Thomson v Ronstan International Pty Ltd
[2000] VSC 227
•7 June 2000
SUPREME COURT OF VICTORIA
COMMON LAW DIVISION
Not Restricted
No. 5230 of 1997
| PETER THOMSON | Plaintiff |
| V | |
| RONSTAN INTERNATIONAL PTY LTD (ACN 068 111 053) | Defendant |
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JUDGE: | Balmford, J. | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27-30 March, 3-7, 10-11, 14 & 17 April 2000 | |
DATE OF JUDGMENT: | 7 June 2000 | |
CASE MAY BE CITED AS: | Thomson v Ronstan International | |
MEDIA NEUTRAL CITATION: | [2000] VSC 227 | |
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Contract - Payment for photographic and design services rendered – Offer and counter-offer - Conditions – Implication of terms – Liquidated damages and penalties.
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20
Butler Machine Tool Co v Ex-Cell-O Corporation (England) Ltd [1979] 1 WLR 401
Codelfa Construction Limited v State Rail Authority of NSW (1982) 149 CLR 337
DJ Hill & Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR 749
Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79
Forestry Commission of New South Wales v Stefanetto (1976) 133 CLR 507
Tompson v Leith (1855) 4 Jur NS 1091
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr C Golvan with Mr A Klotz | Rigby Cooke |
| For the Defendant | Mrs S Marks | Dunhill Madden Butler |
HER HONOUR:
Introduction
The plaintiff is a photographer and designer. He is also a yachtsman and has represented Australia internationally in that capacity. At all relevant times he carried on a photography and design business as a sole trader under the names ‘Thomson Imaging’ and ‘PTP Productions’. As a result of a venture to do with yachting, he was a bankrupt from September 1992 to September 1995. Before the bankruptcy he had established a trust under the name Peter Thomson Trading Trust (“the Trust”), of which the trustee was a graphic designer named Peter Marks. The beneficiaries of the Trust are the plaintiff’s former wife and the Salvation Army.
The defendant is a manufacturer and distributor of marine parts which are marketed both in Australia and internationally. At the relevant time it had a product range of about 2,000 products. From the promotional material before the Court, it would appear that its products are chiefly small hardware items such as blocks, for use in yachts. At some date in 1995 the defendant was acquired by Chemring plc (“Chemring”), a United Kingdom public company, and continued in that ownership until some time after the relevant period, when it was apparently disposed of by Chemring.
In February 1995 the plaintiff was asked by the defendant and agreed to create a catalogue of its products (“the proposed catalogue”), to be used for both export and domestic purposes. Changes were made over time to the requirements for the proposed catalogue. The contractual arrangements between the parties were varied accordingly from time to time. Much work was done and paid for. In the event, when the proposed catalogue was not completed by August 1996, the arrangements between the parties came to an end in circumstances considered at paragraphs 72 and following below, and a catalogue (“the final catalogue”) was commissioned by the defendant from The Craftsman Press (“Craftsman”). The final catalogue was produced by Craftsman at the end of October 1996.
The plaintiff claims under seven heads; five in respect of components of the work for the proposed catalogue, and two in respect of the design and construction of display stands. The amounts claimed (exclusive of interest) under those seven heads are:
Proposed catalogue
The Nicro range $ 17,932
The Rigging range $ 22,460
PNP and other products $ 9,510
Additional 66 images $ 8,980
Additional electronic enhancement $117,000
Display stand and panels $ 25,127
Total $201,009
An additional amount is claimed for interest under contract.
The defendant denies liability for any of the claims of the plaintiff. It counterclaims for the whole amount paid to the plaintiff in relation to the proposed catalogue, or alternatively the amount paid to Craftsman for the final catalogue, or alternatively an amount claimed to have been paid to the plaintiff for printing work which was never carried out and which is claimed as money had and received by the plaintiff to the use of the defendant.
Evidence
A great deal of documentary evidence was before the Court. Witness statements were tendered from the persons listed below, all of whom, save one, attended and were cross-examined.
For the plaintiff:
·The plaintiff himself.
·Mr Coutts, joint general manager and international marketing director of the defendant at all relevant times until February 1996, who was a friend of the plaintiff through a shared interest in yachting. It was he who initially arranged for the plaintiff to undertake work for the defendant. Mr Coutts was dismissed by the defendant with effect from 23 February 1996 and has since formed a business association with the plaintiff. Until his dismissal, he was responsible for the preparation of the proposed catalogue, but day to day management of the project was with Mr Maloney, particularly as Mr Coutts was overseas for three or four months of each year.
·Mr Edwards and Mr Weis, respectively a photographer and a graphic designer, both of whom worked as assistants to the plaintiff in the preparation of the proposed catalogue.
·Mr Widdowson, an expert in photographic enhancement.
For the defendant:
·Mr Maloney, who was at the relevant time promotions and corporate services manager of the defendant, originally reporting to Mr Coutts. After the dismissal of Mr Coutts, Mr Maloney reported to Mr Davies, who had been appointed in October 1995 as regional director of Chemring with responsibility for the defendant. Mr Davies is now resident in the United Kingdom, is no longer with Chemring, and did not give evidence. Mr Maloney was retrenched by the defendant in October 1996.
·Mr Murray, who is now managing director of the defendant, and who was head of the defendant’s United States operations at all relevant times until July 1996, when he returned to Australia.
·Mr Sander, who is now director of marketing and development of the defendant, having been regional director of the defendant in Europe until returning to Australia in April 1996, when it appears that he took over some of the supervision of the proposed catalogue.
·Mr McCooke, who is now financial director of the defendant, and who was financial controller, with similar duties, at all relevant times.
·Mr Taylor, who was at the relevant time and still is, a product manager with the defendant.
·Mr Willox, a sales executive with Craftsman, who died before the trial of this matter and whose statement was accordingly admitted into evidence with reservations as to its weight on controversial issues, given the absence of cross-examination.
·Mr Den Hollander, a graphic designer, and Mr Ingham, a photographer, both of whom were concerned with the preparation of the final catalogue.
·Ms Toholka and Ms Ierodiaconou, who are solicitors employed by the firm representing the defendant.
The relevant events took place four to five years before the hearing. There were inevitable inconsistencies in the evidence, and inevitable gaps in memory. Having heard and observed the witnesses, and taking into account the natural fallibility of human beings, I did not consider any of those witnesses to whose evidence I have found it necessary to refer to be other than, generally speaking, concerned to give honest evidence within their recollection. The plaintiff was cross-examined for four days. His evidence as to the position of the Trust in the operation of his affairs could, in my view, best be described as indicating confusion of mind on this issue, rather than as deliberately misleading. Otherwise there is no criticism which I would wish to make of his evidence. The only witness whose credit was seriously attacked was Mr Coutts, and his position needs to be examined more closely.
As has been said, Mr Coutts is a friend of the plaintiff of long standing, and introduced the plaintiff and the defendant. He is now in a business association with the plaintiff. After his dismissal by the defendant in February 1996, Mr Coutts commenced an action against the defendant, which was discontinued. He was later joined in this proceeding as a third party, but that joinder was also discontinued. It appears to have been a term of the settlement of his action against the defendant that Mr Coutts attend conferences with the defendant’s legal advisers to discuss the background to this proceeding. Notes taken at conferences held in that context were produced to the Court by the two solicitors who gave evidence. At some time after the last of those conferences the respondent’s legal advisers were notified that Mr Coutts was to be called for the plaintiff, and thereafter they had no further contact with him. There are certainly inconsistencies between some of the statements made by Mr Coutts at those conferences and some of the evidence he gave to the Court. However, in all the circumstances I do not regard those inconsistencies as significant, taking into account the considerations to which I have referred in the preceding paragraph.
Given my view as to the credibility of the witnesses generally, it is inevitable that I accept, especially where it is unchallenged and uncontradicted, much of the evidence of the plaintiff and Mr Coutts, on which the plaintiff’s case largely depends.
One aspect of the evidence, which initially led to some confusion, should be clarified at this stage. The plaintiff used a computer-based accounting system and it was his practice to print out and issue estimates and then, when an estimate was accepted by the client, to print out and issue an invoice with the same number and in the same format as the estimate. The invoice would normally be the same as the estimate save that:
(i)the invoice would be headed “invoice” rather than “estimate”;
(ii)the invoice would be dated at the later date when it was printed; and
(ii)the invoice would show the date of the previously issued estimate.
The computer would thus replace the estimate with the invoice; and when payment was received, the computer would show the payment on the same document. Thus when the plaintiff sought, by use of his computer-maintained records, to produce copies of invoices and estimates for the purposes of this proceeding, what was produced by the computer was not necessarily identical, as to all these matters, with what had originally been sent to the defendant. Furthermore, it was not necessarily printed on the same letterhead as was what had originally been sent, because the computer did not record what letterhead had been used.
The history of the proposed catalogue
From about September 1994, the plaintiff carried out various pieces of photography and design work for the defendant, all on a much smaller scale than the proposed catalogue. Where the amounts involved were substantial, estimates were given by him and accepted (normally orally) by the defendant. An invoice would then be issued, as set out in the preceding paragraph. For minor items, the estimate stage was omitted. In about February 1995, the plaintiff was briefed by Mr Coutts and Mr Maloney to quote and generally advise on the production of a proposed catalogue of images of select products from the product range of the defendant. The proposed catalogue had an intended budget of approximately $200,000, and was to be used for export as well as domestic purposes.
Mr Coutts showed the plaintiff a copy of the catalogue produced in the United States by a competitor of the defendant referred to as “Harken”, and said that the standard of that catalogue was the standard to be equalled, if not bettered. After discussions, the plaintiff prepared an estimate which was sent to the defendant and accepted orally, and on 28 March 1995 he sent an invoice number 4055 in similar terms to the estimate. The invoice provided for “production of new International Catalogue including photography, illustration, design, finished art, film separations, proofs and printing as per brief”. However, there appears to have been no written brief. The invoice went on to specify that there were to be 450 photographic shots, 92 pages of typesetting, and 100 illustrations. Thirty-five thousand copies were to be printed of an 88 page catalogue. Certain other matters were specified. The plaintiff was paid $210,000 pursuant to that invoice.
That invoice is the only written document (save for invoice 4120 in similar terms) evidencing the original arrangement between the parties for the production of the proposed catalogue. It is unfortunate that more thought was not given by the defendant at that stage to exactly what its requirements were. Minutes of planning meetings before the Court show various matters as being decided, but it does not appear that any formal written document was ever settled within the defendant company or between the defendant and the plaintiff.
The original plan was that the proposed catalogue would contain images of 450 products. Products for photographing were sent to the plaintiff in unsorted boxes and had to be sorted. It was intended that the proposed catalogue should appear with products grouped according to ranges, like with like. It was not always possible to tell whether a product fell within one range or another, and on such occasions the matter would have to be further discussed with particular product managers. In addition, products were sent which were not meant to be included in the proposed catalogue, and incomplete ranges were sent. These difficulties continued throughout the entirety of the project.
The plaintiff had been told in discussions with Mr Maloney and Mr Coutts, prior to the issuing of his estimate, that products sent for photographing would be hand-selected, checked for imperfections, and hand-polished to remove blemishes. This was not done, and in the event it became necessary for the photographic images to be electronically enhanced to remove all record of the blemishes. The issue of electronic enhancement is discussed further at paragraphs 49 and following below.
The typesetting was completed but had to be changed many times over as a result of frequent changes requested by the defendant. It appears that the text was not given any serious editorial attention until a draft was sent to Mr Sander in February 1996 and he recommended very extensive textual changes. Although there is a suggestion in a note by Mr Maloney that the copy of the proposed catalogue sent to Mr Sander had not included corrections that had already been made, there is no other evidence as to that. If that were the case, it is consistent with the other administrative inefficiencies described in the preceding two paragraphs (and see paragraph 22 below).
The defendant held a sales conference in Sydney in July 1995 at which a number of people said that they were not happy about the exclusion from the proposed catalogue of sections of the product range. Mr Billington, chairman of Chemring, said that the proposed catalogue should be expanded substantially and should be produced to “world’s best” standards. He said that whatever was required to make the proposed catalogue the best catalogue in the industry in the world should be done. As a result of these discussions, Mr Coutts asked the plaintiff for an on the spot estimate for the inclusion of another 200 products so that Mr Billington could approve it. The estimate was done pro-rata and on that basis amounted to $100,000. It was approved by Mr Billington. In the event, a later estimate of $104,836 for 187 additional images involving an additional 48 pages was approved. Some of the additional products were from ranges which had, in part, already been photographed. The inclusion of the additional products involved reconstructing the previous photographic set-up for that range or, in some cases, reshooting. Of the $104,836 agreed upon, only $50,000 was paid by the defendant, the express agreement between the parties being that the balance would be paid on receipt of the proposed catalogue. The plaintiff makes no claim for that balance.
From time to time additional works were requested by the defendant, including authors’ corrections, additional photography, additional product for inclusion in the database, additional scanning and contouring, and additional typesetting and design. A number of such items, including 104 photographic shots, were invoiced at $37,465 in invoice number 4170 dated 14 December 1995 (“the December invoice”). This invoice was paid for. A mock-up of the proposed catalogue (for which the plaintiff was paid an additional $15,000) was prepared for presentation in November 1995 to international representatives of the defendant at the 1995 Marine Equipment Trade Show (“METS”) in Amsterdam. In response to the mock-up, it was decided at METS that the block range should be reshot to appear in three-quarter angle rather than in profile. This involved the reshooting of 165 images, which was done at an additional fee of $41,430, which was invoiced and paid. Those who made the decision to reshoot the block range had been aware that there would be a substantial additional cost of so doing.
In or about January 1996, the plaintiff was asked by Mr Coutts to add the defendant’s Nicro product range to the proposed catalogue. This involved a further 54 images. A week or two later he was asked to add the defendant’s Rigging range, involving 90 photographic shots. In April 1996, he was asked to include additional products known as PNP (for Pacific Nylon Products) and other products, involving 31 images. Work on each of these three additions to the proposed catalogue was essentially completed and invoices were rendered for amounts of $26,161, $22,460 and $10,000 respectively; they have not been paid and form part of the claim before the Court. These claims are discussed further at paragraphs 26 and following below.
It was intended that the proposed catalogue would be part of a project which involved the creation of a database and imagery in a format which would have multiple applications. These included the provision of images for use in the marketing of products on the Internet and for use in marketing by distributors, as for example in high quality large sized posters. It appears that this was the purpose of photographing each product separately, rather than taking one group photograph of the products to appear together on a given page.
In a memorandum of 11 December 1995, Mr Maloney conveyed to the plaintiff the request to reshoot the blocks; requested the placing of the corporate history of the defendant on the inside front cover; gave detailed instructions for the table of contents; required that the distributors list be included on the back cover; required the defendant’s logo to be placed on every page; and included another page of specific instructions on particular points, all stemming from the meeting at METS. That memorandum included a request that the estimate of $41,430 for reshooting the blocks be reviewed “on basis of shooting in groups rather than individual items”. Although in the event the reshooting was paid for on the basis of the original estimate, it may be that this request was the beginning of the end of the intention that the proposed catalogue should be “world’s best”. Shooting in groups was obviously going to be cheaper than shooting each product separately.
Mr Maloney said in evidence that his feeling was that the whole operation was not well managed. The product managers failed to give proper attention to the needs of the project; products and text were not made available to the plaintiff on time; products that were needed for photographing were out of stock. He felt that neither he nor Mr Coutts had been hard enough on the product managers. Mr McCooke also criticised the management of the operation by Mr Coutts, and said that Mr Davies had tried to pull Mr Coutts into line.
I note that one head of the defendant’s counterclaim was based on breach by the plaintiff of an implied term of the contract between the parties that the work on the proposed catalogue would be done in a timely manner. There is no evidence at all of any unreasonable or significant delay being caused to the project by acts or omissions of the plaintiff. There is ample evidence that he and his assistants, Mr Edwards and Mr Weis, worked extremely hard and put in long hours on work for the proposed catalogue. Indeed, the plaintiff’s starting work on a number of particular items without waiting until the issue of a purchase order by the defendant, evidencing his concern for the urgency of the project, is now relied on by the defendant. (See paragraphs 38 and 39 below.) Paragraphs 14 to 16 above set out evidence of delays attributable to the defendant in addition to the delays caused by its constant additions to and changes of the proposed catalogue, and in addition to the management problems described in the preceding paragraph.
When the arrangements between the parties came to an end in August 1996, there were amounts in dispute. By the time of the issue of proceedings those amounts were seen as totalling just over $200,000, exclusive of interest (see paragraph 4 above). The defendant commissioned Craftsman and the final catalogue was produced within nine weeks at a cost of $208,000. There is no suggestion that the final catalogue aimed to be “world’s best”. Indeed, Mr Willox of Craftsman responded to criticisms by Mr Widdowson of the final catalogue by saying that Mr Widdowson was “judging the catalogue with a close artistic eye”. He believed that to be inappropriate with a catalogue of sailing products, although it would be appropriate in a catalogue produced for the National Gallery. In any case, whether or not it adopted the work done by the plaintiff, a question which it has not been necessary for me to determine, the production of the final catalogue was clearly assisted and expedited by the work which had gone on over the previous eighteen months while the defendant gradually decided what it really wanted.
Had the dispute between the parties been resolved, the proposed catalogue been completed by the plaintiff, and the $200,000 in dispute been paid, the defendant would have financially been no worse off than it was after paying Craftsman for the final catalogue; it would have had the proposed catalogue on which a great deal of work had been done by both parties; it would have been spared the necessity of devoting resources to the production of the final catalogue; and both parties would have been spared the cost and disruption of these proceedings.
The Nicro Range, the Rigging Range and the PNP and other products
The background to these three claims appears from paragraph 19 above. The standard form used by the plaintiff for estimates and invoices, explained in paragraph 10 above, included a number of standard conditions (“the Thomson conditions”). All estimates and invoices issued by the plaintiff contained the Thomson conditions, one of which (“the thirty day condition”) reads as follows:
Unless otherwise stated within this estimate/invoice terms for payment in full shall be 30 days from date of invoice.
In the case of some relevant estimates and invoices, as for example invoice number 4055, described in paragraph 12 above, specific terms for payment were negotiated, and stated in the estimate and invoice. The plaintiff contends that where this was not the case, the thirty day condition applied to the contract in question. The invoices in respect of the Nicro range and the PNP and other products both included an express requirement (in addition to the thirty day condition) for payment 30 days from the date of the invoice. The invoice in respect of the Rigging range included an express requirement for payment by 7 October 1996. The plaintiff sues on the basis of those invoices. To the extent that the relevant work charged for has not been completed, the claims in respect of the Nicro range and PNP and other products are reduced from the amounts appearing on the invoices.
It was the practice of the defendant after its acquisition by Chemring to require the issue of a purchase order in its standard form before payment could be made on any invoice. The plaintiff was notified of this requirement and requested to include purchase order numbers in his invoices. A number of letters on this subject from Mr Maloney to the plaintiff were in evidence.
The defendant contends, in respect of all three of these ranges, that the thirty day condition was superseded by the conditions appearing on the reverse of the defendant’s standard form of purchase order as issued after 25 May 1995 (“the Ronstan conditions”). Prior to that date the purchase orders did not contain conditions. The relevant conditions among the Ronstan conditions read:
1.These terms and conditions of purchase shall apply to the exclusion of all others and any terms and conditions of the supplier (whether on the suppliers quotation form or any other) which are contrary to or inconsistent with these terms and conditions shall not apply nor shall they constitute a counter offer. No goods or services will be accepted by Ronstan International Pty Ltd (“Ronstan”) on any terms and conditions other than those set out herein and by delivering goods and services to Ronstan, the supplier shall be deemed to agree to these terms and conditions which shall apply to the exclusion of all others.
4.Unless agreed in writing by Ronstan to the contrary, payment terms are 30 days from the date of Ronstan’s receipt of specified goods and services or 30 days from the date of the suppliers invoice (whichever is the later).
On the basis of those conditions, Mrs Marks for the defendant submitted that, as the proposed catalogue was not completed, and accordingly the specified goods and services had not been received, payment for the inclusion of these three ranges in the proposed catalogue had not fallen due.
There is no evidence to indicate that any such consideration was in the mind of either party at any stage of the transaction until this dispute arose. I cannot find that it was ever suggested that payment for any specific item of the proposed catalogue which was the subject of a separate purchase order issued after 25 May 1995 should, on the basis of the Ronstan conditions, await the actual delivery of the proposed catalogue. There is at least one item for which it was specifically agreed that payment would be made on receipt of the proposed catalogue, namely the additional 48 pages, as to which see paragraph 17 above. But that agreement had nothing to do with the Ronstan conditions. The Thomson conditions appeared on every estimate and invoice issued by the plaintiff to the defendant. There is no evidence that the defendant ever queried the relevance of the Thomson conditions to those transactions where no specific variation to those conditions was negotiated.
As to the purchase order in respect of the Rigging range, providing for payment by 7 October 1996, Mrs Marks submitted that that provision must be read in the context that everyone had assumed that the proposed catalogue would be completed by then, and thus that condition was secondary to the requirement that the goods must be delivered before payment could be made. She did not seek to apply that submission to the express provision in the other two invoices for payment in thirty days.
Mrs Marks submitted that after acceptance by the defendant of an estimate from the plaintiff, the issuing of a purchase order by the defendant, which was required by the defendant to be effected before commencement of the relevant work or preparation of the invoice, constituted a counter-offer, which would be accepted upon the plaintiff’s proceeding to carry out the work involved. She referred to Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1 WLR 401, the facts of which are described by both Lord Denning MR and Lawton LJ in their judgments as constituting a “battle of forms”, a description which is less apposite to the present issue. In that case the plaintiff seller made an offer on its own form, containing conditions; the buyer replied with an order on its own form, containing different conditions; and the seller responded. The seller, in its response, referred to its initial offer, but returned, signed, the tear-off acknowledgment provided in the buyer’s form to the effect that the order was accepted “on the terms and conditions thereon”. The English Court of Appeal held that the buyer’s order was not an acceptance of the seller’s offer, but a counter-offer, accepted upon the seller’s returning the tear-off form, and relied on the principle that a counter-offer destroys the original offer.
The question here is whether the purchase orders were in fact employed in such a way that they constituted a counter-offer of that kind. In Butler Machine Tool Co the documents were sent back and forth between the parties as the transaction was negotiated and concluded. In the present case, it is not clear that the actual purchase orders were in fact communicated to the plaintiff before the issue of his invoices. The emphasis in the relevant correspondence is quite different. (Compare DJ Hill & Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR 749). The letters from Mr Maloney included these passages:
13 June 1995:
Could you provide cost estimates so I can raise a purchase order and ensure prompt payment of any future invoices.
That passage appears to relate wholly to the internal accounting procedures of the defendant.
10 November 1995:
The second thing that must happen is for all your invoices to include a purchase order number or at worst a purchase requisition number. I have already instructed you to contact Kylie or myself for a number. When an invoice comes into this place without an order number the accounts department pass it onto me. With so much going on I cannot readily recall what work an invoice may relate to and consequently must go searching.
That passage is asking that the plaintiff obtain from Kylie or Mr Maloney a purchase order number, not a purchase order. It indicates that, for the more efficient administration of the defendant’s accounting section, an invoice must include the number of the relevant purchase order. It does not suggest that the purchase order itself must necessarily be transmitted to the plaintiff before the issue of the invoice.
27 November 1995:
No work should commence, particularly on large jobs, without a purchase order number which I can provide almost immediately if I know about the work. If I don’t know, then no work should commence until I have confirmed it with the person giving you the instruction. Advertising expenditure is my responsibility. (Emphasis in the original)
16 January 1996:
Can I assume at this point you have purchase order numbers for all work you have in progress. I don’t know what the boys laid on your plate while I was away so lets clear any outstandings before they create problems.
16 January 1996:
Peter, attached copy of your estimates with purchase order numbers. Please quote purchase order numbers on invoice submitted when job complete.
19 January 1996:
Can you advise when the quote will be available for the Nicro pages. We need to get approval from Chemring ASAP so I can raise a purchase order for the work to officially commence.
None of these passages suggests that in any way the purchase order is being put forward as a counter offer, or as anything more than an internal procedure of the defendant. The submission of Mrs Marks was that the plaintiff knew that he was not to start work on any particular item until he received the relevant purchase order. The correspondence indicates only the necessity for him to obtain from Mr Maloney purchase order numbers (not the actual purchase orders) and to include those numbers in his invoices.
The Nicro Range
The invoice number 4178, in the same terms as the estimate, is dated 31 January 1996. The evidence of the plaintiff is that he prepared an estimate number 4178 and that Mr Coutts agreed to his carrying out the work in the estimate. The copy purchase order before the Court (the original of which is unavailable) is dated 24 January 1996. It reads, so far as here relevant:
Changes and additions to accommodate Nicro Product Range into Catalogue
as per estimate 004178 dated 23.1.96
Confirmation only.
It would be difficult to regard that document, with its specific inclusion by reference of the terms of the estimate, as a counter-offer. In any case, the evidence of the plaintiff is that he had not seen that purchase order prior to the commencement of these proceedings. No evidence was called to rebut that statement. In his witness statement, Mr Maloney says that he “arranged for” the purchase order, not that he sent it to the plaintiff. In respect of each of the Rigging range and the PNP and other products, he says that he “arranged for” the purchase order “to be sent to” the plaintiff. Even if the purchase order for the Nicro range had appeared to me to have been intended as a counter offer, I could not have found that it was communicated to the plaintiff. It is not in issue that the work was done. I therefore find the plaintiff’s claim for $17,932 relating to the Nicro range to be made out.
The Rigging Range
As has been said (paragraph 26 above), the invoice number 4183 in respect of the Rigging range provides specifically for payment on or before 7 October 1996. The relevant purchase order is dated 25 March 1996 and reads, so far as here relevant:
Photography and electronic enhancement of Ronstan Rigging range as agreed in January 96 by AC
Refer Estimate 4183
Payment – after 1 October 96 and prior to 7 Oct 96
The initials AC refer to Mr Coutts, and the evidence of the plaintiff is that Mr Coutts and Mr Maloney told him that the defendant agreed to the carrying out of the work in accordance with the estimate which was issued on 30 January 1996. Again, it would be difficult to regard that purchase order as a counter-offer, given that it specifically includes by reference both the agreement by Mr Coutts and the estimate, and expressly sets out the latest date for payment as appearing in the estimate. I therefore find the plaintiff’s claim for $22,460 relating to the Rigging range to be made out.
The PNP and other products
An estimate number 4199 in respect of the PNP and other products was provided by the plaintiff on 18 April 1996. Mr Maloney told him that it was too high and that he should not proceed with the work. However, the plaintiff had already commenced work on photographing the 31 images required under this head because, he says, Mr Maloney had told him that they were required urgently. Mr Maloney, in his witness statement, says that he does not recall telling the plaintiff that the work was urgent, but that he might have done so. I have no reason to suppose that he did not. The work was completed within a few days of the request. Mr Maloney told the plaintiff that he should not have done the work without a purchase order, and the plaintiff replied that he had hardly ever received a purchase order prior to the commencement of work. After some negotiation, Mr Sander, who had apparently taken over some sort of role in the supervision of the proposed catalogue, agreed with the plaintiff on 26 April that the defendant would pay $10,000 for this and some other work involving substantial redrafting of the text of the proposed catalogue. The plaintiff accordingly issued an invoice number 4186 in that amount dated 30 April 1996, referring to an estimate of 20 March 1996 and including an express requirement (in addition to the thirty day condition) for payment 30 days from the date of the invoice. The defendant then issued a purchase order 16449 dated 8 May 1996. After setting out what is comprised in the invoice, the purchase order concludes:
Refer Thompson [sic] Imaging Estimate No 004186.
Terms of payment. Photographic and electronic enhancement costs as per item 1 – upon presentation of final proof on completed catalogue. Scanning costs upon receipt of CD Archives.
This was not consistent with the provision for payment contained in the invoice 4186.
The plaintiff wrote to Mr Maloney on 28 May 1996 in the following terms:
Further to our earlier discussions, would you please arrange to have amended your Purchase Order #16449 so that it reflects both our estimate for this work dated 20/3/96 and the final invoice dated 30/4/96, both of which pre-date your order, in so far as the Terms for Payment of this job are 30 days from date of our invoice – due 30/5/96.
As you are aware at no point did we agree to alter these conditions.
He received no reply to that letter.
It is claimed by the defendant that the plaintiff was frequently asked not to commence work without a purchase order, and that in those circumstances, whenever he started work without waiting for a purchase order he did so at risk that the work would not in fact be ordered by the defendant, and he did so knowing that the terms on which it would be ordered would be those set out on the purchase order form. If that submission is relied on as a ground for varying the terms of payment set out in invoice 4186 it fails, for the following reasons.
My view of the effect of the letters from Mr Maloney to the plaintiff on this point is set out at paragraph 33 above. The evidence of Mr Coutts is that in many cases where, to his knowledge, the defendant ordered goods or services for marketing purposes during the course of his employment, purchase orders were not issued. Further, there is no evidence that any requirement for a purchase order prior to starting work was part of the agreement originally made between the parties in February 1995. The evidence of the defendant’s witnesses supports the statement by the plaintiff, cited in paragraph 36 above, that he had hardly ever received a purchase order prior to commencement. Following is an extract from the cross-examination of Mr Maloney:
Can you recall any instance where you said to Thomson, "We have to reject your invoice because there is no purchase order for it"? --- I can't recall any instance. It is in my mind that it did happen but I can't recall any instance.
Is there any case where you said to Thomson, "Stop work, wait for a purchase order"? --- Yes, I think that related to the METS display stand.
The METS display stand? --- Yes.
You told him to stop work until a purchase order is issued? --- I don't know if they were my words.
I'm sorry to interpolate, but I mean words to that effect? --- To that effect. I think that was the case, yes.
Can you think of any other instance where you said to him, "Stop work until a purchase order is issued"? The question was, Mr Maloney, can you recall any other instance where you told Thomson he had to stop work until a purchase order was issued in relation to any specific part of the work? --- No, I can't recall an instance.
. . .
What I'm trying to get you to address is the real world of business. Thomson was getting requirements placed on him all the time for additional things to do? --- Yes.
And he received them, I suggest to you, on the footing that he had to get on with it, is that how things appeared to you? --- In some cases, yes.
And there were delays in the issue of purchase orders, weren't there? --- Yes, there were sometimes.
And you didn't seriously expect him to wait for the clerks in finance to come up with a purchase order before the next lot of photography was shot? --- Not straightaway, no.
And of Mr McCooke:
Just looking at 4113, is that an example of a Thomson invoice that you would have seen in 1995? --- I didn't see every invoice, but it is possible.
You agree with me that the format of the terms remained the same at the bottom of the page? --- Yes.
And you never raised any issues with Thomson about any of those terms, did you? --- No.
You never rejected any of his invoices as being non-payable because no purchase order had been issued? --- No.
.. ..
You say you adhered to the policy of only accepting invoices where there was a purchase order? --- No, I deny that in this particular case.
What I am putting to you, Mr McCooke, is that there was no such policy, that in truth that in almost every instance involving Thomson, invoices were accepted even though purchase orders issued some time thereafter? --- Well it was an unacceptable practice that we were trying to stamp out, and there is plenty of documentation to support.
The work described in the invoice, so far as it related to the PNP and other products, had been done well before the purchase order was sent to the plaintiff. In the plaintiff’s claim, allowance has been made for the other work not done. The plaintiff rejected the terms which were put forward in the purchase order by way of counter-offer. In the past, his invoices had been paid on occasions when the work had been done prior to the issue of a purchase order, and he was entitled to rely on that course of dealing as indicating that the defendant would not seek to renegotiate terms by the issue of a purchase order.
The purchase order for the additional 48 pages (see paragraph 17 above) for an amount of over $100,000, while dated on 1 August 1995 was said by Mr McCooke to have been most likely issued on 1 September 1995, and refers to an invoice dated 14 August 1995. The $50,000 then due was paid on 5 September 1995. The purchase order for the reshooting of the block range (see paragraph 18 above) is dated on 27 December 1995 and refers to an invoice dated 26 November 1995. Never was it suggested anywhere in the correspondence before the Court relating to purchase orders that those purchase order were sent by way of counter-offer. Nor is there any evidence of any oral statement to that effect made by any officer of the defendant to the plaintiff. As has been said, what the correspondence does make clear to any person reading it is that it was intended to convey to the plaintiff that the purchase orders were necessary for the internal administration of the defendant. I find the plaintiff’s claim for $9510 relating to the PNP and other products to be made out.
Additional 66 images
In August 1996, the plaintiff checked his records and found that there were 66 images which had been produced at the request of the defendant over the period of the project and for which no invoice had been sent and no payment made. Accordingly, an invoice was issued in the sum of $8980, calculated on a pro-rata basis and payable within thirty days. No payment has been made on that invoice and the plaintiff claims the full amount.
There is no evidence to suggest that those images were not produced or that they were not produced at the request of the defendant. The suggestion of counsel for the defendant that there were no images produced which were additional to those covered by other invoices is not supported by any evidence, and I have no reason to disbelieve the evidence of the plaintiff. Mrs Marks submitted further that any work done in respect of additional images was part of the original agreement for the proposed catalogue. However, as to the original agreement and any other additional agreements, there was always specified in the invoice the number of images which were covered by that invoice. It cannot be said that there was any agreement intended to include an unlimited number of images.
I have already (see paragraphs 38 to 41 above) dealt with the submission that it had been constantly made clear to the plaintiff that a purchase order should be given before any work was done and that any work done by him without a purchase order was done at his own risk.
The final submission of Mrs Marks on this claim was that the December invoice, described in paragraph 18 above, was intended as an account stated in respect of all work done and not otherwise charged as at that date. The plaintiff was unable to say whether any of those images were produced after that date and accordingly, Mrs Marks submitted, all of them should have been covered by the December invoice.
The evidence of Mr Maloney in his witness statement was that in December 1995, he had asked the plaintiff to provide to him an invoice for all of the work that he had done to date that was not covered by the purchase orders that he had received from the defendant. He said that he had been directed by Mr Davies, the newly appointed managing director, to ensure that all additional work to date was formalised by a proper purchase order. The December invoice was sent shortly after that request. A purchase order in respect of that invoice was sent to the plaintiff on 27 December 1995 and the sum of $37,465 paid by the defendant on 2 February 1996. Mr Maloney said that the payment was approved because the defendant believed that all accounts were now up to date. He was not cross-examined on this evidence save specifically as to the treatment in the December invoice of the matter of electronic enhancement, which is not relevant at this stage.
The December invoice specified 104 additional images and a number of other items of different kinds. The evidence of the plaintiff in his witness statement was that prior to rendering that invoice, and following a difference of opinion in relation to his work on the display stand for the United States boat show, which is discussed at paragraphs 61 and following below, he had told Mr Maloney that he wanted to be paid for the extra work he had been doing, for which no invoice had been rendered and no agreement reached as regards payment. Mr Maloney said that he should provide an account accordingly and he did so. In cross-examination of the plaintiff the following exchange took place:
Because what you were asked to do on 14 December 1995 was [to] bring Ronstan up-to-date, wasn't it? --- No, that is not the case, Your Honour.
I suggest to you that you were asked by Mr Maloney to ensure that all additional work on the catalogue done to date was formalised by a proper purchase order. Do you disagree that he said that to you? --- Yes, I most definitely do, Your Honour.
But, Mr Thomson, you say yourself that what you were intending to do by this particular invoice was bring up-to-date all work other than the additional enhancement work that you say you had a separate agreement with. Are you saying now you didn't intend to bring it all up-to-date, you just thought you would have a go at it and later you could still charge more? --- No, that wasn't the intent at all, Your Honour.
You knew that by submitting this Ronstan would think that this was the extra work you had done to date - let's leave aside the question of additional enhancement work? --- Yes.
In terms of the number of images Mr Maloney said to you, "Tell us what extra work you have done to date, let's formalise it with a purchase order," and you gave him this; isn't that right? --- That is correct.
But further down the track you have decided, looking back over it, that there could have been more images you produced to that date and you were going to charge Ronstan for those in August 1996. That is what happened, isn't it? --- That was kind of forced upon us by Mr Davies, Your Honour, the managing director at Ronstan.
But that is what has happened, for whatever reason. You have thought about it further down the track and thought there could have been more. You don't know how many more but there could have been more in December 1995? --- Sorry, I didn't get the gist of that question.
You have no idea how many of the extra 66 images that you are claiming for you had shot before 14 December 1995 compared to after, that is your evidence? --- That's correct, yes, absolutely.
. . .
You know that Mr Maloney says he thought upon getting this invoice that Ronstan was up-to-date with all work you had done on the catalogue that had not quoted for, don't you? --- Mr Maloney claims that he was asked by Tom Davies who had been in the seat two or three days - - -
Mr Thomson, I really want to get moving quickly? --- Well, I would like to give you an explanation if you want to finish this off.
With respect, Your Honour, I am feeling pressured in time, with a lot to get through. So far as this witness wishes to make submissions, his counsel can do it.
The evidence here is conflicting as to the genesis and purpose of the December invoice. Considering that the plaintiff was cross-examined on the question and Mr Maloney was not, and noting the background in what the plaintiff describes as a “difference of opinion” regarding the United States display stand, which forms the basis of a claim in this proceeding, I prefer the evidence of the plaintiff on this point. I find that the December invoice cannot be regarded as an account stated. Having no reason, as I have said, to find that the additional 66 images were not produced or that they had been in effect paid for pursuant to the December invoice, I find the plaintiff’s claim for $8980 for the 66 additional images to be made out.
Additional electronic enhancement
The final claim relating to the proposed catalogue is the claim for work said to have been done by way of additional electronic enhancement of the photographic images. The genesis of the problem is explained in paragraph 15 above.
The original invoice 4055 included an item for electronic enhancement at 15 minutes per image, charged at a rate of $200 per hour, which was the plaintiff’s standard rate to all his clients at the time. The plaintiff’s evidence was that he had assessed that level of electronic enhancement as being reasonable for photographs of products in high condition, for such purposes as adjusting highlights and shadows, minimal adjustments of colour and removing traces of dust. The later invoices included amounts calculated on a similar basis.
The plaintiff says that when it became apparent that much more enhancement was needed because of the poor quality of the products supplied to him for photography, from March 1995 he was requested by Mr Coutts and Mr Maloney to make additional electronic enhancements to a significant number of the images. That work was to be done at a rate of $200 per hour, with payment to be deferred to 7 October 1995 (later 7 October 1996) and otherwise on the conditions set out on the plaintiff’s invoices (as to which see paragraphs 10 and 26 above). On 16 May 1996, the plaintiff issued an invoice number 4204 in the sum of $117,000 for 585 hours work on a total of 1170 images, expressly stated to be calculated on the basis of an average of a minimum of thirty minutes work per image. No payment has been made and the plaintiff sues on that invoice.
The plaintiff’s witness statement sets out the negotiations with Mr Coutts and Mr Maloney and the demonstrations made to them which he says led up to the making of the claimed agreement. Relevant considerations were that the defendant wanted the work to be of the highest standard and wanted it to be used not only for the proposed catalogue, but also for trade distributors in the United States and Europe to include the images in their own catalogues. The distribution of images in CD form and their application on a future web site was also contemplated. Mr Maloney agreed in cross-examination that one of his key priorities in relation to the project was quality. The plaintiff says that he told Mr Coutts, with whom he says the agreement was finalised in July or August 1995, that he should expect an additional 30-35 minutes of enhancement for each image.
It was also relevant that the defendant had, by then, slightly overrun its budget for the proposed catalogue for the current year. The financial year of the defendant ran from 1 October to 30 September, and the arrangement for payment by 7 October was intended to ensure that the proposed catalogue was paid for out of the following year’s budget, but as early as possible in that year. At that stage the date for payment was to be 7 October 1995, but because of the prolongation of the time taken to prepare the proposed catalogue the invoice was issued in May 1996, with a payment date being 7 October in that year.
The evidence of Mr Coutts in his witness statement is consistent with that of the plaintiff as to these matters. Mr Maloney had no recollection of the discussions said to have taken place on this subject between the plaintiff, Mr Coutts and himself, but agreed that a decision had been made to retouch all product shots. Mr Coutts remembered telling Mr Maloney about the arrangement, but agreed that it was possible that he did not mention it to anyone else in the company.
The defendant relies on there being no written agreement between the parties relating to this claim, and no purchase order. For reasons already sufficiently set out, I do not regard the absence of a purchase order as relevant. The defendant also suggests that this work was intended to be covered by the December invoice, which included an amount of $8,000 for 40 hours work being described as “Electronic Enhancement – Retouching of product above and beyond original estimate”. As to that, as set out in paragraph 47 above, the evidence of the plaintiff is that the items in the December invoice were matters as to which there was no agreement reached as regards payment. His evidence is, as set out in paragraph 51 above, that there was an agreement in relation to the additional electronic enhancement which is here in dispute. That being so, he did not include in the December invoice the work which was the subject of that agreement. I note Mr Sander’s evidence that the plaintiff had agreed with him that the December invoice had been for all work done to date, but had said that he had forgotten to include the additional electronic enhancement. This statement was not put to the plaintiff, and I prefer the evidence of the plaintiff on this point.
The plaintiff said that he did not document the agreement because it was not his practice to document discussions with clients, and he had had previous contact with Mr Coutts for some years and regarded him as a person of the highest standing. It is not in issue that he went on and did the work of additional enhancement (either by himself or his assistants), and it would seem unlikely that he would do work of that magnitude otherwise than in the expectation of being paid. The evidence is that Mr Maloney frequently visited the premises of the defendant and observed the work of additional electronic enhancement being undertaken, particularly by Mr Weis.
Counsel for the defendant drew attention to certain inconsistencies in the evidence on this issue. I have already, at paragraphs 7 to 9 above, expressed my view as to the credibility of the witnesses. I accept that it is unusual, in the context of the whole transaction, that the agreement said to have been made was not documented by either party, and was not referred to by Mr Coutts in later budget discussions within the company. Nevertheless, having considered the evidence on the matter, particularly the detailed and circumstantial evidence of the plaintiff, I am satisfied, on the balance of probabilities, that the plaintiff and Mr Coutts for the defendant did enter into an agreement that additional electronic enhancement of the images would be performed at the plaintiff’s usual rate of $200 per hour and that the work was done by the plaintiff in accordance with that agreement. The doing of the work was consistent with the defendant’s emphasis on the quality of the proposed catalogue. The arrival of Mr Davies and subsequent departure of Mr Coutts are relevant here; it is clear that the internal administrative machinery of the defendant was improved under Mr Davies; but this agreement was entered into between the plaintiff and Mr Coutts before Mr Davies’s arrival.
The plaintiff said that his records of the time spent on the enhancement of each image had been lost, in circumstances which he explained. He could recall estimating that an average of about 45 minutes had been spent in additional enhancement work over and above the 15 minutes allocated in the original invoices. The evidence of Mr Weis supports that estimate. The amount charged is calculated on the total number of images produced being 1170, at an estimated average of thirty minutes per image. There is no evidence, despite the doubts expressed by counsel for the defendant, to indicate that either estimate is excessive.
Mrs Marks submitted that the number of 1170 images charged for was excessive. The total number of images produced was only 1143. Of those, she said the defendant had specifically asked that the 31 images in the PNP and other products group not be enhanced. Two documents are relied on for this submission. The first is a letter of Mr Maloney to the plaintiff dated 11 April 1996, which includes a passage reading:
Electronic retouching will not be required but I’d be happy to see you show it as a separate cost (as an option).
The second is a passage in the minutes of a meeting between Mr Maloney and the plaintiff on 15 April 1996, which reads:
[The plaintiff] was advised retouching would not be necessary (to reduce cost). They have advised, for the record, against this.
It is not clear in either document what images are being referred to, and neither can be relied on as referring to any specific images. Incidentally, it would appear that again the defendant is becoming less concerned about quality than it had been. The evidence of the plaintiff is that the PNP products were very poorly finished and extensive enhancement was performed on the products in this group.
On my calculations, the total number of images charged for is 1147, not 1143 or 1170. The difference between 1170 and 1147 is 23. The original estimate given to Mr Coutts was 30-35 minutes per image; the enhancement actually took an average of 45 minutes per image; the charge is at the rate of a minimum of 30 minutes per image. At that rate, the amount charged is on the basis of an average time lower than that which was contemplated when the agreement was entered into, and considerably lower than the time actually taken for the work. Twenty-three images at thirty minutes each at a rate of $200 an hour produce a total charge of $2300. I find the plaintiff’s claim for additional electronic enhancement to be made out, save that I find the amount due thereon to be $114,700, being the amount claimed, $117,000, less $2300.
Acrylic sheets and US Display stand
These two claims are unrelated to the production of the proposed catalogue. The plaintiff designed and constructed a display stand (“the European display stand”) to exhibit the products of the defendant at METS in Amsterdam in November 1995. That display stand was a success. Arising from that success are the plaintiff’s claims first, for $10,001 in respect of the supply of acrylic sheets, and some minor items associated therewith, for the production of display panels for French and German language versions of the European display stand; and second, for $12,626.86 in respect of a request from the defendant that he produce a similar stand (“the US display stand”) for use at Sail Expo, the US marine trade fair, to be held at Atlantic City in early February 1996. An invoice number 4236 on the plaintiff’s standard form covering both these claims was issued by him on 6 September 1996, providing expressly for payment on receipt of the invoice.
Acrylic sheets
The plaintiff claims that in October 1995, when he was commissioned to produce the European display stand, he was asked by Mr Coutts to purchase more acrylic sheets than were needed for the immediate purpose so as to enable French and German language versions of the display stand to be produced at a later date. Accordingly, he purchased three times as many sheets as he then needed. He had intended invoicing the defendant for those sheets at the time when they were to be used. In fact, he included them in the invoice in September 1996, when the relationship between the parties had broken down. He was extensively cross-examined on this issue. No other witness gave evidence on the subject. There is no evidence inconsistent with that of the plaintiff and I have no reason to disbelieve him. The amount claimed was reduced by agreement at the hearing to $7501. I find the plaintiff’s claim in that amount for acrylic sheets and associated minor items to be made out.
Mr Golvan submitted that the initial contract for the proposed catalogue, evidenced by invoice numbers 4055 and 4120, was not a contract for a number of separate items enumerated in those invoices, but was analogous to the contract for the building of a ship the subject of Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 2 All ER 29. On that basis, the defendant, having repudiated the contract, had, he submitted, no right to repayment of any part of the moneys paid. I do not accept that submission. Much of the argument in this case has turned on detailed itemised provisions in the plaintiff’s estimates and invoices.
None of the amount of $75,440, attributable in invoice number 4120 to printing costs, was repaid to the defendant, but $43,500 of that amount was applied to expenses associated with the proposed catalogue and not separately billed to the defendant. That being so, there would seem to have been a failure of consideration in respect of the difference, namely $31,940. While that failure of consideration is attributable to the repudiation of the contract by the defendant, the fact remains that the money was paid in advance for a purpose which has not been fulfilled. Accordingly, the defendant is entitled to the repayment of the amount of $31,940, to be set off against the amounts recoverable by the plaintiff in this proceeding.
In summary, I find that:
·the following claims of the plaintiff are made out:
Nicro range $17,932
Rigging range $22,460
PNP and other products $9,510
Additional 66 images $8,980
Additional electronic enhancement $114,700
Acrylic sheets $7,501
US display stand $12,626.86
·the plaintiff’s claim for interest under contract fails;
·the counterclaim is dismissed; and
·an amount of $31,940 is to be set off against the moneys payable by the defendant to the plaintiff.
I invite submissions from counsel as to the orders to be made consequent upon those findings, in particular as to statutory interest and costs.
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