Tor Products Pty Ltd v Redheads Wine Studio Pty Ltd - [2005] SADC 166

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Minor Civil Review)
TOR PRODUCTS PTY LTD v REDHEADS WINE STUDIO PTY LTD
Judgment of His Honour Judge Boylan
20 December 2005
ADMINISTRATIVE LAW
Minor Civil Review. Claim pursuant to the Sale of Goods Act 1895. Whether leaking wine barrels were fit for their purpose and of merchantable quality. Consideration of Section 14(a) & (b) of the Sale of Goods Act. Held, not of merchatable quality.
Sale of Goods Act 1895 S.14, referred to.
H Beecham & Co Pty Ltd v Francis Howard & Co Pty Ltd (1921) VLR 428 at 434; Australian Knitting Mills Limited v Grant (1933) 50 CLR 387 at 417-418, applied.

TOR PRODUCTS PTY LTD v REDHEADS WINE STUDIO PTY LTD
[2005] SADC 166

This is an application to review a minor civil matter in which the learned Special Magistrate gave judgment for the respondent, Redheads Wine Studio Pty. Ltd.
The Parties
Redheads Wine Studio Pty. Ltd., a company represented by Mr Lane, produces wine. Mr Lane is himself an experienced wine maker. T.O.R. Products Pty Ltd trades as Waterworld Home & Garden Supplies. Its representatives are Mr Peter Schlawin and Ms Paula Schlawin. Waterworld’s business, as its name implies, is the supply of products for use in the house and the garden.
The Facts
As part of that business, Waterworld sold secondhand wine barrels for use as pots for container plants. After it had begun acquiring barrels for that purpose, Waterworld received advice that some of the barrels it acquired could be refurbished by a cooper so that they were fit to be used for storing wine. Accordingly, Waterworld began selling to winemakers barrels that had been refurbished by a cooper. Essentially, the process of refurbishment involves the reshaving of the barrel by a cooper. The process is also called “re-coopering”. In March of 2004, Mr Lane had wine stored in blending tanks at Shottesbrook Winery, a winery managed by Mr Hamish Maguire. That wine needed to be emptied into barrels. From Mr Maguire’s point of view, and consequently from Mr Lane’s, there was some urgency. Mr Lane needed about one hundred barrels. Acting on the recommendation of another wine maker, Mr Lane contacted Waterworld and was told that it could supply one hundred barrels. He went to Waterworld’s premises to inspect the barrels.
Dates of Mr Lane’s attendances at Waterworld
I pause here to mention the matter of the dates of Mr Lane’s attendance or attendances at Waterworld as there was, in the evidence before the Magistrate, an unresolved dispute about that. According to Mr Lane, he telephoned Waterworld some time in March 2004 but only attended there once, on the 31^st of March 2004, on which occasion he inspected and paid for the barrels. Ms Paula Schlawin, who gave evidence before the Magistrate, disagrees. It was her evidence that Mr Lane telephoned Waterworld some time in March and first attended at its premises on the 19^th of March when he inspected and selected one hundred barrels which he marked with chalk. She said that nothing further was heard from him until later in the month when Waterworld telephoned him. As a result of that telephone call, according to Ms Schlawin, Mr Lane attended at Waterworld on the 31^st of March and paid for the barrels. The learned Magistrate made no finding on this matter. From the applicant’s point of view, the times are important because, says Waterworld, the barrels deteriorate if not filled with wine soon after re-coopering. They dry out. On the topic of dates, I prefer the evidence of Ms Schlawin. She was precise about dates, gave evidence that she kept a diary, and was supported by her employee Mr Consalvo to the extent that it was his evidence that there was some delay between Mr Lane’s selection of the barrels and his return to pay for them. Although Mr Lane was adamant that he attended at Waterworld only once, that occasion being on the 31^st of March 2004, he was generally unclear about dates and times. Although I prefer Ms Schlawin’s evidence, I do not think that the time matters for reasons to which I shall return.
Treatment with sulphur
Before returning to my narrative of the facts, I must mention one other matter, namely, the issue of treating refurbished wine barrels with sulphur. There is no dispute in the evidence that there is in the industry a practice of treating such barrels with sulphur, either in some sort of solution with water or as a gas. The effect of Ms Schlawin’s evidence was that such treatment swells the barrels so making and keeping them watertight. Mr Lane’s evidence was that sulphur treatment is a technique to prevent infection. The evidence of the Cooper, Mr William Thompson, does not resolve the issue. Again, I do not think the issue is relevant to the final result and I shall return to it. I should say that I accept Mr Schlawin’s evidence that it was her genuine belief that sulphur treatment would have made the barrels watertight for some reasonable time after such treatment.
When Mr Lane went to Waterworld on the first occasion, he spoke with Mr Peter Schlawin. It is not disputed that he told Mr Schlawin that he wanted refurbished barrels and that he wanted to use them for storing wine. Mr Lane saw that the barrels had been refurbished and asked who had refurbished them. Mr Schlawin replied that “he had two guys, one called Will”. Mr Lane then asked “Will, from South Australian Cooperage?” and Mr Schlawin was “Yes”. Mr Lane said that he knew Will and that he knew his work. In his submissions before me, Mr Lane said “If the barrels had not been coopered by a professional then there would be no discussion. There would be no sale.” Mr Schlawin offered to treat the barrels with sulphur. Mr Lane declined the offer on the basis that sulphur might affect the quality of the wine.
The barrels were delivered to Shottesbrook in two lots: forty nine barrels on the 1^st of April and fifty one on the 5^th of April. They were delivered by Waterworld’s driver, Mr Sergiacomi. When he delivered the first lot he was told by Mr Maguire to leave the barrels outside. He did so. The weather was warm. Mr Schlawin said in his evidence that he told Mr Maguire that the timber would shrink if the barrels were left out for too long. According to Mr Sergiacomi Mr Maguire replied “No worries. I know all about it.” When he delivered the second lot of barrels, Mr Sergiacomi put them in the same place as he had put the first lot. That first lot of barrels were still in that place and unused.
Mr Maguire began filling the barrels on the 7^th of April, the Wednesday before Easter. Some were leaking. Mr Lane contacted Waterworld. Waterworld sent Will Thompson, the cooper, to Shottesbrook. Thompson worked on three barrels; that is, he tightened the hoops and partly filled them with water, the appropriate technique for making refurbished barrels watertight as the barrels “take up” the water and the timber swells. Thompson said that he showed Mr Maguire what to do. Some barrels continued to leak and, on the 8^th of April, Waterworld sent two employees to Shottesbrook to work on the barrels. Of the sixty barrels on which those two employees worked, Waterworld allege that only three were still leaking when the employees left. As it was urgent that the wine be removed from the blending tanks, Mr Lane and another wine maker, Mr Christianson, worked on the barrels on 11 April, Easter Sunday. According to Mr Lane, despite all the efforts made, thirty one of the barrels could not be made watertight. Although Waterworld disputed that thirty one were not watertight, the Magistrate accepted Mr Lane’s evidence on that. He was correct to do so. Mr Lane was at the scene. Ms Schlawin was not; nor was anybody from Waterworld. And Mr Lane is supported by Mr Christianson who said that thirty to forty of the barrels still leaked. Mr Christianson was not challenged on that evidence.
Those then are the relevant facts behind the arrangements between Waterworld and Mr Lane. What legal rights and obligations arise from them?
The arguments of the Parties
Mr Lane argued before the Magistrate and before me that, on those facts, there was an implied condition in the contract of sale that the goods were fit for the purpose of storing wine and that, because thirty one of them leaked, Waterworld was in breach of its contract. That is, Mr Lane relied upon Section 14(a) of the Sale of Goods Act. He also pleaded Section 14(b) of that Act, arguing that the goods were not of merchantable quality.
Waterworld argued before the Magistrate and before me that Section 14(a) did not apply because Mr Lane had not relied on Peter Schlawin’s skill and judgement but on his own skill and judgement. As to Section 14(b), Waterworld argued that the barrels were of merchantable quality when Mr Lane selected and marked them but that he left them empty for so long that their condition deteriorated through his fault. The learned Special Magistrate found in Mr Lane’s favour, finding that both Section 14(a) and Section 14(b) applied and that Waterworld was in breach of the conditions of fitness for purpose and merchantable quality.
In my view, and with great respect to the learned Special Magistrate, His Honour was wrong in finding that Section 14(a) applied but correct in finding that Section 14(b) applied.
The Sale of Goods Act
Section 14 of the Sale of Goods Act is as follows:
Implied conditions as to quality or fitness
14. Subject to the provisions of this Act, and of any Statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:
(a)where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose;
(b)where goods are bought by description from a seller who deals in goods of that description (whether he be the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality: Provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed;
(c)an implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade;
(d)an express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith.
Generally speaking, Section 14 makes it plain that no conditions about quality or fitness for purpose are to be implied into any contract for sale of goods other than in the circumstances set out in the section.
Fitness for Purpose
Before the condition of fitness for purpose can be implied, the following must be established:
(i)That the buyer has made known to the seller the particular purpose for which the goods are required;
(ii) That the buyer has relied on the seller’s skill and judgement;
and
(iii)That the goods are of a description which is in the course of the seller’s business to supply.
In this case there is no dispute about (i) and (iii). Mr Lane made it plain to Mr Schlawin that he wanted the barrels for wine storage and it was in the course of Waterworld’s business to sell wine barrels for storing wine. The proviso about the patent or trade name is not relevant here. But the second of those three matters is disputed. That is, the dispute is whether Mr Lane relied on Mr Schlawin’s skill and judgement. In my view, he did not. Mr Lane relied partly on his own skill and judgement when he smelt the barrels and also on the fact that the barrels had been refurbished by a particular cooper known to him. His reliance on that fact is plain from the conversation between him and Mr Schlawin when he selected the barrels and from Mr Lane’s statement to me that “If the barrels had not been coopered by a professional, there would have been no discussion. There would be no sale.” Accordingly, there was no implied condition that the barrels were reasonably fit for the purpose of storing wine. Mr Lane’s claim pursuant to Section 14(a) of the Sale of Goods Act fails.
Merchantable quality
I turn to the issue of merchantable quality. Before the condition of merchantable quality can be implied, it must be established that:
(i) The barrels were bought by description
(ii) That the seller deals in goods of that description.
There is no dispute that Waterworld dealt in goods of the relevant description. The proviso, again, is not relevant because there is no suggestion that the fact that the barrels were not watertight could have been revealed by Mr Lane’s examination of them. Therefore, two issues remain: whether the goods were bought by description and whether, they were, in fact, of merchantable quality.
The fact that Mr Lane examined the goods does not mean that the sale was not one “by description”. Goods can be bought by description even where the goods have been examined and selected by the buyer. See H Beecham & Co Pty Ltd v Francis Howard & Co Pty Ltd (1921) VLR 428 at 434 and the cases there cited. I refer also to the judgment of Dixon J in Australian Knitting Mills Limited v Grant (1933) 50 CLR 387 at 417-418. There, His Honour said:
“When the grounds upon which the goods are selected or identified is their correspondence to a description and when, therefore, it may be said that the buyer primarily relies upon their classification or possession of attributes, then, notwithstanding that they are bought as specific goods ascertained and identified, the goods are bought by description.”
In this case, it is plain from the terms of the conversation between Mr Schlawin and Mr Lane on the occasion when Mr Lane selected the barrels and from what Mr Lane said to me in submissions about there being no sale if the barrels had not been professionally coopered, that there was a sale by description because Mr Lane primarily relied upon the barrels” possessing the attribute of having been refurbished by a professional cooper.
The next question, then, is whether or not the goods were of merchantable quality. I do not think that there can be any doubt that barrels which are unsuitable for storing wine because they leak are not of merchantable quality. There is, however, a complication. The effect of the evidence of both Mr Christianson and Mr Will Thompson is that refurbished barrels may leak but will cease to do so when they have been treated by driving up the hoops and partially filled with water. Once so treated, refurbished barrels should swell and become watertight. In this case, I do not think it would be the case that the barrels were not of merchantable quality if they leaked at the time of sale. But they would not be of merchantable quality at the time of sale if they were then in such a state that subsequent treatment by driving up and half filling them with water would not render them watertight. In this case, thirty one of the barrels proved not to be amenable to that treatment. That brings me back to the question of Mr Lane’s attendances at Waterworld. Waterworld argued that Mr Lane left the barrels so long between the time of the contract and using them that they deteriorated. In other words, Waterworld argued that the barrels were of merchantable quality when sold on the 19^th of March. But the evidence does not support that contention. Mr Christianson’s evidence was that a re-coopered barrel could be left for six months and would still hold liquid “with driving up and water”. Mr Will Thompson, the professional cooper, said that a barrel could be left dry for up to twelve months. The effect of their evidence is that the barrels could not have deteriorated in the period between the 19^th of March and the 11^th of April to the extent that they became unmerchantable. Nor were they rendered unmerchantable only by Mr Lane’s refusal of the sulphur treatment. A number of the barrels which originally leaked became watertight when treated, without sulphur, in the say described by Mr Thompson. It follows that the remaining thirty one barrels must have been beyond repair at the time of sale. At that time, they were not of merchantable quality.
Accordingly, I am of the view that the Magistrate was right in entering judgment for the plaintiff Redheads Pty Ltd.
I have no doubt that that result will seem unfair to Mr and Ms Schlawin. There is no suggestion that either of them or any of their employees has lied or had any knowledge that the barrels, when sold, may prove not to be watertight. They acted in good faith throughout. So, indeed, did Mr Lane. But once the preconditions to the operations of Section 14(b) of the Sale of Goods Act are made out the seller’s liability is strict. That the seller did not know of the defect is irrelevant.
Other arguments
I have not overlooked the submission made by Waterworld that, pursuant to Section 54 of the Sale of Goods Act, an implied condition can be negatived or varied by the express agreement of the parties. In this case, there is no suggestion that the condition implied by Section 1 4(b) was so negative or varied. Given my judgment about fitness for purpose, there is no need to consider this argument further with respect to Section 14(a).
Waterworld also complained in its application for review that the learned Magistrate erred in his application of Section 38(4)(a) of the Magistrates Court Act by permitting the respondent’s legal representative to be present in court during the trial without the consent of the applicant.
In my view there is no substance in that argument. The learned Magistrate declined to permit the respondent to be represented by a solicitor during the trial of the matter. The solicitor remained in court in the public gallery. The Magistrate had no power to order the solicitor from the court. Further, there is no suggestion that any assistance was offered in court to the respondent by the solicitor.
For the reasons I have given with respect to Section 14(b) of the Sale of Goods Act, I affirm the decision of the learned Magistrate.