Cassco Limited v Khatau
[2015] NZHC 2660
•30 October 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-000644 [2015] NZHC 2660
BETWEEN CASSCO LIMITED
Plaintiff
AND
AADIL AHESANALI KHATAU First Defendant
KHATAU INTERNATIONAL CORPORATION LIMITED Second Defendant
Hearing: 12-14 October 2015 Appearances:
M Phillips for Plaintiff
D Hayes for DefendantJudgment:
30 October 2015
JUDGMENT OF HINTON J
This judgment is delivered by me on 30 October 2015 at 5.30 pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
CASSCO LTD v KHATAU & ANOR [2015] NZHC 2660 [29 October 2015]
Introduction
[1] This is a claim by Cassco Limited (“Cassco”) against the defendants for
$150,378 plus interest, arising from the importation and sale of food products. The defendants have a range of points of defence. The disputes are largely factual.
Background
[2] Cassco imports various products, including foodstuffs, on order for wholesale customers. It is managed by Mr Kwok, who is the company’s sole director and principal shareholder. Mr Nino Cassin was formerly a shareholder and a sales manager.
[3] Khatau International Corporation Limited (“KICL”) is a food wholesaler that
trades as “Xcite Brands”. Mr Khatau is the sole director and shareholder.
[4] KICL placed orders with Cassco which KICL then onsold to its retail customers.
[5] None of the goods were delivered to KICL. They were imported by Cassco and delivered either to Shuttle Express, said to be KICL’s storage agent, or in some instances direct to Super Clearance, KICL’s customer.
[6] Most of the dealings between KICL and Cassco were between Mr Khatau and Mr Cassin. There was only one meeting with KICL which Mr Kwok attended. Mr Khatau said that, for him, Mr Cassin was Cassco.
[7] Cassco tried unsuccessfully to have Mr Cassin attend and give evidence but he could not be located, even to serve a subpoena on him.
[8] The actual trading between Cassco and KICL, in terms of placing orders, ran for only three months from approximately February 2013 until April 2013 when the last of the invoices was issued. There were no invoices rendered after 29 April 2013.
[9] Cassco says that five invoices in total were issued to KICL, being invoice
10125 dated 12 February 2013, invoice 10028 dated 26 February 2013, invoices
10053 and 10054 dated 17 April 2013 and invoice 10455 dated 29 April 2013.
[10] On 20 June 2013, after the date of the invoices, KICL and Mr Khatau signed a credit account application and guarantee. Those documents incorporated Cassco’s terms and conditions of trade.
[11] There is no issue over invoice 10125, dated 12 February 2013. That invoice was for a total sum of $76,146 (including GST) and was fully paid directly by Super Clearance, a customer of KICL. Super Clearance paid in one lump sum of $76,146 on 19 February 2013.
[12] Cassco claims that there is a total sum of $150,378 including GST, owing on the four later invoices after allowing for the sale price of various goods that were later returned to Cassco and resold, the last resale being in May 2014.
[13] On 17 March 2014 summary judgment proceedings were filed. On 26 March
2014 Cassco served a statutory demand on KICL. On 7 April 2014 Mr Khatau swore an affidavit opposing the statutory demand. The amount then claimed was higher as no credit had been made for resales.
[14] I have attached to this judgment a chronology of the five invoices rendered, the payments made in connection with them and the credits allowed for by Cassco from resales. All figures are inclusive of GST.
[15] There is no issue as to the payments made by or on behalf of KICL and the date of payments and it is not claimed that there are any payments not accounted for. The parties agree that I do not need to be concerned with which payment should be credited against which invoice. Also no issue is taken over the quantum of the resales.
[16] I therefore approach the matter by considering the various issues raised by
KICL, in respect of the four disputed invoices and to what extent deduction should
then be made from the amount claimed as outstanding. KICL’s issues include arguments in three instances of incorrect invoicing and disputes over the basis on which credits should have been allowed for returned goods.
[17] The issues raised by KICL are set out below in order of time sequence, rather than magnitude.
Invoice 10028 dated 26 February 2013
[18] Mr Khatau agrees that this invoice was received. Furthermore, there is no dispute between the parties that it has been paid except for the sum of approximately
$4,200, including GST.
[19] Mr Khatau’s evidence at the hearing was that this invoice should not have been rendered to KICL, but rather should have been rendered to Super Clearance, so any claim should be against Super Clearance.
[20] It seems that the delivery of goods in respect of this invoice did go directly to Super Clearance and that the two cheques that were paid in respect of this invoice were drawn by Super Clearance, handed to KICL and passed on by KICL to Cassco.
[21] In his affidavit sworn on 7 April 2014, with reference to this invoice and KICL’s defence to it, Mr Khatau made no mention of his claim at the hearing that Cassco should in fact have invoiced Super Clearance. He says in his affidavit that the reason payment has not been made (by KICL) was that not all goods were received and “we paid for the goods that we did receive” (emphasis added).
[22] I have to say that I generally found Mr Khatau’s evidence to be not credible and I do not accept the explanation that he gave at the hearing that this invoice should have been rendered to Super Clearance. In my view, the invoice was properly rendered to Cassco, consistent with Mr Khatau’s own affidavit evidence, and the balance alleged to be outstanding is in fact owing by KICL.
[23] The claim Mr Khatau made in his 7 April 2014 affidavit, that there had been a short-delivery in respect of invoice 10028 did not seem to be pursued at the hearing.
I note further in regard to the claim of short-delivery that the items not delivered but included in invoice 10028 were not identified in Mr Khatau’s April 2014 affidavit.
[24] I conclude that Cassco has satisfied me on the balance of probabilities that no deduction is to be made from the total claim of $150,378 in respect of the issues raised by Mr Khatau regarding invoice 10028.
[25] I make a general observation here that Mr Khatau claimed that a number of “errors” in his April 2014 affidavit were the fault of his previous counsel, Mr St John. I do not accept that explanation. The affidavit appears to have been carefully drawn. It was completed much closer to the actual events and although I accept there would not have been much time to complete it, there were 12 days from 26
March 2014, the date of service of the statutory demand, to 7 April 2014, the date of the affidavit and 21 days from the date of the summary judgment proceedings . Further, the “errors” are not matters of detail but rather matters of overview which could simply not be mistaken. Further still, it is clear Mr Khatau was the prime, if not the only, person dealing with these matters at KICL. Mr Khatau swore that his affidavit was true and correct and now claims it is not in a number of significant respects. I do not accept that he can use Mr St John as an excuse. It seems to me that the correct explanation is that Mr Khatau is casting around for reasons for non- payment that are consistent with the documents and changing his evidence accordingly. In my view, neither what he says in his affidavit, nor what he said in Court, is correct in great part.
Invoice 10053 dated 17 April 2013
[26] Again, Mr Khatau acknowledges that this invoice was received. He disputes liability for an amount of $5,068 plus GST on the basis that he says Fanta cans listed in the invoice in that sum were damaged and had to be disposed of. Wayne Carrol of Shuttle Express confirmed that the Fanta cans were leaking in their premises and that Mr Khatau had told him at the time that Mr Cassin had instructed they could be disposed of. Mr Khatau said he told Mr Cassin there were two pallets of Fanta leaking and asked that Cassco credit them. He said Mr Cassin told him Cassco
would credit these cans and to dispose of the Fanta which he duly passed on to
Mr Carrol.
[27] There is no record of any such advice or instruction from Mr Cassin and obviously no oral evidence from Mr Cassin. However, bearing in mind that there is some (albeit tangentially relevant) supporting evidence from Mr Carrol and bearing in mind that Cassco has the burden of proof, I have decided to allow a deduction of
$5,068 plus GST ($5,828.20) from the total sum claimed.
Invoice 10054 dated 17 April 2013
[28] KICL acknowledges they received “invoice 10054” but says that it did not receive what the plaintiff says is the actual form of that invoice, namely for $101,588 including GST, dated 17 April 2013, being CBD 13. Mr Khatau says that KICL received instead an invoice numbered 10054 for $67,800 (including GST), dated 17
April 2013, being CBD 15.
[29] Mr Khatau said furthermore, in his oral testimony that no money is owing on the $67,800 invoice because KICL paid $25,000 in cash on 13 May 2013, provided Cassco with goods (including “skull” drinks) which KICL invoiced in March and April 2013 for a total price of $51,332 and then made a payment which it described in its own bank records as a “final payment” of $8,000 on 21 May 2013. KICL says that Mr Cassin agreed to take the KICL invoiced goods on account and then the sum of $8,000 in final settlement of the $67,800 invoice.
[30] I do not accept Mr Khatau’s evidence in this regard, for the following reasons:
(a) Cassco’s evidence is that they have searched and there is no CBD 15 in their computer records. Further, both Mr Kwok and Ms Willow He gave evidence that changes could only be made to an invoice that had been allocated a number, by changing the quantity of an item to zero, so that the item still appears in the invoice but with zero quantity and therefore zero dollars against it. This apparently happens not infrequently. An invoice will be issued following an order but when
an item is not in fact shipped, the line price (not the line item) is zeroed out. The changes that had been made between CBD 13 and CBD 15 involved deletions/additions of a number of entire entries. I accept the evidence that this is not something the Cassco computer system could have achieved.
(b)Further, there is documentary evidence, which I accept, that an earlier version of invoice 10054 dated 8 April 2013 (CBD 233) was emailed to KICL on 16 April 2013 which was for a greater amount than
$101,588 but was identical to CBD 13 except two items in CBD 13 had zero quantities against them. The zeroing out of the price was consistent with Mr Kwok and Ms He’s evidence of that being the only change possible in the system. It also further points to CBD 15 not being the genuine invoice.
(c) The goods invoiced by KICL (skull drinks etc) were invoiced at a sum that clearly was not agreed, given even Mr Khatau’s evidence on the matter. On the basis of the KICL invoices, it would have paid
$84,332 on an invoice from Cassco of $67,800 which makes a nonsense of the KICL invoices. Further, the KICL invoices were issued not to Cassco but to a separate company apparently not purchased by Mr Kwok. Further still, the invoices are dated March
2013 and I accept Mr Li’s evidence that skull drinks turned up at the Cassco warehouse in October 2013. Mr Kwok denies ever having received the KICL invoices and there is no evidence of the invoices having actually been sent or received.
(d)The evidence that Mr Khatau gave in Court was materially different to the evidence he gave in the affidavit he swore in April 2014 when he said (to this extent as he does now) that the correct invoice was for
$67,800, but that when he received the invoice he contacted Mr Cassin, told him he did not want all of the stock and Mr Cassin said he could just pay for what stock he took. In evidence, Mr Khatau confirmed that he did get all of the stock (at least listed in CBD 15).
It was clear that all of the stock in CBD 13 was delivered to Shuttle
Express for KICL..
(e) Any evidence relating to what Mr Cassin may have said or agreed is hearsay. I note that KICL did not attempt to call Mr Cassin as a witness, yet it is KICL that relies on statements Mr Cassin has made. I accept nonetheless that Mr Cassin is unavailable as a witness to both parties. Cassco relies on documentary evidence. To the extent the documents are documents of Mr Cassin’s, I find they are admissible under s 19 of the Evidence Act 2006 as business records. I do not accept that the circumstances relating to the hearsay oral statements of Mr Cassin on which KICL relies in connection with invoice 10054 provide any reasonable assurance the statements are reliable. I therefore rule that hearsay evidence inadmissible.
[31] I find that the invoice rendered to KICL was in the form claimed by Cassco, namely CBD 13, that all goods listed in it were delivered to KICL and that all credits that should have been allowed, have been.
[32] I conclude that Cassco has satisfied me on the balance of probabilities that no deduction is to be made from the total claim of $150,378 in respect of the issues raised by Mr Khatau regarding invoice 10054.
Invoice 10455 dated 29 April 2013
[33] KICL’s primary position is that it never placed any order for any of the foodstuffs covered by this invoice and it has no liability for it. KICL says this invoice was never issued to it.
[34] In the alternative, KICL says if I find it did place an order, then it was a condition of the order that Super Clearance would buy the ordered goods from KICL and that if or when Super Clearance did not buy the goods, Mr Cassin agreed on behalf of Cassco that KICL could return the goods to Cassco for a full refund. This proposition was put in a number of ways but I consider I have expressed it as fairly as possible to KICL.
[35] The two arguments are so inconsistent with each other that I reject both and again reject Mr Khatau’s evidence as lacking in credibility.
[36] I note further:
(a) It is entirely inconsistent with KICL’s first argument that two large containers of goods were delivered to Shuttle Express on 5 July 2013 and yet not sent back until over five months later when Cassco asked KICL to authorise their return once it became clear payment was not going to be made for the goods. I note here that there was a dispute over whether Shuttle Express were the agent for KICL. Mr Khatau claimed Shuttle Express was agent for Cassco. However, it was clear from Mr Carrol’s evidence that, at least from very early on, Shuttle Express was KICL’s agent and not Cassco’s.
(b)It is implausible that Cassco would enter into the alternative arrangement argued for by KICL. This would involve Cassco taking the full risk on the purchase and importation of the goods, without having the full potential upside and against a background according to Mr Kwok where Cassco did not import on its own account. If the terms had been as claimed, the goods would never have been delivered to Shuttle Express in the first place. Cassco would have at least wanted to retain possession of them. Cassco would also not have waited for five months before requesting return of the goods for purposes of resale.
(c) Although the version of events contained in Mr Khatau’s April 2014 affidavit is closer to the version given at the hearing in respect of this invoice, it makes no reference to the alternative argument KICL raised at the hearing that the order was a conditional one.
[37] I find on the balance of probabilities that KICL did place the order that lead to invoice 10455 and it is liable in respect of that invoice.
[38] It remains for me to consider the position regarding the goods relating to invoice 10455 which were delivered back from Shuttle Express to Cassco and then onsold with the sale price being deducted to reach the net sum claimed of $150,378.
[39] I have already rejected KICL’s claim that it could return the goods for a full
refund.
[40] There is no question that KICL agreed to the goods being returned to Cassco and that KICL knew Cassco intended to resell the goods. They did not dispute that. In my view KICL agreed to the resales to reduce its debt. Further, under s 49(3) of the Sale of Goods Act 1908, where goods are of a perishable nature, or where an unpaid seller gives notice to the buyer of his intention to resell, and the buyer does not within a reasonable time pay or tender the price, the unpaid seller may resell the goods and recover from the original buyer damages for any loss occasioned by his breach of contract.
[41] Mr Phillips relied on s 49(3) and Mr Hayes did not argue it was inapplicable. I accept it applies.
[42] KICL had possession and control of all the goods. It expressly agreed to the re-sale to Harvest Wagon and returned all the remaining 25 pallets with the intention that these would be resold by Cassco to reduce its losses.
[43] The damages are the difference between the price contracted for and the market price on resale. There is no suggestion there was a resale for under-value.
[44] It was not expressly argued but I record here, should it be relevant, that in my view property in the foodstuffs passed to KICL, at least on delivery to Shuttle Express. I do not consider the notation on the invoices was sufficient to constitute an agreement otherwise.
[45] I conclude that the plaintiff has satisfied me on the balance of probabilities that no deduction is to be made from the total claim of $150,378 in respect of the issues raised by Mr Khatau regarding invoice 10455.
Guarantee
[46] The guarantee dated 20 June 2013 is in writing and signed by Mr Khatau. It complies with s 27 of the Property Law Act 2007. Mr Khatau accepted that the guarantee, credit account application and terms and conditions of trade were all part of a package he signed and received on 20 June 2013.
[47] Clause 1 of the guarantee provides:
I unconditionally and irrevocably guarantee the due and punctual payment to Cassco of all moneys which are now owing to Cassco by the client and all further sums of money from time to time owing to Cassco by the Client in respect of goods and services supplied or to be supplied by Cassco to the Client or any other liability of the Client to Cassco, and the due observance and performance by the Client of all its obligations contained or implied in any contract with Cassco. If for any reason the Client does not pay any amount owing to Cassco the Guarantor will immediately on demand pay the relevant amount to Cassco.
[48] The “client” referred to in clause 1 is described in the attached credit account application as “Khatau International Corporation Limited”. It is immaterial, to address a point taken by Mr Hayes, that the name of the client is left out on the guarantee page. It is quite clear from the written documents as a package that they all relate to KICL.
[49] The reference in one place on the credit account application to Australec instead of Cassco (Australec being another company owned by Mr Kwok) is clearly an error and immaterial.
[50] The guarantee is clearly applicable on the face of clause 1, even though it was signed subsequent to the goods being ordered and invoiced.
[51] I find that Mr Khatau is liable under the guarantee for all sums due by KICL.
Interest and costs
[52] Cassco claims interest under the terms and conditions of trade at 2.5 per cent per month. These terms were not signed until 20 June 2013. They would not apply to orders that had been placed and accepted prior to that date, unless there was an
express provision to that effect. There is no such express provision. Interest will therefore only be available pursuant to the Judicature Act 1908.
[53] Cassco also claims solicitor/client costs under the terms and conditions of trade. Again, I do not consider this provision is retrospective. Costs will be on the standard 2B basis.
Conclusion
[54] Judgment is entered against both defendants:
(a) For damages in the sum of $144,550, being the sum claimed of
$150,378 less $5,828 in respect of invoice 10053.
(b)For interest under the Judicature Act at five per cent per annum from the date of issue of proceedings.
(c) Costs on a 2B basis.
[55] Finally, I note that the plaintiff’s systems and documentary records are inadequate. There were no discovered statements. The plaintiff says statements are regularly emailed but are computer generated and therefore not able to be duplicated. This is obviously unsatisfactory for purposes of debtor recovery. The arrangements regarding return of goods could have been clearly covered in correspondence. The plaintiff has effectively invited the defendant to argue every point in the book by its
slack systems. I strongly recommend this be remedied.
Hinton J
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