Baroni Foods Limited v P K Wholesale Supplies Limited [2015] NZHC 255 (24 February 2015)

Last Updated: 10 March 2015

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV 2014-409-000702 [2015] NZHC 255

BETWEEN	BARONI FOODS LIMITED Plaintiff
AND	P K WHOLESALE SUPPLIES LIMITED Defendant

Hearing:	10 February 2015
Appearances:	G J Ryan for Plaintiff G D Jones for Defendant
Judgment:	24 February 2015

_{JUDGMENT OF ASSOCIATE JUDGE MATTHEWS}

[1] Baroni Foods Limited (Baroni) is an importer and supplier of food products. P K Wholesale Supplies Limited, which trades as Solotti Foods (Solotti), is a food wholesaler and retailer. Both have carried on business for some years. Until the end of February 2014, Baroni also had a retail outlet at 44 Gasson Street, Christchurch, and stored imported foods in the same building. In December 2013, having decided not to continue retailing food, Baroni decided to vacate the premises and the trust from which it held its lease, and agreed to lease the property to Solotti for a period of eight years commencing on 1 March 2014. Solotti took possession of the premises on that day and uses them as a shop and a warehouse.

[2] In this proceeding Baroni seeks judgment against Solotti on four causes of action. The second, concerning a contract to sell certain items of plant to Solotti, has been largely resolved. According to Baroni the sale price of the plant has been paid save only for $23, but there remain issues over interest, and costs are sought on this

_{cause of action. Similarly, the third cause of action which relates to an order for}

BARONI FOODS LTD v P K WHOLESALE SUPPLIES LTD [2015] NZHC 255 [24 February 2015]

olives has been fully resolved, save only for costs. I defer further consideration of these causes of action until the end of this judgment.

[3] In the first cause of action, Baroni maintains that Solotti agreed to purchase its stock of food items stored at the Gasson Street premises, and it seeks judgment for the balance of the purchase price. Solotti says it did not agree to buy all the stock and denies that it owes any sum to Baroni.

[4] In the fourth cause of action, Baroni sues for the purchase price of an order for food items placed by Solotti on 14 February 2014, which arrived in New Zealand in June 2014 and for which Solotti has not paid. Solotti says that it was entitled to inspect the goods before payment, and that when it finally did so it found some of the goods to be unacceptable resulting in it cancelling the contract. Baroni says Solotti was not entitled to inspect the goods before paying for them, and that Solotti has not lawfully cancelled the contract.

Summary judgment

[5] Baroni seeks summary judgment from Solotti under r 12.2 of the High Court

Rules. This provides:

12.2 Judgment when there is no defence or when no cause of action can succeed

(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

...

[6] The principles the Court is to apply on an application for summary judgment are summarised in Krukziener v Hanover Finance Ltd:¹

[26] The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1986] NZCA 112; [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be

¹ Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307.

defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ

84 (CA).

[7] In Auckett v Falvey, Eichelbaum J said:²

On a summary judgment application, the onus is on the plaintiff to show that there is no defence. On the present facts, the plaintiffs are able to pass an evidential onus to the defendants by exhibiting the contract which on its face, entitles them to the remedy they now seek. The defendants are then in a position of having to demonstrate a tenable defence. However, the overall position concerning onus on the application is that at the end of the day the question is whether the plaintiffs have satisfied the Court as to the absence of a defence.

[8] I take from these authorities that the correct approach of the Court is to consider the following:

(a) Does the evidence for the plaintiff establish a position which on its face would entitle it to the remedies it now seeks?

(b) If so, has the defendant demonstrated a tenable defence?

(c) The onus which shifts to the defendant is an evidential one only; the burden of proving that the defendant does not have a defence rests throughout with the plaintiff.

[9] On each of the first and fourth causes of action there is substantial disagreement between Mr Baroni and Mr Solotti, who have given evidence by way of affidavit on behalf of their respective companies. There are also significant discrepancies between the evidence given by Mr J D Mowlem, the former storeman for Baroni, and Mr Solotti. These conflicts in the evidence bring into sharp focus the approach the Court must take when deciding a case on the basis of evidence given by

_{affidavit, without the benefit of the presentation of oral testimony, or cross-}

² Auckett v Falvey HC Wellington CP296/86, 20 August 1986 at 2.

examination of the witnesses on their widely varying versions of the events which occurred. There are numerous cases in which the courts have made it clear that, unless there are sound reasons to entirely reject one version of events in favour of the other, for example support from contemporaneous documents, or subsequent conduct which can only be consistent with one version of events, the appropriate course is to decline to enter judgment on a summary basis and to direct that the case be taken to trial. Mr Jones drew my attention to three such cases, in addition to Krukziener,

above.³ I approach my consideration of the evidence in accordance with these

principles.

First cause of action: claim for the value of stock

[10] The first cause of action is pleaded thus:

First Cause of Action – Contract – Stock Agreement

3 On or about 27 February 2014, the plaintiff and the defendant entered into an agreement by which the defendant agreed to purchase from the plaintiff certain food stock stored at premises at 44 Gasson Street, Christchurch (Stock Agreement).

_Particulars

The stock the subject of the Stock Agreement is itemised in an invoice from the plaintiff to the defendant, reference 00022415, totalling $194,325.93 including GST.

4 The Stock Agreement included the following terms:

4.1 Instalments totalling $45,708.47 each would be paid by the defendant to the plaintiff on 31 March 2014 and 30 April 2014.

4.2 The balance owing under the Stock Agreement, $102,908.99, would be paid by the defendant to the plaintiff within a reasonable period of time thereafter.

5. The defendant paid the first instalment due under the Stock Agreement of $45,708.47 on 31 March 2014.

6. The defendant paid the following sums on account of the second instalment due under the Stock Agreement:

_{6.1 $10,000 on 13 June 2014; and}

³ Corbett v National Mutual Finance Ltd (1992) 5 PRNZ 386 at 391 (CA); Goodwin v Rocket

Surgery Ltd [2013] NZCA 172 at [17]; Local Courier Service v Kesha (1995) 8 PRNZ 690 at

693.

6.2 $5,338.49 on 6 August 2014.

7 On 1 September 2014, the plaintiff made demand on the defendant to pay the balance owing under the Stock Agreement, comprising the balance of the second instalment, plus the remaining balance owing, totalling $133,278.97.

8 The defendant has neglected to pay the balance owing under the Stock

Agreement.

Wherefore the plaintiff claims against the defendant

(a) Judgment in the sum of $133,278.97.

(b) Interest, pursuant to section 87 Judicature Act 1908. (c) Costs.

[11] Although it is not specifically pleaded, Baroni’s position is that the stock agreement is an oral agreement reached between him and Mr Solotti, and he says it is supported by contemporaneous documents as well as by the evidence of Baroni’s storeman, Mr J D Mowlem. I set out, first, the evidence given by Mr Baroni in his first affidavit.

[12] Mr Baroni says that his negotiations with Mr Solotti started in December

2013. He says Mr Solotti proposed that his company would buy all the food and wine stored at the premises. He was, however, concerned about the cash outlay involved, close to $200,000, so he sent an email indicating he was reluctant to purchase all the wine in stock, and suggested that Solotti retain all the stock on hand, selling it on behalf of Baroni and splitting the margin between them.

[13] Mr Baroni was not attracted to this idea. He wanted to sell all the stock at once, and told Mr Solotti that either he needed to agree to a complete sale of the stock or he would remove it from the premises.

[14] On 25 February, Mr Baroni sent Mr Solotti an email in the following terms:

Dear Peter,

I have been trying to contact you all day but I believe you are very busy. Please find attached an invoice prepared by John for the stock on hand that

^{you are taking over.}

_{VERY IMPORTANT}

Any change to this invoice must be done by this Friday 12 o’clock midday.

Otherwise you will not be able to operate the shop on Monday morning. Please advise of any change urgently.

Kind regards, Alfio Baroni.

[15] The attachment to the email is an eight page invoice, number 22415, with the word “Quote” marked on each above the invoice number. It lists various items of food and wine, with quantities and item numbers for each, together with a unit price, a unit description and a total price for the quantities available. On the last page this document shows a balance due of $194,325.93 which is the opening figure for the claim in the first cause of action.

[16] Mr Solotti replied by email. He said that earlier he and Mr Baroni had agreed that the stock to be purchased at handover would be listed by Solotti, that he had appreciated the advice given by Mr Baroni and by Mr Mowlem in relation to stock, and that he did not yet feel able to make financial decisions, and was aware of the need to conserve funds for later import shipments. He observed that a number of the items on the Baroni list were items he had previously indicated Solotti would not purchase, and there were other products listed which, at that time, he had not considered. He then concluded his email with the following:

Until we can identify which products sell well, I want to get a little experience. I will therefore purchase the following items. The list will be altered no doubt once I am able to consult with James. Some minor alterations will also be necessary to align with carton quantities.

The following list is in the same order as John’s stocktake list.

[17] The references to James and John are to his son, James Solotti and John Mowlem. The list to which Mr Solotti referred was sent by a separate email an hour later. It comprised 58 product lines, whereas Mr Baroni’s invoice/quote comprised

130 product lines.

[18] After the list, Mr Solotti made a number of further comments but, relevantly, said:

We do not require any products which are dated or within a couple of months of becoming dated.

There will be more products to add to the list, including pastas, when I

consult with James (hopefully Thursday).

If you wish we can fence the rest of the product off in the warehouse until we discuss further once we are more familiar with the product and our financial commitments become clearer.

I have not committed to any expenditure until now as I anticipated that unexpected bills would appear. The amount of product in your list is higher than I had expected, given that you had told me repeatedly that you are out of stock of most items and I know that to be true of, for example, extra virgin and pure olive oils.

[19] According to Mr Baroni he responded by email the following morning,

27 February at 8.08 am. That was the day before the final day of Baroni’s

occupation of the premises. He said:

Dear Peter

The prices you are being charged are below cost because you have to takeover all the stock and pay 7 days I must see you by 10 am this morning or I will put all my stock in storage at mainfreight

Regards

Alfio and John

Please note I am not your financier.

[20] Mr Baroni then says that he and Mr Solotti met at 10.00 am on 27 February. He says that he told Mr Solotti that if Solotti did not want to purchase all of the stock, there was no deal and Baroni would remove it immediately. He had space to place it in other premises of his, or it could have been stored, he says, with Mainfreight.

[21] Mr Baroni then says that when this position was made known to Mr Solotti at the meeting, Mr Solotti said he had decided to buy all of the stock. He asked, however, whether they could agree to a payment by instalment arrangement in order to give Solotti a little more time to pay. Mr Baroni says that after various proposals were discussed he proposed that Baroni would issue an initial invoice for the items of stock that Mr Solotti had listed in his email of 26 February, for payment by

31 March. After that there would be a second instalment payable in the same amount by 30 April 2014. The balance would be paid on reasonable terms and at reasonable times.

[22] Mr Baroni says that on or about 20 March, Baroni issued an invoice to Solotti in accordance with that agreement. He produced tax invoice 22464 for a total sum of $91,416.95 showing on its face a requirement of a first payment of $45,708.47 by

31 March 2014, and a second payment in the same amount due on 30 April 2014.

[23] Mr Baroni says the first instalment was paid in full on due date and in respect of the second, Solotti paid $10,000 on 13 June and $5,338.49 on 6 August. This left a balance owing for the second instalment of $30,369.98, and a balance owing for the entire purchase of the stock of $133,278.97.

[24] Mr Solotti gives very different evidence. He says that by mid-February, after discussions since December, the issue of the stock Solotti would buy was becoming more pressing because any stock it did not buy, Baroni would need to remove from the premises. When he received the email of 25 February from Mr Baroni with the attached invoice 22415 for what appeared to him to be all the stock on the premises, he noted that the email stated that the invoice was “... prepared by John for the stock on hand that you were taking over.” However, he says “I had never agreed, either at that time or later, to buy all of that stock.” He says the reference to his not being able to operate the shop on Monday morning was an attempt to put pressure on him to agree to take all the stock, much of which was approaching or past its use-by date.

[25] Mr Solotti confirms that he sent the email of 26 February and received Mr Baroni’s response of 27 February which led to the meeting to which I have referred. According to Mr Solotti, Mr Baroni told him that he had to take all of the stock or he would sell none at all. Mr Solotti’s response was that he did not wish to buy all of the stock so if Mr Baroni insisted that he buy all or none, then he would buy none and it would have to be taken away before Solotti moved in. Mr Solotti says Mr Baroni then tried to persuade him to buy all the stock, telling him it was a good deal for him and that he could pay by instalments. Mr Solotti told him:

... no, I only wanted to buy some of the stock right now but would be interested in buying more as required, as I had done previously (I had been purchasing stock for my business from him for the previous two years). When Mr Baroni realised that I would not agree to buy all of the stock he stood up and stormed angrily out of the room, slamming the door behind him. That was the end of the meeting, which lasted about 15 minutes in total.

[26] After that meeting, James Solotti sent Mr Baroni an email at 2.59 pm reiterating that Solotti did not want all of the stock. This email reads:

Dear Alfio and John

Baroni are not helping us to start a new business, we have been operating now since June 5^th 1997 and have a very healthy client base.

We own enough stock at the moment to satisfy our current wholesale customers & the retail operation at Gasson Street.

We are not in the business of buying dated stock, but do appreciate your kind offers

Or for that matter items such as the basil pesto, tinned tuna, or the cream

Marsala

Alfio, I have been very, very clear with John weeks & weeks ago we do not want this stock. We too have been selling out of date stock for the past few months in preparation for the move.

I know there is a lot of A10 Kalamata tins at the back of the warehouse, can you supply an O.N for this item before we move in, we have only sold 12 tins if (sic) these in the last 3 months

Peter & I will visit tomorrow morning before the move but will call you

Friday morning to confirm.

Look forward to seeing you Friday

Best regards

James Solotti

[27] In his affidavit Mr Solotti then says:

I adamantly deny Mr Baroni’s allegation at paragraph 14 of his affidavit that I told him at the meeting on 27 February that I had decided to buy all of the stock and that we discussed arrangements for payment by instalment. As I say above, Mr Baroni offered to accept instalment payments if I agreed to buy all of the product but, other than that, I deny paragraph 14 of his affidavit entirely.

[28] Mr Solotti goes on to say that when Solotti moved into the premises on 1

March the plaintiff’s stock was still there. He heard no more from Mr Baroni until

20 March when he received invoice 22464 of that date, for $91,416.95, with two instalment payments noted. This invoice included some but not all of the items which he had offered to buy in his email of 26 February. Similarly items that he had not offered to buy were on the invoice. Also it included significant quantities of grappa and wine which he says could not be sold without a liquor licence, which Solotti does not have.

[29] Mr Solotti says that he has always been prepared to buy some stock, as required, and since March 2014 Solotti has been able to sell some of the stock left behind by Baroni. For this reason he has made four payments to Solotti, thus:

• $27,347.85 on 10 April 2014

• $18,360.62 on 16 April 2014

• $10,000 on 13 June 2014

• $5,338.49 on 6 August 2014

[30] I note that the total of the first of these two payments equates the amount of the first instalment referred to on Baroni’s invoice 82464 of 20 March.

[31] Mr Solotti then says:

Although I adamantly deny that I ever agreed to buy all of the stock, I accept that some of the stock has been appropriated by the defendant and sold to its customers, with the plaintiff’s knowledge. The defendant has paid the plaintiff on account of the stock it has used but I accept that there has never been a proper accounting to the plaintiff for its stock appropriated and sold by the defendant. The defendant accepts that it should fully account to the plaintiff for the stock appropriated but it disputes there was ever a contract to buy all or any of the stock or that it is liable for the amount claimed in the statement of claim.

[32] Affidavits in reply to this evidence were sworn by Mr Mowlem and by Mr Baroni. I refer to Mr Mowlem’s affidavit first, because he describes a stock-take undertaken by him and James Solotti, to which Mr Baroni refers in his affidavit in reply.

[33] Mr Mowlem says invoice 22415 (on which Baroni sues in this case) resulted from a stock-take undertaken jointly by James Solotti and him on about 20 February, an exercise which took them “many hours to complete”. He notes that he signed this document under the words “checked by”.

[34] The stock-take was given to Mr Baroni’s wife who prepared the invoice. During the exercise James told him that the only stock Solotti did not wish to purchase was stock which had passed its “best before” date, as well as basil pesto, tinned tuna and the bulk of the egg marsala. Everything else was listed. To the best of Mr Mowlem’s knowledge, none of the items listed on the invoice fall into the categories that Solotti did not wish to purchase with one possible exception, some goods close to their use by date in respect of which a very reduced price had been stipulated.

[35] Mr Mowlem says that even though he was not present at the meeting of

27 February he was aware it was taking place and after the meeting Mr Baroni told him that Solotti was to purchase all of the stock, paying in five equal instalments. He recalled that Mr Baroni wrote the five payment instalments on the invoice, along with their due dates (I note the invoice produced by Mr Baroni has five handwritten sums and dates on it, the first four being $38,800 each and the fifth being

$39,125.93, following the words “end June”).

[36] Mr Mowlem then refers to the email from James Solotti sent at 2.59 pm on

27 February, which I have set out. In respect of Mr James Solotti’s statement that he had been very clear in his discussions with John Mowlem that he did not want “this stock”, Mr Mowlem says:

I confirm that I never had any discussions with James or Peter Solotti in which they said to me they did not want to purchase any stock on the premises. To the contrary, my understanding was that they did wish to purchase it, with the exceptions I have referred to above (dated stock, basil pesto, tinned tuna and egg marsala).

[37] Mr Mowlem produces an email he received from James Solotti, on

25 February. In this email James says:

Also, as you already know we do not wish to buy any expired stock on takeover – just confirming. I am sure you have already discussed with Alfio so should be ok.

[38] On 27 February at 1533, just 34 minutes after James Solotti’s email⁴ was sent, John Mowlem sent him an email in reply, thus:

Hello James

The basil pesto, tuna, marsala have already been put aside and will not be part of your purchase. Payment for balance of stock has been agreed to be paid in five (5) instalments as agreed with Peter this morning.

Looking forward to finalising stock take with you tomorrow at 11.00 am

In response to that, James Solotti wrote:

Hi John

Hope no further surprises too! See you tomorrow @ 11 ... Regards

James Solotti.

[39] Mr Baroni accepts that he instructed Mr Mowlem and Mr James Solotti to prepare the material for invoice 22415 but says they were specifically instructed not to include any stock which had passed its expiry date. He says that both he and Peter Solotti knew the invoice had been prepared for stock agreed to by John Mowlem and James Solotti. He says that some time before 28 February he specifically asked James Solotti whether he was happy with the invoice and James told him that the invoice only recorded those items which Solotti wished to purchase. Thus he takes issue with Mr Solotti’s statement that the invoice listed all the stock which was still on the premises. He says that it does not.

[40] Mr Baroni also says that contrary to Peter Solotti’s view, he was not trying to pressure him to take all of the stock. He thought it was a mutually beneficial arrangement for both companies, the benefit to Solotti being that if Solotti did not buy the goods they would be sold to other outlets who would compete. His

_{reference to Solotti not being able to operate the shop on Monday morning was}

⁴ At [29].

because many of the stock items listed on the invoice were already on the shelves, and if Solotti had not bought that stock, it could not sell it.

[41] So far as Mr Solotti’s view on the age of the stock is concerned, Mr Baroni disagrees, saying that only items approved by James Solotti and John Mowlem were included, and that dated stock was excluded.

[42] Turning to the meeting on 27 February, Mr Baroni says:

I reject Peter Solotti’s account of the meeting. We did agree in that meeting that Solotti Foods would buy all of the Stock which is listed on the invoice dated 21 February 2014. The meeting ended peacefully, and I certainly did not storm angrily out of the room, slamming the door behind me, as he alleges.

[43] The next relevant point with which Mr Baroni takes issue is Mr Solotti’s interpretation of James Solotti’s email of 2.59 pm on 27 February,⁵ an email he says he did not receive until he read Mr Solotti’s affidavit, as it was sent to an email address that he does not use. In relation to James Solotti saying that Solotti is not in the business of buying dated stock, basil pesto, tinned tuna or cream marsala, he says that none of these items were included in the invoice. He says the reference to

making it “very very clear” to John Mowlem that “we do not want this stock” is a reference to the items just referred to, which were not in any event included in the invoice.

[44] Mr Baroni suggests that James Solotti sent the email as a result of a discussion he had with James Solotti after his meeting with Peter Solotti. In that meeting Mr Baroni had offered to sell to Solotti the dated pesto, tuna and cream marsala at a very reduced price, failing which it would be given to the Salvation Army. He says the email is a rejection of that suggestion.

[45] James Solotti has not sworn an affidavit.

[46] Mr Baroni then goes on to give an explanation for why the stock on invoice

_{22464 does not correspond with Peter Solotti’s list of stock his company wished to}

⁵ At [29].

buy, sent on 26 February. He says that on 28 February, after the instalment agreement had been reached on 27 February, he, Peter and James held a further meeting to discuss further the payment arrangement. The latter two asked if there could be a different arrangement by which specific stock items were invoiced initially with payment to be half in March and half in April, and the balance in similar proportions later. Mr Baroni produces another version of the invoice of 21

February marked “yes” and “no” next to stock items, those marked “yes” being

items Mr Solotti said he wanted at the meeting. These were invoiced on 20 March.

[47] Mr Baroni then takes issue with Mr Solotti’s evidence in relation to the purchase of alcohol, and produces invoices by which Solotti has sold alcohol to three restaurants. He also takes issue with Mr Solotti’s evidence that a stock-take of the stock left in the premises was not taken, saying this was the document produced by James Solotti and John Mowlem (which was issued as invoice 22415), although he agrees that there is a small quantity of additional dated stock which Solotti did not wish to buy, and which was left at the premises.

[48] Mr Baroni says that Solotti has sold some of the stock because they had bought it all. If not, Solotti has sold stock which, at the time of sale, it did not own.

[49] Mr Baroni then produces an email he sent to Solotti on 30 June 2014 referring to unpaid invoices, one of which is invoice 22464 dated 20 March, which he describes as “part stock purchase”. He says this description has never been challenged.

[50] After the initial affidavit exchange process, Solotti filed another affidavit from Peter Solotti, and Baroni filed a response from Mr Baroni (both with leave and by consent). Both affidavits relate only to the issues raised in the fourth cause of action so I defer reference to them until later in this judgment.

Discussion of the evidence

[51] For Baroni to succeed on its claim, whether by way of summary judgment or at trial, it must establish that it concluded an oral agreement, or a partly oral and partly written agreement with Solotti to buy the entire stock which is described in the

document headed “Invoice” and “Quote” (22415). As I have noted, on this application for summary judgment, Baroni must establish that position to such a degree of likelihood that the Court is left without any real doubt or uncertainty. The onus rests on Baroni at all times.

[52] Mr Baroni and Mr Solotti agree on virtually nothing. Each takes issue with the other on almost every aspect of the evidence. More diametrically differing recollections of the same events are difficult to imagine. Baroni can only succeed on this application if it has established that Solotti’s version of events so lacks credibility that the Court can safely reach a point where it has no real doubt or uncertainty about the correctness of Baroni’s version of events. The Court cannot resolve material conflicts of evidence or assess the credibility of deponents on affidavit evidence unless it is inherently lacking in credibility, and this is the position that Baroni attempts to establish in this case.

[53] It does so by reference to the following factors. First, despite being adamant that if the stock were not purchased by Solotti it would be removed from the premises, Baroni in fact left the stock behind. Mr Ryan says it is inherently unlikely that this would occur given Baroni’s firm stance.

[54] Secondly, Solotti has sold some of the stock, and has made some payments to

Baroni.

[55] Thirdly, the first two of the partial payments made for stock add up to the first of the instalments which Mr Baroni says were agreed in a payment arrangement for the stock referred to in invoice 22464, which Baroni maintains was an invoice for just part of the stock which had been bought, not all of it.

[56] Fourthly, no reason was given by Solotti at the time for not paying the rest of the invoice. To the contrary, in an email on 1 April, Solotti refers to its bank having agreed to fund its stock purchases. This was on or about the date that Baroni maintains is the date for the first payment under the instalment agreement, and the two payments which total the first instalment were made within days of that email.

[57] Fifthly, Mr Mowlam recorded during the afternoon of the alleged oral agreement that agreement had been reached. This statement is in an email to James Solotti with which James Solotti did not specifically take issue (admissibility of this email is challenged by Mr Jones, but given the conclusion I have reached in this case, it is not necessary to decide this point).

[58] On the other hand, however, there are a number of factors which support the position taken by Solotti. First, there are emails in evidence in which both Peter and James Solotti are adamant that Solotti was not buying all the stock.

[59] Secondly, the document on which Baroni relies for this claim as listing all the stock which was to be sold (invoice 22415) is marked not only “Invoice”, but also “Quote”. Whilst this was prepared from a stock-take undertaken by John Mowlam and James Solotti, and bears the former’s signature as having been checked at the time it was prepared (before 28 February), it was not an invoice issued pursuant to the oral contract on which Baroni relies which was made, according to Mr Baroni, on the morning of the 28 February.

[60] After that document was produced, Solotti provided a list of the stock that it wanted, and later received from Baroni an invoice for part only of this list of stock, this last invoice forming the basis, it seems, of the first two part-payments which have been made.

[61] Thirdly, although the first two part-payments do add up to the first instalment which Baroni says was agreed, the next two payments bear no resemblance to the second instalment which Baroni maintains was to be paid. This could be seen as reflecting Solotti’s view that it was paying from time to time for stock that it sold, which was part of the stock left behind in the warehouse.

[62] I find that while the evidence is consistent with Solotti having agreed to buy some stock from Baroni, I am far from persuaded to the requisite standard that there was an oral agreement to buy all the stock listed on “Invoice/Quote” 22415. I accept the inherent unlikelihood of Baroni having left its stock in the warehouse when it moved out, but this point, even when taken in conjunction with all the other factors

which Baroni says point in the direction of an oral agreement having been reached as alleged, leaves the evidence well short of establishing Baroni’s position. I have no difficulty in concluding that Solotti has an arguable defence to the claim.

[63] Mr Ryan submits that if I reach this point, nonetheless, the Court could safely enter summary judgment for the balance of tax invoice 22464 referred to above at [25], because Solotti has paid part of that invoice, and in particular by two payments, the whole of the first stated instalment exactly.

[64] Whilst proceeding in that way would accord with Baroni’s position that this was an interim invoice payable in any event, it would not accord with Solotti’s position that, although it has sold some of the stock and paid for some of the stock, it did not at any point reach any agreement to buy any specific part of it. In my view, to proceed as suggested would be to pick up on one aspect of the plaintiff’s claim, when on any objective assessment of the evidence as a whole, the contractual position between the parties, if any, is manifestly unclear.

[65] The application for summary judgment on the first cause of action is dismissed.

Fourth cause of action: claim for cost of order 1808

[66] In the fourth cause of action Baroni seeks to recover the purchase price of goods it says were ordered by Solotti under order 1808. The goods were shipped to New Zealand after the order was placed, and arrived in June. Solotti has not paid any part of the purchase price of $99,270.75 including GST. The invoice produced in evidence is dated 15 June 2014, and lists 11 products, quantities, rates, prices and a total for the sum claimed. It also states:

Ship to:

PK Wholesale Supplies Ltd T/A Solotti Foods

26 Hillview Road Phillipstown Christchurch 8011.

[67] Although this invoice refers to order 1808, no written order with that number is in evidence.

[68] The second document relied on by Baroni as evidencing the contract of sale is an email dated 14 February 2014 to Peter and James Solotti setting out confirmed landed prices for cheese, and stating, “Terms as discussed 7 days after receipt of container.”

[69] The email then continues, “Pls confirm with Purchase Order for these items and the Motta coffee this am to enable this container, which will have products from several suppliers to be finalized today.”

[70] On 4 September 2014 the solicitors acting for Solotti wrote to the solicitors for Baroni on the issues raised in this proceeding, and in respect of order 1808 stated:

My client does not dispute that the sum of $99,270.75 is owing in respect of order 1808. My client proposes that it pays one third of the amount owing at the same time the olives are paid for, as is referred to above, followed by one third when the container has been emptied and the balance within 30 days of that time.

[71] Solotti accepts that it placed order 1808 and that Baroni’s invoice correctly records the goods ordered. Its initial position was that the goods had not been delivered and Solotti had not had the opportunity to inspect them to make sure that they conformed with the order. It said that it would pay for the goods once they had been delivered and Solotti had had an opportunity to inspect them, subject to its right to reject any goods that did not conform with the contract.

[72] Baroni’s initial response to this was that the payment terms agreed were for payment to be made seven days from date of invoice,⁶ but in Mr Baroni’s affidavit in

⁶ Statement of claim para 20.2, verified by Mr Baroni in his first affidavit.

reply he says that payment was to be seven days from receipt by Baroni of the container containing the order which it says is recorded in the email of 14 February.

[73] When the goods arrived in June they were placed in storage and remained there for some months with Solotti refusing to pay until it had inspected the goods and Baroni refusing to allow inspection until payment was made.

[74] Before this case could be heard by the Court, there was a material development. On 29 January 2015, the solicitors for Solotti wrote to the solicitors for Baroni asking for an opportunity to examine the goods to ascertain whether they were in conformity with the contract, and the goods were made available by Baroni for inspection at a coolstore in Christchurch. They were inspected by Solotti on

3 February. According to Mr Solotti, he found that all the cheeses were too old to sell at normal retail price. Some of the cheeses had passed their use-by dates and all the other cheeses had use-by dates in April 2015. This meant that Solotti would not be able to sell any of it at normal retail prices and would have to heavily discount this product. Mr Solotti says that normally he would expect cheeses of this type to have use-by dates two or three years out from delivery, though this varies depending on the type of cheese. As a result he formed the view that the cheese was not of merchantable quality and rejected all the goods in the contract by written notice on

4 February.

[75] As a result, it is now Solotti’s position that Baroni has repudiated the contract by delivering unmerchantable goods, the contract has been rescinded, and Solotti is not obliged to pay the contract price.

[76] Solotti has filed and served an amended notice of opposition to this aspect of the application for summary judgment claiming a defence on the basis that the contract has been rescinded as the goods are not of merchantable quality.

[77] In his additional affidavit, responding to this updating evidence from Mr Solotti, Mr Baroni takes issue with Mr Solotti’s contentions in relation to the meaning of the use by dates on the products, and the issue of whether the goods are of merchantable quality.

Discussion

[78] In the statement of claim, Baroni simply pleads the order, a due date for payment (being seven days after invoice) and lack of payment.

[79] The case as presented in argument, however, is more complex because of the developments which I have outlined.

[80] Section 50 of the Sale of Goods Act 1908 provides:

50 Action for price

(1) Where, under a contract of sale, the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for

the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods.

(2) Where, under a contract of sale, the price is payable on a day certain irrespective of delivery, and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in the goods has not passed, and the goods have not been appropriated to the contract.

[81] Mr Ryan’s argument is based on three propositions. First, in terms of s 50(2), the price in this case was payable “on a day certain, irrespective of delivery”, and Solotti wrongly neglected or refused to pay the purchase price of the goods. This gives Baroni the right to bring this action for the price, under s 50(2), even if the property in the goods has not passed.

[82] Secondly, Mr Ryan says the property in the goods has passed to the defendant. For this proposition he relies on s 20 of the Sale of Goods Act, and r 5 within it. These provide:

20 Rules for ascertaining intention

Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer:

Rule 1 Where there is an unconditional contract for the sale of specific goods, in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, is postponed.

Rule 2 Where there is a contract for the sale of specific goods, and the seller is bound to do something to the goods for the

purpose of putting them into a deliverable state, the property does not pass until such thing is done, and the buyer has notice thereof.

Rule 3 Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done, and the buyer has notice thereof.

Rule 4 Where goods are delivered to the buyer on approval, or on sale or return or other similar terms, the property therein passes to the buyer –

(a) when he signifies his approval or acceptance to the seller, or does any other act adopting the transaction:

(b) if he does not signify his approval or acceptance to the seller, but retains the goods without giving notice of rejection then, if a time has been fixed for the return of the goods, on the expiration of such time, and if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.

Rule 5 (1) Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made.

(2) Where, in pursuance of the contract, the seller delivers the goods to the buyer, or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.

[83] Mr Ryan says there has been unconditional appropriation of the goods to the contract, with the assent of Solotti. The property in the goods passed to Solotti prior to the inspection and purported rescission of the contract.

[84] Mr Ryan’s third proposition, which follows from the second, is based on s 22 of the Sale of Goods Act 1908 which provides that when the property in goods is transferred to a buyer, the goods are at the buyer’s risk whether delivery has been

made or not. Therefore, once the goods were appropriated to the contract they were

at Solotti’s risk and it has not, therefore, validly rescinded the contract.

[85] For the first proposition, it is necessary to determine whether it is established

that the price of the goods was payable “on a day certain, irrespective of delivery”.

[86] Both counsel referred to cases and to texts in support of differing positions on the meaning of this phrase. It is not necessary to canvas this, because the evidence for Baroni fails to satisfactorily establish the contractual date for payment.

[87] As I have said, the two documents before the Court on which the plaintiff relies to establish the contract are the quoted prices for cheese, given on 14 February, before the goods were ordered, and the invoice for the goods issued on 15 June after they arrived. The former stipulates that payment is required “7 days after receipt of container”. It does not specify whether that is receipt of the container of goods by Baroni, or by Solotti, or where receipt is to take place.

[88] In his first affidavit Mr Baroni does not specifically refer to this, though he confirms the truth of the statement of claim in which Baroni pleads that a term of order 1808 was that the amount owing was due to be paid within seven days of invoice. In his first affidavit in reply, after referring specifically to the payment term in the quote of 14 February, Mr Baroni says that “... the matter that was discussed with Peter Solotti, as referred to in the email, is that payment would be due seven days after the container arrived in Lyttelton”. Mr Solotti does not specifically give evidence on this point in his second affidavit.

[89] Mr Baroni’s contention does not readily fit with Baroni’s verified pleading nor the invoice generated by the company on 15 June which specifically records an obligation to deliver the goods to Solotti’s premises in Hillview Road, Christchurch. An inference able to be drawn from this is that when Mr Baroni referred in the email of 14 February to payment being made seven days after receipt of the container, this was a reference to receipt of the container by Solotti at Hillview Road, Christchurch, not at Lyttelton. In other words, the invoice issued by Baroni in June does not

accord with the arrangement Mr Baroni now says he made with Mr Solotti, and the pleading does not accord with either.

[90] Baroni’s evidence is therefore equivocal, and this has a direct consequence on the application of s 50(2). If payment was required seven days after receipt of the container of goods by Baroni, whether at Lyttelton or otherwise, it is not tied to delivery to Solotti, and s 50(2) would apply. If, on the other hand, payment was tied to receipt of the container by Solotti at its Hillview Road premises, payment is tied to delivery and s 50(2) would not apply. Mr Baroni’s evidence does not explain, or even refer to, the delivery obligation on the invoice. Neither side produced a written order 1808, if one exists.

[91] I am not satisfied, therefore, on the evidence before the Court, that the price for the goods was payable on a day certain irrespective of delivery. I find, therefore, that it is not established on this applicaton that s 50(2) applies.

[92] Turning to Mr Ryan’s second proposition, for s 50(1) to apply it is necessary first to establish that the property in the goods has passed to the buyer. Whilst he relies on r 5(1) set out in s 20, the application of that rule only applies “unless a different intention appears”.

[93] For r 5 to apply, as Baroni asserts, it is therefore necessary to exclude there having been a different intention. In their first affidavits, neither Mr Baroni nor Mr Solotti gives evidence expressly on this point, though Mr Solotti says that there is no dispute that Solotti is obliged to pay for the goods once it has been given possession and has had a reasonable opportunity to examine them to make sure they conform with the order. Once that has occurred, Solotti will pay for them subject to its right to reject any goods that do not conform with the contract. It seems to be a reasonable inference from this evidence that, in his view, the property in the goods would not pass until a reasonable opportunity of inspection was given.

[94] Neither Mr Solotti nor Mr Baroni, in their further affidavits, makes specific reference to the time at which either of them intended the property to pass. Mr Baroni annexes three letters written by Baroni’s solicitors in November and

December 2014 to the solicitors for Solotti, all of which concern inspection of the goods, and delivery of them. Baroni’s solicitors do not assert at any point that the property in the goods has passed.

[95] On 30 June 2014, Mr Baroni emailed Mr Solotti concerning four invoices which he considered to be overdue. The fourth relates to order 1808. Against this order he has written “(stock on hold as your account extremely overdue)”. Mr Jones submits that this shows that Mr Baroni did not think at that point that the stock was already the property of Solotti.

[96] On the evidence presented in this case, I find it impossible to decide one way or the other whether there was an intention that the property in the goods remain with Baroni, even if they were unconditionally appropriated to the contract in terms of r 5. Contrary to Baroni’s position on this issue now, it seems to have been its position up until Solotti purported to reject the goods, that Baroni still owned the goods and Solotti was not going to have them until it paid. That would be an intention contrary to r 5. On an application for summary judgment it is for Baroni to establish there was no contrary intention.

[97] Rule 5 in s 20 also applies only where goods are “unconditionally” appropriated to the contract. In Stein Forbes & Co v County Tailoring, Atkin J said: “I doubt whether goods are appropriated unconditionally if the seller does not mean the buyer to have them unless he pays for them”.⁷ His Honour went on to observe that the overriding question is whether the intention of the parties appears in the course of the making and fulfilment of the contract.

[98] Evidence of the intention of Baroni during the course of fulfilling the contract is comprised of the reference in the email of 30 June 2014 to which I have referred,⁸ as well as a letter written by Baroni’s solicitors to Solotti’s solicitors on 29 January

2015. After confirming that Baroni “stands ready, as it has since the order arrived, to make delivery”, the solicitors stated that “our client confirms that it will grant an

_{inspection of the goods at Avenue Cool Stores as requested in your letter”.}

⁷ _{Stein Forbes & Co v County Tailoring (1916) 86 LJKB 448-449.}

⁸ At [95].

[99] The reference to delivery is important, because as noted on the invoice, delivery was to be made by Baroni to Solotti. The email of 30 June 2014 and the statement by Baroni’s solicitors were therefore in the course of fulfilment of the contract. Both are evidence that Baroni’s position at that time was that the property in the goods had not passed.

[100] The question of when appropriation of goods to a contract is made unconditionally was discussed in Carlos Federspiel & Co S.A. v Charles Twigg & Co Ltd.⁹ Pearson J said the question to be examined is whether there is a further act,

an important and decisive act, to be done by the seller.¹⁰ If so, that would be prima

facie evidence that the property does not pass until the final act is done.

[101] Applying that approach to this case suggests that appropriation of the goods to the contract was not unconditional, because the goods have not been delivered to Solotti, which appears to have been a contractual obligation. Possession has in fact been retained throughout by Baroni and Mr Baroni’s position is succinctly summarised in his further affidavit:

I do not understand why Mr Solotti considers he is entitled to reject the order, given his previous acknowledgements that payment was due. Prior to this litigation, Mr Solotti had never suggested to me that he expected to receive the goods in advance of making payment. That idea is entirely inconsistent with the terms that we agreed.

[102] I therefore find that it is arguable that the parties had a different intention as to when the property in the goods was to pass, from that which is described in r 5 of s 20, and that even if that is not the case, it is arguable that the goods have not been unconditionally appropriated to the contract. As a consequence, Baroni has not established to the standard required for entry of judgment on a summary basis that it may bring an action for the price of the goods under s 50(1).

[103] Mr Ryan’s fourth proposition is founded on s 22, which provides that prima facie, once property passes to a buyer, the risk in the goods passes also, whether or

_{not delivery has been made.}¹¹ _{Without it being established on this application that}

⁹ _{Carlos Federspiel & Co S.A. v Charles Twigg & Co Ltd (1957) 1 Lloyds Rep 240.}

¹⁰ _{At 255.}

¹¹ Sale of Goods Act 1908, s 22.

the property in the goods has passed to Solotti before it inspected the goods and purported to reject them, this requires no further consideration.

[104] I have not overlooked the acknowledgement given by Solotti’s solicitors on

4 September 2014.¹² It is not clear whether this statement is premised on liability to pay arising under s 50(1) or s 50(2). Either way it is inconsistent with the stance taken by Solotti once it inspected the goods, and on this application. It is doubtless a statement on which Baroni may place reliance, but given the range of issues requiring resolution at trial, its relevance and the weight to be accorded to it, are better left for consideration in that forum.

[105] It follows that Baroni’s application for summary judgment on the fourth

cause of action fails.

Outcome

(a) The application for summary judgment on the first cause of action and on the fourth cause of action is dismissed.

(b) On the second cause of action only the sum of $23 remains unpaid and I did not understand counsel to be seeking judgment for that sum. By any standard of reference, it is de minimis. If I am wrong in that conclusion, I leave open to the plaintiff the option for 10 working days to apply for judgment in that sum on the second cause of action.

(c) On the second cause of action, Baroni is entitled to interest. The issue between Baroni and Solotti on this point is derived from an email sent by Mr Baroni on 12 August 2014 making an open offer to Solotti in relation to payment terms for the items covered by the second cause of action, and other invoices. Examination of that offer makes it clear that it was a global offer; whilst Solotti sought to take advantage of the offer for payment to be made later for the plant which is the subject of the second cause of action, it did not comply with the balance of the offer.

_{Accordingly there was no agreement on this point. I find, therefore,}

¹² At [70].

that Baroni is entitled to interest for late payment on the second cause of action. If counsel are unable to agree quantum, it can be referred to me within 10 working days.

[106] Costs on all causes of action are, for the present, reserved. Counsel will be conscious of the general rule laid down in NZI Bank Ltd v Philpott.¹³ However, costs have not been the subject of any submissions from counsel. I therefore invite memoranda within 10 working days if costs cannot be agreed. Counsel are to note

_{that memoranda must not exceed three pages in length.}

J G Matthews

Associate Judge

Solicitors:

White Fox & Jones, Christchurch. Bishopdale Law, Christchurch.

¹³ NZI Bank Ltd v Philpott [1990] 2 NZLR 403.