International Hair Products P/L v Melleuish P/L

CATCHWORDS : Appeal decision of LCM - adjournment application - s 19(2) Sale of Goods Act Local Courts (Civil Claims) Act 1970 (NSW) - ss 69; 75 LEGISLATION CITED : Sales of Goiods Act 1923 (NSW) - ss 18; 19 Trades Practices Act 1974 (Cth) Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Devries v Australian National Railways Commission (1993) 177 CLR 472 CASES CITED : House v The King (1936) 55 CLR 499 Sali v SPC & Anor 116 ALR 625 State of Queensland v JL Holdings (1997) 189 CLR 146 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588 Thomas & Anor v Nedeljkovic [2004] NSWSC 524 International Hair Products Pty Limited (ACN 077 244 092) (Plaintiff) PARTIES : Melleuish Pty Limited (ACN 002 157 799) t/as The Bottle People (Defendant) FILE NUMBER(S) : SC 11561/2003 Mr M Herschderfer (Plaintiff) COUNSEL : Ms M Sneddon (Defendant) Mr R Farago, Langes (Plaintiff) SOLICITORS : Ms M Olsen, Gray & Perkins (Defendant)

LOWER COURT Local Court JURISDICTION : LOWER COURT 1796/2002 FILE NUMBER(S) : LOWER COURT Magistrate C Longley JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

11561/2003 - INTERNATIONAL HAIR PRODUCTS PTY LIMITED (ACN 077 244 092) v MELLEUISH PTY LIMITED (ACN 002 157 799) t/as THE BOTTLE PEOPLE

JUDGMENT (Appeal decision of LCM - adjournment application; s 19(2) Sale of Goods Act) 1 MASTER: By amended summons filed 16 October 2003, the plaintiff, pursuant to s 69 of the Local Courts (Civil Claims) Act 1970 (NSW) seeks orders: firstly, that the orders of C Longley Local Court Magistrate in respect of Local Court proceedings No. 1796 of 2002 made 5 May 2003 and 28 May 2003 be set aside; secondly, that the proceedings be remitted to the Local Court for determination; and thirdly, that the defendant pay the plaintiff's costs of the Local Court proceedings and of this appeal. The plaintiff relied on the affidavits of Kieron Dowd sworn 14 October 2003 and 10 November 2003. The defendant did not rely upon affidavit evidence. The plaintiff is International Hair Products Pty Limited (ACN 077 244 092) (IHP) and was the defendant/cross claimant in the local court proceedings. The defendant is Melleuish Pty Limited (ACN 002 157 799) t/as The Bottle People (Melleuish) and was the plaintiff/cross defendant in the local court.

The appeal 2 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 69(2) of the Local Courts (Civil Claims) Act permits a party who is dissatisfied with a judgment as being erroneous in point of law to appeal to this Court. The onus lies with the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 and Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156. It cannot be said that the Tribunal member acted on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588.

Grounds of appeal 3 The plaintiff seeks to appeal from the decisions of C Longley LCM delivered when sitting in the Local Court at the Downing Centre in Sydney on 5 May 2003 and 28 May 2003 in its entirety. The grounds of appeal are: firstly, that the learned Magistrate erred in not granting the plaintiff an adjournment as sought on 5 May 2003; secondly, that the learned Magistrate erred in that he misapplied s 19(1) of the Sale of Goods Act 1923 (NSW); thirdly, that the learned Magistrate erred in that he overlooked the operation of s 18 of the Sale of Goods Act.

The Local Court Proceedings 4 On 14 February 2002 Melleuish commenced proceedings by way of statement of liquidated claim against IHP in the Local Court Downing Centre claiming that Melleuish and IHP entered into an agreement in June 2001 whereby Melleuish agreed to design and supply to IHP who agreed to purchase 12,000 bottles and associated products. Melleuish claimed outstanding monies owed under the contract and also made a claim pursuant to the Trade Practices Act 1974 (Cth). In the Local Court proceedings IHP admitted that it and Melleuish entered into an agreement whereby Melleuish agreed to supply to IHP who agreed to purchase 12,000 printed bottles and associated products. 5 IHP filed a cross claim claiming that Melleuish, amongst other things, breached the agreement and s 19 of the Sale of Goods Act and as a result IHP suffered loss and damage including: firstly, the payment of a deposit; secondly, the retention of designers to design a new print design due to the plaintiff's failure to supply bottles without defects using the original design; thirdly, the loss of anticipated profits from sales from October 2001; fourthly, the losses relating to Melleuish's refusal to deliver up to the defendant the defendant's hair product liquid and/or, on the assumption the product was delivered up, an amount representing the costs of transferring the product to other bottles; and fifthly, other expenses incurred in anticipation of the product being sold in October 2001. Melleuish denied the allegations set out in the cross claim. On 15 July 2002 and on the application of Melleuish, the court ordered that IHP pay the sum of $10,000.00 into court by way of security for Melleuish's costs in respect of the cross claim. Security for costs has also been provided in this Court. 6 On 28 May 2003 the Magistrate ordered that the defendant (IHP) pay the plaintiff's (Melleuish) claim of $21,095.88 together with costs of $144.00 and the defendant (IHP) pay the plaintiffs (Melleuish) costs on an indemnity basis assessed in the amount of $23,079.49. 7 This appeal essentially involves two issues namely, firstly, the Magistrate's refusal to grant IHP an adjournment to obtain proper legal representation; and secondly, the Magistrate's reasoning in interpretation in respect of ss 18 and 19(1) of the Sale of Goods Act. Section 18 of the Sale of Goods Act was not raised in the defendant's pleadings, which were drafted and filed on behalf of the defendant by his solicitor, nor dealt with at hearing. 8 Prior to the hearing the parties had been to directions hearings. Both the plaintiff and defendant had filed statements and expert reports.

The adjournment application 9 Section 75 of the Local Courts (Civil Claims) Act provides that a court may, upon such terms as to costs or otherwise, from time to time adjourn any proceedings before it as it sees fit. 10 The hearing of this matter commenced on 10 February 2003 before Magistrate Longley. It was stood over part heard to 5 May 2003. Mr Dowd the principal of the defendant appeared on 10 February 2003 without legal representation. The plaintiff was represented by Counsel, Ms Sneddon. At the conclusion of the hearing of 10 February 2003 the plaintiff's case was almost complete. At that stage the Magistrate suggested to Mr Dowd (t 56) that he had plenty of time between hearing dates to speak to the plaintiff about the resolution of the matter. The Magistrate also suggested that he might wish to get some advice about the proofs and merits of his defence. 11 On the second day of the hearing, namely 5 May 2003, Mr Dowd appeared unrepresented and Ms Sneddon appeared for the plaintiff as before. At the outset, Mr Dowd sought leave to transfer the matter to the District Court because the damages exceeded $40,000.00. He stated that this fact was only pointed out to him last week by his lawyer (t 2.27-30). The Magistrate replied that there was no basis for the transfer at that stage. Ms Sneddon on behalf of the plaintiff strenuously opposed the application for transfer. She stated that the proceedings had been on foot for a long time and that there was no evidence to suggest that there was any damage arising from the cross claim at all. Mr Dowd then sought leave to have the calculation of damages completed and stated "we had not actually finished calculating the loss of business aspect which is the biggest part of the claim. This was because we were just waiting on the groups to get back to us with the information that would have range this product". The Magistrate replied that this issue had not been raised even back on 10 February 2003. The Magistrate stated that they were now three months down the track and the defendant still had not calculated the damages that should be awarded if the cross claim was successful. The Magistrate further stated that the system did not work that way; directions are made; affidavits, statements and experts' reports are filed and then the judicial officer makes a decision on the evidence. 12 Mr Dowd, a director of the plaintiff made application for an adjournment. The transcript from the local court proceedings (Tab B at T-7:41- 9:32) reads as follows: "DOWD: Well your Worship I don't understand how the system works on that particular point so therefore can I seek leave to actually appoint some legal representation because a lot of what the plaintiff is objecting to don't understand to why.

BENCH: Well when an objection has been taken I have ruled on it and it's for all to see why the objection if it was upheld was made, or the decision was made, but I take it you haven't spoken to Mr Dowd since 10 February, despite my suggestion that you should.

SNEDDEN: I don't think my instructing solicitors have, no your Worship. I certainly haven't spoken to Mr Dowd and I don't think my instructing solicitors have but I'll seek some instructions on it. No.

BENCH: So what are exactly you seeking today Mr Dowd.

DOWD: Your Worship I was hoping to have legal representation in place but--

DOWD: Yes but I didn't actually get it in place basically.

DOWD: Yeah well your Worship it was more down to the financial situation rather than not being able to find somebody. It's been able to find somebody who--

BENCH: So how is that going to change in the next half an hour.

DOWD: Well not in the next half an hour your Worship. In the next week or two it will change.

BENCH: No. If you are seeking an adjournment to obtain legal representation that application is refused because the matter has been listed, directions were made, it was listed for hearing 14 January it seems. You had the opportunity of speaking to your legal representative and as I say he was here on and off on the last occasion, back on 10 February and to come along now and seek an adjournment to be represented is, in my view, at least open to the suggestion that it is a mere delaying procedure. The application for an adjournment is refused.

DOWD: Your Worship there's no interest for me to drag this on any further than what it has done already but as I said your Worship, down to the financial situation and the lawyer that was here last time I haven't spoken to since because he no longer represents me. He was here on his own doing last time and I have been trying to put some legal representation in place in the last couple of months which has been difficult because of people wanting to be paid in advance before they appear. So I'm still sort of seeking out options. I'm still trying to get the money together to pay a person to be here who understands the system, who put this case forward in the way it needs to be put forward.

BENCH: Well it seems to me that you've done a pretty good job so far in terms of the questions you've asked of the plaintiff's witnesses and in terms of the limited assistance I can give you in your unrepresented position. It seems to me that the fact that you're not in pecuniary situation to have a lawyer here of course often happens with litigants. Some do, some don't. Some choose to be represented. Some don't. But Ms Snedden has been here on each of the occasions and it just seems to me that whilst I can't as a matter of fact that it is a delaying tactic lust seems to me that on the available evidence this matter should proceed and it will.

SNEDDEN: Just one other point your Worship. Mr Dowd has said at the beginning that he's received some recent legal advice in relation to some matters that has come before the Court today so the fact that Mr Dowd says that he hasn't had legal advice seems to be inconsistent with what he was saying at the very beginning of today's proceedings--

BENCH: --About the $40,000 you're talking about? SNEDDEN: Yes, so there seemed to be someone around.

DOWD: Your Worship the person who advised me on that was, a couple of people in fact advised on that and people who looked at the case but then when they came back and said "We need cash in advance" ..(not transcribable).. Yes it would be legal advice but it wasn't legal advice from my lawyer who has actually prepared all of this to date and as it was only an overview of the case it's legal advice that can't be really--

BENCH: Well see the difficulty is if as I say I have already ruled on the application for an adjournment but if I was to grant it there would be I suspect an application, I don't know if Ms Snedden's instructed to do so to make application for costs to today which I suspect will need to be paid ..(not transcribable).. prior to any adjourned date but I'm not going to give you that opportunity Ms Snedden because the application as I say is refused. Do you wish to give any evidence Mr Dowd?" 13 In essence, on behalf of the plaintiff it was submitted that Magistrate erred in the exercise of his discretion in relation to IHP's application(s) in that he: firstly, did not enquire as to the Bottle People's attitude to an adjournment; secondly, did not enquire of the Counsel for the Bottle People as to what, if any, prejudice might be suffered as a result of an adjournment; thirdly, did not consider whether any prejudice that might be suffered by the Bottle People as a result of an adjournment could be adequately compensated for by an order for costs; and fourthly, did not properly consider the application(s) by identifying the competing interests of the parties and undertake a balancing exercise as required in the exercise of his discretion. 14 In Thomas & Anor v Nedeljkovic [2004] NSWSC 524 reference was made to the authorities relating to adjournments. However that is not extensive and reference to the authorities of State of Queensland v JL Holdings (1997) 189 CLR 146 and Sali v SPC Ltd & Anor 116 ALR 625 should be added. 15 The principles according to which this Court is to decide whether the learned Magistrate's discretionary decision to refuse the adjournment application did indeed miscarry are not in doubt. They are stated definitively in a short passage in the joint judgment of Dixon, Evatt and McTiernan JJ in House v The King (1936) 55 CLR 499 at 504-505. It is, I think, useful to re-state them as follows: "The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred." 16 This court is slow to intervene in discretionary decisions such as the granting of adjournments. This matter had been already adjourned part heard for a three month duration. At the resumed hearing, the plaintiffs appeared ready to complete their case and meet the defendant's case. The plaintiff had not properly prepared his case even while he had the services of a solicitor prior to the first hearing date, nor had he sought to remedy these defects over the intervening period. It had not served any evidence to quantify the damages sought in its cross claim. Its defence and cross claim were drafted and filed by solicitors. The defendant elected not to employ legal representatives to present his case during the three month interval while the matter remained part heard. At the conclusion of the first day of the hearing when the matter was about to adjourn part heard, the Magistrate had suggested that prior to the next hearing date, the defendant should seek advice. When the matter resumed part heard the Magistrate considered the merits of the defendant's application for an adjournment and in the exercise of his discretion elected not to grant the adjournment. It is my view that this was a decision open to him and it is not one in which this Court would intervene. There is no error of law.

Sections 19(1) & (2) of the Sale of Goods Act 1923 (NSW) 17 The plaintiff's second ground of appeal alleges that the Magistrate erred in that he misapplied the operation of s 19(1) of the Sale of Goods Act. Section 19(1) provides that a term that "goods are reasonably fit for a purpose" is implied when certain conditions are met. 18 The Magistrate decided that in the circumstances and on the evidence (or lack thereof), Melleuish was entitled to the costs of its production and printing of the bottles. At T 90.7-42 the Magistrate stated: "Now I am satisfied it was made known to the plaintiff that the defendant was going to use these bottles for a specific performance and specific purpose. In my view, on the available evidence, it was not an implied condition of the agreement that these printed bottles would be reasonably fit for the purpose within the meaning of s 19 of the Sale of Goods Act. Whilst it is true that an oral contract will have the same effect in general terms as a written contract, it certainly was not discussed in any way, shape or form or, the available evidence before me." 19 The conditions of s 19(1) are firstly, the purpose for which the goods are required is made known either expressly or by implication; secondly, there must be reliance on the seller's skill or judgment; and thirdly, the goods must be of a description which it is in the course of the seller's business to supply. The Magistrate found that the defendant made the purpose known to the plaintiff. According to the plaintiff, the finding that the purpose was made known should automatically trigger the implication of the term as to fitness. The term that the goods should be fit for the purpose is implied only when the three conditions referred to above are satisfied. The Magistrate made no finding that the defendant was relying on the seller's skill or judgment. It follows that the Magistrate went on to make a finding that on the evidence available, it was not an implied condition of the agreement that the printed bottles would be reasonably fit for the purpose. 20 The plaintiff submitted that the Magistrate misapplied s 19(2) and further that the Magistrate dealt with the evidence on the issue of merchantable quality as though it were a conclusion to be drawn by an expert and present to the court. Section 19(2) of the Act relevantly provides that where goods are bought by description there is an implied condition that the goods shall be of merchantable quality. 21 The Magistrate referred to both the plaintiff's and defendant's experts' reports. The Magistrate summarised the plaintiff's expert Mr Richardson's evidence namely that the items he examined met industry standards and the majority of bottles examined were described to be satisfactory (J 89.22-27). He also referred to Mr Coles's evidence on behalf of the defendant by stating that Mr Cole examined 17 bottles selected at random. Mr Cole evaluated the overall impression of the samples as being "of a relatively poor standard of production at worst, fair to moderate at best and are not up to the standard of the other two reference samples supplied by the client notwithstanding the changes in design". The Magistrate noted that the defendant's experts was not asked to proffer an opinion as to whether the bottles were not a merchantable quality but he gave an evaluation of the samples that he examined (J 89.32-45). 22 The Magistrate referred to the evidence of both the plaintiff and defendant's expert and arrived at his own view, namely that: "There is no evidence to indicate that these bottles were not of merchantable quality. True it is that some, if one was to go through the particular items with a fine tooth comb, may find some small imperfections but to elevate that to not being of merchantable quality, that is not the case in my view. It is claimed that the plaintiff has failed or refused to deliver up the balance of the bottles, of course property remains that of the plaintiff until such time as the account is paid." 23 The plaintiff also submitted that the Magistrate's statement that there was no evidence to indicate that the bottles were not of merchantable quality was incorrect in the light of the evidence of Mr Cole and Mr Dowd (statement 14/10/02 paras 41-43). Mr Dowd's statement asserted that none of the bottles were of good quality, 60% were of poor quality and 40% were of shocking quality. That 40% were sent back for reprinting was the strongest evidence to the effect that the bottles were not of merchantable quality. The defendant's expert report was not as supportive. Mr Richardson, the plaintiff's expert disagreed. Perhaps the statement "no evidence" is not entirely correct. But it was, on all the evidence, open to the Magistrate to reach his own conclusion that overall, the bottles were of merchantable quality. There is no error of law.

Section 18 of the Sale of Goods Act 1923 (NSW) 24 The plaintiff's third and final ground of appeal alleges that the Magistrate erred in that he overlooked s 18 of the Sale of Goods Act. The plaintiff did not in the local court pleadings seek damages for breach of s 18(1) of the Sale of Goods Act. This ground of appeal fails. 25 The result is that the appeal is dismissed. The judgment and orders of Magistrate C Longley dated 28 May 2003 are affirmed. The amended summons filed 16 October 2003 is dismissed. 26 Costs are discretionary. Costs normally follow the event. The plaintiff is to pay the defendant's costs.

(2) The judgment and orders of Magistrate C Longley dated 28 May 2003 are affirmed.

(3) The amended summons filed 16 October 2003 is dismissed.

(4) The plaintiff is to pay the defendant's costs. **********

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