Wine Insights Pty Ltd v OneBev Pty Ltd
[2016] VCC 1603
•18 November 2016
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISON
GENERAL LIST
Case No. CI-15-05456
| WINE INSIGHTS PTY LTD | Plaintiff |
| v. | |
| ONEBEV PTY LTD | Defendant |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 - 20 October & 7 November 2016 | |
DATE OF JUDGMENT: | 18 November 2016 | |
CASE MAY BE CITED AS: | Wine Insights Pty Ltd v. OneBev Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 1603 | |
REASONS FOR JUDGMENT
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Catchwords: Contract – Written agreement for the production and supply of alcoholic beverages – Process for the ordering of the product – Whether obligation to supply if procedures not followed – Subsequent agreement for a credit limit – Consequences if invoices not paid within 60 day trading terms or in excess of credit limit – Extent of purchaser’s ability to set-off claims in respect of supply of defective product or non-supply of orders.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. B. Spinak | Carroll O’Dea Lawyers |
| For the Defendant | Mr M. J. Galvin QC | Evans Ellis Lawyers |
HIS HONOUR:
1This litigation concerns an agreement for the production and supply of a butterscotch and cream liqueur marketed as “Creative Cowboy”. The liqueur seems to be a variation of a popular alcoholic drink created by mixing Butterscotch Schnapps with Baileys Irish Cream.
2Wine Insights Pty Ltd (“Wine Insights”) is a wine producer and wholesaler. OneBev Pty Ltd (“OneBev”) is a manufacturer and distributor of alchoholic beverages. In about August 2014, Wine Insights and OneBev executed a Supply Agreement to commence on 1 August 2014 (“Supply Agreement”) for the production and supply of Creative Cowboy and similar products.
3Pursuant to clause 10.2(a) of the Supply Agreement, “Payment of invoices will be due and payable within sixty (60) days from end of month from the invoice date”. In the proceeding, Wine Insights claims the sum of $241,102.97 as the unpaid balance of 13 invoices dated from 22 December 2014 to 30 November 2015. This sum is not disputed.
4OneBev filed a defence and counterclaim on 22 January 2016. The counterclaim sought damages for alleged breaches of the Supply Agreement relating to:
a.the failure to supply certain orders;
b.the supply of defective product.
5OneBev was ordered by Her Honour Judge Lewitan on 18 May 2016 to provide security for Wine Insights’ costs of the counterclaim. OneBev failed to provide the security and, as a consequence, Judicial Registrar Burchell, on 24 August 2016, ordered that pursuant to earlier orders, OneBev’s “counterclaim stands dismissed”.
6This left OneBev’s defence to the claim. The defence included, what I determined at the start of the trial was, a set-off. This permitted OneBev to argue that it was entitled to set-off against Wine Insights’ claim for unpaid invoices the losses suffered as a consequence of the failure to supply orders or the supply of defective product.
7By a reply, Wine Insights alleged that the Supply Agreement had been varied on about 1 December 2014 by OneBev agreeing not to trade in excess of a credit limit of $150,000. OneBev’s Managing Director, Mark Iacovangelo, conceded in evidence that a credit limit had been agreed to operate until the end of February 2015.
8The dispute concerning the application of the credit limit is relevant to the determination of whether OneBev had defaulted in its payment obligations and whether, as a result, Wine Insights might limit the supply of product until the credit account was regularised.
9There is no dispute between the parties that the product supplied by Wine Insights in the first two batches in August 2014 contained unacceptable features. The parties agreed that Wine Insights would allow a 50% credit in respect of those goods and further time to pay the remaining 50%. OneBev’s counterclaim had included substantial monetary claims which is now sought to set-off against the unpaid balance of the account. Wine Insights disputed that OneBev had suffered any losses which might be set-off, whether in relation to the supply of defective product in August 2014 or the failure to supply product at certain times in 2015.
10The issues for determination in the proceeding are:
a.whether the parties agreed to a limit of $150,000 on OneBev’s credit account, extending beyond 28 February 2015;
b.whether at the time Wine Insights failed to supply product, OneBev had been in breach of the trading terms, being either an agreed credit limit or the 60 day payment period following the end of the invoicing month;
c.whether OneBev has suffered monetary losses as a result of the supply of the defective product in August 2014 or the failure to supply product at certain times in 2015, which might be set-off against the amount owing to Wine Insights for unpaid invoices;
d.whether there is any, and if so what, sum owing by OneBev to Wine Insights?
Agreement about a credit limit
11The Supply Agreement provided that, generally, invoices for the supply of product were “due and payable within sixty (60) days from end of month from the invoice date” (clause 10.2). The “trading terms” in Schedule 2 provided that “the Purchaser shall pay the invoice within sixty (60) days after the end of the month”. This requirement was subject to “receipt of a correct and accurate invoice” and the purchaser’s rights to dispute the invoice, including by setting off any claim the purchaser may have against the supplier.
12The Supply Agreement did not contain a credit limit. By clause 22.8, “any variation to any of the above terms or conditions of this agreement shall be only by agreement between the parties and evidenced in writing…and signed by both parties”.
13On 8 August 2014, OneBev submitted a “credit application” to Wine Insights. The email attaching the application stated, “I would like to make it clear to all parties that the Terms of Credit found in the attached credit application in no way override any of the agreed terms of the Supply Agreement signed by OneBev and Wine Insights on 7/8/14”.
14The “Terms of Credit” were printed terms and included conditions inconsistent with the Supply Agreement. A section of the “Terms of Credit” related to “Credit Limit” and included the right of Wine Insights to “increase or decrease this limit at any time” and a discretion to “refuse to accept an order from the Customer if the value of the products specified in the order exceeds the credit limit”.
15The Credit Application contained information about OneBev and supplied “Bank Details” and “Trade references”. The document was unsigned and also left blank the section for completing the number of days “credit terms requested” and the dollar amount of the “credit limited requested”.
16A signed application was submitted by OneBev on 12 August 2014, although the requested “credit terms” and “credit limit” sections remained blank. The printed “Terms of Credit” were struck through and marked “not applicable” and a signed note was attached, reading: “The above terms are not applicable. Please refer to OneBev/Wine Insights Supply Agreement dated 7/8/14”.
17On 12 August 2014, Wine Insights’ CEO, Allison Payne, gave instructions for an account to be opened, and then stated in an internal email, “We have signed a supply agreement with them where we have agreed to 60 days EOM [end of month] terms. Please initially give them credit for $150k and let me know when that is exceeded so we can manage the credit limit in the first couple of months. Likely it will need to go to $300,000 but let’s do that in a considered way”.
18Ms Payne said in her oral evidence that she had fixed the credit limit of $150,000 after having taken account of the forecasts by OneBev of trading at about $75,000 per month. On that basis, Ms Payne was confident that, provided the 60 day payment terms were complied with, the outstanding amount on the account would not exceed $150,000. Ms Payne was aware that to produce the Creative Cowboy product, Wine Insights would need to pre-order substantial materials itself, including cream powder, flavouring and dry goods packaging.
Supply of defective wine in August 2014
19On 14 August 2014, Wine Insights invoiced OneBev for the supply of 1,170 units of 700ml bottles of Creative Cowboy. A similar quantity (1,171 units) was also supplied on 21 August 2014. Fairly soon after, OneBev had placed quantities of the product in the marketplace and there were complaints of globules of cream accumulating in the neck of the bottles.
20OneBev quickly reported the matter to Wine Insights who investigated the likely cause. It was later thought that the problem was associated with the powdered cream used and, apart from the first two deliveries, no further difficulties arose in relation to the products supplied by Wine Insights to OneBev.
21It will be necessary to later examine the details and timing of the complaints received by OneBev and the action it took and how the possible losses to OneBev were sought to be set-off against Wine Insights’ invoices.
22On 25 August 2014 Tammy Emmins, OneBev’s director responsible for operations, notified Wilhelm Vermeulen at Wine Insights that OneBev had “been receiving some complaints” and that there was “evidence of white flakey particles found in several bottles”.
23On 27 October 2014, Mr Vermeulen met with Ms Emmins and Mr Iacovangelo. Mr Vermeulen later contacted Ms Emmins to “organise collection of the stock”. At a meeting with the OneBev representatives on 13 November 2014, Mr Vermeulen was “told that the stock had been destroyed”.
Agreement reached in late November 2014
24In the last week of November, Ms Payne said she spoke by phone with Mr Iacovangelo and reached an agreement about the outstanding invoices from August and the imposition of a credit limit for OneBev. Ms Payne said that the agreement was accurately recorded in the email she sent Mr Iacovangelo on 1 December 2014.
25The email read, in part, as follows:
“Further to our conversation on the phone last week, as promised, this email details our agreement.
I have confirmed with you that the trade credit provided by Wine Insights Pty Ltd to OneBev is $150,000 and 60 Days. Both elements of these terms need to be adhered to and as explained, I am currently unable to increase the amount of credit we have provided due to the management of cash flow, particularly in relation to dry goods commitments on proprietary packaging.
The current Balance of the account (as at this afternoon) is $197,213.56.
As agreed, we will credit 50% of the balance currently sitting in 90+ days which relates to the first 2 productions made and the quality issues (total $56,652.20). This is a final settlement offer after advice that the stock has been destroyed, as agreed. We will raise a credit of $28,326.10 which will be applied to your account as at 30 November.
The remaining 90+ day balance of $28,326.10 is to be paid by OneBev progressively over the next 3 months i.e. paid in total before 28 February 2014. I also confirm that this $28,326.10 outstanding from August will not be counted towards the $150,000 credit limit whist it is being paid off”.
26The email referred to an order from Cambrian Rock Wines (an associated company of OneBev) which had been charged to OneBev’s account and which Ms Payne proposed to re-invoice to Cambrian. Ms Payne then stated that:
“As a result of the above adjustments, the account balance will be
Current
$197,213.56
Credit
-$28,326.10
Cambrian Cr
-$15,677.20
Balance
$153,210.26
Less 90+
$28,326.10
Total
$124,884.16
Therefore, available credit limit is currently $25,115.84”.
27Mr Iacovangelo disputed Ms Payne’s record of the agreement. He said that in the telephone discussion with Ms Payne at the end of November 2014, “there was no conversation in relation to a credit limit”. Mr Iacovangelo said that Ms Payne was concerned at “the exposure levels” Wine Insights would have from OneBev production “for the December period”.
28Mr Iacovangelo said that he had agreed that OneBev “would work with Wine Insights to make payments ahead of when our invoices were due, in order to reduce [Wine Insights’] exposure levels… to under 150 [thousand dollars] by the end of December. But it was only a temporary arrangement for the Christmas trading period”.
29He said that Ms Payne told him Wine Insights “had already incurred significant costs associated with the setup of the production of our products in the vicinity of $300,000, and that the exposure would continue to grow because some of the materials that they were purchasing they were paying for in advance of receiving payments from our business [and] she just couldn’t fund it unless she received money from us”.
30Mr Iacovangelo said that he and Ms Payne “were talking about exposure and we committed to reducing that exposure for a temporary period to assist Wine Insights but… in no capacity did we ever agree to a credit limit being imposed upon the Supply Agreement”.
31During his cross-examination, Mr Iacovangelo agreed that the $150,000 limit applied for “the Christmas trading period which was December, January, February, then it’s back to normal”. He said that the OneBev account “must remain under 150… till the end of February”.
32Mr Iacovangelo did not at that stage respond to Ms Payne’s email. Although they spoke by telephone and exchanged emails on 4 December 2014, there is nothing in those emails which supports Mr Iacovangelo’s evidence as to what he said had been agreed in the conversation in the last week of November.
33The statement in Mr Iacovangelo’s email dated 4 December that, “We are in agreement with your proposal that the account will be under $150k by month’s end” was not, in my view, a different version of the agreement recorded in Ms Payne’s email dated 1 December. The comment by Mr Iacovangelo was a response to Ms Payne’s statement in her 4 December email that, “I understand from our conversation that the account will be under $150,000 by the end of December”.
34Ms Payne’s email on 4 December followed discussion with Mr Iacovangelo that OneBev needed extended credit to cover the extra requirements of OneBev over the Christmas holiday period. Ms Payne noted in her email that the account balance “currently stands at $123,154.58 (plus $28,326.10 being paid down)”.
35Ms Payne set out the October invoices (which were due by the end of December 2014), and noted that, “These invoices total $98,580.90”, and continued:
“I understand from our conversation that these invoices will be paid in regular weekly payments commencing next week. I also understand that your bottling schedule is approximately
W/E 5/12 $60,000
W/E 12/12 $30,000
W/E 19/12 $30,000
On the basis that we receive regular weekly payment of the October invoices commencing next week, I am happy to extend the $ credit limit on a temporary basis to allow for the bottling currently scheduled to be produced and invoiced. I understand from our conversation that the account will be under $150,000 by the end of December.
Should any of the above change for any reason, please contact me urgently. Otherwise, we should be able to work through the pre-Christmas bottling without Tammy and Wilhelm having to talk about the state of the account”.
Mr Iacovangelo noted in his 4 December email that, “Payments will remain weekly as discussed until October invoices cleared”.
Further emails discussing OneBev’s account balance
36The next email was from Ms Payne to Mr Iacovangelo on 22 December 2014. She stated, “Just looking at your account and we are up to $234k, excluding the $28k of the 120 day+ invoice. Please confirm that the payments we will receive this week (week commencing 22/12) and next week (week commencing 29/12) will be of the required value to bring the account back to $150k by 31/12 (min $84k)…I understand from Wilhelm that you have some product scheduled for the first production week back after New Year and we will need to ensure the account is within the $ credit limit before that production commences”.
37On 30 December 2014, Allan Moss (Wine Insights’ Financial Controller) followed up with an email to Mr Iacovangelo, as follows:
“Thank you for your payment of $12,342.00 for invoice 107749 yesterday being the second October Invoice paid leaving a Balance of $74,380.90 payable for October Invoices. As set out in Allison’s emails below that require your Account to be no more than $150,000 as at the 31 December 2014 together with a reminder that your order for production in early January will not proceed if this milestone is not achieved. Please confirm that the Balance of October Invoices of $74,380.90 will be paid by 31/12/14 together with November Invoices totalling $48,772.68”.
38On 5 January 2015, Ms Payne wrote to Mr Iacovangelo, as follows, “I am surprised that the below arrangements have not [been] met, despite Beelgara [Wine Insights] continuing to supply on the back of the agreement, and the account remains more than $91,000 over the agreed balance. We are in no position to supply per Tammy’s attached email to Wilhelm. Can you please advise arrangements for payment as a matter of urgency”.
39Mr Iacovangelo responded soon after stating, “Tammy [Ms Emmins] and I are in the US without limited email access. Our accounts team have just returned today from their Christmas break and from my understanding they paid close to 50k of October invoices throughout December. They have advised they will be releasing the remaining October invoices this week. We trust this would not impede production”. Ms Payne replied stating that Wine Insights had “received only $24,200 of October invoices” (of the total of $98,580.90). Apparently a further $23,972 was paid on 5 January.
40On 7 January 2015, Mr Iacovangelo wrote to Ms Payne stating that OneBev’s “accounts team…are releasing” two payments to clear “all outstanding payments” for the October invoices, comprising “today - Inv. 107377 - $25,085.94; Friday - Inv. 107567 - $24,245.54”.
41Ms Payne responded that day, as follows:
“Thank you for the advice re payment this week. This however will not entirely resolve the issue. As agreed, it is necessary for the account to get back within $150k. My understanding is that Tammy is requesting production next week which will total approx. $40k. After the payments to be received this week, we will be still sitting at a $168k balance and no room to extend credit further to accommodate the requested $40k of production.
We agreed to work with a weekly payment through December to get the account to $150k by 31 December and to maintain supply in the lead up to Christmas. We cannot continue to support a greater debt now into January. This is the consistent message I have been communicating for weeks. We request that the account urgently be brought back under $150,000. No production can be built into our schedule until this occurs”.
42Mr Iacovangelo replied later on 7 January 2015, as follows:
“The terms of our agreement that we agreed to and documented were based on 60 days EOM terms. There was never a defined ongoing credit amount agreed to at any time since our business together commenced.
In December last year against your concerns of increased exposure due to the festive period, in good faith we agreed to make advance payments prior to the invoices being due in order to reduce the exposure.
At the time we agreed that if we could reduce the exposure by ONEBEV making advance payments (relative to invoice due dates) this would alleviate the ‘large’ exposure issue that our December orders were providing your business. We agreed that if we cleared all October invoices the trading account balance would sit circa 150k which is where the account will sit on Friday. Beyond October invoices, the majority of the invoices outstanding relate to December productions some as late as December 22nd (due for payment March 1 as per our terms). My understanding of our conversation was once the account balance reached circa 150K, in January production would commence as normal hence as a business we made provisions around this. In addition we have made commitments to our major retailers to continue to supply the taller clear 700ml bottle which we purchase exclusively from you. These commitments extend right through to our shelf positioning as the new taller bottle size has been specifically cut into the retailer planograms.
We believe a reasonable ongoing limit to the value of 250K would ensure that we continue to fulfil our obligations to our customers without having to make a significant number ‘advance’ payments which would essentially result in our agreed trading terms being eroded. We have no issue making some advance payments but would have large concerns if our trading terms were significantly eroded given the large trading terms we have with our major customers”.
43This was the first time that Mr Iacovangelo had, in writing, set out an alternative version of the arrangement that had been reached in the telephone conversation with Ms Payne in late November 2014. The parties were to return to the positions articulated in their respective 7 January emails over the following months as Ms Payne sought to contain the OneBev credit account within a limit of $150,000.
44Ms Payne investigated Mr Iacovangelo’s request for a “reasonable ongoing limit to the value of $250K”. NCI Credit Risk Management reported on 8 January 2015, including that, “We have conducted a credit check of the company and directors and have traced adverse information on the directors in relation to companies that were liquidated and a payment default… We have conducted a trade reference survey and results of the references returned show a negative payment performance. Based on the sum of information obtained we are unable to recommend a credit limit. We note you are currently trading with the subject company and recommend you monitor the account closely”.
45Ms Payne advised Mr Iacovangelo of the results of the credit check, noting that “there is certainly no improvement in any reports forthcoming from the trade reference industry”. The correspondence between them continued over the following months. Ms Payne attempted to keep the OneBev credit account within acceptable limits and Mr Iacovangelo disputed Wine Insights’ entitlement to do so.
OneBev sets off projected losses from defective August supplies
46On 13 March 2015, Mr Iacovangelo notified Ms Payne that OneBev’s CFO had “placed a hold on the payment of the invoice for 49k in late December as our Accounts Team have recently received information that WW [Woolworths] and Coles are raising claims for a product withdrawal of Creative Cowboy 700ml for two batches due to the product coagulation in the neck”.
47Pursuant to clause 22.2 of the Supply Agreement, “The purchaser may set-off any payment due to the supplier, whether under this Agreement or otherwise, against any claim that the purchaser has against the supplier, whether under this Agreement or otherwise”.
48The possibility of a set-off arising in relation to the deliveries made in August 2014 was used by Mr Iacovangelo to delay payment of Wine Insights’ invoices for some months. Attempts by Ms Payne to obtain information from OneBev about the progress of discussions with Woolworths and Coles were generally deflected by Mr Iacovangelo.
49On 17 March 2015, OneBev provided “product withdrawal forms” submitted by it to Woolworths for the Creative Cowboy product, apparently in December 2014. The form was not a product “recall”, which would have involved a “health risk”. The “withdrawal” was made because the “product is non-compliant (not meeting quality measures and is safe)” and was “isolated to best before 07.08.16 & 19.08.16 [the product supplied in August 2014] – A few units have reported to have small cream deposits. The product is completely [safe]”.
50The form was one provided by Woolworths to its suppliers and stated that a “product withdrawal” charge of $79.00 (including GST) “per store will be levied – subject to change”. Apparently, the Creative Cowboy product had been supplied to about 2,000 Woolworths stores, and it was the threat of the product withdrawal charge being levied which OneBev said justified the non-payment of Wine Insights’ invoices, until Woolworths’ intentions were clarified.
51Pursuant to clause 8 of the Supply Agreement the product must be “of merchantable quality and fit for purpose [in order to] meet the Quality Standards at the time of delivery and free from defects”. Otherwise, “the purchaser may:
a. reject the goods;
b.require the supplier to refund any payments made by the purchaser to the supplier in respect of the defective goods; or
c.require the supplier to collect and replace the defective goods at the supplier’s cost”.
52On 17 March 2015, Ms Payne wrote to OneBev noting that “under the contract, we have an obligation to replace the stock or raise a credit for the stock at the price charged to you. I am sure you realise that this stock has not been paid for (one invoice credited in full and one on delayed payment terms as agreed when we discussed your destroying stock which was not approved) so we have no further obligation in relation to that particular stock”.
53On 19 March 2015, Ms Payne met with Mr Iacovangelo and Ms Emmins. Later that day, Mr Iacovangelo sent an email to Ms Payne recording “the points agreed at out meeting”, as follows:
“1. In light of the existing product claims from WW, Coles and Independent trade on Beelgara/Wine Insights (BW) products supplied to ONEBEV, ONEBEV will commit to holding payment only for the remaining open December invoice which has a value of approx. 50k. All other invoices will be paid accordingly as per our trading terms. This commitment by no means limits the total exposure position for both parties in light of the issues facing surrounding product merchantability.
2.ONEBEV commit to providing BW a defined monetary resolution (relative to the potential exposure situation caused by the faulty product supplied to ONEBEV by BW) by April 9 2015. Should the exposure amount exceed 50k, ONEBEV I BW propose to meet and re-evaluate this exposure position and the next steps for both parties.
3.BW to continue to supply ONEBEV without interruption as per our existing trading agreement.
4.A meeting of both parties to be held on April 6 or 7 2015. Meeting to be held in Sydney at a location to be determined closer to the date”.
54Notwithstanding the agreement to meet, and to provide a “monetary resolution” by early April, neither happened. Mr Iacovangelo said in evidence that he had nothing further to report to Ms Payne from Woolworths and he and Ms Emmins were at that time travelling in the United States.
55On 14 April 2015, Mr Iacovangelo made a detailed response with apologies, explanations, some information, promises and an assertion of OneBev’s rights of set-off. The promise was “to release 5k per week against this 49k invoice until such a time we receive a complete resolution from Woolworths and Coles”.
56No payments were made over the next 3 weeks and Ms Payne again wrote on 4 May 2015. Mr Iacovangelo responded on 5 May that, “payments will begin tomorrow [with] multiple payments this week and next week”.
57The promised payments were not made and Ms Payne again wrote on 12 May 2015 advising that orders for the supply of further product cannot be confirmed “while the account remains outstanding despite previous agreements and assurances made by you”.
58Further correspondence followed, inconclusively. Peter Toohey, Wine Insights Managing Director wrote to Mr Iacovangelo on 13 May 2015 noting, “your account is out of terms and as such no supply will be forthcoming”. Correspondence continued between them. Lawyers became involved in about June 2015 and the “Dispute Resolution” processes in clause 15 of the Supply Agreement were later put in train.
59I do not propose to traverse the further communications between the parties. In my view the following conclusions should be drawn from the correspondence to this time:
a.an agreement had been reached in late November 2014 in a telephone call between Ms Payne and Mr Iacovangelo;
b.the agreement was as Ms Payne recorded it in her email to Mr Iacovangelo dated 1 December 2014;
c.the agreement to limit the credit account to $150,000 by the end of December 2014 was not met by OneBev;
d.from that time Mr Iacovangelo made statements that were untrue and promises that he likely had no intention of keeping;
e.in mid-March 2015, Mr Iacovangelo purported to set-off claims that Woolworths and Coles might make relating to the defective product supplied in August 2014;
f.a further agreement was reached about this matter on 19 March 2015 in a meeting between Ms Payne, Mr Iavcovangelo and Ms Emmins;
g.OneBev failed to honour that agreement by paying promised sums and keeping Wine Insights informed of the claims Woolworths had foreshadowed;
h.since early January 2015, Ms Payne had made it clear on a number of occasions that if OneBev failed to pay invoices in accordance with the 60 day trading terms and to keep its credit account under $150,000, that Wine Insights would not necessarily supply product to OneBev.
60Generally I regarded the evidence of Mr Iacovangelo and Ms Emmins as unreliable, particularly where it was not supported by the contemporaneous written exchanges between the parties. A significant example follows.
61On 5 August 2015, Mr Moss, Wine Insights’ Financial Controller, sent an email to Ms Emmins advising that “OneBev has reached the credit limit of $150,000 as per the attached statement. So as not to disrupt your requirement for further deliveries this month you will need to arrange the following payments [specified] to avoid any problems with supply”.
62Ms Emmins was taken to this evidence in cross-examination and asked about the reference in the email to the $150,000 credit limit. In responding, Ms Emmins referred to an email received on 5 August 2015 from Mr Toohey, Wine Insights’ Managing Director, to Mr Iacovangelo. The email had the “subject”, “Enough is enough”. The email put OneBev “on notice” that unless by 14 August, OneBev had supplied “original verified copies (WW documentation) relating to the Cowboy recall, I will be sending the attached email to Martin Smith, MD Woolworths Liquor Group”.
63The attached email referred to the recall of the product by Woolworths and continued, “Wine Insights makes ‘Cowboy’ for OneBev Pty Ltd, after repeated attempts to extract information relating to the recall out of OneBev I have taken the next step and come to you directly as Wine Insights is ultimately responsible for the quality and integrity of ALL the products we manufacture. Our auditors (for SQF audit) require the following information; the total amount of stock returned, inclusive of ALL costs and charges levied by WW to OneBev associated to this voluntary recall”.
64OneBev’s response later that day was from Ms Emmins to Mr Moss. The email reads: “Appreciate the heads up. ONEBEV commit to make the following payments to Beelgara to be applied against invoice 113862 & 114029 for August. 7/8 – 10k. 14/8 – 10k. 21/8 – 10k. 28/8 – 10k. 1/9 – 33.6k. Please confirm your acceptance of the above payments and please confirm Beelgara’s commitment that all existing orders will proceed without issue on time and in full. Beyond this the objective is to continue with frequent payments inline with our collection volumes that ensures we maintain the $ amount below the credit limit you have set. This limit will obviously be reviewed coming into November and December 2015 as we approach Christmas peak period” (emphasis added).
65Ms Emmins said that this email was dictated to her by Mr Iacovangelo. She said that they “were quite petrified when we read [Mr Toohey’s] email, because…our customer Woolworths was not aware that Wine Insights was the producer of our product”.
66Ms Emmins said that Mr Iacovangelo told her, “We’ve gotta give this…guy what he wants. He’s gonna go to Woolworths”. As a result she said they “put forward to Mr Moss…a financially even more attractive offer”. Mr Iacovangelo, when taken to Mr Moss’s email dated 5 August 2015 said, “I can’t recall receiving it”. In the circumstances, the evidence of both Ms Emmins and Mr Iacovangelo on this issue is difficult to accept and further casts doubt about the general reliability of their evidence.
Complaints received by OneBev about the products
67The first complaint by OneBev regarding the Creative Cowboy product was notified by Ms Emmins to Creative Insights on 25 August 2014. The email noted that OneBev had “been receiving some complaints…from the first production”.
68Ms Emmins gave evidence that complaints were received within OneBev by Ashley Collins, the company’s National Accounts Manager. Ms Collins recorded all complaints on a spreadsheet, which is in evidence. The spreadsheet does not record the date the complaint was received. It does record the “customer” and “store” where the product was sold and the number of items of stock replaced.
69The first two deliveries of the product dispatched on 14 and 21 August 2014 were, respectively, for 1170 and 1171 units of 700ml bottles of Creative Cowboy. Packs of 2 litre casks were also delivered in August.
| Coles, First Choice & Liquorland | 41 |
| Woolworths, BWS & Dan Murphys | 32 |
| Others | 29 |
| 102 |
70There is evidence that the brand names BWS [Beer, Wine and Spirits] and Dan Murphys are associated with Woolworths and First Choice and Liquorland with Coles. The spreadsheet showed complaints were received from the following customers:
71On 13 October 2014, the Promotions Manager, Liquor Division – BWS, Woolworths Ltd wrote to Ms Collins at OneBev raising, “Another store issue on the Creative Cowboy 700ml”, and noting that, “This is starting to get out of hand”. This email suggests that by this date BWS was requiring a definitive explanation. It stated that otherwise, “we will need to issue a withdrawal”.
72On 4 December 2014, the Business Manager Spirits – BWS sent an email to Mr Iacovangelo and Ms Collins noting that BWS proposed to withdraw the product, and stating:
“1) The Woolworths Liquor Group have been receiving a number of complaints on the Cowboy 700ml with the white lumpy globules and tasting off over the past couple of months both from stores and customers.
2) We have had our quality team check the product and agree with their assessment that it does not meet our quality standard and should be withdrawn from our shelves.
4) The batch affected is the 7th August 2014, we will ask our stores to check this batch and dump any product with the obvious white globules.
5) We will raise a claim against any bottles withdrawn and current dumps. To date from 4/7/2014 up until 26/11/2014 we have dumped 363 bottles of Cowboy 700ml.
We will need to work through what Ashley has credited to date”.
73Ms Emmins said that it was shortly after this email that OneBev completed the process for the initiation of the withdrawal process on the Woolworths’ website.
74A similar process occurred with Coles. On 22 November 2014, the Category Manager, of Liquorland [Coles] advised Ms Collins of problems in a number of Liquorland stores which had “removed from sales bottles of Creative Cowboy that have lumps floating in them”. The Manager asked Ms Collins to “organise credits” and to clarify whether “stores should dispose of stock or if there will be an exchange”. Replacement stock was sent to the stores by OneBev.
75Both Mr Iacovangelo and Ms Emmins gave evidence of conversations with Woolworths’ and Coles’ personnel about quality issues with the product. This evidence was generally vague and non-specific as to dates, participants and detail of conversations. No confirming correspondence or other record of the conversations is in evidence. It is difficult in these circumstances, and in view of the reservations I have about the evidence of Mr Iacovangelo and Ms Emmins, to give this evidence much credence.
Analysis of the evidence
76In my view, the evidence leads to the following conclusions:
a.whilst the Supply Agreement should have governed the trading relationship between the parties, the parties did not strictly follow its processes, most significantly in the procedure for the ordering of the product;
b.the early product supplied in August 2014 was probably defective;
c.the parties, by the agreement reached in the telephone conversation between Ms Payne and Mr Iacovangelo in late November 2014, dealt with the issue of payment for the defective product by agreeing that one invoice would be the subject of a credit and the other invoice would be paid off over three months;
d.as it transpired, the total loss to OneBev as a consequence of the supply of defective product was limited to the sum of $13,479.51 which OneBev was charged by Woolworths following the withdrawal of the defective product. In these circumstances, the credit of $28,326.10 allowed by Wine Insights to OneBev was more than sufficient to cover this loss;
e.as part of the agreement reached between Ms Payne and Mr Iacovangelo in late November 2014, it was agreed that as a result of the larger orders over the Christmas period, OneBev would, by the end of December 2014, have reduced its account balance to less than $150,000 (not taking into account the remaining August 2014 invoice for $28,326.10);
f.it is likely that Mr Iacovangelo agreed to a permanent credit limit of $150,000, and not simply a temporary limit which would become unlimited on 28 February 2015;
g.at critical times from December 2014, OneBev’s trading account with Wine Insights;
i.exceeded $150,000;
ii.had invoices in arrears for more than 60 days after the end of the month of invoice in breach of the trading terms in the Supply Agreement;
h.under the Supply Agreement, Wine Insights had no express obligation to supply product to OneBev until OneBev had approved Wine Insights’ confirmation or amendment of a purchase order placed by OneBev;
i.there may have been an implied obligation for Wine Insights to supply product to OneBev:
i.pursuant to the agreement between Ms Payne and Mr Iacovangelo in late November 2014, but only if OneBev observed the $150,000 credit limit and the 60 days payment period;
ii.there may have been a similar requirement implied in the Supply Agreement, although this is far less clear, and would likely only be in circumstances where the 60 day payment term was complied with;
j.at the times when OneBev, by its defence, alleged that Wine Insights failed to supply product it had ordered, or supplied the product late, that situation arose because at the relevant date:
i.OneBev had defaulted in the terms of trade in the Supply Agreement by failing to pay invoices within 60 days after the end of the month of invoice;
ii.OneBev had exceeded $150,000 in credit orders;
iii.OneBev had wrongly claimed, or maintained its claim to a set-off in respect of the December 2014 invoice no. 109644 for $49,063.86 arising from anticipated back charges by Woolworths or Coles, in circumstances where:
A.Woolworths and Coles had by that time no intentions of levying back charges;
B.in breach of an agreement reached on 19 March 2015 at a meeting between Ms Payne, Mr Iacovangelo and Ms Emmins, OneBev had failed to keep Wine Insights informed of the progress of the claims foreshadowed by Woolworths and Coles and had failed to make payments of $5,000 per week from the December 2015 invoice for $49,063.86;
k.if OneBev suffered any losses as a consequence of Wine Insights’ refusal to supply product whilst the OneBev account was in default, those losses are the responsibility of OneBev;
l.there was no valid set-off OneBev could raise in respect of its admitted debt to Wine Insights of $241,102.97.
77Supply Agreement – ordering process: Clause 5 of the Supply Agreement provides as follows:
“5. Goods
Orders
5.1Subject to the terms of this Agreement, the purchaser shall place Orders for the Goods to the Supplier in writing.
5.2The Supplier will in turn confirm or amend the Order and submit back to the Purchaser a sale confirmation for the Purchaser’s approval. The sale confirmation shall include a Delivery Date for the Order.
5.3No agreement to supply the Goods in an Order exists until the Purchaser provides confirmation of approval.
Delivery and Collection
5.4The Supplier will supply the Goods to the Purchaser at the Delivery Location on the Delivery Date in accordance with the terms of the confirmation Order.
5.5 The purchaser or their Representative will collect, or arrange for collection, all Goods produced for Coles or Woolworths from the Collection Location and will be responsible for freight or transfer of such Goods to Coles and Woolworths.
…
Late Delivery
5.8The Supplier must deliver the Goods to the Purchaser on the Delivery Date. In respect of this obligation time is of the essence”.
78The Supply Agreement specified the following process for ordering product:
a.OneBev places a written purchase order;
b.Wine Insights may confirm or amend the purchase order;
c.Wine Insights submits a sales confirmation to OneBev, which includes a delivery date for the order;
d.OneBev must confirm to Wine Insights that it approves the confirmation of the order, or amended order.
79Clause 5.3 provides that, “No agreement to supply the goods in an order exists until the purchaser provides confirmation of approval”. This suggests that each individual purchase by OneBev from Wine Insights is a separate transaction and which is otherwise “subject to the terms of this agreement”.
80Ms Emmins said that the way OneBev went about ordering goods from Wine Insights was, “in various ways. Sometimes I would submit purchase orders. Sometimes it would be via email. Sometimes I would call Wilhelm [Vermuelen] [by phone]… but it was all based back to the forecast”. Ms Emmins said that she was not aware of ever having received “a sale confirmation from Wine Insights”.
81Clause 5.10 provides that, “The purchaser will provide all forecasts of purchases of goods on a six (6) month rolling basis and update those forecasts … Any forecast or estimate provided by the purchaser to the supplier in relation to the goods and services will not be binding”. The clause provided a mechanism for Wine Insights to “request a deposit equivalent to the dry goods component of the cost of supply” in circumstances where “the forecast and actual disagree by 20% or more over a 6 month period”.
82The first forecast by OneBev was made as an attachment to an email dated 4 September 2014 and included OneBev’s requirements for the months September 2014 to January 2015 inclusive. During August 2014, OneBev had submitted two purchase orders, each for both bottled and bulk product at an expected cost, apparently based on agreed rates, of $44,473. These orders were fulfilled. Subsequently, OneBev’s requirements, as forecasted on 4 September 2014, were generally supplied and invoiced between August 2014 and January 2015, although OneBev did not always order the quantities it had forecasted.
83Later in 2015, when there were disputes about the sufficiency of payments made by OneBev, Wine Insights threatened to not fulfil orders made by OneBev until the account was regularised. On occasions, orders were not fulfilled, or the delivery of product was delayed.
84By its Defence, OneBev alleges that Wine Insights failed to fulfil orders which it said were placed pursuant to the Supply Agreement on:
a.11 May 2015, which Wine Insights refused to supply;
b.19 May 2015, which Wine Insights refused to supply;
c.an order for delivery on 11 June 2015, which Wine Insights did not supply until 16 June 2015;
d.2 July 2015, for delivery on 3 July 2015, which Wine Insights did not supply until 10 July 2015;
e.31 July 2015, for delivery on 14 August 2015, which Wine Insights did not supply until 29 September 2015;
f.18 September 2015, for delivery on each of 13, 19 and 26 October 2015, which Wine Insights failed to supply.
85In each of these instances, there had not been compliance by either party with the strict terms of clause 5 of the Supply Agreement. Accordingly, in those cases pursuant to the agreement, “no agreement to supply the goods in the orders exists”.
86Between August and November 2014, and later, the parties ignored the ordering process set out in the Supply Agreement and orders were placed, and generally processed, by the variety of means described by Ms Emmins.
87Late November 2014 agreement: In late November 2014, the parties reached agreement to resolve the issues raised by the defective product supplied in August 2014, and how Wine Insights would ensure the continuity of increased supply over the Christmas period.
88This was a significant agreement which cut across the terms of the Supply Agreement. The solution in relation to the defective product issue was a practical one which, from Wine Insights’ perspective took account of OneBev’s apparently unilateral decision to destroy the large bulk of the August deliveries and not to retain it for return to Wine Insights.
89I am satisfied that the agreement in relation to the increased supply over the Christmas period was resolved, as Ms Payne described in her evidence and as she recorded in her contemporaneous emails. I reject the evidence of Mr Iacovangelo on these matters. It is inconsistent with both Ms Payne’s emails and his own responses, or lack of response, to those emails.
90Accordingly, I am satisfied that the parties agreed to an ongoing credit limit for OneBev’s purchases of $150,000, although this was a limit which would be subject to review. OneBev denies that any such agreement was reached, and even if it had been, the agreement would not be enforceable because the process in clause 22.8 of the Supply Agreement to effect a variation was not followed. Further, it was said there was no consideration for OneBev’s acquiescence to the credit limit.
91In my view, OneBev reached agreement to vary the terms of the Supply Agreement by adding to the trading terms a requirement that its credit account with Wine Insights be kept within a credit limit of $150,000. The agreement was evidenced by the email dated 1 December 2014. The requirement in clause 22.8(b) for a variation to be “signed by both parties” seems inconsistent with the requirement in 22.8(a) that it simply be “evidenced in writing”, and should not affect its operation.
92I consider that consideration was offered in the sense of an implied undertaking that, if OneBev kept its account within the agreed credit limit, continuity of supply would be guaranteed for the expected increased demand for product over the Christmas period.
93Since the submission of the OneBev forecast on 4 September 2014 and the order history since then, it was obvious to Ms Payne that the “exposure” to Wine Insights of supplying the increased quantities on 60 day terms, without a credit limit was an “unacceptable risk”. Without the agreement to the credit limit, Wine Insights would, more likely, not have continued to meet the OneBev orders.
94In my view, clause 5 of the Supply Agreement did not, in the absence of adherence to the ordering process, require Wine Insights to be bound to deliver product in accordance with OneBev’s orders. Clause 5 allowed Wine Insights to either “confirm or amend” the purchase orders and, before a final order was said to “exist”, OneBev was required to approve any confirmed (or amended) order.
95In its defence, OneBev alleges that the set-off arises from Wine Insights’ failure “to make available goods for collection” by OneBev or its failure to “deliver goods as ordered” by OneBev.
96Although it is not pleaded in the defence, OneBev’s counterclaim pleaded that Wine Insights had “breached the Supply Agreement by:
a.failing to meet orders placed or attempted to be placed by [OneBev] for the supply of goods, in breach of clause 5.2 of the Supply Agreement; …
b.failing to supply or deliver goods to [OneBev] in accordance with orders, in breach of clause 5.4 of the Supply Agreement”.
97In my view, there is nothing in clause 5 generally, or particularly clauses 5.2 and 5.4, which support OneBev’s contention that Wine Insights’ failure to supply the product in accordance with OneBev’s orders, in the circumstances in which it did, breached the Supply Agreement.
98An argument might have been advanced that it was necessarily implied in the Supply Agreement that goods ordered must be supplied or delivered. In my view, an implication in such broad terms would be inconsistent with the processes detailed in clause 5 and, at the very least, would be subject to OneBev’s compliance with the “trading terms” in the Supply Agreement.
99In the present case, the defendant must also confront the circumstances of the agreement reached by the parties in late November 2014. It is clear that any continuity of supply over the Christmas period and beyond would be dependent upon OneBev complying with both the 60 day trading terms and keeping its account balance within the $150,000 credit limit.
100OneBev’s credit account at critical dates: It is necessary to examine the state of OneBev’s credit account at critical times, including:
a.the dates relevant to the promise of payments made by Mr Iacovangelo in the phone call with Ms Payne in late November 2014 and in the meeting with her on 19 March 2015;
b.the dates upon which OneBev alleges that there was a failure to supply or deliver the product in breach of the Supply Agreement.
101In late November 2014, Mr Iacovangelo agreed on behalf of OneBev that its credit account would be kept below $150,000 from the end of December 2014 to at least the end of February 2015.
102The Wine Insights’ statement for the OneBev account for the period ending 30 December 2014 (CB 562-3) shows that the “amount due” (invoiced sums less receipts) was $269,414.28. This amount took account of the credit note for $28,328.10 raised on 30 November 2014 in respect of the two August invoices of $28,314 and $28,338.20. The “amount due” did however include the balance of the two August accounts ($28,324.10), which Ms Payne and Mr Iacovangelo agreed would not be included in the calculation of the $150,000 credit limit.
103The adjusted amount due of $241,090.18 (less $28,324.10) included unpaid invoices, in respect of which credit notes had not been issued, as follows:
December 2014
$142,134.58
November 2014
$24,572.88
October 2014
$74,380.90
104The October invoices were due for payment by 30 December 2014 pursuant to the 60 day trading terms. On 5 January 2015, following further orders placed by Ms Emmins on 2 January 2015, Ms Payne wrote noting that “the account remains more than $91,000 over the agreed balance”. Mr Iacovangelo responded that his understanding was that OneBev had “paid close to 50k of October invoices throughout December” and that “the remaining October invoices [would be paid] this week”.
105In fact, $24,200 of the October invoices had been paid by the date of the December statement (30 December 2014). A further $23,972 was paid on 5 January. On 7 January 2015, Mr Iacovangelo acknowledged that two October invoices totalling $9,331.48 had not been paid. He promised that they would be cleared in the next few days.
106On 19 March 2015, Ms Payne met with Mr Iacovangelo and Ms Emmins. The meeting was to discuss OneBev’s failure to pay the December 2014 invoice of $49,063.85 on the basis that Woolworths and Coles had “recently” informed OneBev that they “are raising claims for a product withdrawal”. This claim was supported by 8 debit notes from Woolworths totalling $13,479.51 and copies of Woolworths withdrawal forms apparently submitted by OneBev in December 2014. The 8 debit notes from Woolworths are dated 16 or 17 February 2015 and were forwarded by OneBev to Wine Insights on 16 March 2015. The Woolworths product withdrawal forms were sent to Wine Insights on 17 March 2015.
107The December invoice of $49,063.85 had become due on 28 February 2015 and the balance of the August 2014 invoices was still unpaid although this had been agreed by Mr Iacovangelo in the late November 2014 telephone call with Ms Payne to be cleared “over 3 months”. Mr Iacovangelo had first raised the set-off against the December invoice on 13 March 2015, after Ms Payne had queried the unpaid amounts from August and December 2014.
108An agreement was reached at the meeting on 19 March 2015 which Mr Iacovangelo recorded later that day in an email to Ms Payne. OneBev committed to providing Wine Insights with a “defined monetary resolution” by 9 April 2015. In return, Wine Insights agreed “to continue to supply OneBev without interruption as per our existing arrangement”.
109By 9 April 2015, the December Invoice of $49,063.85 was still outstanding. On 14 April 2015, Mr Iacovangelo advised that:
a.he and Ms Emmins had met with Woolworths in early April 2015;
b.Woolworths “are still processing claims regarding the withdrawl”;
c.“at present we have approx. 25k of claims issued [against OneBev]”;
d.OneBev was “willing to release 5k per week against this 49k invoice until such time we receive a complete resolution from Woolworths and Coles”;
e.further claims were possible “regarding the withdrawal in the event Woolworths/ Coles issue further store withdrawal claims”;
f.OneBev was “simply attempting to be proactive to ensure payments continue to be made while the supermarkets finalise their claims”.
110Ms Payne had in her email dated 13 April 2015 queried OneBev’s failure to pay the remaining August 2014 invoice. She said that only a $10,000 payment towards the invoice “was received on 8 March 2015, and $17,426.10 remains outstanding”.
111In his 14 April 2015 email, Mr Iacovangelo stated that:
a.“the 27k payment was released in error to another supplier and you in turn received their payment”;
b.“you should have 2 lots of 10k in your account which relates to the 27k remittance”;
c.OneBev “are releasing a further payment to complete this transaction”.
112It is likely that, as regards to Mr Iacovangelo’s 14 April 2015 email, much of the information was untrue and OneBev had no intention of meeting the promises made. This conclusion follows from the following matters:
a.no further claims were later made by Woolworths on OneBev;
b.no claims were ever made by Coles on OneBev;
c.the only claims OneBev received were the 8 debit notes from Woolworths dated 16 or 17 February 2015 and sent to Wine Insights on 17 March 2015;
d.the 8 Woolworths’ debit notes totalled $13,479.51, and not “approx. 25k”;
e.no relevant correspondence from Coles, apart from the email dated 22 November 2014 from Liquorland, or any other document referring to the defective product or any meeting to discuss the issue, was produced in evidence;
f.no document from Woolworths later than the debit notes dated 17 February 2015 relating to this issue was produced in evidence;
g.despite the promise to “release 5k per week against this 49k invoice”, no payment was made until after Ms Payne raised the issue again on 4 May 2015;
h.no payments were made after that date, apart from 2 payments of $5,000 received by Wine Insights on 12 May 2015 and a third payment of either $5,000 received on 18 May 2015 (or according to the Amended Statement of Claim, $8,789.15 received on 28 May 2015). These payments were likely to have been made only because Ms Payne advised on 8 May 2015 that Wine Insights “will not be able to despatch stock, packaged or bulk, until the payment issue has been resolved”;
i.on 12 May 2015, no payments had been received and Ms Payne wrote again about the promised $5,000 payment off the December invoice of $49,063.85. She also noted that an invoice of $23,789.15 from February 2015 had become due after 60 days, on (30 April 2015) and was unpaid;
j.as admitted in its Defence, OneBev never fully paid the December 2014 invoice of $49,063.85, the February 2015 invoice of $23,789.15, and a June 2015 invoice of $10,836.76, and never paid invoices rendered in September October and November 2015.
113In these circumstances, it is clear that as at each of the dates when One Bev alleged that Wine Insights had failed to supply or deliver product in accordance with the Supply Agreement, namely 11 and 19 May and 11 June, 2 and 31 July and 18 September 2015, OneBev:
a.was in breach of the 60 day trading terms;
b.had exceeded the agreed $150,000 credit limit;
c.had no basis to claim a set-off against the unpaid invoices arising out of the defective product supplied in August 2014.
Losses OneBev claims it should be entitled to set-off
114In his final address, Mr Galvin QC conceded that the only losses OneBev claimed “for damages as a result of the supply of defective goods” was the sum of $13,479.51, being the total of the eight Woolworths’ debit notes dated 16 and 17 February 2015.
115I consider that this sum was adjusted between the parties by Ms Payne agreeing with Mr Iacovangelo in late November 2014 for Wine Insights to:
a.only charge OneBev for one half of the two August invoices totalling $56,852.20 and to allow a credit for other half;
b.to allow OneBev a further 3 months in which to pay the remaining August invoice;
c.not to include the remaining August invoice in the calculation of the credit limit of $150,000.
116In relation to the alleged breach of the Supply Agreement by Wine Insights arising from its failure to supply or deliver product ordered by OneBev, OneBev claims to be entitled to set-off so much of the following losses as in necessary to extinguish Wine Insights’ claim for $241,102.97 in respect of the outstanding invoices:
a.$168,916.84, loss of profit on cancelled Woolworths and Coles orders;
b.$54,191.60, costs paid to alternative supplier;
c.$10,850.00, Cottonwood labour charges;
d.$76,971.93, airfreight charges;
e.$13,648.66, Woolworths’ product withdrawal claims;
f.$20,170.64, replacement stock supplied to customers.
117Loss of profit on cancelled orders: OneBev has produced evidence of purchase orders from Woolworths seeking delivery of the following orders:
Delivery dates No. of orders Products July 2015 3 Creative Cowboy 2L August 2015 1 Creative Cowboy September 2015 9 Creative Cowboy, Creative Cowboy 2L,
Shakem, Schnapps
October 2015 18 Cretive Cowboy, Creative Cowboy 2L, Shakem, Schnapps November 2015 14 Creative Cowboy, Creative Cowboy 2L,
Shakem
December 2015 20 Creative Cowboy, Creative Cowboy 2L, Shakem, Schnapps January 2016 2 Creative Cowboy 118OneBev also tendered Woolworths and Coles purchase orders dated from 1 June to 30 December 2015. There are 7 orders for Woolworths in June 2015, in respect of which there is no evidence that the deliveries were not fulfilled. There are purchase orders relating to each of the orders except for the 2 orders for delivery in January 2016. Each purchase order was dated generally less than a week prior to the requested delivery date.
119In its Defence, OneBev alleges that the latest purchase order Wine Insights failed to fulfil was an order on 18 September 2015 for delivery on 13, 19 and 26 October 2015. It appears, however, that OneBev relies upon the evidence of Ms Emmins that, “the way that we were transacting with Wine Insights…we were using the forecast as like the Bible…I saw the forecast as a blanket order…and then from that I would draw down stock from the forecast based on my emails [and] purchase orders”.
120In these circumstances, OneBev purports to rely upon the following production forecasts it delivered to Wine Insights:
a.by email dated 11 May 2015, for deliveries for the weeks commencing 11 May 2015 to 27 July 2015;
b.for the period July to September 2015, I have not been able to find a forecast in evidence;
c.by email dated 17 September 2015, a production forecast for deliveries for the weeks commencing 21 September 2015 to 25 January 2016. It may be that this forecast was delivered for the purpose of founding a claim that Wine Insights was bound to supply product until at least January 2016.
121In relation to the Coles orders, they are dated between late June and late December 2015. The evidence that the orders were cancelled (apparently because they could not be fulfilled) is limited to September and October 2015.
122By reason of the conclusions I have reached on OneBev’s set-off, it is unnecessary for me to quantify its losses. It is also a very difficult task to undertake in the abstract without having made findings that specific breaches occurred which relate to particular periods. If I had undertaken the task of quantifying losses, in relation to the alleged loss of profit, I would have needed to consider in relation to each of the orders:
a.the sufficiency of evidence of any failure to supply;
b.whether there was an adequate causal link between the breach found and the loss claimed, particularly the period of unfulfilled orders;
c.the specific nature of the breach;
d.the impact of other factors, including the time after which an alternative supplier had been found.
123The loss of profit was calculated as the difference between the sale price to Coles and Woolworths and the purchase price from Wine Insights. No attempt was made to factor in the other expenses which would have been deducted in any calculation of profit, or the savings that OneBev would have made as a consequence of not being required to fulfil the orders.
124Although Wine Insights’ counsel Mr Spinak commented upon the lack of expert evidence to support the quantification of OneBev’s set-off, this aspect of its case might have been appropriately proved without the evidence of an “independent expert”. However, as I have discussed, there remain a number of issues that would have been assisted by further evidence, if the determination of quantum had been necessary.
125Costs paid to alternative supplier: Ms Emmins said that when OneBev was “unable to obtain supply from Wine Insights around…October [2015]...we went to Oncall Beverages, who is a supplier that we’ve used before to obtain product so that we can supply our customers for the Christmas period, and ongoing”.
126OneBev tendered in evidence 27 invoices dated between 9 November and 25 December 2015. The total value of the orders was $213,160.60. The purchase cost from Oncoll Berverages was higher than it had been from Wine Insights. The additional cost totalled $54,191.60.
127If OneBev were entitled to damages for late delivery, it would probably be entitled to claim for the additional cost of obtaining the product from an alternative supplier. However, the difficulty for OneBev would remain, to establish that Wine Insights had an obligation to continue supplying product in response to orders. And further, whether it was obliged to continue the supply at the same price as it had been charging OneBev over an extended period.
128Cottonwood labour charges: Ms Emmins said that “Cottonwood Springs were the packer of two litre products [and] put [the bulk product] in the two litre casks…[there were] additional charges that we incurred for every time that we were trying to get supply from Wine Insights and it was rejected, and basically we had productions at Cottonwood Springs booked and then they would on-charge us for lost time”.
129OneBev tendered in evidence six invoices for dates between 15 September and 24 December 2015 totalling $10,850 variously described in the invoices as “additional labour set up costs”, “miscellaneous charges”, “additional factory charges”. It is difficult to make an assessment of the appropriateness of the three later invoices which relate to periods during which Oncoll Beverages were supplying OneBev.
130Airfreight charges: Ms Emmins said these charges related to the cost of airfreighting the cream used in manufacturing the product. She said, “[W]e didn’t have supply leading into Christmas, and the only way that we could get supply was to airfreight the cream from overseas”.
131Four invoices were produced. The relevant goods freighted is described as “grape alcohol cream concentrate”. The invoices are dated between 1 December 2015 and 23 March 2016 and relate to flights between 28 November 2015 and 17 March 2016 and total $76,971.93. It is difficult to see how these costs could be referable to a failure by Wine Insights to supply product between May and October 2015.
132Woolworths product withdrawal claims: The eight Woolworths’ debit notes are dated either 16 or 17 February 2015 and total $13,479.51. Insofar as clause 8.6(b) of the Supply Agreement required “the supplier to refund any payments made by the purchaser to the supplier in respect of the defective goods”, Wine Insights had made allowance for this by crediting OneBev with one half of the two August 2014 invoices in the sum of $28,328.10.
133Replacement stock supplied to customers: Ms Emmins said that Fastway Couriers were engaged by OneBev to send “replacement stock to the customers that had complained about product”. These customers were those Ms Collins had recorded on a spreadsheet. Apparently, OneBev purchased from Fastway Couriers books of tickets for the various regions in Australia. The tickets were applied to the delivery of replacement product to different locations throughout Australia.
134There are 12 invoices in evidence dated from 4 September 2014 through to 2 April 2015. The invoices total $10,950.50. This would seem an appropriate charge for OneBev to set-off against Wine Insights, notwithstanding Mr Galvin QC’s statement that OneBev’s “damages as a result of the supply of defective goods” was limited to the sum of $13,479.51 (the Woolworths’ debit notes). However, the credit given by Wine Insights in December 2014 of $28,328.10 was sufficient to also incorporate the Fastway Couriers’ invoices.
Conclusion and proposed orders
135Accordingly, OneBev have not demonstrated that any sum should be set-off against the admitted unpaid total of the Wine Insights’ invoices, namely $241,102.97. In those circumstances, Wine Insights is entitled to an order for judgment for the plaintiff against the defendant that the defendant pay to the plaintiff the sum of $241,102.97.
136I will hear further from the parties at a time convenient to them and the Court on the issues of interest and costs.
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Certificate
I certify that these 29 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 18 November 2016.
Dated: 18 November 2016
Carla Cianfaglione
Associate to His Honour Judge Anderson
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