George Wills & Co Ltd v Davids Pty Ltd [1957] HCA 6; (1957) 98 CLR 77 (18 February 1957)

HIGH COURT OF AUSTRALIA

GEORGE WILLS & CO. LTD. v. DAVIDS PTY. LTD. [1957] HCA 6; (1957) 98 CLR 77

Sale of Goods - District Court

High Court of Australia
Dixon C.J.(1), McTiernan(1), Williams(1), Fullagar(1) and Taylor(1) JJ.

CATCHWORDS

Sale of Goods - Sale by description - Breach of warranty - Canned beetroot - Deterioration in storage - Merchantable quality - Implied condition.

District Court - Appeal - Questions of law - Notation by trial judge - District Courts Act 1912-1953, s. 144.

HEARING

Sydney, 1956, November 26-28;
Melbourne, 1957, February 18. 18:2:1957
APPEAL from the Supreme Court of New South Wales.

DECISION

February 18, 1957.
THE COURT delivered the following written judgment:-
In an action in the Metropolitan District Court the respondent, which appellant, judgment for damages for the breach of an implied condition that certain goods purchased by it from the appellant should be of merchantable quality. No other claim was made by the respondent and it secured judgment for the sum of 522 pounds. A subsequent appeal to the Supreme Court of New South Wales was dismissed (1956) SR (NSW) 237; 73 WN 368 and this appeal is brought by special leave from the order of dismissal. (at p85)

2. On the trial of the action there was no dispute that the goods in question were the subject of a sale between the parties and that the sale was subject to an implied condition that the contractual goods should be of merchantable quality. The substantial question was, as will appear, whether the goods were of merchantable quality. (at p86)

3. The goods supplied under the contract were some three hundred and sixty cases of canned beetroot. Each case contained thirty cans of beetroot and the labels on each can showed that the contents were the product of the Glen Ellen Cannery Co. and that the beetroot was "Pickled in Vinegar". The three hundred and sixty cases were purchased between the end of June 1951 and the beginning of September in the same year and the beetroot appears to have been the product of the most recent season. The purchase was made by the respondent in the expectation that the goods would be disposed of for sale by retail during the ensuing summer but, owing to a glut of canned vegetables in the grocery trade, the respondent, in November 1952, still held in store two hundred and twenty-one cases of the subject goods. During that month it was found that "hydrogen swells" had developed in many of the cans, some of them had "blown" and the contents were leaking. Moreover, bacteria had obtained access to some of the cans and in the same month they were condemned as unfit for human consumption by an officer of the Department of Public Health and, thereafter, they were destroyed. (at p86)

4. The Glen Ellen Cannery Co. had commenced to can beetroot in vinegar in 1949 and this practice continued during 1951 and 1952. In the early part of 1949 and previously to that year it had been the company's practice to can beetroot in brine and it seems clear from the evidence that when canned in this fashion the resultant product had much better keeping qualities. But it was not found as palatable or attractive if canned in brine. It is in effect a different product. Evidence was admitted to show that, in general, the life of other canned vegetables is a minimum of three years and the learned District Court judge appears to have been satisfied that this is so. He did not, however, find that beetroot canned in brine would last for such a period though it is clear enough that he considered that the life of such a product was much longer than beetroot pickled in vinegar. The "fair life" of the latter product he found to be approximately one year. It should be observed that at no stage did the appellant deny this fact; on the contrary it asserted that this was so and that its shorter life resulted from the circumstance that the addition of vinegar increased the already acid content of the pack with the result that the action of the acid on the interior of the container might well, after the expiration of twelve months, result in "hydrogen swells" and ultimately in the "blowing" of the container. (at p86)

5. Nevertheless his Honour found that there had been a breach of the implied condition. He was led to this conclusion by a comparison between the lasting qualities of beetroot pickled in vinegar and those of the "majority of other canned goods". After referring to the lasting qualities of other canned goods and the nature of the wholesale grocery trade he expressed the view that "In order to be merchantable, canned foodstuffs should . . . possess the following qualities". "They should", he said, "be of not unpleasing appearance; they should be palatable to the tongue, and not offensive in odour" and "in addition . . . they should, in order to be merchantable, possess a quality which is inherent in the very description of the goods, that is preserved canned foodstuffs. In other words they should possess lasting qualities far and away beyond that of the article in its natural state". Much the same view was entertained by the members of the Full Court of the Supreme Court who, after discussing the meaning of the expression "merchantable quality", said: "In light of these principles we are of opinion that it was open to his Honour to decide the issue before him as a question of fact. The canned beetroot was sold to a firm of wholesale grocers. The firm carried on its business in New South Wales. It was open to his Honour to find that it was a circumstance attending the sale that the only purpose of the transaction was to distribute throughout New South Wales the commodity by methods ordinarily associated with a wholesaler, and that such distribution was to be made over a period of time to retail grocers and thence through the housewife or restaurant keeper or other agency to the ultimate consumer. It was clearly not sold for immediate consumption by the respondent. It was consequently open to his Honour to decide as a question of fact that, as understood in the world of commerce, the canned beetroot was to have a reasonable life or prospect of preservation which was to be commensurate with its known ultimate destination. The period of preservation which is to be regarded as reasonable differs, no doubt, to some extent with the class of goods put up in tins. Doubtless some keep longer than others. But in the wholesale grocery trade, according to his Honour's findings, it is understood that canned beetroot possessed the characteristic of preservation similar to canned beetroot of earlier seasons or of any other canned goods, or canned vegetables at any rate, so that such food would be estimated to remain fit for consumption and in a state of freshness when in the normal course it should reach the consumer. This characteristic of preservation, according to his Honour's view, was not limited only to the season of canning or solely to the calendar year of purchase; in his view it was understood by merchants that if it were eventually retailed beyond that season or year it would still be edible" (1956) SR (NSW), at p 243; 73 WN (NSW), at p 372 . (at p88)

6. The conclusion of the members of the Full Court appears to have rested upon the view that in 1934 and 1936 "The House of Lords and the Judicial Committee expanded the definition of 'merchantable quality' so as to produce the result that if an article which is sold is only meant for one particular use in the ordinary course it must answer the one particular purpose for which it was sold". "'Merchantable'", it was said, "has come, therefore, to mean that the goods are suitable for the purpose for which they are normally used" (1956) SR (NSW), at p 242; 73 WN (NSW), at p 371 . But neither of the cases referred to in their Honours' reasons - Cammell Laird & Co. Ltd. v. Manganese Bronze & Brass Co. Ltd. (1934) AC 402 and Grant v. Australian Knitting Mills Ltd. [1935] HCA 66; (1936) AC 85; (1935) 54 CLR 49 - so decided. In the former case Lord Wright - with whose observations on this point Lord Tomlin and Lord Russell of Killowen appear to have agreed - considered that, although the contractual goods were unfit for the particular purpose specified, they had not been proved to be unmerchantable whilst, in the latter case, their Lordships of the Judicial Committee were concerned with a proved defect in articles of wearing apparel which constituted them, at one and the same time, both unfit to wear and unmerchantable. In those circumstances Lord Wright said: "In effect, the implied condition of being fit for the particular purpose for which they are required, and the implied condition of being merchantable, produce in cases of this type the same result" (1936) AC, at p 100; (1935) 54 CLR, at p 61 . But this is far from saying that proof of unfitness for a particular purpose is always evidence of unmerchantability. Before goods can be characterised as unmerchantable it must be shown that, as goods of that description or character, they are defective though no doubt, in many cases, proof of their unfitness for some particular and obvious purpose may well establish that the goods are defective. It is true that Lord Wright said in Grant's Case [1935] UKPCHCA 1; (1936) AC 85; (1935) 54 CLR 49 that "whatever else merchantable may mean, it does mean that the article sold, if only meant for one particular use in ordinary course, is fit for that use" (1936) AC, at pp 99, 100; (1935) 54 CLR, at p 60 but it is clear that what he had in mind was that the existence of some defect in the condition or quality of contractual goods may, sometimes, be proved by evidence of this character. Indeed, even if this observation of his Lordship is not entirely clear, his ensuing observations leave no doubt on this point. Immediately thereafter he said: "it is not merchantable in that event if it has defects unfitting it for its only proper use but not apparent on ordinary examination" (1936) AC, at p 100; (1935) 54 CLR, at pp 60, 61 and subsequently he made the observation, already quoted, that "the implied condition of being fit for the particular purpose for which they are required, and the implied condition of being merchantable, produce in cases of this type the same result" (1936) AC, at p 100; (1935) 54 CLR, at p 61 . (at p89)

7. The expression "merchantable quality", in relation to goods the subject of a contract of sale, must, obviously, constitute a reference to their condition or quality. Consequently, goods are said to be of merchantable quality "if they are of such a quality and in such a condition that a reasonable man, acting reasonably, would, after a full examination, accept them under the circumstances of the case in performance of his offer to buy them, whether he buys them for his own use or to sell again". (Benjamin on Sale, 8th ed. (1950), p. 645, and cases there cited.) Now, if as the learned District Court judge found, the normal life of beetroot canned in vinegar is twelve months, how can evidence that more than twelve months after its purchase it was found to have deteriorated in the manner previously described be taken as proof that it was defective when it was supplied? Or, perhaps it may be asked, if the contract called for the supply of beetroot canned in vinegar, how could the vendor have discharged its obligation under the contract by supplying canned beetroot which would keep for a longer period? Or, indeed, having been supplied with beetroot canned in vinegar, could the purchaser have rejected it merely because it had then ascertained that its normal life was twelve months only? The answer to these questions is provided by saying that, if the contract called for the supply of beetroot canned in vinegar, the parties were bound to deliver and accept goods of this description and, if the condition and quality of the goods were normal for goods of this description, the purchaser could have no complaint on the ground of their merchantability. It would be nothing to the point, on any such complaint, to show that beetroot canned in vinegar would not keep for as long a period as canned peas or canned beans or, indeed, beetroot canned in brine or for as long as other canned foodstuffs. Nor would it be material to show that a wholesaler, who had purchased such goods, might still have them in his store more than twelve months later. Indeed, evidence as to the keeping quality of other goods and as to the practice in the wholesale grocery trade would not be admissible in such circumstances. (at p90)

8. As already indicated the action was tried in the District Court. That court is not a court of pleading and the issues between the parties were not defined as precisely as they might otherwise have been. The particulars of claim alleged the existence of a contract for the purchase of "a quantity of tinned beetroot" and, thereafter, alleged a breach of a condition that they should be of merchantable quality. In announcing its defence at the commencement of the hearing the appellant's counsel merely denied the breach alleged and the trial proceeded on this basis. It was an unfortunate consequence of the forms of the court that evidence was not led either by the respondent or the appellant to establish precisely what contracts were made. But it sufficiently appears that the purchases which were made were of the products of the Glen Ellen Cannery Co. and that those products were canned in vinegar. Moreover there had been an earlier purchase of products of this description in January 1951 and there seems little doubt that the later contracts were for similar goods. In any event no objection was raised by the respondent at any stage that the goods were canned in vinegar and, even after the institution of the proceedings, when particulars were sought by the appellant of the allegation that the goods were not of merchantable quality, no such complaint was made. On 25th October 1954 the appellant's solicitors wrote to the respondent's solicitors asking for particulars of the respects in which the contractual goods were alleged to be unmerchantable and on 12th November 1954 the respondent's solicitors replied. The reply was in the following terms: "We refer to your letters of the 25th ultimo and 9th instant and have to advise that it is alleged by the plaintiff that the goods supplied were not of merchantable quality in that: (1) The contents and the containers were defective in that the goods - (a) became "blown" and/or (b) leaked, and/or (c) developed hydrogen swells, and/or (d) contained viable bacteria. (2) They were not fit for human consumption. (3) They did not comply with the requirements of the Public Health Act and were ordered to be destroyed by the Board of Health." (at p90)

9. Following the receipt of this letter the appellant's solicitors wrote inquiring "whether it is to be alleged at the hearing that the goods and containers were defective in the manner appearing in par. 1 of your letter and were not fit for human consumption at the time when the goods were supplied by the defendant company to the plaintiff". The reply to this letter, dated 22nd November 1954, was as follows: "In reply to your letter of the 15th instant you are advised that it will be alleged at the hearing that the goods and containers were defective and the goods were not fit for human consumption at the time when the goods were supplied by the defendant to the plaintiff and at all other relevant times." (at p91)

10. In these circumstances there can be no doubt that the case which the respondent set out to make was that the goods in question were defective at the time of their delivery and that their subsequent deterioration resulted from this defective condition. Upon this issue the respondent failed for the learned District Court judge was satisfied that, as asserted by the appellant, the "fair" or normal life of beetroot canned in vinegar is twelve months and, upon this finding, there can be no reason for thinking that the deterioration noticed in November 1952 proceeded from any defect in the goods themselves or in the canning process or that it was otherwise than normal in goods of that description and character. Consequently there is no ground upon which it can be held that the goods were defective at the time of their delivery. This being so it is difficult to understand why the respondent should have succeeded in the District Court and again in the Full Court. But, as already indicated, it succeeded because, in the first instance, the learned District Court judge adopted an erroneous test to determine whether the goods were of merchantable quality and, in the Full Court, the erroneous assimilation of "merchantable quality" to fitness for a particular purpose or purposes led that court to think that the District Court judgment rested on a finding of fact which could be supported by reference to the evidence concerning the keeping qualities of other canned foodstuffs and consideration of the incidents of the wholesale and retail grocery trade. In all the circumstances it is, we think, proper to treat the contract as a contract for the sale of beetroot canned in vinegar and to regard the claim of the respondent as a claim that the goods were in a defective condition when delivered and that their subsequent deterioration resulted from their defective condition at that stage. Indeed this was of the very essence of the respondent's particulars and upon this view of the matter the respondent failed to make out a case. We should add that we are far from satisfied that the evidence establishes that the goods in question were unfit for any purpose made known by the respondent to the appellant but, as we are concerned only with an action for breach of the statutory condition of merchantable quality, it is unnecessary to say more. (at p91)

11. On the appeal to the Full Court the further submission was made by the respondent that the appeal was incompetent because the points of law on which it was based were not specifically raised in the District Court. After referring to two cases which were concerned with the provisions of s. 144 of the District Courts Act 1912-1953 the Full Court acceded to this submission as an independent ground for the dismissal of the appeal. Whilst counsel for the appellant did not specifically ask the District Court judge to make a note of any question of law raised at the trial some indication of the appellant's attitude at the trial is gathered from a perusal of the transcript which includes references to objections made on its behalf to evidence concerning the course of the wholesale grocery trade and the keeping qualities of other types of canned foodstuffs. Moreover, an examination of the reasons of the learned District Court judge leaves no room for doubting that the material questions were fairly and squarely presented to him for decision. The provisions of s. 144 did not preclude the appeal to the Full Court and, in our view, there was no other reason why the appeal should be regarded as incompetent. (at p92)

12. For the reasons given the appeal should be allowed. (at p92)

ORDER

Appeal allowed with costs. Order of the Supreme Court discharged. In lieu thereof order that the appeal to the Supreme Court from the District Court be allowed with costs and the judgment of the District Court set aside and that judgment in the action in that court be entered for the defendant with costs.