ACLAW P/L v FULLSTON No. SCGRG-00-357 [2000] SASC 440

2 In 1993 the appellant took action against the respondent in the Mount Barker Magistrates Court. The claim was for $17,900 being the balance claimed to be due to the appellant by reason of the supply of the potatoes. The matter was listed for trial on 19 July 1994 but was settled. The settlement was announced to the court and recorded in the transcript as follows:

"The defendants will make payment to Mr Frank Mondello and/or nominee $2,500 to be paid on or before 29/7/94. Balance of $2,500 to be paid on or before 29/8/94. In addition defendants will supply to Frank Mondello or nominee on or before 31/3/95 22 tonnes of premium washable potatoes to be delivered to Ward Road, Virginia."

Mr Mondello is a director of the appellant company. The agreement was incorporated into an order of the court directing the respondent and the other defendant, who is now deceased, to carry out the obligations required by the compromise agreement.

3 The respondent made the two payments of $2,500 to the appellant. However, it is claimed that he has not yet fulfilled the further requirement of the terms of settlement, namely, that he supply 22 tonnes of premium washable potatoes to Mr Mondello.

4 On 30 October 1995 the appellant filed an interlocutory application in the Magistrates Court seeking the following orders:

"1. That judgment in the amount of $17,600.00 be entered against the Defendants.

2. That interest on the said judgment be payable by the Defendants at the rate of 10% (pursuant to the Magistrates' Court Act) from 1 April 1995 until payment.

3. That the Defendants pay the plaintiff's costs of and incidental to this Application."

5 In an affidavit filed in support of the application the appellant's then solicitor stated that the respondent had not delivered the potatoes on or before 31 March 1995 in accordance with the court's order of 19 July 1994 and that the effect of non-compliance with the order was that the appellant had "suffered loss and damage". The loss was particularised as follows:

"3.6.1 The right to receive the proceeds from the sale of '22 tonnes of premium washable potatoes' at the price of $800.00 per tonne on 31/3/95 namely, $17,600.00.

3.6.2 Interest on the said $17,600.00 from 31/3/95.

3.6.3 Legal costs in enforcing the order made 19 July 1994 by this Honourable Court."

6 An order was made by the Magistrates Court on 7 March 1996 entering judgment for the appellant against the respondent in the sum of $20,070.46. This figure was based on the amount claimed in the initial application plus an increase based on a rise in the price of potatoes.

7 There was an appeal against this order which came before me in June 1996. I took the view that the interlocutory application was misconceived in that the effect of it was to seek damages for the failure to abide by a court order. The original consent order directed, in part, the delivery of certain goods and the appellant claimed damages for the failure to comply with that order. If the order of the court were to be enforced in the same action, it could only be by way of contempt proceedings. I allowed the appeal and set aside the order of 7 March 1996. Although the action was misconceived, the effect of commencing it was to evince an intention by the appellant to terminate the agreement.

8 The appellant then commenced fresh proceedings against the respondent. This claim was filed in the Magistrates Court on 23 September 1996. In these proceedings the appellant claimed that the respondent breached the compromise agreement entered into between the appellant and the respondent and that the respondent was liable in damages for the breach. It was alleged in the particulars of claim that the breach took place on 31 March 1995, the final date for the fulfilment of the respondent's obligation to deliver the 22 tonnes of premium washable potatoes. The claim was dismissed by the learned magistrate and the present appeal is against that order of dismissal.

9 When the matter was called on before me I expressed some concern about an issue which had not been raised at the trial or in the respondent's outline of argument prepared for the purpose of this appeal. I have referred to the fact that the present action is based on the compromise agreement. The court record indicates that judgment was entered for the appellant in accordance with that agreement and in the terms which I have set out above.

10 The question which I raised at the commencement of the appeal was whether the appellant was entitled to commence fresh proceedings based on the compromise agreement as opposed to enforcing the judgment which was entered in consequence of that agreement.

11 After researching the matter I have reached the conclusion that proceedings based upon the compromise agreement are available, although such a course of action is unusual. In Wentworth v Bullen [1829] EngR 253; (1829) 109 ER 313 the court had occasion to consider whether action could be taken in respect of an agreement which subsequently formed the basis of a judgment of the court. Parke J said (316):

"Now though there is no remedy for disobedience of a Judge's order (as such) by one of the parties against another by action, but by attachment merely, yet if it be made by the consent of both, and is founded on a binding agreement, an action will not the less lie upon that agreement, though it have also the additional sanction of a Judge's order. The contract of the parties is not the less a contract, and subject to the incidents of a contract, because there is superadded the command of the Judge. The case of an agreement to refer by order of a Judge, is a familiar instance; many actions being brought upon such agreements."

(See also Conolan v Leyland (1984) 27 Ch D 632 at 638).

12 Mr Schroeder, for the respondent, submitted that Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21; (1988) 164 CLR 502 is an authority to the contrary. However, that case is no more than an illustration of the accepted principle that where one party brings an action against another and recovers judgment against that party, the cause of action upon which the first party relied merges into the judgment thus destroying its independent existence. The same result occurs when a consent judgment is recorded. However, in the present case, the appellant did not attempt to litigate the original cause of action between the parties. The present proceedings were taken to enforce the compromise agreement which was in the same terms as the consent judgment. It would seem that there is no inconsistency between the existence of such an action and the additional remedy derived from the procedures to enable the enforcement of judgments.

13 The agreement reached as part of the settlement of the first action was admitted by the respondent in his defence. A question arose at the trial before the learned magistrate as to the meaning of the term "premium washable potatoes" used in the terms of the agreement. The magistrate found that this term meant "generally" premium quality potatoes and that a load of potatoes answering this description would contain 60 to 70 per cent of potatoes graded as "premium" or "premium number one". This finding was not disputed at the hearing of the appeal before me.

14 The agreement required that the delivery of potatoes take place on or before 31 March 1995. There was evidence of various offers of potatoes made by the respondent to the appellant from late 1994 to September 1995 in order to comply with the terms of the compromise agreement. The learned magistrate held that all but one offer fell short of complying with the requirement for delivery of 22 tonnes of premium washable potatoes. Towards the conclusion of his judgment, he referred to an offer of the supply of potatoes which he considered would have satisfied the compromise agreement, but which was wrongfully refused by the appellant. The learned magistrate found that this refusal constituted a repudiation of the agreement by the appellant. He said:

"The case ultimately turns upon my finding that there was a rejection by Mondello of potatoes grown on the Landiluke pivot (and offered to him in satisfaction of the terms of settlement) because they would yield only 60 per cent premiums. The defendant was willing to supply those potatoes. He offered to and Mondello wrongly refused to accept them. The plaintiff thereby repudiated the contract.

In an endeavour to satisfy Mondello the defendant at that time agreed to supply the Desiree potatoes requested. He was not, for a variety of reasons including unseasonable rain, able to supply Desiree potatoes which were of 'generally' premium quality.

The facts found establish that the defendant was, prior to 31 March 1995, ready willing and able to supply potatoes in accordance with the terms of the agreement and the plaintiff would not accept them. It is true that the defendant did not tender an actual delivery. But he was excused from doing so the plaintiff having already wrongfully rejected those potatoes. The facts might have been pleaded as raising the defence of tender. It is a defence not pleaded but the facts which give rise to that possible plea are before the Court, issue upon them has been joined and, if necessary, I would permit the pleading to be amended. However, the facts found fit within what the plaintiff has suggested is necessary to raise the defence of repudiation and in the circumstances I find the defence to have been made out.

15 Earlier in his reasons for judgment the learned magistrate made findings relating to the potatoes referred to in the above passage which were growing at the location known as the Landiluke pivot and which were offered to, but rejected by, the appellant. He found that in late January or early February 1995 the respondent harvested varieties known as Kennebec and Coliban potatoes at Landiluke and offered a load of 22 tonnes to the appellant. The appellant's agent, Mitchell, went to the property and inspected the potatoes. He took a sample away with him. The respondent spoke to Mitchell on that occasion and suggested that he look at other crops as well. Mitchell did so. There was a discussion about the potatoes at this other location known as Gericke No. 1 and the respondent informed Mitchell that he could not harvest these potatoes for about three weeks until he moved his plant to that location. The magistrate found that the respondent was willing to supply those potatoes when he moved the plant. Later Mondello rang the respondent. The learned magistrate summarised the conversation as follows:

"A few days later Mondello rang the defendant and told him that the potatoes taken from the Landiluke property were yielding only 60 per cent premium quality. The defendant offered to dig those potatoes but Mondello refused to accept them. A crop bearing 60 per cent of premium potatoes fits within the plaintiff's own expert's expectations of what a load of 'generally' premium potatoes should contain.

There was then a discussion between Mitchell and the defendant concerning Desiree potatoes which the defendant was growing at Gericke No. 1. Mondello requested that the defendant supply Desiree potatoes from Gericke No. 1 and the defendant agreed to do so but warned the plaintiff that they would not be ready until mid May 1995."

16 The repudiation found by the learned magistrate is based on this telephone conversation. The magistrate appears to have accepted the version of the conversation which was given by the respondent in his evidence which was as follows:

"A He thanked me for the samples I sent up there and he said the potatoes were [sic] I am digging would only yield 60 per cent premiums but up on this pivot site, Gericke, No. 1, the Coliban were excellent and he would like a load of those and I said, 'Well, they haven't been sprayed off, they are still growing' and I was harvesting this patch because of the distance of 50 km. I just couldn't leave that patch to dig those, but that maybe in two or three weeks time and I would harvest them. I would go and spray them off shift my plant and equipment after finishing Gereckes and he said what about those Desiree. And I said, 'Well you can't harvest them they are only very young'. He said, 'He would like them'.

Q What then happened, you told him that they weren't ready to be dug?

Q Was that in essence the conversation with you, that you had with him?

A I indicated to him I would like to dig a load of potatoes to satisfy the agreement.

A No, because he said you only get 60 per cent premiums out of them.

Q Notwithstanding, that you were prepared to dig the white ones out for him. At that time, did you agree that he could have the Desiree?

Q That he wanted that he was prepared to wait for them?

A I said to him we have to have this out of the way before March. He said Desiree potatoes are a new spud and hard to get hold of, you have to wait. It may be middle April before they are ready. He said I'll wait for the Desiree."

17 I cannot agree that there was evidence sufficient to justify a repudiation of the agreement and counsel for the respondent on the appeal did not argue strongly in favour of such a finding. It has been pointed out that repudiation of a contract is a serious matter and is not to be lightly found (Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620). It would be strange for the appellant to evince an intention not to be bound by a contract which was for the appellant's sole benefit.

18 In my view the circumstances of this case fall a long way short of supporting the inference that there had been a repudiation. The remarks of Mason CJ in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 are apposite. After referring to observations by Fullagar J in Carr v JA Berriman Pty Ltd [1953] HCA 31; (1953) 89 CLR 327 at 351 that one party was entitled to treat the contract as at an end if the other party evinced an intention not to be bound by the contract, Mason CJ said:

"Fullagar J. went on to say that the intention evinced was 'an intention not to be bound by the contract' and that, upon that intention being shown to exist, the other party was entitled to treat the contract as at an end (1953) 89 CLR at pp 351-352. What his Honour said in this respect accords with later statements upon the topic by members of this Court. In Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 at pp 625-626, Gibbs CJ stated that:

'... a contract may be repudiated if one party renounces his liabilities under it - if he evinces an intention no longer to be bound by the contract ... or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way ...'

See also Progressive Mailing House Pty. Ltd. v Tabali Pty. Ltd. [1985] HCA 14; (1985) 157 CLR 17 at pp 33, 40."

19 In the present case the respondent and Mondello were discussing alternative sources of potatoes from which the respondent's obligation might be met. There is nothing in the discussion to support the view that, because Mondello said he did not wish to accept a particular load of potatoes because of inadequate quality as perceived by him, that an intention not to be bound was demonstrated and accepted by the respondent as such. This was no more than one of a series of proposals being discussed between the parties. The very fact that Mr Mondello agreed to wait for other potatoes to be delivered to him indicates that he was anxious that the obligation to deliver should remain and it is equally obvious that the respondent understood that to be the case. The two men were simply discussing another way to perform the contract.

20 The learned magistrate's dismissal of the action on this ground cannot be justified.

21 It remains, however, to consider whether the appellant proved the breach of the agreement which is alleged against the respondent. It is clear that the potatoes were not delivered, but the question arises as to whether the delay in delivery is such that the appellant was entitled to terminate the agreement at the time which it did and sue for damages. The first action was settled on 19 July 1994 and the time agreed upon for the delivery of the potatoes was on or before 31 March 1995. I have referred to the fact that the appellant's agent Mitchell inspected the Landiluke potatoes. This seems to have been in January or February 1995. When Mondello said he did not want the Landiluke crop, but would take the Desiree potatoes from Gericke No. 1 he was warned that they would not be ready until mid-May 1995. Mondello agreed to wait and so it must be acknowledged that he impliedly waived the requirement that the delivery to which he was entitled would occur by 31 March 1995. Clearly then, the appellant cannot rely on a breach of the agreement on 31 March 1995 as is alleged in the particulars of claim.

22 The dealings between Mondello and the respondent lead to the conclusion that the obligation to deliver the potatoes by 31 March 1995 was replaced by an obligation to deliver them in a reasonable time. I do not accept that the initial obligation was replaced by an obligation to deliver at a specific time, namely, in May. Rather it was contemplated that the delivery would take place within a reasonable time and that it would be fulfilled by delivery of Desiree potatoes from the Gericke No. 1 location which could be expected in May.

23 In May the respondent offered to deliver the Desiree potatoes to Mondello who was unable to accept them because of the relocation of his washing plants. Although these potatoes were not of the required quality, it is apparent from the evidence that Mondello would have accepted them if it had not been for this disruption. A short time later these potatoes were destroyed by heavy unseasonable rain and Mondello was advised of this occurrence. The requirement to deliver the potatoes within a reasonable time remained, but in determining what was a reasonable time it was important to take into account that up to this point the respondent had made two attempts to supply potatoes to the appellant and on each occasion the attempt had been frustrated through no fault of his own. Of course the test is not whether the respondent acted reasonably, but rather whether there was delivery within a reasonable time. Nevertheless the events to which I have referred cannot be disregarded in determining what was a reasonable time in the circumstances.

24 In mid-July the respondent offered Coliban potatoes to Mondello. They were rejected and it was not established that they were of the required quality. In September 1995 the defendant offered three options by way of deliveries to the appellant. The learned magistrate found that the potatoes which were the subject of the first option were not of the required quality. The second option was the payment of a sum of money and the magistrate found that Mondello was justified in refusing to accept this offer. The third option involved the supply of potatoes but it was not established that these were of the required quality. The appellant refused the offers but the evidence discloses that the question of supply was still being discussed between Mondello and the respondent as late as September 1995.

25 I have expressed the view that the learned magistrate was incorrect in finding that the appellant had repudiated the agreement. I have said that in my view the obligation to deliver by 31 March 1995 was replaced by an obligation to deliver within a reasonable time. It is also my view that there had been no breach of the agreement by the respondent as at 30 October 1995 when the first proceedings to recover damages were taken. The respondent had been thwarted in his efforts to fulfil his obligation in February 1995 when he offered the Kennebec and Coliban potatoes from the Landiluke site to the appellant. This offer, if accepted, would have satisfied the requirement to deliver "22 tonnes of premium washable potatoes" according to the meaning of that expression as found by the magistrate. It must also be borne in mind that the Desiree potatoes which the appellant would have accepted could not be delivered at a time when they were ready because it did not suit the appellant's convenience. As I have pointed out, they were then destroyed by rain in about May 1995.

26 The appellant's counsel conceded that further discussions revolved around an anticipated delivery in July. Discussions about ways in which to effect the respondent's obligation were still going on in September. Against this background and the fact that Mr Mondello, contrary to the magistrate's findings, was of the view that all the potatoes had to be of premium quality instead of only 60 per cent as found by the magistrate, it cannot be said that the respondent had breached the agreement by the date of the issue of the proceedings on 30 October 1995. After that time it is clear that Mr Mondello was not prepared to entertain any offers made by the respondent. It is also of some significance to note that the appellant did not attempt to bring the matter to a head by serving on the respondent a notice to complete within a reasonable time.

27 In my view the appellant has not established that the respondent failed to deliver potatoes of the required quantity and quality within a reasonable time. It follows that the appeal must be dismissed.