Baroni Foods Limited v P K Wholesale Supplies Limited
[2017] NZHC 335
•3 March 2017
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2014-409-000702 [2017] NZHC 335
BETWEEN BARONI FOODS LIMITED
Plaintiff
AND
P K WHOLESALE SUPPLIES LIMITED Defendant
Hearing: 1-3 August, 24 November 2016 Appearances:
G J Ryan for Plaintiff
G Jones for DefendantJudgment:
3 March 2017
JUDGMENT OF DUNNINGHAM J
Introduction
[1] These proceedings are the culmination of a long running dispute between the parties over their business dealings. Several of the claims have been resolved since commencing these proceedings, but the parties remain in dispute over whether the defendant (“Solotti Foods”)1 has breached two contracts for the sale and purchase of European food products from the plaintiff (“Baroni Foods”).
[2] In relation to the first dispute, Mr Baroni, the plaintiff’s director, says that agreement was reached with Solotti Foods to purchase the imported food stock the plaintiff left in a warehouse, when Solotti Foods took over the lease of it. The defendant’s director, Mr Solotti, says that no such agreement was ever reached. Mr Solotti accepts that his company has converted the plaintiff’s goods and must pay the value of the converted goods. However, he says it has already paid Baroni Foods
more than the value of what it has taken and sold.
1 Although the defendant is P K Wholesale Supplies Limited, it trades under the name
Solotti Food Company and, for convenience, is referred to as Solotti Foods.
BARONI FOODS LIMITED v P K WHOLESALE SUPPLIES LIMITED [2017] NZHC 335 [3 March 2017]
[3] In relation to the second dispute, it is agreed that Solotti Foods placed an order for the importation of cheese, coffee and other food products by Baroni Foods (order 1808). However, Mr Solotti says when he finally inspected the goods some months after they arrived, he saw the cheese was at, or near to, its “best before” date and therefore, in his view, not of merchantable quality. He rejected the entire order. Baroni Foods denies that there were grounds for rejecting the order and seeks an award of damages under s 51 of the Sale of Goods Act 1908.
[4] The issues for determination are:
Stock agreement
(a) Was an agreement reached on 27 February 2014, and varied the following day, for the defendant to buy stock from the plaintiff?
(b) If so, what were the terms of that agreement?
(c) If an agreement is proved, what damages are payable?
(d)Alternatively, if there was no agreement, what amount, if any, is owed between the parties in relation to the conversion of stock?
Order 1808
(a) In respect of order 1808, when (if ever):
(i) was the defendant obliged to make payment for the products? (ii) did property (and accordingly risk) in the relevant products
pass from the plaintiff to the defendant?
(b)If property in the goods had not passed to the defendant, did it validly rescind order 1808 on 4 February 2015 because the plaintiff tendered goods that were not of merchantable quality?
(c) If order 1808 was not validly rescinded, what damages is the plaintiff able to claim from the defendant?
How did the stock agreement dispute arise?
[5] Baroni Foods ran an imported foods business from commercial premises at
44 Gasson Street in Christchurch. The premises are owned by Mr Baroni’s family trust. However, in 2013 Mr Baroni decided to discontinue the retail and wholesale side of his imported foods business, and focus instead on the importation side. As a result, Baroni Foods no longer needed to occupy the Gasson Street premises and it reached an agreement with Solotti Foods for that company to lease the premises commencing 1 March 2014.
[6] At the time the lease was being negotiated, Baroni Foods held a large quantity of food and wine at the Gasson Street premises. As Solotti Foods was to continue operating an imported food distribution and retail business from the premises, it seemed logical, at least to Mr Baroni, that Solotti Foods acquired this stock and took over Baroni Foods’ customers. Negotiations took place between Mr Baroni and Mr Solotti regarding this. In late September 2013, Mr Solotti seemed willing to entertain this idea, saying in an email that “we would purchase the stock at cost price”. However, despite further exchanges, by early 2014, no agreement had been reached on purchase of Baroni Foods’ stock.
[7] In mid-February 2014, Mr Solotti sent an email to Mr Baroni where he expressed reluctance “to commit to the purchase of full wine stocks” as he needed to “preserve cash for other stock purchases from you”. He suggested that he sold the wine on Baroni Foods’ behalf and split the margin between the two entities. His views on the purchase of the food stock were not mentioned and, from Mr Baroni’s perspective, Mr Solotti had not resiled from his previously communicated intention to buy the stock, although a formal agreement on terms had not been reached.
[8] In late February 2014, in anticipation of finalising an agreement on the stock purchase, Mr Baroni had a staff member, Mr John Mowlem, undertake a stocktake and prepare an invoice of the stock in-hand on the premises. He said that, as agreed
with Mr Solotti, this was done with assistance from Mr Solotti’s son, James, who also worked for Solotti Foods.
[9] An invoice listing the remaining stock as identified in the stock take (but excluding some dated stock items which Mr Baroni says he and Mr Solotti had agreed would not form part of the purchase) was sent to Mr Solotti under the cover of an email dated Tuesday, 25 February 2014, headed “Urgent! Stock takeover”. The email advised:
Please find attached an invoice prepared by John for the stock on hand that you are taking over.
VERY IMPORTANT
Any change to this invoice must be done by this Friday 12 o’clock
midday.
Otherwise you will not be able to operate the shop on Monday morning. Please advise of any change urgently.
The total value of the stock in the accompanying invoice was $210,614.61.
[10] Mr Solotti responded later that afternoon thanking Mr Baroni and saying “I’ll try and get on to this at home tonight. James & John have been working on it”. Later again that evening he emailed Mr Baroni saying “I’ve had a quick look. There’s a few things I need to look at again. … I will get back to you Wednesday night”.
[11] The following day, Mr Solotti indicated by email that he did not wish to purchase everything on the list. While he acknowledged Mr Baroni’s advice that he should “prioritise stock above all else”, he said he was also aware of the “need to conserve funds for later import shipments”. In any event, he said “there are a number of items on the list that we have given previous notice that we would not purchase”. The email concluded saying:
Until we can identify which products sell well, I want to get a little experience. I will therefore purchase the following items. The list will be altered no doubt once I am able to consult with James. Some minor alterations will also be necessary to align with carton quantities.
[12] What followed later that evening was an email to Baroni Foods which listed Mr Solotti’s stock requirements by giving the product’s stock number and the quantity Mr Solotti wanted from the list prepared by Mr Mowlem. In that email he also said “we do not require any products which are dated or within a couple of months of becoming dated”, and that:
If you wish, we can fence the rest of the product off in the warehouse until we discuss further once we are more familiar with the product and our financial commitments become clearer.
[13] The events of the next two days are critical. With the takeover date on the warehouse lease looming, Mr Baroni says he made it clear in an email sent early the following morning that he was selling the stock at “below cost”, so Solotti Foods either had to take over all the stock on the invoice, or he would put it in storage at Mainfreight. In the same email he proposed a meeting at 10.00 am the next morning. Mr Baroni said he was very keen to resolve the outstanding issue of the stock as quickly as possible and he thought that meeting with Mr Solotti to discuss it directly would be the easiest way to do that.
[14] Both men confirm that they did meet on Thursday morning. Mr Baroni says he again made it clear that if Solotti Foods was not prepared to purchase all the stock on the invoice, there was no deal and Baroni Foods would remove all the stock immediately. From his perspective there was no other practical commercial option. He was offering the stock at below cost, and was also handing over his retail client base to Solotti Foods, but only on the basis that it took over all the stock, save for the items they had already agreed would be excluded.
[15] Mr Baroni’s evidence is that when he made his position clear at the meeting of 27 February, Mr Solotti responded saying that he would buy all of the stock on the invoice. However, he asked whether a payment by instalment arrangement could be agreed in order to give Solotti Foods a little more time to pay. Mr Baroni says that given Mr Solotti’s previous indications that he was concerned about the financial outlay involved, he had already decided he would enter a financial arrangement for payment over time to support Solotti Foods. He knew from experience that finance might be tight for Solotti Foods at the start of a new lease and that he had to be realistic about that.
[16] He says the two of them then discussed a payment arrangement for the goods. By then an updated stock invoice had been prepared which took account of the stock sales since 21 February 2014, and, as a consequence, the purchase price reduced to
$194,325.93 (“the updated stock invoice”). The payment arrangement Mr Baroni
says was reached was noted in handwriting on the copy of the updated stock invoice. It recorded five payments as follows:
1. $38,800.00 7 days 2.
$38,800.00
End of March
3.
$38,800.00
End of April
4.
$38,800.00
End of May
5.
$39,125.93
End of June
[17] As a result, Mr Baroni’s position is that, on 27 February 2014, Solotti Foods agreed to purchase all the stock listed on the updated stock invoice and to pay for that in the five instalments listed above.
[18] Mr Baroni acknowledges that Mr Solotti contacted him by email on the following morning saying he wanted to discuss matters further. He said that he then met with Mr Solotti and his son James at the Gasson Street premises later that morning. He says that at the meeting Mr Solotti sought confirmation that the stock items they did not want to buy (being basil pesto, tinned tuna and marsala) had been excluded from the updated stock invoice. It was confirmed that that was the case. According to Mr Baroni, Mr Solotti then said that he and his son had been thinking about the payment arrangement and asked if it could be amended. He proposed an arrangement where specific stock items were invoiced initially, with half to be paid for in March and half to be paid for in April, with the balance being invoiced later and then paid for in similar proportions thereafter, as this would be “better for Solotti Foods’ computer stock record system”. Mr Baroni said that, so long as the value of the stock to be initially invoiced totalled around the sum of the proposed initial instalments payable through to the end of April, he had no objection to that.
[19] Mr Baroni says the three of them then sat down and went through the updated stock invoice and discussed which items were to be included on the initial invoice.
All the items that were marked “yes” on the updated stock invoice as a result of that
exercise were then included on a fresh invoice made out to Solotti Foods dated
20 March 2014 (“the 20 March invoice”). Mr Baroni’s evidence is there was no change to the agreement that the entirety of the stock on the updated stock invoice was being purchased and the change related only to when the invoices were to issue for the purchase of the stock. He is adamant that the parties left the meeting on
28 February 2014 with a clear agreement, and this is why he left all the stock at the premises instead of taking it away and putting it in storage.
[20] From Mr Baroni’s perspective, the invoice he sent on 20 March 2014 was sent in accordance with the stock agreement as varied on 28 February 2014. It listed all the items which had been marked “yes” on the updated stock invoice. It totalled
$91,416.95 and recorded that payment was to be in two instalments of $45,708.47, with one due on 31 March 2014, and the second due on 30 April 2014. Solotti Foods met the total of the first instalment of $45,708.47 by making two payments, one of
$27,347.85 on 10 April 2014 and the balance of $18,360.62 on 16 April 2014. In respect of the second instalment, Solotti Foods paid $10,000 on 13 June 2014 and
$5,338.49 on 6 August 2014, leaving $30,369.98 outstanding on the second
instalment. In Mr Baroni’s view, the total amount outstanding for the stock is
$133,278.97.2
[21] Mr Solotti’s version of events differs. He agrees that there were negotiations from late 2013 through to February 2014 over the purchase of stock. However, he says he was only ever interested in buying some of the stock lines and certainly no dated stock or alcohol, and with product quantities to be determined once he had become familiar with the product available and customer requirements over the ensuing months.
[22] Mr Solotti acknowledges receiving the 25 February 2014 email attaching the list of stock Mr Baroni expected him to purchase, but says that he never agreed, either at that time or later, to buy all of that stock. From his perspective, Mr Baroni’s
requirement to confirm the contents of the invoice by 12 o’clock midday that Friday,
2 Being the total value of the stock of $194,325.93, less the four amounts paid by Solotti Foods on the 20 March 2014 invoice.
failing which “[Mr Solotti would ] not be able to operate the shop on Monday morning”, was simply Mr Baroni trying to pressure him to agree to take all of the stock before the lease commenced on 1 March 2014.
[23] He accepted, as Mr Baroni says, that the two of them met on the morning of
27 February 2014. However, Mr Solotti’s account of that meeting is different from Mr Baroni’s. He accepts that Mr Baroni proposed that he buy all the stock listed on the updated stock invoice and that he could pay by instalments, and that he wrote this proposal down on the copy of the invoice. However, Mr Solotti’s evidence is that he was firm in his position that he only wanted to buy some of the stock at that time but would be interested in buying more as required. When he rejected Mr Baroni’s offer, he said Mr Baroni “stormed angrily out of the room, slamming the door behind him”.
[24] Although James Solotti was not at that meeting he sent an email to Mr Baroni and Mr Mowlem that afternoon which said “we are not in the business of buying dated stock, but do appreciate your kind offers”. The email then referred to the fact Solotti Foods did not want the basil pesto, tinned tuna or cream marsala. Mr Mowlem responded saying:
The basil pesto, tuna, marsala have already been put aside and will not be part of your purchase. Payment for balance of stock has been agreed to be paid in five (5) instalments as agreed with Peter with morning. Look forward to finalising stocktake with you tomorrow at 11.00 am.
[25] Mr Solotti accepts that he did not recall speaking to his son James between the time of his meeting with Mr Baroni in the morning and this email exchange with Mr Mowlem that afternoon, so whatever understandings were reached at the
27 February meeting were not known to James. However, Mr Solotti subsequently spoke with his son and this prompted a further email from him to Mr Baroni on the morning of Friday 28 February 2014. In it, Mr Solotti expressed his disappointment at what he saw as a lack of transparency on Mr Baroni’s part at the meeting the previous day, saying that his son James had told Mr Mowlem repeatedly that there were products which they did not wish to purchase but which were on the list. Mr Solotti’s email concluded:
So we go back to Square 1 and start again. I imagine you will be as disappointed as I am but I repeat how disappointed I am by the lack of transparency yesterday.
We have signed the lease of the warehouse and that’s all so far.
We will see you this morning again where all four of us will be present but I
will not be signing anything today and neither will James.
[26] Both Mr Solotti and his son deny that a meeting between himself, Mr Baroni and his son occurred that day. Mr Solotti says he did not meet or speak to Mr Baroni on 28 February 2014 and did not visit the Gasson Street premises that day. Instead he said his son visited alone that morning and reported back to Mr Solotti that Baroni Foods was “in a state of chaos and did not seem ready to move out tomorrow”. He therefore denies that any negotiations to vary the alleged agreement occurred on Friday. He simply says that when Solotti Foods moved in to the premises on 1 March 2014, Baroni Foods’ stock had been left there.
[27] Mr Solotti says he did not hear any more from Baroni Foods until it sent the
20 March invoice. He acknowledges the 20 March invoice included some, but not all, of the items Mr Solotti offered to buy in his email of 26 February 2014. He also accepts that Solotti Foods was obliged to make some payment to Baroni Foods and that it subsequently did so, but says that these were not pursuant to any agreement reached, because none had been. Rather the payments reflected the fact that he was always prepared to buy some stock items as required in order to sell that to his customers.
[28] He says the first payment made on 10 April 2014 was his estimate of what Solotti Foods owed Baroni Foods for the stock that had been sold up to that time, while the second payment on 16 April made up the balance of what Mr Baroni claimed was owing to meet the first instalment payable on the 20 March invoice. At that time, he says he made the payment in that amount “largely to appease Mr Baroni”, both because he had an ongoing commercial relationship with Mr Baroni because Mr Baroni’s trust owned the Gasson Street premises, and because he was still intending to buy product from Baroni Foods. As he wanted to keep the relationship intact, he paid the amount Mr Baroni had invoiced him. He was
adamant though, that it was not an acknowledgement that he had agreed to make payments as per the 20 March invoice.
[29] He then says the third payment Solotti Foods made of $10,000 on 13 June was simply a round lump sum, being the amount he felt Solotti Foods could afford at the time on account of further sales. The fourth payment of $5,338.49 made on
6 August was Mr Solotti’s calculation of what was owed to Baroni Foods for goods
sold up to that time.
[30] In short, Mr Solotti denies that he ever agreed to buy all the stock, but he accepts that Solotti Foods has sold stock belonging to Baroni Foods and that it must account and pay for this. In his view, Solotti Foods has actually overpaid Baroni Foods by $8,136.16.
Was there an agreement to purchase the stock and, if so, what were its terms?
[31] As there was no formal record of an agreement, the first issue to determine is whether, on the balance of probabilities, an agreement was reached on
27 February 2014 and, if so, on what terms.
[32] In the absence of a complete written record of an agreement,3 the plaintiff invites me to look at the totality of the:
(a) prior negotiations;
(b) contemporaneous evidence; and
(c) subsequent conduct
to infer that an agreement, on the terms asserted, was concluded on
27 February 2014 and varied on 28 February 2014.
3 Except insofar as Mr Baroni says its terms are recorded on the updated invoice as a purchase of the goods listed thereby five payments totalling $194,325.93, albeit the timing of the payments was varied on the subsequent day.
[33] In terms of the relevance of prior negotiations, the plaintiff was not relying on these as an aid to contractual interpretation,4 but rather was a factual circumstance which had a bearing on the probability of the parties reaching a binding agreement for Solotti Foods to take over the stock which was left on site. The conduct particularly relied on was Mr Baroni’s consistent and clear assertion that he would only leave the stock there if Mr Solotti had agreed to buy it.
[34] I consider that evidence that Mr Baroni had consistently said it was an “all or nothing deal” (which Mr Solotti did not deny) is a relevant factor to take into account in making a factual finding about what happened on 27 February 2014. However, it is no more than that and having a consistent intention to form a contract does not absolve Mr Baroni from having to establish that a legally binding contract was reached on that day.
[35] For several reasons, though, I am satisfied that an agreement was reached on
27 February for Solotti Foods to acquire all the stock on the updated stock invoice. First, while Mr Baroni was a garrulous and excitable witness, I consider that he was an honest witness, who was as frank, artless and open in his business dealings, as he was in his answers in Court. He clearly undertook many of his business ventures on trust, without recording them fully, and expected the same openness and trust from other people. I accept his evidence as to the content of the discussions on the 27th as being an honest recollection of what occurred.
[36] This conclusion is reinforced by the fact that Mr Baroni’s recollection of what was agreed was consistent with the recollection of Mr Mowlen. I consider Mr Mowlen was a credible witness who gave his evidence honestly and without colouring it to favour any party. Mr Mowlen’s evidence that five payment instalments were agreed at the 27 February meeting, with payment dates as is recorded in handwriting on the updated stock invoice, is consistent with his email to James Solotti on the same day. That email confirmed that certain items had been
excluded from the purchase and recorded that “payment for balance of stock has
4 Which would face difficulties given the principle that the previous negotiations of the parties and their declarations of subjective intent are not considered admissible background to assist in construction of a contract as per Investors Compensation Scheme v West Bromwich Building Society Ltd [1998] 1 All ER 98 at 114.
been agreed to be paid in five instalments as agreed with Peter this morning”. I do not consider that he would have said this in this email if that had not been his clear recollection of the conversation he was privy to only a short time earlier.
[37] The fact an agreement was reached is also implicitly confirmed in an email from Mr Solotti on the same day. In response to an email from James Solotti, Mr Mowlen sent an email saying the updated invoice already excluded the items the two of them had agreed would be excluded. It appears that Mr Solotti nevertheless felt he had inadvertently agreed to buy some stock items which his son James had said Solotti Foods did not want to buy, prompting his statement in a reply email that “we go back to Square 1 and start again”.
[38] At the hearing the parties each relied on this email, with Solotti Foods saying it demonstrated that no agreement had been reached, whereas Baroni Foods characterised it as Mr Solotti asserting he should be released from the agreement, because he (erroneously) thought it included items that Solotti Foods had asked to be excluded.
[39] In my view, looking at the totality of the evidence, Mr Solotti regretted committing to purchasing the stock on the updated stock invoice the day before and was hoping to put pressure on Mr Baroni to negotiate a better deal and to take advantage of the fact that what had been discussed the previous day had not been formally recorded, nor had he signed anything. Indeed, I consider he thought the absence of a written record of the agreement meant he could not be held to it, because he then went on in the email to say “we have signed the lease of the warehouse and that’s all so far”, and referred to the fact that all four of them would be meeting that morning, Friday 28 February, but saying “I will not be signing anything today and neither will James”. However, based on the combined evidence of Mr Mowlen and Mr Baroni, whom I considered to be reliable witnesses, I am satisfied that an agreement was reached on 27 February 2014, which Mr Solotti could not, by unilateral declaration, set aside.
[40] However, complicating that conclusion, is the fact that Mr Baroni asserts that the 27 February agreement was varied the following day, and the factual evidence on
this again differed starkly between the parties. Mr Baroni said that he met with the Solottis the next day and, at their request, it was agreed that he would invoice a selection of items from the agreed stock purchase first, to be paid for in two equal payments (as long as these roughly equalled the agreed payments to the end of April), with the balance of the stock to be invoiced later, also in instalment payments as agreed. Mr Baroni’s evidence was that there was no change to the agreement that all the stock in the updated stock invoice was being purchased and the only change was to how the purchase was to be invoiced and paid for.
[41] Mr Baroni’s evidence explains that, as a consequence of his discussion with Mr Solotti on the Friday morning, he handwrote the words ‘yes’ or ‘no’ by various items on the updated stock invoice. He also agreed to a change in price in respect of one food item, being some prosciutto, which was reduced from $34.75 to $32.00.
[42] In stark contrast, Mr Solotti says he never attended the Gasson Street premises that morning and, while he accepts he received the 20 March invoice for the goods marked “yes” on the updated stock invoice, he denies that he ever agreed to purchase the goods which were listed on that invoice.
[43] Mr Solotti’s evidence that he never attended a further meeting with Mr Baroni on Friday, 28 February was supported by his son. James Solotti said that he attended Gasson Street that morning and briefly assisted Mr Mowlen doing a stock inventory for about 10 or 15 minutes, but refused to sign a copy of the updated invoice confirming that the items on it were left in the warehouse.
[44] Mr Mowlen’s evidence was that he simply could not recall whether Mr Solotti was there or not. However, he disputes James Solotti’s recollection that James only assisted with his stocktake for about 10 to 15 minutes. He also disputes James Solotii’s denial of assisting with the earlier stocktake used to compile the updated stock invoice.
[45] Again, I find Mr Mowlen’s evidence more credible than that of James Solotti and his father. I accept that he engaged in a stocktake with James Solotti during February during which prices for the stock were negotiated. That process was
undertaken in order to compile the invoice for the stock that Mr Baroni says was eventually agreed to be purchased. The fact that there was a joint stocktake undertaken by James Solotti and Mr Mowlen in order to prepare the updated stock invoice, is consistent with Mr Solotti’s response to receiving the invoice listing all the stock Mr Baroni proposed Solotti Foods takes over, where he replied saying “I’ll try and get on to this at home tonight. James and John [Mowlen] have been working on it”.
[46] In terms of whether a meeting occurred on the morning of Friday,
28 February, there are emails referring to the fact that Mr Solotti was planning to meet Mr Baroni in the warehouse on that day. It is improbable, in my view, that Mr Solotti did not go to the warehouse on Friday when both James Solotti in an email on Thursday, and Mr Solotti in an email sent first thing Friday morning, refer to them attending the Gasson Street premises on Friday. If that plan had changed I would expect that to also have been communicated by email, particularly when Mr Solotti said he wanted to have further discussions about the purchase of the stock in the updated stock invoice.
[47] Furthermore, I consider there must have been an occasion shortly after
27 February where someone from Solotti Foods sat down with Mr Baroni to discuss the stock purchase and which led to the ‘yes’ and ‘no’ being written against every item on the updated invoice, to form the basis of the 20 March invoice. There is no plausible reason for Mr Baroni to have done this himself, when it was to Solotti Foods’ advantage, rather than Baroni Foods’ advantage, to invoice the stock in two separate invoices, to reduce the amount required to be paid by 30 April,5 and to reduce the price on one item.
[48] In my assessment Mr Solotti was, as Mr Baroni said, in the habit of “chopping and changing” his position every five minutes and this explains his inconsistent communications, particularly once his company got into financial
difficulty. Despite now saying he never agreed to purchase any of the items on the
5 Because under the 27 February agreement, $116,400 was to be paid by the end of April, with approximately $78,000 in the next two months, whereas under this agreement only $91,416.94 would be received by the end of April, leaving just over $100,000 to be paid in the May and June instalments.
updated invoice on 27 February, and that he never agreed to a variation of that agreement on 28 February, it was clear in communications he made shortly after takeover that he considered he had entered into some form of obligation to purchase stock. For example, on 31 March 2014, he emailed Mr Baroni saying “confirming today’s telephone conversation, the bank have okayed verbally an overdraft to cover our stock purchases but their paperwork is still going through their processes via Auckland Head Office. I have impressed on them the urgency of this matter … we will make the payment asap.”
[49] By April, disputes had arisen over Solotti Foods’ failure to pay for stock and for other items they had purchased as part of the business takeover. Nevertheless Mr Solotti referred in an email to purchasing a “second instalment” when his “banking arrangements come through”. A sequence of more and more impatient emails were then exchanged between Mr Solotti and Mr Baroni over the ensuing months as payments for a range of purchases got more and more overdue. Even as late as 5 August 2014, Mr Solotti was still referring to sales of products “we have purchased”. But, by 4 September 2014, when Solotti Foods’ lawyers become involved, it was asserted, for the first time, that “my client never agreed to purchase the items in tax invoice 00022415” and, as a consequence “Solotti Foods disputes any liability to pay”.
[50] From thereon Mr Solotti maintained the position that no agreement of any kind had been reached to purchase the stock. Instead he acknowledged that he had converted the stock by selling some of it and must account for that. However, in cross-examination during the hearing, his position became more malleable again, saying “there were a number of products that [Mr Baroni] had large quantities of he wanted to get rid of … verbally we, we agreed to run them in the shop on special to help him”. He also said that, while he never agreed to buy all of Mr Baroni’s stock, Mr Baroni had “a number of times” agreed that he could sell some of the stock.
[51] In my view, Mr Solotti’s position changed when he came under severe financial pressure after commencing business in the Gasson Street premises. When he took over the lease he knew he needed access to the stock to run a viable shop and to have an income stream, which is why he agreed to purchase the stock. However,
his poor financial position meant that he was unable to honour the time payment commitments he had agreed to as and when they fell due. At that point he took advantage of the fact the arrangements with Mr Baroni were not formally recorded in writing. He was able to have the benefits of the stock agreement which allowed him to retain the goods on the premises to be available for sale, but was not prepared to comply with the obligations to make the full payment for them once he ran into financial difficulties. The fact he paid the exact amount owing under the first instalment of the 20 March invoice reinforces the fact he had agreed to do this.
[52] I find it implausible that he would have paid the invoice just because he wanted to appease Mr Baroni rather than because he was acknowledging this was an agreed obligation. I also find it implausible that an experienced businessman like Mr Solotti would, as he now claims, have simply converted goods by selling them without any authority to do so, or that Mr Baroni would have allowed that to occur for so long without demur.
[53] While counsel for Solotti Foods made much of the fact that Mr Baroni’s later emails referred to the stock as “my stock”, saying this was inconsistent with it having been purchased by Solotti Foods, I think this was explicable in the circumstances. Mr Baroni was speaking in layperson’s terms, not in legal terms. The term identified the origin of the stock rather than any legal analysis of the position. Furthermore, he continued to refer to the existence of an agreement, saying in April that because Solotti Foods was not “maintaining the agreement” it was not to sell any of the stock until it had been “purchased”, by which it is clear he meant “paid for”.
[54] In conclusion, Solotti Foods agreed to purchase all stock in the updated stock invoice and Mr Baroni left it in the warehouse as a consequence of that stock agreement. The stock was to be paid for in instalments; the first two in accordance with the variation of the 27 February agreement, as recorded on the 20 March invoice, and the remaining payments in two further equal instalments, at monthly intervals consistent with the 27 February stock agreement.
What damages flow from the breach of the stock agreement?
[55] When Solotti Foods failed to pay for the balance of the stock, Baroni Foods cancelled the contract, recovered the majority of the unsold stock and has attempted to resell it through Euro Foods Limited. The recovered goods have not all been able to be resold, and the proceeds of those that have sold has only been a modest
$9,464.95.
[56] However, at the point the stock was uplifted, Baroni Foods said it left some items at the warehouse at Solotti Foods’ request. If the pleaded stock agreement was not upheld, Baroni Foods seeks payment for these items, calling this the “residual stock agreement”. However, there is also a dispute over that arrangement. Solotti Foods admits it agreed to purchase the Resibra coffee beans left at the premises but not the other goods which were left at the premises by Baroni Foods, and which Baroni Foods says Solotti Foods agreed to buy.
[57] Baroni Foods claims $123,814.02 in damages which is the total value of the stock as set out in the updated stock invoice, less payments received to date of
$61,046.96, and less the amount of $9,464.95 recovered through resale of the repossessed stock. I am satisfied this sum represents the loss suffered by Baroni Foods and its claim for this amount succeeds. Interest is also claimed on this sum. I award interest under s 87 of the Judicature Act 1908 from 22 April 2015, being the date the goods were uplifted because the agreement had been cancelled.
The claim in conversion
[58] Given my findings that there was a stock purchase agreement, I do not have to consider the plaintiff’s alternative claim in conversion and the issue of whether damages should be quantified based on prices in the updated invoice or on some other basis.
The residual stock agreement
[59] As a consequence of my findings, I also do not have to resolve the claim alleging a residual stock purchase agreement because it is subsumed in the damages claimed for breach of the stock agreement.
Order 1808
[60] In mid-February 2014, Solotti Foods placed orders with Baroni Foods for the supply of various food products, including coffee and hard cheeses. The orders were placed by email, with prices for the coffee and for the cheese set out in emails from Baroni Foods dated 11 February 2014 and 14 February 2014 respectively. The
14 February 2014 email, after listing the varieties and quantities of cheese ordered and the price per kilogram, recorded “terms as discussed seven days after receipt of container”. Solotti Foods was asked to confirm with a purchase order for these items “to enable this container, which will have products from several suppliers to be finalised today”. Order numbers were duly given and the stock ordered, albeit Solotti Foods’ orders were later consolidated under the one order number, 1808.
[61] On 15 June 2014, when the container carrying order 1808 was about to arrive in Lyttelton, Baroni Foods invoiced Solotti Foods for the total purchase price, being
$99,270.75. However, Solotti Foods was under financial pressure at this time and was having difficulty meeting its payment obligations. When the goods arrived in Lyttelton on 16 June 2014, Baroni Foods was chasing Solotti Foods for the balance it said was owed on the stock purchase, the balance owing on an invoice for the purchase of certain plant, and the amount owing under another order. In an email dated 30 June 2014, Mr Baroni listed the totals owing on those three invoices plus the total owing on the 15 June 2014 invoice. In relation to order 1808 he noted: “stock on hold as your account extremely overdue”.
[62] There was no action for a further month and Mr Baroni emailed Mr Solotti expressing some impatience saying “one more month gone, no change to your accounts”. Further emails were exchanged in mid-August proposing options for paying at least part of some of the outstanding invoices, including releasing some of the cheese if certain payments were made. However, Mr Baroni was becoming
increasingly impatient with the situation and, by September 2014, the matter was in the hands of the parties’ lawyers.
[63] Baroni Foods’ lawyers wrote to Solotti Foods’ lawyers on 1 September 2014 pointing out that Solotti Foods was invoiced for order 1808 on 15 June 2014 and payment was due within seven days of invoice. Legal action was threatened if payment of that and the other outstanding invoices, totalling $311,469.16, was not made.
[64] Solotti Foods’ lawyers replied. In relation to order 1808, they said “my client does not dispute that the sum of $99,270.75 is owing in respect of order 1808. My client proposes that it pays one-third of the amount owing at the same time the olives are paid for … followed by one-third when the container has been emptied and the balance within 30 days of that time”.
[65] Matters were not resolved and shortly afterwards an application for summary judgment was made by Baroni Foods.6 In response, Solotti Foods asserted for the first time that it was not obliged to pay for order 1808 until the goods were delivered. That was not accepted by Baroni Foods and matters remained at an impasse.
[66] On 29 January 2015, Solotti Foods took a new tack. It now asserted it had a statutory right under s 36 of the Sale of Goods Act 1908 to examine the goods for the purpose of ascertaining whether they were in conformity with the contract. While Baroni Foods’ solicitors did not accept that such rights of inspection arose, they facilitated an inspection at the cool store, albeit without prejudice to their client’s right to assert that the payment obligation had fallen due and that it was exercising an unpaid seller’s lien under s 42 of the Sale of Goods Act.
[67] While some difficulties were experienced in organising the inspection, it did take place on 3 February 2015. The following day Mr Solotti wrote to Baroni Foods advising that Solotti Foods was “rejecting the goods and rescinding the contract”,
because “all of the cheese tendered for delivery is too old to sell at normal retail
6 This was dismissed by Associate Judge Matthews in Baroni Foods Ltd v P K Wholesale Supplies Ltd [2015] NZHC 255 because of the uncertainty as to the contractual position and the number of factual disputes which would need to be resolved at trial.
price. The Pecorino Romano is past its expiry date and all of the other cheese seen expires in April 2015. Therefore we consider all of the cheese examined not to be of merchantable quality”.
[68] Baroni Foods brought this claim asserting that it had suffered losses calculated by reference to the the purchase price of $99,270.75 less resale proceeds, along with storage costs. However, Solotti Foods maintains that property and risk in the goods had not passed to it and that it validly rescinded the contract on 4 February
2015 because the goods proposed to be tendered for delivery were not of merchantable quality, so no damages are payable at all.
When was payment due and when did property and risk pass?
[69] The parties are at odds over whether payment was due seven days after Baroni Foods received the container carrying the ordered goods, or seven days after the goods were received by Solotti Foods (which it says has yet to occur). This hangs on the interpretation of the phrase “terms as discussed seven days after receipt of container”, contained in the email of 14 February 2014. It is accepted that, other than what was recorded in the emails, there is no written contract for Order 1808.
Baroni Foods’ position
[70] Mr Baroni’s evidence is that the payment terms on the email were discussed with Mr Solotti, and those discussions made it clear payment was due following receipt of the container by Baroni Foods. This was also submitted to be the only logical interpretation of the payment terms as the container was never going to be received by Solotti Foods as it contained goods for another customer and Solotti Foods had no facility to receive a refrigerated container.
[71] Mr Baroni also said that the payment terms were favourable to Mr Solotti as normally, with an indent order such as this, payment would be required when the seller produces the supplier invoice and bill of lading for the goods.
[72] In this case, Mr Baroni invoiced Solotti Foods for the goods one day before the container arrived in Lyttelton, but he accepts that payment was not due until
seven days after the goods arrived on 16 June 2014. When the goods arrived he had them transferred to a cool store where the goods were separated into the two orders, one for Solotti Foods, and one for another customer.
[73] When the goods which Solotti Foods ordered were not paid for, Baroni Foods asserted that it was exercising a seller’s lien over the goods pending payment. This right arises under s 41 of the Sale of Goods Act 1908 (the Act) which provides:
41 Unpaid seller’s rights
(1) Subject to the provisions of this Act, and of any statute in that behalf, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has, by implication of law,—
(a) a lien on the goods, or right to retain them for the price, while he is in possession of them:
…
[74] Mr Baroni says that title and risk passed to Solotti Foods when the goods were set aside for it in cool storage by Baroni Foods and at that stage Baroni Foods had done all that it needed to do to complete the order, including constructive delivery. As the risk was with Solotti Foods from that point onwards, it could not thereafter reject the goods as having become unmerchantable sometime after that. Baroni Foods also points to s 22 of the Act and says, alternatively, that the non-delivery of the goods occurred due to the fault of the defendant for breach of payment obligations. As a result, the goods were held at Solotti Foods’ risk from late June 2014 when payment became overdue.
Solotti Foods’ position
[75] Solotti Food’s view, however, is that payment was due within seven days of it receiving the goods, and property never passed because Baroni Foods reserved the right of disposal until payment had been made. It says that the payment term referred to in the email of 14 February, being seven days after receipt of container, was ambiguous as to whether that meant seven days after receipt of the container by the plaintiff or the defendant. Mr Solotti also said that, in his prior dealings with Baroni Foods, the terms had been payment within seven days of delivery to the
defendant, and there was no discussion about different payment terms on this occasion. In addition, Solotti Foods says that even if I accept Mr Baroni’s interpretation of the payment terms in the 14 February 2014 email, which related to the cheese order, I must still decide whether those terms extended to the balance of the order.
[76] Whether or not payment was due by 23 June 2014, Solotti Foods says that property never passed because Baroni Foods reserved to itself the right of disposal until payment had been made and that any appropriation of the goods to the contract by Baroni Foods was conditional upon it receiving payment of the price from the defendant.
[77] As this was a sale of future goods by description, Rule 5(1) in s 20 of the Act applies, and property in the goods only passes when the goods are unconditionally appropriated to the contract. Solotti Foods argues that Mr Baroni’s evidence made it clear Baroni Foods was never going to transfer property to the defendant until payment was made. As a result, property in the goods subject to order 1808 never passed to Solotti Foods and the goods remained at the seller’s risk. Furthermore, as the invoice specified the defendant’s address as the place for delivery (albeit its previous address), the parties contracted for delivery to the defendant’s address. There was no reason why Baroni Foods could not have removed the goods from the container at a suitable facility, attended to bio-security formalities, and then delivered the goods to Solotti Foods’ premises. Until it had done that, the goods were at Baroni Foods’ risk and it must bear the consequences of them deteriorating in the interim.
Discussion
[78] In relation to when payment was due for order 1808, I accept that the logical interpretation of the phrase “terms as discussed seven days after receipt of container” is the one contended for by Baroni Foods. Adopting the accepted approach that the language the parties have used must be read in the context of the document as a
whole and the surrounding circumstances,7 I am satisfied that the only practical
7 Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5.
reading of this provision is that it referred to receipt of the container by Baroni Foods. It was never intended that Solotti Foods would receive the container but, rather, would receive the goods themselves once they had been separated from the goods of Baroni Foods’ other client. I also accept Mr Baroni’s evidence that the payment arrangement was discussed with Mr Solotti. Mr Baroni’s email was not lengthy. I do not consider he would have added the words “as discussed” unless there had been a discussion between him and Mr Solotti about when payment was expected. I also accept that it was likely to have been discussed because Mr Baroni was offering a more favourable payment arrangement to Solotti Foods than would normally be the case for an indent order such as this.
[79] The final issue is whether these payment terms applied to the entirety of the order when, at this stage, the email only referred to the cheese order. In the absence of any other agreement as to payment terms, and where the usual terms for indent orders would have required earlier payment, I am satisfied that it is reasonable to imply these payment terms into the order as a whole, particularly where the parties agreed to consolidate the cheese order and the other orders under one order number.
[80] There is no dispute that the Act applies to order 1808. Section 20 of the Act sets out rules for ascertaining the intention of the parties as to the time at which property in the goods is to pass to the buyer. The parties are agreed that this was a sale of future goods by description, because they were goods to be acquired by the seller after the making of the contract of sale.8
[81] Section 20 provides that:
Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied and be given either before or after the appropriation is made.
[82] I accept that the goods set aside in cool storage met the contractual description. I also accept that they were in a deliverable state. Section 2(4) of the
Act defines this as being “in such a state that the buyer would under the contract be
8 Sale of Goods Act 1908, s 2.
bound to take delivery of them”. They had been separated from other goods in the
container and there was nothing more to be done to put them in a deliverable state.
[83] While the rule in s 20 applying to future goods requires the goods to be unconditionally appropriated with the buyer’s assent (whether expressed or implied), I consider Solotti Foods’ assent can be implied in the circumstances. As Mr Ryan said in closing submissions, whatever goods Baroni Foods was going to supply under the order, were going to be goods it received from its own suppliers in Europe. It is implicit in that, that authority was given for Baroni Foods to appropriate the goods it received from those suppliers. Furthermore, Mr Solotti accepted in cross-examination that, as long as the goods complied with the order, he would be bound to accept them. By setting the goods aside in the coolstore, they were unconditionally appropriated to the contract. The goods had been specifically ordered for Solotti Foods and there was no other buyer for them. Mr Solotti’s offers to make payment instalments in order to have access to the cheese supports the cheese being appropriated to Solotti Foods’, as does Mr Baroni’s assertion in his
12 August email that the storage costs should be met by Solotti Foods.
[84] I do not consider that the reference to a delivery address in the invoice suggested something more was required. The address was incorrect, as it was Solotti Foods’ previous address not its current address, and appears to have been no more than a pro forma entry on the invoice. In the circumstances it could not objectively be considered to be something the parties agreed was a term of the purchase order.
[85] I also do not accept that the observation made in Stein, Forbes & Co v County Tailoring, is relevant in this case.9 It was cited by the defendant as authority for the proposition that goods are not unconditionally appropriated “if the seller does not mean the buyer to have them unless he pays for them”. I accept Mr Ryan’s submission that the view expressed in Stein was a tentative one as the relevant passage reads:10
I doubt whether goods are appropriated unconditionally if the seller does not mean the buyer to have them unless he pays for them. But it seems to me
9 Stein, Forbes & Co v County Tailoring (1916) 86 LJKB 448.
10 At 448-449.
impossible to lay down a general rule applicable to all c.i.f. contracts. The overruling question is “Does the intention of the parties appear in the course of the making and the fulfilment of the contract?
[86] Given the goods were ordered specifically for Solotti Foods, were perishable products, and no contrary intention was discussed regarding when property would pass, it was reasonable to infer that the intention of the parties was that property would pass at, or close to, when the goods arrived in New Zealand and payment fell due. From the point when they were set aside for Solotti Foods in the warehouse, the goods were appropriated unconditionally to the contract.
[87] However Baroni Foods was entitled to retain possession of the goods pursuant to s 42 of the Act because, at the same time, Solotti Foods was failing making payment for this and other invoices owed to Baroni Foods. Section 42 provides as follows:
42 Unpaid seller’s lien
(1) Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely:
(a) where the goods have been sold without any stipulation as to credit:
(b) where the goods have been sold on credit, but the term of credit has expired:
(c) where the buyer becomes insolvent.
(2) The seller may exercise his right of lien, notwithstanding that he is in possession of the goods as agent or bailee for the buyer.
[88] I accept the defendant’s submissions that Baroni Foods was entitled to
withhold possession under both s 42(1)(b) and s 42(1)(c), as:
(a) the goods were sold on credit, and the period in which payment was required to be made had passed; and
(b)Solotti Foods had become insolvent as that term is defined in the Act because it had “ceased to pay [its] debts in the ordinary course of business, or cannot pay [its] debts as they become due”.11
[89] Finally, even if there had not been constructive delivery by unconditional appropriation to the contract, I am satisfied that the proviso in s 22(1) of the Act would apply. It provides that the normal position that risk passes with title, does not apply where delivery has been delayed through the fault of one party, in which case the goods are at that party’s risk. I have found that Solotti Foods’ payment obligation arose seven days after arrival of the container, and Solotti Foods was in default of that obligation. Indeed, the letter from Solotti Foods’ solicitor in September 2014 acknowledged this, saying “my client does not dispute that the sum of $99,270.75 is owing in respect of order 1808”. Thus, even if the cheese had deteriorated in some way between the time of arrival and when it was inspected, I consider this was not the fault of Baroni Foods. Property had passed to Solotti Foods and payment was due. Baroni Foods is entitled to sue for damages for non-acceptance of the goods as I discuss below.
Was the cheese of merchantable quality?
[90] In the event I am wrong on the issue of when property and risk in the relevant products passed, I have to consider whether the cheese was of merchantable quality when it was inspected in early February 2015.
The evidence
[91] It was clear there was nothing physically wrong with the cheese at the time of that inspection. Cassandra Johnson, a food scientist who tested samples of the cheese, gave evidence which confirmed that all of the cheese was within acceptable standards for moisture content, water activity and pH analysis. No foodborne pathogens were found in the cheese and organoleptic tests confirmed that the cheese
all tasted as was to be expected.
11 Sale of Goods Act 1908, s 2(3).
[92] The real issue is whether cheese which was either close to, or exceeded, the “best before” date on its packaging is cheese of “merchantable quality” in the circumstances of this sale.
[93] Mr Solotti says it is not, relying on his experience and on the evidence of Mr Gillian, a delicatessen owner, whom he called as a witness. Both say that consumers would only buy this cheese at a significant discount. Mr Gillian estimates that there would need to be a 50 per cent discount in price to sell the cheese. He also says that he would not accept the cheese and would expect cheese to be delivered with at least nine months to go before it reached its best before date.
[94] Mr Baroni’s evidence was that, because of the European Union regulations, all hard cheeses would have a maximum best before date of 12 months from when it was packaged for sale.12 It would therefore be virtually impossible to order and transport such cheese to New Zealand by ship and yet still have at least nine months remaining before the best before date was reached, as Mr Gillian advocated.
[95] In any event, Solotti Foods had access to a processing room at the Gasson Street premises where it could cut or grate the cheese and repackage it. It therefore could have resold the cheese in New Zealand at full retail price, as Baroni Foods used to do. Mrs Johnston also gave evidence that the cheese could not lawfully be sold in New Zealand in its European packaging showing the manufacturer’s ‘best before’ date. Furthermore, evidence was given of equivalent hard cheeses being purchased from both Mr Gillian’s delicatessen, and Mr Solotti’s retail outlet, in plain wrapping and with no best before date on it. Thus the cheese was able to be sold at normal retail price with the customer having no way of knowing the “best before” date of the cheese shown on the original packaging.
Discussion
[96] This issue turns on what is meant by the term ‘merchantable quality’. The
defendant argues that the test turns on commercial saleability. In asserting this, the
12 While initially Mr Baroni’s evidence was that it was 12 months from manufacture, it appears that the hard cheeses must be aged for periods of up to two years, for example, parmigiano reggiano must be aged for two years before its matured and ready for sale, so in fact, the
12 months dated from when the product was packaged for sale.
defendant relied on Henry Kendall & Sons v William Lillico & Sons Ltd, where Lord Reid said that “merchantable can only mean commercially saleable”,13 and B S Brown and Son Ltd v Craiks Ltd, where it was said that if the goods “would only be sold at a ‘throw-away-price’ then that might indicate that the goods were not of merchantable quality”.14 In this case, even though the cheese might be perfectly edible, customers knowing of the best before date were unlikely to buy it unless it was significantly discounted. For that reason it was not commercially saleable and therefore not merchantable.
[97] However, I accept, as the plaintiff says, that the obligation of the goods to be of merchantable quality arises under s 16(b) Sale of Goods Act 1908, which relates to goods sold “by description”. That concept was explained by Salmon J in Taylor v Combined Buyers, as follows:15
I conclude that the expression “sale of goods by description” … with respect to sales of specific articles means a sale of goods described in the contract itself as belonging to a particular kind, class, or species. The description within the meaning of the Act is the identification of the article sold by reference to the class of things to which it belongs. Conformity with the description means that the article really belongs to that class and not to some different class ….
[98] In the present case, the description of the cheese orders was contained in the email from Mr Baroni to Solotti Foods dated 14 February 2014. It specified the weight of the cheese, the type of cheese and the requirement that the units of cheese be vacuumed packed. As Hardie Boys J said in Finch Motors Ltd v Quin (No. 2), “‘merchantable quality’ means commercially saleable under the description by which
the goods are sold”.16
[99] Here it was not part of the description for the order of cheese that the packaging would have a use by date on it or that such date would not have passed, or would have a specified period to run before it was exceeded. Labelling was not part of the description. I accept that the mere existence of a date on the label is not
relevant to the merchantable quality of the cheese being sold.
13 Henry Kendall & Sons v William Lillico & Sons Ltd [1968] 2 All ER 444 at 449.
14 B S Brown and Son Ltd v Craiks Ltd [1970] 1 All ER 823 at 828.
15 Taylor v Combined Buyers [1924] NZLR 627 (SC) at 641.
16 Finch Motors Ltd v Quin (No. 2) [1980] 2 NZLR 519 at 524.
[100] Furthermore, the goods remain of merchantable quality if they remain saleable in any alternative market. As Lord Morris said in Henry Kendall & Sons:17
If the buyer merely orders goods by description, all that he can expect is that he will get goods that correspond with the description and goods of such a quality that they could be used for one of the purposes for which such goods are normally used… If, therefore, goods of the contract description are tendered and if the tendered goods though having certain defects are reasonably capable of being put to a use for which a buyer known of the defects would be likely to buy them, then they are of merchantable quality.
[101] For example, in B S Brown and Son Ltd v Craiks Ltd the purchaser rejected a quantity of cloth ordered because it was not suitable for dressmaking, but only for industrial use. However, as the cloth was not purchased on the basis it was required for dressmaking, and the cloth was reasonably capable of being used for a number of industrial purposes, it was held to be of merchantable quality.
[102] In this case, all witnesses, including the defendant’s witness Mr Gillian, accepted that the relevant cheese was saleable for consumption by the public, even without relabelling. There was also clear evidence before the Court that the cheese could readily be sold in fresh packaging without reference to the manufacturer’s “best before” date. I therefore am satisfied that the cheese imported for this order was of merchantable quality. Even if property and risk had not already passed by the date of inspection, Solotti Foods wrongly rejected the order at that point and thereby repudiated the contract.
Damages
[103] When Solotti Foods purported to cancel the agreement to purchase the goods ordered under order 1808, Baroni Foods delivered the goods to Euro Foods, to be resold. Euro Foods’ terms are that it receives a 30 per cent commission on the sale price it achieves for the goods. It has, however, had difficulty in reselling the goods as it does not have a retail shop or processing room to repackage the cheese, nor does
it have a pre-existing customer base. It has made sales totalling $6,955.80.
17 At 468.
[104] Baroni Foods therefore seeks damages of $92,314.95 under s 51 of the Act for the unpaid balance for order 1808, being $99,270.75 less the resale proceeds to date of $6,955.80. It also seeks the storage costs it incurred from June 2014 until March 2015 in the sum of $3,447.13, along with interest and costs.
[105] The claim for storage costs relies on s 51 of the Act which provides that, “where the buyer wrongfully neglects or refuses to accept and pay for goods, the seller may maintain an action against him for damages for non-acceptance”.18 The measure of such damages is “the estimated loss arising directly and naturally resulting, in the ordinary course of events, from the buyer’s breach of contract”.19
[106] I am satisfied that:
(a) Baroni Foods has made reasonable efforts to resell the goods; and
(b)the storage costs incurred were as a natural consequence of Solotti Foods refusing or failing to make payment for the goods at the time payment was required to be made, being within seven days of
16 June 2014.
[107] Accordingly, I award damages in the total of $92,314.95, with interest, pursuant to s 87 Judicature Act 1908, to run from 24 June 2014. Damages are also awarded on the sum of $3,447.13, being the storage costs accrued until
25 March 2015 when the goods were uplifted. Interest is also awarded on that sum, pursuant to s 87 Judicature Act 1908, from 26 March 2015 until the date of payment.
Costs
[108] Baroni Foods has been successful in its claims and would appear to be entitled to costs in the usual way. It is to be hoped the parties can resolve this last issue by agreement. If not, memoranda can be filed in accordance with the
following directions:
18 Section 51(1).
19 Section 51(2).
(a) the plaintiff’s cost submissions are to be received within 20 working days of the date of this judgment;
(b) the defendant’s cost submissions are to be received within 30 working
days of the date of this judgment.
Solicitors:
White Fox & Jones, Christchurch
Bishopdale Law, Christchurch
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