Peters (W.A.) Ltd v James Hardie Paper Ltd

[1987] FCA 677

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CATCHWORDS	!.
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TRADE PRACTICES - sale of goods - paper leaflets - J [ ,-

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suitability for intended use - whether representation l . .

as to suitability made - conflicting evidence - i '

established not allegation \ '

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Trade Practices Act 1974, ss.52,	53(a)
Sale of Goods Act 1895 (w.A.),	s.14(1)
PETERS (W.A.) LIMITED V	JAPlES HARDIE PAPER LIAITED

NO. W.A. ~ 5 7 of 1987

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Perth

Norling J.

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17 November, 1987

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IN THE FEDERAL COURT OF AUSTRALIA

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WESTERN AUSTRALIA DISTRICT REGISTRY	)	No. WA G57 of 1987
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DIVISION GENERAL 1

/ BETWEEN: PETERS (W.A.) LIMITED

Applicant

AND :  JAMES HARDIE PAPER

LIMITED

Respondent

MINUTE OF ORDER

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JUDGE MAKING ORDER :	Morling J.	! .
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DATE OF ORDER	:	17 November 1987
WHERE MADE	:	Perth

THE COURT ORDERS AS FOLLOWS:

1. Application dismissed.

2.      Applicant to pay respondent's costs.

NOTE: Settlement and entry of orders is dealt

with in Order 36 of the Federal Court
Rules.

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IN THE FEDERAL COURT OF AUSTRALIA	)	I I I .
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WESTERN AUSTRALIA DISTRICT REGISTRY	NO. WA ~ 5 7	of 1987

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DIVISION GENERAL 1

BETWEEN:  PETERS (W.A.) LIMITED

Applicant

AND :  JAMES HARDIE PAPER
LIMITED

Respondent

MORLING J. 17 November 1987

ORAL REASONS FOR JUDGMENT

The applicant brings these proceedings to recover

damages for alleged breaches by the respondent of ss.52 and 53(a) of the Trade Practices Act 1974, and of s.14(1) of the

sale of Goods Act 1895 (w.A.).

The applicant is engaged in the business of selling,

inter alia, dairy products. One of the products it sells is cheese. In October 1986 it purchased from the respondent a large number of paper sheets or "inserts" upon which was

printed some promotional material. It will	be convenient to
refer hereafter to these artlcles as "leaflets".	They were

described as "glassine sheets printed" on the purchase order . - I .

for the goods. The leaflets were purchased so that they could

be placed lnside plastic packs in which pieces of cheese were

to be placed. After the cheese and leaflet were Inserted	In a
pack it was sealed and the cheese in due course	was distributed
to the applicant's customers for sale	by retail.

The applicant claims that it invited the respondent to

recommend paper which would be suitable for use as leafl ts and that it made known to the respondent the use for which the

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leaflets were required. It is common ground between the

parties that the respondent is in the business of

manufacturing, inter alia, printed leaflets and prlnted paper,

some of which are used in the packaging of foodstuffs for sale

by retail.

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The applicant also claims that in the course of

discussions held between the representatives of the parties prior to the purchase of the leaflets Mr Van De Werve, an

officer of the respondent, represented to Mr Featherby, who was

then the product manager for the dairy division of the

applicant, that various types of paper discussed by them,

including glassine paper, were suitable for contact with food,

specifically cheese, and that the ink to be used for the

printing on the leaflets would also be suitable for contact

with food.

It is not in doubt that the leaflets were not suitable

for the purpose f o r which they were used. It appears that !

after they and the cheese were sealed inside the packs the

leaflets became moist or soggy and that the printing ink

permeated the paper, thus coming	in contact with the cheese
itself. The ink which	was not suitable for use in contact
with food products permeated the cheese thus reducing	or

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destroying its saleability. At this stage of the proceedings	- .
I have not heard any evidence as	to the damage suffered by the

applicant but it claims that it has suffered damage of

approximately $79,000.

According to Mr Balaam who, at the relevant time, was

the purchasing officer for Brownes Dairy Pty Limlted, one of I

the applicant's subsidiaries, he spoke to Van De Werve in late

August 1986 and asked him to supply different types of paper suitable for use as inserts to be inserted in the cheese packs.

He said that he told Van De Werve that the inserts were to go

inside packs of cheese and that the ink used in printing the

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inserts would need to be food-grade ink.

According to Balaam, Van De Werve mentioned that

glassine paper would	be suitable and gave him samples	of such
paper to take away.	Van De Werve denied that	salaam told him
that the leaflets were to	be inserted inside the packs.	I
shall later refer	in more detail to Van	De Werve's evidence on

this matter. It appears that after the applicant discovered

that the leaflets were unsuitable for the purpose for which they had been used a conference was arranged to discuss the matter. The conference was held on 22 December 1986 and was attended by Balaam, Van De Werve and others. Although the

accounts of what happened at that conference vary as between the witnesses it is reasonably clear that Van De Werve used

words indicating that he had not been told that the leaflets

were to be placed inside the packs and that when he used these

words Balaam neither denled what Van De Werve said nor asserted

that he, Balaam, had previously said that the leaflets were to

be inserted inside the packs.

Balaam also agreed that in his conversations with Van

De Werve he might have described the paper required as "sheets" and not necessarily "inserts". However, it is clear from the

totality of Balaam's evldence that he asserts that he made it i

quite clear to Van De Werve that the leaflets were	to be placed
inside the packs of cheese.

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Balaam said that after samples of the glassine paper i

(which at that stage had not been printed with the promotional

material) were handed to him he tested them by placing them in

a number of packs to see whether they would absorb moisture and

fat from the	cheese. They were found to have	a tendency to	do
so.

M r Featherby, who is no longer employed by the

applicant, also gave evidence to the effect that	he told	Van De
Werve qulte specifically that the leaflets were to	be placed

inside packs of cheese and that they would be coming in contact

with the cheese. He said he asked whether the leaflets could

be printed in food-safe ink and that Van	De Werve replied that
would be "no trouble at all". According to Featherby, Van	De

Werve said that he recommended the use of glassine paper as it

was the best for the purpose. Featherby said that he

mentioned that he had reservations about the glassine samples

which had already been supplied to Balaarn.

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Van De Werve brought to the meeting some samples of

other materials which could be used for making the leaflets.

These materials included poly-coated paper, cellophane,

grease-proof paper, and also glassine paper.	Featherby said
that he would test the	n w samples and would repeat the tests

already carried out on the glassine paper.

None of the samples supplied by Van De Werve to

Featherby had been printed with the promotional material.

There is a considerable collision between Van De Werve's

account	of	his conversations with Balaam and Featherby and
those given	by those gentlemen. Van	De Werve denied that

either Featherby or Balaam told him at any stage that the paper

was to be used as Inserts. Indeed, he denied that the word

"Inserts" was ever used. He agreed that Balaam's original

request was for vegetable parchment paper, which is grease

resistant paper used for wrapping products such as butter.	He
said that when he discovered that this type of paper was

unavailable he told Balaam of that fact and said that he could !

print the required leaflets on glassine paper. When he filled

out an internal quotatlon form for	use by	his company for	\
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costing purposes he described the applicant's requirement as I

being for "Veg parchment wraps" but he said that he used the

word "wraps" as a term applying to various types of paper.

Van De Werve had a telephone conversation wlth

Featherby in mid-September 1986.	Featherby asked hlm whether
there were other types of material which could	be used instead

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of glassine. Van De Werve told Featherby that there were other

types of material and that he would give him some a ples of

them. He collected samples of poly-coated paper, cellophane,

grease-proof paper and glassine and personally took them to	i
Featherby's office. He left all the samples with Featherby
for hlm to try them out.	He said that Featherby asked him
whether any of the samples	were water resistant and he replied

that they all were. He denied that Featherby told him that

the	leaflets	were to be placed Inside packs, that he told
Featherby that they would	be suitable for use	in direct contact

with	cheese, and that he had any discussion with Featherby
about ink. He	said that when Featherby asked whether the

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leaflets were water resistant he thought that they may need to
be water resistant because they might be kept in glass food
cases. He said he knew that they were to be used as
promotional material and assumed that they would be kept near
the cheese, but that he did not know that it was intended to
put the leaflets inside sealed packs.

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According to Van De Werve, at the meeting of

2 2 December at which Balaam was present, he, Van De Werve,

exclaimed, "Oh God, how come you used it like this?"

immediately he was shown a pack of cheese with	a leaflet sealed
inside it.	He said that Balaam made no response to this

exclamation and did not, at any stage in the conference, assert

that he had told Van De Werve that the leaflets were	to be used
in the manner in which they had been used.

Van De Werve said that he was not an expert in the technical aspects of paper quality and that had he been told

that it was intended to seal the leaflets inside packs	of
cheese he would have referred the matter to	Islr Fairclough who
was expert in those matters. Fairclough	was the respondent's
factory manager.

The applicant called Mr Medley, another of its

officers, and the respondent called IiIr Fairclough who was c

present at the meeting of 22 December. I do not think that

their evldence is of any great assistance in determining the

issues between the parties.

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I think this is a case In which the recollection of some of the witnesses is faulty and that none i

of them is

telling deliberate untruths. There are lmprobabillties	in the
conflicting accounts given by Balaam and Featherby	on the one
hand, and Van De	Werve on the other.

As counsel for the applicant properly pointed out it

would have been extraordinary for neither Balaam nor Featherby

to have mentloned the fact that the leaflets were to be l .I

inserted inside the cheese packs, since that was the very

purpose for which they were quired. In this respect counsel

relied on the circumstance that another company,	AIK Labels and
Promotions (from which a quotation for the supply	of the
leaflets had also been obtained) described the	applicant's
requirements in its internal documents	a "Cheese promotlonal
wrappers/inserts". The polnt of this submission	was that that
company must have been told that the leaflets were to be	used
as "inserts".

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On the other hand it is extraordinary that if Van De

Werve had been told of the proposal to insert the leaflets inside the packs he did not refer the matter to Fairclough. This would have been the normal action for him to have taken

and was the sort of thing he had done on other occasions when

there was some doubt	as to the suitability of	a product for the
client's purposes.

In these circumstances it is necessary to make a

choice between the witnesses.

I prefer Van De Werve's account of what happened to

that of Balaam and Featherby. It	1s possible that Balaam and
Featherby had discussions with	AIK Labels and Promotions
representatives in	whlch they stated specifically that the

leaflets were	to be inserted inslde the cheese packs.	A
posslble explanation	of the	conflict between their evidence and

Van De Werve's is	that they think, albeit erroneously, that
they had a similar conversation	with Van De Werve.

It is not without significance that Van De Werve's

conduct on 22 December was consistent only	with surprlse at the
way in which the leaflets had been used. Of	course, this

surprise could have been feigned. The exclamation could have

been a device to throw blame off himself. But if this had been

the case it surely could have been expected that Balaam would

have said that Van De Werve had been told that the	leaflets
were to be inserted in the packs. Balaam appears	to me to be a

reticent person who may have been nervous in giving his

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evidence. Butthat does not satisfactorily explain away Van	De
Werve's	uncontradicted evidence that he, in effect, said on

22 December that	he had not been told that	the leaflets were to
be inserted in the packs. Van De	Werve, like M r Featherby, is	I
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no longer employed by his former employer. Neither of them

has anything to gain from these proceedings.

It is also not without slgnificance that he

applicant's order form which it sent to the respondent did	ot
describe the leaflets as "inserts".

There 1 s much in the evidence to support the view that . .

the applicant was relying substantially on its own judgment as

to the suitability of the leaflets. In the flrst	place, the
applicant was experienced in the production of dairy	p oducts,
and other products such	as meat pies and iced confections for
which some forms of paper	was used as wrapping. Further, from
the beginning	of the relationship between the parties the

applicant had clearly in mind what sort of paper it wanted. It

was Balaam who first said that the applicant wanted vegetable

parchment paper. When that paper was not available it	was the
applicant which tested the samples of glassine paper	whlch were
furnished to it. Havlng tested that	paper, the applicant

became aware that it had problems	in that it tended to become	2	'
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soft after it had been inside a cheese pack for two or three	I _:
days.	It was the applicant whlch sought further samples of
alternative materials, and carried out further tests	on them.
It is true that the respondent is	a large manufacturer of paper
products including products of the kind used by food processors	I
in wrapping their products. Nevertheless,	I would not find on

the facts of this case that the applicant relied on the respondent's skill or judgment in deciding t o use the leaflets inside the packets of cheese.

For the reasons I have given I do not think the

applicant has made out any of its causes of action and	I '
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accordingly the application will be dismissed with costs. l

I certify that this and the 9 (nine)

preceding pages are a t rue copy of the Reasons

for Judgment of his Honour Mr Justice Morling.

Associate:	c &on,
Date :	17 NovemW1987.

Counsel for Applicant:  R.K. Davis

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instructed by Keall Brinsden I . .

Counsel for Respondent:  A.J. Power

instructed by Jackson McDonald

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Date of Hearing:  16.11.1987

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Date of Judgment:  17.11.1987