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Hart Industries Pty Ltd v Riggcorp Pty Ltd[2020] QDC 214

Hart Industries Pty Ltd v Riggcorp Pty Ltd[2020] QDC 214

DISTRICT COURT OF QUEENSLAND

CITATION:

Hart Industries Pty Ltd v Riggcorp Pty Ltd and Anor [2020] QDC 214

PARTIES:

HART INDUSTRIES PTY LTD (ACN 060 151 680)

(plaintiff)

v

RIGGCORP PTY LTD (ACN 621 342 943)

(first defendant)

DAVID GEOFFREY HEMSLEY LONGRIGG

(second defendant)

PAUL EDWARD HART

(defendant by counterclaim)

FILE NO/S:

D37/18

DIVISION:

Civil

PROCEEDING:

Claim

DELIVERED ON:

18 September 2020

DELIVERED AT:

Maroochydore

HEARING DATES:

24 February 2020; 25 February 2020; 26 February 2020

JUDGE:

Cash QC DCJ

ORDERS:

Judgment for the plaintiff in the amount of $65,303.78 with interest in the amount of $9,378.16

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where contract for sale of business – where defendant purchaser was to purchase stock-in-trade ‘at the landed invoice cost or as mutually agreed’ by the parties – where independent stocktaker not appointed and the parties did not finish the stocktake – where a subsequent dispute arose as to what was agreed between the parties – whether defendant was aware prior to settlement that the actual value of the stock-in-trade was close to $150,000 rather than $75,000 – whether the parties agreed to settle on the understanding the stocktake would be completed later and the defendant would only take stock-in-trade to the value of $75,000

Australian Consumer Law

Aurizon Network Pty Ltd v Glencore Coal Queensland Pty Ltd & Ors [2019] QSC 163; (2019) 1 QR 392

Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99

Bunnings Group Ltd v Chep Australia Ltd (2011) 82 NSWLR 420

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544

Generation Corporation Woodside Energy Ltd (2014) 251 CLR 640

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165

COUNSEL:

S Gerber for the plaintiff/defendant by counterclaim
P Travis for the defendants

SOLICITORS:

Mooloolaba Law for the plaintiff/defendant by counterclaim
Axia Litigation Lawyers Pty Ltd for the defendants

Introduction

  1. [1]
    The plaintiff, Hart Industries Pty Ltd, owned and operated a business known as ‘Maroochydore Guns and Ammo’. The business was situated on Aerodrome Road in Maroochydore and was concerned with the sale of firearms, ammunition and related items to the general public. Paul Hart was a director of Hart Industries along with his wife, Sally-Anne Hart. In 2017 Hart Industries contracted to sell the business to the first defendant, Riggcorp Pty Ltd. The second defendant, David Longrigg, as director of Riggcorp, guaranteed Riggcorp’s obligations under the contract. The contract of sale required Riggcorp to take over and purchase the stock-in-trade of the business ‘at the landed invoice cost or as mutually agreed’ by the parties. Riggcorp paid a deposit in September 2017. The contract settled on Monday 18 December 2017 and Riggcorp paid the balance of the purchase price together with the sum of $75,000 for stock-in-trade.
  1. [2]
    Hart Industries claimed that the actual value of stock-in-trade held by the business at settlement was close to $150,000 and Riggcorp, having paid only $75,000, must pay for the balance (adjusted to reflect some stock returned to Hart Industries). As discussed below, the contract made provision for the parties to mutually agree the value of the stock-in-trade. On the weekend immediately preceding settlement, Paul Hart, Sally-Anne Hart and Mr Longrigg commenced, but did not complete, a stocktake at the business. Hart Industries claimed that on the morning of the day of settlement, the parties verbally agreed that settlement would proceed despite the stocktake being incomplete. They said that Riggcorp agreed to pay at settlement $75,000 for the stock-in-trade with the option to purchase or return stock in excess of that value once the stock take was completed. After settlement Riggcorp returned stock valued at about $15,000. Taking into account the $75,000 paid at settlement, and a further credit of $881, Hart Industries sues Riggcorp for payment for the ‘excess’ stock worth $57,715.78. Further, Hart Industries claimed that Riggcorp was obliged by the contract to pay $7,588 relating to some guns that had been specifically obtained for customers.
  1. [3]
    Riggcorp denied there was any such agreement. Mr Longrigg said that immediately before settlement it was agreed that $75,000 would be paid for the entire stock-in-trade, whatever its actual value. Mr Longrigg accepted that he guaranteed Riggcorp’s obligations under the contract and that if Riggcorp was liable, his liability as guarantor would follow. Initially Riggcorp and Mr Longrigg counterclaimed against Hart Industries and Paul Hart, alleging unjust enrichment and misrepresentation pursuant to the Australian Consumer Law. At the commencement of the trial the defendants applied for, and were granted, leave for the counterclaim to be discontinued. The issue of costs of the counterclaim was reserved.
  1. [4]
    Hart Industries claimed $65,303.78 as, in effect, money owed by Riggcorp under the contract. In its statement of claim, Hart Industries also sought damages in detinue and conversion, or an order for delivery up of the excess stock-in-trade. While Hart Industries did not abandon this claim, it was not pursued with vigour.[1] Presumably that was because if Hart Industries succeeded on the contract claim it would be compensated for the loss of the excess stock-in-trade. An order for delivery up of the stock would not be practical given the nature of the goods.[2] Hart Industries did not plead or prove any damages said to arise from the detention of the stock[3] or that the stock had appreciated in value.
  1. [5]
    The real issue at the heart of the trial was what, if any, agreement was reached by the parties as to the purchase of the stock-in-trade. Before considering the evidence relating to this issue it is helpful to set out relevant parts of the contract.

The contract

  1. [6]
    The parties entered into the contract on 13 September 2017. It was a standard form Real Estate Institute of Queensland Ltd contract for the sale of a business. The essence of the contract was that Hart Industries agreed to sell, and Riggcorp agreed to buy, the business ‘in accordance with the Items Schedule and the Standard Conditions of Sale’. Mr Longrigg entered his name as guarantor pursuant to clause 35 of the standard conditions. Relevantly, clause 35 provided that the guarantor:

…unconditionally …:

  1. (a)
    guarantees the Buyer’s Obligations; and
  1. (b)
    indemnifies the Seller against any loss or liability the Seller incurs arising from or connected with the Buyer’s obligations.
  1. [7]
    Stock-in-trade was defined in clause 1 and governed by clause 4. Some relevant parts of the contract are set out below.

1  Interpretation

1.1 In this contract:

 “Stock-in-trade” means:

  1. all goods owned or agreed to be bought by the Seller which are to be sold to third parties (whether by wholesale or by retail) in the course of conducting the Business …

3 The Business

3.1 The Business includes the goodwill, fixtures, fittings, furniture, chattels and the plant and equipment, industrial and intellectual property, work-in-progress (if any) and stock-in-trade…

4 Stock-in-trade and work in progress

4.1 (a) … in addition to the Purchase Price specified in item L, the Buyer must at the date of Completion take over and purchase from the Seller all the goods and saleable stock-in-trade being in and on the premises at the landed invoice cost or as mutually agreed between the Seller and the Buyer.

  1. Unless the Seller and the Buyer agree as to the value of the stock-in-trade for the purpose of Clause 4.1(a), a stocktake must be carried out by an independent stocktaker appointed by the Seller and the Buyer and in default of agreement in that regard appointed by the Seller’s Agent. The value and saleability or otherwise of such stock-in-trade must be determined by the stocktaker. The stocktaker’s fee in respect of the stocktake must be borne equally by the Seller and the Buyer.
  2. The stocktake must be carried out after the close of trade on the nominated date of stocktake referred to in Item M(a).
  3. The Buyer must pay for stock-in-trade to the maximum nominated figure contained in Item M(b) on the date of Completion. If the value of the stock-in-trade exceeds that amount the Buyer may elect to reject such items selected solely at the option of the Buyer as may be necessary to reduce the total value of the stock-in-trade to the maximum nominated figure.
  1. [8]
    The amount entered in Item M(b) was $75,000.
  1. [9]
    Clause 6 dealt with completion of the contract and provided:

6 Completion

6.1 The balance of the Purchase Price set out in Item L(c) together with the sum to be paid for stock-in-trade and work-in-progress determined according to Clauses 4.1 and 4.2 must be paid in cash or by Bank Cheque or such other means as agreed to by the parties on the date of Completion to the Seller’s Solicitor named in Item D or as directed by the Seller in exchange for:

 

  1. any other documentation necessary to vest in the Buyer unencumbered title to the Business and the Business Assets (and the stock-in-trade, if applicable)…
  1. [10]
    Clause 7 required Hart Industries to give possession of the business and ‘Business Assets’ to Riggcorp upon payment:

7 Possession

7.1 On the date of Completion (provided always that the Buyer has paid all monies which are payable on or prior to that date in terms of Clauses 5 and 6) the Seller must give and the Buyer must take possession of the Business and the Business Assets.

  1. [11]
    Clause 39 made the contract the entire agreement between the parties and required any amendment or variation to be in writing:
  1. Entire Agreement

39.1 This Contract contains the entire agreement between the parties with respect to its subject matter and supersedes all prior negotiations, understandings and agreements, whether oral or written.

39.2 This contract shall not be modified, amended or supplemented except by an instrument in writing duly executed by the parties (any Guarantor exempted).

  1. [12]
    The parties agreed to special conditions to the contract as set out in an attachment. These provided for Hart Industries to give training to Riggcorp, a restraint on Hart Industries competing with Riggcorp, and a special condition dealing with existing debtors and creditors. The latter special condition provided:

5. DEBTORS AND CREDITORS

  1. (1)
    In addition to Standard Term 16[4] of the Contract, the parties acknowledge and agree that any sales recorded, but not completed by the Date of Completion, will be apportioned as follows:
  1. (i)
    Any firearms or ammunition ordered for a customer, and held in stock in the Business, will be credited to the Seller.
  1. (ii)
    Any firearms or ammunition ordered for a customer, but not currently held in stock in the Business, will be credited to the Buyer.
  1. (iii)
    Any fees received by the Seller for the storage of firearms by the Date of Completion will remain the property of the Seller. However, any firearms storage fee accrued prior to the Date of Completion, but that remain unpaid, will become the property of the Buyer and the Buyer may recover these as the Buyer see fit.

The pleadings

  1. [13]
    Hart Industries claimed:[5]
  1. On the morning of 18 December 2017, it was verbally agreed between Mr Hart (on behalf of the plaintiff) and the second defendant (on behalf of the first defendant), during a meeting at the Premises, that:
  1. (a)
    settlement of the Contract would take place that afternoon (18 December 2017) despite the fact that a full stock take had not been completed and that the plaintiff’s stock-in-trade to be selected and purchased by the first defendant had not been finalised;
  1. (b)
    at settlement, the first defendant would pay the sum of $75,000.00 in respect of the plaintiff’s stock-in-trade; and
  1. (c)
    a stock take, in respect of the plaintiff’s new and used firearms, would be completed after settlement of the Contract; and
  1. (d)
    the first defendant would purchase any additional stock it wished to keep in excess of the value of $75,000.00 and return to the plaintiff any stock it did not wish to purchase.
  1. [14]
    In its Statement of Claim, Hart Industries pleaded that this agreement resulted in a variation of the contract or, alternatively, produced a collateral agreement. At trial Hart Industries moved away from the suggestion that the alleged agreement effected a variation to the contract. Presumably this was to accommodate any difficulties caused by Clause 39 and its requirement for any modification or amendment of the contract to be in writing. In the end, Hart Industries relied upon the alleged agreement as reflecting what was ‘mutually agreed between the Seller and the Buyer’ for Riggcorp to take over and purchase the stock-in-trade as contemplated by Clause 4.1(a). In this sense it was said to be a collateral agreement in terms consistent with the main contract and to give effect to the agreement between the parties.
  1. [15]
    In response the defendants assert that:

at Completion, [Riggcorp] paid $75,000 to [Hart Industries] for all stock-in-trade; and … at Completion, all title in the stock-in-trade vested in [Riggcorp] free of any encumbrance or other restriction…[6]

  1. [16]
    That is, on the proper construction of the contract, Hart Industries agreed to sell all of the stock-in-trade, whatever its actual value, for $75,000 and, by paying this amount at settlement, Riggcorp acquired all the stock-in-trade then in the business.[7]
  1. [17]
    Hart Industries also claimed $7,588 for firearms it said had been ordered on behalf of customers, but for which Hart Industries had not yet been paid. It was pleaded that special condition 5(1)(i) obliged Riggcorp to pay Hart Industries for these firearms (after which Riggcorp could collect payment from the customers before supplying the firearms). Riggcorp pleaded that at settlement it:

paid and credited [Hart Industries] in relation to all firearms held in stock in the Business as at the Date of Completion, regardless of whether the firearms were ordered for a customer by [Hart Industries] before Completion.[8]

The evidence

  1. [18]
    Hart Industries called two witnesses to testify, Paul Hart and his wife Sally-Anne Hart. David Longrigg and his wife Vanda Longrigg gave evidence for the defendants. Their evidence is summarised below.

Paul Hart

  1. [19]
    Mr Hart’s role was to manage the business and also complete sales and book work, while Mrs Hart helped with sales and support.[9] Mr Hart said that, over approximately five years of running the business, the stock level varied from time to time.[10] There were both heavy and slow trading periods, for example Christmas and May/June respectively. There were four periods where trading would ‘peak and trough’ and the stock would be adjusted accordingly.[11] Around the Christmas/New Year period, certain stock was not available due to warehouse closures.[12] The business would generally have extra stock around Christmas time, with a maximum level from 18 December, and less stock in the May/June period.[13]
  1. [20]
    Mr Hart negotiated the sale of the business. A stocktake was to occur the weekend before settlement. Mr Hart testified that on many occasions in the lead up to the stocktake weekend, he had discussions with Mr Longrigg as to how it was to occur.[14] Mr Hart expected that he, Mrs Hart and Mr and Mrs Longrigg would all help carry out the stocktake.[15] He was to pre-prepare stocktake sheets with details of all the stock,[16] and either Mr or Mrs Longrigg would accompany Mrs Hart around the shop confirm the details recorded on the stocktake sheets accurately reflected the stock-in-trade.[17] Once adjusted, Mr Hart planned to use the stocktake sheets to calculate the value of the stock-in-trade.[18] Mr Hart did not know the ‘landed invoice cost’ of the goods in store.[19] Instead he valued each item of stock using online dealership portals listing wholesale prices.[20] Mr Hart testified that Mr Longrigg agreed to this method of valuation.[21]
  1. [21]
    According to Mr Hart the stocktake took place over Saturday 16 and Sunday 17 December 2017. The process described by Mr Hart was that he had prepared stocktake sheets for each category of stock. He showed Mr Longrigg how to use the computer to check wholesale prices on the dealer portal[22] and then Mr Longrigg went around the store with Mrs Hart and the stocktake sheets to check what items were actually in the store. For example, in relation to ammunition, Mr Longrigg took the stocktake sheets[23] and went around the shop with Mrs Hart to check the ammunition actually in the store. According to Mr Hart, Mr Longrigg ticked or otherwise marked the stocktake sheet to indicate the stock that was actually present.[24] The documents marked by Mr Longrigg were returned to Mr Hart who adjusted them according to the actual count to reach a final stock value.[25]
  1. [22]
    The same process was undertaken in relation to other categories of stock.[26] Mr Hart adjusted these sheets to reflect the true count and used the resulting values to calculate the total value of the stock-in-trade. Updated versions of the stocktakes sheets after adjustment were also created by Mr Hart and form part of exhibit 5.
  1. [23]
    Mr Hart said that the stocktake was ‘essentially completed’ on the evening of 17 December 2017 at which time he prepared a document summarising the stocktake.[27] The stocktake was not actually complete because the new[28] and used[29] firearms in the store had not yet been counted.[30] Nevertheless, Mr Hart was confident of the value of those firearms as he knew exactly what firearms were in store because of the strict requirements for storing and handling such items.[31] Mr Hart explained that he set a value for the new firearms based upon wholesale prices from an online dealer portal.[32] Some items were given a zero value as they were to be gifted to Mr Longrigg. These were largely pink-coloured items as Mr Longrigg had indicated he did not want to buy them.[33] The used firearms sheet contained estimated retail values for these items but Mr Hart reduced this to $700 because he ‘didn’t really want any dispute over secondhand firearms’.[34] Mr Hart said that he and Mr Longrigg checked the new and used firearms after settlement but by 24 December 2017.[35]
  1. [24]
    The total value of the stock-in-trade on 17 December 2017 was assessed by Mr Hart to be $148,994.59. The summary document recorded Mr Hart’s calculation that, having regard to the $75,000 to be paid for stock-in-trade at settlement, there was ‘excess stock’ worth $73,994.59.[36] Mr Hart said he provided the document to Mr Longrigg before settlement.[37]
  1. [25]
    On the morning of settlement Mr Hart had a discussion with Mr Longrigg about the extent of excess stock-in-trade. Mr Hart testified that Mr Longrigg told him:

Look, Paul, don’t worry about the extra stock… I’ve got $60,000 coming to me from my knee operations. I’ve had $30,000 per knee… Between that money and some of the product I don’t want, like clothing and pink items, I’m sure we can work it all out.[38]

  1. [26]
    Mr Hart said he did not insist on the difference being paid at settlement. He ‘took [Mr Longrigg] at his word’ that they would work it out. Mr Longrigg said ‘don’t worry Paul… I won’t stook you.’[39]
  1. [27]
    After settlement Mr Longrigg identified items of stock that he did not want to purchase. These items were returned to Mr Hart at the shooting range. Mr Hart prepared amended sheets to reflect the consequential adjustment in value of the stock-in-trade.[40] The reduced total value on 1 January 2018 was $143,424.87.[41] Up to this time, the stocktake sheets were kept in hard copy form in the shop, spread out flat so each could be easily picked up, adjusted, and used to prepare a new sheet if necessary.[42] Further adjustments were made on 3 January 2018 in relation to firearms on order for five customers. The firearms were on backorder and the customers had paid deposits totalling $881. Hart Industries did not have to pay for the firearms until they were delivered. As such, the deposits were to be credited to Riggcorp.[43] The further adjusted value of the excess stock-in-trade was recorded[44] and came to $67,543.87. The revised summary document of 3 January 2018 was emailed to Mr Longrigg that afternoon.[45]
  1. [28]
    On 4 January 2018 Mr Hart said he attended the business and found a whole lot of ammunition had been moved into the kitchenette area. Mr Longrigg told Mr Hart that he could have the ammunition to reduce the stock levels. Mr Hart moved the ammunition to the shooting range and adjusted the excess stock-in-trade value to $63,562.47.[46] More stock was returned to Mr Hart on 6 January 2018 with a consequent reduction in the excess stock-in-trade to $57,715.78.[47] The updated summary documents were emailed to Mr Longrigg on 4 and 6 January respectively.[48]
  1. [29]
    Mr Hart testified there were firearms which special condition 5 applied.[49] These were the 15 firearms listed in paragraph 12(b) of the Statement of Claim, being firearms that were in stock and partly or fully paid for by Hart Industries on behalf of customers.[50] These firearms were not included in the stocktake.[51] The evidence was less than clear but it appeared that Mr Hart was asserting the amounts set out in paragraph 12(b) of the Statement of Claim were amounts he had expended to order in the firearms and was entitled to recover.[52] Some of these firearms had been assigned a value of ‘$0’ because the customer had paid in full.[53] Mr Hart gave some evidence about a firearm ordered and paid for in full, but allegedly not given over to the customer by Mr Longrigg. Mr Hart asserted that he compensated the customer.[54] In any event, Hart Industries did not claim to be entitled to any payment in relation to this firearm.[55]
  1. [30]
    Mr Hart provided training to Mr Longrigg as contemplated by the contract. On the afternoon of 16 January 2018 Mr Hart left the shop to complete paperwork at the shooting range. When he returned to the shop, the Longriggs would not unlock the door to allow Mr Hart to enter. It was usual practice for the doors to remain locked but be unlocked by whoever was inside. Mr Longrigg said to Mr Hart:

Haven’t you read your emails?... Go back and check your emails. There’ll be something there.[56]

  1. [31]
    Mr Hart then became aware of a letter sent by email from lawyers acting on behalf of the defendants.[57]
  1. [32]
    In cross-examination, Mr Hart was taken to emails he exchanged with Mr Longrigg before the contract was signed.[58] In late July 2017 Mr Longrigg wrote to Mr Hart that, ideally, he wanted the amount of stock-in-trade at settlement to be around $50,000. In response Mr Hart wrote, ‘Agreed… we will do our best to get the stock level as low as possible, but still properly be able to operate on a day to day basis’.[59] Mr Hart agreed that he did not run up the stock approaching Christmas, while making sure there was sufficient stock for the Christmas trading period. Mr Hart did not email Mr Longrigg advising him of this.[60]
  1. [33]
    In an email, Mr Hart wrote:[61]

We will attempt to reduce stockholdings as low as possible while maintaining a workable level of product. We estimate stock valuation will be in the order of 50 to 100,000 at the time of settlement. We will ordinarily operate with a stock level of around 100,000.

  1. [34]
    Mr Hart accepted that on 11 August 2017 Mr Longrigg emailed, asking for a, ‘more accurate idea of what we are going to be required to pay on settlement.’ The email continued:

We will be using every dollar of our savings & money from the sale of our house along with borrowings to fund this & a variance of $50k is just too much for us to forecast with our funding arrangements. When we first spoke, I recall you mentioned the usual stock holding was around $75k & that you would try to reduce this if possible to around $50k, so we have based out financing requirement on around $50k.[62]

  1. [35]
    Mr Hart replied that ‘stock will be valued at cost prices based on each wholesaler’s price listing,’ and that Mr Longrigg could view and cross-check the stock at any time. Mr Hart explained that the ‘stock level is always growing because we have found that if you have product, you can sell it.’[63] Mr Hart denied that he told Mr Longrigg stock was usually around $75,000 but could be lowered to $50,000. He maintained that stock value was always between $75,000 and $125,000.[64] Mr Hart recalled that on 27 September 2017 he suggested to Mr Longrigg that he take out a loan for $75,000 to $100,000 for the stock.[65] He accepted that on 3 December 2017 he wrote an email to Mr Longrigg saying that a stock level of $75,000 at settlement, ‘looks likely today’.[66] Mr Hart understood that Mr Longrigg only wanted to pay $75,000 in total for stock.[67] As late as 4 December 2017 Mr Hart was aiming for the value of the stock-in-trade at settlement to be $50,000 to $75,000, which was a substantial reduction of the stock levels in mid-2017 of $100,000 to $125,000.[68]
  1. [36]
    Mr Hart testified that he became concerned Mr Longrigg would not obtain his gun dealer’s licence in time for settlement, creating a prospect that settlement would be deferred. In response Mr Hart allowed stock to continue to come into the store.[69] He agreed that a settlement statement was prepared by Hart Industries’ solicitor and sent to Mr Longrigg. The statement contained a figure of $75,000 for stock-in-trade. Mr Hart did not accept the figure of $75,000 reflected the agreed value of the stock-in-trade.[70] He said:

I understood the $75,000 figure to be the maximum amount of money that Mr and Mrs Longrigg wanted to pay for the stock in our shop regardless of where the stocktake figure ended up at the end of the weekend and I understood they had already advised me they were – had already advised me that they knew what stock they wanted to hand back to me as needed. If needed.[71]

  1. [37]
    Asked about events concerning the stocktake, Mr Hart said Mr Longrigg arrived at the store mid-morning on Saturday 16 December 2017. Mr Hart had not prepared all of the stocktake sheets so told Mr Longrigg he would call when they were. Mr Longrigg left but according to Mr Hart returned in the afternoon of 16 December and participated in stocktake.[72] On the evening of 16 December, Mr Longrigg sent a text message to Mr Hart asking what time they were starting on Sunday 17 December. Mr Hart responded at 8:15am on 17 December, saying they were behind schedule with the stocktake spreadsheets.[73] Mr Longrigg responded via text message indicating he was already at the business premises.[74] Mr Hart agreed that during the stocktake he was at the computer while Mr Longrigg and Mrs Hart were checking the sheets against the physical stock on the shelves.[75] He denied the suggestion that Mr Longrigg did not check any wholesale prices on the dealer portal as he was too busy checking the physical stock.[76] Mr Hart had showed Mr Longrigg the portals prior to the stocktake, and observed Mr Longrigg use the portals during the stocktake.[77] He said that he was not physically with Mr Longrigg the whole time, but saw Mr Longrigg writing ticks in the quantity columns as he walked around the shop with Mrs Hart.[78] Mr Hart could not comment on whether ticks in the quantity column were the only marks Mr Longrigg made.[79] It was suggested to Mr Hart that at the end of the stocktake on Sunday, Mr Longrigg asked, ‘What’s the total? How much do we need to pay you tomorrow?’ Mr Hart did not recall this conversation.[80]
  1. [38]
    The next day was settlement day. That morning there were discussion about the stock-in-trade, but Mr Hart did not agree to be paid $75,000 for all the stock in the store.[81] Mr Hart was asked:

[W]as the reality that you were running out of time to calculate more precisely the number under the spreadsheets because … the settlement was imminent. So you offered a number that you believed to be about right and Mr Longrigg agreed to that?

  1. [39]
    Mr Hart rejected this proposition.[82] He also denied that he created the stocktake summary bearing the date 18 December 2017 sometime well after the settlement had occurred.[83] It was suggested to Mr Hart that by the time of settlement he had not given Mr or Mrs Longrigg any documents. Mr Hart appeared to accept this was literally correct but maintained that all the sheets were available for Mr Longrigg to inspect in the store.[84] Mr Hart said that before settlement, ‘everybody had full knowledge of the stocktake and value was much higher than expected, and there was a lot of discussion around that fact.’[85]
  1. [40]
    Mr Hart did not accept that a few days after settlement, on Thursday 21 December 2017, he told Mr Longrigg, ‘we are a little over stock’ and when asked gave the figure of $35,000.[86] He said on the day of settlement there was a discussion about value of the stock-in-trade and the possibility of the Harts providing vendor finance for the excess. The amount of $35,000 may have been mentioned in this context.[87] It was suggested to Mr Hart that on both 22 and 23 December 2017 he asked Mr Longrigg how he was going to pay for the excess stock. It was also put to Mr Hart that the first time he told Mr Longrigg the value of the excess stock was about $75,000 was on Saturday 23 December and when Mr Longrigg said he did not have the money to pay, Mr Hart threatened to walk around the store and ‘rip’ out stock. Mr Hart denied these suggestions.[88] Finally, Mr Hart denied that between settlement and 4 January 2018 he took stock, including ammunition and optical sights, from the store, moving them to his premises at the gun range.[89]

Sally-Anne Hart

  1. [41]
    Mrs Hart described herself as the sales assistant whose job was to admit and deal with customers. She was not involved in the negotiations for the sale of the business.[90] Mrs Hart recalled the stocktake commenced around 12:30 pm on the Saturday.[91] Her role in the stocktake was to take Mr Longrigg around the store with the stocktake sheets and clipboards to count the stock.[92] She was not involved in checking ammunition,[93] but did check other items with Mr Longrigg. Any ticks on the stocktake sheets were put there by Mr Longrigg.[94] Once a sheet was finished Mrs Hart would have a break and Mr Longrigg took the sheet to Mr Hart who would go through it with Mr Longrigg, using the dealer portal to check the prices of products.[95] She did not keep a constant watch, rather, ‘[i]t was just now and then that I would look over and see it, but I heard Paul [Hart] explaining it to him and going through each product.’[96] On Sunday they worked on the stocktake from around 8:30 am to 6:00 pm. Mrs Hart left at the end of the stocktake and was not involved in any discussions with Mr Longrigg.[97]
  1. [42]
    The next day was settlement day. Mrs Hart heard some conversation between Mr Hart and Mr Longrigg. She said:

I remember Paul telling David that there was – that the stock level was at the 148 – that it was – not 148, but it was over a lot more than the 75,000. And Paul actually wanted to stall – well, Paul and I wanted to stall the settlement and David didn’t want any part of it … Because of – the stocktake hadn’t been completed.[98]

  1. [43]
    As to the decision to proceed to settlement the following exchange occurred:

And so was it decided to proceed with the stocktake – sorry – with the settlement? Was it - - -?---It was, because David didn’t want us to stall it. He said to us that – he said to Paul that Paul wouldn’t let him trade with Paul’s dealer’s licence, so he wasn’t going to let Paul stall the settlement. And he said they needed to proceed with settlement because they needed to start making money.[99]

  1. [44]
    In cross-examination Ms Hart denied that she had written ticks in the ‘Total value’ column of the ‘Ammo’ stock sheet. She denied Mr Longrigg specifically said he would not place ticks in that column until he had verified the value for himself.[100] She agreed that by the Monday of settlement the stock take had not been completed and she and Mr Hart wanted to hold off settlement for ‘that and other reasons’. They were not in a position to put a final value on the stock-in-trade – hence her clarification that a figure of $148,000 was not mentioned on that Monday.[101] Ms Hart was present for some subsequent discussion between Mr Longrigg and Mr Hart about the value of the stock-in-trade but did not recall Mr Hart saying it was a little over but nothing to worry about.[102]

David Longrigg

  1. [45]
    Mr Longrigg’s evidence focussed on the events of the stock take and settlement. He said he had flown from Adelaide the previous Wednesday and he was occupied with getting a Queensland firearms licence and moving into a home on the Sunshine Coast. On Saturday 16 December 2017 he went to the store an hour or two before it closed for trading at midday. He did so to observe the business while it was operating. He expected that when the store closed at midday the stocktake would commence. It did not, and Mr Hart said he was not yet ready.[103] Mr Longrigg attended to other matters having been told by Mr Hart the stock sheets were not ready. By 8.30 pm that evening it was apparent nothing would occur on the Saturday.[104]
  1. [46]
    The next morning Mr Longrigg went to the store. As he arrived he received a message from Mr Hart saying he was still not ready. Mr Longrigg did other things while checking in with Mr Hart. Just before 2.00 pm Mr Hart called and said he was ready to start the stocktake. Mr Longrigg’s wife dropped him off at the store and he met with Mr and Mrs Hart who were at the store.[105] He was told by Mr Hart how the stock take would occur:[106]

So then he said, “Look, how we’re going to do things is I’ve still got a few things to do on the computer. You don’t need both of us to walk you around the – the stock. So here’s a clipboard and a pen. Everything’s been itemised and go and check that what is on the paper is in stock”. So Sally led me around to do that.

  1. [47]
    Mrs Hart had the stock sheets and was marking them. Mr Longrigg took over as he was concerned the process was moving too quickly. He consciously placed ticks in a different column to Mrs Hart’s marks as he did not want to appear to be agreeing to a total value rather than just stock numbers.[107] Mr Longrigg said he only counted stock – he expected Mr Hart to show him the dealer portal to ascertain the value of the stock but there was not enough time to do that. The stocktake came to an end around 6.00 pm or 6.30 pm when the Harts left for a dinner engagement.[108] After finishing the count, Mr Longrigg asked Mr Hart if there was a final figure. Mr Hart said he still had finish that and should have it done by the next day.[109] The next day was settlement day. Mr Longrigg went to the store at about 9.00 am and asked Mr Hart for the final figure. Mr Hart said he still had not finished the calculation. Mr Longrigg said they had to settle that day and needed the information.[110]
  1. [48]
    Mr Longrigg gave evidence of the following exchange:[111]

And I said, “Well, are we at that figure of 75 that we spoke of so many times and you said you were going to be at that figure or less. Is that where it’s ended up? I mean, I’m assuming that it has?”, and he said, “Look, I don’t know but just pay the 75 grand on[112] settlement. Just pay that 75”, and I then went off to do what I had to do to get my ducks lined up.

  1. [49]
    Mr Longrigg was not concerned that store contained substantially less than $75,000 worth of stock. He relied upon earlier discussions about reducing the level of stock to $75,000 or thereabouts. Mr Longrigg was prepared to pay even if the actual value was less than $75,000 in order to settle that day.[113] He was certain that Mr Hart did not tell him on the day of settlement that the actual value of the stock in the store was about $148,000. Mr Hart did not give him the document containing that total.[114]
  1. [50]
    Over the next couple of days Mr Longrigg attended to urgent matters such as transferring possession of firearms. On Thursday Mr Longrigg went to the store in the morning. Mr Hart was already there and said to Mr Longrigg there was a ‘small problem’ as they were ‘over stock by a bit, but nothing to worry about.’ When Mr Longrigg asked by how much Mr Hart told him about $35,000. Mr Longrigg was shocked and indicated he would have to speak to his wife.[115] The next day they were all in the store together and discussed the matter. Mr Longrigg testified that Mr Hart offered to provide ‘vendor finance’ so they could pay the $35,000 and proposed a repayment plan. Mr and Mrs Longrigg were hesitant and would not commit as they were not satisfied they could pay according to the arrangement proposed by Mr Hart. They were also concerned as to how it came to be that the stock was undervalued by $35,000. When they declined to make a commitment Mr Hart said, ‘We’re not off to … a very good start,’ and stormed off.[116]
  1. [51]
    Mr Hart became unhappy and over the next few days raised the issue again and tried to have Mr Longrigg agree to pay the money. Mr Longrigg was still concerned that he did not know how Mr Hart calculated there was excess stock worth $35,000 and had not received all the stock sheets to review.[117] Their relationship continued to sour until Mr Hart said if the Longriggs did not pay the amount said to be owed, Mr Hart would remove stock from the stock.[118] About two days after the amount of $35,000 was first raised, Mr Hart said to Mr Longrigg, ‘Actually, it’s $75,000 over and vendor financing is off the table.’[119]
  1. [52]
    Mr Longrigg related that he received a call from a customer about a particular rifle, a Tikka T3. Hart Industries alleged this rifle was on order for a customer and had been paid for in full. It was alleged that Mr Longrigg did not supply this rifle to the customer and in the end Mr Hart refunded the customer and was thereby left out of pocket. Mr Longrigg testified that the customer contacted him and asked for a refund of the money the customer had paid. I had difficulty following Mr Longrigg’s evidence on this topic, but the end position seemed to be that Mr Longrigg was not satisfied the customer had paid so he did not supply the gun or a refund.[120] In the days following settlement Mr Longrigg returned to Mr Hart the items he had agreed not to purchase. This consisted of pink items and some clothing.[121] One morning Mr Longrigg came into the store and found Mr Hart with a pile of ammunition and rifle scopes that Mr Hart said he was taking across the gun range.[122] The first Mr Longrigg knew of a claim that the actual total value of the stock was about $148,000 was when Mr Hart’s then-solicitors made the stock sheets available.[123]
  1. [53]
    In cross-examination Mr Longrigg accepted that he had been told before agreeing to buy the business that the value of new firearms in the shop were about $30,000 and that the shop usually traded with about $100,000 worth of stock.[124] In December 2017 Mr Longrigg received an email from Mr Hart stating that the shop has held $100,000 to $125,000 worth of stock six months previously.[125] He did not call off the deal because he had been assured by Mr Hart the stock value would be reduced to $75,000, or close to it.[126] At one point Mr Hart offered to allow Mr Longrigg to call the deal off as he was concerned he was ‘stretched’. Mr Longrigg went ahead because he thought the value of the stock would be $75,000 and had allocated funds on that basis.[127] Mr Longrigg did not give thought to the possibility that the actual value of the stock-in-trade would exceed $75,000.[128]
  1. [54]
    Mr Longrigg denied that on the morning of settlement he was shown the stocktake summary document recording the total value of stock as $148,994.59.[129] He was taken to a stock sheet relating to ammunition and accepted he had placed ticks in the column headed ‘Quantity’. On the last page of the document was a total value of ammunition of $33,400.22.[130] Mr Longrigg denied that he knew the value of ammunition in the store was $33,400.22. He said that he did not pay a lot of attention to the final figures on the stock sheets and was not sure the figures for quantity were correct. Defending his lack of attention to the figure for total value Mr Longrigg said:

That wasn’t my task there. My task was to count the numbers of stock. There was a secondary activity was going to be to verify the costs then verify the totals. I was doing one task at a time.[131]

  1. [55]
    Mr Longrigg accepted that, apart from new and used firearms, there were stocktake sheets that he had checked for each other category of stock. He denied accessing dealer portals to check the value of individual stock items.[132] He did not accept that he was aware of the totals for each category of stock prior to settlement, having not paid attention to that during the stocktake or had the opportunity to add up the various categories.[133] Mr Longrigg denied that he was aware on the morning of the settlement the value of stock-in-trade was significantly more than $75,000 and that the Harts did not want to proceed with settlement because a value had not been agreed.[134] He went on to deny that there was an agreement to pay for or return stock over the value of $75,000. While Mr Longrigg agreed that some items were returned to Mr Hart this was pursuant to an early indication that he did not want to carry certain lines of stock.[135] He did not accept that in early January 2018 there were further attempts to reduce the value of the stock.[136] On 16 January 2018 Mr Longrigg stopped Mr Hart’s access to the store.
  1. [56]
    Mrs Vanda Longrigg testified that on Saturday 16 December 2017, just a couple of days after moving to Queensland, her husband went to the gun shop expecting to carry out the stocktake. He left mid-morning and returned about 1:30 pm.[137] The next day Mrs Longrigg dropped her husband at the shop in the afternoon. She collected him about 7:00 pm that night.[138] Later that week, on Thursday or Friday, Mrs Longrigg went to the store with Mr Longrigg. A meeting had been arranged between the Longriggs and the Harts to discuss the indication that the value of the stock in the store was $35,000 over the amount of $75,000. The Longriggs’ children were in the store as well because it was school holidays.[139]
  1. [57]
    They discussed what Mr Hart identified as $35,000 in excess stock. He wanted to know how the Longriggs were going to pay for this stock. Mrs Longrigg wanted to know when Mr Hart discovered the total value of the stock exceeded $75,000 and how it happened. Mr Hart did not want to answer such questions. He offered to provide vendor finance and a repayment plan over the next 12 months. Mrs Longrigg told Mr Hart they would not do that but then had to attend to the children. She heard Mr Hart ask Mr Longrigg about the money he expected to receive in refunds relating to a knee operation. Mrs Longrigg called out that they planned to use that money as a deposit for a house.[140] In response Mr Hart said, ‘Well we’re not off to a very good start. And if you don’t pay the money, I will just walk around the shop and take out $35,000 worth of stock.’[141]
  1. [58]
    Mr Longrigg disputed Mr Hart’s purported entitlement to do this. Mrs Longrigg asked for a copy of the stock sheets that had been ticked by Mr Longrigg. Mr Hart said he would provide them but did not. Mr Hart ended the discussion abruptly saying they would have to continue the conversation at a later time. The Longriggs left the store.[142] Mrs Longrigg became aware in the following days that the value of excess stock was said to have increased to around $75,000. On 1 January 2018 she went to the store with Mr Longrigg and they identified items of clothing and pink items they had earlier stated they did not wish to sell so as to return them to Mr Hart.[143] She saw Mr Hart who appeared to be annoyed but she did not speak to him or hear Mr Hart say anything of substance.[144]
  1. [59]
    In cross-examination Mrs Hart confirmed that she signed the contract and was familiar with the terms of the agreement.[145] She did not have any conversation with Mr Hart on the day of settlement.[146]

Facts in dispute and findings

  1. [60]
    It is not necessary to resolve every matter in dispute between the parties. The critical fact in dispute concerns what was discussed and agreed immediately prior to settlement. Did the parties agree to settle on the understanding that the stocktake would be finished later and Riggcorp would only take stock-in-trade to the value of $75,000? The answer to this question is to be found in the evidence of the conduct of the parties before and after settlement and conclusions of fact to be drawn from this conduct.

Mr Longrigg must have known the stock-in-trade was worth more than $75,000

  1. [61]
    When the stocktake was conducted on the weekend prior to settlement, Mr Longrigg had an opportunity to peruse various stocktake sheets. These were divided into categories. Each set of sheets contained on the last page a provisional total. Some of these totals were substantial. For example the provisional total for ammunition was about $33,000. For primer, powder and projectiles the provisional total was more than $25,000. As well, Mr Longrigg agreed that he had been told that the value of new firearms in the shop was about $30,000. It must have been apparent to Mr Longrigg, at least by the end of the partial stocktake, that the likely value of the stock-in-trade exceeded the hoped for $75,000. I do not accept Mr Longrigg’s evidence that when he conducted the stocktake he did not notice the provisional totals. Given the concern he had repeatedly expressed over the stock level it is implausible that during the stocktake he would not have noticed these figures. I am satisfied that Mr Longrigg must have been aware that the value of the stock-in-trade exceeded $75,000.

Mr Longrigg was not specifically aware the stock-in-trade was worth $150,000

  1. [62]
    Mr Hart did not say there was any conversation concerning the total value of the stock on the evening of 17 December when the stocktake concluded or that the ‘totals’ sheet was given to Mr Longrigg that night. The evidence does not support a conclusion that Mr Longrigg knew at that time the total value was as much as was alleged by Hart Industries. Mr Hart testified that the next morning, before settlement, he gave Mr Longrigg the summary document setting out the total value at almost $149,000. I do not accept Mr Hart’s evidence on this point. There had been numerous exchanges leading up to settlement that made it clear Riggcorp wanted the stock level at settlement to be $75,000 or less. Hart Industries knew this and had said it would strive to keep the stock level as low as possible. As late as 4 December 2017, a fortnight before settlement, Mr Hart emailed Mr Longrigg and expressed an aim to reduce the stock to a level between $50,000 and $75,000. Up to nearly the point of settlement the parties had proceeded on the basis that the total value of the stock-in-trade would be around $75,000, or less. It is plain that Mr Longrigg was particularly concerned to keep the value of the stock-in-trade to $75,000 or less. A revelation shortly before settlement that the true value was close to $150,000 would be a significant, if not shocking, matter. I do not accept that when confronted by such information Mr Longrigg’s response would be to tell Mr Hart ‘don’t worry’ and offer to pay another $60,000.[147]
  1. [63]
    The evidence of Mrs Sally-Anne Hart does not support Mr Hart’s testimony that Mr Longrigg was given the summary document prior to settlement. In her evidence Mrs Hart first said that Mr Longrigg was told prior to settlement the total was $148,000. She quickly qualified this answer, saying the figure was not finalised at the time of stocktake but was known to be a lot more than $75,000.[148] She made no mention of Mr Longrigg being given the summary document at that time.
  1. [64]
    Having regard to all of the evidence I find that while at settlement Mr Longrigg must have known the total value of the stock-in-trade was more than $75,000, and perhaps significantly more, he was not told that it was almost $150,000 or shown the summary document.

Mr Longrigg knew he was not purchasing all the stock-in-trade for $75,000

  1. [65]
    I do not accept the testimony of Mr Longrigg that it was agreed he would pay $75,000 for all of the stock-in-trade. It is most unlikely Mr Hart would so agree when he knew the actual value of the stock was nearly double that amount. As well the conduct of Mr Longrigg after settlement is inconsistent with such a conclusion. In the days after settlement Mr Longrigg was told the stock figure was wrong. He did not raise the agreement he said had been reached. While he said he was shocked his concern was to find out why the figure was different. Even when Mr Hart said the value of excess stock was actually $75,000 Mr Longrigg did not raise the agreement. Instead he returned items of stock valued at about $15,000. Mr Longrigg said this was pursuant to an understanding he would not carry certain lines of stock. I do not accept that this is the whole explanation for the items that were returned. The items that were returned went well beyond those coloured pink or archery products. Ammunition worth about $7,200 was returned. I do not accept Mr Longrigg’s evidence that the ammunition was effectively stolen by Mr Hart. Once again, if there was an agreement that entitled Mr Longrigg to this ammunition it is to be expected he would have said something at the time.
  1. [66]
    I should briefly mention as well my impression of the evidence of Mr Longrigg. I did not find Mr Longrigg to be an impressive witness. As I have noted I do not accept his evidence that he did not notice the amounts contained on the stock sheets. At times I thought he was evasive or unresponsive.[149] I suspect there was an element of reconstruction affecting his testimony. Taking these matters into account, I do not accept Mr Longrigg’s evidence that there was an agreement to buy all of the stock for $75,000.

Doubts about Mr Hart’s account of the conversation

  1. [67]
    Having said that, I do not accept entirely what Mr Hart said as to the agreement. Mr Hart testified:

I had a discussion with Mr Longrigg on the morning of settlement day in particular, which was the 18th, before settlement had taken effect, and Mr Longrigg was aware of the excess stock level that morning, because the stock take – as I’ve said previously – essentially finished on the Sunday evening, or late at night. Mr Longrigg said – and can I said what he said?

Yes?---Yep. Mr Longrigg said to me – on the morning of the 18th, he said something – words to the effect, “Look, Paul, don’t worry about the extra stock.” He said, “I’ve got $60,000 coming to me from my knee operations. I’ve had $30,000 per knee.” He said, “Between that money and some of the product I don’t want, like clothing and pink items, I’m sure we can work it all out.”

And so was there any agreement or understanding as to what would occur at settlement? Were you insisting that he comply with his contractual obligation and pay you the difference of $73,000 at settlement?---No, I wasn’t insisting of that. I took him at his word, our conversation, when he said those things to me. The conversation went back and forward a little bit, like, “I’m sure we can work it out” and what have you and Mr Longrigg quoted me something. He said, “Don’t worry Paul.” He said, “I won’t stook you.”

  1. [68]
    As I have already noted, it is inherently unlikely that Mr Longrigg would respond to a revelation that real value of the stock was close to $150,000 with such equanimity. Given his concern about the amount to be paid for the stock-in-trade he would not have told Mr Hart not to worry and immediately offered to pay another $60,000. But it does not follow that I must reject Mr Hart’s evidence that there was an agreement to value the stock-in-trade after settlement. Both Mr and Mrs Longrigg testified that in the days after settlement Mr Hart said the actual value of the stock-in-trade exceeded $75,000.[150] A further revised total was mentioned later that week. That this was being discussed is consistent with Hart Industries case that the valuation of the stock continued after settlement.
  1. [69]
    On the evidence that I do accept I think it is more probable than not that Mr Hart and Mr Longrigg agreed prior to the settlement to determine the value of the stock-in-trade later and for Riggcorp to take only $75,000 worth of the stock.

Construction of the contract

  1. [70]
    A question then arises as to effect of an agreement of this kind in the context of the contract entered into by the parties. The construction of clause 4.1 is central. The relevant legal principles governing the construction of contracts are reasonably well settled.[151] The terms of the contract are to be construed objectively, by what a reasonable business person in the position of the parties would have understood them to mean, having regard to the relevant and admissible surrounding circumstances, and the object and purpose of the transaction.[152] The task is to ascertain the meaning of the words agreed by the parties to contain their contract in the context of the contract as a whole.[153] Construction of the terms of the contract should be approached in a manner that is practical and realistic.
  1. [71]
    Clause 4 is set out above. There is no doubt that it was engaged in the transactions between the parties. Clause 4 began with a requirement that Riggcorp take over and purchase the stock-in-trade of the business at the time of settlement. The amount to be paid by Riggcorp for the stock-in-trade had to be either the landed invoice cost or as mutually agreed between the parties. Clause 4.1(b) provided a mechanism for determining the landed invoice cost if it was not otherwise known. In such a case there was to be ‘a stocktake … carried out by an independent stocktaker’. Clause 4.1(d) allowed the parties to fix a maximum amount to be paid by the purchaser for the stock-in-trade, in this case $75,000. In the event the actual or agreed value of the stock-in-trade exceeded this amount the purchaser could choose what stock to return to reduce the value of the stock the maximum amount. Riggcorp appeared to accept this construction, submitting they had ‘an obligation to pay $75,000 so long as [Riggcorp] elects to reject items necessary to reduce the total value of all stock-in-trade to be given by the Seller at Completion to $75,000.’[154]
  1. [72]
    The contract did not expressly contemplate a situation such as the present where settlement occurred before there was a value assigned to the stock-in-trade. The parties did not provide in direct terms, in the written contract, what was to happen in that event. The question is whether, construed objectively, practically and as a whole, the contract allowed for an agreement of the kind I have found was reached. Hart Industries submitted that the agreement to determine the value of the stock after settlement was within the scope of clause 4.1(a). It represented a mutual agreement by the parties not as to the precise value of the stock-in-trade, but as to how it was to be determined after settlement. I accept that submission. The purpose if the transaction entered into by the parties was to sell the business and its stock-in-trade. At the time the parties agreed to go ahead with settlement they knew the final value of the stock-in-trade had not been determined. The phrase ‘or as mutually agreed’ in clause 4 would have conveyed to a reasonable business person in that position there was the capacity to agree either upon a figure or as to a method for calculation of the value.
  1. [73]
    Clause 39 of the contract presents a potential obstacle to Hart Industries’ case. On its face the clause prohibits modification, amendment or supplementation of the contract other than in writing. But in my view, what was agreed between the parties was already within the terms of the contract. To construe the contract otherwise would leave an entirely unsatisfactory gap in the agreement between the parties. It would create uncertainty as to the position of the parties and could easily lead to inequity. Clause 4.1(d) required Riggcorp to pay a maximum of $75,000 for the stock-in-trade but also to reject items to reduce the value of the stock-in-trade to the amount it paid. Absent some means to determine the value of the stock there would no way to work out what was to be rejected to reduce the value of the stock to $75,000. A situation could easily arise, as it has here, that Riggcorp ended up in possession of stock the value of which considerably exceeded the $75,000 it had paid.
  1. [74]
    Riggcorp presented no evidence challenging the valuation of the stock-in-trade relied upon by Hart Industries. I accept that the value of the stock-in-trade at settlement was $148,994.59. Riggcorp paid $75,000 and returned stock worth $15,397.81. A further $881 was credited to Riggcorp in relation to firearms on order for customers. Contrary to the requirements of the contract, Riggcorp retained, and did not pay for, stock valued at $57,715.78. They, and Mr Longrigg as guarantor, are liable to pay Hart Industries for this stock.
  1. [75]
    In these circumstances it is unnecessary to consider the claim in detinue.

The special condition and firearms obtained to satisfy customer orders

  1. [76]
    This leaves for consideration the claim of Hart Industries that it is entitled to $7,588 for firearms obtained by the business to satisfy customer orders. According to Mr Hart there were ten rifles that had been ordered for customers, paid for by Hart Industries and in relation to which money was owing by the customer at the time of settlement.[155] It is said that special condition 5(1)(i) meant that the value of these rifles was to be credited to Hart Industries.
  1. [77]
    The evidence in relation to this matter was scarce.[156] But it was not challenged in cross-examination. Instead the case for Riggcorp was that these firearms were part of the stock-in-trade and clause 4 of the contract was sufficient to entitle the first defendant to ownership of the firearms. I do not accept that proposition. Special condition 5 was not concerned with who became the owner of particular items in stock but rather with who was to benefit from the customer orders. Special condition 5(1)(i) was to ensure that Hart Industries did not lose money having paid for firearms on behalf of customers but for which the customer had not yet paid. It was equally to prevent Riggcorp gaining the financial benefit of the customer’s payment when Riggcorp had not paid for the firearm. Mr Hart, with reference to the pleading, testified that there were ten such firearms for which Hart Industries had paid $7,588. Special condition 5 requires Hart Industries to be compensated for this expenditure.

Conclusion and orders

  1. [78]
    Hart Industries has proven it is entitled to $57,715.78 as the value of the ‘excess’ stock. It has proven it is entitled to $7,588 by reason of special condition 5. There will be judgment for the plaintiff in the amount of $65,303.78 with interest in the amount of $9,378.16.
  1. [79]
    The parties have indicated a desire to be heard as to costs, including the costs of the counterclaim. Each party is to provide written submissions as to costs, not exceeding six pages, on or before 2 October 2020. If any party requests an oral hearing on the question of costs they should include that request in their submissions.

Footnotes

[1]T.3-21.43-46.

[2]T.3-20.17-24.

[3]Cf Bunnings Group Ltd v Chep Australia Ltd (2011) 82 NSWLR 420.

[4]Which also dealt with debtors and creditors.

[5]Statement of claim, paragraph 8.

[6]Defence, paragraph 14(a)(iii) and (iv). While this was pleaded specifically in response to the plaintiff’s claim concerning firearms ordered in for customers, it represents the position of the defendants in response to the whole claim.

[7]T.3-35.21-39.

[8]Defence, paragraph 12(b)(ii).

[9]T.1-22.17-18, 22-23.

[10]T.1-27.10-11.

[11]T.1-27.13-22.

[12]T.1-27.24-34.

[13]T.1-27.38-43, T1-28.1-3.

[14]T.1-30.19-26.

[15]T.1-33.36-8.

[16]T.1-33.38-9.

[17]T.1-33.45-7; T1-34.1-6.

[18]T.1-34.6-19.

[19]T.1-34.36-45.

[20]T.1-34.24-30.

[21]T.1-34.32-34. Hart Industries tendered an exchange of emails between Mr Hart and Mr Longrigg in the lead up to the stocktake (exhibit 4).

[22]T.1-53.7-13.

[23]Exhibit 5, pp. 123-127 of the ‘tender bundle’.

[24]T.1-45. 26-46; T.1-46.10-39.

[25]T.1-46.30-T.1-47.10.

[26]Copies of the stocktake sheets said by Mr Hart to have been marked by Mr Longrigg can be found in exhibit 5 as follows: ‘Projectiles, Primers, Powder’ at pp. 128-133, ‘Gun Safes in Shop’ at p. 134, ‘Gun Safes at Range’ at p. 137, ‘Re-loading’ at pp. 138-140, ‘Scopes’ at p. 144, ‘Cleaning Products’ at pp. 148-150, ‘Accessories’ at pp. 156-160, ‘Mags and Rings’ at pp. 164-166, ‘Garrett’ at pp. 168, ‘Clothing’ at pp. 171-172, ‘Archery’ at pp. 175-176, ‘Knives’ at pp. 179-180, and ‘Misc’ at p. 181.

[27]T.1-34.13-14, 25, 27-33. A copy of the document is the first page of exhibit 5, p. 120 of the ‘tender bundle’.

[28]Exhibit 5, p. 121 of the ‘tender bundle’.

[29]Exhibit 5, p. 122 of the ‘tender bundle’.

[30]T.1-36.27-33.

[31]Mr Hart said when they were later checked by Mr Longrigg there were no changes: T.1-65.9-17.

[32]T.1-44.7-14.

[33]T.1-44.16-31.

[34]T.1-45.10-21.

[35]T.1-65.14-18.

[36]T.1-36.43-47; T1-37.1-10.

[37]T.1-36.35.

[38]T.1-39.15-27.

[39]T.1-39.29-32, 34-5. The word ‘stook’ (or perhaps it was intended to be ‘shtoop’ or ‘shtup’) was not explained in the hearing, but in context must be understood as a colloquialism meaning to cheat or swindle.

[40]T.1-58-9.

[41]Exhibit 5, p. 182 of the ‘tender bundle’.

[42]T1-61.16-38.

[43]T.1-60.15-45.

[44]Exhibit 5, p. 195 of the ‘tender bundle’.

[45]T.1-61.1-21.

[46]T.1-61.40-1-62.18; Exhibit 5, p. 196 of the ‘tender bundle’.

[47]T.1-62.20-47; Exhibit 5, p. 197 of the ‘tender bundle’.

[48]T.1-63.1-15; Exhibit 5, pp. 212-215.

[49]T.1-66.29-31.

[50]T.1-66.33-44.

[51]T.1-66.46-7; T1-67.1-7.

[52]T.1-68.37-38.

[53]T.1-67.9-30.

[54]T.1-67.30-T.1-68.9.

[55]Item 13 of the table at paragraph 12(b) of the Statement of Claim.

[56]T.1-69.13-28.

[57]T.1-69.30-6.

[58]Whether or not these exchanges are relevant to the construction of the contract, a matter that is controversial (see Aurizon Network Pty Ltd v Glencore Coal Queensland Pty Ltd & Ors [2019] QSC 163; (2019) 1 QR 392), they are relevant to deciding if in fact Mr Longrigg agreed with Mr Hart to deal with the stock-in-trade after settlement as the plaintiff alleges.

[59]T.1-75.5-18; T1-78.3-9.

[60]T.1-78.11-27.

[61]T.1-83.22-6.

[62]T.1-84.34-T.1-86.6.

[63]T.1-85.11-29.

[64]T.1-86.28-43.

[65]T.1-87.9-20.

[66]T.1-88.1-19.

[67]T.1-88.40-44.

[68]T.2-2.40-T.2-3.18.

[69]T.2-54.18-29; T.2-5.17-26.

[70]T.2-4.38-T.2-6.27.

[71]T.2-7.1-7.

[72]T.2.17-36. There was a dispute, which is unnecessary to resolve, about whether Mr Longrigg participated in the stocktake on Saturday as well as Sunday.

[73]T.2-7.38-T.2-8.15.

[74]T.2-10.43-44.

[75]T.2-11.36-39.

[76]T.2-12.24-25.

[77]T.2-12.10-43.

[78]T.2-15.23-5.

[79]T.2-15.17-22.

[80]T.2-15.32-34.

[81]T.2-16.1-41.

[82]T.2-24.35-41.

[83]T.2-26.15-17.

[84]T.2-27.43-.T.2-28.8.

[85]T.2-28.10-15.

[86]T.2-31.13-30.

[87]T.2-31.34-47.

[88]T.2-32.4-29.

[89]T.2-32.45-T.2-33.1.

[90]T.2-35.1-10.

[91]T.2-37.24-45.

[92]T.2-35.15-19.

[93]T.2-35.35-40.

[94]T.2-36.29-30.

[95]T.2-36.32-37.

[96]T.2-37.7-9.

[97]T.2-38.4-11.

[98]T.2-38.35-40.

[99]T.2-38.42-46.

[100]T.2-40.29-41.

[101]T.2-41.33-T.2-42.12.

[102]T.2-43.5-16.

[103]T.2-49.6-45.

[104]T.2-50.10-19; T.2-50.33-39.

[105]T.2-51.1-37.

[106]T.2-52.9-13.

[107]T.2-52.13-23.

[108]T.2-53.4-19.

[109]T.2-54.18-28.

[110]T.2-54.43-45.

[111]T.2-54.45-T.2-55.3.

[112]The transcript records this as ‘of’ settlement, but the context and my recollection indicate the word used was ‘on’.

[113]T.2-55.5-25.

[114]T.2-55.29-31. The document is exhibit 5, p. 120 of the ‘tender bundle’.

[115]T.2-57.18-33.

[116] T. 2-58-T.2-59.2.

[117]T.2-59.15-26.

[118]T.2-60.1-8.

[119]T.2-60.19-21.

[120]T.2-60-62; T.2-65.14-33.

[121]T.2-66.1-18.

[122]T.2-66.21-35.

[123]T.2-60.14-17.

[124]T.2-69.13-40.

[125]T.2-70.11-34.

[126]T.2-71.1-3.

[127]T.2-73.40-47.

[128]T.2-75.45-T.2-76.5.

[129]T.2-76.12-15. The document is exhibit 5, p. 120 of the ‘tender bundle’.

[130]Exhibit 5, p. 127.

[131]T.2-77.33-40.

[132]T.2-78.1-20.

[133]T.2-79.1-13; T.2-79.39-46.

[134]T.2-80.10-25.

[135]T.2-82.34-43; T.2-86.13-18.

[136]T.2-88.27-T.2-89.13.

[137]T.2-103.4-6; T.2-104.12-21.

[138]T.2-105.23-36.

[139]T.2-106.4-18.

[140]T.2-106.20-T.2-107.5.

[141]T.2-107.6-8.

[142]T.2-107.12-20.

[143]T.2-107.

[144]T.2-108.1-14.

[145]T.2-109.34-42.

[146]T.2-110.40-45.

[147]Evidence of Mr Hart at T.1-39.23-27.

[148]T.2-38.35-40.

[149]T.2-81.19-21; T.2-89.14-17; T.2-71.21-27.

[150]T.2-57.18-33; T.2-106.20-25.

[151]There is no need in this case to consider the debate about the permissible use of extrinsic material in the construction of a contract: see generally Aurizon Network Pty Ltd v Glencore Coal Queensland Pty Ltd & Ors [2019] QSC 163; (2019) 1 QR 392 and Edelman J, ‘The Interpretation of Written Contracts’ in C Mitchell and S Watterson (eds), The World of Maritime and Commercial Law: Essays in Honour of Francis Rose (Oxford, Hart Publishing, 2020) 243.

[152]Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 461-462 [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116-117 [46]-[50], 131-132 [108] and 134 [119]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544, 551, [16]; Electricity Generation Corporation Woodside Energy Ltd (2014) 251 CLR 640, 656-657 [35].

[153]Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99, 109.

[154]Closing submissions of the defendants at paragraph [42].

[155]There were another five rifles in respect of which no money was owing: T.1-67.9-30.

[156]T.1-66.33-T.1-67.7.

Close

Editorial Notes

  • Published Case Name:

    Hart Industries Pty Ltd v Riggcorp Pty Ltd, David Geoffrey Hemsley Longrigg and Paul Edward Hart

  • Shortened Case Name:

    Hart Industries Pty Ltd v Riggcorp Pty Ltd

  • MNC:

    [2020] QDC 214

  • Court:

    QDC

  • Judge(s):

    Cash DCJ

  • Date:

    18 Sep 2020

Appeal Status

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