Syntech New Zealand Limited v Idas Group Limited

[2015] NZHC 288

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-002014 [2015] NZHC 288

UNDER	The District Courts Act 1947
BETWEEN	SYNTECH NEW ZEALAND LIMITED Applicant
AND	IDAS GROUP LIMITED Respondent

Hearing:	26 February 2015
Appearances:	D J G Cox for Applicant G A Cooper for Respondent
Judgment:	26 February 2015

JUDGMENT OF VENNING J

ON APPLICATION FOR LEAVE TO APPEAL

This judgment was delivered by me on 26 February 2015 at 1.00 pm, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Cavell Leitch, Christchurch

Rennie Cox, Auckland

SYNTECH NZ LTD v IDAS GROUP LTD [2015] NZHC 288 [26 February 2015]

Introduction

[1]      In a judgment delivered on 12 December 2014 the Court allowed Idas Group Limited’s (Idas) appeal against a decision of the District Court dismissing Idas’ claim against Syntech NZ Limited (Syntech).1   Syntech seeks leave to appeal to the Court of Appeal.

Background

[2]      Idas manufactured and supplied trays for the storage of fish.  It developed a tray for storing frozen fish that could also be used when cooking the fish.  It used a mix of polyethylene (35 per cent) and polypropylene (65 per cent) (the 35/65 blend) in the manufacture of the trays.

[3]      Syntech sources and supplies plastic materials to the tray forming industry. Syntech agreed to supply the 35/65 blend to Idas.

[4]      Idas used the material supplied by Syntech to manufacture trays.  Its major client, Talleys complained the trays manufactured using Syntech’s 35/65 blend were unsuitable for the storage of frozen fish.

[5]      In the District Court at Waitakere Judge B A Gibson concluded that, while Syntech had breached s 15 of the Sale of Goods Act 1908 by failing to supply goods in accordance with the description of a 35/65 blend, Idas had not proved its claim for damages.2   For that reason the Judge entered judgment for Syntech.

[6]      On appeal this Court agreed with the Judge’s finding that the contract was for sale of goods by description.  Syntech was in breach of s 15 of the Sale of Goods Act.  However, this Court differed from the Judge and found that Idas had made out its claim for damages.  Judgment was entered for Idas against Syntech in the sum of

$33,673.96 together with interest.

1      Idas Group Limited v Syntech New Zealand Limited [2014] NZHC 3188.

2      Idas Group Limited v Syntech NZ Limited DC Auckland CIV-2012-090-1444, 16 July 2014.

[7]      The application for leave to appeal is out of time.   The 20 working days provided for in r 20.22 are to be calculated in accordance with the definition in r 1.3. Court holidays are not directly relevant to that calculation.  However, the application was only one day late.  Idas cannot be said to be prejudiced.  I extend the time for the application for leave to be made.

Principles

[8]      An application for leave must raise some question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of a further appeal.3

[9]      Upon a second appeal the Court of Appeal is not engaged in the general correction of error.   Its primary function is to clarify the law and to determine whether it has been properly construed and applied by the Court below.   It is not every alleged error of law that is of such importance either generally or to the parties as to justify further pursuit of litigation which has already been twice considered and

ruled upon by a Court.4

[10]     There is a trend both in New Zealand and in the United Kingdom to reverse the steady increase in the number of second appeals reaching the Court of Appeal to free up valuable and expensive judicial resources to give more effective attention to hearing first appeals.5

[11]     With those principles in mind I address the issue sought to be raised on appeal.

Grounds for leave

[12]     The application for leave to appeal is advanced on the grounds that the Court erred in finding Idas was able to establish a claim for damages under s 54 of the Sale

of Goods Act.  It is said that this Court erred in holding:

3      Rutherfurd v Waite [1923] GLR 34;  Cuff v Broadlands Finance Ltd [1987] 2 NZLR 343 (CA);

and Waller v Hider [1998] 1 NZLR 412 (CA).

4      Waller v Hider, at 413.

5      Downer Construction (New Zealand) Ltd v Silverfield Developments Ltd [2007] NZCA 355 at

[36]; and Chief Executive of Land Information New Zealand v Luke [2008] NZCA 43 at [18].

(a)      there was no need in the circumstances for Idas to call expert evidence to show that the product would fail;

(b)that there was uncontested evidence that plastic material complying with the description of 35/65 blend would produce trays that could be frozen;

(c)      that the loss was the amount Idas had paid Syntech for the product not supplied in accordance with description (because, it is argued, there was no evidence that if Syntech had supplied material in accordance with the description it would have been capable of withstanding freezing);  and

(d)the District Court Judge erred in reasoning that since Idas had not been  advised  the trays  to  be  manufactured  were to  be frozen  the respondent could not have foreseen the losses.

[13]     The first three points advanced by Mr Cox are essentially challenges to this Court’s interpretation of the evidence and at (d) to the Court’s analysis of what Idas was required to prove to established its loss.  Mr Cox accepted that Syntech seeks to run the arguments it ran in the District Court and this Court again.  On the evidential points, Mr Cox repeated his previous submission that there was no evidence that trays manufactured with the 35/65 blend could be frozen, adopting the reasoning of the District Court Judge.

[14]     However,  there was  evidence on  the Court  record  to  support the factual findings of this Court on appeal.   In direct response to Mr Cox’s submission that there was no evidence that material complying with the 35/65 blend could be frozen, there was the following passage this Court cited from Mr McEachen’s evidence:

6.Together with Talleys the plaintiff successfully developed a market manufacturing  trays  from  35/65.    Between  2007  and  2010  the plaintiff manufactured and sold hundreds of thousands of 35/65 trays to the fishing industry.   As a result of this experience [Idas] was completely satisfied that 35/65 was suitable for the task of both storing and cooking frozen fish.  In particular the 35/65 trays did not crack or fracture when commercially frozen.

[15]     Mr Cox sought to address that point by submitting that this Court did not have  regard to  the  test  applicable  where  an  appellate Court  had  been  asked  to overturn a credibility determination.6

[16]     While the trial Court has an advantage where credibility is in issue, the relevant finding was not a credibility finding in the nature of a direct conflict.  Mr Farley gave some evidence to the effect a 35/65 blend would not produce trays that could be frozen, but Mr Farley and Syntech were in no position to challenge Mr McEachen’s evidence that in the past trays manufactured using 35/65 blend had not cracked or failed when frozen.   Idas ordered the 35/65 blend to use it in the manufacture of trays to be frozen, because it had done so successfully in the past.

[17]     Importantly, the principal finding of the District Court, namely that there was a breach of the sale by description was upheld by this Court.  This Court differed from the District Court only on the issue of whether damages were sufficiently proved.   I note that Mr Cox accepted that the District Court Judge’s approach in relation to mitigation was flawed.

[18]     The fundamental flaw in the District Court Judge’s reasoning on the damages issue was, having found a breach of sale by description, to then find that the failure of Idas to make Syntech aware of the purpose for which the material was to be used meant that Idas failed to prove foreseeability of loss.  While evidence of that may have been required to make out a claim for breach of fitness for purpose, it was not necessary to establish a claim for damages for breach of sale by description.

[19]     The legal test for damages under s 54(2) of the Sale of Goods Act is settled as the usual test of estimated loss directly and naturally arising in the ordinary course of events from the breach.

[20]    Where a party such as Syntech supplies goods not in compliance with description, knowing they are to be used in a manufacturing process, the supplier must contemplate the costs of the goods supplied (if paid for) will be lost.

[21]     The  proposed  points  are  essentially  an  attempt  to  re-argue  this  Court’s analysis of the issues and interpretation of the evidence.  Even if it could be said they are capable of bona fide and serious argument, they do not raise any issues of public importance.  The proposed appeal does not raise any important principle or issue of law.

[22]     While the appeal  does  raise  a matter of private interest  to  the applicant Syntech, the damages sum of $33,673 plus interest is relatively modest in the context of litigation which involved two hearings days in the District Court and a half day hearing in the High Court on appeal.   As Mr Cooper submitted, the costs on the proceedings to date exceed the principal amount of the judgment.  Syntech has not filed any affidavit evidence to provide details of any other private interest.

[23]    Mr Cox suggested that Syntech would suffer reputational damage if the judgment stood.   However, as noted, both the District Court and this Court found Syntech breached s 15 of the Sale of Goods Act.  That finding is the most relevant to Syntech’s reputation and is not in issue.

Conclusion

[24]     The  present  case  has  no  particular  special  features  or  matters  of  public interest.  It is a case where both the District and the High Court have found Syntech breached the contract for sale by supplying goods that did not comply with the description. The difference between the Courts was on the proof of damages flowing from that.  The damages are relatively modest compared to the costs of the litigation. This is not an appropriate case for a second appeal to the Court of Appeal.  It is not sufficient that there have been different results in the District Court and the High

Court as the case is otherwise not of general importance.7

Result

[25]     The application for leave to appeal is dismissed.

[26]     The associated application for stay pending appeal is also dismissed.

Costs

[27]     Costs to the respondent Idas on a 2B basis, together with disbursements as fixed.

Venning J