plaintiff. Judgment for the plaintiff in the amount of $31,350,364, subject to adjustment by bringing the amount attributable to the unexpired portion of the contract to net present value using a discount...
Key principles
The SKA was not frustrated by Uniwell's withdrawal because delivery to Uniwell was not the object or purpose of the contract; performance was to Chinatex and Uniwell's conduct...
A plaintiff's claim for damages for breach of contract which seeks compensation for loss directly and naturally resulting from the breach is not converted into a claim in debt...
An implication of a contractual term imposing on the processor an unbounded duty to gather and provide market information to enable the customer to authorise purchases is not...
Damages for future losses over the unexpired contract term should be discounted to present value; a realistic discount rate (in this case 2.375%) is to be applied to produce NPV...
Issues before the court
Was the SKA frustrated by Uniwell's withdrawal making performance radically different?
Is Bindaree's claim a claim in debt (requiring performance) or a damages claim?
Plain English Summary
Bindaree contracted to process 900 cattle a week for Chinatex under a Service Kill Agreement. Chinatex failed to pay the weekly fees and refused to take deliveries. Uniwell, a third party, withdrew but the court found that did not frustrate the contract because delivery to Uniwell was not the SKA's object. The court rejected Chinatex's argument that Bindaree's claim was a debt claim and refused to imply a term requiring Bindaree to gather market information. Bindaree was awarded damages of $31,350,364, subject to discounting future losses to present value at 2.375%, and pre-judgment interest for the non-performance periods. The court credited Bindaree for proceeds from sales it made after Chinatex's breaches.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
Deep Dive
1,635 words · generated 09/09/2026
What happened
Bindaree Beef Pty Ltd (the abattoir processor) and Chinatex (the customer) entered a Service Kill Agreement (SKA) dated 1 May 2015 under which Bindaree was to buy, slaughter and process 900 head of cattle each Service Kill Week for Chinatex, over a three-year term (150 weeks), for a Total Product Fee (Service Kill Fee of $405/head payable in advance each Service Kill Week and the Carcass Cost payable before loading) (see SKA definitions and clauses 2.1, 2.5, 3.1–3.2). The SKA gave Bindaree title to cattle and product until the Total Product Fee was paid (cl 12.1–12.3). The parties expected that Uniwell (an Australian subsidiary of an initial Chinese counterpart) would be the off-taker in the supply chain, but Uniwell was outside the contract between Bindaree and Chinatex and a separate Underwriting Contract existed between Uniwell and Chinatex (Background).
Should an implied term be read into the SKA obliging Bindaree to provide market information to enable Chinatex's authorisations?
Did Bindaree mitigate its loss or cause the loss by continuing to perform in breach of clause 9.1?
Cited legislation
2 cited instruments linked from this judgment.
From the scheduled start (18 August 2015) Chinatex refused consistently to pay Service Kill Fees and later refused to accept delivery; Bindaree nevertheless purchased and processed cattle for a first non-performance period (19 Aug–5 Oct 2015) and invoiced Chinatex $6.9 million for amounts not paid; Chinatee paid nothing. Bindaree then found buyers (via Sanger and later Hondo) and sold product, sometimes to Hondo with Chinatex paying invoices for product in the “performance period” (8 Oct 2015–15 Jan 2016). Hondo ceased buying and from 15 Jan–31 May 2016 there was a second non-performance period. Chinatex's solicitors later contended the SKA had come to an end; Bindaree terminated the SKA on 31 May 2016 and sued for breach claiming damages for the non-performance periods and loss of bargain for the unexpired term (Post-termination claim) (Non-performance and Post-termination periods).
Hammerschlag J heard the matter and found for Bindaree, rejecting arguments of frustration, implied term and that the claim was a debt claim. Judgment was entered for $31,350,364, subject to discounting future losses to net present value at 2.375%, and with pre-judgment interest for the non-performance periods. Directions were given to calculate interest and to enable agreement or further submissions on calculations and costs (Decision and Conclusion).
Why the court decided this way
Frustration rejected because wrong focus on Uniwell. The court emphasised the proper object of the SKA: slaughter and delivery to Chinatex (Consideration: Liability 1–5). Uniwell was not a contracting party and its role (and its withdrawal) was a matter of a separate underwriting arrangement between Chinatex and Uniwell. The judge found no common assumption that continued delivery to Uniwell was essential to performance of the SKA. Chinatex's own conduct, paying security deposit in October 2015 and finding an alternate buyer (Hondo), showed it treated the SKA as subsisting and capable of performance.
Characterisation of claim as damages, not debt. The court held Bindaree sought damages: the loss directly and naturally resulting from Chinatex's breach (Consideration: Liability 6). The presence of a specified weekly Service Kill Fee did not convert the damages claim into a debt claim. The Service Kill Fee was payable in advance and was not conditional on prior performance by Bindaree (Consideration: Liability 9). The court noted that, if the case were treated as a claim for debt, the result for Chinatex would be no better (Consideration: Liability 8–11).
No implied term that Bindaree must provide market information. Chinatex argued for an implied obligation on Bindaree to assist Chinatex's purchasing decisions by providing market information. The judge rejected the term because it failed each of the tests for implication: it was not necessary for business efficacy, it was not so obvious that it went without saying, it was not reasonable or equitable (it would impose a broad obligation of gathering and assessing market information), and it was inconsistent with clause 2.4 (which permits the processor to buy a specified mix if no authorisation is given) (Consideration: Liability 12–18).
Mitigation and benefit crediting. Bindaree's choice to continue processing after Chinatex's breaches was its own; had that produced loss it could have affected recovery. However, the processing produced sales proceeds which exceeded the Carcass Cost for some periods; the court treated those proceeds as a credit reducing Chinatex's liability. Freight costs incurred as a result of selling to third parties were recoverable as part of the accounting adjustment because they reduced the real benefit obtained by Bindaree and therefore properly reduced the credit given to Chinatex (Consideration: Liability 9–11; Quantum 4).
Quantum and discounting. For the unexpired portion of the contract the court accepted the need to discount future losses to present value. The parties proposed a range and the judge took a midpoint of 2.375% to be applied to produce an NPV at judgment date (Quantum 1; Conclusion 1).
Before and after state of the law
Before this decision the applicable doctrines were long-settled:
Frustration requires an unforeseen event making performance radically different from the contractually contemplated performance.
Terms will be implied only to the limited extent necessary to give business efficacy or where they are obvious, reasonable and consistent with express terms.
Damages aim to put the claimant in the position they would have been in had the contract been performed; future losses are discounted to NPV.
This judgment applies those established principles to the facts of a service/tolling meat-processing contract. It reinforces that:
The focus in frustration is the contract's object and parties' assumptions, not collateral commercial expectations about third-party chains.
A failure by a third-party buyer (Uniwell) does not frustrate a bilateral contract where the counterparty remains able to perform or to secure other buyers.
Courts will not readily imply broad market-information duties, particularly where express contractual mechanisms allocate authority and contingency (eg clause 2.4).
Key passages with plain-English translation
"Delivery to Uniwell ... was not the object or purpose of the SKA. Its object was slaughter and delivery to Chinatex.", Plain English: The SKA was made to supply Chinatex, so Uniwell pulling out did not change what the parties had contracted to do.
"Bindaree's claim is for its loss directly and naturally resulting in the ordinary course of events from Chinatex's breach.", Plain English: Bindaree is claiming normal contractual damages caused by Chinatex not paying or accepting delivery.
"The Service Kill Fee was payable in advance and the obligation to pay it was not dependent on any prior performance by Bindaree.", Plain English: Chinatex's duty to pay each week's fee arose before Bindaree had to act that week.
"It is not reasonable or equitable. It casts on Bindaree an unreasonable obligation of gathering ... what information Chinatex would need ...", Plain English: The implied term Chinatex wanted would force Bindaree to do open-ended market-research work and therefore cannot be implied.
"Bindaree is entitled to judgment ... $31,350,364 ... adjusted ... to net present value ... 2.375%.", Plain English: The court awarded about $31.35m, but the part that represents future losses must be discounted to present dollars at 2.375%.
Citations: the judge's reasons are in the written judgment (Hammerschlag J, NSWSC, 24 Nov 2017).
What fact patterns trigger this precedent
Bilateral commercial supply or tolling contracts where a third-party buyer or distributor in the background withdraws or becomes unable to perform.
Contracts where the customer pays a periodic fee in advance and retains some control over authorising purchases.
Facts where the processor/seller continues to perform and sells to third parties after the buyer’s repudiation or failure to pay.
Cases in which a defendant asserts frustration based on changed commercial chains rather than an impossibility of performance by the contracting counterparty.
In these settings courts are likely to examine the contract’s object, the parties’ contemporaneous conduct, and whether a third party was a contracting counterparty or simply in the background.
How later courts have treated it
This deep dive covers Hammerschlag J’s full reasons. The judgment applies orthodox principles (frustration, implication, damages) in a fact-sensitive context. Later courts considering frustration claims grounded on third-party withdrawals will likely look to the same core questions: whose performance was the contract truly intended to serve, and did the intervening event make performance radically different? This decision is a clear expression of that approach in a commercial supply chain context and will be persuasive authority in similar NSW commercial disputes. Specific post-2017 appellate treatments of this judgment are not discussed here; users should search subsequent case law for citations and treatment.
Still-open questions
The judge credited Bindaree for profits/proceeds obtained after Chinatex's breach. If the sales had resulted in losses, would the court have treated Bindaree's choice to continue as a failure to mitigate? The judgment notes the decision was Bindaree’s and might have limited recovery had further loss been caused; the boundary remains fact-sensitive (Consideration: Liability 19).
The precise mechanics of discounting and what rate is appropriate will always be contestable in future cases; the court chose a pragmatic midpoint here (Quantum 1), but different evidential settings may attract different rates.
The scope of what constitutes an "assumption" common to both parties sufficient to found frustration remains highly fact-dependent: here the presence of an underwriting contract and subsequent conduct undermined a frustration argument, but in closer factual matrices the result may differ.
The degree to which express clauses (like cl 2.4 in this SKA) will block the implication of assistance/co-operation terms is again context-dependent; drafting clarity can often avoid the need for implication analysis.
This analysis is based solely on the text of Bindaree Beef Pty Ltd v Chinatex (Australia) Pty Ltd [2017] NSWSC 1615 as provided. It summarises the judgment's reasoning, holdings and practical implications for contract litigation in NSW. It is general legal information, not legal advice. I can make mistakes. Before relying on this, acting on it, or using any draft or analysis here, get a qualified Australian lawyer to check it.
HIS HONOUR: The plaintiff, Bindaree, sues the defendant, Chinatex, for damages for breach of a written Service Kill Agreement (the SKA) which they entered into on 1 May 2015.
For the reasons which follow, Bindaree is entitled to succeed.
Bindaree operates an abattoir at Inverell, New South Wales. It processes cattle into consumable beef and beef products for sale. It also operates its own feedlot.
Chinatex is an Australian subsidiary of a Chinese state corporation, whose primary business is the import and export of textiles to and from the People's Republic of China.
In late 2014, negotiations commenced between Bindaree and an organisation styled Shenzhen Lianhua Enterprise Development Co. Ltd (SLED), a Chinese meat wholesaler, with a view to entering into an agreement under which Bindaree would slaughter cattle owned by SLED and would process it for a fee, upon payment of which, SLED would take the beef to sell on the market. This type of arrangement is sometimes described as a toll or service kill.
Mr Andrew McDonald (McDonald), Bindaree's Chief Executive Officer, represented Bindaree in the negotiations. SLED was represented principally by Mr William Li (sometimes spelt Lee) (Li). Other participants for SLED were a Mr Qu and Mr Huang. Chinatex had some involvement in the discussions. The precise nature of Chinatex's relationship with SLED is not clear. SLED had no corporate presence in Australia, whereas Chinatex did. For this reason, McDonald suggested that Chinatex guarantee SLED's obligations.
However, on 19 December 2014, Li wrote to McDonald requesting that Chinatex be made the formal signatory to the contract rather than SLED, obviating the need for a guarantee. McDonald agreed.
Chinatex was represented principally by Mr Zhihua Liang (Liang).
Somewhere in the background, unbeknown to Bindaree, was another entity, Uniwell Group Pty Ltd (Uniwell), an Australian subsidiary of SLED. It was seemingly contemplated on the Chinatex side of the deal that Uniwell would be the ultimate purchaser of the beef products to be produced under the proposed agreement between Bindaree and Chinatex. McDonald, who I found to be an entirely truthful witness, gave evidence that he became aware of Uniwell's existence for the first time on 14 May 2015 during a visit to Beijing.
In early 2015, Bindaree instructed its solicitor, Mr Norman Hunt, to prepare a draft agreement. Various drafts were produced. Chinatex had its own solicitor. Discussions between them covered the procedure that would apply to the choice of cattle and the prices which would be paid.
On 1 May 2015, Bindaree and Chinatex signed the SKA. It defines Chinatex as the Customer and Bindaree as the Processor. The Recitals record that the Processor operates beef abattoir facilities at Inverell and that the Customer has agreed to engage it to purchase cattle and carry out a Service Kill for it on the conditions of the SKA.
The following are the materially relevant terms of the SKA:
1. DEFINITIONS AND INTERPRETATION
1.1. Definitions
AUS-MEAT Descriptors means the bovine basic end alternative categories descriptors as published in the Aus-Meat Handbook of Australian Meat 7th Edition
Carcass Cost means and includes the average price paid by the Processor to acquire cattle of the same quality, price and trade descriptors referred to in clause 2.2 of this Agreement, including the Service Kill Cattle, during that Service Kill Week in which the Service Kill is carried out in accord with the provisions of this Agreement and all costs and expenses of whatsoever nature in transporting and delivering those Service Kill Cattle that are purchased at auction to the Abattoir .
Customer means Chinatex (Australia) Pty Ltd ACN 003400217 of Level 11, 53 Walker Street, North Sydney NSW 2060
Customer's Purchasing Representative means Mr Zhihua Liang or such other person nominated by the Customer in writing to the Processor as the Customer's authorised representative to approve all the Customer's proposed Service Kill Cattle purchases for the purposes of this Agreement
Product means and includes all boned beef from the Service Kill Cattle and any Customer Residuals not acquired by the Processor pursuant to Clause 6, but does not include the Processor Residuals.
Service Kill means and includes holding feeding and watering the Service Kill Cattle at or around the abattoir prior to slaughter including, any veterinary costs incurred with respect to those Service Kill Cattle prior to the time that they are slaughtered, and the yarding, slaughtering, skinning and gutting of those Service Kill Cattle and disposal of waste material therefrom, chilling and boning carcasses, vacuum packing and packing beef into boxes by the Processor for the Customer in compliance with the Customer's boning specifications in Schedule 1 of this Agreement, all AUS-Meat specifications and all relevant AQIS export standards, for a fee for service.
Service Kill Cattle means the mixture of Aus-Meat Descriptor cattle referred to in clause 2.2, which have been acquired by the Processor and delivered to the Abattoir by the Processor during the Service Kill Period to be slaughtered and otherwise dealt with by the Processor for the Customer in accordance with the terms of this Agreement.
Service Kill Fee means the sum of $405 for each head of the Service Kill Cattle that the Processor provides a Service Kill for pursuant to the terms of this Agreement.
Service Kill Period means 50 weeks during each 52 week period during the Term, and/or such other days that may be agreed between the parties.
Service Kill Week means any week during the Service Kill Period
Total Product Fee means the Service Kill Fee plus the Carcass Cost
2. SERVICE KILL
2.1. The Processor agrees, and is hereby authorised and directed by the Customer, to acquire and deliver, or cause to be delivered, in consideration of the payment of the Total Product Fee by the Customer, nine hundred (900) head (or such other number as may be agreed between the parties) of Service Kill Cattle, to the Abattoir, and carry out a Service Kill of those Service Kill Cattle for the Customer during each Service Kill Week nominated by the Processor to the Abattoir during the Service Kill Period.
2.2. Unless otherwise agreed between the parties the Service Kill Cattle to be delivered, or caused to be delivered, to the Abattoir by the Processor for the purpose of this Agreement shall be grass fed cattle and be a mixture of Aus-Meat Descriptors PR/YG/S(Ox)/Steer SS average 300kg to 320kg dressed carcass weight, and Manufacturing Cow average 240kg dressed carcass weight, with the average dressed weight for the Service Kill Cattle for each Service Kill Day being approximately 275kg
2.3. Subject to clause 2.5, the Service Kill Cattle to be delivered, or caused to be delivered, by the Processor for the purposes of this Agreement will be purchased by the Processor, in accordance with clauses 2.2 and 3 of this Agreement, on behalf of the Customer with the prior authorisation of the Customer's Purchasing Representative whose authorisation shall be final and binding on the Customer
2.4. In the event that the Customer's Purchasing Representative does not authorise the Processor to purchase a mixture of Aus-Meat Descriptors for a Service Kill Week in accord with the provisions of clause 2.2 by the ordinary close of business in New South Wales of the previous Service Kill Week, then the Processor may purchase and deliver 900 head of cattle of the mixture of the Aus-Meat Descriptors in accordance with clause 2.2 chosen by the Processor for the following week's Service Kill.
2.5. The Service Kill Fee for the Service Kill Cattle is to be paid in advance, in full and cleared funds, by the Customer to the Processor on the first Business Day of every Service Kill Week throughout the Term for that Service Kill Week
2.5. The Processor is not obliged to acquire Service Kill Cattle unless the Service Kill Fee has been paid to the Processor in accordance with clause 2.5
3. TOTAL PRODUCT FEE
3.1. The Total Product Fee is to be paid by the Customer to the Processor in two separate instalments, as follows:
i) the Service Kill Fee is to be paid on the first Business Day of every Service Kill Week pursuant to clause 2.5
ii) the Carcass Cost is to be paid before the Product is loaded onto the Customer's transport pursuant to clauses 3.2 and 12
3.2. The Customer will pay the Processor the Carcass Cost for each Service Kill Day's production and in any event within 7 days of the Product, and any Customer Residuals not acquired by the Processor in accord with the provisions of clause 5 of this Agreement, being ready to be loaded into containers or refrigerated transport in accord with the Customer's written specifications. If the Processor does not receive payment in full in cleared funds in accord with the terms of this Agreement, then the provisions of clause 12.1 shall apply and indefeasible title to the Product will remain with the Processor
4. BONING YIELD
4.1. If meat yield does not reach 77% from beef carcass to beef cuts, the Processor must make up corresponding beef cuts of the same quality as compensation.
7. PRODUCT PACKAGING AND DISPATCH
7.1. The Processor will pack the Product into the Customers branded cartons ready for delivery and all Product produced in one week must be loaded into refrigerated transport or containers by the Customer prior to the next weeks' Service Kill Day's production. Any Product still on site on a subsequent weeks' Service Kill Day, will be transported to a China Approved Cold Store in Brisbane at the Customer's cost provided the Processor has received payment in full for those costs in advance of the transport. In the event that the Processor does not receive payment in full in advance of transport, the provisions of clause 12.1 of this Agreement will apply.
9. FAILURE TO PAY
9.1. In the event that the Customer fails to pay the Total Product Fee, or any part thereof, at the time stipulated by the provisions of this Agreement it will be a breach of a fundamental term of this Agreement and without limiting any other rights that the Processor may have at law with respect to any such breach of that fundamental term by the Customer, the Processor's obligation to acquire Service Kill Cattle on behalf of the Customer for a following Service Kill Day or Service Kill Week pursuant to clause 2.1 of this Agreement shall cease and the provisions of clause 10.3 of this Agreement shall apply
12. OWNERSHIP OF PRODUCT
12.1. Indefeasible title in the Service Kill Cattle and the Product remains with the Processor at all times until the Total Product Fee with respect to the Product has been received in full by the Processor from the Customer for the Product
12.2. Title in the Product passes to the Customer once the Total Product Fee has been received in full by the Processor prior to the loading of the Product onto the Customer's loading containers or refrigerated transport at the Abattoir
12.3. Where the Processor has not received payment in full and therefore retains indefeasible title in the Product pursuant to clause 12.1, the Processor has the absolute right and discretion to sell that Product to any person or entity that they so wish and retain the proceeds of sale of that Product for its own beneficial use
12.4. Indefeasible Title in any Customers Residuals acquired by the Processor shall pass to the Processor at the time that the Customer delivers its written request to the Processor for the Processor to acquire any or all of the Customers Residuals produced during particular Service Kill Day
13. CUSTOMER SPECIFICATIONS
13.1. The Customer's Boning Specifications are set out in Schedule 1 to this Agreement.
Schedule 2 of the SKA names Liang as the Customer contact person for Chinatex.
The SKA contemplated the acquisition and slaughter by Bindaree of 900 head of cattle per week, over the 150 week period from 18 August 2015 to 18 August 2018, with a two week hiatus each year. Chinatex was to pay Bindaree the Total Product Fee comprising the Service Kill Fee of $405 per head, and the Carcass Cost, being the average price paid by Bindaree to acquire the cattle, plus the costs and expenses of transporting cattle bought at auction to Inverell.
Five days earlier, on 27 April 2015, Chinatex and Uniwell entered into a written Underwriting Contract with each other in contemplation of Chinatex entering into the SKA. Under that instrument, Uniwell would assist Chinatex to reach agreement with Bindaree and would sign the SKA, and Uniwell would pay Chinatex for products according to the Underwriting Contract and the agreed amount in the SKA.
McDonald travelled to Beijing where, on 14 May 2015, he met, amongst others, with Li, who told him that "they" were now operating as Uniwell, which was going to be the sole sales company for Chinatex for the meat. This is when McDonald says he first learnt of Uniwell's existence.
The SKA was a potentially very lucrative arrangement for Bindaree. The risk of movements in the market prices for cattle was Chinatex's. On the other hand, Bindaree would profit to the extent that its production costs were under $405 per head.
Market prices for cattle apparently increased after the SKA was signed. Chinatex would have to pay more for the cattle slaughtered and processed under the SKA.
18 August 2015 was scheduled to be the start of the first Service Kill Week.
Things did not start well for the SKA.
On 13 August 2015, after a somewhat extensive exchange of correspondence about prices, Li emailed McDonald as follows:
We stressed many times, Chinatex can not lose money which is bottom line.
On 19 August 2015, McDonald met with Liang and Bindaree's solicitor, Mr Hunt. A conversation to the following effect took place:
McDonald: We are starting to kill cattle today under the contract. The market has turned and I know there will be a rough time at first and you will lose some money in the beginning, but over the three-year contract there will be highs and lows, we hope that you will come out of it in front.
Liang: Look, you got to help me. I think Uniwell is going to walk. I am aware of Chinatex's obligations under the contract, but I cannot show losses to head office from the beginning of the Service Kill. If only we were making money to start with, then I could deal with losses later. I need to hide the losses. I don't want Beijing to know. You've got to help me. Help me, help you.
McDonald: I am happy to work with you on possible commercial solutions here. But until we agree on another solution, Bindaree will continue to purchase and process cattle under the Chinatex contract.
Liang: We are here for a long-term business relationship with Bindaree. But you got to help me. I can't afford to have a loss. We could sell grain to you cheap and under market value for your feedlot and you offset that from the cost of the beef. Or we could provide a finance facility at good rates for meat trading. I have access to cash. You have just got to help me. I cannot show these losses up front.
McDonald: Liang, we are happy to work with you, but we need you to honour the contract.
Liang: I understand Chinatex's obligations under the contract.
Liang gave evidence. Notwithstanding significant contemporaneous evidence to the contrary, he denied having acknowledged Chinatex's obligations under the SKA (then or at any other time) or having made any request for assistance in hiding losses from Beijing. He is an intelligent, articulate and thoroughly unscrupulous man, entirely lacking in any commercial moral compass, whose evidence I reject where it conflicts with that of McDonald, and in any event, where it is not supported by contemporaneous, objective material. Senior Counsel for Chinatex correctly did not seek to support his evidence. Liang's attitude (which informed his behaviour throughout) can be simply stated: Chinatex cannot lose money.
At some point in his evidence, Liang said, unconvincingly, that this attitude yields to Chinatex's legal obligations. His and Chinatex's behaviour throughout shows otherwise.
It is clear that Chinatex never intended to perform its obligations under the SKA to take meat products and pay for them if that meant paying prices which it did not like. A limited selection of outward expressions of this attitude is set out below.
On 27 August 2015, Liang wrote to McDonald:
Well noted the cattle killed for last week and would love to discuss next week on how to proceed between Chinatex and Bindaree/Sanger. Please make sure we must not show loss in our book. I wish the lower AUD would help a bit.
On 2 September 2015, Liang wrote, amongst others, to McDonald:
Thanks for your mail and please be noted that since Uniwell's position changed, both Bindaree and Chinatex need to work out a solution for win win long term cooperation.
As we discussed in last meeting, I would request you to help Chinatex not to show a loss in one month or two month general. Please consider how to coordinate between Bindaree/Chinatex/Sanger.
On 7 October 2015, Liang wrote, amongst others, to Campbell:
Thanks for your reply and we would like to confirm that Chinatex needs to take all the products from the Service Kills and pay the costs of cattle and service charges. We just cannot accept the sales arrangement from your side and the calculations of profits and loss.
Chinatex gave no instructions to Bindaree for the purchase of any cattle. It did not take delivery of any meat products. Its communications made it clear that it would not do so. It did not make any payments.
Clause 10 of the SKA required Chinatex to deposit a security bond for its performance. On 15 October 2015, it transferred $364,000 into the trust account of Bindaree's solicitors.
McDonald was hopeful that Chinatex would find an acceptable commercial solution so that Bindaree could start delivering the meat processed under the SKA. He was reluctant for Bindaree to commence legal action.
So that Chinatex could not say that Bindaree had failed to hold up its end of the bargain under the SKA, Bindaree (presciently) adopted the following course: from 19 August 2015 until 5 October 2015 for each Service Kill Week, Bindaree bought cattle from saleyards or farmers and slaughtered, boned and placed them in chillers separate from Bindaree's own cattle.
Bindaree generated a daily production summary of this activity. The meat was, of course, never delivered to Chinatex.
Bindaree carried out the Weekly Service Kill in the hope that Chinatex would take delivery, but in the knowledge that this was hardly likely.
From 18 August 2015 to 5 October 2015, Bindaree regularly invoiced Chinatex for the difference between the Total Product Fee under the SKA and the amounts which it received from third parties to whom it sold the Products. These invoices totalled $6,916,684.47. Chinatex paid nothing. During the proceedings this period was termed the first non-performance period.
When payment was not received by Bindaree from Chinatex for a particular week, the Product was sold by Bindaree on a piecemeal basis to make up orders for other customers, via Sanger Australia Pty Ltd (Sanger), a sales and marketing agent to whom Bindaree paid a commission on sales. Sanger received orders from customers which it relayed to Bindaree. Bindaree sourced and processed meat to fill the orders. The sales agency relationship between Bindaree and Sanger had been in place for years.
McDonald gave evidence, which I accept, that if Chinatex had wanted delivery, Bindaree would have given it. Arrangements to supply Bindaree's other customers would have been made. Bindaree was at all times ready, willing and able to, and to the extent it could without Chinatex's cooperation, it did, perform.
On 6 July 2015, Bindaree and Sanger merged. Sanger continued to sell the meat products, but was no longer paid a commission.
In August 2015, Mr James Campbell (Campbell) was appointed Chief Executive Officer of Sanger. McDonald assigned to him responsibility for managing the SKA. Campbell was an entirely truthful witness. I prefer his evidence to that of Liang where they conflict.
On 29 September 2015, Campbell met Liang. Liang told him that the overall arrangement from Chinatex's perspective had been that Bindaree would sell to Chinatex, which would sell to Uniwell, which would sell to a Chinese "off-taker", which was unable to import beef in its own right. Liang said that Chinatex had been unable to perform the SKA because the Chinese off-taker had gotten into financial difficulty. Uniwell was unable to facilitate the export of the beef to the off-taker and therefore could not pay Chinatex, which was therefore unable to pay Bindaree. Liang said that Chinatex understood its obligations under the contract and needed to find a solution.
Liang identified a Chinese company called Hondo as a possible customer for Chinatex to sell the beef from the Service Kill. More than once, Campbell made it clear that Bindaree was willing to work with Chinatex to assist it in meeting its obligations under the SKA.
From mid-September 2015 to May 2016, Campbell dealt mainly with Liang. He also dealt with a Mr Clement Quan, who he learnt from Liang was an agent for Hondo.
On 8 October 2015, Campbell had a conversation to the following effect with Liang:
Campbell: How is Hondo going?
Liang: Good, we are in a position to perform under the contract with Hondo as our customer.
Campbell: Will you take the product?
Liang: Yes, except residues.
Campbell: Will the product go to China?
Liang: Yes.
Campbell: Do you want it all "A" grade cow?
Liang: Yes, within the specs of the contract, we want as much as possible chilled. The current cuts under the contract are too small, Clement will go to Bindaree to adjust some of the cuts, and he is authorised on behalf of Chinatex.
Campbell: Great. We are willing to work closely with you and Clement in order to find a commercial solution.
Hondo started taking meat products produced by Bindaree from 8 October 2015.
In November 2015, McDonald visited Hondo in Chongqing, China.
Hondo's specifications were more onerous than those which the SKA contemplated, but Bindaree met them anyway, according to McDonald, at Chinatex's direction to satisfy its customer.
From 8 October 2015 to 15 January 2016, Bindaree invoiced Chinatex $17,583,093.39 for these sales. Chinatex paid. It never suggested it was wrongly invoiced. The parties termed this period the performance period.
Liang, in my view dishonestly, denied that his understanding was that the Hondo arrangement was Chinatex's performance of the SKA.
Hondo stopped buying from Bindaree at the beginning of January 2016.
Communications between Bindaree and Chinatex about future performance of the SKA ensued. These included the assertion on 5 January 2016, for the first time, by Liang that cl 2.3 of the SKA required Bindaree to seek Chinatex's authorisation to buy cattle each week, and that without asking Chinatex for authorisation, Bindaree should not buy cattle, and a response by Campbell that under cl 2.4, if Chinatex's Purchasing Representative did not provide authorisation, Bindaree could choose the mix of Aus-meat descriptors specified in cl 22, and deliver that mix.
There were exchanges regarding, amongst others, payment of $2,641,048.63 owed for the Service Kill performed by Bindaree during the weeks beginning 21 and 28 December 2015.
There were negotiations about a settlement agreement to bring the SKA to an end, but these did not reach fruition. In a letter dated 15 January 2016, Campbell referred to a verbal agreement reached on 5 January 2016, that the two week period from 4 - 15 January 2016 had been a period of suspension under the Service Kill Period definition in accordance with the SKA.
Campbell says that because it appeared to him that Chinatex accepted it had to comply with the SKA, he allowed the weekly kill in accordance with the SKA to continue into 2016.
Once Hondo stopped buying, Chinatex reverted to form by not performing the SKA because its commercial interests did not suit it to do so.
On 8 April 2016, Chinatex's solicitors, Websters, wrote to Campbell denying any liability to pay any amounts to Bindaree, and asserting that the SKA came to an end when Chinatex "long since indicated that it would no longer perform its obligations under the contract". The letter also asserted that Bindaree, not Chinatex, had been in fundamental breach of the contract.
On 31 May 2016 Bindaree's solicitors wrote to Chinatex's solicitors, terminating the SKA effective immediately.
The parties termed the period from 15 January 2016 to 31 May 2016 the second non-performance period.
[3]
bindaree's case
Bindaree says that from the commencement of the SKA on 18 August 2015, it acquired and delivered, or caused to be delivered, 900 head of Service Kill Cattle to the abattoir each Service Kill Week, and carried out a Service Kill of them. It also says that at all material times, from 1 May 2015 until 31 May 2016, it was ready, willing and able to perform the SKA.
It pleads that, in breach of the SKA, Chinatex failed to pay the Service Kill Fee and the Carcass Cost.
It pleads that by reason of these breaches, it was entitled to terminate the SKA and, in addition, was entitled to terminate it when on 8 April 2016, in the letter from its solicitors, Chinatex repudiated the SKA by confirming that it no longer intended to perform its obligations under it. Bindaree pleads that on 31 May 2016, it terminated the SKA.
[4]
Non-performance periods
For the non-performance periods of 19 August 2015 to 5 October 2015 and 15 January 2016 to 31 May 2016, Bindaree claims as damages the difference between the Total Product Fee (i.e. the amount equivalent to the Service Kill Fee and Carcass Cost) less the amounts which Bindaree received from third parties to whom it sold the Product.
It claims the freight costs it incurred in delivering to its other customers on the footing that under cl 7.1 of the SKA, no freight costs would have been incurred by it in selling to Chinatex, because Chinatex had the obligation to take delivery of the refrigerated transport or containers into which the Product was to be loaded, or to pay the cost of transporting what was left to an approved cold store in Brisbane for which Chinatex had to pay in advance.
Omitting cents, this claim is as follows:
Service Kill Fees not paid (incl. GST): $10,801,372
Carcass Cost not paid (incl. GST): $28,730,266
Sub-total: $39,531,638
(less)
Meat Sales: $32,614,954
Sub-total: $6,916,684
(add)
Freight costs: $461,679
Total: $7,378,363
McDonald's evidence included provision of the Carcass Cost invoices, tax invoices rendered to Chinatex, and credit notes given to it, for the money received for the beef that had been killed and processed "for Chinatex" but sold to other customers on a weekly basis. Bindaree deducted the average price paid by those customers from the outstanding Service Kill Fee and Carcass Cost payable under the SKA. The prices were calculated according to weight. Bindaree's Chief Financial Officer, Mr James Jamison Roger (Roger), gave unchallenged evidence of the saleable weight of this meat and the average yield from this cattle. There is no suggestion that Chinatex ever raised any difficulty with the genuineness of the prices achieved by Bindaree.
There was no suggestion that the sales did not happen, were not genuine arms' length ones or that Chinatex could or would have been able to sell at better prices. I find that the sales were at market value, although, for reasons which will appear below, it does not matter if they were not.
Bindaree's claim does not include any amount referrable to the performance period.
[5]
Post-termination period
For the post-termination period (31 May 2016 to 18 August 2018 - the unexpired portion of the SKA) Bindaree claims loss of bargain damages as follows:
Revenue forgone: $40,460,000
(less)
Costs saved: $16,488,000
Total: $23,972,000
The calculation of revenue foregone is a simple arithmetical one. It is the Service Kill Fee payable over the unexpired portion of the SKA. The principal evidence on costs savings was that of Roger. Additionally, Bindaree called an expert forensic accountant, Ms Julie Planinic.
In the alternative, Bindaree claims $9,990,000, being the loss of profit for the remainder of the Term of the SKA. This is on the footing that the $450 Service Kill Fee was originally negotiated on the basis that it would contain a profit component for Bindaree of $100 per head of cattle slaughtered. There were 111 Service Kill Weeks remaining. 900 head per week at $100 profit per head for the remaining period yields the figure claimed.
[6]
chinatex's position
A number of untenable, unmeritorious defences and contentions, including mutual abandonment and failure by Bindaree to slaughter cattle that complied with the specifications under the SKA, were abandoned. Ultimately, what Chinatex put is set out below.
[7]
Liability
Chinatex put that the SKA was terminated by frustration when Uniwell unilaterally withdrew (counsel for Chinatex described it as "decamped") from what Chinatex characterises as "the tripartite arrangements" in August 2015, rendering performance required under the SKA radically different from that which had been agreed. It argues that Bindaree and Chinatex entered into the SKA on the common assumption that delivery to Uniwell would continue, which common assumption was mistaken with the consequence that the SKA was frustrated.
Chinatex put that Bindaree's claim with respect to the non-performance periods, despite not being pleaded as a claim in debt but solely as one in damages, is nevertheless one in debt. It put that the existence of the debt is dependent upon Bindaree having performed the SKA. It put that no debt was brought into existence because Bindaree did not undertake Service Kills "for" Chinatex.
Chinatex put that there was implied into the SKA an obligation on Bindaree to co-operate in the performance by Chinatex of the SKA by offering to Chinatex such information as to the type, mix and price of the Service Kill Cattle as would enable Chinatex to make an informed decision as to the terms of the authorisations which Chinatex was able to give pursuant to cl 2.3 of the SKA. It put that Bindaree breached this term and that the consequence of this breach is that Chinatex did not incur any obligation to pay, so that Bindaree suffered no loss. (An insupportable contention that on their proper construction, cls 2.3 and 2.4 imposed such an obligation on Bindaree, was correctly abandoned. Chinatex could identify no constructional choice to be made.)
Chinatex put that once it had failed to pay the Service Kill Fee, Bindaree had no obligation to proceed with the Service Kills, and could have simply ceased production altogether. It put that Bindaree took a deliberate and considered decision to acquire and process 900 head of cattle weekly during the non-performance period, and whilst Chinatex's failure to pay the Service Kill Fee was an anterior cause, the proximate cause of Bindaree's loss was its free, deliberate and informed decision to proceed with the Service Kills.
[8]
Quantum
Leaving aside a late submission on quantum (referred to later), Chinatex put the following arguments.
It put that Bindaree's claim for the post-termination period should be discounted to bring it to its net present value (NPV) for the unexpired portion of the SKA. It put that a discount rate of 2.25 - 2.5% per annum should be adopted.
It took issue with one aspect of Bindaree's calculation of the cost savings made (or to be made) by it for the non-performance period. It made no complaint about Bindaree's methodology.
From July 2015 through May 2016, Bindaree slaughtered 23,276 head of cattle per month (that is, 5376 per week). From July 2016 through December 2016 (at about the time the calculation was done) this reduced to an average of 14,801 head of cattle per month. This represents an average reduction of 8475 head of cattle per month, or 1956 head of cattle per week. The Service Kill under the SKA was 900 head per week, that is, 46% of the reduction. Bindaree applied that percentage to the categories of costs sensitive to the number of cattle slaughtered and processed to calculate what percentage of those costs should be attributed to not slaughtering under the SKA.
Evidence elicited by Chinatex during the hearing established that from 1 January 2017 until the time of the hearing, Bindaree's average weekly kill was between 3700 and 4000 head per week - taking the midpoint, 3850. If these figures are taken together with the figures which Bindaree used, an average weekly kill of 3633 results. On this footing, the difference in the number of cattle killed weekly in the pre and post termination periods is 1739 (i.e. 5372 - 3633), and not 1956. 900 is 52% of 1739. This is the percentage which Chinatex argues should be used in the cost reduction calculation.
Finally, Chinatex put that freight costs for sales of beef products to other customers are not recoverable under the SKA, and therefore do not form part of Bindaree's damages.
[9]
Liability
I reject the submission that the SKA was frustrated by Uniwell's "departure" or "decampment".
Delivery to Uniwell, let alone continued delivery for the life of the SKA, was not the object or purpose of the SKA. Its object was slaughter and delivery to Chinatex.
Performance of and under the SKA is not affected by Uniwell or anything done or not done by it.
Bindaree took Chinatex as a counter-party because of its presence in Australia. There is no tripartite arrangement. Bindaree has only one counter-party. Chinatex had (and for all that is known, still has) a separate back to back arrangement with Uniwell under the Underwriting Agreement, to which Bindaree is not a party. On the face of the Underwriting Agreement, Chinatex has rights against Uniwell which, apparently for reasons of its own, it has not enforced.
Neither Chinatex nor Bindaree held any assumption that Uniwell's continued taking of delivery (and, presumably, paying for it) was essential to the existence of the SKA. To the contrary, after Uniwell's departure, they both acted on the footing (it was no assumption) that the SKA was alive. Chinatex provided the security deposit in October 2015. Chinatex went so far as to find Hondo to take the meat which it was obliged to take under the SKA, and itself to pay for it.
I reject the submission that Bindaree's claim is one in debt. It is a conventional claim for damages for breach by Chinatex of its contractual obligations under the SKA, including the obligation to pay the Service Kill Fee and its neglect or refusal to accept and pay for the Product of the Service Kills. Bindaree's claim is for its loss directly and naturally resulting in the ordinary course of events from Chinatex's breach. [1]
The general principle is that when assessing damages for breach of contract, the plaintiff is to be put in the position that it would have been in but for the breach, that is, the position if the contract had been performed. This is what Bindaree is seeking. The Service Kill Fee component of the claim may be a liquidated amount but that does not convert it into a debt claim.
If Bindaree's claim were one in debt, Chinatex's position would be worse.
The Service Kill Fee was payable in advance and the obligation to pay it was not dependent on any prior performance by Bindaree. If Bindaree had taken the Service Kill Fee and then not performed, Chinatex would undoubtedly have had an entitlement to recovery. But that is not this case.
[10]
Quantum
Bindaree accepted that an NPV discount is to be applied. It suggested that a midpoint of the range of percentages selected by Chinatex, 2.375%, should be adopted to give an NPV at the date of judgment. It is appropriate to adopt this figure. A calculation will be required to be made with reference to the judgment date.
Chinatex's proposed methodology with respect to the proportion the Weekly Service Kill bears to the overall reduction in Bindaree's kill is unsound. Bindaree has applied the percentage reduction to the actual costs incurred by it over the period of the reduction. Chinatex suggests a percentage reduction derived over a longer period, but does not apply it to the actual costs incurred over that period. Notionally, at least, the costs for the additional period may have increased in accordance with inflation or otherwise. The Service Kill figures may, at the present time, be different again.
Bindaree has provided a logical and rational basis upon which to assess its cost savings and Chinatex has not provided any compelling or reasonable alternative.
Bindaree is (indirectly) entitled to an amount equivalent to the freight costs incurred by it. As I have said, the decision to carry out the Service Kill was its own, and it would not be entitled to claim damages if a further loss had been incurred as a consequence of that decision. But, having taken the decision, and having profited by it, it fairly and correctly gives Chinatex credit for it. The true amount of the benefit that Bindaree has received is the sales less the freight. The allowance which it must make thus properly includes the freight.
Some three weeks after the hearing, Chinatex sought to put an additional submission supporting Bindaree's alternative quantification of damages for the post-termination period if damages are awarded. Leave was granted. Bindaree responded with a brief written submission.
I have concluded that Bindaree is entitled to damages for the non-performance period calculated in accordance with its primary methodology.
It is therefore unnecessary to deal with its alternative calculation, and the late submission. It suffices to say that I do not consider that the alternative calculation represents Bindaree's true loss for the post-termination period, which was $405 per head (with Chinatex taking the risk of the Carcass Cost) less cost savings which Bindaree made (McDonald gave evidence that the weekly kill was reduced as a consequence of the termination of the SKA). This is the correct comparator for the position that Bindaree would have been in had Chinatex performed. There is no reason why the calculation of Bindaree's loss should assume some artificial figure.
[11]
conclusion
Bindaree is entitled to judgment in the amount of $31,350,364, as adjusted by bringing the amount attributable to the unexpired portion of the post-termination period to net present value by application of a discount of 2.375%.
Bindaree is entitled to pre-judgment interest in respect of the non-performance period claims. Strictly, this calculation is to be done on a weekly basis. Bindaree, however, suggested that a practical approach would be to calculate interest from the mid-point of each non-performance period.
I will stand the matter over for the necessary calculations to be done, and to give the parties an opportunity to reach agreement on the calculation of interest and costs.
I will hear the parties on costs, should this be required, and on any issues that remain to be decided.
The exhibits are to be returned.
[12]
Endnotes
Section 52 of the Sale of Goods Act 1923 (NSW) provides:
(1) Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against the buyer for damages for non-acceptance.
(2) The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer's breach of contract.
(3) Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or if no time was fixed for acceptance, then at the time of the refusal to accept.
Section 90(1) of the Civil Procedure Act 2005 (NSW) provides: the court is, at or after trial or otherwise as the nature of the case requires, to give such judgment or make such order as the nature of the case requires.
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.
Decision last updated: 24 November 2017
Judgment for the plaintiff in the amount of $31,350,364, subject to adjustment by bringing the amount attributable to the unexpired portion of the contract to net present value using a discount rate of 2.375%; plaintiff also entitled to pre-judgment interest for non-performance period; further calculations and costs reserved (Conclusion 1-4).
Although Bindaree has framed its case as damages for both Chinatex's breach in failing to pay the Service Kill Fee and for failure to take delivery and pay for Product, no amount is actually claimed for the latter. To the contrary, and as the figures set out earlier demonstrate, Bindaree sold Product for more than the Carcass Cost which Chinatex had to pay, and has given Chinatex credit for $3,884,688 against the Service Kill Fee liability, thereby reducing Chinatex's overall liability. The question whether Bindaree's sales were at market value thus does not arise. It might have if Bindaree had made a further loss from those sales and claimed it. Chinatex can hardly complain about Bindaree having taken on a risk which was really Chinatex's, made a profit and then given Chinatex credit for it, despite Chinatex being in continued breach of the SKA. After all, it is Chinatex's position that Bindaree had no obligation to slaughter once Chinatex had defaulted in paying the Service Kill Fee.
If (contrary to what I have found) Bindaree were to be restricted to a claim for the Service Kill Fee (as the asserted debt), Chinatex would get no allowance for sales and Bindaree would be entitled to judgment in the amount of $10,801,372, which would be judgment that the nature of the case would require. [2]
Chinatex's suggested proposed implied term is unsustainable.
The formulation contended for was put up for the first time in final submissions. It differs from the term formulated in Chinatex's Commercial List Response, which formulation was abandoned. No application to amend the Commercial List Response to plead the formulation was made. Bindaree properly objected to the formulation being argued without an amendment to the pleadings, which it would have opposed had an amendment been sought. As counsel for Bindaree pointed out, the notion of such information as would enable Chinatex to make an informed decision brings with it the enquiries as to what information Chinatex had anyway and what information would be necessary in the particular market to enable Chinatex to make a decision, matters about which Bindaree could have, but did not, call evidence. This would be sufficient to have refused any application for amendment.
More than this, however, the amendment would be futile because the proposed term fails to meet any of the requirements for the implication of such a term, let alone all of them.
It is not reasonable or equitable. It casts on Bindaree an unreasonable obligation of gathering and then assessing, from all the information available, what information Chinatex would need to have to make up its mind. For this reason, it is also not so obvious that it goes without saying.
It is not necessary to give the SKA business efficacy. No good reason was suggested why Chinatex needed Bindaree to give it market information to make the agreement work. As this case demonstrates, the SKA did work without it.
It is inconsistent with cl 2.4 of the SKA. That provision is intended to give Bindaree authorisation without having to do anything in addition, when the Customer does not provide prior authorisation.
Given that there was no such obligation on Bindaree, it committed no breach of the SKA.
In my view, Bindaree did carry out the Service Kill "for" Chinatex, albeit on the contingency that Chinatex would take delivery. It did so in the face of Chinatex's failure in breach of the SKA to pay the Service Kill Fee. It was an eminently sensible thing to do in the face of Chinatex's evident lack of commercial probity. However, under cl 9.1 of the SKA, Bindaree's obligation to carry out the Service Kill ceased on Chinatex's default in paying the Service Kill Fee. Its decision to carry out the Service Kill was therefore entirely its own. Had it resulted in some further loss, Chinatex's submission would have some substance. But it did not. Bindaree sold the meat for prices in excess of the Carcass Cost, and has given Chinatex credit. Bindaree's claim does not include any amount referrable to the carrying out of the Service Kill. Chinatex has benefited from what Bindaree determined to, and did, do.