Australia 13 October 2006 Supreme Court of New South Wales [Appellate Court] (Italian Imported Foods Pty Ltd v Pucci S.r.l.)
[Cite as: http://cisgw3.law.pace.edu/cases/061013a2.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 15801/2005
CASE HISTORY: 1st instance Magistrates Court
SELLER'S COUNTRY: Italy (defendant)
BUYER'S COUNTRY: Australia (plaintiff)
GOODS INVOLVED: Capers, semi-dried tomatoes, eggplant and capsicum
AUSTRALIA: Supreme Court of Wales, 13 October 2006
(Italian Imported Foods Pty Ltd v Pucci S.r.l.)
Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/96],
CLOUT abstract no. 957
Reproduced with permission of UNCITRAL
Abstract prepared by Bruno Zeller, National Correspondent
The case was an appeal from the Magistrate Court in relation to the failure to supply goods of merchantable quality. The appeal was based on an attempted change of position to that taken at trial.
The Italian defendant had agreed to supply goods, preserved vegetables, to the Australian plaintiff. This latter refused to pay the price arguing that some of the goods had been defective. The defendant brought action to the Magistrate Court to recover the price of the goods. The case was discussed and decided based on the domestic Sale of Goods Act 1923 and not on the CISG.
The buyer appealed the decision of the lower court and argued that the claim should be decided pursuant to the CISG. The judge of the Supreme Court, however, stated that the buyer was trying "to run a new defence" in appeal, i.e. to raise an issue that it had not raised in the Magistrate Court. The judge noted that "if the point had been raised [by the buyer] in the Court below, the defendant might have conducted its case differently". Furthermore, the judge considered that granting the requested amendment to include the CISG, "…in any event, it would be futile…"
Therefore, although recognizing that the Sale of Goods Act, 1923 and the Sale of Goods (Vienna Convention) Act, 1986, are not the same and that they entail different consequences, the judge refused to apply the CISG and decided the case based on local sales law. The appeal was dismissed.Go to Case Table of Contents
APPLICATION OF CISG: Yes, but plaintiff first sought to plead the CISG in the appeal, which the court did not allow
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
38A [Buyer’s obligation to examine goods: time for examining goods]
EDITOR: Dr. Bruno Zeller, Victoria University, Melbourne
This was an appeal from the Magistrate Court in relation to the failure to supply goods of merchantable quality. The appeal was based on an attempted change of position to that taken at trial. The original case was based on the domestic Sale of Goods Act instead of the CISG. It is curious to note that there are still cases surfacing which display a lack of knowledge of the relevant applicable law.
The judge of the Supreme Court dismissed the appeal. Whether the fact that the wrong law was pleaded gives rise to an appeal in itself is of little significance here. More importantly is the fact that the appeal would have failed in any case. Not only did the Australian importer not know that the CISG is the relevant applicable law but once he found out he did not understand the basic rules within the convention.
If the Australian importer would have consulted article 38 only he would have realized that he had lost any chance of invoking the CISG. It was established in the original trial that the importer refused to have any testing done on the goods after they arrived in Australia. The importer was of the erroneous view that it was not his responsibility to undertake the tests. It is embarrassing to realize that not only was the first trial based on the wrong law but that once that was discovered no real attempt was made to make sure that the appeal has a chance of succeeding by analyzing the relevant articles of the CISG.Go to Case Table of Contents
EDITOR: Lisa Spagnolo
Excerpt from analysis of Australian case law on the CISG. Reproduced with permission of 10 Melbourne Journal of International Law (2009) 197-199
Italian Imported Foods Pty Ltd v Pucci Srl 
The case involved an Italian seller of preserved vegetables and an Australian importer. The seller sought to recover the price. The buyer argued the goods had been defective. A magistrate held the relevant time for assessing quality was upon delivery to the buyer's shipping agent in Italy, and that the buyer had not discharged its onus of proof regarding 'merchantable quality'.
Incredibly, neither side nor the Magistrate were aware that the CISG applied, and the trial case was argued and decided on the basis of the wrong law.
On appeal in the Supreme Court, buyer's counsel applied to amend pleadings to base the claim on the CISG. Despite realising the error, argument was still inadequate. In support of its contention that the Magistrate erred regarding the point in time for measurement of quality, rather than refer to arts 35-44 and relevant CISG case law which could have properly guided the decision, the Court was directed to non-CISG, and therefore irrelevant, English case law.
However, leave was refused, thus the CISG could not be relied upon on appeal. Unlike Summit, where more latitude to amend pleadings was shown, in Italian Imported, the arguments sought to be raised on appeal had not previously [page 197] been heard at trial. The discretion to grant leave is not exercised as easily in such circumstances. The Court gave two reasons for the refusal. The first was that the seller 'might have conducted its case differently at trial'. As a rule, appellate courts refuse leave where an issue was not litigated at trial. The second reason given was that the amendment would be futile in any event. Thus Italian Imported differs from Summit because futility formed part of the basis for the procedural decision.
With respect, on this second point, the Court fell into error. The futility of the amendment to include a CISG claim could not be gauged without examination of its viability in light of arts 35-44. This was not undertaken. Instead, the Court discussed lack of proof that the goods were not 'merchantable' at any time, and the buyer's denial of responsibility for testing and consequent lack of evidence. The buyer's case might still have been weak, but its prospects could not be resolved by evaluation under domestic sales law, itself pre-empted by the CISG's application.
Even if leave had been granted, Zeller argues the buyer had probably 'lost any chance' by its refusal to inspect the goods, since art 38 requires buyers to 'examine the goods ... within as short a period as is practicable in the circumstances'. Further, notice of non-conformity was not given until five months after delivery, so the right to damages was probably lost pursuant to art 39(1). This conclusion is underscored by the unlikelihood on the facts that the buyer could have argued that there was a reasonable excuse for delay in giving notice. There also seemed to have been little prospect of an argument under art 40 that the seller was already aware of the non-conformity.
The best that can be said about the case is that on appeal, the Court acknowledged that local sales law and the CISG 'are not the same'. Yet this mild encouragement pales against the Court's worst miscalculation. After refusing to allow CISG arguments to be raised on appeal, it treated the Sale of Goods Act as an alternative, fallback law. There is no second bite of the cherry. If a CISG claim fails for lack of proof of non-conformity or late notice, or for procedural reasons, the applicability of domestic sales law is not revived. The [page 198] matter must stand or fall on the CISG when it is applicable law, since it displaces domestic sales law. To uphold a lower court's decision based on inapplicable law perpetuates an error of law that is borne of a misunderstanding of the CISG's pre-emptive effect.
Perhaps because the quality of CISG interpretation had stepped up considerably elsewhere, or possibly because this was now the standard anticipated from Australian shores, the case barely raised an eyebrow internationally.
388.  NSWSC 1060 (Unreported, Malpass AsJ, 13 October 2006) ('Italian Imported'). Also reported internationally at: Pace Law School, <http://cisgw3.law.pace.edu/cases/061013a2.html>; available from CISG-online, Search by Cases (Case No 1494) <http://www.globalsaleslaw.org/index.cfm?pageID=29>.
389. Italian Imported  NSWSC 1060 (Unreported, Malpass AsJ, 13 October 2006) .
390. Ibid  (setting out the reasons of Sweeney LCM).
391. Ibid (referring to the reasons of Sweeney LCM).
392. See ibid , .
393. Ibid .
394. See, eg, Bedial SA v Paul Mggenburg & Co GmbH (Cámara Nacional de Apelaciones en lo Comercial, Argentina, 31 October 1995) <http://cisgw3.law.pace.edu/cases/951031a1.html> (deterioration during shipping); Person of Greece v Ed Fruit and Vegetables BV (Rechtbank Breda, Netherlands, 16 January 2009) [3.9] <http://cisgw3.law.pace.edu/cases/090116n1.html> (watermelons subject to decaying during transportation). On art 35 of the CISG, see above nn 275, 279, 280, 283. Bedial and many of the cases and commentaries were available at the time.
395. Italian Imported  NSWSC 1060 (Unreported, Malpass AsJ, 13 October 2006)  (noting citation in argument of Lambert v Lewis  2 WLR 713.
396. Italian Imported  NSWSC 1060 (Unreported, Malpass AsJ, 13 October 2006) .
397. Williams, above n 367, [36.01.210].
398. Italian Imported  NSWSC 1060 (Unreported, Malpass AsJ, 13 October 2006) .
399. Williams, above n 367, [36.01.145], [36.01.210].
400. Italian Imported  NSWSC 1060 (Unreported, Malpass AsJ, 13 October 2006) .
401. Ibid . On art 35 of the CISG, see above nn 275, 279, 280, 283, 394.
402. Italian Imported  NSWSC 1060 (Unreported, Malpass AsJ, 13 October 2006) , -.
403. 'Editorial Remarks' in Pace Law School, CISG Case Presentation: Italian Imported Foods Pty Ltd v Pucci Srl (2006) <http://cisgw3.law.pace.edu/cases/061013a2.html#ce>.
404. Italian Imported  NSWSC 1060 (Unreported, Malpass AsJ, 13 October 2006) , .
405. On art 39 of the CISG, see above n 74. On interrelation between arts 38 and 39, see below n 496 and accompanying text
406. CISG, above n 1, 44. On art 44, see Rheinland Versicherungen v Srl Atlarex and Allianz Subalpina SpA (Tribunale di Vigevano, Italy, 12 July 2000) <http://cisgw3.law.pace.edu/cases/000712i3.html>; Person of Greece v Ed Fruit and Vegetables BV (Rechtbank Breda, Netherlands, 16 January 2009) [3.12] <http://cisgw3.law.pace.edu/cases/090116n1.html> (no excuse for delay in notification of non-conformity).
407. Italian Imported  NSWSC 1060 (Unreported, Malpass AsJ, 13 October 2006) .
408. For matters within its sphere of applicability, subject to the interpretive hierarchy of art 7(2), see, eg, Asante Technologies Inc v PMC-Sierra Inc (US District Court (ND Cal), US, 27 July 2001) <http://cisgw3.law.pace.edu/cases/010727u1.html> (similarly commenting that the 'availability of [domestic] contract law ... action[s] would frustrate the goals of ... the CISG').
409. The only international comment has been from Zeller, 'Editorial Remarks: Italian Imported', above n 403.Go to entire text of Spagnolo commentary || Go to Case Table of Contents
CITATIONS TO OTHER ABSTRACTS OF DECISION
CITATIONS TO TEXT OF DECISION
Original language (English): Text presented below; see also <http://austlii.edu.au/cases/nsw/supreme_ct/2006/1060.html>;  NSWSC 1060
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Text available on the Internet courtesy of the AustLII website
13 October 2006
Last updated: 16 October 2006
In the Supreme Court of New South Wales Common Law Division
JUDGMENT of Associate Justice Malpass
1 HIS HONOUR: The defendant is a supplier of preserved goods (its place of business is in Italy). In early July 2002, it agreed to supply goods (capers, semi-dried tomatoes, eggplant and capsicum) to the plaintiff (its place of business is in New South Wales). The goods have a shelf life of about three to four years. On or about 22 July 2002, the goods were delivered to the plaintiff's shipping agent in Italy for transportation. Thereafter, the goods arrived at the premises of the plaintiff in Australia. Subsequently, they were sold to customers in Sydney and elsewhere.
2 Whilst no complaint has been made as to the quality of the capers and the eggplant, complaint came to be made concerning the capsicum and the semi-dried tomatoes. No payment was made by the plaintiff.
3 The defendant brought proceedings in the Local Court to recover the price of the goods. The plaintiff claimed by way of set-off, inter alia, costs and loss of profits.
4 The dispute went to a hearing. It was heard and determined by Sweeny LCM. Her Honour found in favour of the defendant.
5 The plaintiff now seeks to challenge the decision in this Court. Subsequent to the filling of the summons, the plaintiff filed a notice of motion, which sought leave to file an amended summons. Commendably, the proposed amendment sought to reduce the numerous grounds to three in number only. However, one of the three grounds raises an issue that was not litigated before Her Honour. This aspect of the amendment was opposed by the defendant. In the circumstances, there was a consensus to the hearing of the application for leave to amend together with the hearing of the appeal itself.
6 The appeal was heard on 9 October 2006. Both parties were represented by Counsel. Counsel relied on written submissions, supplemented by oral argument.
7 For present purposes, the relevant issue raised by the plaintiff in its defence was a failure to supply goods of merchantable quality. The case conducted by the plaintiff in the lower Court was that this term was implied by the provisions of the Sale of Goods Act 1923.
8 Before the Magistrate, the defendant relied on evidence from Marissa Tazzari (its export manager) and Grazia Farneti (its quality control manager). There was also documentation (including control sheets).
9 The plaintiff relied on evidence from Furio Rossi (a director of the plaintiff) and Domenic Mercuri and Robert Genobile (both being customers of the plaintiff).
10 The Magistrate accepted the evidence of both Marissa Tazzari and Grazia Farneti. There was conflict between evidence given by Marissa Tazzari and Furio Rossi. In resolving this conflict, the Magistrate preferred the evidence of Marissa Tazzari. The Magistrate took a poor view as to the credibility of Furio Rossi.
11 The dispute in the Local Court on the merchantable quality issue was identified and resolved by the Magistrate as follows [at page 31]:-
"At the end of the plaintiff's case, its evidence could be summarised as being that it supplied goods of merchantable quality to the defendant pursuant to an agreement and it has not been paid. The defendant's solicitor submitted that the plaintiff bore the onus to demonstrate on the basis of its quality control procedures that the goods were of merchantable quality when they arrived in Australia. The plaintiff's council (sic) says the relevant time is the time of delivery to the plaintiff's shipping agent in Europe and I am of the view that that is the appropriate time. The plaintiff cannot be held liable for the goods once they are in the possession of the defendant and its agent.
In my view the plaintiff did establish that at the time of delivery the goods were of merchantable quality. I have referred to the evidence of Ms Farneti and Ms Tazzari as to the tests conducted and the quality of the goods. The defendant did not establish otherwise either by impeaching the plaintiff's witnesses or educing (sic) any contrary evidence. Indeed the defendant's position was that it refused to have any testing done as it was of the view that it was not its responsibility.
12 The plaintiff contends that the view taken by the Magistrate was erroneous (she erred in finding that the relevant time to assess merchantable quality was when the goods were delivered to the plaintiff's agent in Italy). The plaintiff now contends that the goods should remain merchantable for a reasonable period subsequent to delivery. In support of that contention, the Court has been taken to a number of decided cases (including Lambert v Lewis  2 W.L.R. 713).
13 It can be observed at this stage that this represents a change of the position taken by the plaintiff before the Magistrate. The relevant point of time is no longer when the goods arrived in Australia. It is for a reasonable period after delivery was taken by it.
14 This is not the only change of position contemplated by the plaintiff. It is now conceded that the Sale of Goods Act did not apply to the transaction. Instead, it is said that the transaction was governed by the Sale of Goods (Vienna Convention) Act 1986. It is this attempt to rely on the latter legislation which has aroused the opposition to the application to amend the summons.
15 It seems to me that these attempts to change stance now place the plaintiff not only in an awkward position, but an untenable one.
16 There is an implicit concession that the defence litigated before the Magistrate could not succeed. There is an attempt in this appeal to run a new defence. The respective provisions of the Sale of Goods Act and the Sale of Goods (Vienna Convention) Act are not the same. They throw up different considerations and there were questions which were neither argued nor dealt with by the Magistrate.
17 In my view, the plaintiff should not now be allowed to depart from the case that it elected to run at trial and present a case which relies, inter alia, on the Sale of Goods (Vienna Convention) Act.
18 Accordingly, leave to amend is refused in respect of the first of the three grounds. Otherwise, leave to amend is granted.
19 There are two bases for this refusal. Firstly, because if the point had been raised in the Court below the defendant might have conducted its case differently at trial (Chilcoton Pty Limited & Anor v Cenelage Pty Limited & Ors  NSWCA 11). Secondly, in any event it would be futile to do so.
20 I shall now proceed on the assumption that there was a defence that had the capacity to succeed at trial. It first needs to be observed that the plaintiff had the onus to make good that defence (that the goods were not of merchantable quality).
21 The Magistrate described the evidence adduced by the plaintiff on the question of "asserted defects" as being "scant". She had difficulty in concluding whether this evidence revealed any fault or defect. These were views that she was entitled to take. The plaintiff's evidence fell well short of making good a defence that the goods were not of merchantable quality. The result that she reached was consistent with a finding to that effect. This made any error as to point of time immaterial. The plaintiff's evidence failed to demonstrate that the goods were not of merchantable quality at any point of time.
22 Accordingly, the plaintiff's case could be dealt with by reason of its own evidentiary weaknesses. In the circumstances, the defence could be disposed of without having regard to the evidence led by the defendant.
23 Leaving aside that state of affairs, there was powerful non-controversial evidence that militated strongly against the plaintiff's defence.
24 There was evidence that following the arrival of the goods in Australia, Furio Rossi informed the defendant that the goods had arrived in good condition. There was evidence of other conversations had with him prior to the making of any complaint. The Magistrate found that there had been no complaint made about the quality of the goods until December 2002. She also found that there was no written complaint until February 2003. The plaintiff did not itself do any testing of the goods. The goods were a portion of a larger batch delivered to other customers. There was evidence that there had been no complaint from any other customers.
25 In the light of this material, it could not be said that there was no evidence to support a finding that the goods were not of merchantable quality.
26 Apart from this evidence, there was also the evidence of Marrisa Tazzini and Grazia Farneti, together with the documentation. It was argued by the plaintiff that part of this evidence was expert evidence and should not have been received. Having regard to what has already been said, this consideration does not need to be pursued.
27 However, for completeness, I will observe that much of the evidence given by these two persons, and challenged by the plaintiff, would not fall within the category of expert evidence and added more weight to the material confronting the plaintiff. Even if it be assumed that some of it did fall within that category, it would not assist the plaintiff in this appeal.
28 The plaintiff bears the onus of satisfying the Court that there is error in point of law that justifies the disturbing of the decision of the Magistrate. In my view, the plaintiff has failed to discharge their onus.
29 The summons is dismissed. The Plaintiff is to pay the costs of the summons. Exhibits may be returned.
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