Allied Express Transport Pty Limited v BGL Operations Pty Limited

District Court of NSW|2010-03-19

CITATION: Allied Express Transport Pty Limited v BGL Operations Pty Limited [2010] NSWDC 47

HEARING DATE(S): 8/2/10 - 10/2/10, 19/2/10 and 19/3/10

CATCHWORDS: Contracts for carriage of ice - Consideration of whether oral agreement was made - classification of written agreement within Masters v Cameron categories - Meaning of "market price" within context of contractual obligation to purchase equipment - Market dominated by defendant - Defendant not entitled to take advantage of its own wrong in order to minimise damages payable - Consideration of whether Plaintiff acted reasonably

Masters v Cameron (1954) 91 CLR 353 Baulkham Hills Private Hospital Pty Limited v G R Securities Pty Limited (1986 40 NSWLR 622 Jones v Dunkel (1959) 101 CLR 298 European Bank Limited v Robb Evans of Evans and Associates (2010) HCA 6 (10 March 2010) Tabcorp Holdings Ltd v Bowen Investments Pty Limited (2009) 236 CLR 272 Robinson v Harmon (1848) 1Exch 850 Howie v Crawforde (1990) 8 ACLC 3077 CASES CITED: MMAL Rentals Pty Limited (CAN 008 293 490) v Bruning (2004) 63 NSWLR 167 Spencer v The Commonwealth of Australia (1907) 5 CLR 418 Alghussein v Eton college (1988) 1 WLR 587 Ruthol Pty Limited v Mills & Ors (2003) NSWCA 56 Charington & Co Limited v Wooder (1913) AC 71 Codelfa Constructions Pty Limited v State Rail Authority of NSW (1982) 149 CLR 337 Reardon Smith v Hansen-Tangen (1976) 1 WLR 989 Banco de Portugal v Waterlow & Sons Limited (1932) AG 452 Segenhoe Ltd v Atkins (1990) 29 NSWLR 569

PARTIES: Allied Express Transport Pty Limited (Plaintiff) BGL Operations Pty Limited (Defendant)

COUNSEL: T J Davie (Plaintiff) R H Weinstein (Defendant)

1 The plaintiff in these proceedings, Allied Express Transport Pty Limited, conducts the business of a local courier and interstate freight transport operator. The plaintiff and related entities operate nationally with over 1000 vehicles and an annual turnover in excess of $100 million.

2 The defendant, BGL Operations Pty Limited, is the largest supplier of packaged ice in New South Wales. The defendant trades under the name "Bells Pure Ice". It produces approximately 25,000 tonnes of ice each year and the ice is sold in approximately 1,300 outlets throughout New South Wales.

3 In February or March 2006 the defendant decided that it was not satisfied with the services provided to it by another transport company which was referred to in the evidence as "Axis". As a consequence, the directors of the defendant, Adam Lucas Port and Alex Abulafia, consulted the transport and logistics consultants known as Logiworx Pty Limited ("Logiworx"). The defendant appointed Logiworx to review its transport requirements, develop a distribution system and to assist it in locating a new transport provider.

4 As a consequence, in May 2006, the defendant issued a Request for Proposal ("RFP") to selected transport companies, excluding Axis. The defendant was concerned that if Axis became aware of the RFP it might immediately withdraw its services. So the defendant was keen to appoint another company in the place of Axis to provide transport services on an interim basis until a tenderer was selected.

5 Logiworx recommended to the defendant that it approach the plaintiff to provide these interim transport services and see if it was interested in tendering. Following this approach in June 2006, the plaintiff decided it would put a tender together. It also immediately commenced providing transport services to the defendant on an interim basis.

6 When these proceedings were commenced in October 2007, the parties were in dispute about a number of matters, including the terms of the agreement made in June 2006 for the supply of transport services relating to the delivery of ice. However, when the matter came on for final hearing on 8 February 2010, the only issue which remained for the Court to determine was the plaintiff's claim concerning equipment. This is pleaded in paragraphs 16 - 25C of the Further Amended Statement of Claim filed on 30 October 2009. The claim is pleaded on a number of different bases.

7 First, the plaintiff claims that it entered into an oral agreement with the defendant on 3 August 2006. The defendant denies that there was a concluded agreement made between the parties on that day.

8 Alternatively, the plaintiff says that the defendant represented to the plaintiff on 3 August 2006 that it would pay for the equipment, that the plaintiff relied on these inducements and therefore the defendant is estopped from denying that it agreed to pay for the equipment.

9 Thirdly, the plaintiff relies on a written agreement made on or about 7 September 2006 entitled "Heads of Agreement between Bells Pure Ice and Allied Express". It is convenient to adopt the description given by the parties to this document, namely, the "Interim Agreement".

10 The defendant admits that it entered into the Interim Agreement with the defendant and relies on it as regulating the issues between the parties to be determined by the Court.

11 The equipment that is the subject of dispute is as follows: (a) 10 Pallet jacks, ordered on 15 September 2006 and which were delivered on 30 October 2006. These cost the plaintiff $52,250.

(b) One 1996 international ACCO 2350 tautliner truck registered as YEB 247, which was a retrofit of the plaintiff's own vehicle, and which arrived at the premises of the plaintiff on 23 November 2006, having been ordered on 15 September 2006 at a cost of $58,496.

(c) One 1994 Barker Chiller tautliner trailer which arrived at the plaintiff's premises on 23 November 2006, having been ordered on 23 October 2006. It was purchased for $57,050.

(d) One 1984 Maxicube insulated trailer which arrived at the plaintiff's premises on 15 December 2006, having been ordered on 21 November 2006. Its cost was $36,417.

(e) One tautliner truck, registered at WIG 858, which was a retrofit of the plaintiff's own vehicle, and which arrived at the plaintiff's premises on 15 December 2006.

12 The defendant does not dispute the date the equipment was ordered or purchased. Nor is there any dispute about the price paid for each piece of equipment.

13 I will deal first with the plaintiff's claim that it entered into an oral agreement with the defendant on 3 August 2006.

14 Colin Albert McDowell is the Chief Executive Officer of the plaintiff and its founder. Mr McDowell said that since the beginning of this century the plaintiff has had a commercial relationship with Logiworx. Most of his dealings were with either Peter Jones or David Irvine of Logiworx. Through these dealings the plaintiff was introduced to important clients.

15 It was through this connection with Logiworx that Mr McDowell heard about the defendant putting its work out to tender. Through Logiworx the plaintiff then sent an RFP to the defendant. Shortly after this, the plaintiff was asked to provide transportation services on a short term basis, which it did.

16 The demand for ice is seasonal; there is not much demand in winter, then there is a build up in late spring and early summer and that is followed by periods of high demand around about Christmas and the New Year. In this respect, the plaintiff did not have a fleet of refrigerated vehicles which could do the job and so the task of working out how this could be done was allocated to the plaintiff's General Manager, Noel Ryles.

17 Mr Irvine of Logiworx arranged a meeting between the parties to discuss this on 3 August 2006. Mr Ryles and Mr Hamilton attended the meeting on behalf of the plaintiff, Mr Irvine and Mr Jones were present on behalf of Logiworx, and Mr Port and Mr Abulafia attended on behalf of the defendant. Mr McDowell joined the meeting some time after it started.

18 In his affidavit in chief Mr Ryles said that he told the meeting that he required a core fleet of 4 refrigerated pantechicons operating all year round to meet the defendant's minimum demand. It would be necessary to add to the fleet for spring and summer. At that point Mr Ryles was suggesting 5 tautliners with refrigeration and insulated curtains installed in them. He said that the tautliners would not be as effective as refrigerated pantechnicons but would be about a third of the cost. Mr Ryles envisaged that the plaintiff could either fit out or retrofit 5 tautliner vehicles from within its own fleet. He informed the meeting that the tautliners would not be able to carry ice for long periods but he proposed to plan for this. He indicated that when the 5 tautliners were not required during the winter they could be used for normal taxi truck work, that is, courier work over relatively short distances in the Sydney metropolitan area.

19 Mr Ryles also said that he proposed to advertise for four sub-contract drivers who owned refrigerated pantechnicons and he reckoned at that point that the total cost would be in the order of about $400,000 by the time supplementary equipment such as pallet jacks had been purchased. Mr Ryles told the meeting that his idea of retrofitting 5 of the plaintiff's own vehicles would be a much better idea than purchasing 5 new refrigerated pantechnicons because that could cost about $1 million.

20 Mr Ryles gave his oral testimony in a very straightforward, matter of fact way and I consider him to be an honest witness.

21 Mr Ryles said he had not met Mr Port or Mr Abulafia before this meeting and he knew it was the first time they had been to the plaintiff's premises. Critically, Mr Ryles' evidence in cross-examination was that prior to this meeting he had only had preliminary discussions with Mr Irvine of Logiworx about what he had in mind in terms of the plaintiff being able to meet the defendant's requirements. In cross-examination, Mr Ryles described his approach to the meeting on 3 August 2006 merely as presenting his "idea". Although Mr Ryles had outlined his idea before the meeting to Mr McDowell, it was the first time he had put it forward to the other parties who attended on 3 August 2006.

22 Mr Ryles also agreed in cross-examination that at the meeting a number of matters were canvassed including the difficulties the defendant had with the delivery of ice, the equipment that the defendant's directors thought was necessary to transport it and so on. Mr Ryles agreed that at the meeting he did not really know how much it would cost to implement the proposal he had outlined although he had a rough idea. In this respect, Mr Ryles agreed that Mr Port said at the meeting that if the plaintiff retrofitted the vehicles, when the defendant knew what the cost was, it would work out a way to pay for the retrofit. Mr Ryles conceded that, at the very least, he would have to inform the defendant of the cost of the refit before the defendant agreed to pay for it. Mr Ryles conceded that the plaintiff would have to do more work before the defendant could agree to pay the cost of the retrofit and this was because, at its highest, he was only presenting an idea to the meeting. Mr Ryles reiterated that both before and after the meeting of 3 August 2006 he was not sure how the plaintiff was specifically going to be able to provide the services to the defendant on an ongoing basis. No decisions had been made to purchase equipment and Mr McDowell had not given Mr Ryles any go ahead in this regard because the situation was uncertain.

23 In addition, although during the meeting Mr Ryles mentioned the retrofit of 5 tautliner vehicles from the plaintiff's own fleet, he agreed that, down the track, this did not occur. In fact, the plaintiff purchased two rigid vehicles as well as one insulated trailer and one tautliner trailer. The latter two were retrofitted to suit the defendant's needs. Although there was a third vehicle which was to be refitted, it never eventuated.

24 Barry Hamilton is the plaintiff's General Manager, Operations. In his oral testimony Mr Hamilton said that he was aware that Mr Port and Mr Abulafia were coming to the plaintiff's premises for the first time and to look at the plaintiff's operation.

25 Mr Hamilton said that Mr Ryles "presented his concept" to the meeting (T 101) but that Mr Ryles was not authorised at that point in time to expend any money on any retrofit.

26 In his cross-examination, Mr Abulafia said he did not recall Mr Port saying after Mr Ryles presented his plan at the meeting on 3 August 2006 that the defendant would reimburse the plaintiff for the cost of any retrofit. He also said that a concept was presented at the meeting whereby, during the performance of the contract, it was envisaged there would be a component which would ensure that the cost of the retrofit would be addressed (T 166). At that point the defendant was still examining a number of different RFP's which it had received and there was no certainty as to what the outcome would be.

27 In both his affidavit, evidence in chief and his cross-examination, Mr McDowell sought to assert that through Mr Port and Mr Abulafia, at the meeting on 3 August 2006, it had firmly agreed to accept Mr Ryles' proposal. Whilst I am satisfied that Mr McDowell held this belief honestly, I do not consider that his evidence accurately reflects what occurred at the meeting. Mr McDowell regards himself as an honourable man and the Court does not doubt that he is. However, he was under the mistaken impression that this is the way in which the defendant would see him, through the eyes of Mr Port and Mr Abulafia, and because the plaintiff subsequently purchased vehicles and so on, both Mr Port and Mr Abulafia understood they were agreeing to a firm arrangement because that is what it was in the mind of Mr McDowell on 3 August 2006.

28 The Court is of course obliged to look at the matter objectively. In doing so, I do not accept that Mr McDowell's evidence accurately reflects the contractual position as at 3 August 2006. I am satisfied that the evidence goes no higher than establishing that Mr Ryles floated an idea at the meeting on 3 August 2006 which was generally met with approval by Mr Port and Mr Abulafia on behalf of the defendant without the intention of entering into a binding arrangement. They were still considering other proposals. As well, Mr Ryles had to progress his idea and put something concrete to the defendant. Whilst the plaintiff worked on this, in the meantime it supplied transportation services to the defendant. It was only after the meeting that Mr Ryles started to investigate the cost of the equipment. It was only then that Mr McDowell authorised him to go ahead with the purchase.

29 In all those circumstances, I am satisfied that there was no agreement made by the plaintiff with the defendant on 3 August 2006.

30 In paragraphs 25C.1 - 25C.4 of the Further Amended Statement of Claim the plaintiff pleads its case in estoppel essentially on the basis of the discussion that took place on 3 August 2006. However, for the same reasons expressed in connection with the claim about the oral agreement, I am satisfied that the defendant did not represent to the plaintiff that it would pay for the equipment or, indeed, that the plaintiff should go ahead and purchase the equipment. In any event, I accept the submission made by counsel for the defendant that what was said at the meeting did not induce the plaintiff to purchase the equipment and it did not in fact purchase equipment until a date shortly after the Interim Agreement was signed by Mr McDowell on 7 September 2006. It was only after this occurred that Mr Ryles was authorised by Mr McDowell to purchase the equipment as Mr McDowell makes clear in paragraph 13 of his affidavit in reply.

31 Accordingly, the plaintiff fails on its estoppel claim.

32 Following the meeting on 3 August 2006 there were further discussions between the parties culminating in Mr McDowell signing the Interim Agreement on 7 September 2006 on behalf of the plaintiff and Mr Port signing it on 9 September 2006 on behalf of the defendant.

33 The Interim Agreement is exhibit B and both parties rely on it in the cases they have presented to the Court.

34 Following the execution of the Interim Agreement, the plaintiff had the two vehicles identified in paragraph 11 (b) and (e) of this judgment retrofitted. It also purchased the two trailers and pallet jacks identified in paragraph 11 (a), (c) & (d).

35 Although Clause 1.1.1 of the Interim Agreement described it as a "non-binding agreement", as I have said, both parties accepted that it constituted a binding contract between them.

36 Clause 1.1.1 referred to the Interim Agreement being "subject to contract" and.Clause 2.2.1 referred to the capital expenditure for the equipment being "amortised for the period of the contract". Clause 2.2.2 recorded: "Bells enter this Heads of Agreement with a view to a 5 year performance based contract."

37 Counsel for the defendant submitted that the contract referred to in Clause 2 should be classified as either within the first category stipulated in Masters v Cameron (1954) 91 CLR 353 or as being within the fourth class identified in Baulkham Hills Private Hospital Pty Limited v G R Securities Pty Limited (1986) 40 NSWLR 622. In my opinion, the case falls within the fourth class because on close analysis, the provisions of the Interim Agreement demonstrate to my mind that the parties were content to be bound immediately and exclusively by the terms they had agreed on but, nevertheless, they expected to make a further contract in substitution for the first one. I have reached this conclusion because Clause 8.2 of the Interim Agreement contemplates that further terms of a formal contract might or might not be agreed. This therefore takes the case outside the first category in Masters v Cameron.

38 The Court's categorisation of the Interim Agreement is important insofar as the operation of Clause 2.2 is concerned. That clause deals with amortisation "for the period of the contract". In my opinion, it could only have applied if, indeed, the parties had entered into a further contract.

39 Accordingly, insofar as the plaintiff pleaded in paragraphs 25A 1 -.7 that it was entitled to recover the cost of the equipment in accordance with the provisions of Clause 2.2 and the schedule attached to the Interim Agreement, such claim fails.

40 At the end of the day, the plaintiff's case rested on the provisions of Clause 8 of the Interim Agreement: " Completion of Agreement

8.1 The parties agreed to work to complete the draft contract agreement and execute and exchange the signed parts by the 30th of September 2006.

8.2 If said contract can not be agreed and executed for any reason by 30th November 2006, or Bells Pure Ice decide not to proceed to execute said contract with Allied Express, then all retro fitted vehicles, and materials handling equipment configured to perform work for Bells Pure Ice will be purchased by Bells Pure Ice from Allied Express at the vehicle/equipment market price."

41 The defendant accepted that, broadly speaking, Clause 8.2 of the Interim Agreement made provision for a breakdown in the relationship between the parties. In this respect, the defendant accepted that Clause 8.2 contained a direction to it to purchase the equipment at market price. However, the defendant contended that it was never given an opportunity to purchase the equipment because the plaintiff chose to keep it in its possession and never insisted that the defendant purchase it. The parties then went their separate ways and, so the argument goes, whatever loss the plaintiff now says it suffered should not be visited upon the defendant.

42 Given the submission made by the defendant, it is necessary to examine the circumstances which unfolded after the Interim Agreement was executed by the parties.

43 About one week after the plaintiff signed the agreement Mr Ryles obtained quotes from Mark Williams to retro fit three tautliners. He discussed the quotes with Geoffrey Gill, the defendant's plant manager, on the same day. After this discussion, Mr Ryles accepted the quotes, although, in the events that happened, only two of the tautliners were retro fitted. This is because Mr Ryles came across another vehicle himself and purchased it on 24 October 2006 from Trucks R Us for $45,000 and bought a tailgate to fit it from a company known as RADS for $12,050. This was all done with Mr Gill's consent.

44 Around about this time the plaintiff ordered 10 pallet trolleys for $52,250 and Mr Ryles informed Mr Gill accordingly. On 21 November 2006 the plaintiff ordered the maxi cube semi-trailer with tailgate and arranged a retro fit of tautliner WIG 858. I am satisfied this order was confirmed by Mr Ryles with Mr Gill.

45 By 15 December 2006 the plaintiff had obtained delivery of all of the equipment which is the subject of its claim against the defendant. In this respect I am comfortably satisfied that, through Mr Gill, the defendant knew about and approved these purchases no later than 23 November 2006.

46 In terms of the progression to the next stage, that is the completion of "the draft contract agreement" and its execution and exchange by 30 September 2006 envisaged under Clause 8.1 of the Interim Agreement, the evidence is as follows.

47 In mid-September 2006 Mr Irvine of Logiworx, acting on behalf of the defendant, telephoned John Richardson. Mr Richardson was the plaintiff's National Operations Administration Manager and looked after its contracts.

48 In his conversation with Mr Richardson, Mr Irvine asked him to prepare a first draft based on the plaintiff's standard contract.

49 On 19 September 2006 Mr Irvine sent Mr Richardson an email encouraging him to provide the document so that Mr Irvine could get the ball rolling with the defendant.

50 On 21 September 2006 Mr Richardson sent Mr Irvine the first draft of the agreement (exhibit JR 6 to Mr Richardson's affidavit). Although Mr Irvine responded by thanking Mr Richardson for sending him the draft, that was the only response Mr Richardson ever received about it.

51 Mr Abulafia's evidence in cross-examination was that, as between him and Mr Port, Mr Port was responsible for the operational side of the defendant's business and Mr Abulafia was responsible for looking after the defendant's contracts. In this respect, Mr Abulafia said he instructed a firm of solicitors, VPro to prepare a draft contract which was attached to each RFP that was sent out (exhibit C).

52 Mr Abulafia was asked about the draft contract which Mr Richardson sent Mr Irvine on 21 September 2006. He was asked whether he recalled seeing a copy of it and he said that he did not recall the exact date but he recalled "that a draft services agreement was circulated following which a meeting was soon held to address that".

53 When shown Mr Richardson's email of 21 September 2006 to Mr Irvine (annexure V to Mr Richardson's affidavit), Mr Abulafia could not recall if it was forwarded to him (T 169).

54 Mr Abulafia was shown the draft contract which Mr Richardson had sent Mr Irvine. When asked if it jogged his memory, Mr Abulafia first stated that he remembered attending a meeting to discuss it (T 170.6), but next said at T 170.22): "I'm not saying I didn't receive it, I just cannot remember it."

55 When it was put to Mr Abulafia that Mr Richardson's evidence was that, apart from Mr Irvine thanking him on 22 September 2006 for sending the draft contract, Mr Richardson heard nothing further about it, Mr Abulafia did not dispute that (T 170-171).

56 Mr Abulafia accepted that it was a mutual obligation of the parties to work towards finalising the draft contract and that he was responsible for doing this on behalf of the defendant.

57 Mr Abulafia was asked a number of questions about his knowledge and understanding of the Interim Agreement, that is to say, whether he knew that the defendant did not have to pay for the equipment by way of amortisation until such time as the draft contract was formalised and executed by the parties. Initially, Mr Abulafia claimed that he was not aware of that (T 172.15), but when pressed further, he agreed with the proposition at T 173.9.

58 When it was put to Mr Abulafia that it was not to the defendant's disadvantage if it did not execute the final contract because it delayed the obligation to pay for the equipment by way of amortisation, he said he was not conscious of this at the time. I do not, however, accept this evidence. Having seen and heard both Mr Port and Mr Abulafia in the witness box I have concluded that they are both extremely astute businessmen who are careful and thorough in their business dealings. In this respect, I am satisfied that Mr Abulafia was acutely aware of the favourable position that the defendant found itself in by the end of September 2006 because the plaintiff had embarked on the purchase of the equipment. Further, by 30 November 2006 the defendant was in an even better position because the plaintiff had finalised the placing of the orders for the purchase equipment which is the subject of its claim in these proceedings.

59 Mr Abulafia was shown a marked up version of the draft contract which Mr Richardson had sent Mr Irvine. (This document is annexure ALP 6 to Mr Port's affidavit). When pressed about it, Mr Abulafia agreed that he would have been involved in the marking up of the document. Mr Abulafia also agreed that the marked up copy had not been sent to the plaintiff.

60 The marked up copy of the contract bears the date "1 November 2006". Around about that time of the year demand for ice started steadily increasing.

61 Although Mr Abulafia rejected the suggestion that the marked up draft contract was not sent back to the plaintiff because it was not in the interests of the defendant to do so at that time, I do not accept his evidence. The defendant had the plaintiff exactly where it wanted because it knew that most of the equipment had been ordered and that the plaintiff was already delivering ice. The fact was the defendant had been dissatisfied with the performance of its previous contractor Axis and it suited the defendant to proceed with caution and to assess the plaintiff's performance over the coming months. It therefore suited the defendant not to take the matter further at that point in time, leaving it with the upper hand. Certainly, in this respect, I am satisfied that at least by 30 November 2006 the defendant, through Mr Abulafia, had made a conscious decision not to finalise the form of the contract with the plaintiff until a point in time which suited it. In reaching this conclusion I have taken into account Mr Abulafia's failure to give any satisfactory or adequate explanation to the Court as to why the matter was not progressed within the defendant's organisation. To the extent that he suggested in his evidence that the ball was somehow or other in Mr Irvine's court, Mr Irvine was acting for the defendant as its agent. Mr Irvine is still active within the transport industry and is located in Sydney. There was no reason why Mr Irvine could not be called to give evidence on behalf of the defendant and its failure to do so leads me to draw an inference, adverse to the defendant, that Mr Irvine's evidence would not have assisted the defendant on this aspect of its case (Jones v Dunkel (1959) 101 CLR 298).

62 On the basis of the above findings I am satisfied that the defendant had decided not to proceed to execute the contract by 30 November 2006 or within a reasonable time. I am further satisfied that this decision had been made by the defendant at least at the beginning of November 2006, if not earlier.

63 In addition, Clause 8.1 of the Interim Agreement contains a mutual obligation on the parties to work together to complete the draft contract. I am satisfied that the defendant breached this provision by virtue of the fact that, after receiving the draft contract and marking it up, the defendant did nothing further. This failure was "another reason" why the contract was not "agreed and executed … by 30 November 2006" as contemplated by Clause 8.2.

64 As mentioned, the defendant submitted that the plaintiff never requested the defendant to purchase the equipment. The defendant sought to tie this in with "the breakdown of the relationship" in June 2007.

65 First of all, by reason of the events which occurred, as per the Court's findings, the onus was on the defendant to purchase the equipment as at 1 December 2006. It made no attempt to do so.

66 Secondly, the meetings which took place between the parties through early 2007, culminating in a meeting of 5 June 2007, were concerned with attempts to sort out the problems which had occurred while services had been provided on an interim basis. The problems discussed included how much the plaintiff claimed it was owed for those services and how much the defendant was prepared to pay it.

67 Thirdly, at the meeting on 5 June 2007, the defendant made it clear, through Mr Port, that it was never going to purchase the equipment. Mr Hamilton's file note of the meeting (annexure P to his affidavit) records: . "the conversation then moved to the equipment. Adam (Port) said that we can keep the equipment and that none of it works anyway."

68 Mr Port added that the plaintiff had "brought the wrong brands and old stuff that did not work".

69 Mr Hamilton's note further records: . "We said that we would check and come back to him."

70 Although the defendant sought to do so, in my opinion, it cannot rely on the fact that the plaintiff did not respond to Mr Port's criticism as a means of absolving the defendant from its obligation to purchase the equipment under the Interim Agreement. The plaintiff was simply going to check on the accuracy of the assertion and let the defendant know its view. Nothing had otherwise changed because the defendant had already told the plaintiff to keep the equipment and it had made it clear it was not going to change its mind.

72 In assessing the plaintiff's damages, the Court is required to ensure that the plaintiff is put in the same position as if the contract had been performed, that is, as if the defendant had purchased the equipment: European Bank Limited v Robb Evans of Evans and Associates (2010) HCA 6 (10 March 2010); Tabcorp Holdings Ltd v Bowen Investments Pty Limited (2009) 236 CLR 272; Robinson v Harmon (1848) 1Exch 850.

73 A critical issue in the determination of this case is the meaning of "market price" in Clause 8.2 of the Interim Agreement and its application to the facts.

74 The defendant relied on what was said by Vinelott J in Howie v Crawford (1990) 8 ACLC 3077 at 3079-3080 as follows: "The market price of an asset is the price which that asset will fetch in the open market between a willing vendor and a willing purchaser … The addition of the word 'fair' adds nothing except to remind the valuer that the market value must be ascertained on the assumption that there is a willing vendor and a willing purchaser, that there is a fair market and that no one would be excluded from bidding in it."

75 The defendant also relies on the interpretation given to the words "market value" in various cases. Reference was made to the detailed discussion about that by Spigelman CJ in MMAL Rentals Pty Limited (CAN 008 293 490) v Bruning (2004) 63 NSWLR 167 at 47-61 where it was stated: "A test of a 'market value', whether in a statutory or contractual context, usually invokes the test long established and frequently applied in Spencer v The Commonwealth of Australia (1907) 5 CLR 418 esp. at 432 and 440-441 of a willing but not anxious purchaser and vendor, bargaining with each other."

76 For its part, the plaintiff submitted that "market price" meant the price that a purchaser in the position of the defendant would have had to pay to acquire the equipment as at 1 December 2006.

77 Appreciating that market value is not always the same as market price, it is nevertheless worth noting the following statement of Isaacs J in Spencer v The Commonwealth with reference to the land in question in that case as follows at 440-441: " The facts existing on 1st January 1905 are the only relevant facts , and the all important fact on that day is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted." ( Emphasis Added )

78 In my opinion, looking at the contract as a whole in this case, the Court has to bear in mind that the specific purpose of the equipment was its availability and suitability for carrying the defendant's ice. There can be no doubt that the plaintiff, in retrofitting some of the vehicles, did so in order to make them adaptable for this specific purpose. In effect, the result was a "hybrid" in the case of the vehicles which were retrofitted. In this respect, in my opinion, the defendant cannot take advantage of its own breaches by asserting that, on the facts peculiar to the case, the Court should ignore the price paid by the plaintiff for the equipment and should determine the price with reference to what might be available in a general market place (where it would be difficult to achieve a sale). I accept the plaintiff's submission that if the Court were to do this it would allow the defendant to take advantage of its own wrong: Alghussein v Eton College (1988) 1 WLR 587; Ruthol Pty Limited v Mills & Ors (2003) NSWCA 56 (at 94).

79 The best evidence before the Court about the market price as at 1 December 2006 is the evidence of what the plaintiff paid for the equipment. Further, on the facts that existed at that date, it is abundantly clear from Mr Port's evidence, in terms of "the market", that the market was either solely the defendant or it was largely dominated by the defendant.

80 Mr Port's evidence in cross-examination at T 112 was that the defendant was the largest supplier of packaged ice in NSW. Although it had about three competitors, each of them was significantly smaller. There were some other competitors in regional centres, maybe 10 all up, but Mr Port described those operators as "minnows" compared to the defendant. By and large they were small family businesses. Although Mr Port would not agree that the defendant dominated the market, he conceded it was by far and away the largest company in the market for ice in New South Wales.

81 In approaching the matter this way, the Court is doing no more than construing the provisions of Clause 8.2 in the light of the circumstances to which it applied: Charington & Co Limited v Wooder (1913) AC 71. In my opinion, Charington v Wooder was referred to with approval by Mason J in Codelfa Constructions Pty Limited v State Rail Authority of NSW (1982) 149 CLR 337 at 351. Mason J referred to Charington v Wooder in the context of the speech of Lord Wilberforce in Reardon Smith v Hansen-Tangen (1976) 1WLR 989 at 995-996 where his Lordship said: "In a commercial contract it is certainly right that the Court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market , in which the parties are operating." (Emphasis added)

82 I therefore propose to assess the plaintiff's damages on the basis of the price paid by the plaintiff for the equipment. In doing so, it is necessary to determine what, if any, deductions should be made from the purchase price of the equipment to arrive at the final figure for damages. In doing so, I have kept in mind the remarks of Lord MacMillan in Banco de Portugal v Waterlow & Sons Limited (1932) AG 452 at 506 that it is sufficient if a plaintiff has acted reasonably. His Lordship's remarks have been accepted in Australian cases: Segenhoe Ltd v Atkins (1990) 29 NSWLR 569. In all the circumstances, I am satisfied that the plaintiff has acted reasonably. I now consider each piece of equipment in turn.

83 The ten pallet jacks were ordered by the plaintiff on 15 September 2006 and delivered on 30 October 2006 at a cost of $52,250. The evidence of Mr Richardson was that two or three of the pallet jacks are at the plaintiff's warehouse. The remaining ones were despatched to the plaintiff's warehouse in Perth where they were used on a one-off basis to relocate pallets within that warehouse. Mr Richardson said that, apart from this, the plaintiff had not been able to put the pallet jacks to use.

84 Mr Richardson said in cross-examination that an attempt was made to sell the pallet jacks to the original supplier. This did not occur because the supplier offered only a "rock bottom price". The plaintiff otherwise made no attempt to sell the pallet jacks.

85 Although a broad submission was made in relation to all the equipment that the plaintiff had not mitigated its loss, no submission was made by the defendant about what amount should be allowed for this in each case. The plaintiff, therefore, claimed the full amount of the purchase price. However, to award the full amount to the plaintiff by way of damages would not be appropriate, given that the plaintiff had a purchaser for the pallet jacks in the form of the original supplier. As Mr Richardson was not asked in cross-examination how much he meant by "rock bottom price", the Court will have to do the best it can and infer that Mr Richardson meant "not very much". I therefore allow $5,000 on this basis. Also, given Mr Richardson's evidence that the pallet jacks were used on a one-off basis in the plaintiff's warehouse in Perth, I propose to allow a further $1,000 for the benefit the plaintiff received, rather than having to hire other jacks to do the job.

86 Thus, after deducting these two sums, the amount of $46,250 will be included in the plaintiff's damages.

87 The plaintiff owned this vehicle before it entered into the Interim Agreement with the defendant. It was worth $13,636 around about that time, as per the plaintiff's damages schedule handed up in Court during final submissions.

88 The cost of the retrofit of this vehicle was $58,496.

90 On 1 November 2007 the plaintiff sold this tautliner to a former employee, Glenn Munroe, for $73,251. Thus the plaintiff's loss is: Cost of Retrofit $58,496

91 The plaintiff sold this vehicle to Mr Munroe for slightly more than its loss, that is, $1,219. Accordingly, this amount will be credited to the defendant as against the damages awarded to the plaintiff for the other items of equipment.

92 The plaintiff purchased this vehicle for $57,050 in total, including the cost of the tailgate.

93 Mr Richardson's evidence was that the plaintiff had been unable to sell this vehicle and that it had a residual value of $30,000 as at the date he made his affidavit. Since two and a half years have elapsed since then, doing the best I can, I allow $15,000 for the residual value of this vehicle. This amount should be deducted from the price paid for the vehicle in order to arrive at the plaintiff's damages.

94 Accordingly, I award the plaintiff $42,050 in respect of this item.

95 The plaintiff purchased this trailer for $36,417. Mr Richardson's evidence was it had an estimated value as at July 2007 of $2,000 - $3,000 but that the plaintiff had been unable to sell it. Nearly 3 years have elapsed since the date of the estimate. Therefore, doing the best I can, I will allow $1,000 for the vehicle's present day value. This should be deducted from the purchase price.

96 Accordingly, I award the plaintiff $35,417 in respect of this item.

97 The plaintiff owned this vehicle before the parties entered into the Interim Agreement. Around about the date of the Interim Agreement the vehicle was worth $31,121.

98 The plaintiff had this vehicle retrofitted at a cost of $70,446.

99 The plaintiff mitigated its loss by eventually selling this vehicle for $75,415. Thus, the plaintiff's loss is: Cost of Retrofit $70,446

Value of Vehicle before Retrofit 31,121 _______ $101,567

Less Sale Price 75,415 ________ Loss $26,152

100 Accordingly, the amount of $26,152 will be included in the plaintiff's damages.

101 In the result, there will be a verdict for the plaintiff in the amount of $148,650.

102 The plaintiff is entitled to interest on the Verdict. I will stand the matter down so the parties can do the calculations.

103 Costs should follow the event on the ordinary basis, but I will hear argument if either party wishes to contend for a different result.

104 I direct that the exhibits be returned.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

At a glance

Court

Decision date

Source

Judgment (117 paragraphs)

Parties

Cases Cited (8)

Cited By (1)