Husain v O & S Holdings (Vic) Pty Ltd

[2004] VSC 274

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 7574 of 2003

F5604

IFTIKHAR HUSAIN and ORS	Plaintiffs
v
O & S HOLDINGS (VIC) PTY LTD (ACN 004 504 018) and ANDREW OLIVER	Defendants

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JUDGE:	Byrne J
WHERE HELD:	Melbourne
DATE OF HEARING:	28, 29 July and 2, 3 August 2004
DATE OF JUDGMENT:	13 August 2004
CASE MAY BE CITED AS:	Husain v O & S Holdings (Vic) Pty Ltd
MEDIUM NEUTRAL CITATION:	[2004] VSC 274

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Contract – Whether contract made.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J.D. Wilson With Mr N. Dragojlovic	Kempsons
For the Defendants	Mr P.W. Collinson	Deacons

HIS HONOUR:

1. The plaintiffs, Iftikhar Husain, Zulfiqar Husain, Ashraf Husain, Rehana Mansoor, Saleha Husain and Nabeel Husain, at all material times carried on business in partnership under the name Zazman Exports.  The firstnamed defendant, O & S Holdings (Vic) Pty Ltd, carried on business under the name Oliver Footwear.  From 1983 or thereabouts, Zazman Exports in Kampur, India manufactured for and sold to Oliver Footwear stitched leather uppers which were then made into work boots by Oliver Footwear at its factory in Ballarat.  The commercial relationship between the two enterprises was characterised by a fair degree of informality.  Oliver Footwear would simply place orders with Zazman Exports at the beginning of each month which orders were complied with.  This arrangement continued until 8 April 2003 when Oliver Footwear wrote to Zazman Exports announcing that it would be placing no further orders.  Thereupon trading between them ceased save, I would suppose, for supplies under pre-existing orders. 

1. The dispute which gives rise to this litigation arises from the fact that Zazman Exports says that, at the time of termination, it had a stock of leather and accessories which it had got in specifically to meet expected orders from Oliver Footwear.  It asked Oliver Footwear to place further orders so as to exhaust these materials or to purchase the materials itself.  Oliver Footwear declined to comply with either of these requests. 

1. I should mention that the termination of the arrangement between the two enterprises appears to have been the result of a falling out between them.  The circumstances of this falling out are, I understand, controversial.  I declined to hear evidence of those circumstances on the ground of relevance.  It was not suggested that the termination was for breach by either party.  The issue between the parties was as to whether there was some overriding agreement between them pursuant to which the monthly orders were placed, as Zazman Exports contended, or whether the placing and acceptance of each of the monthly orders constituted an independent agreement.  Zazman Exports contended that it was a term of the overriding agreement that the agreement would continue indefinitely but that it was terminable by either party upon reasonable notice.  In the circumstances, it was said that reasonable notice was six months.  There were further express terms of this agreement:  that Zazman Exports would have on hand a stock of leather and accessories sufficient to meet six months worth of orders placed at any time and that, at regular intervals, Oliver Footwear would notify to Zazman Exports its requirements as to the quantity and type of leather and accessories needed for the next six months' orders.  There was also an express term that Zazman Exports would not sell uppers to any other customer in Australia.  So much is contained in paragraphs 3, 4 and 5 of the statement of claim[1]. 

   [1]Third further amended statement of claim filed 4 June 2004.

1. As I have mentioned, dealings between the parties were informal.  No written document, or even exchange of letters, recorded the suggested agreement.  It was put that it was oral and that it was made in the context of the insistence of Oliver Footwear that Zazman Export maintain at all times a stock of leather and other materials sufficient to meet six months of orders.  It was put that Mr I. Husain on behalf of Zazman Exports agreed to this in exchange for a commitment from the secondnamed defendant, Andrew Wilson Oliver, the managing director of Oliver Footwear, that it would place orders to use up this stock of materials, and that such a commitment was given. 

1. There was a surprising degree of uncertainty in the Zazman Export camp as to the conversation which contained this commitment.  Its date was uncertain.  Initially, in the first and second amended statement of claim filed on January and March of this year respectively it was given as 1991.  In particulars given in May it was said to have been made in a number of conversations which occurred in 1997 or thereabouts and thereafter.  In the third amended statement of claim filed in June the agreement was made in or about April 1999.  Two witnesses were called on behalf of the plaintiff on this point.  Mr Husain, said in his witness statement that the conversation was in the course of a meeting "about the time when Oliver Footwear was introducing the range of rubber safety footwear".  The evidence showed that this introduction occurred in 1998 and 1999.  The second witness was Zoran Angelovski, the factory manager of Oliver Footwear from 1990 until September 2002.  Mr Angelovski fixed the meeting in his witness statement at the same time as Mr Husain – during 1998 and 1999, when Oliver Footwear revived its plans to introduce a range of rubber footwear.  Each of the witnesses was cross-examined.  Mr Husain said in cross-examination that the discussion took place in August 1998.  Mr Angelovski said "it could have been before or after April 1999.  When pressed further, it was apparent that neither of those witnesses was certain about the date of the meeting. 

1. There was a surprising uncertainty about the location of the meeting at which the discussions took place.  In the early pleadings the place was not identified.  In the May particulars they took place in India and this was the place identified in the June statement of claim.  Both Mr Husain and Mr Angelovski in their verified witness statements, likewise, fixed the place of meeting as Kampur, India.  In cross-examination, each of these witnesses resiled from this and located the meeting at Ballarat.  This, I think, was not merely an example of inadvertence.  The two witnesses on their oath verified their witness statements without qualification.  The documents in the Court Book, however, showed beyond doubt that Mr Oliver could not have been in India at the suggested date of April 1999.  These two witnesses readily and without any satisfactory explanation resiled from their evidence in chief. 

1. There was also some uncertainty about the participants at the discussion.  In the statements of claim filed before May 2004 there were said to be a number of persons identified as taking part.  Thereafter there were only three, Mr Husain, Mr Angelovski and Mr Oliver.

1. Finally, the evidence offered as to what was discussed at this meeting was unsatisfactory.  Having set out over two pages of his witness statement the conversations which were central to the claim, Mr Husain verified it on oath.  It was apparent, however, in cross-examination that his recollection was very uncertain and wanting in any of the detail which he asserted in his evidence in chief.  Likewise, Mr Angelovski.  In his verified witness statement this witness described the conversation over nearly two pages;  in the witness box he said he was unable to go "to the specifics". 

1. This is important because the third person said to be present at this meeting, Mr Oliver, flatly denied that it took place.  I accept his evidence on the point. 

1. I find that in early 1999 it was important for Oliver Footwear that its delivery schedule of 90 days from order be maintained.  Mr Oliver and Mr Angelovski made this known to Mr Husain.  From Mr Husain's point of view this meant that he had to have sufficient stock of leather and accessories on hand to meet this deadline.  Since the cow hide had to be imported from the United States or Mexico, this meant that he had to place orders for materials well in advance of the receipt of orders from Oliver Footwear.  I am satisfied that, from time to time, Mr Husain on behalf of Zazman Exports and Mr Oliver and Mr Angelovski on behalf of Oliver Footwear discussed how the objectives of their respective organisations might be achieved.  From time to time Mr Husain requested, and Mr Oliver agreed, to provide forward estimates for the next six months' orders so that the Indian supplier could lay in the required stock.  This sensible procedure was put in place merely to assist Zazman Exports.  It was not a binding contract.  It was not tied to any arrangement whereby Zazman Exports was not to sell uppers to another customer in Australia. 

1. It must be emphasised that in 1999, and generally, arrangements between the two enterprises were conducted on an informal basis.  The procedure which the parties set in place to advise Zazman Exports of future orders was no more formal.  It was not referred to in the correspondence between the parties.  Nothing was said about how this notice should be given, other than it be for the next six months.  There was no agreement as to price. 

1. The arrangement appears to have been implemented in a similarly informal way.  There were tendered in evidence a six month estimate of cow hide requirements sent by Oliver Footwear on or about 23 April 1999 and again on 12 August 1999.  On or about 3 December 2000, Oliver Footwear sent to Zazman Exports a list of the numbers of pairs of uppers of various styles for the next 24 weeks.  This was sent in response to a fax from Zazman Exports whose terms do not sit easily with the existence of any firm agreement.  The next estimate was sent on 14 February 2001.  There does not appear to have been sent any estimate for the six month periods from August 2000, from August 2001, from February 2002, from August 2002 or from February 2003.  The absence of any forward estimate for the period from this last date is particularly significant for it was within that period that termination occurred. 

1. My finding that the suggested agreement was not established is sufficient to dispose of the plaintiffs' claim which was solely based on a breach of a term of that agreement. 

1. It is not therefore necessary that I consider the further contentions of the parties.  These were the contention of the defendant that the agreement, if proved, was insufficiently certain.  There are indeed serious practical difficulties in implementing the suggested agreement.  Not the least was the requirement that Zazman Exports have a six month stock of materials on hand at any given time.  Given the first period for example, how much stock was Zazman Export to have in hand in June 1999 to meet orders for the six month period from then until December?  At that time it held no forecast beyond August.  Other uncertainties raised were as to the quantities to be included in each monthly order and the prices for the goods to be ordered.  I doubt, however, whether these would be fatal to a commercial agreement which appeared to operate satisfactorily for some four years.

1. If I were satisfied that the agreement as pleaded had been made out, the obligation of Zazman Exports with respect to stock was to have sufficient on hand to meet orders to be placed in April to September 2003.  What it was expected to manufacture in this period was unknown to it.  No estimates had been given by Oliver Footwear.  On the assumptions which I make for present purposes, I would have found that the obligation accepted by Zazman Exports in 1999 to have six month stock on hand carried with it the corresponding obligation that the agreement was terminable by notice but only where six months notice was given. 

1. But I have concluded that the agreement suggested by the plaintiffs was not made.  It follows from this that there should be judgment for the defendants.

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