Pangallo Estate Pty Ltd & ors v Killara 10 Pty Ltd

Pangallo Estate Pty Ltd & ors v Killara 10 Pty Ltd - [2007] NSWSC 1528 - NSWSC 2007 case summary — Zoe

[15]

6 On or about 23 February 2007, Pangallo delivered to Ms Cecchini's winery 19.796 tonnes of Shiraz grapes and 9.24 tonnes of Zibbibo grapes, which were processed that day by Ms Cecchini. On 6 March 2007 Ms Cecchini rendered an invoice for "contract winemaking charges for 19.796 tonnes of Shiraz grapes processed on 23 February 2007 at $950/tonne (excl GST) and contract winemaking charges for 9.24 tones of Zibbibo grapes at $950/tonne (excl GST)", with provision for a discount and twelve instalment payments. 7 Mr Barbalace delivered to Ms Cecchini's winery 20.67 tonnes of Summerville Verdelho grapes on 28 January 2007, 21.783 tonnes of Summerville Chardonnay grapes on 29 January 2007, and 20.851 tonnes of Summerville Shiraz grapes on 10 February 2007. She issued an invoice on 10 February 2007 for "contract winemaking charges" at $900 a tonne in respect of them. On 5 March 2007 she provided Mr Barbalace with a stocktake of his wines held at that date, as follows: 2005 Summerville Shiraz 14 oak barriques = 3,150 litres approx 2006 Summerville Shiraz 16 oak barriques = 3,600 litres approx 2006 Chardonnay: approx 12,000 litres 2005 Chardonnay: approx 2,800 litres 2006 Verdelho: approx 3,350 litres Differences in volumes from last stocktake explained in header letter. The 2005 Chardonnay and the 2006 Chardonnay has been "mixed" together. There is a straight 2006 Chardonnay, which won the medal, the 12,000 litre batch. I recommend that the 2006 Verdelho be backblended with the 07 Verdelho, as it is looking tired in the tank. Same with the Chardonnays. I would be bottling the 2006 Chardonnay. At least half of the volume, as it is looking tired in the tank. 8 On or about 29 August 2007 Mr Pangallo contacted Ms Cecchini to make arrangements to collect some wine for bottling. Ms Cecchini told him that she had been evicted from the winery and was not in a possession to release any wine. He contacted Mr Orr, the manager of Killara 10, who would not permit him to remove the wine. Subsequent attempts to collect the wine were unsuccessful until the interlocutory arrangements to which I have referred were made. 9 The grapes delivered by Barbalace and Pangallo Estates were crushed separately and stored into separate tanks according to their variety in the course of the winemaking process. 10 Killara 10 took possession of the winery on Monday 20 August 2007. Bailment, or sale and resale?

[17]

12 As will become apparent from the authorities discussed below, that proposition states the position rather too widely. Whether a farmer loses title to wheat upon a baker turning it into bread depends, fundamentally, on the legal relationship between the farmer and the baker, which may be a contract for sale of goods, or may be a contract for services. Some of the complexities are adverted to by Bryson J in Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty Ltd (1996) 20 ACSR 205, (at 209): The question whether goods which have been used in some manufacturing process still exist in the goods produced by that process, or have gone out of existence on being incorporated in the derived product is, in my opinion, a question of fact and degree not susceptible of much exposition. When wheat is ground into flour it is reasonably open to debate whether the wheat continues to exist; when flour is baked into bread there could be little doubt that the flour does not. Many examples might be encountered or imagined, and each must be addressed separately. Where goods of a homogenous character are mixed co-ownership might be a correct conclusion; but that is a problem of a different kind. There is some discussion in the judgment of Bridge LJ in Borden (UK) Ltd v Scottish Timber Products Ltd [1981] 1 Ch 25 at 41; [1979] 3 All ER 961, addressing "a mixture of heterogeneous goods in a manufacturing process wherein the original goods lose their character and what emerges is a wholly new product …". Goff LJ in Clough Mill Ltd v Martin [1985] 1 WLR 111 at 119; [1984] 3 All ER 982 said: "Now it is no doubt true that, where A's material is lawfully used by B to create new goods, whether or not B incorporates other material of his own, the property in the new goods will generally vest in B, at least where the goods are not reducible to the original materials: see Blackstone's Commentaries , 17th Ed (1830), vol 2, at 404-5." 13 It is well established that a bailment may involve an obligation to return the goods in an altered form. Halsbury's Laws of England, 2nd edition, cites the definition of bailment in Bacon's Abridgment, in which it was said (emphasis added): A bailment, properly so called, is a delivery of personal chattels in trust, on a contract, express or implied, that the trust shall be duly executed, and the chattels redelivered in either their original or an altered form , as soon as the time or use for, or condition on which they were bailed, shall have elapsed or been performed. 14 This statement was cited by Cohen J in Re S Davis & Company Ltd [1945] Ch 402 (at 405). The same concept is apparent in the judgments of Rich and Starke JJ in Chapman Bros v Verco Bros & Co Ltd (1933) 49 CLR 306. Rich J said (at 314) (emphasis added): The arrangement is inconsistent with the very idea of bailment according to English law, which involves the redelivery of a specific thing in its original or some altered form to the bailor or to some other person in accordance with the terms of the bailment.

[22]

20 This passage makes clear that in the case of fungible goods, their commingling, or their manufacture into other products to be returned to the original owner, does not result in property passing from the original owner, if the parties' intent is consistent with a bailment. Accordingly, the intent of the parties in ultimately determinative. 21 Lamkin v RH Binder Pty Ltd (1984) ASC 55-354 was concerned with a contract for the manufacture of wine by a contractor from wines supplied by the grower. The grower complained that the wines were not of good saleable quality. The trial judge found for the winemaker, on the basis that the case was one of "caveat emptor". The Full Court of the Supreme Court of South Australia allowed the grower's appeal, on the basis that there was imported into the contract a duty to exercise reasonable care and skill. The judgments do not analyse whether the contract was one for sale of goods or one for services, but in the distinct approaches of the trial Judge and the Full Court it is implicit that the trial judge treated the contract as one for the sale and resale of goods (in which the concept of caveat emptor might be applicable), whereas the Full Court treated the contract as one for services (in which a duty to exercise reasonable care and skill was imported). It follows that the Full Court's decision is authority, if not expressly so, for the view that the contract in that case - which is akin to that in the present case - was one for services, as distinct from a sale and resale. This is analogous to the distinction identified by Blackburn J in Lee v Griffin (1861) 121 ER 716 and cited in Deta Nominees by Fullagar J (at 182): If the contract be such that, when carried out, it would result in the sale of a chattel, the party cannot sue for work and labour; but, if the result of the contract is that the party has done work and labour which ends in nothing that become the subject of a sale, the party cannot sue for goods sold and delivered.

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