PURE NEW ZEALAND FOODS LIMITED V CARTER HOLT HARVEY LIMITED HC WN CIV 2004-485-2747

PURE NEW ZEALAND FOODS LIMITED V CARTER HOLT HARVEY LIMITED HC WN CIV 2004-485- 2747 11 November 2008IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2004-485-2747BETWEEN PURE NEW ZEALAND FOODS LIMITED Plaintiff AND CARTER HOLT HARVEY LIMITED Defendant Hearing: 28-31 October 2008 Counsel: P W Michalik and A A D Wortman for Plaintiff D M Salmon and T J Herbert for Defendant Judgment: 11 November 2008JUDGMENT OF RONALD YOUNG J Table of ContentsParagraphIntroduction and Background Facts [1] Pleadings [19] What were the terms of the contract? [27]Quality and timelines [28]Terms of Sale [35] Exclusion clause [61] Was there a breach? [71]Quality [73]Registration of gold print and registration of embossing [76]Embossing [78]Smudge mark [80]Gloss [81]Thickness of cardboard [82]Overgloss [83]Lamb Vindaloo Packet [85]Discussion of quality complaints [86]Delivery date delay [101] Claim for damages [117]Cap on damages and consequential damages [121]Causation [124]Remoteness [127]Mitigation of loss [134]The contract between the plaintiff and Ray Global [138] Negligence and Sale of Goods Act alternatives [143] Right to Export [146] Quantum of Damages [151] Counterclaim [162]Introduction and Background Facts[1] The plaintiff says that when the respondent provided packaging for its export business, which was late and of poor quality, it lost its export order. It seeks damages for the loss. [2] The defendant's case is that there was no delay, any lack of quality was minor, and in any event the contract between the parties prevented the plaintiff from suing for consequential loss. It rejects the quantum of damages claimed or that the loss of the export order had anything to do with the supply of packaging. It says the claimed loss is too remote. [3] Mr Sandhu is a director and shareholder, along with his wife Mrs Roy, of the plaintiff company. Together they run the day to day operations. Mr Sandhu has a history in the food and beverage industry and he has managed and owned restaurants.[4] In the late 1990s, Mr Sandhu began producing frozen Indian meals. Eventually the business grew and he incorporated the plaintiff company as the vehicle for the business. Initially the business supplied only the New Zealand market. The frozen Indian meals had the name Tandoori Heritage, the name of the restaurant that Mr Sandhu had operated in Wellington. [5] In 1999 while producing these frozen meals for the domestic market, Mr Sandhu engaged Carter Holt Harvey ("CHH") to produce packaging for his meals. The meals were then and are now said to be at the high quality end of the market. Mr Sandhu was unhappy with CHH's packaging and printing work and he switched to another printing supplier. [6] By 2002 Mr Sandhu decided to incorporate the plaintiff company with the idea of exporting the frozen meals he was producing. At about that time, Mr Sandhu was approached by CHH who hoped to do business with him again. It seems common ground between the parties that Mr Sandhu was initially reluctant to use CHH given their history. In discussions with CHH Mr Sandhu stressed that if it was to provide the printing and packaging for his cartons, he wanted a high quality job to match the quality of his product. [7] Eventually, in January 2003, Mr Sandhu asked Mr Glen Smith (with whom he had been dealing) of CHH to provide quotes for packaging. At that stage the plaintiff was still to obtain an export licence for their business and to arrange distribution of their product in Australia. The proposed business was still in its infancy. CHH provided the quotes. [8] The January 2003 quotes for the printing were for 5, 10 and 15 varieties of cartons, each carton variety for a different variety of meal. By mid 2003, at the plaintiff's request, the quotes expanded to up to 25 varieties of cartons. Each of the quotes provided by CHH referred, at the bottom of the quote, to the "Standard Terms of Sale" applying to the quote. [9] In May 2003 there was an exchange of correspondence between the parties relating to the plaintiff's request for quality printing and timeliness of delivery whichthe plaintiff says were terms ultimately incorporated into the contract for the printing and supply of the cartons. [10] In mid 2003 Mr Sandhu began discussing distribution of his frozen meals in New South Wales with a Mr Sanjoy Ray, of Ray Global Consultants in Sydney. Mr Sandhu told Mr Ray that they believed they had a quality product complimented with quality packaging. [11] By the 3 rd quarter of 2003 the plaintiff company began undertaking the necessary work to obtain a licence to export food from New Zealand. They also obtained a draft form of a distribution agreement from Trade & Industry New Zealand, which they sent to Mr Ray, personalised to their business, for his consideration. [12] Part of the arrangement between CHH and the plaintiff company was that the plaintiff would provide the necessary film for printing the carton and CHH would produce the printing plates. [13] Finally, after almost a years' discussion and negotiation, on 24 November 2003, the plaintiff placed its first order with CHH for the printing of 35,000 cartons. The order was accepted by CHH on 2 December 2003. CHH then suggested an approximate delivery date, initially of 5 January 2004, and shortly afterwards, 12 January 2004. In the meantime the distribution agreement was signed by the plaintiff on 1 December 2003 and Mr Ray on 12 December 2003. At this stage Mr Ray said he was looking for the first delivery by the end of January 2004. He had not, however, by 12 December actually placed an order for frozen meals. [14] There were then various delays in printing the cartons. By mid January the plaintiff had the initial proofs of the cartons. They provided feedback to the defendant on the proofs. However, further delays occurred. By February 2004, the date for delivery set by CHH was late February 2004. In mid February Mr Ray enquired when he could order his first shipment given there was a six week delay from order to supply. By late February the final artwork was produced and sent to the plaintiff for comment, approval and return. By that stage CHH said the deliverydate of the printed cartons was the 5 th or 6th of March. The cartons were finally delivered to the plaintiff on 9 March 2004. [15] Eight days later the plaintiff wrote to CHH detailing nine particular problems with the printing of the carton and asking CHH to pick up all the cartons and reprint them. Sample cartons, which the plaintiff said illustrated the faults identified by them, were sent to CHH several days later. [16] The plaintiff, shortly afterwards, told Mr Ray about what they considered to be the unacceptable packaging. He expressed concern about the delays and said he was unsure about continuing with the distribution contract. [17] The sample packages, which the plaintiff said illustrated the problems, were examined by CHH and a report prepared dealing with each complaints. The defendant accepted there were faults but rejected the suggestion that this entitled the plaintiff to reject all of the cartons. They suggested a compromise, which the plaintiff rejected. [18] The plaintiff visited Mr Ray in Sydney in late April in an attempt, they said, to protect their distribution contract with him. However, by late April Mr Ray wrote to the plaintiff cancelling the contract between them. Despite attempts to resolve the dispute, in late 2004 these proceedings were issued.Pleadings[19] The plaintiff's case is that the contract between the plaintiff and defendant for the printing of the cartons included the following terms. The amended statement of claim alleges:8. The terms of the Agreement were reached by three parties through correspondence and are referred to as if pleaded here in full, and include, inter alia: (a) The defendant was to supply cartons to the plaintiff that met or exceeded the minimum specifications provided by the plaintiff such minimum specifications included:(i) that the cartons replicate the sample cartons supplied by the plaintiff to the defendant in our about November 2002; and (ii) the board used for the cartons was to be no less than the thickness of the sample board provided by the defendant to the plaintiff, signed as accepted by the plaintiff, and represented to be 500 microns wet strength; and (iii) the print details were to incorporate three colours, over gloss and embossing; and[20] In addition, the plaintiff says the parties agreed the cartons would be delivered on a date agreed between them. [21] The plaintiff pleads that the nine faults identified in its letter of 17 March 2004 to CHH meant the printing and packaging was not of the same standard as the samples provided and the cartons were not delivered on time. As a result the plaintiff says Mr Ray cancelled the distribution contract and the plaintiff suffered damages, especially loss of profits they anticipated from the export contract. [22] As an alternative to a breach of contract, the plaintiff pleads causes of action in negligence and breaches of ss 15, 16 and 17 of the Sale of Goods Act if the conditions as to quality in [19] are not found to be part of the contract. [23] The damages sought are now: a) loss of profits from the cancellation of the Ray contract ($361,866.41); b) cost of storage, provided by the plaintiff, for the cartons from 20 March 2004 and continuing at $150 per week; c) cost of three cutting forms ($5,400); d) cost of embossing block ($1,500);e) cost of the certification with the New Zealand Food Authority ($3,022.29). [24] The defendant's counterclaim is for the cost of printing the cartons of $12,969.28. [25] CHH disputes the terms of the contract as alleged by the plaintiff. They deny any breach but say if there was breach their liability is limited to the printing cost. They dispute that an independent duty of care is available and submit an action in negligence is not available. They say the parties agreed to exclude the Sale of Goods Act as part of the contract. [26] In addition they plead the affirmative defences of, failure to mitigate, an absence of causation and remoteness of damage.What were the terms of the contract?[27] I am satisfied the terms of the contract relating to quality and timeliness of delivery were: a) the cartons to be printed by CHH would be at least to the standard of the samples provided by the plaintiff in particular as to: i) board thickness; ii) printing registration; iii) gloss; iv) embossing; b) the cartons would be delivered on the date agreed between the parties; c) that CHH's Standard Terms of Sale applied.Quality and Timelines[28] The evidence clearly established that right from the time CHH approached the plaintiff to see if they could obtain their printing work, the plaintiff stressed the importance of quality printing and cartons. [29] This was especially so, given Mr Sandhu's previous problems with CHH's printing standards. These discussions culminated in the plaintiff's letter of 12 May 2003 to CHH. The letter reads:12 May, 2003 ATTENTION: DANIEL TELFER Carter Holt Harvey Packaging Carton Auckland 862 Great South Road Penrose Auckland Dear Daniel, We're writing to express our concerns about our past experience with CHH, before we finalise a decision to place an order for packaging. We want you to confirm with us that we will be provided with the best customer service this time. We would like our order to be made as per the quality specification we provide. The sample we had given to you of our packaging is the minimum standard of printing quality we expect. As you are aware, this packaging is for our overseas market so it is of the utmost importance that this job is done properly. All the deliveries have to meet the specified delivery deadline. Please ensure that the board thickness, printing registration, gloss and embossing are done as per the minimum acceptable specification provided (sample carton given). Can you also please ensure the quantity of cartons produced are as accurate as the order specification. We look forward to hearing from you before we make our final decision. We will require your total commitment and quality assurance towards our job. And Daniel, thank you for your patience and putting in all your efforts into rebuilding a relationship with us. Thanking You Sincerely Surinder SandhuCEO PURE NEW ZEALAND FOODS[30] The defendant in turn replied:13th May, 2003 Pure NZ Foods Limited Unit 3, 3-7 Mahora Street Kilbirnie Wellington Subject: Carter Holt Harvey's Performance Guarantee Dear Surinder, Further to our conversation today and your letter dated 12 th May I feel compelled to supply you with Carter Holt Harvey's commitment to meeting or exceeding your quality expectations in writing. The quality issues you have experienced with us in the past have been extremely disappointing for both parties and it is unacceptable that we have not been able to supply you with a service that is worthy of your trust. Thank you for the current opportunity to secure your new packaging and renew the faith you once held in us. We understand the importance of quality in products being exported to the overseas market and to this end I wish to assure you that we will do everything in our power to ensure the quality control systems we have in place do not fail us again. We have our total commitment to supplying packaging that meets or exceeds the minimum specifications you provided and arrive on the agreed delivery date. I look forward to hearing from you and hope we can start the rebuilding process between our companies in the near future. Regards Daniel Telfer Account Manager Carter Holt Harvey, Carton[31] CHH I find, therefore, accepted the plaintiff's conditions as to quality and timeliness. At that time no order had been given by the plaintiff and, therefore, no contract concluded. However, I am satisfied that viewed objectively (Investors Compensation Scheme Ltd v West Browich Building Society [1998] 1 WLR 896) both parties accepted that these conditions would be included in any order for printing and packaging given by the plaintiff and accepted by the defendant. Toreinforce this point when the plaintiff later ordered a print run it expressly returned to the letter of 12 May 2003. [32] On 24 November 2003 the plaintiff confirmed with CHH an order for 35,000 cartons based on a 30 June 2003 quote given by CHH. The plaintiff sent samples of previous printing of the same type of cartons for CHH to follow as to gloss, registration, embossing and colour. The plaintiff asked for the defendant's written acceptance. And they expressly referred to their letter of 12 May 2003 ([31]). [33] On 2 December 2003 the defendant company confirmed the order placed by the plaintiff. [34] This exchange of correspondence and discussions satisfy me that, viewed objectively, the parties intended the conditions referred to in [27] (a) and (b) were to be terms of the contract for the printing of the cartons by CHH.Terms of Sale[35] The defendant claim and the plaintiff dispute that the other terms of the contract were the defendant's standard "Terms of Sale". [36] When Mr Sandhu began dealing (as a sole trader) with CHH in the late 1990s he was provided with a number of quotes for printing work and with a number of invoices for work completed on his behalf. It was the defendant's case that each of these quotes and each of these invoices contained the "Terms of Sale" and that the quotes made it clear they were being provided on the basis of these "Terms of Sale". [37] In 1999 and again in 2002 Mr Sandhu completed at CHH's request an "Application for an Account". The defendant's evidence was that before an order could be placed by a customer an application had to be made to CHH and the applicant approved as a customer. [38] Both applications completed by Mr Sandhu contained an acknowledgement, near where Mr Sandhu signed, that he accepted CHH's "Terms of Sale".[39] During the late 1990s CHH supplied to Mr Sandhu, as a sole trader, a number of printing jobs. Mr Sandhu was then operating the Tandoori Heritage restaurant. On each occasion he was sent a credit note from CHH which had on the face "Terms and Conditions of Sale overleaf". These Terms and Conditions were printed on the backside of the credit note. Mr Sandhu could have read these at any time. [40] The defendant says that, therefore, even before the negotiations commenced between the plaintiff and defendant some years later in 2002 Mr Sandhu, even though in a different capacity (then as a sole trader now as a director of the plaintiff), knew trading with CHH was to be subject to their Standard Terms of Sale. [41] In the first two quotes provided by CHH in November 2002 the quotations said at the bottom of the sheet:It is important to note the following Standard Terms and Conditions will apply, refer to reverse.[42] In January 2003 two further quotes were provided to Mr Sandhu with the same standard "Terms of Sale" notice. [43] In late January 2003 Mr Sandhu filled out an application for an account. The application was in his own name as a sole trader. The application form said, near where Mr Sandhu signed, "I/We accept Carter Holt Harvey's Packaging Terms of Sale". [44] Further quotations for printing work to be provided were given to Mr Sandhu in mid June and late June 2003. All those sent by mail had the "Terms of Sale" printed and particular attention was drawn to the Terms by the reference, on the quote, to the words "It is important to note the following". [45] When the plaintiff finally provided an order to the defendant company to proceed with the printing on 24 November 2003, the quote they referred to was the quote of 30 June 2003 which drew to Mr Sandhu's notice the fact that the quote was being provided subject to the "Terms of Sale".[46] Although the format of the Terms of Sale from 1999 through to the 2002/2003 negotiations are in a slightly different form the content is essentially the same. [47] Mr Sandhu said that although the quotes and the application for accounts all refer to the terms of trade between the parties as being subject to the Terms of Sale that he did not receive any document from CHH which had the Terms of Sale. He claimed all of the quotes he received in 2002/2003 from CHH were by facsimile and only the quote itself, without the Terms of Sale, was sent to him. Mr Sandhu said that he had never received any quote by surface mail from the defendant. He pointed out the mail from CHH was addressed to the plaintiff's work premises which had no post box itself. In addition Mr Sandhu maintained either that he had not been given or had not read the Terms of Sale when he signed the account application form. [48] Mr Sandhu's evidence can be contrasted with that of Mr Telfer who was then CHH's account manager. Mr Telfer's evidence was that the quote of 7 November 2002 was sent by letter to Mr Sandhu. The letter was on "quotation" letterhead and had on its reverse CHH's then standard "Terms of Sale". In addition, the two quotes themselves were also on quotation letterhead and had the Terms of Sale on the reverse as the quotes identified. Both quotes drew Mr Sandhu's attention to the "Terms of Sale". [49] The amended quotes of mid January 2003 were, Mr Telfer said, also posted to Mr Sandhu and contained the Terms of Sale on the reverse of the letter and quotes. Shortly afterwards Mr Telfer said Mr Sandhu contacted him with a variation of board thickness of the card to be used. Mr Telfer said he faxed the amended quote and put the original of the new quote in the post to Mr Sandhu. [50] Mr Telfer said in contrast to Mr Sandhu's evidence that he had always sent the original quotes for supply of cartons to Mr Sandhu/Pure New Zealand Foods Ltd by mail. He said these originals always had the Terms of Sale on the back of the letters and the quotes.[51] In June 2003 when Mr Telfer said he visited Mr Sandhu he asked Mr Sandhu to complete an Application for Account with CHH to cover Pure New Zealand Foods printing work. Mr Sandhu told him he had completed an application earlier in the year and asked if this could include the plaintiff company. Eventually CHH agreed to this arrangement. The application form of January 2003, near where Mr Sandhu signed, said he accepted CHH's Terms of Sale. [52] Mr Telfer accepted that he had never discussed nor had drawn to Mr Sandhu's attention any of the particular "Terms of Sale". [53] I am satisfied that Mr Telfer's evidence on these points was credible and reliable and that Mr Sandhu's evidence was not. Mr Telfer was a careful accurate witness whose evidence I consider was correct and I am satisfied I can rely upon his evidence. I note that Mr Telfer is no longer employed by CHH but now employed by a rival company. Loyalty influencing his evidence, therefore, can reasonably be discarded. [54] On the other hand Mr Sandhu often gave conflicting and contradictory evidence. My clear impression was that on a number of points Mr Sandhu simply could not accurately remember but replied to a question on the basis of the most advantageous (to him) response. He eventually dismissed the suggestion he had ever received any correspondence by post from the defendant company. Everything was by fax he said and the Terms of Sale had never been faxed to him. I was uncertain at the end of his evidence whether he was claiming he had never seen the Terms of Sale or simply never read them. [55] I am satisfied that Mr Sandhu saw the Terms of Sale in 1999 during his dealings with CHH. The credit notes with the delivery of the goods had the Terms of Sale on the reverse. Further, the two applications for an account, one in 1999 and the other in the beginning of 2003, would both have had the Terms of Sale. Mr Sandhu must have seen these. [56] I accept Mr Telfer's evidence that he always posted as well as sometimes faxed the quotes to Mr Sandhu during 2002 and 2003. I reject the possibility thatnone of the letters posted ever reached the plaintiff's business. I am sure that some inevitably would have. Until Mr Sandhu completed the application for an account in late January 2003 the only postal address available to CHH was the business address at Unit 3, 5-7 Mahora Street. [57] During 2003 Mr Sandhu received at least 6 quotes from CHH each of which said that the Standard Terms of Sale would apply to the particular quote received. All the letters and quotes had the Terms of Sale on the reverse. When Mr Sandhu signed his application for an account he knew that the Standard Terms of Sale would apply to any order he made because the document told him so. [58] Finally, the plaintiff made it clear on 24 November 2003 that they were accepting the 30 June quote (as amended) from CHH which specifically said it was subject to Terms of Sale, copies of which were on the reverse of the letter and quotes. [59] This evidence establishes that Mr Sandhu, both as an individual and as director of the plaintiff had drawn to his attention the existence of the standard Terms of Sale and the fact that the acceptance of any quote provided by CHH would entail an acceptance that the standard Terms of Sale would apply to the contract between them. In accepting the 30 June quote the plaintiff accepted the Terms of Sale would apply. Whether Mr Sandhu chose to read the Terms of Sale was entirely a matter for him but any failure to do so is not relevant to whether they were a term of the contract. [60] I am satisfied the Terms of Sale attached to the 30 June quote were incorporated into the contract between the parties subject only to any required qualification arising from the specific terms agreed in the exchange of correspondence between the parties of May 2003.Exclusion clause[61] The plaintiff says that if I find the Terms of Sale are incorporated into the contract CHH's exclusion clause in the Terms of Sale is so wide that it wouldexclude any claim for damages arising directly or indirectly from any breach of the contract. Thus the plaintiff says this exclusion clause is inconsistent with the thrust of the terms of the contract relating to quality and timeliness of performance in the May 2003 exchange of letters. The plaintiff says that if these conditions apply then any failure by CHH to comply with the specific contractual terms as to quality and timeliness can be met by the exclusion clause. In those circumstances the terms as to quality and timeliness would be rendered meaningless. [62] The plaintiff says, therefore, the exclusion clause should be set aside as inconsistent with the specifically negotiated terms. Any objective observer would, the plaintiff says, conclude the standard exclusion clause was intended by the parties to be excluded given the terms they negotiated in May 2003. [63] Clause 6 of the Terms of Sale, headed "Guarantees" provides as follows:6. GUARANTEES Where the Consumer Guarantees Act 1993 applies to this contract: - if the goods are acquired by the Buyer for business purposes, the Buyer agrees that the Consumer Guarantees Act 1993 does not apply; and - if the goods are not acquired by the Buyer for business purposes, the Seller reserves the right to replace any goods which fail to comply with any guarantee contained in the Consumer Guarantees Act 1993. Where the Buyer supplies the goods in trade to a person acquiring them for business purposes, it must be a term of the Buyer's contract with that person that the Consumer Guarantees Act 1993 does not apply in respect of the goods. The Buyer acknowledges that the Seller does not provide any Express Guarantees (as defined in the Consumer Guarantees Act 1993) other than those expressly confirmed by the Seller in writing. Where the Buyer supplies the goods to any other person in the course of trading, the Buyer must not give or make any undertaking, assertion or representation in relation to the goods without the Seller's prior approval in writing. The Buyer agrees to indemnify the Seller against any liability or cost incurred by the Seller under the Consumer Guarantees Act 1993 as a result of any breach by the Buyer of the obligations contained in this contract.The following terms apply wherever the Consumer Guarantees Act 1993 does not apply to this contract, or where the following terms are not inconsistent with the Consumer Guarantees Act 1993: - Defective goods or goods which do not comply with the contract shall at the Seller's discretion be replaced, or the price refunded. - Any right which the Buyer may have to reject non-conforming or defective goods shall only be effective if the Buyer notifies the Seller in writing within thirty days following delivery and the Seller is given the opportunity to inspect the goods. - No goods shall be returned unless the Seller has agreed in advance. - The Seller may, at its discretion, delay the replacement of, or the refund of the price of, any goods for so long as the Buyer is in default in relation to the Amount Owing. - The Seller accepts no liability for any Claim by the Buyer or any other person, including without limitation any Claim relating to or arising from: - any conditions, warranties, descriptions, representations, conditions as to fitness or suitability for any purpose, tolerance to any conditions, merchantability or otherwise, whether express or implied by law, trade custom or otherwise; or - any representations, warranties, conditions or agreement made by any agent or representative, which are not expressly confirmed by the Seller in writing, and the Buyer agrees to indemnify the Seller against any such Claim. - In any event, the Seller's liability under any Claim shall not exceed the price of the goods. It is the responsibility of the Buyer to approve all artwork and origination before going to press. Nothing in these terms is intended to have the effect of contracting out of the provisions of the Consumer Guarantees Act 1993 except to the extent permitted by that Act, and these terms are to be modified to the extent necessary to give effect to that intention.and "Claim" is defined in this way:"Claim" includes any claim: - for loss of profits; or - for any consequential, indirect or special loss, damage or injury of any kind suffered by any person arising directly or indirectly from:- any breach of the Seller's obligations under this contract; or - any cancellation of this contract; or - any negligence, misrepresentation or other act or omission by the Seller or its employees, agents or contractors; or - for compensation, demand, remedy, liability or action.[64] As I read clause 6, it is designed to avoid any possible consequential loss claim for any failure by CHH but not to exclude the right of the plaintiff to reject defective goods. It does provide that CHH will control remedy (replacement or refunded price) but it does not purport to remove remedy for defect. It does limit damages to no more than the value of the work done by CHH. [65] There was no evidence to suggest this type of clause in a commercial contract is anything unusual. Indeed, linking liability to the price of the goods or services provided is common in commercial contracts. [66] I am satisfied that clause 6 of the Terms of Sale is not inconsistent with the May terms negotiated by the parties ([34]). The Terms of Sale permit rejection of the work of CHH by the plaintiff and permit replacement of the inadequate printing or a refund of the cost of the defective goods. [67] I, therefore, reject the claim that to allow clause 6 of the contract to survive is inconsistent with the specific terms agreed. [68] Finally, the plaintiff claims that clause 6, the exclusion clause, is harsh and contains onerous or unusual terms and required CHH to draw the clause to the particular attention of the plaintiff (see Chitty on Contracts (1999) 28th Edition Vol, 12-008-12-018). [69] There is no evidence to justify the assertion that the pleaded exclusion clause is harsh. It does not, as the plaintiff claims, exclude all liability, it preserves the right to reject the goods and preserves remedy. It limits only the choice of remedy and consequential loss. There is no evidence to suggest this is an especially harsh term in such a commercial contract.[70] In summary, therefore, I am satisfied that the terms of the contract as to quality and timeliness and the Terms of Sale, viewed objectively are the terms the parties agreed.Was there a breach?[71] The plaintiff alleges two basic breaches of contract. Firstly a breach of the condition relating to quality, and secondly, a breach of the condition relating to timeliness. [72] Turning first to the alleged breaches relating to quality.Quality[73] The plaintiff alleges nine breaches of quality in the cartons manufactured by CHH. To analyse whether these complaints are justified, I consider, in particular, the evidence of the plaintiff and the evidence of Mr Moxey. Mr Moxey is currently a technical manager for CHH and was in 2004 the quality and technical manager for that company. He has a lifetime experience in the printing trade. Mr Moxey was responsible for the assessment of the plaintiff's complaint about the printing provided. [74] I acknowledge that Mr Moxey was and is an employee of CHH, however, he was the only printing expert called to give evidence. I found Mr Moxey to be a reliable witness who properly conceded fault when this was required. He was fair and balanced. I rely upon his evidence relating to the inadequacies or otherwise of the CHH printing job. [75] I accept Mr Sandhu has had considerable experience as a consumer of carton printing and manufacture. He is not, however, an expert. As can be seen, although many of his complaints were accepted by CHH, there were many exaggerations.Registration of gold print and registration of embossing[76] Part of the packaging is gold coloured lettering including the words "Tandoori Heritage". These words are also embossed. The object of the printing and embossing process was to ensure that the embossing lines match the edge of the lettering so that only the letters in the words "Tandoori Heritage" are embossed and that they are embossed to the outer edge of each letter. [77] Mr Moxey's evidence is that in a small number of cartons embossing is slightly inside the line of some of the letters. This is apparently caused by a slight movement of the cardboard during the printing process. While it can be fixed, it is generally caused by small quantities of print runs. I note that the plaintiff's print runs were almost all short print runs with the total of 35,000 boxes being spread amongst 27 individual designs.Embossing[78] Two aspects were of concern to Mr Sandhu. One, the embossing was not as deep on the CHH cartons as the sample. Mr Moxey's evidence was that this was because the board used by CHH, at Mr Sandhu's request, is different than the samples. The different board was obtained to improve the survival time of the box in freezers, however, its hardness requires sacrifice of embossing depth. [79] Mr Moxey accepted there was some unevenness in the embossing depth with shallow embossing on the lower portion of the letters in most of the cartons. He accepted this could be improved and would on any following print run.Smudge mark[80] The plaintiff complained of a smudge mark on the cartons. On the blue coloured cartons for the meals without rice, there can seen a small very fine scratch of about 1cm in length leading from the carton lettering immediately downwards. This is apparently the black "smudge" mark complained of by Mr Sandhu.Mr Moxey thought this may have been caused by a very small scratch on the printing plate which had not been picked up during printing. The scratch could be removed in any future printing runs he said.Gloss[81] The gloss level of the sample packets was, when tested after the complaints by Mr Sandhu, was at 80 on a relative scale of 100. This compared with a level of 63 with respect to CHH's cartons. Mr Moxey, therefore, accepted the gloss level was lower on the cartons produced by CHH when compared with the sample cartons. He said this could have been fixed in subsequent runs by double hitting the gloss on the press.Thickness of cardboard[82] Mr Sandhu complained the thickness of CHH's cardboard did not match the samples provided. Mr Moxey measured the CHH cardboard and concluded it was as thick as that provided by Mr Sandhu and did meet the 500 micron thickness requested by Mr Sandhu.Overgloss[83] On the samples provided by Mr Sandhu a small area was left without a gloss surface to facilitate stamping a "use by" date. The CHH produced cartons had gloss over the entire carton. Mr Sandhu complained that that would prevent a use by date being stamped onto the carton. [84] Mr Moxey made three points in response. Firstly, Mr Sandhu signed off the proof with the gloss shown over the entire carton. Secondly, it is possible to date stamp a gloss surface and thirdly, many packages have stickers rather than an imprint. A copy of the plaintiff's new packaging was produced which showed they were using stickers on those packages. CHH offered to provide such stickers to the plaintiff free of charge.Lamb Vindaloo Packet[85] On the Lamb Vindaloo cartons the black lettering on the letter "L" on one part of the package touches and impinges slightly into a gold outline. Mr Moxey accepted this was an error and said the error was in the artwork supplied by the plaintiff. He said it could easily be fixed on subsequent print runs. Of the 35,000 cartons only 400 were for Lamb Vindaloo "quick meal" variant which had this fault.Discussion of quality complaints[86] I am satisfied the unevenness of the embossing meant the standard of the packaging was below the sample standard. Clearly, it is possible to obtain a consistent, even, embossing of the carton. There is no reason why with care this could not have been achieved by CHH. The gloss level was also below the standard specified by Mr Sandhu. There is no reason why the same or similar level of gloss could not have been achieved on the cartons supplied by CHH. [87] The scratch to the blue cartons was an operator error and should not have happened. To see the scratch by the human eye requires the carton to be looked at very carefully and very closely. [88] The registration issues have much to do with the very small print run for many of the 27 variety of cartons printed. These register faults do mean the cartons are not to the plaintiff's expected standard. [89] The lesser embossing depth is primarily a feature of the cardboard chosen by the plaintiff. This board has other compensating attributes mentioned in [78]. The thickness of the board complies with the specifications of the plaintiff. [90] The plaintiff's instructions were for a gloss throughout the carton and in any event there are alternatives to ensure a use by date which are reasonably and sensibly available. The Lamb Vindaloo lettering was the responsibility of CHH.[91] In summary, therefore, the standard of the CHH cartons were below the standard of the samples in the following ways: a) Registration. There were some inadequacies in registration in a small number of packages. b) Embossing. The uneven embossing was below the sample standard. c) Scratch. The scratch mark was on some of the blue coloured cartons. d) Gloss. The gloss level was below the standard agreed to by CHH. e) L. The L on the Lamb Vindaloo was probably an error caused by the plaintiff's artwork. [92] The test for breach of contract is set out in s 7(4) of the Contractual Remedies Act 1979 which provides as follows:7 Cancellation of contract (4) Where subsection (3)(a) or subsection (3)(b) or subsection (3)(c) of this section applies, a party may exercise the right to cancel if, and only if,— (a) The parties have expressly or impliedly agreed that the truth of the representation or, as the case may require, the performance of the [term] is essential to him; or (b) The effect of the misrepresentation or breach is, or, in the case of an anticipated breach, will be,— (i) Substantially to reduce the benefit of the contract to the cancelling party; or (ii) Substantially to increase the burden of the cancelling party under the contract; or (iii) In relation to the cancelling party, to make the benefit or burden of the contract substantially different from that represented or contracted for.[93] Section 7(4) provides two alternative circumstances where a party may cancel a contract. The first relates to essentiality. I accept that the plaintiff made it clear in its letter of 12 May 2003 that they would only contract with the quality assurance they sought; that the standard of the CHH carton's would be up to the standard of the samples provided. However, in deciding whether the performance of the stipulations as to quality was essential to the plaintiff, regard must be had to the purpose of the quality assurances sought and given. These were not quality assurances simply for the sake of aesthetics. They were assurances sought so that the cartons maintained a quality look consistent with the quality product inside and, therefore, could be sold as such. [94] Here, the evidence of Ms Dow is relevant. She is the owner of a graphic design firm, which has been involved in many thousands of food packaging designs, creations and productions. She looked at the sample packets and the CHH packets. She was certain no consumer could notice the difference between the two packages. She pointed out that a consumer, looking into a freezer to decide which meal to buy, spends no more than 3 seconds looking at the packaging. Most of the observation is at arms-length. In her view, no consumer could possibly distinguish between the two types of packaging in such a situation. Her evidence was uncontradicted and barely challenged on this point. The essentiality for the plaintiff was that the cartons in a functional sense be of the same quality as those in the sample. Ms Dow's evidence confirmed that they were and, therefore, no breach justifying cancellation has occurred under subsection 4(a). [95] As to subsection 4(b) this is concerned with whether or not the breach is sufficiently substantial in the way set out in (i) to (iii). It is, therefore, intended that the breach be more than simply technical or aesthetic or trivial. The question is whether the breached term "went to the heart of the contract": see Wilson v Hines(1994) 6 TCLR 163. [96] In my view none of the breaches described at [91] either individually or in combination go the heart of the contract. The heart of the contract as far as printing quality was concerned was to ensure that consumers had a carton which they would see as of high quality matching the quality of the product. Ms Dow's evidence isthat from a consumer perspective the two types of cartons were indistinguishable. This was not a contract, which had the aesthetic look of the carton at the heart of the arrangement: Stine v Maiden (1984) 2 NZCPR 176. [97] I am satisfied, therefore, that the defects identified were not sufficient to justify section 7 cancellation of the contract and where in that sense, therefore, de minimis. [98] I note that this finding in law coincides with Mr Moxey's conclusions that the errors in the cartons were within an acceptable range, were minor, and not the type that he considered would justify rejection of the whole packaging. [99] The plaintiff has not established it had the right to cancel the contract for the breaches alleged. This conclusion by itself inevitably means the plaintiff's claim must fail. [100] However, I go on to consider the other issues, which arise in this case as if breach has been established.Delivery date delay[101] The plaintiff's case is that there was an agreed delivery date of either 5 January or 12 January 2004 for supply of the cartons and the actual supply on 10 March was a breach of the contract term relating to delivery dates. [102] I am satisfied there was never any agreed delivery date in the sense pleaded and in any event a portion of any delay here was caused by the plaintiff. The plaintiff itself neither nominated nor directly asked the defendant for a promised delivery date. The plaintiff's letter of 24 November 2003 accepted the quote from the defendant and asked for the earliest possible delivery date. The 2 December 2003 reply by CHH said delivery "should be" 5 and then 12 January 2004.[103] Both parties knew that delivery date had to be subject to the necessary materials being available to the defendant so that printing could commence. From the plaintiff's perspective I am satisfied that it knew it had to provide to CHH the digital artwork and the film in a format they could use before printing could start. Both were necessary for the production of the printing plates, fundamental to the printing process. [104] Mr Sandhu accepted that although CHH was to meet the cost of producing the printing plates, the plaintiff was required to provide the films from which the plates could be made. Mr Sandhu complained that no-one contacted him from CHH until 11 November 2003 with the film specifications. However, by that date (11 November) CHH had no order for any printing work from the plaintiff. [105] Mr Sandhu said that when he received the film specifications he immediately went about having the relevant films produced. His evidence, however, seemed to contradict this assertion. He said he was waiting for CHH to request the film work. Once a request was made he would then order the film work to be completed, which he believed would only take a few days. In his brief Mr Sandhu claimed that the film was ready in late November 2003. [106] Mr Telfer on the other hand, said that from early November 2003 he asked Mr Sandhu to supply the digital artwork and film. He said, on a number of occasions, he repeated that request orally to Mr Sandhu. [107] The digital artwork and the film was finally sent to CHH by Mr Sandhu on 20 February 2004. It was then discovered the digital artwork was in the wrong format causing further delay [108] I again prefer the evidence of Mr Telfer to that of Mr Sandhu on the question of whether Mr Sandhu was asked for the digital artwork and the film work from November onwards. As early as 11 November 2003 Mr Telfer sent an email to Mr Sandhu/Ms Roy which, in part, said " please send me a copy of the digital artwork with the film work". Mr Sandhu was experienced in dealing with requestsfor printing of cartons and knew that the artwork and film work was essential for the printing process. [109] As I have observed Mr Sandhu confirmed that he knew he was responsible for obtaining both the artwork and the film work. He knew that CHH could not print without this material given it was essential to the production. [110] In mid December 2003 Mr Ray emailed Ms Roy of the plaintiff company advising her he wanted to place an order immediately for delivery late January 2004. For this to be achieved the plaintiff would have to have received the cartons by early to mid January. The production of the food took approximately 4 weeks and cartons were needed to be filled and frozen immediately after the meals were cooked. Yet from the order of the cartons on 24 November 2003 through into the new year and beyond the plaintiff made no mention of any particular export order to CHH nor did they mention any time constraint they were under. [111] When 12 January 2004 came and went, the plaintiff made no enquiry of the defendant regarding the whereabouts of the printed cartons. If, as they now claim, the supply date had come and gone an enquiry and protest to CHH would have been expected as a minimum. Mr Sandhu had not been hesitant in the past to make his displeasure with inadequate performance by CHH known. No such enquiry or protest was made. [112] On 14 January Mr Sandhu advised CHH by email that he expected to have the films ready by that afternoon and would courier them immediately to CHH. This email contradicts his evidence he had the film ready in late November 2003. [113] Further, given Mr Sandhu's evidence that he was only to send this material when requested by CHH and given he said no request had been forthcoming, it was difficult to understand why he would suddenly advise CHH about the artwork on 14 January. The film was not in fact sent to CHH until 20 January. At that stage the plaintiff told CHH they were waiting from them for the earliest delivery date. This observation is in conflict with the plaintiff's claim that it had an agreed delivery date of 12 January.[114] At this stage it became clear the CD for the digital artwork provided by the plaintiff's agent was in the wrong format for use by CHH. The CD had to be sent back to the plaintiff's agent to be reformatted. This delay was also at the feet of the plaintiff who, through its agent, had supplied the CD in the wrong format. The responsibility of the plaintiff was to provide a CD of the digital artwork that the defendant could use to print the plaintiff's job. [115] The new disk seems to have arrived at the end of the first week in February. At that stage proofs of the printing job were able to be produced by CHH and sent to the plaintiff for checking and approval. That was completed by 20 February. There is no suggestion by the plaintiff that there was any unreasonable delay by the defendant in completing the printing from then on. The plaintiff did not tell the defendant of any particular time pressure or specifically of the contract with Ray Global or that the contract was under any time pressure. Given those facts there is no basis for alleging CHH failed to provide the printed cartons on an agreed date. [116] I am satisfied that, in the sense the contract intended, no date for delivery of the cartons was ever agreed upon and in any event the various delays were significantly contributed to by the actions of the plaintiff or its agent. There was, therefore, no breach of contract based on delay.Claim for damages[117] At [23] I set out the plaintiff's claim for damages under various heads. The claim for loss of profits from the Ray Global contract is based on an assessment of the volume of sales provided for in the distribution contract, an assessment of the overheads payable by the plaintiff to produce the goods and a calculation of profit. [118] The Ray Global contract provided for the plaintiff to supply one container of frozen meals every six weeks. In addition Ray Global was to keep in reserve one container of meals. This meant in the course of a year, 9.65 container loads of frozen meals would be provided.[119] Each container had 21,780 frozen meals. Assuming a split of 75% curry only meals and 25% curry with rice then the profit margin based on Mr Sandhu's figures were $1.87 for each curry only meal and $1.27 for the curry and rice meals. The total loss, therefore, being $361,866.41. [120] Assuming I had found breaches of contract by the defendant, the plaintiff's case faced insurmountable problems relating to its claim for damages. They are: a) cap on damages and limitation of claim for consequential damages in the Terms of Sale; b) whether in any event the breaches of contract caused a loss; c) remoteness of damage; d) the plaintiff's failure to mitigate the loss; and e) factual basis on which the major damages claim is based.Cap on damages and consequential damages[121] The Terms of Sale provide:In any event, the Seller's liability under any Claim shall not exceed the price of the goods.[122] There is no reason to read down this provision in any way. The thrust and intent of the clause is supported by other Terms of Sale, which prohibit any claim for loss of profits or any consequential or indirect loss. Thus, the plaintiff's main head of damage, claim for loss of profits which is a consequential or indirect loss, here is expressly prohibited. This clause is hardly surprising. The defendant, for understandable reasons, is likely to be reluctant to be open to damages claims for many times the value of the work undertaken by them. This is especially so when, as here, the plaintiff has failed to warn them of the potential liability.[123] This cap and prohibition on consequential damages, therefore, means the plaintiff is contractually prohibited from claiming the loss of profits from the export contract with Ray Global.Causation[124] The defendant's case is that the loss of profits claimed by the plaintiff was not caused by any breach of the plaintiff's contract with the defendant. They point to the evidence of Ms Dow, which was essentially unchallenged. Ms Dow said that the CHH produced cartons, which were perfectly acceptable commercially and could and should have been used to launch the frozen meals. [125] Mr Ray cancelled the contract because the plaintiff said it could not provide meals in suitably printed cartons and the delay that would be caused by a reprint of the cartons was unacceptable to him. [126] However, it is clear the cartons were of an appropriate commercial standard and the plaintiff was not justified in refusing to use the cartons. Thus the cause of their loss of profits was not the inadequate cartons, but their erroneous decision to further delay supply of the meals to Mr Ray because of their personal dissatisfaction with the cartons. The loss of profits was caused, therefore, by their unwise choice in refusing to supply Mr Ray and not from any breach by CHH. On this basis their damages claim for loss of profits must fail.Remoteness[127] The defendant submits that the claimed loss of profits from the Ray Global contract failure was too remote for the plaintiff to claim. They say Burrows, Finn and Todd sum up their position in the following way:We have seen that prima facie the loss suffered by the buyer of goods where the seller refuses delivery is the value of the goods less the price payable under the contract. This loss of value, if the seller has no actual or constructive knowledge of the further exceptional circumstances, is the onlynatural result of the breach, the only kind of damage that ensues in the usual course of things. Every other kind of loss, though actually and directlysuffered by the buyer, is in the eye of the law abnormal, not within the reasonable contemplation of the seller in ordinary circumstances, and therefore too remote. Thus, to take one common example, a sub-contract loss is usually too remote. A buyer, who has agreed before delivery to resell the goods to a third person at a price higher than the contract price, loses the profit that would have been made on the resale had delivery been made; but nevertheless the loss is too remote, since it is not the natural and normal result of a failure to deliver sold goods. In order to recover for this exceptional loss the buyer must prove that at the time of the contract the seller knew of special circumstances that signalled the probable resale of the goods. So where a purchaser agreed to buy land and on the same day resold the land to a third party, the purchaser could not recover its loss on the second contract arising from its inability to complete it owing to the defendant's refusal to complete the first. The purchaser had not shown that the vendor knew or should have known of the plaintiff's intention to enter the second contract, so as to accept the risk of liability for losses arising therefrom.[128] CHH stressed that the plaintiff had deliberately failed to tell them they had a contract with Ray Global and failed to tell them that there was pressure to provide the cartons by a particular time. CHH, therefore, points to the fact that this was a $13,000 printing job, which took over a year to negotiate. They say in those circumstances they could hardly anticipate that they could be liable for hundreds of thousands of dollars in damages for any delay in printing. [129] The plaintiff accept it did not specifically inform the defendant about the Ray Global contract but say they told the defendant the boxes were for export and stressed the importance of early supply. [130] I am satisfied the claimed loss of profits is too remote and that from an objective basis the loss was not in the reasonable contemplation of the parties:Hadley v Baxendale (1854) 9 Ex 341. Expressed another way the test relies on whether a particular loss is "not unlikely to occur": McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39; Balfour Beatty Construction (Scotland) Ltd vScottish Power Plc (1994) 166 NR 199. [131] All the facts point to a relaxed and casual attitude by the plaintiff towards the timing issue of production of boxes. Negotiations for the $13,000 contract from beginning to end took over 12 months. The message inherent in such a time was that the plaintiff had no pressing export. After the order plaintiff delayed for several weeks in providing art and film work to the defendant knowing it was essential forthe printing process. Although the plaintiff told CHH the cartons were for export they gave them no information about an actual contract. When hoped for printing completion dates came and went, they expressed no dismay or revealed any supply pressure to CHH. The plaintiff did not tell CHH the volume of any future orders. [132] When CHH suggested it would be better to delay and improve quality of the packaging the plaintiff did not resist the suggestion. [133] Given these circumstances it was clear to CHH that the cartons were to be used to supply frozen meals for export. There was, however, no suggestion from the plaintiff that there was any time pressure for the supply of the cartons. The defendant did not know there was a contract for the distribution of the meals in Australia. Given the modest value of the printing contract CHH could hardly anticipate an almost million dollar a year export business. The defendant could hardly anticipate a very large commercial contract would depend upon the very modest complaints at [91]. Given those circumstances I am satisfied it was not reasonably foreseeable that delay caused by breach of contractual conditions as to quality could cause the loss of the export contract. Again this conclusion means the plaintiff's loss of profits cannot succeed.Mitigation of loss[134] The defendant says, based on the evidence of Ms Dow that the plaintiff could and should have mitigated their loss by using the cartons provided. As I have recounted, Ms Dow's evidence is that the cartons were of an acceptable commercial standard and that the most important process in the launching of a product is to get the product on the market. She described examples of product launches where the packaging was well less than ideal, but the imperative of getting the product on the market outweighed, by a significant degree, any concern about packaging quality. [135] In those circumstances the defendant says it was a simple case of the plaintiff being obliged to mitigate loss by using the packaging. The only evidence before the Court supported the proposition that the quality of the packaging for commercial purposes was indistinguishable from the packaging used as a sample.[136] In my view this is not, as the defendant says, some form of alternative scheme for dealing with a difficult issue as it arose that could not reasonably have occurred to the plaintiff at the time. The plaintiff, when it rejected the cartons produced by CHH, set a standard for the cartons, which bore little or no relationship to commercial reality. The plaintiff had a simple option open to it to use the cartons to supply the meals and avoid any loss. It would have been a simple matter for the plaintiff to obtain the services of Ms Dow or someone similar so that they had professional advice as to the quality of the cartons that they have received. It would have been immediately apparent to them that they could use the cartons without affecting their product. The CHH cartons would still have provided quality packaging for their quality product. [137] In the circumstances the plaintiff failed to mitigate the loss and could have done so to completely thereby avoiding any loss. For this reason also the plaintiff's damages claim for loss of profits must fail.The contract between the plaintiff and Ray Global[138] Up until signing the contract with Ray Global, the plaintiff had been producing approximately 60 frozen meals a week. The contract they signed with Ray Global meant that they would be selling 6,000 frozen meals in Sydney every week through Ray Global. This seems like a remarkable business opportunity, which apparently overnight would produce profits of hundreds of thousands of dollars for the plaintiff and the distributor. [139] Mr Ray did not give evidence before me. There was no description whatsoever of Mr Ray's distribution company. It was not clear what, if any marketing he had done of the product, what, if any, distribution system he had, exactly what businesses he had agreements with to supply the frozen meals to other than a general reference to small grocery stores around Sydney. It, therefore, seems remarkable that the plaintiff could confidently predict the sale of 6,000 frozen meals per week in a market where they had never previously sold one.[140] The agreement between Pure New Zealand Foods and Ray Global appeared to allow the contract to be determined without apparent consequence for either party if it turned out that Ray Global could not meet the minimum sales provided for. The contract provided:This contract may be terminated if it is found after discussions that the distributor is not able to sell enough products to achieve the minimum purchase targets.[141] In evidence, Mr Sandhu confirmed that if Ray Global had failed to meet the sales targets he would not have sued the distribution company. [142] In my view this agreement between the plaintiff and Ray Global was not intended to be a binding contract. It was more an expression of hope. The parties hoped to sell 6,000 meals a week. If they did there would be large profits for them both. But if, as was probable, they did not then there would be no consequences for either party. This arrangement could not, therefore, give rise to an action in damages for loss of profits based on the sale of thousands of meals per week.Negligence and Sale of Goods Act alternatives[143] The plaintiff in the alternative to the allegation of breach of contract alleges negligence on the defendant's behalf arising from a duty of care in the production of the cartons and a breach of ss 15, 16 and 17 of the Sale of Goods Act 1908. [144] At the plaintiff's opening it advised that if the Court found that the quality standard the plaintiff pleaded was not included in the contract between the parties then the plaintiff relied on some terms of claims in negligence and Sale of Goods Act. [145] I have found that the quality standard set out in the exchange of correspondence between the parties in May 2003 was included in the contract between the parties. In those circumstances, therefore, the alternative causes of action need not be considered.Right to Export[146] CHH claims that the plaintiff could not export to Australia as at the date of the cancellation of the distribution agreement (28 April 2004) because as at that date they did not have the necessary authority to do so pursuant to the Animal Products Act 1999. As relevant s 48 provides:48 Exporters of animal products for human or animal consumption, and certain other animal material and products, must be registered(1) No person may export from New Zealand any animal material or product to which this Part applies unless— (a) The person is registered as an exporter under this Part; or (b) [the animal material or product or consignment or person concerned is exempted from the requirements of this section—] (i) By Order in Council made under section 9; or (ii) By regulations under this Act or by notice given by the Director-General under section 50. (2) Subject to subsection (1)(b), this Part applies to— (a) All animal products intended for human or animal consumption: [(b) all animal material or products in respect of which— (i) requirements are notified or made available under section 60A; and (ii) an official assurance is required:] (c) Such other animal material or products as are specified by Order in Council made under section 49.[147] CHH's submission is, therefore, that any loss arising from the 28 April cancellation cannot have been caused by them. [148] I am satisfied that once the cartons arrived the plaintiff could have obtained the necessary permission to export animal products within a few days.[149] In late October 2003 the New Zealand Food Safety Authority confirmed that Pure New Zealand Foods Ltd Risk Management Proposal ("RMP") was acceptable for registration. The plaintiff then paid the requisite fee and obtained registration of the RMP. [150] Mr Sandhu and Ms Roy were not aware at that time that it was necessary for them to obtain registration as an exporter with the New Zealand Food Safety Authority. However, it is clear once the RMP was registered, registration as an exporter was an administrative formality. In those circumstances the plaintiff was eligible for registration as an exporter from November 2003 and could have obtained such registration within a day or two of application being made. The provisions of s 48, therefore, were no impediment to the plaintiff. I reject this ground of defence.Quantum of Damages[151] Even if I had concluded there had been a breach of the contractual terms and that the loss was caused as a result of the cancellation of the export contract, and that such loss was not too remote and did not require to be mitigated or the plaintiff had mitigated its loss there are also reasons to doubt the plaintiff's calculation of damages. [152] The loss said to arise from cancellation of the export contract with Mr Ray was said to be a loss of profit for the year of $361,866.41. This calculation of damages was undertaken by Mr Stephen Nicholas, a chartered accountant called by the plaintiff. There is little dispute with his arithmetic. But the information used to inform his calculations were entirely provided by Mr Sandhu. Mr Nicholas was not asked to verify any of the figures supplied by Mr Sandhu. [153] Mr Lane, a chartered accountant gave evidence for the defendant. He reviewed the reasonableness of Mr Sandhu's information on which Mr Nicholas calculated his damages claim. [154] Without considering Mr Lane's evidence in detail he made the following points, with which I agree:a) The figures provided to Mr Nicholas and, therefore, his calculations did not take into account the cost of getting the goods from the plaintiff's factory to the ship, the shipping cost, and the cost of getting the meals from the ship in Sydney to the refrigerated warehouse where the meals were to be stored. b) The retail price proposed to be charged for the meals in Sydney were uncompetitive with some similar products then on the market. c) The margin available to Ray Global was not sufficient to provide money for promotion and distribution of the product. d) The cost of producing the meals had been underestimated and the labour and overhead costs were also underestimated. e) The profit per meal had been overestimated by Mr Sandhu and as a result the damages claim was inflated. f) As to the cost of storing the cartons the cost had not been incurred by the plaintiff given it had stored the cartons in their own premises. g) The claim for $3,022.29 for export approval was not a lost cost because the plaintiff continues to export. h) Finally, as to the forms, the printing blocks and film, this was an incurred cost and if it was treated as wasted expenditure by the Court then it could give rise to a damages claim based on actual cost of the items. [155] I have no reason to doubt the accuracy or reliability of any of Mr Lane's evidence given it was essentially unchallenged by any expert evidence of the plaintiff. The conclusions in (a) to (h) would have substantially reduced the plaintiff's damages claim.[156] Mr Sandhu's evidence was that after the cancellation of the export contract with Ray Global in 2004, the plaintiff rebranded the product and over a period of approximately 18 months have been able to make export sales of some $150,000. This sales volume can be contrasted with the plaintiff's claim in this case to have been able to make sales of up to $900,000 in the first year of operation based on the plaintiff's sale price of approximately $5 per meal to Ray Global with at least nine containers supplied in the first year each containing 21,000 meals. I note, Mr Sandhu's evidence that the plaintiff made a loss on the $150,000 sales for the year ended March 2008. [157] I accept Mr Lane's evidence that the claim for the storage of the cartons in March 2004 down to the date of the hearing of this case at $150 per week cannot succeed. Firstly, the defendant could only be responsible for any storage costs if the plaintiff was entitled to reject the cartons. I have found they were not and that they could and should have been used to supply the frozen meals in terms of the contract with Ray Global. Secondly, in any event, this is not a cost the plaintiff has actually incurred given its accounts showed, at that time, it paid no rent. [158] As to the cutting forms/embossing blocks this claim arises in a different context than the plaintiff's claim arising from the breach of contract. The plaintiff's case is that the cutting forms and the embossing blocks are the plaintiff's property and the defendant has wrongly refused to return these items and in those circumstances, they say, the loss is the cost of replacing these items being a total of $6,900. Mr Lane accepted that that actual cost was the proper basis on which to assess damages with respect to this claim. [159] The defendant's case is that while it accepts these items are the plaintiff's property, it says it is entitled to a lien over these goods until the cost of printing the cartons is paid and $1,700 is paid for CHH's cost in modifying the cutting forms and embossing forms. [160] There is no credible dispute that the two items are the property of the plaintiff. Clause 7 of the Terms of Sale entitles CHH to charge the plaintiff for the cost of reworking any item supplied. Here, the defendant says it has incurred a costof $1,700 for reworking the cutting forms and embossing blocks. They are entitled to be paid by the plaintiff for the work done. Given these circumstances the defendant was entitled to keep the plaintiff's goods until its account for $1,700 was paid. If the plaintiff elects to pay the $1,700 (this sum was not part of the defendant's counterclaim) then the plaintiff is entitled to have their property back because the lien can no longer apply. [161] If, however, the property cannot for any reason be returned or the defendant elects not to return it after the payment of the $1,700 then the plaintiff would be entitled to damages of $6,900 for the cost of replacement of the items. I accept there was limited evidence to support the actual replacement costs at $6,900, however, I am satisfied there is sufficient to establish this part of the claim. [162] The plaintiff's claim against the defendant is dismissed same for those matters set out in [158] to [161]. I reserve leave to the parties to make further submissions on this aspect of the plaintiff's claim.Counterclaim[163] The plaintiff's counterclaim is for the cost of printing the cartons. I have found that although in some respects, the quality of the printing fell below the standard required by the plaintiff it was not such that entitled the plaintiff to reject the cartons. All the cartons could have been used to package the frozen meals and to export them to Australia. In those circumstances the full counterclaim is payable. There will be judgment for the defendant against the plaintiff for the sum of $12,990.[164] The defendant, if it seeks costs, should file memoranda within 14 days and the plaintiff has a further 14 days in which to reply. ___________________________ Ronald Young JSolicitors: Morrison Kent, PO Box 10035, Wellington, email: paul.michalik@morrisonkent.com Lee Salmon Long, PO Box 2026, Shortland Street, Auckland, email: davey.salmon@lsl.co.nz