Case: Kemp Ltd v Tolland (trading as James Tolland &amp; Co) [1956] 2 Lloyd's Rep 681
Outcome: considered
Being a contract for the sale of goods, each order filled was subject to the provisions of the Sale of Goods Act . As I earlier noted, it is agreed in light of my sale finding that property in the cherries passed in respect of each consignment when the goods were appropriated to the contract and this occurred on delivery: see Sale of Goods Act , s 18 rule 5 ; Gamer's Motor Centre (Newcastle) at 255; Carlos Federspiel &amp; Co SA . The individual orders equally were subject to the provisions of s 14 of the Act as to implied conditions as to quality and fitness. Though it has not been the subject of contest by TVO, I am prepared to assume without deciding that, with the subject matter of the contract being perishables and it being a known purpose of the individual orders that the cherries were intended to travel to, variously, Singapore and Hong Kong for resale, it was an implied condition of each order filled that the cherries were, at the time of sale, in such a condition that they would still be fit for human consumption at the end of their shipment unless "that condition is unnaturally changed" after delivery to the first buyer, ie Farmlink: Sale of Goods Act , s 14(a) ; Kemp Ltd v Tolland (trading as James Tolland &amp; Co) [1956] 2 Lloyd's Rep 681 at 684-685; Benjamin's Sale of Goods at [11-067], but see also [11-060] and [11-062] as it is contended by TVO that Farmlink had an opportunity to inspect prior to shipment. I will refer to this later in these reasons: see [235]. The corollary of this condition was that Farmlink bore responsibility for unnatural changes in the cherries' condition occurring after delivery to it and until delivery to the overseas buyers: Kemp at 684-685. 195 I would add, though it does not strictly arise given my amendment ruling, that I have great reservations about whether what we know about (a) past purchase discounts passed on; (b) the explanations for, and contexts of, them (we know nothing of the causes of the alleged defects: cf Kemp ); (c) the fact that the only catastrophic discounts (in the 2001/2002 season) gave rise to insurance claims which ameliorated the loss; and (d) the usually small to moderate amounts for discounts in past years revealed in the material before me, would be sufficient to justify inferring a term committing Mr Hannaford to accept a quality discount passed on to him, assuming such a term could be formulated intelligibly. 196 I should make this additional comment about prior dealings. It is clear that Mr Hannaford appears to have accepted as of course some level of price discounts during the preceding years of dealing with Farmlink. It is unsurprising that he did so given the perishable nature of cherries and the known factors that could produce defects even in well run orchards and packing sheds which he clearly considered TVO to be. To repeat what he frankly conceded: I mean, there is always some things that happen during the season. There are quite often some issues, some problems. Maybe it is our fault. Maybe some cherries snuck through the system and so there are, from time to time there are some issues, either fair or unfair, that can result in some discounts, yes. 197 Parties to a sales contract are, as a matter of party autonomy, quite entitled to agree a regime of some form which would permit a buyer unilaterally to discount the price paid for the goods purchased because of some quality defect in them. As I earlier noted, the CISG contains such a regime: see also Sale of Goods Act (1979) (UK), s 48C(1)(a) and Benjamin's Sale of Goods (at [19-203]). Benjamin's Sale of Goods (at [12-129]) notes that this "special remedy of reduction of the price" is one which may lead to a monetary award different from what an award of damages would produce. 212 No expert evidence was called in relation to these shipments. Ms Churchill, in passing the discounts on, appears simply to have assumed without inquiry that the alleged defects were caused by circumstances for which TVO was responsible. Given the view I take of the TVO-Farmlink contract, this was a matter for Farmlink to prove, not assume, if it was to secure a reduction in price: see Kemp . In any event, the evidence of the complaints made by Mr Koh does not establish the truth of what he alleged, let alone justify the discounts applied. I say this while acknowledging that, if the Farmlink-Freshmart contracts were subject to the provisions of the CISG, Mr Koh's emails may have provided the trigger to unilateral price reductions in the Farmlink-Freshmart contract, under Art 50 of the Convention. 213 Purchase discounts, allegedly for quality reasons, were applied to ten of the eleven consignments to Hong Kong. As to five of these orders 4020, 4035, 4036, 3038 and 4039 there is no evidence at all of any quality problems with them. There were no written complaints from Mak; no emails; and no Marinasia reports. Absent such evidence, Farmlink could proffer no reasonable basis for its accepting a purchase reduction let alone for passing it on to TVO. In any event the circumstances surrounding at least order 4020 excite a real suspicion that this order, and possibly some orders other than the above (eg order 4023), were discounted in whole or in part for reasons unrelated to quality as such. Mak, as I earlier indicated, had been caught on a falling market. 214 Of the remaining five orders, order 4023 elicited a belated email quality complaint and photographs from Mak on 9 January 2004; the remaining orders 4017 (the sea shipment), 4028, 4037 and 4041 resulted initially in emails and photographs alleging quality issues and subsequently in each instance, a Marinasia Report. I would emphasise that all five of these orders were total losses. The price discount in each instance exceeded TVO's agreed price and resulted in a nil return to Farmlink as well. In what follows I am concerned only with these five orders. The discounts applied to the other five orders were clearly not appropriately substantiated. 220 Fourthly, there is evidence, relied upon by each side when to its own advantage, both of cherries included in the consignments in question being picked from the same sub-block at the same time as those accepted by Woolworths and Coles and of such cherries being rejected by Woolworths and Coles. It is understandable that TVO would rely upon the former of these particularly in light of Devlin J's comment in Kemp (at 687) on the relevance of sales of the same commodity to other purchasers without complaint, when searching for causes of defects. The most that I consider should be said generally of the comparison of export and domestic consignments is that the domestic picture for comparable quality cherries does not match that from Hong Kong. However, I place little reliance upon this in relation to the five orders under consideration for the reason that the evidence on which to base the comparability of cherries going to Woolworths and Coles and to the export market does not for the most part permit meaningful and in the case of order 4028 any comparison: see Schedule 3 to the Schedules Brief. 221 The only expert evidence called by the respondents was that of Dr Brown. The instructions Farmlink's solicitors gave to Dr Brown are not unimportant in understanding his report and the significance to be attributed to it. They include: On the basis of the assumptions we have asked you to accept, we seek your written report and opinion as to possible causes for the condition and quality of the cherries as observed, commented on and photographed by Freshmart in Singapore and Mr Thomas Kwan, Managing Director of Marinasia (Hong Kong) limited to whether their condition and quality could possibly have been caused during: 1. the growing and/or; 2. the picking and/or; 3. the packing and/or; 4. the storing of the cherries prior to their transport from the premises of the packer to the warehouses in Australia from where they were shipped or airfreighted overseas. If you are of the view that there are possible causes for the observations, comments and photos made and taken in Singapore and Hong Kong during the above stages, can you identify them and explain how they could possibly occur. We realise that some if not all of the observations and comments could have been due to causes during the export stage, but we do not seek your opinion on this issue, except to ask you to identify any observations or comments as to condition or quality that could not possibly have been caused during the export stage, and if so, for the reasons why not. 222 The applicant's counsel, again for understandable reasons, focussed upon the last paragraph quoted and has submitted that it constituted an admission made in circumstances such that it can be treated as having been made by Farmlink under s 87 of the Evidence Act . Before dealing with that submission, I would note that Dr Brown indicated in his report that he did "not cover possible causes of the fruit deterioration that may have occurred during transport, shipment and receival". The alleged admission 237 Even if, which is not the case, Farmlink was defending TVO's claim for its sale price on the basis of breach of a s 14 warranty or was suing for such a breach, I am satisfied that, on the material before me, it would be unsuccessful in either case. As I have already indicated, TVO's warranties of quality and fitness address the condition of its cherries at the time of sale to Farmlink, albeit that condition must be such that they would be fit for consumption on delivery overseas (unless their condition had been changed through causes for which TVO was not responsible: Kemp at 684-685). 238 The evidence clearly suggests potential causes contributing in whole or in part to the losses on the five orders in question for which, variously, TVO, Farmlink and Mak would, if made out, be separately responsible. And there is Farmlink's problem. The state of the evidence in relation to these five orders could not reasonably justify a finding that TVO was alone responsible for the total losses, bearing in mind that Farmlink would bear the onus of proof of that: Kemp at 685. This said, I am satisfied in relation to order 4041 in particular that a cause of defects in the cherries in that shipment could have been a matter for which TVO bore responsibility. 239 The Marinasia reports and the circumstances of three of the four surveys (orders 4028, 4037 and 4041) on which they were based are quite incapable of sustaining the burden of proving TVO's sole responsibility, the more so in relation to the three mentioned because of the unexplained delays in shipment or inspection and of the circumstances of the inspection (ie at Mak's store). There are, in consequence, real grounds for apprehending that the losses were caused or contributed to by causes for which either, or both, Farmlink and Mak were responsible, eg possible inappropriate storage during delays in air shipment (cf Dr Brown's evidence) and breaks in the cool chain through exposure to warm and humid conditions in Hong Kong. Equally, there are unresolved questions surrounding order 4017 (the sea shipment): eg was the vent setting altered? Farmlink packed the container, but did it break the cool chain after delivery to it? 240 The reports, moreover, while purporting to describe the condition and appearance of the cherries, do not address the causes thereof. While those causes ought to have been of some concern to Ms Churchill for the purposes of Farmlink's own contractual obligations to Mak, they should have been of vital concern to her if Farmlink was to ascribe sole responsibility for the losses to TVO under its contract with Farmlink. The evidence does not suggest that Ms Churchill questioned or probed the Marinasia reports or Mak in any way. TVO's responsibility for the loss seems to have been assumed and Mak's assertion of total losses accepted without question. And for the purposes of this proceeding, Farmlink has relied upon them. Mak was not called to give evidence.