AFJ Software Pty Ltd v Wine Nomad Pty Ltd [2015] NSWCATAP 226 | Case summary

Notices of appeal and submissions

In the first appeal, the appellant raised seven grounds. However ground 2 (which related to a claim the Tribunal had denied procedural fairness in declining to hear oral evidence from a Mr Cooke) was not pressed. The other grounds can be summarised as follows: 1. the decision made was contrary to common law and equitable principles; 2. the Tribunal erred in failing to apply material relevant factors required to be considered when making an order under the Consumer Claims Act, 1998 (CC Act); and 3. the decision of the Tribunal was not fair and equitable within the meaning of section 13(1) of the CC Act or alternatively was against the weight of evidence.
The appellant filed written submissions and provided oral submissions to the following effect: 1. There was a contract in writing between the parties for the provision of goods and services. The contract had been entered into on 7 August 2013 and the appellant had received full payment under the contract on 23 August 2013. After entry of the contract the appellant had attended the respondent's site for the purpose of inspecting the site so installation could be arranged, this inspection occurring on 8 August 2013 and for the purpose of training, two hours of which was provided on 3 September 2013. 2. The contract required the appellant to deliver to the respondent the point of sale system consisting of various hardware and software. 3. Prior to delivery, on 16 September 2013 the respondent sought to "rescind" the agreement with the appellant and return the goods. 4. On 18 September 2013 the appellant delivered the goods which were accepted by the respondent. However, the respondent subsequently re-consigned the goods and returned them to the appellant using the same courier on that day. 5. The contract had been fully performed and the respondent had no right to cancel the contract. Consequently, the attempt by the respondent to unilaterally return the goods and cancel the contract occurred in circumstances where there was no entitlement to do so: see appellant's outline of submissions dated 16 March 2013 (sic) at paragraph 2. 6. The return of the goods was not accepted by the appellant on return under the contract and the appellant cannot be forced to accept the respondent's unlawful rescission of the contract "by dumping the goods": appellant's submissions paragraph [2]. 7. The Tribunal found that the attempt to cancel the contract had not been accepted by the appellant: appellant's submissions [2]. 8. The actions of the respondent amounted to an abandonment of the goods in consequence of which the appellant obtained a good title and was entitled to sell the goods. In this regard the appellant submitted that "title to the goods did not derive from the contract… but from the appellant's possession of them following the respondent's act of intentionally and permanently part (sic) with possession of the goods to the carrier". 9. Consequently, the Tribunal was in error in that: 1. it did not identify any relevant cause of action upon which the Tribunal could make an award of damages; and 2. in any event the appellant obtained a good title to the goods on abandonment and was entitled to sell the goods. 1. Further, the Tribunal failed to give proper reasons identifying a cause of action upon which the Tribunal relied upon to make an order in favour of the respondent and failed to set out the relevant factual and legal considerations in making the award.
During the hearing, the Appeal Panel raised the issue of whether or not the relevant cause of action was damages for conversion by reason on the appellant selling the goods in circumstances where it did not have title in the goods. The appellant said the goods had been abandoned and therefore it had been entitled to sell the goods.
At the conclusion of the hearing, leave was given to the parties to file further submissions on this aspect of the appeal.
In relation to the issue of abandonment, the appellant filed supplementary submissions on 24 March. The appellant submitted abandonment may arise in one of four ways. 1. Firstly, by the respondent disclaiming the transfer in which case property never passes. The appellant relied on a decision of Kiefel J in Jigrose Pty Ltd v Drummond [1994] 1 Qd R 382. 2. Secondly, the appellant submitted abandonment could arise where an owner parts with possession of goods, intending that the parting be permanent and without reserving any interest in the ownership, such as by leaving the goods in public or throwing them away. In this regard, while the appellant asserted there was some uncertainty concerning who had property in the goods, the appellant submitted that Australian authority suggested that abandonment immediately operates to divest a person of their interest in the property. 3. Thirdly, abandonment can occur by an owner parting with possession and leaving goods on another's private property or giving possession to another person or intending that another person appropriate the goods where the owner's intention is to permanently part with possession without reservation of any interest in ownership. In this regard the appellant relied on the decision in Jigrose as well as the decision of the Court of Appeal in Moorehouse v Angus and Robertson No1 Pty Ltd and Anors [1981] 1 NSWLR 700. 4. Fourthly, goods can be abandoned where an owner parts with possession of them to another apparently for that person to deal with as their own but subjectively not intending to part with property rights. In this case a recipient who disposes of the goods may have a defence of estoppel to any action for damages for conversion "if they have acted in accordance with representations made by the owner, including by conduct, that the recipient may treat the goods as if the recipient's own or that the owner does not intend to claim their return."
Applying these principles to the present circumstances, the appellant made the following submissions (at paragraphs 9 - 13): 1. the appellant accepts the finding that the goods had originally been delivered to the respondent "as a matter of fact and law" but the appellant acquired good title because the goods were abandoned upon their return; 2. the Tribunal's finding that the appellant did not obtain good title following the return of the good was made without either party having an opportunity to address the proposition by evidence or argument. In this regard the appellant submitted that "a putative claim for damages for conversion was first raised by the Appeal Panel in the course of the appellant's submissions as an alternative ground on which the Tribunal's findings could possibly be supported." The appellant went on to say that while such a claim appeared to have been adopted by the respondent, the claim "could only be permitted to be first raised on appeal if it is within jurisdiction (considering the limited nature of it the appeal), if no evidence could possibly be called or cross examination conducted by the (appellant) that would assist it to meet such a new case or if the (appellant) was given an opportunity to respond to it."
In reply and by way of "cross appeal" the respondent made the following submissions.
The respondent admitted that it breached the contract by returning the goods to the appellant. By reason of this breach the appellant had an entitlement to either terminate the contract and exercise rights of termination or, alternatively, to treat the contract as on foot and require performance (see respondent's submission dated 6 February 2015, paragraph 8 and paragraph 11 of the respondent's supplementary submissions in reply).
The respondent submits that the appellant did not take steps to terminate the contract and did not "accept the cancellation of" the contract. Therefore the appellant's action in reselling of the goods at a time when it did not have title constituted a breach of contract: see respondent's submissions paragraphs 10-11, page 3.
The respondent submitted that the appellant "itself breached the contract in a fundamental way, in circumstances where the contract could not remain on foot". Consequently the respondent submits "it would be contrary to accepted legal principles and equity for the appellant to have both the monetary consideration and the goods, the subject of the contract. By re-selling the goods the appellant was effectively receiving double consideration. Accordingly the order of the Tribunal was not contrary to general law, was fair and equitable and should be upheld." Therefore the appellant was receiving "double consideration". See respondent's submissions paragraphs 12-13, page 3.
The respondent also made oral submissions that the decision of Protector Glass Industries Pty Ltd v Southern Cross Autoglass Pty Ltd [2015] NSWCA 16 was relevant in determining the parties' entitlements. In this regard the respondent submitted that the appellant's act of repudiation in reselling the goods brought the contract to an end and the respondent was therefore entitled to a full refund of the monies paid.
The respondent also submitted that the Tribunal was correct in concluding that the appellant; 1. did not have title to the goods when it resold them "so that there was in effect no loss"; 2. did not prove it had "incurred expenses in and in connection with the resale". 3. Therefore the Tribunal had been correct to disallow any deduction from the amount which it found the appellant was liable to pay to the respondent: see respondent's submissions paragraph 9 pages 5-6.
By way of cross appeal, the respondent contends the Tribunal was in error in deducting the so called "15% re-stocking fee" as found in paragraph 48 (xi) of the decision. The respondent submitted that this was because "termination of the contract was complete as at the date that the goods were on-sold". Therefore "it was not possible for the Tribunal then to make a finding that thereafter the (appellant) was entitled to a 15% re-stocking fee": see respondent's submissions on cross appeal paragraph 5, page 2. In this regard the respondent also submitted that there was no evidence that any such fee could properly be claimed or that restocking took place and the clause relied upon by the Tribunal had no application in the present circumstances.
Consequently, the reduction of 15% under clause 10 of the contract was said by the respondent to be an error of law: see respondent's submissions on cross appeal paragraphs 5-6, page 2.
As a result, the respondent contended it was entitled to a refund of the full amount of $28,309.05.
In relation to the issue of abandonment, the respondent made the following written submissions.
Firstly, the respondent submitted that the issue of abandonment of the goods had not been raised at any time prior to the hearing of the appeal. Therefore it was not a matter which could now be raised.
Secondly, the goods were not in any event abandoned. For this to occur, the party abandoning the goods must intend to relinquish all claims to the property, not merely possession. The respondent referred to the decisions of Hibbert v McKiernan [1948] 1 All ER 860 and Arrow Shipping Co Ltd v Tyne Improvement Comrs (the Crystal) [1984] AC 508. The respondent relied on the email dated 18 September 2013 from the respondent to the appellant (found at page 53 of the Bundle) and submitted that this email is not consistent with an intent to abandon the goods, but rather is an attempt to disclaim acceptance of delivery.
The respondent also refers to an email that was in evidence before the Tribunal dated 28 October 2013 sent by the respondent to the appellant. This email is referred to in the Tribunal's decision at paragraph 24 but is not in evidence before the Appeal Panel. The respondent submits that these communications, which relate to returning of the goods, cannot support any conclusion in favour of abandonment.
In support of the submissions that the issue of abandonment cannot now be raised on appeal, the respondent says that evidence could have been provided on the issue of the intent of the respondent with regard to the goods.
The respondent also challenges the appellant's submission that the appellant had fully performed its obligations under the contract. In this regard the respondent submitted that while the goods had been supplied, there were additional services still to be provided by the appellant in order to fulfil the appellant's obligations under the contract. Consequently, the respondent says that there was an obligation on the appellant to "resupply the goods (at the purchaser's price) so as to complete its requirements under the agreement" and "where the goods were returned to the (appellant), the goods were accepted by the (appellant) so that it became a bailee of the (respondent's goods)". See respondent's submissions paragraph 11, page 3.
Therefore, the subsequent sale by the appellant of the respondent's goods constitutes a repudiation of the contract which had not otherwise been terminated.
In relation to whether or not the contract had been subsequently terminated by the respondent, the respondent corrected an earlier submission to the Appeal Panel to the effect that the respondent was not required to give notice to terminate the contract following a fundamental breach by the appellant. The respondent referred to the decision of Byrne v Australian Airlines Ltd [1995] 185 CLR 410, particularly at 427-428 and said that the law in Australia provides that a contract does not end automatically following repudiation by one party of its obligations but rather requires an election to be made. However, the respondent says that it made the necessary election by commencing proceedings.
The respondent then submits that the Tribunal correctly concluded that there was a wrongful sale by the appellant of the respondent's goods, title having passed, and that the appellant was "unjustly enriched by payment of a double consideration for the same goods". The respondent says "that is the cause of action pursued and within the NCAT jurisdiction edifice of S3 of the Act.": see respondent's submissions on abandonment paragraph 15(vii).
Consequently, the respondent submits that "the finding made by the Tribunal was in all the circumstances uncontroversial and correct". Finally, the respondent submitted that it is not necessary for the Appeal Panel to consider any claim for damages for conversion. Rather, the respondent submitted that the claim brought by the respondent was based on the appellant repudiating the agreement by reselling the goods in circumstances where property had passed.
In these circumstances, and subject to the issue raised on the cross appeal in relation to the allowance for a restocking fee, the respondent submits that the appeal should be dismissed.

Consideration

The following matters are common ground in this appeal: 1. The appellant and the respondent entered into a contract on 7 August 2013 by which the appellant was to supply to the respondent various goods and services. 2. The respondent paid to the appellant the full amount due under the contract on about 23 August 2013. 3. Following payment of the contract price, the appellant arranged for delivery of the goods which occurred on 18 September 2013. 4. The respondent wrongly rejected the goods and had them returned to the appellant. 5. The return of the goods constituted a breach of the contract by the respondent who wrongly refused to accept delivery of the goods. 6. Upon the appellant delivering the goods on 18 September 2013 property in the goods passed from the appellant to the respondent pursuant to clause 7 of the contract. 7. After return of the goods to the appellant, the appellant resold the goods for the same price which it had originally received.
It also appears to be common ground that the appellant had supplied various services in the nature of training sessions to representatives of the respondent on 17 September 203 although there appears to be a dispute concerning whether or not all services had been provided.
In relation to the goods which had been provided, there was evidence before the Tribunal from a Mr Cooke (who gave evidence on behalf of the respondent) that two items of equipment, a point of sale terminal and a thermal printer, had been retained by the respondent. However, the Tribunal noted that the point of sale terminal was "returned during the course of the hearing at the Tribunal": see paragraph 32 of the Decision. There was also evidence that a printer was to be supplied and installed prior to any training sessions: see Bundle page 50. This evidence suggests that some of the goods were in fact delivered prior to 18 September 2013, training having occurred on 17 September 2013, but not all the goods were returned.
On the other hand, the parties appear to accept that the appellant in fact received return of all of the goods because there seems no dispute that all goods were subsequently resold for the same price as provided in the contract.
It is against this background that the Decision needs to be considered.
The primary submissions of the appellant are that the Tribunal failed to identify any cause of action in coming to its conclusion to award the respondent the sum of $24,062.70 and failed to give adequate reasons.
In our opinion, these submissions should be accepted and the decision of the Tribunal should be set aside. Further, in the absence of adequate reasons and findings on critical questions of fact, and in the absence of all evidence (including the transcript of the hearing) the Appeal Panel is unable to determine what orders should be made. Therefore the proceedings should be remitted for rehearing.
Our reasons are as follows.
As indicated above, the critical findings of the Tribunal are recorded in paragraph 48 of the Decision. In that paragraph the Tribunal concludes: 1. the respondent had unilaterally purported to "cancel' the contract via email on 16 September 2013 (paragraph 48(v)); 2. the appellant did not accept "cancellation" of the contract on 16 September 2013: paragraph 48(vi); 3. training services were provided on 17 September 2013: paragraph 48(vii); 4. delivery of the goods was tendered on 18 September 2013 on which day title in the goods passed to the respondent: paragraph 48(viii) and (ix); and 5. at the time the goods were on sold by the appellant, it did not have title in the goods: paragraph 48 (x); 6. the actions of the appellant in reselling the goods was an attempt to mitigate its loss and that it was entitled to a 15% restocking fee even though it had not provided written agreement to return of the goods: see paragraph 48 (x) and (xi). 7. The respondent is entitled to the refund of the balance of the purchase price, namely $24,062.70: paragraph 48(xii).
There are a number of problems with these findings and the orders made. It is sufficient to deal with those matters which demonstrate that the award of $24,062.70 cannot be sustained.
Firstly, the respondent's entitlement to an award for damages requires the identification of a relevant cause of action. See for example Yeldham J in Fairey Australasia Pty Ltd v Joyce [1981] 2 NSWLR 314 at 321 and Hope JA in State Rail Authority v Consumer Claims Tribunal and others (1988) 14 NSWLR 474 at page 477
The Tribunal describes the respondent's application for relief in paragraphs 1, and 2 of the Decision and sets out the submissions made by the respondent in paragraphs 37 - 39 of the Decision in the following terms: 1. The applicant lodged an application with the Tribunal on 4 February 2014 seeking an order that the respondent refund the money the applicant paid to the respondent for a point of sale system the respondent was contracted to supply to the applicant for use in a restaurant managed by the applicant. 2. The applicant stated in the application that they 'cancelled the contract' prior to the restaurant opening. The applicant also stated in their application that the goods were not supplied. ... 37. The applicant asserts they are entitled to the refund of the whole of the purchase price in relation to the contract. The applicant stated that they had breached the contract. 38. The applicant asserts that the respondent is not entitled to damages as they have mitigated the loss through the on sale to a third party of the product the subject of the contract with the applicant for the same sale price. The applicant asserts that as there has been a 100% mitigation of loss, there has therefore been no loss sustained by the applicant's decision to terminate the contract. 39. The applicant disputes the evidence provided by the respondents in relation to the loss they sustained, as contained within the affidavit of Mr Buckham. The applicant disputes the respondent's contention that they have experienced a loss due to the GST being payable to the Australian Taxation Office ('ATO') on the contract amount.
The Tribunal also records the fact that the appellant submitted that there was no cause of action under which the respondent could obtain a refund of monies as claimed and that the law of restitution had no application: see decision paragraph 42 (v) and (vi).
While: 1. paragraphs 1 and 2 of the Decision suggest the respondent's claim arises in contract based on the failure of the appellant to supply the goods; and 2. submissions of the respondent recorded in paragraphs 37-39 of the Decision suggest the respondent breached the contract but the appellant has suffered no damage because it has mitigated all its loss and damage, the Tribunal does not identify the cause of action upon which the award was based. Further the Decision does not set out, by reference to any identified cause of action, the reasons why an order for refund of the whole purchase price, less an allowance of 15% restocking fee, is an appropriate award in the present circumstances.
In the present case, this is an error of law: see Moussa Enterprises Pty Ltd v Stanford [2015] NSWCATAP 99 at [30] referring to Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110.
Secondly, the Tribunal failed to make relevant findings concerning performance of the contract and the obligations of the parties in consequence thereof.
The conclusions in paragraph 48 (x) and (xi) suggest that the appellant suffered loss and damage which it attempted to "mitigate" when it resold the goods.
Loss and damage to the appellant could only arise in circumstances where the respondent had breached its obligations under the contract and the appellant suffered loss as a consequence. Otherwise, the appellant had been fully paid in connection with the supply of all goods and services under the contract, its only obligation to perform the contract according to its terms.
The fact the respondent sought to "cancel" the contract by email request dated 16 September 2013 was not, of itself, a breach of contract. Rather, it was a request for advice about how the respondent could terminate the contract. In this regard, after stating that a different point of sale system had been found that was compatible with other systems used by the respondent, continued: Please advise what is required from my end to rescind the agreement between Wine Nomad Pty Ltd and Fedelta.
Further, after this email had been sent, the respondent in fact accepted delivery of training services on 17 September 2013, an act consistent with 1. the respondent continuing to perform its obligations under the contract, 2. the appellant having elected to perform the contract not repudiation of the contract.
The Tribunal found that the appellant "did not accept the cancellation on (16 September 2013": see Decision paragraph 48(vi). Consequently, at the time of delivery of the goods on 18 September 2013, the respondent was obliged to accept delivery and its failure to do so constituted a breach of contract.
However, while the finding at paragraph 48(vi) means that no agreement had been reached as at 16 September 2013 to "cancel" the contract, that did not mean the actions of the respondent in returning the goods immediately upon delivery amounted to repudiation.
The respondent conceded in its submissions that the return of the goods constituted a breach. Also, the respondent appears to concede that this conduct gave rise to an entitlement for the appellant to elect to terminate the contract or require performance, presumably because the respondent's conduct amounted to repudiation: see respondent's submissions paragraph 8.
However, return of goods under the contract was not impermissible in all circumstances. Rather, the contract allowed the return of goods with the written permission of the appellant. Clause 10 of the contract was in the following terms: 10. Return Written permission must be received from Fedelta prior to return of any product. Returned items are subject to fifteen percent (15%) restocking charge. In addition the Buyer is responsible for arranging shipment and paying all freight, duties, or other charges associated with returning the product to Fedelta.
In reaching its conclusion at paragraph 48(vi), the Tribunal did not deal with: 1. the factual issues of whether or not at the time the goods were returned, the appellant had communicated to the respondent that the appellant: 1. would not agree to terminate the contract; 2. would not give permission for return of the goods; and/or 3. required performance of the contract; 1. the status of the contract following return.
While the parties appear to agree that no written approval for return of the goods had been given at the time the goods were delivered nor when the respondent's email of 18 September 2013 was sent at 6:43pm, the email exchange found at pages 53 - 54 of the Bundle suggest that: 1. the request to "cancel" or "rescind" the contract had been referred to the appellant's "legal team"; 2. no formal response refusing the request had been provided by the appellant to the respondent; and 3. when the goods were returned the respondent believed that the contract had been "cancelled".
Therefore, in the absence of: 1. relevant findings about the state of communications and the contract after 16 September 2013; or 2. all relevant evidence (including the transcript) the Appeal Panel is unable determine whether or not the conduct of the respondent in refusing to accept delivery of the goods constituted an act of repudiation which had been accepted or merely a breach of contract.
This is because return of the goods by the respondent was permissible if prior written approval was provided by the appellant as provided in clause 10. However, nothing in the contract prevented the appellant from giving approval subsequently. Therefore, returning the goods at a time when the request to "rescind the agreement" had not been refused may constitute a breach of an obligation to accept the goods on delivery. However, it may not be an act that evinces an intention not to be bound by the contract, in which case it could not amount to a repudiation of the contract.
Further, the concession by the respondent, if made, that it had repudiated the contract, does not resolve the dispute. This is because if the contract was repudiated by the respondent returning the goods, the respondent may have had no right to terminate the contract while it remained in breach.
In the present case, the Appeal Panel is unable to determine the status of the contract at the time the goods were resold by the appellant. In this regard, there are a number of possibilities, including: 1. The actions of the appellant amounted to conduct from which it could be inferred the appellant accepted the return of the goods and therefore the provisions of clause 10 of the contract applied; 2. In reselling the goods the appellant thereby repudiated the contract; 3. Neither party had terminated the contract, which remained on foot, in which case the resale of the goods may render the appellant liable to the respondent for conversion; 4. Neither party had terminated the contract and it was abandoned, thereby discharging both parties from further obligations of performance.
A resolution of these matters requires an analysis of all the evidence in determining what, if any, award should have been made in favour of the respondent and the Appeal Panel is unable to do so based on the evidence provided on appeal.
Thirdly, the appellant was only entitled to a restocking fee of 15% pursuant to clause 10 of the agreement when it accepted return of the goods.
While the orders made suggest that the Tribunal concluded the return of the goods had in fact been accepted by conduct (rather than by written approval), thereby entitling the appellant to an allowance of the restocking fee of 15%, the finding that there was no written consent to "cancel" or "rescind" the contract (at least at 16 September 2013) is a counter indicator. The Decision does not allow this matter to be resolved.
Absent a finding that: 1. the appellant accepted the return of the goods in writing pursuant to clause 10; or 2. acceptance by the appellant should be inferred from its conduct in reselling the goods; or 3. there was some other basis to justify the allowance, the restocking fee was not payable and there is no reason why this amount should be allowed as compensation for the appellant's "loss and damage" as an offset against the claim for a refund.
Fourthly, the order for refund does not take account of the fact that some services were provided by the appellant to the respondent in training the respondent's staff on at least 17 September 2013 and that some equipment was provided for this purpose.
The price payable by the respondent for these services appears to form part of the award made in favour of the respondent by way of refund, despite the fact the respondent received the services and made no claim that the services were defective.
Unless the contract was void ab initio, there appears no reason why the appellant should not be paid for the services performed.
Consequently, the absence of any analysis of what occurred in the performance of the contract and the failure to set out the cause of action to justify an order in the nature of a restitutionary remedy demonstrates error in the present case.
For these reasons, the orders made by the Tribunal on 25 September 2014 should be set aside and the matter remitted for rehearing by the Tribunal differently constituted. At that rehearing the parties may adduce further evidence, including in relation to any issue of abandonment.
Finally, we note that during the hearing of the appeal submissions were made concerning whether the resale by the appellant of the goods constituted conversion or whether the goods had been abandoned.
Having regard to our conclusions above and because a resolution of these matters includes issues of fact concerning the performance and/or termination of the contract, it is appropriate that these issues be dealt with by the Tribunal upon rehearing.
Further, having regard to our conclusions above, the cross appeal filed by the respondent should be dismissed. The issue of whether or not a restocking fee was payable will need to be dealt with at any rehearing.

AFJ Software Pty Ltd v Wine Nomad Pty Ltd

At a glance

Court

Decision date

Source

Judgment (9 paragraphs)

Parties

Cases Cited (5)

Cited By (1)