International Premium Nutrition Co Pty Ltd v Arrowpak

[2006] NSWSC 773

CITATION:	International Premium Nutrition Co Pty Ltd v Arrowpak [2006] NSWSC 773
HEARING DATE(S):	21, 24, 26, and 28/07/06
JUDGMENT DATE :	26 July 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	White J
EX TEMPORE JUDGMENT DATE:	07/26/2006
DECISION:	Order that, upon the plaintiff tendering to the defendant a bank cheque in the sum of $4,674.63, the defendant forthwith deliver to the plaintiff, its servants or agents the goods described in the defendant’s invoice number 00114875 dated 16 March 2006. This order may be entered forthwith.
CATCHWORDS:	EQUITY – Equitable remedies – Injunctions – Interlocutory injunctions – Parties entered into commercial contract for the mixing and packaging by defendant of goods produced by plaintiff – Goods defective – Plaintiff alleged defects arose through fault of defendant – Plaintiff refused to pay defendant’s invoices – Defendant refused to release plaintiff’s other goods – Whether balance of convenience favours grant of interlocutory injunction mandating release of plaintiff’s goods – Interlocutory injunction granted – No question of principle.
CASES CITED:	Kolback Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533
PARTIES:	International Premium Nutrition Company Pty Ltd v Arrowpak Packaging Pty Ltd
FILE NUMBER(S):	SC 3865/06
COUNSEL:	Plaintiff: N Cowap - Director of Plaintiff Defendant: J Jobson

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY JUDGE LIST

WHITE J

Wednesday, 26 July 2006

3865/06 International Premium Nutrition Co Pty Ltd v Arrowpak Packaging Pty Ltd

JUDGMENT

1 HIS HONOUR: This is an application for an order that the defendant hand over what is described in the summons as “the replacement batch of sachets”.

2 The plaintiff is in the business of selling by wholesale products described as carbohydrate gel. These take the form of sachets of a liquid product containing glucose and other ingredients intended for consumption shortly before and during vigorous exercise. The defendant carries on business as a packager of materials, and was engaged by the plaintiff to mix the plaintiff’s product and put it into flexible packaging.

3 The evidence was that the mixing process was to be undertaken by the defendant, in accordance with the protocol provided by the plaintiff, and, at least in the first instance, under the observation of the director of the plaintiff. There is a dispute as to the extent to which the plaintiff was responsible for the mixing process.

4 On or about 26 September 2005, the plaintiff placed an order, called a purchase order, with the defendant for the supply of quantities of vanilla gel, lemon/lime gel and espresso gel. The evidence on this application is that the batch of vanilla gel was mixed by the defendant on 13 October 2005, and the batches of espresso gel and lemon/lime gel were mixed on 19 October 2005.

5 The plaintiff claims that the batches of espresso gel and lemon/lime gel were defective, and claims that the defects arose through the fault of the defendant in filling the sachets with those products. There is a dispute as to whether the defects revealed in laboratory testing were attributable to this or to the mixing process and, if the latter, whether the faults were attributable to the instructions given by the plaintiff. In the view I take, it is not necessary to resolve these issues.

6 The defendant rendered invoices for the supply of the products on 31 October 2005. The invoices were not paid by the plaintiff. On 31 January 2006, the defendant sought payment of outstanding invoices asserting that the sum of $10,019.19 was overdue for payment. In response to that claim, the plaintiff asserted contamination of the batches of espresso gel and lemon/lime gel, the subject of its purchase order of 26 September 2005.

7 On 20 February 2006, the plaintiff asked the defendant to send its inventory to the plaintiff. This appears to have been a request for the delivery of packaging materials and, perhaps, other raw materials which the plaintiff supplied to the defendant in order for the defendant to carry out the mixing and filling processes. The defendant’s position was that no stock would be released until the account was settled.

8 On 8 March 2006, the defendant asserted that it had no responsibility for the defects in the earlier product run. It stated:

“Your payment of outstanding invoices must be paid in full before any consideration is made in running any future jobs. Our terms are for any future work will be payment in full paid into our account prior to the release of your goods.”

9 On 15 March 2006, the plaintiff by e-mail said that as a gesture of good faith it was prepared to pay cash on delivery for another batch of gels after the plaintiff received micro-clearance, provided that the defendant could run the job as soon as possible. It advised that it could provide sealed pallecons (which I was informed were pallets containing liquid) shortly. The plaintiff expressed concern that Coles or Woolworths would cancel contracts it had with them, and said that it was already more than a week late with deliveries to those retailers.

10 In response, the production manager of the defendant replied:

“To show our good faith we will run your products ASAP. Please note that there is a lot of set up involved in your job. ... Please Note: That none of these products will leave this factory until the money is in our bank account. ... ”.

11 The plaintiff responded by saying:

“We are happy to move forward but we are working on the basis that we will be invoiced for the new batch at the agreed price...and that we will require our packaging material back with the delivery of sachets. ... Please confirm that you are in agreement with the above ... ”.

12 The defendant replied:

“As agreed on the phone with you, we will bulk fill your sachets 500 sachets into clean boxes supplied by you at $0.14 each plus GST and with a $600 clean room set-up fee, all payable by pick-up of the product by either cash or bank cheque.”

13 The defendant says, and the plaintiff denies, that on the following day, 17 March 2006, the production manager of the defendant told the director of the plaintiff that:

“You are threatening to sue us for something that is not our fault and we have shown you this. Why should we do any more work for you?”

14 According to the defendant’s production manager, the plaintiff’s director, Mr Cowap, replied:

“Okay, I will pay for the mixing trial, the good vanilla mix and the new run as soon as it is finished and passed microbiology tests. The two disputed products I will let you look at so you can count the stock and credits.”

15 There is no evidence of any contemporaneous note of the alleged conversation, and it is difficult to reconcile the conversation with the e-mail correspondence between the same persons which immediately preceded it. The defendant’s production manager, Mr Stevens, had already agreed to bulk fill the sachets.

16 The defendant’s charge for producing the goods the subject of this agreement totalled $4,674.63. An invoice in this amount was raised by the defendant on 16 May 2006. In the meantime, the parties remained in vigorous dispute in relation to the plaintiff’s claim that the defendant was responsible for producing contaminated product in October 2005.

17 On 17 July 2006, the defendant advised that no stock would leave its premises until the invoices were all paid for. The plaintiff complained that it had supermarket orders to fulfil and that if the defendant continued to refuse to hand over its property, both its packaging material and sachets, it would lose some of its accounts due to non-supply.

18 On 20 July 2006, the defendant wrote to the plaintiff saying:

“I also refer to our discussions here on 17 March 2006 where you promised to pay your outstanding balance of $14,022.36 as well as your current product. The current product is ready (sic) for collection on payment by you in the sum of $4,674.63. Please be advised the current product will not be released until the above-mentioned sum in cash or bank cheque is received.”

19 Notwithstanding the terms of this letter, it appeared to the plaintiff from the previous correspondence that the defendant’s position was that the stock would not be released until all of the claimed debt, totalling $18,696.99, was paid.

20 These proceedings were commenced on 21 July 2006 when orders for short service were made and the matter was returned before the duty judge on 24 July 2006. On that occasion, the defendant in substance confirmed that it was not willing to release the product the subject of the March agreement on payment of the sum of $4,674.63, but did indicate that it was willing to release the product if an amount of $8,000 was paid into court as security for the debt which it claims. That offer was not acceptable to the plaintiff, which nonetheless claimed that it would suffer, or might suffer, substantial damage if it were unable to meet its contracts with the retailers because the product was withheld by the defendant.

21 The matter was then heard today. Because of the speed with which the matter came on for hearing, the matter was not treated as if it were a final hearing. Nonetheless, having regard to the small amounts involved in the claim, and also having regard to the fact that if a mandatory interlocutory injunction is given the claim will be substantially resolved, it was accepted, sensibly, by counsel for the defendant, that if I formed the view that the plaintiff was entitled to mandatory interlocutory relief, the matter would not proceed further, and, in those circumstances, no undertaking as to damages was to be given. That, however, highlights the need to approach the claim for interlocutory relief having regard to the strengths of the plaintiff’s case as the issue will determine this part of the claim (see Kolback Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533 at 536).

22 It appears to me to be clear from the correspondence to which I have referred that on 15 March 2006, the defendant, as a demonstration of its good faith, agreed to alter the position which it had taken to that point of requiring payment of all outstanding invoices before it proceeded to undertake further work for the plaintiff. The defendant did not say that it would carry out the mixing and packaging required, but not release the products to the plaintiff except on payment of the outstanding invoices, or except on payment of invoices for part of the work done prior to that date. It did insist on payment in cash on delivery for the goods to be produced.

23 The defendant’s later correspondence of June and July 2006 is inconsistent with its having made an agreement in March 2006 that it would release the newly mixed and packaged product on payment of some of the alleged earlier debts.

24 There is certainly a serious question to be tried that the parties made an agreement on 15 and 16 March 2006 for the delivery of the sachets to then be produced by the defendant on payment of the price for those sachets, as set out in Mr Stevens’ e-mail of 16 March 2006, without any other condition. Indeed, the circumstances in which the agreement of 15 and 16 March 2006 was made, and the subsequent correspondence, which makes no reference to an agreement in terms of para 25 of Mr Stevens’ affidavit, shows that the plaintiff has a strong case on that question.

25 If the proceeding were to be treated as a final hearing, I would so conclude.

26 It was clear that the parties were in dispute in March 2006 in relation to the various issues between them, and the plaintiff was refusing to pay any of the amounts claimed by the defendant, and was asserting its own claim. It is unlikely in those circumstances that the plaintiff would have agreed to put itself in the position that the product would not be released to it except on payment of earlier outstanding invoices.

27 Treating the matter as an interlocutory application, there is no doubt that the balance of convenience heavily favours the grant of a mandatory interlocutory injunction. There is evidence as to the times by which the plaintiff is required to deliver its product to the retailers and I accept that there is a risk that it may lose valuable contracts if it is unable to fulfil the orders. Against that, the defendant puts that unless it can withhold delivery of the goods it may not receive payment for debts which it claims are otherwise due to it.

28 There is claim and counter-claim between the parties and there is no reason to think that if those claims and counter-claims are litigated in the appropriate forum, the defendant will not recover any amount which is properly due to it.

29 I am satisfied that damages would not be an adequate remedy and it would appear to me that this is an appropriate case for a decree for specific performance or, treating the matter as an interlocutory matter, an appropriate case for a mandatory interlocutory injunction.

30 As I have said, no undertaking as to damages is sought in relation to such an order.

31 It is for these reasons that I made the following order.

32 I order that, upon the plaintiff tendering to the defendant a bank cheque in the sum of $4,674.63, the defendant forthwith deliver to the plaintiff, its servants or agents, the goods described in the defendant’s invoice number 00114875 dated 16 March 2006. This order may be entered forthwith.

33 I stand over the balance of the summons to 10am on Friday 28 July 2006.

******