Summary

The claimant retailer succeeded in its claim for monies due under a contract for the supply of films for sale in its stores.

Facts

The claimant retailer (S) claimed £1,276,000 from the respondent film distributor (F) pursuant to a contract for the supply of films.

Between 1999 and 2006, F supplied S with films which were sold in their stores. The films were supplied on a sale or return basis and pricing varied. S and F ran their respective ledgers in different ways. If S did not accept an invoice from F, its practice was to send a debit note to F for the disputed amount. If not settled, the debit note was entered on S's purchase ledger as a deduction from the sum due to F. F would deal with any concession it made to S by issuing a credit note in favour of S but S did not accept credit notes so F would use them as an internal accounting tool in its account receivables (AR) ledger. The trading relationship ended in 2006 and the parties tried to agree a final account but there was no early matching of F's credit notes to S's debit notes in respect of which they were raised. Between 1999 and 2004, F had outsourced its book-keeping and an irreconcilable amount of £517,000 remained unexplained from that time. F's gross ledger balance was £2.1 million. The disputed balances were significantly reduced by a series of audits but S claimed £1,276,000 which it alleged remained due from F.

F submitted that (1) although its ledger recorded credit notes in favour of S in that sum, S had already had the financial benefit of those credit notes against receivables in a corresponding amount due from S to F so that nothing further was due; (2) S was claiming a debt so the burden of proof rested on S to prove that the debt was due; (3) a sum of £61,000 which represented disputed pricing deductions between the parties remained in dispute.

Held

(1) The legal or persuasive burden did not rest solely on one party. The burden lay on the party who asserted a positive proposition which was essential to the success of its case. S bore the persuasive burden to make good its claim to payment and there was a persuasive and evidential burden on F to prove its assertion that the credit notes had already been off-set (see paras 47-52 of judgment). (2) The account between the parties was not a running account because the transactions within it did not give rise to reciprocal financial obligations. If F's AR ledger evidenced true receivables of £1.2 million due to S after deductions, F would have overpaid S when it conceded an adjustment in an earlier audit. Yet there was no counterclaim to recover such an overpayment. It followed that not all the outstanding credit notes could have been off-set against the receivables in F's AR ledger balance and there was simply no evidence of what other receivables they were off-set against. F's argument that, for there to be credit notes outstanding there had to have been debts, ignored how and when S's debit notes came to be issued and whether an invoice from F may not have been paid in full and a debit raised by S after payment of the original invoice. A credit note in respect of a debit note issued in those circumstances would not cancel out a debt outstanding on that transaction. It would represent an acknowledgement that a refund was due. F's argument could only be made good on a full reconciliation of the accounts. The court did not accept that F's receivables figure was reliable (paras 48, 63-66). (3) F's argument on the sum of £61,000 was well-founded. It was a claim by S arising from a dispute over pricing deductions and was an asserted set-off against sums originally invoiced by F. S's claim in the action based on F's credit notes assumed that all other items on S's ledger were valid or had been compromised. That assumption was not demonstrably correct for the £61,000 of pricing deductions. F was entitled to say that S had not justified its deduction from its invoices on grounds of price deduction to the extent of £61,000. Therefore, until it was justified, the sum represented a sum still due to F against which the credit notes could be off-set (para.69). (4) Aside from the £61,000, F had not succeeded in discharging the evidential burden of proving that receivables of at least £2.1 million were due from S when the trading relationship ended. Nor had F been able to show against which receivables the credit notes were off-set, if they were not receivables within the figure of £2.1 million. S was entitled to succeed on its claim to the extent of £1,215,000, its claimed amount less the £61,000 (paras 70-71).

Judgment for claimant