Leadoo Pty Ltd trading as Champ East Hospitality Products v Rova Media Pty Ltd

1. The Defendant did not dispute receipt or part payment for the goods in question. It submitted that the issues to be determined by the Court were as follows:- "(i) What where (sic) the terms of the common law agreement between the parties, did the terms of the agreement include and is the Defendant entitled to rely on the implied guarantees as set out in sections 54(1), 55(1) and 56(1) of the Australian Consumer Law? (ii) Were the goods supplied by the Plaintiff of acceptable quality, fit for purpose, free from defects and did the goods correspond with the description of the goods provided by the Plaintiff to the Defendant or by Defendant to the Plaintiff? (iii) Where the goods supplied by the Plaintiff were not of acceptable quality, not fit for purpose, not free from defects and did not correspond with the description of the goods provided by the Plaintiff to the Defendant or by the Defendant to the Plaintiff, is the Defendant entitled to set off the amount of any monies paid by the Defendant for the defective goods and the costs incurred by the Defendant to replace the goods against any monies alleged to be owing to the Plaintiff?" [3]
2. Beyond this however, the Defendant claims in its Defence that it is entitled to a credit in relation to the abovementioned invoices in the amount of $133,028.73 and, by the terms of its agreement with the Plaintiff, may set this amount off against the amount which the Plaintiff claims it is owed. [4] This was reiterated in the Defendant's opening submission. [5] The calculation of this sum was particularised as follows:- 1. In relation to invoice RO 0063 the sum of $5,190 to rectify taxi poster frames so that they may be securely fitted to the relevant vehicles without detaching from the vehicle when moving. In addition the Defendant also claims by way of offset an amount of $2260.50 for Yellow Taxi Back Modules and $5108.73 in respect of Orange Prius Taxi Back Modules on the grounds that they were not fit for purpose or of merchantable or acceptable quality and had to be scrapped. This makes a total sum of $12,559.23. [6] 2. In respect of invoice RO 0070 "White HiAce Mark II Taxi-Back modules" the amount of $3,616.80 and in respect of "Orange HiAce Mark II Taxi-Back modules" an amount of $4,068.90 and in respect of "White Prius Hybrid Taxi-Back modules" an amount of $5,425.50 on the basis that the goods did not meet the specifications provided by the Defendant and were not fit for the purpose of merchantable or acceptable quality and had to be scrapped by the Defendant. Further, 293 of the taxi poster frames were allegedly not fit for their purpose or of merchantable or of acceptable quality and failed to match the specifications provided by the Defendant thereby causing the Defendant to expend $8,700 to rectify the frames so that they could be securely fitted to the relevant vehicles without detaching when moving. In fact, the total was $8,790. [7] These sums are said to total $21,812.70 exclusive of GST. [8] In fact it totals $21,901.20. 1. In relation to Invoice Number RO 0087/88, the "Yellow Ford G Series Sedan Taxi Back Modules" in the amount of $9,764 and the "Switches Installed on the Ford G" in the amount of $1,254 and the "Yellow Prius 30 (2011)" in the amount of $4,521 and the "Switches Installed on the Yellow Prius 30" in the amount of $627 and the "Orange Prius 30 (2011)" in the amount of $4,521 and the "Switches Installed on the Orange Prius 30" in the amount of $627 on the invoice did not meet the specification provided by the Defendant to the Plaintiff and were not fit for purpose or of merchantable or acceptable quality and had to be scrapped by the Defendant. [9] Further, in relation to the said invoice, 400 blue frames specified were said to be not fit purpose or of merchantable or acceptable quality and failed to match the specifications provided by the Defendant to the Plaintiff, thereby causing the Defendant to expend $12,000 in rectifying the frames so that they could be securely fitted to the relevant vehicles without detaching themselves therefrom. [10] Accordingly, in respect of invoices RO 0087/88 a credit of $34,560 exclusive of GST is claimed in total to offset against the amount the Plaintiff claims it is allegedly owed. [11] In fact the total comes to $33,314. 1. In relation to RO0095/96 the "Yellow Ford G Series Sedan Taxi Back Modules" in the amount of $5,272.56 and the "Switches Installed on the Ford G" in the amount of $677.16 and the "Yellow HiAce Mark II Module" in the amount of $13,653.42 and the "Yellow Camry 2011 Module" in the amount of $4,930.82 and the "Camry 2012 Sample and Mould" in the amount of $2,500 and the "HiAce Mould" in the amount of $2,500 on the invoice did not meet the specification provided by the Defendant to the Plaintiff and were not fit for purpose or of merchantable or acceptable quality and had to be scrapped by the Defendant. [12] The Defendant alleged that the "Blue Frames" specified in the said invoices were not fit for purpose or of merchantable or acceptable quality and failed to match the specification provided by the Defendant to the Plaintiff thereby causing the Defendant to expend $23,100 in rectifying the frames so that they could be securely fitted to the relevant vehicles without detaching from the vehicle when moving. [13] The Defendant contended that it is owed a credit by the Plaintiff in relation to the goods specified in the said invoices in the amount of $64,097.40. [14] In fact the amount totals $52,633.96. 1. In total, the set off claimed is $133,028.73. [15] However the total of the set off particularised is $120,408.39.
3. In its Final Submissions the Defendant summarised the relief it was seeking as follows: "109. Finally, it is submitted the Court should make the following orders; 1. The statement of claim filed 11 July 2014 is dismissed. 2. Judgment for the Defendant. 3. The Plaintiff is ordered to repay to the Defendant the amount of $59,337.50 paid by the Defendant's finance company to the Plaintiff on or about 30 October 2013 with interest pursuant to Section 100 of the Civil Procedure Act 2005. 4. The Plaintiff is ordered to repay to the Defendant the amount of $22,333.23 paid by the Defendant with respect to the Plaintiff's Invoice RO 0063 and the amount of $14,585.46 previously paid by the Defendant with respect to the Plaintiff's Invoice RO 0070 less the amount of $14,652.07 in respect of the Plaintiff's Invoice RO 0084. 5. In accordance with Section 259(4) [16] the Plaintiff is ordered to pay the Defendant the amount of $132,451 for the costs incurred by the Defendant in replacing the faulty products supplied by the Plaintiff. 6. The Plaintiff is to pay the Defendant's costs of the proceedings on an indemnity basis from the time the Plaintiff failed to comply with the order of the Court that the parties participate in mediation." [17]

Cross Claim or Set Off

1. The Defendant has asserted a set-off under s 21 of the Civil Procedure Act 2005 (NSW). [18] The latter section reads as follows:- "21 Defendant's right to set-off (1) If there are mutual debts between a plaintiff and a defendant in any proceedings, the defendant may, by way of defence, set off against the plaintiff's claim any debt that is owed by the plaintiff to the defendant and that was due and payable at the time the defence of set-off was filed, whether or not the mutual debts are different in nature. (2) This section extends to civil proceedings in which one or more of the mutual debts is owed by or to a deceased person who is represented by a legal personal representative. (3) This section does not apply to the extent to which the plaintiff and defendant have agreed that debts (whether generally or as to specific debts) may not be set off against each other. (4) This section does not affect any other rights or obligations of a debtor or creditor in respect of mutual debts, whether arising in equity or otherwise. (5) This section is subject to section 120 of the Industrial Relations Act 1996 . (6) In this section, "debt" means any liquidated claim. Note: The application of this provision to existing debts is dealt with in clause 6 of Schedule 6 (Savings, transitional and other provisions)."
2. The reference to "debt" in s 21(6) of the 2005 Act means any liquidated claim. The question of what constitutes a liquidated claim was considered in the context of the UCPR [19] by Sackville AJA (with whom McColl JA and Young JA agreed) in Arnold v Forsythe [20] . His Honour stated:- "The UCPR do not define the expression "debt or liquidated claim" used in r 16.6(1). However, similar expressions have been employed in other legislation or rules providing for default judgments. In Spain v Union Steamship Co of New Zealand Ltd [1923] HCA 21; 32 CLR 138, the question was whether a claim under an award for reasonable legal expenses incurred in an inquiry was for a "debt or liquidated demand" within the meaning of s 64 of the District Court Act 1912 (NSW). Knox CJ and Starke J adopted (at 142) the view of Odgers, Pleading and Practice (5 th ed), at 41, that: "whenever the amount to which the plaintiff is entitled ... can be ascertained by calculation or fixed by any scale of charges, or other positive data, it is ... liquidated." Their Honours held that since the plaintiff had a contractual right to recover his reasonable expenses incurred at the inquiry and since the expenses could be readily quantified, his claim was for a liquidated amount. See also at 145, per Isaacs and Rich JJ; Dalgety Futures Pty Ltd v Poretsky [1980] 2 NSWLR 646, at 649-650, per Rogers J. However, a claim is not necessarily one for a liquidated amount merely because it can be readily quantified. In Alexander v Ajax Insurance Co Ltd [1956] VicLawRp 70; [1956] VLR 436, Sholl J held that a claim under a house insurance policy for ₤1,000, the maximum amount payable under the policy for lost contents, was not a claim for a debt or liquidated demand. His Honour, after a detailed historical analysis of the authorities, held (at 445) that the expression "debt or liquidated demand" covered any claim: "(a) for which the action of debt would lie; (b) for which an indebitatus (or 'common') count would lie - including those cases formerly covered by the quantum meruit or quantum valebat counts, notwithstanding that the only agreement implied between the parties in such cases was for payment at a 'reasonable' rate; (c) for which covenant, or special assumpsit , would lie, provided that the claim was for a specific amount, not involving in the calculation thereof elements the selection whereof was dependent on the opinion of a jury." The plaintiff's claim in Alexander v Ajax Insurance did not answer this description since it sought damages for breach of the contract of insurance. This was so notwithstanding that, on the plaintiff's case, the loss exceeded the maximum payable under the policy. See also Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26; 19 VR 358, at 385 [78]-[81], per Nettle JA (with whom Ashley and Dodds-Stretton JJA agreed). In Rothwells Ltd v Nommack (No 100) Pty Ltd (1988) 13 ACLR 421, McPherson J observed (at 424) that there were three ways in which a debt could arise at common law such as to support an action in debt or indebitatus assumpsit. These were: "(1) by judgment; (2) by deed under seal; and (3) as the quid pro quo for a consideration that was executed. " His Honour quoted Australian Woollen Mills Pty Ltd v Commonwealth [1954] HCA 20; 92 CLR 424, at 456-457, per curiam, as authoritatively stating the nature of the required relationship between a promise to pay money and the executed consideration: "In cases of this class it is necessary, in order that a contract may be established, that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act; and that the act was really done in consideration of a potential promise inherent in the statement or announcement. Between the statement or announcement, which is put forward as an offer capable of acceptance by the doing of an act, and the act which is put forward as the executed consideration for the alleged promise, there must subsist, so to speak, the relation of a quid pro quo."
3. The particularisation of the hours spent by the Defendant to rectify the frames which were the subject of RO 0063 were described in opening submissions by the Defendant as 173 man-hours at $30 per hour, being an amount in relation to RO 0063 totalling $5,190. In respect of the man-hours expended in relation to RO 0070 it is contended that this comprised 293 hours to rework the frames at $30 per hour totalling the sum of $8,790 (although $8,700 was asserted). It was contended that all of the modules supplied under these invoices were not of acceptable quality and therefore had to be scrapped by the Defendant. [21]
4. Contrary to the claim made in the Defendant's Opening Submissions [22] as well as the Defence [23] , Mr Christopher Jones, the Defendant's manager to its New South Wales and Queensland business since April 2012 [24] did not assert the rectification work in relation to these items. He does state that he modified four modules out of the Prius 30 group but gave up attempting to rectify any more due to the time required. He also asserted some work on the Prius modules. [25]
5. The only allegation made was reworking taxi poster frames being 173 in number in invoice RO 0069 and 293 in invoice RO 0070. The modules are separately listed to the taxi frames and their numbers and identity do not or equate to the modules the Defendant alleges it reworked. What, if any, deficiencies there were with the taxi frames was not described nor the nature of the work and time spent.
6. In relation to RO 0087 and RO 0088, it was stated in opening submissions that the Defendant spent 400 man-hours at $30 per hour to rework 400 of the frames supplied, thereby requiring the Defendant to expend the sum of $12,000. Ultimately, it was asserted that all of these were not of acceptable quality and had to be scrapped by the Defendant. [26]
7. The Defendant gave no evidence in relation to such expenditure apart from being incurred. In particular it provided no substantiation as to the time spent, need or purpose. The Plaintiff's submission was that there was absolutely no evidence of the alleged expenditure, its nature, to whom it was expended. In my view this submission has force and thus the Defendant's claim in this regard must fail. [27]
8. In relation to invoice numbers RO 0095 and RO 0096, it was asserted that the Defendant spent 770 man-hours at $30 per hour reworking the frames supplied, coming to a total of $23,100, although ultimately these modules were said to be not of an acceptable quality and therefore had to be recalled or scrapped by the Defendant. [28]
9. There is again no evidence to support this aspect of the claim and for the reasons previously given, it must also fail.
10. Beyond this, the set-off that the Defendant is alleging, is not a liquidated debt to the extent that it is asserted to be for failure to comply with a guarantees in the ACL (based on hours expended on rectification). It was not open to the Defendant to assert these claims under s 21 of the 2005 Act. The Defendant has not exercised a right to cross-claim pursuant to s 22 of the 2005 Act.

Claim for Damages under s259 (4) of the ACL

1. The claim for damages which the Defendant advanced under s 259 (4) of the ACL was not foreshadowed in the Defendant's Defence nor in its Amended Schedule of Issues filed in Court on 24 September 2015. [29] In its Opening Submissions the Defendant stated: "Further, the Defendant submits that as it has had to pay some $132,451 to replace the modules provided by the Plaintiff then for the Court to award the Plaintiff any damages in respect of its' claim would be to unjustly enrich the Plaintiff." [30]
2. The Plaintiff has taken exception to the claim for the claim under s 259 (4) of the ACL being raised in the circumstances.
3. The invoices provided by the Defendant for what it claimed were replacement items were ThermoTec Pastics (Australia) Pty Ltd from 8 April to 31 October 2014 and from Coastal Vacuum Forming Pty Ltd from 7 May 2014 to 2 March 2015. [31] There was evidence that approximately one thousand taxi installations were turned over each year. [32]
4. I am not persuaded that the claim has any substance. To the extent that the Defendant has succeeded in its claim that that it is not indebted for items claimed by the Plaintiff it is relieved of any obligation to pay. The Defendant has not explained how beyond this it would be entitled to be compensated for the cost what it alleges were substitute modules it acquired from other suppliers.
5. However it is unnecessary to consider this in any detail. Bearing in mind the overriding purpose in s 56 of the 2005 Act and bearing in mind the objects in s 57 and the requirements to follow the dictates of justice in that same Act, it would be unjust to address issues which were outside those raised by the parties in the course of the trial and which were the subject of pleadings. Further it was not open to the Defendant to reconstitute its claim in Final Written Submissions as it has purported to do. [33]

Contract

1. The Defendant asserted that by reason of the Plaintiff's own admission, the unspoken understanding was that the Defendant would be provided with goods that complied with the Plaintiff's quotation specifications and that the goods were fit for the Defendant's purpose. [34] Mr Xu's evidence was that his understanding of purpose was "according to the measurements and the specifications." He conceded that he knew that the modules were to be installed and fixed on the back of taxi cabs and that they needed to fit the particular taxi that they were being ordered for. [35] Mr Xu further acknowledged that the goods were to be defect free and of acceptable quality. [36]
2. On this basis the Defendant submitted that the Court should find that from sometime in 2010 the parties entered into an unwritten common law contract whereby by custom and usage they agreed the following terms and warranties:- i. That where the Plaintiff provided a quotation to the Defendant the goods supplies were in accordance with that quotation; ii. That the products provided by the Plaintiff would be fit for the Defendant's purpose being that the taxi back modules would securely fit the rear of the relevant taxicab and the frames would properly secure the advertising poster the Plaintiff knew was to be inserted therein; iii. That the products provided by the Plaintiff were to be defect free, durable and of acceptable quality; and iv That where the products provided by the Plaintiff were not defect free and were not of acceptable quality the Plaintiff was not entitled to payment and the Defendant would be entitled to a credit for any monies paid for products that would (sic) not defect free and of acceptable quality. [37]
3. The Defence in fact pleaded breaches of the implied statutory conditions now set out as guarantees in s 54(1) and s 56(1) of the ACL and asserted that on this basis of breach it was entitled to a credit in respect of any defective goods and a set off in respect of any monies that it owed the Plaintiff. The reference to s 55 of the ACL appears to have been raised for the first time in the Defendant's Final Written Submissions. [38] The matter was not advanced in the Statement of Claim or the Amended Schedule of Issues which was presented to the Court on 24 September 2015. [39] Had it been advanced it might well have been met by an argument as to the application of s 55 (3) of the ACL. Be that as it may it is not open to the Defendant to raise the matter as it has purported to for the first time in Final Submissions and I decline to deal with it.
4. The Defendant submitted that the Plaintiff bore the onus of proving that taxi back modules and frames it supplied the Defendant to fulfil the Defendant's Purchase Orders were fit for the Defendant's purpose, were of merchantable and acceptable quality, were defect free and were in compliance with the description it provided to the Defendant that all taxi back modules would be manufactured from ABS acrylic plastic with a thickness of not less than 3.5 mm. In fact, to the extent that the Defendant chooses to rely on the breach of statutory guarantee to resist payment, the law places the onus on it to establish them. [40]

Claim Goods Failed to Meet Guarantee under s 56(1) of the ACL

1. Section 56 (1) of the ACL reads as follows: "56 Guarantee relating to the supply of goods by description (1) If: (a) a person supplies, in trade or commerce, goods by description to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods correspond with the description. "
2. The Plaintiff has not contended that the Defendant is not a consumer within the terms of the ACL and hence by force of s 3(10) of the ACL, it is presumed to be a consumer.
3. The Defendant drew attention to a quotation supplied by the Plaintiff dated 27 January 2010, referring to the unit costs of producing taxi plate moulds. [41] The quotation described the moulds to be produced as:- "Specifications: ABS acrylic white, sheet thickness 3.5mm including a filling of sponge/rubber seal and filling of aluminium frame." [42]
4. The quotation also noted payment of $2,500 upfront until a satisfactory sample is made and $1,250 would be refunded on payment for the first order.
5. Mr Xu stated that he did not see the "drawings" specify the thickness. [43] In cross-examination he stated that he was asked to produce sheeting of 3.5mm thickness by Mr David Byrne (a previous director of the Defendant). The Plaintiff agreed that this thickness was to be used for all items specified in invoices RO00 63, 70, 87, 88, 95 and 96. [44] Mr Xu further conceded that "we didn't change that sheet - the sheet thickness" and that was the thickness of the sheets for all the modules that from the time he started manufacturing up until the time he stopped supplying the Defendant. [45]
6. In advancing its case of breach of s 56 of the ACL, the Defendant referred to Mr Xu's evidence asserting that it was an express term of the contract that all taxi back modules were to be manufactured using acrylic plastic with a thickness of not less than 3.5mm. [46]
7. The Plaintiff contended that the relevant sale was not by description, stating at paragraphs [59] and [60] of its written submissions as follows:- "The proposition that the Plaintiff offered a "description" of the goods to be supplied to the Defendant defies both the evidence, and common sense. The Plaintiff did not operate a shop. The Plaintiff sourced and arranged manufacture of products specified by the Defendant. The Defendant specified the products for its own purposes. It follows, and the evidence goes to show, that the designs and specifications of the products were generated by the Defendant, and then in some form or another, were passed to the Plaintiff so that the sourcing and manufacture could take place. The Defendant submits that a quotation for an unspecified product, dating from 3 years prior to the ordering of the goods in question can be characterised as a "description" for the purposes of the Consumer Law. The evidence does not support that characterisation where Cheng was unchallenged when he testified that not all orders were received in response to a quote, and in any case, product features were developed over time."
8. There is force in the Plaintiff's contention that the quotation itself cannot be the 'description' for the purposes of s 56. That specification related to ABS white acrylic and minimum orders of 1000. Nevertheless Mr Xu's evidence in any event was that the 3.5mm thickness was specified for the items in the referred invoices. The fact that goods were supplied by sample would not preclude them being also a sale by description. [47] Accepting therefore that the relevant sales were sales by description, the question is whether the relevant guarantee was met.
9. It was put to Mr Xu that none of the Taxi Back modules supplied by him in invoices RO 0063, RO 0070, RO 0087, RO 0088, RO 0095 and RO 0096 complied with the specification in the quotation of 27 January 2010. Mr Xu rejected the suggestion. [48]
10. Mr Christopher Jones swore two affidavits dated 26 February 2015 and 5 June 2015. Apart from his role as manager, he was also employed as a fitter where he fitted and removed modules on the rear of taxis on the Gold Coast and in northern New South Wales. [49] Mr Jones was also involved in the design and oversight of Thermo Tec Plastics Pty Ltd and Coastal Vacuum Forming Pty Ltd, the manufacturers of the new taxi moulds in ABS acrylic plastic subsequent to the Defendant's involvement. [50]
11. At first, Mr Jones's evidence as to the modules not being of the specified thickness related to the modules in the Ford G series. [51] Mr Jones subsequently added the Ford Falcon series in oral evidence. [52] He contended that the modules totalled 600 in number and were referred to in Purchase Order N00129 dated 4 July 2013. [53] The 600 units described in that document are:

• Falcon BF Wagon-White 200
• Falcon BF Wagon -Yellow 200
• Falcon G Series- Yellow 200

1. Mr Jones asserted problems with the Ford G Series and Ford Falcon modules were that they had arrived with mounting points stretched too thin in the cooling process. It was asserted that these were so poorly manufactured that when held up in sunlight, the stretch mounting sections were paper thin. [54]
2. Expert evidence as to breach of the guarantee that the goods correspond with the description was presented by Mr John Ruggles, a training consultant with Parlec Plastics and Rubber Technical Education Centre. Mr Ruggles affirmed an affidavit on 11 June 2015. His expertise was not challenged by the Plaintiff.
3. Mr Ruggles' evidence was that on 1 May 2015 he was supplied with 6 vacuum formed taxi back advertising units used on commercial vehicles to display advertising media. Following information supplied to him that the first sample was in fact produced by Coastal Vacuum Forming Pty Ltd. Samples 2, 3, and 4 were identified as Ford G White. Sample 5 was from a Prius 30 whilst Sample 6 was identified as Sample Ford G Orange. The latter two samples were clearly not amongst the 600 units referred to earlier.
4. Mr Christopher Jones stated in his affidavit:- "4. I caused [55] the defendant to send the six samples numbered 1 - 6 referred to in the report of Mr John Ruggles dated 20 May 2015 to him to assist with the preparation of his report. 5. Of the six samples forwarded to Mr John Ruggles, samples 2 - 5 were samples that had been previously supplied by the plaintiff. The rest of the modules that had been supplied by the plaintiff were dumped at the tip. Those samples numbered 2 - 5 referred to in Mr John Ruggles report were the only modules that I caused the defendant to retain. 6. In relation to 'Sample 1' referred to by Mr Ruggles on page 4 of his report I say that this was a sample manufactured by Coastal Vacuum Forming Pty Limited of Tweed Heads in the State of New South Wales. I caused the defendant to engage Coastal Vacuum Forming to produce taxi back advertising modules to replace the modules supplied by the plaintiff. 'Sample 1' was forwarded to Mr Ruggles for the purposes of comparison." [56]
5. In cross-examination however Mr Jones was asked:- "Q: Paragraph 4 - this is your affidavit of 5 June, paragraph 4. A: Yes. Q: You selected those samples, didn't you? A: No I didn't. Q: Who did? A: They were at the Buffalo Road address and they were to be kept. What they were - what was sent, I wasn't aware what was sent to Mr Ruggles." [57]
6. Mr Ruggles gave evidence that he was dealing with the Defendant's solicitor not Rova Media. [58] He presumed the items were delivered to him by Rova Media although he did not know [59] . He stated that he has no role in the selection of the items or their background. [60]
7. Mr Ruggles provides a report dated 20 May 2015 together with an appendix dated 10 June 2015. [61] In his first report having examined the items referred to him, he stated as follows:- "The process of vacuum-forming (thermoforming) produces non uniform distribution of material over a mould, flat areas at the top of the mould exhibit almost no stretching or thinning whereas vertical sides or deep draw points will thin the material significantly. This was evident on all samples examined; the deepest draw point on all samples is the mounting point which is a deep draw recess. The material thinning at these zones was on all samples (except samples 1 and 6) excessive to the point that there was insufficient strength to adequately support the product without breaking. By measuring the thickness at the top of the product it was possible to determine with some accuracy the thickness of the sheet used by the manufacturer; sample 1 was 3.00mm thick at this point indicating that a sheet somewhere in the range of 3.5 to 4.00mm may have been used. In the other samples these thicknesses indicate a sheet thickness range of between 2.5 to 3.00mm." [62]

1. Mr Xu was cross-examined in relation to a meeting held with Mr Byrne on 2 July 2013 about the Ford G modules. [69] That meeting is referenced in the aforementioned diary entries. Critically it is before the Defendant sent its Purchase Order. As such I am satisfied as Mr Xu asserted in his evidence [70] that this meeting related to samples produced as part of the product development process and not the final product. Mr Xu's evidence in was that the meeting was to discuss how to improve the product via the samples. [71] Mr Xu's evidence was that he would only go ahead with production when the client confirmed. [72]
2. The 600 modules themselves appear to have been the subject of Packing Lists prepared by Ace Plus International Limited in China dated 8 September 2013. [73] The relevant Tax Invoices were RO 0087 and RO 0088 dated 23 October 2013. [74]
3. The Defendant asserted that in relation to the Ford G Series and Ford Falcon, there was an urgency which forced them to engage Wysiwyg to design aluminium holding plates to temporarily secure the Plaintiff's defective modules to the back of the Ford taxicabs, a matter which resulted in a quotation being issued by the Wysiwyg on 26 September 2013. [75] 500 plates were ordered however, no claim is made in relation to this.
4. It follows that I do not accept that the Packing Lists of 21 January 2013 and 27 April 2013 [76] which relate to other Ford modules were those contended to involve a breach of the s 56 guarantee as these predated the purchase order NO0129 dated 4 July 2013.
5. Huang Delu, the General Manager of Shuangtian Technology Co Ltd responded in an email dated 2 April 2014 which translated is said to state: "Dear Mr Xu, Mr Sun Min and email saying that according to clients feedback, Ford G's screw hole position is thin and easy to break. I rushed to the warehouse this morning to open up the boxes (because there are some products not shipped and in storage). 1. I find out that product and forming quality is good, there is no abnormalities (sic). However, as screw holes are positioned at the very edge, this is where the plastic product is most vulnerable (this is also the very characteristics of vacuum forming production, which is unchangeable). At the edge plastic sheet thickness can be significantly thinner, this is normal. 2. As per your email feedback in July 2013, you mentioned this issue. Therefore, all Ford G production after July 2013, we paid special attention to this edge position and used technical treatment, and it worked better. Nonetheless, as I mentioned before, (thinning at the edge) it is the very weakness of the vacuum forming production. At present, industry does not have technology to overturn this phenomenon. We can only improve and make it a bit better. 3. If the client thinks it's unacceptable. I can only suggest the client move the screw hole position, or by re-design to avoid this weak position. Above all, there's no problem if the screw not positioned too close to the edge of the plastic product. Please see below my proposal. [77]
6. The contents of this email were not explored in the evidence. However it is consistent with what was a process of product development in relation to the Ford G modules before July 2013.
7. Even if I accept Mr Jones' evidence as to final modules supplied not meeting the description provided I cannot be satisfied that the delivery of modules he complains of were those supplied in response to Purchase Order NOO129. The email of Mr Huang does not embrace a failure to meet the description provided. Tax Invoices RO 0087 and RO 0088 dated 23 October 2013 were paid by the Defendant in circumstances which would later be described.
8. The evidence of Mr Ruggles though not contradicted, does not establish that whether the items tested were in fact final products or pre-production samples. In at least one instance being Sample 1, it was clearly a pre-production sample. No control appeared to be exercised in the selection of the items tested to confirm the source from which they came. The reversion testing carried out and subject of the appendix dated 10 June 2015, does not appear to be the subject of accepted methodology, and the Court is not bound to accept it. [78]
9. In all I am not satisfied the alleged breach of the guarantee in s 56 (1) of the ACL has been established.

Goods Failed to meet the Guarantee in s 54(1)

1. Section 54 (1) of the ACL reads as follows: Guarantee as to acceptable quality (1) If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods are of acceptable quality. (2) Goods are of acceptable quality if they are as: (a) fit for all the purposes for which goods of that kind are commonly supplied; and (b) acceptable in appearance and finish; and (c) free from defects; and (d) safe; and (e) durable; as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3). (3) The matters for the purposes of subsection (2) are: (a) the nature of the goods; and (b) the price of the goods (if relevant); and (c) any statements made about the goods on any packaging or label on the goods; and (d) any representation made about the goods by the supplier or manufacturer of the goods; and (e) any other relevant circumstances relating to the supply of the goods. (4) If: (a) goods supplied to a consumer are not of acceptable quality; and (b) the only reason or reasons why they are not of acceptable quality were specifically drawn to the consumer's attention before the consumer agreed to the supply; the goods are taken to be of acceptable quality. (5) If: (a) goods are displayed for sale or hire; and (b) the goods would not be of acceptable quality if they were supplied to a consumer; the reason or reasons why they are not of acceptable quality are taken, for the purposes of subsection (4), to have been specifically drawn to a consumer's attention if those reasons were disclosed on a written notice that was displayed with the goods and that was transparent. (6) Goods do not fail to be of acceptable quality if: (a) the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality; and (b) they are damaged by abnormal use. (7) Goods do not fail to be of acceptable quality if: (a) the consumer acquiring the goods examines them before the consumer agrees to the supply of the goods; and (b) the examination ought reasonably to have revealed that the goods were not of acceptable quality.
2. Whist I accept that the Defendant bore the onus of establishing a breach of the guarantee it was for the Plaintiff to establish the application of circumstances that would exonerate it from liability in particular under s 54 (4) of the ACL. In this instance it was clearly the position that the Defendant supplied the Plaintiff with specifications/drawings for the manufacture of the items and approved them before issuing a purchase order. To the extent that the goods complied with the specifications/drawings and this was the reason why the goods were of unacceptable quality, it follows that the reason would have been specifically drawn to the Defendant's attention such as to engage s 54(4). The section does not require the fact that the goods were of unacceptable quality to be within the knowledge of the Defendant at the same time as the reason.

RO 0063 and RO 0070

1. Mr Jones' evidence was that in January 2013 when fitting the HiAce Mark II and Prius modules, he noted that when attached to a taxi they had a 25-28mm gap on the right hand side which caused the advertising poster to be displaced.
2. Mr Jones makes reference to an email forwarded by Mr Dan Wake (the Defendant's general manager for development) to the Plaintiff on 11 February 2013. [79] The email is said to enclose photos of the HiAce Modules and adds:- "You will notice the gap around the bottom half of the module which sits over the metal portion of the door. The edge needs to come out by 30mm to meet the metal surface of the door. The top section of the module that sits over the glass portion of the door needs to come out by 20mm to meet the glass. It is crucial for the edge of the modules to make contact with all surfaces on the door to ensure the integrity of the unit."
3. Mr Jones asserted that this email was sent after he had informed Mr Wake and Mr David Byrne (one of the Defendant's directors at the time) of the problems with the HiAce Mark II and Prius models. Mr Jones stated that the Prius 30 models referred to the white, orange and yellow modules and modules for the Prius Hybrid. [80]
4. The email of 11 February 2013 does not refer to the Prius vehicles.
5. Mr Xu asserted that the Prius 30 modules complained of by Mr Jones [81] were before delivery of the final product. [82] By reference to annexure CXX02 of his affidavit dated 31 March 2015, he asserted that the packing list showed that the Prius 30 modules left China on 9 September 2013. I accept that this is so.
6. Mr Jones does not assert in his affidavit of 26 February 2015, the rectification work in relation to the HiAce modules. He does, as noted earlier, state that he modified four modules out of the Prius 30 modules but gave up attempting to rectify any more due to the time required. [83] He also gave evidence of forcing down the top section of Prius modules downwards in an arch to fit the glass and stop vibration. [84]
7. Mr Jones conceded that although his job entailed buying a boot for a taxicab of the same model and sending it through to a pattern maker he was not involved in the design of any of the modules produced for the Defendant by the Plaintiff. [85] He conceded that in expressing the opinion that the HiAce Mark II "was a faulty ill-fitting module", he "had to know what its proper specifications were" [86] , but he was not involved in the design of the module [87] and had never seen the drawings or specifications. [88]
8. Mr Xu's evidence was that, following the email from Mr Wake, he had a conversation at the Defendant's offices with Mr Wake in which Mr Wake said that he would get drawings for improvements which the Defendant required on 2 July 2013. On 16 July 2013, he stated that he sent to Shuangtian Technology Co Ltd in China an email which enclosed the drawings which were provided by the Defendant with improvements and requested that a sample module be produced. [89] Mr Xu asserted that, on 17 July 2013, he received the HiAce scan analysis from the Defendant and forwarded this to Shuangtian Technology Co Ltd for its attention. This was produced and shows the author as Wysiwyg 3D. [90] It refers to the inspection date of 7 May 2013 and the date generated as 7 May 2013.
9. No drawings were in evidence in relation to the Prius which, as I noted earlier, was not the subject of Mr Wake's email. Further Mr Xu concedes that he was advised by Mr David Byrne that the second HiAce sample did not meet the specification. [91] A meeting was held with the Defendant's CEO Mr Butler and Mr Xu on 1 October 2013. [92] On 3 October 2013 Mr Xu sent an email to the manufacturer [93] . Mr Xu stated that, in English, this email read as follows:- "Hi, Mr Huong(?), Director Huong, today I have a meeting with client regarding the product, the product issue relating to HiAce Mark II. The sample has threefold issues. One, number 1, the edges and also the installation panel are not on the same plane. Number 2, the installation plane has some curves according to the design - according to client's design, but it didn't show in the sample. Number 3, the client alleges that the sample isn't made according to the design sheet. Further, because the client needs to order large amount of HiAce Mark II product, I suggest you make another mould according to client's design and produce samples for us to confirm. Please let me know your opinions. Regards." [94]
10. It will be noted that the only reference in this email to complaints is in relation to the HiAce Mark II and to a sample. Mr Xu's evidence was that the sample was approved according to his understanding by Mr Dan Wake on 25 November 2013. He has produced an email from Mr Wake dated 25 November 2013 which states in part: "The Commuter Van is OK to proceed, I am happy with how it fits." [95]
11. The Purchase Order NO 118 although dated 25 June 2012 stated in relation to the HiAce "Drawing to be supplied." [96] However The Tax Invoice RO 0070 which is the subject of the Plaintiff's claim is dated 10 December 2012 and I accept that a delivery of 80 white and 90 Orange HiAce modules was made to the Defendant prior to that time. I am satisfied that following Mr Wake's email the process being undertaken by the Plaintiff and the Defendant involved further product development but only after a delivery of the items in question were made and subsequently disputed by the Defendant.
12. RO 0063 was paid in full. RO 0070 was paid as to $14,585.46.
13. In respect of invoice RO 0063, the Defence related to the yellow Prius taxicab modules (bearing a sum of $2,260.50) and the orange Prius taxicab modules (bearing a sum of $5,108.73). The Plaintiff has made no claim in relation to these as they have been paid. Whilst the Defendant disputes the Plaintiff's entitlement to such funds and seeks a set off, I am not satisfied that there was any deficiency in these items. They were not the subject of Mr Wake's email nor is there evidence of further specifications from Wysiwyg.
14. In relation to the 173 taxi poster frames the Defendant claims the sum of $9,198.28 together with the expenditure of $5,190 in rectifying the frames. I have previously expressed my views as to the rectification expenditure. Quite apart from this however what, if any, deficiencies there were with the taxi frames has not been described.
15. As best as I can determine, it appears that samples for HiAce modules were supplied and the email of 11 February 2013 from Mr Wake referred to a deficiency in them which was subsequently the subject of further product development, leading to the yellow modules being ordered. The deficiency related to the filling of the module. Further specifications were required and were to be drawn by Wysiwyg.
16. I am satisfied on the basis of the evidence of Mr Jones and the email of Mr Dan Wake that the HiAce modules supplied as part of RO 0070 were not of an acceptable quality in breach of s 54 (1) in that they were not fit for purpose, of an acceptable appearance and finish, safe and durable. There is no evidence of them having complied with specifications although there is evidence that the drawings were subsequently revised by Wysiwyg. On balance I do not consider that the Plaintiff has established the application of s 54(4) of the ACL and it follows that the Defendant is entitled to decline payment for the HiAce modules as it has done.
17. The amount unpaid from invoice 70 is said to be $8,454.34. When one accounts for the invoice costs of the white HiAce Mark II taxicab modules (bearing a sum of $3,616.80) and the orange HiAce Mark II taxicab modules (bearing a sum of $4,068.90) the amount outstanding is $768.64 to which the Plaintiff is entitled.

RO 0084 and RO 0085

1. In its Defence, the Defendant alleged in paragraph [11] that the Defendant's invoices RO0084 and RO0085 were duplicates of each other and for the same goods. In its document titled Opening Submissions, it did not make any further reference to these invoices nor was there any reference made to them in the Defendant's closing submissions. The transcript records the following exchange:- "HIS HONOUR: Well I don't know is the answer, if you want to discuss that. This is about the duplication of the invoices. GOWER: Yes, your Honour. LAMBERT: Yes. They are still pressed. I don't think a lot turns on it. HIS HONOUR: Well the amount of money in question might be affected by it. LAMBERT: Yes. I take your Honour's point in that regard and I think if that's my friend's concern-- HIS HONOUR: What do you say is the amount of money that's owing if these three invoices were duplicated? LAMBERT: We say no moneys are owing, your Honour, by virtue of the fact that none of the products met-- HIS HONOUR: That's not the question I asked you. LAMBERT: --the criteria. HIS HONOUR: The question I asked you is if your contention that these invoices were duplicated, what does that reduce the plaintiff's claim to? LAMBERT: I'd have to calculate that figure, your Honour, and give you that figure. But-- HIS HONOUR: Perhaps you can do that and tell me." [97]
2. The request directed of counsel for the Defendant was not responded to, however, a further exchange is recorded as follows:- "LAMBERT: Perhaps the best way to answer this is to take you to the invoices, your Honour, and show them to you. HIS HONOUR: I just wanted to know whether the amount still in issue is $135,835.20, or is it a lesser amount? LAMBERT: The amount we claim in offset, your Honour? HIS HONOUR: No, the amount that's claimed-- LAMBERT: By the plaintiff? HIS HONOUR: The amount that's claimed is as per para 10 of the statement of claim plus, I presume, interest under the s 100 of the Civil Procedure Act. There was a suggestion in your defence that some of these invoices were duplicated. The plaintiff contends that that's not the case and you haven't raised that as an issue in your statement of issues so I take it you're conceding the plaintiff's argument or not? I don't know. If you have a look at para 10 of the statement of claim I think what your defence suggests is that there's overlap between invoices RO84 and 85. LAMBERT: Yes, my defence at 11-- HIS HONOUR: 87, 88 and 95, 96. LAMBERT: Correct, your Honour. HIS HONOUR: What I want to know was because that - is there an amount by your calculations that is arrived at if that overlap is accounted for? LAMBERT: I would have to recalculate-- HIS HONOUR: That's what I asked you before. LAMBERT: I beg your pardon, your Honour, I apologise. HIS HONOUR: But you also haven't raised it in your statement of issues. GOWER: No. LAMBERT: No, I haven't raised it in my statement of issues, your Honour, but I have raised it in my defence. HIS HONOUR: I need to know what the issues are. What are the factual and legal questions that you're asking the Court to resolve? Is this an issue that's being advanced or not? LAMBERT: If your Honour would give me one moment? It's an unusual invoicing system, your Honour, and if I take you to the statement of claim you'll see, for example, that invoice 87, it says there the amount invoiced is $59,330. In fact, when one looks at the actual invoice which is at 182 of the annexure to Mr Xu's affidavit of March, the total order amount is $89,362 but then the figure on the bottom is $59,337. On 88 the figure on the total order is $89,362 and the second instalment on the bottom of the invoice is $30,025. On 95, the total order amount is $78,019, the first instalment amount is $46,811 and on 96 the total instalment, total order amount again is $78,019, the first instalment about $31,208. On that basis, your Honour, with respect to 87, 88 and 95 and 96 there appears not to be any duplication and with respect to 84 and 85, again the same system seems to in here, total order amount on 84 is $14,652 and the statement of claim expressed as the first instalment of $707,332 and then on 88 a total order amount again is $14,652 expressed as $7,320. There's a 7 cent difference, which we won't haggle about. We would like to put it to your Honour this way. We would accept the figures set out at para 10 as the amounts invoiced against each of those invoices are correct figures, but what we also wish to continue to maintain is that the goods the subject of invoice 84 are the same goods the subject of invoice 85. The goods the subject of invoice 87 are the same goods the subject of invoice 88 and the goods the subject of invoice 95 are the same goods the subject of invoice 96 by virtue of the fact that the plaintiff seemed to have a system whereby he invoiced in two amounts, a first instalment and a second instalment, but he raised two invoices rather than having one invoice that was payable in two instalments, if your Honour understands. HIS HONOUR: Yes. LAMBERT: Does that answer your Honour's question? So we don't dispute the amounts claimed at para 10, but what we are saying and what we want the Court to comprehend and understand is that the same goods appear-- HIS HONOUR: It's in relation to the same purchase order. LAMBERT: Exactly. Your Honour has it in one. Exactly. So, for example, in my opening submissions I actually equated the purchase orders to the actual invoices, and your Honour will see, for example, we talk about 87 and 88, they are the goods the subject of purchase order 129, and they are all the same goods. The goods on 87 are the same goods that are on 88. The invoices 95 and 96 are the invoices the subject of purchase order 136, and again the goods on 95 are the goods on 96. Perhaps with respect to 84 and 85, I don't make any submissions about those inasmuch as they relate to numberplate holders, not to taxi cab modules. GOWER: Not to be obtuse here, but my original question was whether 11, 12, and 13 of the defence were pressed. 11, 12, and 13 of the defence plead that those relevant invoices were duplicates, which infers or implies that there is double counting. Is it the case that the defendant now-- HIS HONOUR: You have just heard what Mr Lambert has said about that. GOWER: I think I understood it to mean there is no double counting alleged. Is that-- LAMBERT: No, we don't allege double counting, we're just trying to point out that those invoices are for the same goods." [98]
3. Counsel for the Defendant conceded that double counting was not being alleged and a similar concession was made in relation to invoices RO0095 and RO0096. [99] This concession was properly made as the invoices, whilst covering the same supply, relate to two separate instalments for payment of the amount in question. There being no other issue relating to the items the subject of invoices RO 0084 and RO 0085 the Plaintiff is entitled to their payment.

RO 0087 and RO 0088

1. The Defendant next asserted that the following items failed to meet the specifications provided and were not fit for purpose or of merchantable or of acceptable quality and had to be scrapped by the Defendant:- [100] 1. (200) Yellow Ford G Series Sedan Taxiback modules - $9,764; 2. (200) Switches installed on the Ford G Series - $1,254; 3. (100) Switches installed on the yellow Prius 30 (2011) - $4,521; 4. (100) Switches installed on the yellow Prius 30 - $627; 5. (100) Switches installed on the orange Prius 30 (2011) - $4,521; and 6. (100) Switches installed on the orange Prius 30 -$627.
2. It was also asserted that four hundred of the blue frames (out of 950) provided by the Plaintiff were not fit for purpose or of merchantable or acceptable quality and failed to match the specifications provided by the Defendant to the Plaintiff, thereby causing the Defendant to expend $12,000 to rectify the frames so that they could be securely fitted to the relevant vehicles.
3. Initially the Defendant asserted that it spent four hundred man hours at $30 per hour reworking four hundred of the frames supplied as part of RO0087 and RO0088. However, the Defendant gave no evidence in relation to such expenditure, neither an invoice, timesheet nor anything in affidavit evidence as to purpose. The Defendant does not explain how the items in question breached the guarantee is s 54 of the ACL.
4. To the extent that it relies on the evidence relation to the alleged failure of the Ford G modules to comply with the described thickness of 3.5mm I have already found in the Plaintiff's favour.
5. Tax Invoice RO 0087 was paid on 30 October 2013. [101] This was obtained from finance from Macquarie Bank. The evidence from Mr Butler was that this was the only occasion that he was aware of where purchase had been funded through finance. He stated "Q. Did you make any other applications for finance in relation to paying for product delivered to you by the plaintiff? A. No. Q. So this was the only one? A. (No verbal reply) Q. You need to answer Mr Butler, it's a microphone, you have to say yes or no? A. Sorry no we haven't - we didn't apply for any finance. Q. So it was just that one time? A. Pardon. Q. Just that one time? A. Yes. Q. So it's not in the normal course of events? A. To my understanding you can go backwards, that's the only time we finance stock, we certainly haven't financed stock since my arrival at the company, I don't believe they financed stock before my arrival." [102]
6. In contrast to Mr Butler, who was the chief financial officer, Mr Matthew Byrne gave evidence as follows:- "Q. Prior to you affirming your affidavit in these proceedings, you read Mr Chu's affidavit, didn't you, or Mr Cheng as you know him? A. Yep. Q. You then therefore have seen pages 206 and 207 before? A. Sure. Q. Who is, in relation to Rova Media, Wade Oldham? A. We use Wade's finance company to finance mouldings, cars, all sorts of bits of pieces for our company and have for over a decade. Q. Is it true that page 207 is an RTG or a settlement confirmation report from Macquarie Bank, the deposit into the company's bank account of $59,337.50? A. It's what it looks like to me, yes. Q. Do you recall that transaction? A. Specifically, no, but it looks like a standard transaction to me in the way that we funded all of our modules both here in Australia and from China, so nothing out of the ordinary. Q. So why, if it was not out of the ordinary, was it sent to the plaintiff? A. I'm not quite sure what the question is. Q. If this is a financial arrangement made which you say in the normal course of business and not unusual, why would you tell your supplier that you've borrowed money to buy the stock? A. So this is not the first time we've done this, this is the 25th time we've done this. I don't know how many times, but this is the standard way that we purchased our product. We're a small business that grew out of a garage and invested every single dollar that we made back into the business, and out of all of these transactions that have ever been made, there is only one to two container loads, both in the same 12 months that were so faulty I couldn't use them on a vehicle and were a danger to the public, that have been treated this way." [103]
7. The Defendant submitted that Mr Byrne's evidence is to be preferred rather than Mr Butler's evidence. I do not accept that this should be so.
8. Mr Byrne's answer in any event indicated that financing stock purchases were a vehicle used to assist in the growth of the company.
9. The email from Mr Wade Oldham dated 23 October 2013 [104] was copied to Mr David Byrne and Mr Ron Butler. Mr David Byrne was not called to give evidence and Mr Butler's evidence was that this was a one off occasion. [105] Furthermore, Mr Butler acknowledged that he was the only person in the organisation who could authorise payment of the bill. [106] The fact that the bill may have been processed through a finance broker does not detract from Mr Butler's evidence. Mr Butler further stated:- I would not be authorising payment or paying him and - until we came to some resolution regarding a credit, because I'm not paying - I never pay somebody where there's an outstanding issue for payment, I'm not going to pay somebody and expect to get a credit back, I don't pay them and then they make the alteration. [107]
10. Nevertheless, a meeting is said to have occurred on 1 October 2013 between Mr Xu and Mr Butler.
11. Mr Butler conceded that he had taken on the role of conveying problems with individual modules to Mr Xu. [108] However, Mr Butler raised no question in relation to the identified items the subject of RO 0087 and RO 0088 and they do not appear in his account of the meeting on 1 October 2013. [109] Mr Butler only refers to a fault in the moulding on the HiAce in his account of the discussion. The HiAce modules are not the subject of the Defence as outlined above for these invoices.
12. Notwithstanding these issues, payment was made in relation to RO0087 on 23 October 2013. [110] Furthermore on 9 January 2014, Mr Xu sent an email to David Byrne stating as follows:- "There are still three invoices long in arrears, #84, #85 and #88. We have this tradition of settling any outstanding accounts with head office in China before Chinese New Year, which is end of this month. I appreciate if you authorise payment." [111]
13. To this email, Mr David Byrne responded on 10 January 2014, stating:- "Responsibility for this function now lies with Ron and Chris Jones, As (sic) Ron is in charge of Finance, you will need to chase any outstanding payments from him. These accounts were authorised for payment by Sam and I months ago. I do not understand why they have not been paid. I hope your family has a wonderful Chinese New Year. Is William still interested in selling more of his other products in Australia that we discussed whilst visiting China? If so could we meet to discuss sometime convenient this month?"
14. The Plaintiff produced much of conversations which he had prepared as diary notes. These diary notes recorded as follows:- "12:32pm - called Sean of Rova 12:30pm - (1) complained about non-payment (2) pointing out CEO Ron didn't act even I chased payments by email, phone calls and by writing office (3) Ron promised once to submit payment within 24 hours, second time to pay in a week, but did not materialise (4) pointing out that behaviour is destroying trust between Rova and our business" (3 February 2014) "11am - Visited Rova office (1) met Sam (2) meeting with Matthew - Matthew has been investigating payment delays - there were areas Rova had trouble but he's confident moving forward - he pointed out Prius 30 modules have problems. However, Prius 30 sample was approved - he will investigate with Chris to find out whose responsibility - payment is forthcoming around 17th 7:30 - visit Botanica" (10 February 2014) "13:44pm called Matthew of Rova (1) payment is not ready (2) Rova has some funds coming to account (3) Matthew will contact me when cheques are ready" (17 February 2014) "9:30am - called Matthew of Rova (1) Ron, the CEO is in Melbourne meeting clients. Matthew has to wait for Ron's instruction regarding payments to Champ East Hospitality Products (2) Matthew asked if there's a pending shipment to Sydney. I told him the shipement was withheld due to Rova non-payment. A bit naïve of him even to ask the question. He shall go to the school of common sense. (3) Matthew promised to call me back re payment" (21 February 2014) [112]
15. I have also noted that despite the no reference in the pleadings Mr Jones gave evidence on working on the Prius 30 modules in or about August 2013 in order to make them fit the rear of the motor vehicle.
16. At a meeting on 10 February 2015 Mr Matthew Byrnes is recorded in Mr Xu's diary notes as having "pointed out Prius 30 modules have problems". Mr Xu further records "However, Prius 30 sample was approved" [113] It is not apparent from these notes which shipment is referred to and what the problems were. Mr Byrnes' oral evidence did not refer to the Prius 30 order of NOO129 but instead to "the last 1 or 2 container loads." [114]
17. Mr Xu in any event, obtained a Prius 30 model and took it to the manufacturer. The email response of 11 March 2014 from Delu Huan, Ltd asserts that upon inspection the trimming dimensions were consistent with the drawings. [115]
18. Despite the recording in the diary note above the Prius 30 modules were not the subject of a claim in relation to a breach of s 54 of the ACL. Nor were any other Prius modules. [116] Only switches were pleaded.
19. On this evidence I would not in any event have been satisfied of a breach of s54 of the ACL in relation to the modules.
20. The fact that the matter was raised on 10 February 2014 and not at the earlier meeting of 1 October 2013, despite the actions that the Defendant claims it took, was not explained.
21. In all, the Defendant has not established breach of s 54 in relation to the items identified in these invoices and the Plaintiff is entitled to payment.

RO 0095 and RO 0096

1. The final aspect of the plaintiff's claim was in respect of invoices RO 0095 and RO 0096. [117] These invoices were dated 27 February 2014. They were the subject of a purchase order issued by the Defendant dated 8 October 2013 NO 0136. [118] As best as I can ascertain, these were the subject of a packing order issued in China dated 2 January 2014 by Ace Plus International Ltd. [119]
2. The Defendant contended that the following items in the invoices cannot meet the specifications provided by the Defendant to the Plaintiff, and were not fit for purpose or merchantable or acceptable quality and had to be scrapped: - 1. (108)Yellow Ford G Series sedan and taxi-back modules - $5272.56 2. (108) Switches installed on the Ford G - $677.16 3. (302) Yellow HiAce Mark II module - $13653.42 4. (101)Yellow Camry 2011 module - $4932.82 5. (1) Camry 2012 sample and mould - $2500 6. (1) HiAce mould - $2500
3. Further it was contended, 770 of the blue frames were not fit for purpose or of merchantable or acceptable quality and failed to match the specifications provided by the Defendant to the Plaintiff causing it to spend $23,000 rectifying the frames so that they could be securely fitted to the vehicles without detaching from the vehicle when moving. The Defendant contended that ultimately all modules and frames supplied under the invoice had to be scrapped and the amount charged for the blue frames had to be offset. The $23,000 is calculated on the basis of 770 man hours at $30 per hour. [120] For the reasons previously given this latter claim cannot be sustained.
4. Mr Xu gave evidence that on 16 January 2014 he prepared a "balance of orders stats" for the Defendant's order which was due to come to Sydney. [121] The document that Mr Xu prepared indicated that the outstanding purchase orders were in relation to NO 0136 and NO 138. In relation to the NO 0136 delivery it was noted "All done and ready to be shipped."
5. Mr Xu next gives evidence that on 29 January 2014, he went to Melbourne to receive a shipment of items. [122] I can only assume that this related to the items which were the subject of invoices RO 0095 and RO 0096.
6. Thereafter various demands of payment were made with Mr Sam Basta, fleet manager for the Defendant, Mr Ron Butler and Mr Matthew Jones. The discussions which Mr Xu had are described in his affidavit. [123] In short, Mr Xu asserts that it was indicated to him that payment would be made shortly.
7. Mr Butler's evidence was that the quality issues were largely taken up with Mr Matthew Jones. [124] Mr Butler gave evidence as to his raising of the question of quality as follows: "No, not with, I raised with Mr Cheng the quality of the modules and the problem we were having with the modules flying off the back of the car and that was at my meeting with Mr Cheng in January 2014 and that's why I advised him at the time until we worked out some sort of settlement or credit regarding the issues that were outstanding at the time, I wouldn't be paying it. Once the modules started flying off the back of the cars in Melbourne, the first thing I did was to ring our insurance broker to make sure we were covered for public liability." [125]
8. According to the evidence of Mr Matthew Byrne, he met with Mr Xu and discussed the issue on 10 February 2014. [126] Mr Byrne's evidence was that he informed Mr Xu at that meeting that the stock was faulty, could not be used and would not be paid for, but Mr Xu ignored this fact. [127] The stock in question was identified as "modules" [128] Mr Matthew Byrne states: "To my understanding we are going through all the stock on hand in ascertaining its quality as we have found that most of the stock that has come through in the last 1 or 2 container loads to be of such poor quality. The modules are paper thin and breaking very easily. Some of the stock has been fitted to taxis and it is coming off the taxis whilst they are driving. They are ill fitting, they are chattering when the wind gets under them. They are not being built to the specs supplied and agreed. I have examples of the faulty produce for you to inspect." [129]
9. In fact Mr Xu's evidence was that he was ready to negotiate on payment of items subject to quality complaints. [130] A proposal to review the stock to ascertain which was faulty and come to an arrangement was conceded by Mr Byrne. [131]
10. Mr Byrne gave further evidence that he also met with Mr Xu on 21 February 2014, in which the following conversation occurred:- "With regard to paragraph 64 I say that I had a telephone conversation with Mr Xu on or about 21 February 2014 and he said to me words to the effect: 'I have not receive (sic) any of the money' I responded with words to the effect: 'Have you resolved with Ron and Chris what modules will or will not be paid for due to quality control. As far as I know Cheng, everything that you sent in the last couple of containers is not of a high enough quality to go on to taxis. They are falling off the taxis. I know that Ron is in Melbourne, you will have to take it up with Ron and Chris. Have you any shipments coming in because the only stock we have is faulty.' Mr Xu said words to the effect: 'There is a container of modules that is being withheld until payment is received.' I responded with words to the effect: 'Well take it up with Ron and Chris.'" [132]
11. Issues relating to the quality of the goods produced appear to have been acknowledged by Mr Xu, who in an email to Mr Basta dated 11 April 2014, indicated that he was discussing bringing people to Australia from China to inspect installation of the taxi modules, in particular those of Ford G and Prius 30 which were the subject of the complaint. [133] A letter was indeed forwarded to the manufacturers on 19 May 2014 inviting them to come to Australia and in particular, in relation to the Ford G series and the HiAce II series. [134] Mr Xu gave evidence of a meeting on 21 May 2014 with Mr Butler and Mr Jones in which Mr Jones questioned bringing people from China because of the expense and stated that:- "We are talking to our accounts department and auditor and will try and resolve this as quick as possible… I promise we will get it paid …but there are some products that are not fitting well and we have to something about it… [135]
12. Mr Butler denied being present at this meeting. [136] Mr Christopher Jones' account was that Mr Xu was maintaining that the Chinese manufacturers were to come out and see the problems for themselves. [137] He further maintained that Mr Xu was told that:- "I don't understand why you have to bring out people to from China to see this they are clearly unacceptable."
13. Mr Matthew Byrne gave evidence that the Defendant underwent a major restructure from an ownership point of view when Mr David Byrne left the company and "trying to find relevant emails, drawings or any information pertaining to this case has been quite a difficult process." [138] Mr David Byrne ceased to be a director with the Defendant on 12 March 2014. [139] Mr David Byrne was not called to give evidence nor did the Defendant call Mr Basta whose role was to release final purchase orders under instructions from Mr David Byrne. [140] Mr Byrne conceded that he did not approach Wysiwyg in order to obtain copies of drawings or specifications. [141]
14. The Defendant also did not call Mr Dan Wake the previous employee of the Defendant who worked in the operations side of the business, who fitted, ordered process, and developed the modules and posted operations stock. [142] Mr Byrne considered that Mr Wake was intimately involved in the design of the modules. [143]
15. Notwithstanding this the Plaintiff appears to have accepted that in relation to the Ford G and the Yellow HiAce modules there was a quality issue of such a nature as he would arrange for the travel of his manufacturer from China. On his own admission he was prepared to make allowance for faulty modules. The evidence in his email however relates only to Yellow HiAce and the Ford G Series.
16. Mr Jones also raises an issue of the Camry modules being ill-fitting around the top and side sections in a similar manner to the faulty ill-fitting HiAce Mark II modules. He claims he attempted to rectify six or so modules and then made a decision to scrap 200 of them. [144] In fact there were only 101 of them in the supply.
17. Be that as it may, the Plaintiff did not challenge Mr Jones' evidence in regard to the modules condition. In his affidavit in reply under the heading "Camry" Mr Xu in fact does not respond to the claims of Mr Jones in relation to the those modules but rather to the "Prius 30."
18. Overall I accept that the three types of modules were not of an acceptable quality. Bearing in mind the factors in s 52 (3) in particular the nature of the items and the evidence that they could not securely fit on the back of taxi cabs I am satisfied that there was a breach of s 52 of the ACL. It was for the Plaintiff to establish that the circumstances in which s 52 (4) was engaged. It has not done so.
19. The Defendant has confined its evidence to the question of modules. I am not satisfied that it has established a breach of s 54 of the ACL in relation to the other items. In the circumstances I would allow the amount claimed in respect of invoices RO 0095 and RO 0096 totalling $78,019.04 less $23,856.80 (being the cost of the Ford G, HiAce and Camry modules). This comes to an amount of $54,162.24.

ORDERS

1. Accordingly for the preceding reasons I make the following orders: 1. Verdict and judgment for Plaintiff in the sum of $99,620.28. 2. Pursuant to s 100 of the 2005 Act the Defendant is to pay pre-judgment interest on this sum calculated in accordance with Practice Note 15 from 30 March 2014 to date. 3. Subject to any application within 14 days through my Associate to relist the mater for any further or other order as to costs, the Defendant is to pay the Plaintiff's costs. 4. Exhibits are to be retained for 28 days.

Endnotes

1. Hereinafter "Wysiwyg"
2. Affidavit of Mr Chengdong Xu dated 21 January 2015 at [20]
3. Defendant's Final Written Submissions at [1]
4. Defence at [28]
5. Defendant's Opening Submissions at [38]
6. Defence at [15] - [16]
7. Defence at [17] - [18]
8. Ibid at [19]
9. Ibid at [20]
10. Defence at [21]
11. Ibid at [22]
12. Ibid at [23]
13. Ibid at [24]
14. Ibid at [25]
15. Defence at [28]
16. Competition and Consumer Act 2010 (Cth) Schedule 2 - Australian Consumer Law. Hereinafter referred to as the "ACL"
17. Defendant's Final Written Submissions at [109]
18. Hereinafter referred to as "the 2005 Act"
19. Uniform Civil Procedure Rules 2005 (NSW)
20. [2012] NSWCA 18 at [44]-[47]
21. Affidavit of Mr Christopher Jones dated 26 February 2015 at [22] and Affidavit of Mr Christopher Jones dated 5 June 2015 at [5]
22. Defendant's Opening Submissions at [12]
23. Defence at [15] and [18]
24. See Affidavit of Mr Christopher Jones dated 26 February 2015 at [1] and T 149.24-.27
25. Ibid at [14]-[17]
26. Ibid
27. Plaintiff's Written Submissions at [57]
28. Ibid
29. T 166.15; Defendant's Amended Schedule of Issues, dated 24 September 2015
30. Defendant's Opening Submissions at [40]
31. Affidavit of Mr Christopher Jones dated 26 February 2015 at pp 31-52
32. T 159.20 160.2
33. Defendant's Final Written Submissions at [109]
34. T 32.45-.50
35. T 33.4-.9
36. T 33.30-35
37. Defendant's Final Written Submissions at [7]
38. Ibid at [1(i)]
39. T 166.14 and Defendant's Amended Schedule of Issues, dated 24 September 2015
40. See: Effem Foods Ltd v Nicholls [2004] NSWCA 332 per Handley JA (with whom Tobias JA and Palmer J agreed) at [11] and [30]. See also: Courtney v Medtel Pty Ltd [2003] FCA 36 per Sackville J at [185] and Cavalier Marketing (Australia) Pty Ltd v Rasell and Another (1990) 96 ALR 375 per Cooper J at 392 - 393
41. Defendant's Final Written Submissions at [16]
42. Affidavit of Mr Chengdong Xu dated 21 January 2015, p35
43. T 84.30
44. Affidavit of Mr Chengdong Xu dated 21 January 2015, Annexure C 24. See T 85.5
45. T 85.7-.24
46. Defendant's Final Written Submissions at [20]
47. See s 57(2) of the ACL
48. T 110.3
49. See Affidavit of Mr Christopher Jones dated 26 February 2015 at [4]
50. Ibid at [5]
51. Ibid at [19]-[21]
52. T 146.6, .18 and .24
53. Affidavit of Mr Chengdong Xu dated 21 January 2015 at pp145-6
54. Affidavit of Mr Christopher Jones dated 26 February 2015 at [19]
55. Emphasis added
56. Affidavit of Mr Christopher Jones dated 5 June 2015 at [4]-[6]
57. T 161.20-.28
58. T 136.11
59. T 136.30-.41
60. T 136.34-137.1
61. Affidavit of Mr John Ruggles dated 11 June 2015 at pp16 and 18
62. Affidavit of Mr John Ruggles dated 11 June 2015 at p16
63. Ibid at p6
64. Ibid at p18
65. Ibid at p18
66. T 141.17-.28
67. T 160.32 - 161.12
68. Affidavit of Mr Chengdong Xu dated 21 January 2015, p76
69. T 107.33-108.40
70. T 108.30
71. T 107.38
72. T 109.38
73. Affidavit of Mr Chengdong Xu dated 21 January 2015 at p192
74. Ibid at pp182-5
75. Affidavit of Christopher Jones dated 26 February 2015 p 29;
76. See Affidavit of Mr Chengdong Xu dated 31 March 2015 at [19]-[20] and Annexures CXX-03 and CXX-04
77. Ibid, Annexure CXX-08
78. Brodie v Singleton Shire Council (2001) 75 ALJR 992, [355] (Callinan J) and Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 (14 September 2001) [89] (Heydon JA).
79. Affidavit of Mr Chengdong Xu dated 21 January 2015, Annexure CX 6
80. Affidavit of Mr Christopher Jones dated 26 February 2015 at [7]
81. Affidavit of Mr Christopher Jones dated 26 February 2015 at [13]
82. Affidavit of Mr Chengdong Xu dated 31 March 2015 at [17]
83. Ibid at [16]
84. Ibid at [17]
85. T 151.12 and T150.24
86. T 152.21-23.
87. T 152.25-.27
88. T 153.4-.12
89. Affidavit of Mr Chengdong Xu dated 21 January 2015 at [23]
90. Ibid at pp 55-72
91. Affidavit of Mr Chengdong Xu dated 21 January 2015 at [26] and Affidavit of Mr Ron Butler dated 4 March 2015 at 5(a)
92. Affidavit of Mr Chengdong Xu dated 21 January 2015 at [27]
93. Ibid at p81
94. T 30.33-43
95. Affidavit of Mr Chengdong Xu dated 21 January 2015 at p85
96. Affidavit of Mr Chengdong Xu dated 21 January 2015 at p197
97. T 7.37-8.15
98. T 26.35-28.40
99. A similar position applies in relation to RO 0087 and RO 0088 see [12] of the Defence
100. Defence at [20]-[21]
101. Affidavit of Mr Chengdong Xu dated 21 January 2015 at pp206-7
102. T 186.8-.28
103. T 177.47-178.30
104. Affidavit of Mr Chengdong Xu dated 21 January 2015 at p206
105. T 186.23
106. T 186.39
107. T 189.11 - .16
108. T 189.6
109. Affidavit of Mr Chengdong Xu dated 21 January 2015 at [27]; Affidavit of Mr Ron Butler dated 4 March 2015 at [5(a)]
110. Affidavit of Mr Chengdong Xu dated 21 January 2015 at pp 206-207
111. Ibid, p 209
112. Affidavit of Mr Chengdong Xu dated 21 January 2015 at pp212-219
113. Ibid at p215
114. Affidavit of Mr Matthew Jones dated 4 March 2015 at 4
115. Affidavit of Mr Chengdong Xu dated 31 March 2015, Annexure CXX-08
116. Affidavit of Christopher Jones dated 26 February at [17]-[18]
117. Affidavit of Mr Chengdong Xu dated 21 January 2015 at pp186 - 189
118. Ibid at pp203 - 204
119. Ibid at p192.
120. Plaintiff's Opening Submissions at [25]
121. Affidavit of Mr Chengdong Xu dated 21 January 2015 at [54] and p211
122. Ibid at [55]
123. Ibid at [57] and onwards
124. T 196.11-197.4
125. T 196.7
126. Affidavit of Mr Matthew Byrne dated 4 March 2015 at 4
127. T 176.15-.37
128. Affidavit of Mr Mathew Byrne dated 4 March 2015 at 4
129. Ibid at 4
130. Affidavit of Mr Chengdong Xu dated 21 January 2015 at p229
131. T 176. 20
132. Affidavit of Mr Matthew Byrne dated 4 March 2015 at 4
133. Affidavit of Mr Chengdong Xu dated 21 January 2015 at p223
134. Ibid at p225
135. Ibid at [73]
136. Affidavit of Mr Ron Butler dated 4 March 2015 at 5
137. Affidavit of Mr Christopher Jones dated 26 February 2015 at [32]
138. T 168.45
139. T 173.19
140. T 175.17-.26
141. T 177.14-.24
142. T 172.45
143. T 172.49-. 50
144. Affidavit of Mr Christopher Jones dated 26 February 2015 at [25] - [26] 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: 26 February 2016