By a Statement of Claim filed and dated 8 November 2019, the Plaintiff claims damages in the sum of $24,735 from the Defendant, plus interest, storage fees, filing, service and solicitor's fees, and costs. In summary, the Plaintiff alleges a breach of contract arising from the Defendant's refusal or failure to pay the sum of $24,735 to the Plaintiff for the supply of manufacturing services and product packaging for products produced by the Defendant.
At the start of the hearing, the Plaintiff supplied the Court with a 'Damages Table' (which was marked MFI #1). It sets out the quantum of the Plaintiff's claim as follows (the meaning and basis for these various claims will become apparent once the background facts are understood as set out below):
1. Cost of purchase order: $23,760;
2. Variation (50% cost of cylinders): $975;
3. Claim: $24,735 (as outlined above, being the addition of points (1) and (2) above);
4. Interest on claim: $1,262.71;
5. Storage fee: $2,662.34;
6. Filing fee: $557.70;
7. Service fee: $68;
8. Solicitors fee: $630;
9. TOTAL: $29,915.75.
An alternative claim in quantum meruit, as set out in pars [16] - [19] of the Statement of Claim, was withdrawn at the hearing on 7 July 2020.
The Defendant, by its defence, denies any liability to the Plaintiff. It argues it was not in breach of the contract, or alternatively says that by reason of an estoppel by convention, it is not liable to the Plaintiff. The Local Court has the power to consider and determine every ground of defence, equitable and legal, in as full and ample a manner as might and ought to be done in the like case by the Supreme Court (see s 6 of the Law Reform (Law and Equity) Act 1972).
Importantly, the parties agree there was a valid contract on foot, but they disagree as to whether the Defendant was in breach of the contract.
The background facts are largely agreed. Exhibit 2 is a "Statement of Agreed Facts and Issues".
At all material times, the Plaintiff was (and remains) in the business of manufacturing and supplying packaging products, including customised resealable pouches for food products.
At all material times, the Defendant was (and remains) in the business of manufacturing snack food products, and traded under the name 'Wallaby Foods'.
On or about 2 April 2019:
1. The Defendant requested that the Plaintiff manufacture and supply it with packaging for products produced by it known as 'Dark Chocolate Thins' (and sold under the 'Coles Finest' brand); and
2. The Plaintiff undertook to manufacture and supply the Defendant with the packaging so requested.
On or about 3 April 2019, the Defendant sent the Plaintiff a purchase order in respect of the packaging requested on 2 April 2019 (Purchase Order). The Plaintiff promised to manufacture and supply the packaging described in the Purchase Order. The Defendant promised to accept delivery of, and pay for, the packaging described in the Purchase Order. Accordingly, by no later than 3 April 2019, the Plaintiff and the Defendant had entered into a contract for the manufacture and supply of the packaging the subject of the Purchase Order (Contract).
On 4 April 2019, the Plaintiff made an offer to the Defendant:
1. To make changes to the packaging the subject of the Purchase Order and the Contract;
2. To prepare 13 new printing cylinders for the purpose of manufacturing that packaging for the Defendant; and
3. To cover half the cost of producing the new printing cylinders (being half the cost of $150 plus GST per cylinder).
On 4 April 2019, the Defendant accepted the Plaintiff's offer by stating 'Yes, lets [sic] proceed with the changes on that basis' (though the extent and meaning of this 'request to proceed' is disputed by the Defendant). At the very least, the Defendant admitted that it agreed to pay half of the total cost of preparing the 13 new printing cylinders.
Between 4 and 8 April 2019, the Plaintiff acted in reliance on the matters set out above, and prepared 13 new cylinders for the purpose of manufacturing the packaging for the Defendant. The Defendant disputes, however, whether the Plaintiff was entitled to act in this way in light of the disputed meaning of the 'request to proceed', as referred to above.
As a result of these matters, by at least 4 April 2019 (and by no later than 8 April 2019), the Contract was varied (the Variation).
The Plaintiff performed the manufacture of the packaging. The Defendant denies, however, that it gave final approval for the Plaintiff to do so.
Since 1 June 2019, the Defendant has refused to accept delivery of, and pay for, the packaging manufactured by the Plaintiff.
In these circumstances, the Plaintiff alleges the Defendant has breached the Contract. The Defendant denies this allegation on the basis that the 'request to proceed' with the packaging did not constitute final print approval and that the request to proceed was on the basis that the Plaintiff would provide a print proof for the final print approval of the Defendant before proceeding to produce the packaging.
With this background in mind, the following further background facts emerge. The Plaintiff and the Defendant commenced a business relationship in June 2017. In the period between June 2017 and April 2019, the Defendant placed 23 orders with the Plaintiff. Out of the 23 orders, 12 were what was known as 're-run orders' and 11 were 'new artwork orders'. Part of the oral evidence referred to below made clear that the phrase 're-run orders' means a packaging process where no change to any artwork is necessary and the 'run' can proceed based on existing agreed data and design.
Further, in early 2019, the Plaintiff manufactured some resealable food packages for the Defendant to provide Coles (the well-known supermarket chain) with chocolates to be sold under the 'Coles Finest' home brand. The process of manufacturing the packages took several months (from about December 2018 to February 2019) and involved 3 parties: the Plaintiff, the Defendant and a company known as 'Jupiter Prestige Group' (JPG). JPG was engaged by Coles to oversee the creation of what was known as the 'artwork' for the packages. Artwork consists of the background, words and graphics that appear on the packaging.
The Plaintiff and the Defendant had not worked together with JPG before, though the Plaintiff had worked with a different client and JPG previously.
I do not understand it to be in dispute that the process of manufacturing the packages generally involved 2 broad steps:
1. First, the artwork was designed (Step 1). This was done using computer software to produce a digital image of the artwork; and
2. Secondly, the physical process of turning the approved digital artwork into a physical package took place at the Plaintiff's factory in China (Step 2). That physical process, in turn, involved a number of steps, as follows:
1. Metal cylinders were engraved with the approved artwork;
2. The engraved cylinders were rolled in ink;
3. The artwork was printed by running plain packaging material through the cylinders (in effect, a printing press); and
4. The printed-on packaging material was then cut and formed into the shape of a three-dimensional package (and a zip-lock added to it).
Once the physical packages were finished, they were shipped from China to Australia.
It is apparent that the first production order in early 2019 was a success for the parties, and in April 2019, the Defendant placed the order for the second production order for the same packaging based upon the same approved artwork. It is this second production order, as defined above as the 'Purchase Order', that is the subject of the dispute between the parties.
It is not in dispute that shortly after the Defendant placed the Purchase Order, the Plaintiff offered to make improvements to enhance the physical packages by preparing new cylinders for the printing press - new cylinders that would be engraved to pick-up more ink and produce a better and more vibrant final product (in effect, improving the quality of the artwork presented on the cylinder).
The Defendant accepted this offer (and agreed to pay half the cost of creating the new cylinders) and thus varied the Purchase Order (defined above as the 'Variation'). The Plaintiff then created the new cylinders and manufactured the order. This order is at the heart of this dispute, and I consider it further below. Tendered into evidence were a series of samples of the subject cylinders. There were 4 in total. They were admitted into evidence as Exhibit 1.
Upon my own inspection of the material in Exhibit 1, and based on my observations made at the outset of the hearing, the printing quality of the final product arising from the Variation is appreciably superior to the printing quality of the first production order. The text is more prominent, clearer, vibrant and striking. I consider the relevance of this further below.
The parties relied on the following evidence at the hearing:
1. For the Plaintiff:
1. Affidavit of Jeremy Morgenstern, the operations manager of the Plaintiff company; and
2. Affidavit of Jason Rubenstein, the director of the Plaintiff company;
1. For the Defendant:
1. Affidavit of Paul Owies, the director of the Defendant company; and
2. Affidavit of Peter Reed, the general manager of the Defendant company.
The affidavit evidence was largely admitted without objection. Where objection was taken to certain hearsay material, the evidence was admitted, by agreement of the parties, on the basis it was not read as to the truth of what was asserted. Each witness was also cross examined at the hearing.
I was ably assisted by Mr Eli Ball, counsel for the Plaintiff, and Mr Vikram Misra, counsel for the Defendant. Both counsel presented their respective clients' cases with efficiency and focused on the real issues in dispute, and I observed admirable co-operation between them in order to assist the Court's determination of the matter. This is also reflected in the helpful preparation and presentation of Exhibit 2.
At the hearing on 7 July 2020, I heard closing oral submissions from the Plaintiff, however due to time pressures on that day, the parties agreed that the hearing could be finalised by the exchange of written closing submissions from the Defendant and written closing submissions in reply from the Plaintiff. Both parties duly filed and served their written submissions and I have had regard to those documents in arriving at my decision.
My reasons below address each party's respective arguments.
[2]
B. ISSUES
The issues in this case, as is apparent from the background facts above, are as follows.
First, whether, as is alleged by the Defendant, it was a term of the Contract (implied by previous dealings and common understanding) that, if changes were made to the packaging the subject of a purchase order, final print approval from the Defendant was required as regards any print proof provided by the Plaintiff before the Plaintiff could proceed to produce the packaging (the Defendant's Allegedly Assumed State of Affairs).
Secondly, whether, as alleged by the Defendant, the Plaintiff is estopped (by reason of an estoppel by convention) from denying the Defendant's Allegedly Assumed State of Affairs.
Thirdly, whether, if either of the preceding 2 paragraphs are resolved in the Defendant's favour, the 'request to proceed' constituted final print approval.
Fourthly, whether, as alleged by the Defendant, the Variation was subject to the Defendant's Allegedly Assumed State of Affairs.
Fifthly, whether, in preparing the 13 new cylinders for the purpose of manufacturing the packaging for the Defendant, the Plaintiff suffered detriment.
Sixthly, whether the Defendant has breached the Contract and, if so, what the quantum of the Plaintiff's entitlement to damages is (including the costs of storing the packaging for which the Defendant has refused to accept delivery to date).
[3]
C. THE COMPETING POSITIONS OF THE PARTIES
The Plaintiff's position may be summarised, in broad terms, as follows:
1. There is a very clear delineation and distinction between Step 1 and Step 2 and who was involved in each step (and equally important, who was not involved). JPG made clear (in an email sent to the Plaintiff, Defendant and Coles on 9 January 2019) that further 'sign-off' was not necessary once the artwork had been approved (the conclusion of Step 1), while Coles had earlier (on 4 January 2019) indicated that it did not require anyone to attend the 'first press pass' of production (Step 2). Further, neither the Defendant, nor JPG or Coles had input into the physical manufacturing process that comprised Step 2. Once the proof was approved, the manufacturing process was left to the Plaintiff and no further approvals were required before the fulfilment of the Defendant's order. Indeed, this was how the Plaintiff and Defendant had conducted business between themselves previously when neither of JPG nor Coles were involved;
2. The second important point about the manufacturing process is the role played by the engraved metal cylinders: regardless of what appears in the approved digital image, the ultimate look and feel of the physical packages depends upon the quality of the printing press (in much the same way that, no matter how clear a photograph may appear on one's computer, the quality of the physical photograph will depend upon the printer used to print it). In the case of the packages, the vibrancy of the images and the strength of colour appearing on them depend upon the physical characteristics of the engraved cylinders: deeper engravings means the cylinder picks up more ink, and so print stronger and more vibrant product. Further, and because a given metal cylinder can only be engraved once, if a second run of packages needs to be made stronger and more vibrant than a previous run, then a whole new cylinder needs to be engraved;
3. The above observations are important because they are central to understanding why the Defendant's position in respect of the dispute between the parties is fundamentally flawed. This is because the Defendant alleges that it was required to approve production after the engraving of the metal cylinders because it claims this step constituted a change to the artwork. This is manifestly wrong because the engraving of metal cylinders did not change the artwork that has already been approved, and no further approval was required after the cylinders were engraved;
4. The first production order was a success and, in April 2019, the Defendant placed an order for a second production order (defined above as the Purchase Order) for the same packaging based upon the same approved artwork. Shortly after the Defendant placed the second production order, the Plaintiff offered to make improvements to enhance the physical packages by preparing new cylinders for the printing press - new cylinders that would be engraved to pick up more ink and produce a better and more vibrant final product (defined above as the Variation). The Defendant accepted this offer (and agreed to pay half the cost of creating the new cylinders) and thus varied the Purchase order. The Plaintiff then created the new cylinders and manufactured the order. In these circumstances, the Plaintiff:
1. Denies that it was a further (unwritten) term of the Purchase Order that 'where changes are made to the packaging subject to a purchase order, the Defendant must give final print approval to the Plaintiff as regards any print proof provided by the Plaintiff before the Plaintiff can proceed to produce the packaging';
2. Denies that an estoppel by convention arose preventing the Plaintiff from acting otherwise than in accordance with the alleged term;
3. Denies the Defendant's claim that because it never gave the allegedly necessary 'final print approval to the Plaintiff' that it is not required to accept delivery of, or pay for, the second production order, which was completed in May 2019 and delivered to Australia in early June 2019, and which have been kept in storage (at the Plaintiff's cost) ever since.
In closing submissions, Mr Ball, counsel appearing for the Plaintiff, said that although the 4 witnesses were cross examined, the claim can largely be determined on the documentary material.
The Defendant's position may be summarised, in broad terms, as follows:
1. There was a further (unwritten) term of the Purchase Order that 'where changes are made to the packaging subject to a purchase order, the Defendant must give final print approval to the Plaintiff as regards any print proof provided by the Plaintiff, before the Plaintiff can proceed to produce the packaging'. This arises by reason of the previous course of dealings between the parties, being a consistent course of dealings over 2 years and covering 23 previous orders; and
2. Alternatively, the Defendant says that the Plaintiff is estopped (estoppel by convention) from denying the assumed state of affairs between the parties, being where changes are made to the packaging subject to a purchase order, the Defendant must give final print approval to the Plaintiff as regards any print proof provided by the Plaintiff, before the Plaintiff can proceed to produce the packaging. The parties' conduct in May 2019, that is, by the Plaintiff requesting approval of the print proofs and the Defendant saying it would provide such approval in due course, viewed objectively, supports that they both adopted this state of affairs between them. The detriment suffered by the Defendant is that, as the print proofs were not approved, the products are of no value as they do not accord with the Defendant's specifications and requirements.
My reasons below separately address the implied contact term claim, and the estoppel by convention claim.
[4]
(a) An implied term?
The parties agreed that the relevant case authorities make clear that a course of dealing occurs when the contract at issue between the parties is preceded by a series of transactions over time, and that such a course of dealing may have the effect of incorporating terms into a contract. In order to decide had to the extent of dealing between the parties and the steps taken. The course of dealing must be consistent and sufficiently long. If there is inconsistency in the dealings between the parties, the court may conclude that there is no relevant course of dealing such as to give rise to an implied term. In this respect, see the decisions of Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31, Premium Grain Handlers Pty Ltd v Elite Grains Pty Ltd [2005] WASC 103, La Rosa v Nudrill Pty Ltd [2013] WASCA 18 and James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland [2015] NSWSC 243.
The present case highlights the problems that occur when parties do not fully and completely document, in express terms, their ongoing contractual relationship. It is clear on my review of all of the documents which have been tendered, including the various email exchanges in the affidavit material, that the parties developed mutual trust and confidence in each other, and had a good working relationship, and did not feel the need to formalise their changing contractual relationship, either prior to, or upon the arrival of, JPG. Prior to JPG's arrival, the contractual relationship is evidenced by the series of transactions and correspondences that occurred between 2017 and 2019, as set out in the affidavit of Mr Reed and the annexures referred to therein (see at pars [10] - [30]).
The 16 November 2018 order (referred to at par [27] of Mr Reed's affidavit), which was the last 'new artwork' production order in that sequence of orders, includes an approval to proceed with 'the packaging'. It is clear to me, and I find, that the packaging of a product is intimately connected, or related, to the artwork, and the parties considered that this was the case. That is, the quality of the package is as important as the artwork itself. Although the quality of the second production order is, on any objective assessment, superior, this is not determinative of the issues in this case (that is, simply because the packaging of the finished product was superior does not mean that the Defendant must accept the product and make payment for it).
Changes to the packaging have the effect of altering the appearance of the artwork and the general presentation of the finished product. Accordingly, I do not consider that Mr Reed's concession in cross examination that there was no change to the 'artwork' between the January 2019 order and the April 2019 order damages the Defendant's case, because the changes to the cylinders had the effect of changing the packaging, and hence the presentation of the packaging to the ultimate consumer. The implied term contended for by the Defendant is that if changes are made to the 'packaging' the subject of a purchase order, final print approval from the Defendant was required as regards any print proof provided by the Plaintiff before the Plaintiff could proceed to produce the packaging. Accordingly, a concession that there were no changes to the 'artwork' is not determinative.
It is clear that on each prior occasion involving a transaction between the Plaintiff and the Defendant, final 'sign off' of the finished product, including the way it would be 'presented' to intended customers in terms of its packaging, rested with the Defendant. That course of dealing was consistent and, I find, occurred over a sufficiently long period, comprising 23 orders during the period June 2017 to April 2019. On each occasion, the Defendant authorised the relevant order to proceed to finality.
As stated above, I consider that there is no relevant difference or distinction between the artwork on the one hand, and the packaging onto which the artwork is applied on the other hand. The packaging can (and obviously does) influence the presentation of the product and hence the appearance of the artwork, including its clarity and vibrancy as perceived by the ultimate consumer. It can be readily accepted that approval of the artwork is different to the engraving of the cylinders (i.e. they are separate processes), but the engraving process clearly affects the presentation of the finished product, and hence the presentation of the artwork.
In this case, the Plaintiff sought to win the support of the Defendant for a change to the packaging and hence the presentation of the artwork on the cylinders. Although the change clearly enhanced the finished product, it was a change which, consistent with the course of conduct and dealings over many years, the parties had impliedly agreed would require the Defendant's sign off or approval before proceeding with the order to finality. As I earlier observed, there is a clear difference in quality between the cylinders in Exhibit 1, due primarily to the clarity of the text in cylinder 4 (cf cylinder 2) and cylinder 3 (cf cylinder 1). This difference is similar to the concerns, just to take one example in relation to a past transaction/order, at p 137 of Mr Reed's affidavit where he requested that the word "MILK" be emboldened in relation to the particular package on that occasion (presumably to increase the prominence of that word on the packaging).
Accordingly, in all of the circumstances, although the specifications of the packaging itself may have the effect of improving the quality of the finished product, those specifications are intimately tied and connected to the presentation of the artwork. It does not matter that, in this case, the Defendant received what is apparently a more superior product as a consequence of the changes to the packaging. Consistent with the contractual history between the parties, the Defendant reserved to itself the right, and the Plaintiff accepted that the Defendant had the right, to approve the final product and its presentation, including the packaging. In the example I just gave above in relation to the word "MILK", on that same page (page 137 of Mr Reed's affidavit), Mr Morgenstern noted he was 'awaiting your [the Defendant's] approval'. This is also consistent with what Cameron Marshall observed in his email at p 160 of Mr Reed's affidavit (see the text 'Approval to proceed to print needs to come from Peter or Paul').
Accordingly, I find that, in light of the matters to which I have referred above, the contractual relationship between the Plaintiff and the Defendant, by reason of their consistent course of dealings over a number of years, was such that there is and was an implied term of the Contract that, if changes were to be made to the packaging the subject of a purchase order, final print approval from the Defendant was required as regards any print proof provided by the Plaintiff before the Plaintiff could proceed to produce the packaging. I do not find anything in the evidence which supports the proposition that the implied term is inconsistent with any previous course of conduct between the parties, or with JPG, nor do I find that at any time did JPG have any role, right or responsibility to approve the artwork. To the contrary, I find that the implied term is consistent with the past course of conduct between the parties over a lengthy period of time.
Notwithstanding JPG's 'involvement', to use a neutral term, in the contractual relationship between the Plaintiff and the Defendant, I do not consider that the evidence shows that its introduction and involvement with those parties contained any break in the otherwise consistent course of dealings between the parties, including, importantly, the Defendant's power of approval of the final product prior to manufacturing and packaging of the relevant product. I also note that neither Coles, nor JPG, had any direct contractual relationship with the Plaintiff. Further, the email from JPG of 17 April 2019 sent at 12:25 pm confirms that the decision to make the 13 new cylinders was at the discretion of the Plaintiff and the Defendant and that neither Coles nor JPG would be involved in subsequent discussions concerning costs.
As to the contentious email of 9 January 2019 (sent at 11:05 am by Mr Chris Morse of JPG), I consider that JPG was making clear that it was not their process to sign off digital or physical proofs prior to print. This is in line with the prior dealings between the Plaintiff and the Defendant, namely, that the Defendant always had to give final print approval before production and manufacturing commenced.
I also do not consider the prior involvement of 'B Brand Design' in November 2018 as particularly illustrative or informative of the contractual relationship between the Plaintiff and the Defendant. The 'relationship' between the Plaintiff and the Defendant with JPG/Coles, and the 'relationship' between the Plaintiff and the Defendant and 'B Brand Design' is consistent with the implied term contended for by the Defendant, for the reasons I have set out.
I find that the Variation was, therefore, subject to the Defendant's Allegedly Assumed State of Affairs, that is, that final print approval from the Defendant was required before the new style of cylinders were manufactured and produced for the Defendant.
I find that Mr Rubenstein and Mr Morgenstern were genuine in their belief that the Defendant was in breach of the Contract and sought to assist the Court with a truthful and complete account of their understanding of the contractual relationship between the Plaintiff and the Defendant. It is not necessary, in order to resolve this case, however, to make any credit findings in relation to any of the witnesses and I do not propose to do so. This is a unique case in which I found all of the witnesses who gave evidence strived to give truthful evidence to the Court to the best of their ability.
The matter, however, can largely be determined based on the documentary evidence. Mr Rubenstein says in his affidavit at par [16] that if the Defendant's position is to be accepted, that this would have serious implications for the Plaintiff's business and its financial viability. That may well be the case, but the difficulty is that, as I have found, the contractual relationship with the Defendant gave the Defendant the right to approve (or reject) the final product (including the cylinder) before manufacturing commenced.
This finding also explains why Mr Rubenstein's observations at par [19] of his affidavit are misplaced, in a contractual sense. I have found that because the Defendant, contractually, has the ability to approve or reject the intended product, this includes oversight and approval of the quality of the words and images as they appear on the cylinder. If the Plaintiff does not wish for the Defendant (or anyone in the Defendant's position) to have that right, the contract should expressly provide as such. I have found, however, that the Contract contains the implied term, as contended by the Defendant, for the reasons I have set out above, by reason of their past consistent and longstanding relations.
[5]
(b) Estoppel by convention?
Given my findings above, it is not strictly necessary that I make any findings in relation to the estoppel by convention claim. However, as the matter has been argued, I will proceed to do so.
In accordance with the Defendant's pleading, I have considered the course of conduct between the parties, or alternatively the alleged common understanding between them, as well as the emails of 17 April 2019, 6 May 2019, 7 May 2019 and 15 May 2019 (as identified in par [6.2.1] of the Defendant's defence).
The requirements for an estoppel by convention were set out by Edelman J in Mineralogy Pty Ltd v Sino Iron Pty Ltd (No. 6) [2015] FCA 825; (2015) 329 ALR 1 at [758] - [759]. The Defendant must establish that both it and the Plaintiff acted upon a mutual assumption, knowing that the other would do the same, and that departing from that assumption would cause detriment to the Defendant. Further, the assumption must be clear and unequivocal (see TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2015] NSWCA 343 at [117]). Other decisions that have considered estoppel by convention include Blockbuster Australia Pty Ltd v Karioi Pty Ltd [2009] NSWSC 1089 and Moratic Pty Ltd v Lawrence James Gordon & Anor [2007] NSWSC 5. Further, estoppel by convention requires proof of detriment. A speculative possibility of detriment is insufficient for an estoppel case (see Bell Group Ltd (in liq) v Westpac Banking Corp (No. 9) [2008] WASC 239, 39 WAR 1 at [3502]). That is, the detriment must be material, must be proved and cannot simply be presumed.
I accept that the packages produced by the 2 production runs are near-identical: the text, graphics and colours are the same, and the only difference between them is that the quality of printing for the second production order is superior. However, consistent with my findings above, the artwork and the cylinder on which it is placed are intimately connected. I find, based on the course of dealings between the parties, and for the reasons set out above in the context of my findings on the implied contractual term, that both parties acted upon a clear and unequivocal mutual assumption, knowing that the other would do the same, that the Defendant had full right and authority to approve (or reject) the artwork and the cylinder on which the artwork was applied (i.e. the packaging of the product).
I do not need to make findings as to the reasons why the Defendant refuses to pay for the second production order. It was put by the Plaintiff that it was due to the Defendant discovering an error of its own making, namely, that the nutritional information panel on the packaging was erroneous and that it did not want to take responsibility (including financial responsibility) for that discovery. Whether that is the case is not relevant in the circumstances here, because I have found that the Defendant enjoyed the legal right to approve the packaging before manufacturing and production commenced on the second production order, and this opportunity was not afforded to it.
I cannot find, however, that the Defendant has suffered any material detriment beyond mere speculation. Rather, I find:
1. The Defendant has not identified any actual specifications for the packaging which would have been required and accepted by Coles, hence there is no sufficient evidence to satisfy me that the packages produced by the Plaintiff in pursuance of the second production order were of no value to the Defendant, despite its apparent concerns in relation to the nutritional information panel; and
2. The Defendant has not given any evidence of what it would have done if it had been provided with a final print proof for its approval. In other words, the Defendant has not and cannot prove that it would not have given print approval had it been provided with a final print proof for the second production order.
It follows that although I accept that both the Plaintiff and the Defendant acted upon a relevant mutual assumption, knowing that the other would do the same, I do not find that departing from that assumption has or would cause detriment to the Defendant.
Accordingly, I do not uphold the Defendant's estoppel by convention defence.
[6]
(c) Did the request to proceed constitute final print approval?
In an email sent on 4 April 2019 at 4:52pm, Mr Owies responded to an earlier email from Mr Morgenstern sent at 4:46pm. Mr Owies said: 'Yes lets proceed with the changes on that basis'. To understand what he was referring to, it is necessary to read Mr Morgenstern's email. In his email, Mr Morgenstern referred to the mere 'number' of changes that would be made to the cylinders (being 13 changes) and referred to the print of each cylinder being AUD$150 plus GST, and that out of good faith, the Plaintiff was prepared to cover half of that cost. He went on to say that proceeding with the changes was not obligatory and Coles had not mentioned the need for those changes, rather it was only JPG who had raised the idea with the Plaintiff.
The answer to the question raised by the parties, namely, 'Did the request to proceed constitute final print approval?' can be answered by looking at the email exchanges and their context. Based on these matters, I find that the Defendant did not, in its email sent at 4:52 pm, give final print approval in relation to the second production order. Rather, the context, having regard to the historical course of dealings between the 2 parties, in fact reveals, and I find, that this email was a request to proceed on the basis that the Plaintiff would provide a print proof for the final print approval of the Defendant before proceeding to manufacture the packaging. Expressed another way, the Defendant was giving its imprimatur to changes to the cylinders in principle and had only agreed at that moment, on a final basis, to the cost sharing proposal in the Plaintiff's email of 4:46 pm.
Although it may not be necessary to make this further observation, I find that the Defendant's response sent at 4:52 pm was only an in principle approval subject to sighting, and finally approving, the final product, because this is corroborated by the email exchanges that were sent subsequently. In an email from Mr Morgenstern sent on 17 April 2019 at 11:27 am, he said at the conclusion of his email that 'we have gone ahead & made these cylinder changes & will have a print proof ready to assess towards the end of next week' (see Mr Owies' affidavit, p 216). That the Defendant had wanted to review (and therefore approve) the changes is also corroborated by the emails in Mr Owies' affidavit at pp 218 - 228 sent on 7 May 2019 and 15 May 2019.
I do not consider that it is impermissible to have regard to these emails because I am not doing so in order to determine the terms of the contractual relationship between the Plaintiff and the Defendant. Rather, the purpose of considering these emails is to determine whether, in all of the circumstances, the Defendant in fact approved the second production order and the manufacturing and packaging associated with that order. Post-contractual conduct is generally not relevant to the issues I need to consider, and so I make these observations in the context only as to what the 'request to proceed' meant.
Accordingly, for these reasons, I find that the Defendant did not give final print approval in relation to the second production order, as required by the implied term, and accordingly, I find that the Defendant is not and was not in breach of the Contract, as varied.
[7]
(d) Remaining matters
In light of my findings, the Plaintiff's claims for interest, storage fees, filing, service and solicitor's fees fall away.
On the issue of costs, ordinarily costs follow the event. However, I have not heard argument on this issue and am unaware whether any formal offers of compromise or Calderbank offers have been made by either party such as to justify a special costs order. I will, therefore, make a self-executing order reflecting the usual costs position, but give the parties an opportunity to seek a different order if thought appropriate.
[8]
E. ORDERS
Consistent with my findings above, I make the following orders:
1. Verdict and judgment for the Defendant;
2. The Plaintiff's Statement of Claim dated 8 November 2019 is dismissed; and
3. Unless a motion is filed by either party within 14 days of the date of this order seeking an alternative costs order, the Plaintiff is to pay the Defendant's costs of the proceedings as agreed or assessed on the ordinary basis. If such a motion is filed, the parties should make clear to the Court registry that the motion will need to be listed before me for directions in relation to any further evidence, submissions and in order to set a hearing date for the motion.
[9]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 16 November 2021