAN STENNING
FREMANTLE FRANCHISE
Dear Ron and Jean,
Until authorisation is revoked we hereby authorise you to deal directly with Telecom and Telepacific. Gardner Electronics Fremantle hereby agrees to forward a copy of any reimbursement cheques received from Telecom or any other carrier together with ten dollars per validation on any phone
(Page 9)
- validated by Gardner Electronics Fremantle from the 7th August 1995. Please confirm acceptance of this proposal in writing as soon as possible.
Yours sincerely
(signature)
Charles Gardner
FRANCHISOR
4th August 1995"
- CDG 37 is Mr Ron Stenning's response on the letterhead of Gardner Electronics, Fremantle, which reads:
" 7th August '95
MR CHAS GARDNER
Thankyou for your Facsimile of Friday the 7th confirming your permission for us to deal direct with Telecom and Telepacific.
We confirm our agreement to pay to the Franchisor $10 per telephone validation.
We hope this agreement will work to our mutual advantage and that all of us will reap future benefits.
Yours sincerely
(signature)
Ron Stenning"
"The representations as regards a flat royalty
The representation with respect to the 'flat royalty', which I have set out above, was to the effect that the franchisee would pay only a flat royalty regardless of turnover but that the royalty would increase or decrease "in line with the CPI + 2% p.a.' The defendants contend, and Gardner Corporation disputes, that this representation meant that no other fees would be paid whether
(Page 10)
- based on turnover 'or otherwise'. The defendants complain that there were 'other fees' in the form of the rebates, to which I have earlier referred, which Gardner Corporation was paid by suppliers from whom individual franchisees in the Group bought products directly, the surcharge imposed by Gardner Corporation on goods supplied by it to the franchisees and the $10 fee or levy which was, for part of the period of operation of the Fremantle store by the franchisees, paid to Gardner Corporation in respect of mobile telephones purchased directly from suppliers."
- The Judge then discusses the evidence on those matters at pages 59 - 61 and concludes at 61 - 62. I quote extracts from his conclusion:
"I do not accept, in any event, that the commissions or rebates which were paid to Gardner Corporation should be categorised as royalties or payments in the nature of royalties. Apart from anything else those payments were not made by the franchisees but by the suppliers themselves. ... Nor do I consider that the 10 per cent surcharge levied by Gardner Corporation (or 5 per cent in cases of prompt payment) on goods supplied by it directly to franchisees and the $10 fee payable in respect of mobile phones purchased directly from suppliers by individual franchisees could properly be categorised as royalty fees.
I am, in all the circumstances, satisfied that there was no misleading or deceptive conduct on the part of Gardner Corporation in respect of the representation relied upon under this heading."
12 Order 21 r 5(1) of the Supreme Court Rules provides that the court may at any stage of the proceedings allow the plaintiff to amend the writ or a pleading on such terms as to costs or otherwise as may be just and in such manner (if any) as the court may direct, it is not uncommon for minor amendments to be made to a statement of claim during the course of the trial where the evidence departs somewhat from the pleading and where the defendant is not thereby prejudiced. An amendment to allow a correction of a date is an example. No application for amendment of the plaintiff's plea in 3B(a)(ii) has been sought. Counsel for the plaintiff has argued that the seven invoices for phone charges which span the period
(Page 11)
- 30 October 1995 to 18 June 1996 and total $5,290 come within the definition of moneys "owing for products sold and supplied as per invoices". It is true that these seven invoices are included in the list of invoices set out in attachment "B1", annexed to the plaintiff's particulars of 22 October 1996. It is also true that prior to that the defendant knew that it was being invoiced for these sums. As quoted, the defendants, through Mr Ron Stenning, agreed to pay the $10 fee in a memo of 7 August 1995 and, as stated, the invoices were sent to the defendants for these fees over a nine month period. None were paid.
13 I consider it just to interpret the plaintiff's pleading as including these fees. They come loosely within the scope of "balance owing for products sold and supplied as per invoices". The moneys owing were for the plaintiff's facilitation of getting the phones to the franchisee. The latter needed that help - without it, it was in breach of the franchise agreement. The defendants complain that, had these charges been properly pleaded by the plaintiff, they could have pleaded a proper response in the defence and that it would be unfair to deprive them of that opportunity. They also point out that, if this sum is excluded from the plaintiff's claim, it can sue separately for it. It is not time barred. I am not moved by those arguments. If pleaded properly, the defendants could plead a defence - duress (?), undue influence (?), mistake (?). But, practically, I think not in face of the written agreement. I consider the defendants should pay these charges.
14 I will consider, next, item 19 in the schedule which is invoice No 1, annexure "F28", dated 24 April 1995 for $22,033.13. According to Mr Gardner this was for opening stock recorded on stock sheets. According to Mr Gardner's first statement tendered to me ("P1"), the stock sheets were written up in hand writing by the plaintiff's Mr Kim Pollock when the goods were supplied, namely, towards the end of April 1995. Mr Gardner recalls the circumstances in which the goods were supplied to the defendants as he was personally involved in the process. Mr Stenning called at the plaintiff's headquarters at that time when neither Mr Gardner or to his knowledge, members of his staff, were expecting him. He stated his purpose was to collect stock to start the operation of the franchise earlier than originally planned, that is, he personally by van collected the goods from the bulk store: "I was there when this large consignment of goods were collected". The standard practice when a new franchise was starting, which was also followed in respect of the Fremantle franchise, was to go through the storeroom and start putting aside stock which would be required by the new franchise. As new lines arrived at the bulk store, they too were added to the existing pile. One or two days before the
(Page 12)
- franchise was due to open, the new franchisee was invited to seek what stock had been allocated and to make amendments if required. Mr Stenning and one of his staff made two or three trips to the bulk store adding and returning stock which they felt was not suitable. Mr Gardner said that he anticipated this new franchise would be a busy one, so there was a very large pile of stock stacked in one corner of the storeroom for Mr Stenning. As the stock was put into cartons it was marked on a current, at the time, blank stock sheet. In the case of Fremantle, some of the stock was put into cartons but most was loaded directly into Mr Stenning's van. Mr Gardner cannot recall exactly if it was the same day, or, perhaps, the very next day. Mr Stenning and one of his staff returned some items that they felt were not suitable. Mr Gardner recalls this specifically because it was the first time any franchisee had returned stock before they had even opened the store. The stock sheet was then used to enter into the computer what was invariably a large order. Unfortunately, Mr Gardner has been unable to locate the stock sheets, nor are the list of items collected at that time stored on the computer. By way of analogy, Mr Gardner has produced the typed stock sheet for the opening of the franchise at Morley in November 1990. It is "F36" in "P3". It covers some 11 pages with approximately 50 items on each page and totals $44,586.96. I can learn from that that a similar stock sheet for goods worth $22,000 would cover about five and a half typed pages and include about 250 to 300 items.
15 The invoice No 1 raised for this stock dated 24 April 1995 is an unusual one. It is not itemised. It does not refer to the stock sheets. Although dated 24 April 1995 it was first issued in October 1995. Due to computer problems, it does not itemise the stock as other invoices produced to me do. It is very brief. It shows sales tax as "nil". It simply gives a gross total of $22,033.13 and it also states that this sum has been paid leaving a balance of nil. Mr Gardner says that part of it was incorrect.
16 Mr Stenning, in his evidence, denies that he received these goods. He said he was most careful in checking off all goods received and advising his wife who was his bookkeeper of any missing items and that he never received this invoice nor the goods said to be represented by it. He says he purchased $49,592.01 worth of opening stock from the plaintiff, as shown in the plaintiff's other invoices for April 1995. The other invoices for April number 28 and are numbered consecutively 47751 to 4779 and cover various dates between 24 April and 28 April. They are listed at page 13 of Exhibit "P3" and are not disputed by the defendant. I have no doubt that Mr Gardner is telling the truth in saying
(Page 13)
- that he and his staff collected some goods together for the start of the new business at Fremantle and that those goods were listed on a worksheet by Mr Kim Pollock. In other words, the goods were not collected pursuant to an order from the Fremantle franchise, as was later the normal case. I also accept Mr Gardner's evidence that it was normal practice to issue sometimes four or five or more invoices to a store on the one day. As goods were found they would be written up on an invoice. A later phone call or query might come in on another matter and the staff member would be interrupted. When he later attended to the task of meeting the order for this particular franchisee he would grab a new invoice form and fill out some more items on this. So, it was not an unusual practice to issue numerous invoices on the one day. Of the 28 invoices mentioned between 24 and 28 April, excluding invoice No 1, four were issued on 24 April, 19 were issued on 27 April and five issued on 28 April. I consider Mr Stenning's evidence firm, reliable and credible on this matter. I accept his evidence that his normal practice was to check carefully new stock coming in against the invoice which was supplied with it and to note any missing items. I accept his evidence that he never saw a detailed invoice or work sheet listing all the goods to support invoice No 1. I also accept his evidence, indeed it is undisputed, that this invoice was generated in October 1995. I consider it most likely that all the goods which were collected by Mr Gardner and his staff commencing on Monday 24 April for the new franchise are those invoiced in the 28 invoices mentioned. In the absence of the worksheets supporting invoice No 1, and the absence of Mr Kim Pollock, and in the light of the fact that this invoice has a special number and was not produced until months later from a computer which was, admittedly, seriously faulty, I am not willing to accept the plaintiff's evidence on this. I consider the plaintiff's claim for payment for this invoice is unproved.
17 I turn now to items 13, 14, 15 and 16 which were four invoices for goods said to have been supplied by the plaintiff to the defendants in July 1996. I will consider, first, items 13, 14 and 15 together. In July 1996 relationships between the parties were strained leading up to the termination of the franchise arrangement on 9 August 1996. Invoice 13, No 175087 (annexure "F19"), is dated "4.7.1996" and then was amended to read "15.7.96". It is for various goods totalling $1,429.56. Item 14, invoice No 175088 (Annexure "F20"), is also dated 15 July 1996. It has four items on it. The first is "Part No 2428 Uniden 4 pin mic, suite Uniden PC 122 $13.53". The other three items give a part number and then say exchange for another part number and in each case, in the price column, is the annotation "N/C -" which means "no charge". These three
(Page 14)
- items supplied were in exchange, apparently for three items returned. Item 15, invoice No 175090 (Annexure "F21") is dated 18 July 1996 and is for 10 items of the one kind stated there at $5 each, total $50. Mr Gardner's evidence is that, despite the fact that there was a stop credit arrangement in force then, that he recalls about three or four deliveries to the defendants that month. Mr Gardner also relies on his general evidence that goods invoiced were supplied. I accept Mr Gardner's evidence on these three invoices in preference to Mr Stenning's evidence to the contrary. I place special weight on "F 31" which is a docket from "Executive" which is a transport company dated 23 July 1996 which shows that three boxes were to be delivered from Gardner Electronics to Fremantle. This carrier was commonly used to transport goods from the plaintiff to the defendant. I consider it supports Mr Gardner's evidence that a few deliveries were made to the defendant at this time. I propose to allow items 13, 14 and 15.
18 Item 16 is invoice No 175091 ("F 22") dated 22 July 1996 for "2 Bell 745 Part No 7043 at $496.48 each = $992.96 plus 3 leads and plus Part No 7066 at $16.54 each = $49.62". Total invoice is $1,042.58. Mr Gardner says these items were delivered. Mr Stenning says they were not. Both witnesses were plausible on this. The docket (F 31") from "Executive", the transport company, does not help the plaintiff here. It refers to three boxes transported from the plaintiff to the defendant on 23 July 1996. I relied on that in finding for the plaintiff on items 13, 14 and 15 above, those invoices being dated 15 and 18 July respectively. "F 22", which I am considering here, is dated 22 July so it could have been one of the boxes delivered by the courier on 23 July. But only three boxes are covered by that docket. Having found that those were items 13, 14 and 15, that is "F 19, 20 and 21", I cannot add in a fourth. Mr Gardner sought to support his evidence that the goods invoiced in "F 22" were delivered by pointing out that several goods of this type were sold by the defendants in July. He referred to the defendants' records of sales "F 32". I do not accept that argument. "F 22" shows, inter alia, two Bell 745 items being sold to the defendants. I am told these are radar detection units for cars. "F 32" shows one Bell 745 sold by the Fremantle franchise in July 1996. No specific date is given. It says cost of sale $540, sale price $665. The cost price does not equal the cost price of $496.48 shown on the plaintiff's invoice "F 22". I accept Mr Stenning's evidence that he did not falsify cost prices for his business. This piece of evidence does not support the plaintiff. Faced with Mr Stenning's strong denial, I consider the plaintiff's evidence on this invoice fails to satisfy me of its
(Page 15)
- truth on the balance of probabilities and I will not allow the plaintiff this item.
19 Item 18, invoice No 175093 ("F 24") dated 31 July 1996 was issued for a Panasonic QVZ900, part No 3816 for $1,218.46 tax exempt. Mr Gardner says he recalls this expensive radio cassette coming into his warehouse. It was one of its kind, very expensive and the only one he ever sold. It was to meet an order from the Fremantle franchise. It was wanted personally by Mr Brendan Gregory, one of the defendant's Fremantle staff. He ordered it. Mr Gardner said he saw it come into the store but he did not see it dispatched. He assumes it was dispatched as per the invoice. I pointed out in passing that this was the last invoice for goods sold and delivered sent to the defendants.
20 Mr Gardner had a specific recollection of this one-off, unusual, very expensive item and of who ordered it. He recalled seeing it on the shelf. This evidence, however, was weakened in cross-examination. He was shown a photocopy of the same invoice on which one of his staff had written:
"Unit supplied direct to Fremantle by Panasonic and charged to Fremantle when we got the bill."
21 Mr Stenning gave evidence that this radio cassette was not received, indeed that no goods were received from the plaintiff in July 1996 as his company had no credit. He said that Brendan Gregory was a trusted worker and had authority to order goods.
22 "F 25" is an order form from Gardner Electronics Fremantle to the plaintiff for this radio cassette. It is dated 18 July 1996 and signed by Brendan Gregory. It refers to a tax exemption form attached, which is "F 26" and is also dated 18 July. "F 24" is an invoice on Gardner Electronics' Fremantle letterhead to "Brendon Gregory (Staff Account)" dated 17 July 1996 for the Panasonic QVZ900 for $1,610 plus other items including speakers, total $2,450. The invoice was written out by Brendan Gregory.
23 On this matter, I am prepared to accept the evidence of Mr Gardner that the radio cassette was ordered in, obtained and supplied as a favour to Brendan Gregory, despite the fact that credit to the franchisee had otherwise stopped. Mr Gregory was keen to get the expensive radio cassette. He specifically ordered it. He submitted a claim for tax exemption - to which he was not entitled. I was told that by both sides. He invoiced himself. He allowed a mark-up for the sale to himself. He
(Page 16)
- was not seeking to get the goods at cost price. He invoiced himself prior to getting the goods. I consider the order was received by the plaintiff. It took a few days to come. I consider the radio cassette was picked up and invoiced out by the plaintiff on 31 July. Mr Stenning said he never saw the radio cassette and that Brendan Gregory never got it. Mr Stenning said he never saw it in Brendan's Ford Capri car and that Brendan never paid his firm for it. I am satisfied, nevertheless, on the balance of probabilities that this item was supplied. I consider that the unknown person who later annotated a photocopy of the invoice that the radio cassette was supplied by Panasonic directly to Fremantle, was mistaken. The original copy invoice retained in a book of invoices, has no such annotation. Maybe Brendan took it without paying for it. He wanted it. Maybe he kept his receipt of it quiet from his boss. Brendan was not called as a witness. No reason was given why he was not called. I propose to allow this item.
24 In summary, I will allow the plaintiff the following items under the heading "Goods sold and delivered".
ItemInvoiceAnnexureAmount
1 47785 F1 $1,020.27
3 27525 F4 $29.04
4 24874 F5 $1,380.00
5 197483 F6 $410.00
6 175081 F7 $410.00
7 175083 F8 $700.00
8 197472 F9 & 10 $370.00
9 197471 F11 & 12 $760.00
10 24900 F13 & 14 $1,260.00
13 175087 F19 $1,429.56
14 175088 F20 $13.53
15 175090 F21 $50.00
18 175093 F24, 25, 26 & 27 $1,218.46
$9,050.86
(Page 17)
- The plaintiff's claimed invoices for goods
supplied and delivered Attachment B to the
book of pleadings Total 352,183.68
Less paid (Attachment A)
or credit given 262,145.94
Net 90,037.74
Less 20 disputed invoices 38,520.43
(Annexure "G" on P3)
Undisputed sum owed 51,517.31
Plus 13 disputed invoices
allowed by me 9,050.86
Balance due $60,568.17
"9.3.5 Payment for Products
Subject to the provisions hereof, the Franchise Owner shall pay for all products including stock and other charges invoiced to the Franchise Owner in the following manner:
- (a) For the first order by the Franchise Owner, the goods invoiced and other charges incurred shall be paid at least seven (7) days prior to delivery by the Franchisor to the Franchise Owner.
(b) For subsequent orders, payment for goods invoiced and other charges shall be made within seven days of receipt by the Franchise Owner or the Franchisor's invoice in respect thereof or if the Franchise Owner has established a credit account with the Franchisor within thirty (30) days of the receipt of the said invoice.
(Page 18)
- (c) Subject to the Franchisor's absolute discretion, should the Franchise Owner's orders and indebtedness to the Franchisor exceed the Franchisor's credit limit as determined from time to time in accordance with clause 9.6, all orders in excess of the credit limit must be paid for on a "cash on delivery" basis.
(d) The Franchise Owner shall pay all the cost of handling plus freight and insurance for the products he orders from the Franchisor.
- ...
- "9.6 Credit
9.6.1 Should the Franchise Owner wish to purchase products from the Franchisor on credit ( as opposed to paying for products on their delivery), the Franchise Owner shall first make an application to the Franchisor in writing and shall provide all such information as may be required by the Franchisor in order to enable it to make an informed decision as to the creditworthiness of the Franchise Owner. Should the Franchisor in its absolute discretion decide to grant credit to the Franchise Owner, the sum initially granted to the Franchise Owner on execution of this document will be the sum set forth in Schedule I and known as the Initial Credit Limit.
9.6.2 The Franchise Owner acknowledges that it is in the Franchisor's absolute discretion as to whether to grant credit to the Franchise Owner and that the Franchise Owner has no right to credit.
- ...
(Page 19)
- 41.8 Interest
All amounts payable pursuant to this Agreement or any other agreement between the parties shall bear interest after the date upon which the said payment becomes due at the Interest Rate.
- ...
SCHEDULE 1
INTEREST RATE: The prime rate of interest
[CLAUSE 9.3.8] charged by the Commonwealth
Bank of Australia from time to time
for overdraft accounts in excess of
$50,000 plus five per cent (5%).
- INITIAL CREDIT LIMIT: $25,000.00
26 It appears that no formal application for credit was ever made by the franchisee. I am nevertheless satisfied that as from day one the franchisee was allowed credit. The franchisee was not required to pay for the first order of goods seven days in advance. The credit allowed soon soared above the $25,000 permitted by the Franchise Agreement. As at 20 July 1995 Mr Gardner, for the plaintiff franchisee, circularised all franchisees and said he was reducing their credit limit from $50,000 per franchisee to $40,000 per franchisee as at 1 August 1995. So it appears that the defendants' limit had risen to $40,000 at that time. On 28 August 1995 Mr Gardner wrote to Mr and Mrs Stenning of the Fremantle franchise pointing out that their indebtedness was now over $100,000. He asked them to repay the whole sum but if unable to do that then at least by mid September to have paid $60,000 so as to bring the account back within the trading terms of $40,000. I consider that throughout the life of this franchise the defendant franchisee was never required to pay within seven days and at all times was required to pay within 30 days of receipt of the invoice as per cl 9.3.5(b) of the Franchise Agreement. As seen, the franchisee was often over its credit limit. The sanction available to the franchisor to remedy this problem was to stop the supply of goods. This was done in July 1996 subject to some exceptions. I do not consider cl 9.3.5(b) of the Agreement requires payment within seven days of the invoice when the franchisee was above the credit limit.
(Page 20)
27 The interest rate was "the prime rate of interest charged by the Commonwealth Bank of Australia from time to time for overdraft accounts in excess of $50,000 plus 5%". The bank has produced evidence of its overdraft interest rates which I accept. It is Annexure "D", as corrected by a fax dated 10 April 2001, both of which are Exhibit 16 before me. I summarise those rates as follows:
3.1.95 - 15.9.96 11.25% pa
16.9.96 - 1.12.96 10.75% pa
2.12.96 - 27.1.97 10.25% pa
28.1.97 - 30.6.97 9.75% pa
1.7.97 - 17.8.97 9.45% pa
18.8.97 - 2.4.98 8.96% pa
3.4.98 - current 7.95% pa
28 Dr Schoombee, for the plaintiff, has argued that reference to the interest rate charged by the Commonwealth Bank from time to time for overdraft accounts means compound interest. The Commonwealth Bank and other banks normally charge compound interest on overdraft accounts. There is judicial recognition of that fact: see, for example, Monarch Airlines Ltd v Air Services Australia & Ors, unreported; FCt of Australia (Ranson J); BC 9701565; 4 April 1997 at 6. Dr Schoombee relies on that case but, more particularly, on Alington Group Architects Ltd v Attorney General [1998] 2 NZLR 183 and Jalmoon Pty Ltd (In Liq) v Bow, unreported; SCt of Qld, Court of Appeal; BC 9704231; 5 September 1997. He also referred me to an article D I Cassidy QC, Interest Revisted, 71 ALJ 514.
29 I am not persuaded by those cases or those arguments. I consider that the wording of this clause does not extend to compound interest and that only simple interest is intended. Alington Group Architects Ltd v Attorney General is a decision of the New Zealand Court of Appeal. The agreement in that case included this clause:
"4.15 The architect is entitled to interest at the architect's current bank overdraft rate on all charges due and not paid within 30 days of rendering of the account."
(Page 21)
- By a later agreement, the parties "modified" that clause by inserting the following clause in handwriting:
"All fees are charged monthly commensurate with services rendered. 2% permonth interest is charged on overdue accounts." (Emphasis mine.)
When the Court of Appeal is referring to cl 4.15 as "modified", they are referring to the original clause as modified by the clause just quoted about 2 per cent per month. The "modification" is hugh. It is a partial replacement of the clause. The words "per month" are of special significance. I quote from 190:
"In the first place, it is difficult to give any sensible meaning to the requirement that interest is to be 2% per month if it was not intended to attract interest on interest. If it had been intended to be simple interest the parties could have simply provided for interest at the rate of 24% pa. The express reference to interest on a 'per month' basis indicates the intervals at which interest is to be calculated on overdue accounts. When calculated the amount then outstanding and overdue will include the sum equal to interest at 2% on the original account for the previous month. Monthly calculations will continue to compound the interest for so long as the account is unpaid. It would be pointless to calculate the interest on a monthly basis if interest was to relate only to the original account."
I agree. I consider the case turns on that modification of the original cl 4.15. I do not agree that the original cl 4.15 permits compound interest and, insofar as the court may have said so at 190, I consider that is obiter and should not be followed. The other cases do not carry the plaintiff's argument any further. I consider the plaintiff's interpretation of the interest clause of the Franchise Agreement is unreasonable and unjust: see Australian Broadcasting Commission v Australasian Performing Arts Association Ltd (1973) 129 CLR 99 at 109. In summary, I consider interest should run at the bank rates, plus 5 per cent, on a simple interest basis calculated from 30 days after the receipt of each invoice for goods supplied.
30 I accept the plaintiff's evidence that invoices went out with the goods. The goods were normally delivered, or picked up by the franchisee on the date of the invoice or within a day or two thereafter. The invoices were thus received by the franchisee on the dates they bear or within a day or two thereafter. The exception to that was invoices 175087, 175088 and 175090. Items 13, 14 and 15 discussed above, which
(Page 22)
- are dated 15, 15 and 18 July 1996 respectively. I consider they were received by the franchisee on 23 July.
31 I turn now to the franchise services fees - they are set out in Annexure "B" to Mr Gardner's supplementary statement of 21 December 2000. That annexure is found at Annexure "B" to Exhibit P3 which is the booklet of exhibits put before me.
32 Clause 9.3.3 of the Franchise Agreement reads:
"9.3.3 Franchise Service Fee
In consideration of the Franchisor's ongoing support and assistance, the Franchise Owner shall pay to the Franchisor a Franchise Service Fee as set out in Schedule I."
- The relevant part of schedule 1 reads:
"FRANCHISE SERVICE FEE: (a) The sum of $479.51
[CLAUSE 9.3.3] per week. This sum is payable
regardless of the Franchise
Owner's gross sales. The sum
is to be reviewed on the 1st of
January of every year and will
be increased/decreased and
any such increase/decrease
will be calculated by having
regard to the Consumer Price
Index for the preceding twelve
(12) months plus an additional
two per cent (2%) per annum.
(b) The franchise service fee
shall be paid weekly in advance
by the Franchise Owner to the
Franchisor by no later than
noon of each Wednesday, such
payment being by direct bank
transfer of monies into a bank
account nominated by the
Franchisor."
(Page 23)
- added some interest. Under cl 41.8 interest runs on all amounts payable under the agreement after the date upon which the said payment becomes due at the interest rate set out in the schedule. The franchise service fee was due and payable weekly in advance no later than noon of each Wednesday. Such payment was to be by direct bank transfer into the bank account nominated by the franchisor. This means the franchise fees were not to be invoiced. I consider that simple interest runs on the week's franchise fees from Wednesday at the bank rate, plus 5 per cent, until the date of judgment. The defendants are not given 30 days grace. The charge is not covered by cl 9.3.5. That only applies to moneys due for stock and other charges invoiced to the franchisee. The reference to "other charges" there refers to, for example, sundry items such as stationery, signage etc referred to in cl 9.3.10. It does not, in my view, refer to franchise service fees.
34 I turn now to the advertising levies. The amount claimed by the plaintiff is set out in Annexure "A" to Mr Gardner's statement of 21 December 2000 which is found as Annexure "A" to Exhibit P3. Two of the items there were disputed. That has now been resolved. The total given there is $11,146.63 (capital only). A further $1,328.66 was paid by the defendants on 5 July 1995 and should be deducted from the total. So the outstanding fees now total $9,817.97.
35 Clause 9.3.4 of the Agreement reads:
"9.3.4 Advertising Levy
The Franchise Owner shall pay to the Franchisor the Advertising Levy for the development of the Gardner Electronics Image, the Gardner Electronics System and the Trade Marks and for the advertising and promotion thereof including such advertising agency fees and reasonable overhead and administrative costs as the Franchisor may incur in connection with the administration of such development, advertising and promotion including but not limited to advertising campaigns and the like. The Franchise Owner acknowledges that the Advertising Levy is part of the ongoing consideration paid by the Franchise Owner for the Franchise and that there is no trust created in respect of the payment by the Franchise Owner of the Advertising Levy."
(Page 24)
- The relevant item in Schedule 1 reads:
"ADVERTISING LEVY: (a) The sum of $300.00
[CLAUSE 9.3.4] per week is payable by the
Franchise Owner to the
Franchisor. This sum is
payable regardless of the
Franchise Owner's gross sales.
The sum is to be reviewed on
the 1st January of every year
and will be increased/
decreased and any such
increase/decrease will be
calculated by having regard to
the Consumer Price Index for
the preceding twelve (12)
months plus an additional two
per cent (2%) per annum.
(b) The advertising levy shall
be paid weekly in advance by
the Franchise Owner to the
Franchisor by no later than
noon of each Wednesday, such
payment being by direct bank
transfer of monies into a bank
account nominated by the
Franchisor."
37 Mr Kyle argued that the second, fifth and sixth defendants, that is Krishell Pty Ltd and Mr and Mrs Myers, should be relieved of the obligation to pay interest at the bank rate plus 5 per cent after
(Page 25)
- 10 August 1996, because of Order 6 of Steytler J quoted at the outset of these reasons. The plaintiff's counsel has argued to the contrary. I agree with Mr Kyle's argument. I consider Order 6 requires that interpretation. However, I can also see that my finding on this may be slightly outside the terms of reference given to me in the earlier orders. The trial Judge may well consider it is his role to interpret the impact of Order 6 on the question of interest. I will therefore express my views in a conditional way. Subject to any contrary decision of the trial Judge, simple interest at bank rates stated, plus 5 per cent, is to run on the moneys owed by the second, fifth and sixth defendants from the dates stated in these reasons until 10 August 1996. Thereafter interest on their debt (which here includes interest at the higher rate to 10 August 1996) is to run at the rate fixed by the Treasurer under s 142 of the Supreme Court Act 1935 (WA). For ease of reference, I set out those rates from Seaman 42.2.3:
31.7.92 - 13.9.97 8% pa
14.9.97 - present 6% pa