Owies v Ozimek

[2010] VCC 488

IN THE COUNTY COURT OF VICTORIA Unrevised

Not Restricted

AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST

GENERAL DIVISION

Case No. CI-09-03019

PAUL OWIES	Plaintiff
v
BRUCE OZIMEK	Defendant

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JUDGE:	HIS HONOUR JUDGE SHELTON
WHERE HELD:	Melbourne
DATE OF HEARING:	29 and 30 April 2010
DATE OF JUDGMENT:	21 May 2010
CASE MAY BE CITED AS:	Owies v Ozimek
MEDIUM NEUTRAL CITATION:	[2010] VCC 0488

REASONS FOR JUDGMENT

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Catchwords: Sale of doughnut making machine – substantial performance – Zamperoni

Decorators Pty Ltd v Lo Presti [1983] 1 VR 338.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R N Wallace	Lewenberg & Lewenberg
For the Defendant	Ms P Neskovcin	C Kyriacou & Associates
HIS HONOUR:

1          This proceeding concerns the sale by the plaintiff to the defendant of a Belshaw C200 Doughnut Making System (“the machine”).

2          It is not in issue that a written agreement for the sale of the machine was entered into at the Botanical Hotel in Domain Road, South Yarra on 26 May 2009. Nor is it in issue that the purchase price for the machine and associated equipment and manuals was $180,000 plus GST, a total of $198,000, nor is it in dispute that the sum of $50,000 was paid by the defendant to the plaintiff at the Botanical Hotel on 26 May 2009 pursuant to the agreement made between them.

3          What is in dispute between the parties is the content of the written agreement entered into between the parties on 26 May 2009 which set out the obligations imposed upon them in relation to the completion of the purchase of the machine.

4          I turn to consider what the parties state happened at the meeting on 26 May 2009.

5          The plaintiff gave evidence that he purchased the machine in 2006 for the sum of $550,000 and paid approximately $70,000 in addition for mixers and spare parts. The machine was approximately 30 metres long and was purpose-built in the United States of America. Apparently there are only two others of its kind in Australia. It was capable of producing 1600 doughnuts per hour. The machine was located in a retail outlet at Burwood Highway, Burwood where the plaintiff carried on business under the name of “Doughbuoys”. The machine was commissioned there in May 2007 by the American manufacturer. At the Burwood site the plaintiff sold doughnuts, muffins and coffee. As well as this retail outlet, the plaintiff had a number of contracts for the provision of doughnuts, including for the Melbourne Cricket Ground.

6          Early in 2009, the plaintiff sold his Doughbuoys business to a New Zealand company and decided to close down the Burwood shop and sell the machine. He engaged a broker for this purpose. In mid-April 2009, the defendant became interested in the purchase of the machine. Meetings between the parties, telephone conversations and email exchanges followed. Following a meeting on 15 May 2009, the plaintiff emailed to the defendant a draft of an agreement dated that day which he had prepared, based on an agreement his solicitor had drawn for a somewhat similar transaction.

7          The next meeting between the parties took place at the Botanical Hotel on 26 May 2009. The plaintiff brought with him, two hard copies of the draft agreement he had forwarded to the defendant by email on 15 May 2009. The plaintiff states that they met at about 7.30 pm and the meeting lasted for an hour to an hour-and-a-half. The plaintiff and the defendant then went through this draft agreement line by line and various provisions were added to, queried or deleted. They had trouble in deciding what some of the provisions meant.

8          The defendant then suggested, according to the plaintiff, that they should instead prepare a simple agreement themselves. Accordingly, the plaintiff states that, in the presence of the defendant, he wrote out the two-page agreement, a copy of which is ‘Annexure A’ to this judgment. The first page is the execution page from the agreement he brought along to the meeting. It will be noted that, in particular, this document provided for a further deposit of $98,000 to be paid on 9 June 2009, with the balance of purchase price to be paid on the successful commissioning of the machine. Schedule 1 referred to on the first page of the agreement is the second page of the agreement. It will be noted that the machine is the third item of plant and equipment. This Schedule is initialled by the plaintiff but not by the defendant.

9          The plaintiff states that he and the defendant then signed the agreement on the first page. There were no photo-stating facilities at the Botanical Hotel and only one copy of the agreement had been signed. The plaintiff stated that he took the signed copy of the agreement, promising to forward a copy of it to the defendant.

10        It is not in issue that on 27 May 2009, the defendant collected the plant and equipment referred to in Schedule 1 from Fagan Bakeries in Moorabbin, where it was stored after being taken there when the Burwood premises shut down, and took it to a storage facility owned by the defendant in Thomastown. The plaintiff states that he wrote the last five lines on the bottom of Schedule 1 after being advised by Grant Coleshaw, an employee of the defendant, that the plant and equipment had been collected.

11        The defendant told a quite different story of what happened at the Botanical Hotel on the evening of 26 May 2009. He stated that he came along to the meeting with a document setting out the serial numbers of the plant and equipment included in the sale. He had obtained these details from the plaintiff’s broker. He had the plaintiff initial this document so that he could collect the machine and the ancillary equipment the next day. A copy of this document is ‘Annexure B’ to this judgment. This document was on the letterhead of Bruno Engineering Pty Ltd. The defendant was the sole director of this company and its business on its letterhead is stated to be “Food Industry and Retail Industry Fit-out Specialists”. He, too, confirmed that at the meeting he and the plaintiff went closely through the document which he had brought to the meeting. He said that he had received a copy of it from the plaintiff a few days previously. He, too, stated that he and the plaintiff were having some difficulty in understanding the meaning of some of the clauses in the draft agreement. He stated that after the various amendments and deletions were made to the draft agreement by the plaintiff, each signed two copies and each took one copy away. On the next day he realised that he had two pages numbered “6” and he did not have the execution page. A copy of the document he took away is ‘Annexure C’ to this judgment. He asked the plaintiff to forward him a copy of the execution page, which he received two weeks later. He stated that in fact he received the first page of Annexure A, except that the wording “we are agreeing to sell” and below were not on the document when he signed it. He relies upon Annexure C, which does not provide for a further deposit of $98,000 payable on 9 June 2009 as embodying the agreement between the parties. Rather, this agreement provides, in Clause 2.2, for payment of the balance of the purchase price on the completion date, which is stated to be thirty days after successful commissioning. Clause 5.1 of this agreement defines “Completion Date” as meaning “30 day after commission” (sic). Alternatively, Clause 3.2 provides that the completion date is “two weeks from the agreements date” (sic).

12        The relevant factors, in my view, in determining what were the terms of the agreement entered into on 26 May 2009 and, in particular, whether $98,000 was payable by the purchaser on 9 June 2009, are as follows.

13        On 28 May 2009, the plaintiff sent an email to the defendant as follows:

“Hi Bruce

I spoke with Grant as I’m sure you have and it was good to hear the move went smoothly and Grant advised that all items were accounted for which is great. I am away from tomorrow to 10 June. As arranged at our meeting I will fax through the sale agreement. In relation to the second payment of $98,000 which is due 9 June 09 could you please pay this amount directly into designated bank account as I will not be here being:

Name of account : Paul Owies, Paris Mahony : Bank : Westpac, BSB
033305 and account no. 371401.

When back I will pass over the recipes and HACCP manual for the workings and settings of the machine. Also once you have the company name that the machine will be purchase in I will write up an invoice so you can claim the GST.

Also I would appreciate being kept in touch regarding when you are going to run the machine so the deal can be settled and I would love to see the set up when you are ready.

Speak soon Paul.”

14        I note reference to payment of the sum of $98,000 on 9 June 2009 in this email. The requirement to pay this sum by 9 June 2009 was not disputed by the defendant as might have been expected. The defendant stated that he only saw the email of 28 May 2009 two or three weeks after it was sent. He stated that Bruno Engineering Pty Ltd employed at the time thirty to thirty five people, and that he effectively ran the business but did not check emails sent to the business nor send emails himself. I find this hard to accept. I note that on 28 April and 14 May 2009, he received emails from the plaintiff to which he replied promptly.

15        Unfortunately, the plaintiff overlooked forwarding his version of the agreement to the defendant before he went on holidays on 29 May 2009.

16        The next contact between the parties was on 5 June 2009 when the parties had mobile telephone contact. They spoke for three and a half minutes. The plaintiff states that in this conversation he was following up his email of 28 May 2009, confirming that the payment of $98,000 was to be made on 9 June 2009, and querying when the machine was to be commissioned as he had Peter Reed, who had been the general manager at Doughboys and was responsible for the operation and maintenance of the machine at the Burwood site, on standby to do this.

17        The plaintiff returned from holidays on 8 June 2009, not on 10 June 2009 as stated in his email of 28 May 2009.

18        The next contact between the parties was a mobile telephone call on 9 June 2009 at 9.07 pm. The plaintiff stated that he had some difficulty in contacting the defendant. They spoke for twelve and a half minutes. The plaintiff states that in this conversation he told the defendant that the sum of $98,000 due that day had not been paid. He states that the defendant said that he would pay this sum on the following day. He queried the defendant as to when the machine would be commissioned and was told that a council permit had to be obtained for the former McDonald’s store which the defendant owned and where he intended establishing a take-away food store where the machine would be installed. The defendant stated that he anticipated obtaining the permit soon. The plaintiff states he also told the defendant that he would send to him by facsimile on the following morning a copy of the agreement between them.

19        The plaintiff states that he then wrote a note to the plaintiff in the following terms:

“Hi Bruce 10/6/09

Please find attached Executed agreement. Please note $98,000 due on 9/6/09. As discussed this evening I look forward to receiving payment today 10/6/09 for $98,000. Please let me know when you will be able to hook up machine to view & check operationally so ownership of the machine can be completed. Also let me know the name re Invoice so I can complete & you can claim GST Rebate of 10%.

Thanks
Paul.”

20        This note again refers to the payment of $98,000 due on 9 June 2009 and to the reference to this payment in the telephone discussion earlier that evening.

21        This note was forwarded by facsimile by the plaintiff to the defendant from a post office on the following morning at 9.55 am. The defendant’s evidence with respect to receipt of this facsimile was somewhat confusing. Initially he stated that he did not recall receiving this facsimile and then, as I understand his evidence, he did in fact see it at a later date. Again, I find it hard to accept that a medium sized business could operate in such a haphazard fashion.

22        The plaintiff states that he telephoned the defendant on 10 June 2009 and when he asked the defendant about the payment of $98,000, the plaintiff, he stated, became “a little bit uneasy” and that he could not state the exact date when the payment would be made, but then he asked for another copy of the agreement for his lawyer. He said that after he had spoken to his lawyer he would be able to say when the $98,000 would be paid.

23        In forwarding the facsimile dated 10 June 2009 to the defendant, the plaintiff stated that he overlooked attaching Schedule 1 and therefore, on 11 June 2009, sent the following facsimile to the defendant:

“Hi Bruce

Please find attached Schedule 1 for the purpose of the sale agreement signed on 26/5/09. You may have a copy of this but I have faxed through so your lawyer has the full agreements and dates in respect of the equipment being picked up by Grant.

If your lawyer wishes to discuss the agreement with myself today please give him my mobile no. otherwise I look forward to hearing from you today re the further deposit of $98,000 due on 9/6/09.

Thanks Bruce.”

24        Attached was Schedule 1, being the second page of Annexure A.

25        The defendant admits having received this facsimile on 11 June 2009.

26        On 12 June 2009, the plaintiff and the defendant had two lengthy telephone calls, one of fifteen and a half minutes and one of fourteen minutes. The plaintiff stated that in these conversations the defendant indicated that he no longer wanted the machine and that they should jointly try to sell it. The plaintiff did not agree to this proposal.

27        On 18 June 2009, Coleshaw forwarded an email to the plaintiff as follows:

“Hi Paul

Bruce has advised me that he can’t see $70,000 dollars of spare parts and he doesn’t believe that it is all there. He has asked me to advise you of this.”

28        Again, it appears strange that even then the defendant is not disputing in writing the requirement to pay $98,000. Also strange is the reference to the sum of $70,000 worth of spare parts. In an email of 21 April 2009 from the plaintiff to the defendant, the plaintiff stated that $70,000 was the approximate value of the ancillary pieces to the machine as new. Neither of the alleged agreements refers to this sum. It is surprising that this allegation was made three weeks after the machine and ancillary equipment were collected.

29        The defendant stated, somewhat strangely, that he had not inspected the machine and ancillary equipment until then.

30        The plaintiff’s solicitors, Lewenberg & Lewenberg, wrote a letter of demand to the defendant on 17 June 2009 alleging that pursuant to the agreement made between the plaintiff and the defendant, the sum of $98,000 was payable on 9 June 2009, with the balance of $50,000 payable on successful commissioning. This is in line with the version of the agreement propounded by the plaintiff. This, I was told, was not responded to.

31        The Defence and Counterclaim filed by the defendant on 8 September 2009 states that the following was a term of the agreement between the parties:

“Final payment 50,000 – On successful Commission, machine ownership

passes to Bruce or Nominee only on full payment or of final payment.”

32        It will be noted that this wording is virtually identical with that on Annexure A, the plaintiff’s rather than the defendant’s version of the agreement. There is no reference in the defendant’s version of the agreement to a final payment of $50,000. Reference to this term was only deleted when the Defence and Counterclaim were amended at the commencement of the trial on 29 April 2010.

33        As indicated, the defendant’s version of the agreement is contradictory in its terms in its definition of the completion date. The defendant conceded that the words “agrees to sell equip in Schedule 1” was written on the execution page of Annexure A at the meeting on 26 August 2009. However, Annexure C already refers to Schedule 1 in Clause 5.1. It follows that on the defendant’s version of what the agreement between the parties was, the words “agrees to sell equip in Schedule 1” are superfluous. Presently, the machine is still in the defendant’s storage area at Mill Park.

34        Neither of the parties struck me as being particularly efficient businessmen. The manner in which the plaintiff prepared the agreement and then his failure to forward his version of the agreement to the defendant before going on holidays and then, when he did so, failing to forward Schedule 1, is evidence of this. The defendant was fairly vague in the evidence he gave and quite haphazard in his office procedures if, in fact, important emails and facsimiles were not brought to his attention promptly.

35        In final submissions, Ms Neskovcin, who appeared for the defendant, referred to the two pages of Annexure A, upon which the plaintiff relies, being on different paper and each page being written with what appears to be a different pen, which I accept. She submitted that this was consistent with the second page entitled “Schedule 1” being brought into existence by the plaintiff at a later point in time. It is, however, equally consistent with the plaintiff’s evidence that he brought two copies of the draft agreement to the meeting on 26 May 2009, together with some paper to make notes upon and that between them they had more than one pen at the meeting.

36        Ms Neskovcin further relied upon the reference in the email of 29 May 2009 from the plaintiff to the defendant to “be kept in touch when you are going to run the machine so the deal can be settled and I would love to see the setup when you are ready” and in the facsimile of 10 June 2009, “Please let me know when you will be able to hook up machine to view and check operationally” as being inconsistent with the plaintiff’s obligation to commission the machine. I do not agree. I also note the plaintiff’s evidence that at all times he was anxious to commission the machine and had Reed on standby ready to do this.

37        In any event, in all the circumstances, in view of the matters outlined above, I am satisfied that the plaintiff’s version of the agreement, which is Annexure A, is the agreement which was made between the parties on 26 May 2009.

38        What follows from this, is that, firstly, the sum of $98,000 was payable on 9 June 2009. It remains unpaid.

39        Reed gave evidence that he was involved in the removal of the machine from the Burwood Highway premises to Fagan Bakeries at Moorabbin and that the machine was dismantled into six or seven pieces. He stated that it was a fairly simple procedure to reassemble the machine and show the defendant how to make doughnuts in it. He stated that this would only take two to three hours to do and that he was capable of doing it. He mentioned that it might possibly be necessary to obtain some assistance with respect to electrical work to be done.

40        So far as the final payment of $50,000 is concerned, in my view, there has been substantial performance of the Annexure A agreement between the parties on the part of the plaintiff.

41        In Zamperoni Decorators Pty Ltd v Lo Presti [1983] 1 VR 338, Anderson, J was considering whether there had been substantial performance of painting works. He stated, at page 340:

“In Bolton v Mahadeva, [1972] 2 All ER 1322, which is the most recent of the quartet of cases I have referred to, Sachs, LJ, at pp. 1327-8, said: ‘So far as the law is concerned, I would merely add that it seems to me to be compactly and accurately stated in Cheshire and Fifoot, [The Law of Contracts, 7th ed., 1969, at p. 492] in the following terms: '...the present rule is that ‘so long as there is substantial performance the contractor is entitled to the stipulated price, subject only to a cross- action or counter-claim for the omissions or defects in execution’'; and, to 'cross-action or counter-claim', I would of course add 'set-off'. The converse, however, is equally correct--if there is not substantial performance, the contractor cannot recover.’

In the same case, at p. 1325, Cairns, LJ, said: ‘In considering whether there was substantial performance I am of opinion that it is relevant to take into account both the nature of the defects and the proportion between the cost of rectifying them and the contract price. It would be wrong to say that the contractor is only entitled to payment if the defects are so trifling as to be covered by the de minimis rule’.”

and at page 342, he stated:

“…in each case it is essentially a question of fact as to whether there has been substantial completion or performance, and this is so determined on the facts and circumstances of each case. … .”

42        Here the machine and ancillary equipment had been delivered to the defendant. There was only a few hours of work for Reed to perform in commissioning the machine to complete all the plaintiff’s obligations under the contract. Reed was available to do this free of charge. It is not a case where some allowance should be made to the defendant for the cost of commissioning the machine since the plaintiff, through Reed, was prepared to do this free of charge with the possibility of assistance with electrical work.

43        An alternate approach is that there has been a waiver by the defendant of the requirement on the part of the plaintiff to commission the machine – see Hoenig v Isaacs [1952] 2 All ER 176, at 181, per Denning LJ (if there has not been substantial performance).

44        In the circumstances, the plaintiff is, in my view, entitled to the final payment of $50,000.

45        There will be judgment for the plaintiff in the sum of $148,000. I will hear from the parties on the question of interest and costs.

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Annexure A – (2 pages)

Annexure B – (1 page)

Annexure C – (8 pages)

Annexure A

Annexure B

Annexure C