Francis Gregory Hannigan v Inghams Enterprises Pty Limited - [2019] NSWSC 321 - NSWSC 2018 case summary — Zoe

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Francis Gregory Hannigan v Inghams Enterprises Pty Limited

[2019] NSWSC 321

Supreme Court of NSW|2018-11-08|Before: Robb J

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Source facts

Court

Supreme Court of NSW

Decision date

2018-11-08

Before

Robb J

Source

Original judgment source is linked above.

Judgment (31 paragraphs)

[1]

CA 1833 Broadlex Services v RCR Resolve FM (No 2) [2015] NSWSC 1514 Chappel v Hart (1998) 195 CLR 232; [1998] HCA 55 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 346; [1982] HCA 24 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Fulham Partners LLC v National Australia Bank Ltd [2013] NSWCA 296; (2013) 17 BPR 32,709 Gooley v Motasea Pty Ltd [2015] NSWCA 31 Hevilift Ltd v Towers [2018] QCA 089 Hume v Munro (No 2) (1943) 67 CLR 461 In the matter of Asia Pacific Data Centre Limited [2018] NSWSC 1375 Kriketos v Livschitz [2009] NSWCA 96; (2009) 14 BPR 26,717 Kyrwood v Drinkwater [2000] NSWCA 126 March v Stramare (E & MH) Pty Ltd (1991)171 CLR 506; [1991] HCA 12 Massoud v NRMA Insurance Ltd (1995) 62 NSWLR 657 New Zealand Shipping Co Ltd v Societe des Ateliers et Chantiers [1919] AC 1 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14 Re Idoport Pty Ltd (in liq) (recs apptd) [2012] NSWSC 524 Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (recs and mgr apptd) (1997) 42 NSWLR 462 Sanpine v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365 Sharjade Pty Ltd v Commonwealth of Australia [2009] NSWCA 373; (2009) 15 BPR 28,443 Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 Stapley v Towing Masters Pty Ltd (trading as Dynamic Towing) [2009] NSWCA 382 State of New South Wales v Fahy (2007) 232 CLR 486; [2007] HCA 20 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; [1950] HCA 35 Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 White v Johnston (2015) 87 NSWLR 778; [2015] NSWCA 18 Ying Mui Pty Ltd v Hoh (No 3) [2017] VSC 29; (2017) 349 ALR 296; (2017) 119 ACSR 577 Texts Cited: Cheshire and Fifoot Law of Contract (11th, Australian edition) Category: Principal judgment Parties: Francis Gregory Hannigan (plaintiff) Inghams Enterprises Pty Limited (defendant) Representation: Counsel: M Henry SC (plaintiff) D Neggo (defendant)

[2]

[3]

Introduction

The plaintiff in this matter is Mr Francis Gregory Hannigan, who is a farmer as well as a solicitor and company director.
Mr Hannigan is the owner of six chicken sheds at 900 Benns Road, Woodview, near Casino in this State. The property on which the sheds are erected is known as "Avoca Vale Farm" (the Farm).
The sheds were built by Mr Hannigan and his late wife, for the purpose of entering into contracts with commercial chicken suppliers for growing chickens on behalf of the suppliers.
Initially, Mr Hannigan and his wife entered into a contract to grow chickens with a firm that traded under the name "Sunnybrand Chickens" (Sunnybrand). In about 2011, Sunnybrand was taken over by the defendant, Inghams Enterprises Pty Ltd (Inghams), which is a major supplier of broiler chickens to the market in this country.
Mr Hannigan contracted with a company called Rawhide Pty Ltd (Rawhide) to manage the chicken enterprise. The shareholders and directors of Rawhide have at all times been Mr Hannigan's son, Brett Anthony Hannigan, and Brett's wife Angela. In practical terms, Brett Hannigan has acted as the manager of the chicken farm.
Until about November 2015, Inghams effectively adopted the contract that Mr Hannigan had with Sunnybrand, and Inghams supplied chickens to Mr Hannigan, together with the necessities for growing the chickens, and Mr Hannigan, through the management of Brett Hannigan, continued to grow the chickens and to deliver them when mature to Inghams, in accordance with the terms of the Sunnybrand contract, including as to the price that Mr Hannigan was entitled to receive.
On 5 January 2016, Inghams issued to Mr Hannigan a new draft contract that, as I understand it, was in the standard form that Inghams adopted for use with chicken growers in Queensland. The first of the two primary issues in this case is whether, as Mr Hannigan alleges, he and Inghams entered into a binding contract in the terms of the draft that was supplied by Inghams. Inghams denies that it entered into any contract on the terms of the draft contract, and claims instead that it merely had a "chicken growing relationship" with Mr Hannigan, which, whatever its other terms and effect may have been, could be terminated by Inghams at will or on short notice.
On 8 August 2017, Inghams purported to terminate its agreement or relationship with Mr Hannigan. The second primary issue in this case is whether, assuming that there was a binding contract between Mr Hannigan and Inghams that could not be terminated at will by Inghams, the termination that Inghams purported to effect on 8 August 2017 was effective.
Throughout the relevant period, Inghams delivered substantial numbers of chickens to Mr Hannigan at Avoca Vale Farm in a number of batches, and also delivered the feed necessary to grow the chickens. Inghams provided various technical services necessary for the growth of the chickens. In due course, Mr Hannigan allowed carriers contracted by Inghams to collect the batches of mature chickens. Inghams paid Mr Hannigan substantial sums for the batches of chickens that were grown by Mr Hannigan. In-so-far as it was disclosed by the evidence, all of these steps were taken in accordance with the applicable provisions in the draft agreement that Inghams supplied to Mr Hannigan. The parties agreed that all of these steps could not be explained by, and were not consistent with, the terms of the earlier Sunnybrand contract.

[4]

Amended summons

After Inghams purported to terminate its arrangements with Mr Hannigan, Mr Hannigan commenced these proceedings by summons filed on 30 August 2017.
Although this case is one that conventionally would require pleadings, for reasons that are not apparent pleadings have not been served.
Mr Hannigan filed an amended summons on 9 February 2018, by which he sought the following relief: A declaration that the parties are bound by an agreement the terms of which are recorded in the document styled "Queensland Broiler Chicken Growing Agreement" between Inghams Enterprises Pty Limited and F G & L M Hannigan - Avoca Vale, a copy of which is at pages 25 to 58 of Exhibit AW-2 to the affidavit of Andrew Walsh sworn 5 December 2017. A declaration that the agreement referred to at paragraph 1 above was not terminated by the letter dated 8 August 2017 from Quinton Hildebrand to Brett Hannigan and Frank Hannigan. Alternatively, a declaration that the parties are bound by an agreement the terms of which are recorded in the document styled "Queensland Broiler Chicken Growing Agreement" between Inghams Enterprises Pty Limited and F G & L M Hannigan - Avoca Vale, a copy of which is at pages 12 to 43 to the affidavit of Francis Gregory Hannigan sworn 2 February 2018 (being pages 3 to 34 of Annexure FGH-7). A declaration that the agreement referred to at paragraph 3 above was not terminated by the letter dated 8 August 2017 from Quinton Hildebrand to Brett Hannigan and Frank Hannigan. An order that the defendant pay the plaintiff's costs of the proceedings. …
The version of the agreement identified in prayer 1 is a copy of the original document that Mr Hannigan received from Inghams, altered in handwriting by Mr Hannigan by changing clause 28, and attaching letters from Inghams to Mr Hannigan dated 5 and 18 January 2016. The version identified in prayer 3 is the original draft agreement without any changes. At the hearing, Mr Hannigan abandoned his claim in prayer 1 of the amended summons and, accordingly, the claim in prayer 2 also ceased to be relevant.
The difference between the terms of the two documents the subject of prayers 1 and 3 of the amended summons was minor, and will be explained in more detail below.

[6]

Mr Hannigan's statement of facts and contentions

Mr Hannigan filed his statement of facts and contentions on 6 June 2018. The document is succinct. Many of the particulars are precisely expressed, but are somewhat obscured by reason of having been given by reference to identified parts of the evidence. Therefore, it will be more intelligible for me to outline the more significant parts of the document. First, it may be noted that Inghams styled its draft agreement as "Queensland Boiler Chicken Growing Agreement". I will call this document the "Inghams Agreement", or the "Agreement".
Mr Hannigan alleged that Inghams provided him with unsigned copies of the Inghams Agreement on 5 January 2016 (par 2) and 7 October 2016 (par 4). Between February 2016 and 16 June 2017, Inghams supplied chickens in Batches 159 to 167 to Mr Hannigan (par 5), for the purpose of him growing them (par 6), which Mr Hannigan did (par 7). Between 4 April 2016 and 1 August 2017, Inghams gave Mr Hannigan recipient created tax invoices in respect of the growing of the chickens (par 8), and paid him approximately $1,780,000 (par 9).
Mr Hannigan then alleged, in par 10: 10. In the premises stated at paragraphs 1 to 9 above, during 2016, [or] alternatively 2016 and 2017, the plaintiff and the defendant entered into an agreement pursuant to which the plaintiff agreed to grow the defendant's chickens for reward ("the Agreement").
In par 11, Mr Hannigan alleged that the terms of the Agreement are as recorded in the Inghams Agreement referred to in prayer 3, which is the first draft delivered by Inghams to Mr Hannigan.
Mr Hannigan then alleged, in par 12, that, by letter dated 8 August 2017, the defendant purported to terminate the Agreement. He then alleged: 13. As at 8 August 2017 there were no grounds upon which the defendant was entitled to terminate the Agreement. 14. The purported termination of the Agreement by the defendant on 8 August 2017 was invalid, unlawful and of no effect.
The following preliminary observations may be made at this stage about Mr Hannigan's claim, as advanced in his statement of facts and contentions.
First, Mr Hannigan did not allege that what he called the Agreement became effective by any process referable to any conventional notion of offer and acceptance, as the standard means for parties to enter into enforceable contracts. He referred to the Inghams Agreements as being unsigned when received, and did not allege that those documents were signed by the parties. He did not allege that any offer constituted by the delivery by Inghams of the Inghams Agreements was formally accepted by Mr Hannigan. Instead, Mr Hannigan alleged the receipt of the initial Inghams Agreement on 5 January 2016; he then alleged the growing of chickens in Batches 159 to 167 in the manner summarised above; and then alleged, in par 10, that "in the premises" the parties entered into the Agreement.
Secondly, consistently with prayer 4 of the amended summons, in which Mr Hannigan sought a declaration that the Agreement was not terminated by Inghams' 8 August 2017 letter, Mr Hannigan made a bare assertion in pars 13 and 14 that there were no grounds upon which Inghams was entitled to terminate the Agreement, and that the purported termination was invalid, unlawful and of no effect. The prayers for relief and the grounds asserted by Mr Hannigan are all in substance statements of a negative.
Thirdly, it is notable that, by his prayers for relief, Mr Hannigan only seeks declarations that the parties are bound by a particular agreement, and that Inghams' 8 August 2017 letter did not terminate the agreement. Mr Hannigan has not sought any consequential relief, either in the nature of orders obliging Inghams to implement the agreement, or ordering Inghams to pay damages to Mr Hannigan for breach of the agreement. As Inghams ceased to deliver chickens to Mr Hannigan after it purported to terminate the agreement, it may be imagined that Mr Hannigan may have suffered some damage. The Court does not know what Mr Hannigan's aspirations are concerning the possible continuity of the performance of the agreement, if it is found by the Court to be valid and to continue in effect. The Court does not know what course Inghams proposes to take in that event. If Mr Hannigan succeeds in these proceedings, the only result will be that he will establish that he has an agreement in terms of the Inghams Agreement, and that the agreement has not been terminated. Mr Hannigan will apparently be satisfied with that outcome, and Inghams has not suggested that Mr Hannigan's claims are incomplete as he has not sought in these proceedings all of the relief to which he may be entitled. As the parties have been content to proceed on that basis, so will the Court.

[7]

Inghams' statement of facts and contentions

Inghams served a statement of facts and contentions dated 27 June 2018.
An amended statement of facts and contentions was filed by Inghams with the leave of the Court on 7 August 2018, which was the second day of the hearing.
Inghams correctly noted that Mr Hannigan had abandoned prayers 1 and 2 in his amended summons.
Inghams then contended that the claims for relief in prayers 3 and 4 should be dismissed because there was no offer and acceptance, so that the version of the Inghams Agreement referred to in prayer 3 did not become binding on the parties. Alternatively, Inghams argued that there was nothing in the conduct of the parties to support a finding that they were bound by the terms of that document. Consequently, the commercial relationship between the parties was determinable by either party either at will or upon reasonable notice.
In the alternative, Inghams contended that, if the version of the Inghams Agreement referred to in prayer 3 was binding on the parties, Inghams had lawfully terminated that agreement.
Inghams expanded upon its contention that there was no contract in the terms alleged by Mr Hannigan in pars 9 to 34, the essence of which I will now summarise. Inghams contended that each version of the Inghams Agreement that was supplied by one party to the other was supplied with the invitation that it be signed if acceptable. No version of the document was ever signed. No conduct by the parties signified acceptance in the absence of a signature. In more detail, on 5 January 2016, Inghams delivered its current version of the Inghams Agreement to Mr Hannigan, and asked him to review it, and sign and return it "if there are no issues". Mr Hannigan did not sign and return the document. Instead, on 15 January 2016, he wrote a letter to Inghams asking for the insertion of a clause to the effect that "The Fee paid shall not be less than any other grower", and requested that Inghams send him a draft clause to that effect. On 18 January 2016, Inghams confirmed in writing that the Fee would be the same as for any other grower, but did not provide a draft clause to that effect. Inghams' letter said that Inghams looked forward to receiving the executed agreement. On 20 January 2016, Mr Hannigan sent Inghams a version of the original Inghams Agreement in which clause 28 (the entire agreement clause) had been amended in handwriting so as to add an exception being the letters written by Inghams dated 5 and 18 January 2016 concerning the Fee, which were annexed to the document. Mr Hannigan's covering letter said that he had signed the amended Inghams Agreement, and that he looked forward to receiving a copy of the executed agreement. Inghams did not return an executed copy of the document. On 24 March 2016, Mr Hannigan wrote to Inghams asking to be forwarded the executed document he had provided on 20 January 2016. Mr Hannigan asked Inghams for a response on 6 May 2016. Inghams responded on 9 May 2016 to say that there were internal discussions about the matter. On 7 October 2016, Inghams wrote to Mr Hannigan to advise him that the change to clause 28 was not acceptable, and that the two letters referred to were not part of the contract. A further copy of the original Inghams Agreement was provided, with the request: "If you agree with these terms please sign and return this contract to us without alterations." Mr Hannigan did not sign and return the document. On 5 December 2016, Inghams wrote to Mr Hannigan again, referring to its 7 October 2016 letter, and stating: "We have not received the signed contract indicating your acceptance of the contract sent over eight weeks ago. The offer is now withdrawn with immediate effect. We will continue to operate under the existing contractual terms." Mr Hannigan did not reply to this letter. Finally, Inghams contended that the commercial dealings between the parties, and the history of payments by Inghams to Mr Hannigan, fell short of establishing the existence of a contract in the terms of the document referred to in prayer 3 of the amended summons.
Inghams contended, in par 39, that the conduct of the parties that Mr Hannigan has relied upon to establish an agreement in terms of the Inghams Agreement only gave rise to what Inghams described as a "[chicken] growing relationship".
Inghams did not state in any specific way what the nature or effect of this chicken growing relationship was. There was discussion between the Court and counsel for Inghams at the beginning of his final oral submissions as to what the real nature of the chicken growing relationship was. It will be convenient to defer a consideration of the effect of that discussion.
Inghams then set out in detail, in pars 42 to 69, its contentions as to why, if there was a binding contract between Inghams and Mr Hannigan on the terms alleged by the latter, it had been validly terminated for breach.
It will be more meaningful to defer an analysis of the detailed contentions made by Inghams until the Court comes to consider the dispute concerning whether, if the contract asserted by Mr Hannigan was created, it was validly terminated for breach. It is sufficient to note, for the present, that Inghams' contentions were comprehensive and detailed, and based upon identified clauses of the Inghams Agreement.

[8]

The Inghams Agreement

As I have mentioned above, Mr Hannigan had a contract with Sunnybrand before he began to deal with Inghams. The terms of the Sunnybrand contract were not in evidence, but it was agreed between the parties that those terms were materially different to those contained in the Inghams Agreement. The evidence did not make clear precisely when the parties started to act in accordance with the terms of the Inghams Agreement, but it was agreed that they did so, in that they acted consistently with those terms. I infer that the parties started to act consistently with the terms of the Inghams Agreement from about the time that Mr Hannigan received the chickens in Batch 159, which was on 16 February 2016. The evidence did not focus on what this involved, but I will proceed upon the basis that, in the period after Inghams initially provided a copy of the Inghams Agreement to Mr Hannigan, what I will call the mechanics of the parties' dealings were in accordance with that agreement.
It will be appropriate to set out the relevant terms of the Inghams Agreement.
The initial draft Inghams Agreement that was given to Mr Hannigan contained the typewritten date, 22 December 2015.
By clause 1.1, the term of the agreement was to commence on 6 February 2016 and expire on 6 February 2021, a period of 5 years. 6 February 2016 was apparently the date on which the first batch of chickens to be grown under the new agreement was expected to be delivered to Mr Hannigan, although it was in fact delivered 10 days later.
Clause 1.3 provided for the parties to negotiate the terms of a further 5 year agreement, starting no less than 18 months before the end of the Initial Term. However, apart from having to act in good faith, the parties were free to decide not to enter into a further agreement.
Inghams' general obligations were provided for in clause 3 in the following terms: 3.1 Subject to this Agreement, the availability of Chickens and the Grower's capacity to raise those Chickens (in accordance with the terms and conditions of the Agreement), Inghams will supply Batches to the Grower and the Grower will accept and grow those Birds for Inghams in the Sheds. 3.2 Inghams will so far as is reasonably practicable supply the Grower with Batches at placement densities commensurate with the Commercial Growers or such other placement densities which may be agreed by Inghams with the Grower Representative from time to time but subject to variation… 3.3 Inghams will use its best endeavours to provide reasonable notice (either verbally or in writing) to the Grower as to when Inghams will: 3.3.1 make any deliveries to the Grower; and 3.3.2 collect any Birds or other goods from the Grower. … 3.5 Where Inghams is obliged to supply a Batch to the Grower, Inghams must (unless otherwise agreed) Supply at no cost and free of delivery charges to the Grower: 3.5.1 the Birds (and may upon delivery assist the Grower with placement of the Birds into the Sheds); 3.5.2 feed for the Birds; and 3.5.3 such technical services, medication, vaccines, disinfectant and/or other supplies for the Birds as it considers necessary. … 3.9 In circumstances where the Growers farming practices fail to meet or comply with Animal Welfare Standards or other regulations, Inghams shall have a right to refuse further placement of Birds and or invoke density cuts on the Grower.
Clause 4 set out the Grower's general obligations as follows: The Grower must: 4.1 accept each Batch delivered by Inghams to the Grower pursuant to this Agreement and raise the Birds in each Batch to the stage of maturity determined by Inghams; 4.2 raise the Birds in accordance with the Manual; … 4.6 furnish all labour, utilities, water, electricity, litter, bedding and all other supplies (other than those Inghams agrees to supply under this Agreement) required to raise the Birds and comply with its obligations under this Agreement and the Manual; … 4.13 use exclusively the goods and services described under clauses 3.5.2 and 3.5.3 and no other such goods or services, in raising the Birds; 4.14 maintain all such records as Inghams and the Manual reasonably require ("Records"); … 4.16 without limiting clause 8, allow Inghams' representatives full and free access at all reasonable times to the Birds, the Records and any other goods belonging to Inghams on the Premises …
The "Manual" was defined in clause 30.2.24 as being a number of identified Inghams' manuals, as amended from time to time (Inghams Manual, or Manual).
Clause 6 had the effect that all goods supplied by Inghams to the Grower (including live Birds) would remain the property of Inghams, and the Records would also be and remain the property of Inghams.
Under clause 7, Inghams had the right in its absolute and unfettered discretion to determine when the Birds in a Batch would be collected for processing. Inghams was responsible for arranging for the Birds to be caught, loaded for transportation and delivered to Inghams' chosen destination, free of charge to the Grower.
The Grower's entitlement to payment was provided for in clause 9 as follows: 9.1 For each Batch raised by the Grower and collected by Inghams from the Grower, Inghams will pay the Grower the Payment calculated on the basis of the Fee but varied as may be required by clauses 9, 10 and 11 and Annexure 1. …
The clause contained provisions dealing with the consequences of birds being killed or smothered, the weighing of birds, deductions from the amount to be paid in certain circumstances, the time for payment, and the Grower's right to audit the way that Inghams had calculated the Fee.
Clause 10 was headed "Payment System" and provided: 10.1 From the commencement of this agreement Inghams will make Payments to the Grower calculated in accordance with Annexure 1 and Annexure 2.
Annexure 1 provided, in clause 1, that: 1. The Fee for all Birds collected on or after the date of this agreement will be: (a) for Birds grown in tunnel ventilation sheds - 85.12 cents per Bird ("Tunnel Shed Birds"); or Plus (b) 4.0 cents per Bird for RSPCA variable costs.
The balance of Annexure 1 contained terms governing the method of reviewing the Fee over the term of the agreement.
Annexure 2 contained provisions that governed the relatively complex formula for determining amounts payable to Growers relative to the commercial circumstances of the performance of all Growers within a pool of Growers, and included: … The Pool Payment System will be a three week rolling pool - The Pool Growers included in the Pool for the purposes of the Payment calculation for a Batch will be those Pool Growers with Batches settled in the preceding week, the same week and the following week as the relevant Batch of the Grower is settled. The payment to be made to each Grower shall be equal to: Fee + ((Grower ALW - Pool ALW) × 100 × Liveweight Point Valuation) + ((Pool CFCR - Grower CFCR) × 100 × CFCR Point Valuation) …
The terms in this formula are defined in the Annexure. One aspect of the formula is relevant to Inghams' claim that Mr Hannigan breached a fundamental or essential term of the Inghams Agreement (assuming that the agreement is proved to have been made). The relevant breach was the failure by Mr Hannigan to comply with a requirement that he provide Inghams, at regular intervals, with average weights of the chickens during the period of their growth. Inghams' case is that receipt of this data was essential to enable Inghams to develop an effective schedule for the collection and processing of chickens so that they would have optimal weights. Inghams submits that the term is essential because, if it is not complied with meticulously, Inghams will be put at risk of processing chickens that are under the desired weights.
A factor that may have relevance to the determination of Inghams' claim is whether the formula for reimbursement of the Growers makes provision for a reduction in the amount payable by Inghams if chickens grown by particular Growers are underweight.
In the formula set out above, Grower ALW is defined as "(a) the total live weight of all Chickens collected by Inghams from the Grower divided by (b) the total number of Chickens collected from the Grower". Pool ALW is defined in the same way, except that it relates to all of the chickens grown by all of the Growers in the Pool. The effect of this part of the formula (Grower ALW - Pool ALW) is that, if the average weight of chickens grown by a particular Grower is less than the Pool average, then that part of the formula will yield a negative number, which will lead to a reduction in the Fee payable to the particular Grower. That is, if a Grower permits Inghams to collect chickens that are below average weight because the Grower has failed to provide Inghams with the required average weight data, the amount payable by Inghams to the Grower will be reduced by application of the formula. I will consider below how this result may have a bearing on Inghams' claim that the relevant term is a fundamental or essential term.
Clause 20 provided for the termination of the agreement, and relevantly provided: 20.1 This Agreement may be terminated: … 20.1.5 by either party notifying the other party in writing if that other party commits a fundamental breach of this Agreement, provided however that if the breach is one that is capable of remedy, the non-defaulting party must notify the defaulting party in writing of the breach and allow the defaulting party a reasonable time (being not less than seven (7) days) after receipt of that notice to remedy that breach, and may only terminate this Agreement if the defaulting party fails to do so; 20.1.6 immediately by Inghams notifying the Grower in writing if the Grower is negligent in the performance of its duties and obligations under this Agreement; … 20.1.9 immediately by Inghams providing notice in writing to the Grower if the Grower: … (g) commits any material breach of, or is in material non-compliance with, Animal Welfare Standards… …
"Animal Welfare Standards" was defined in clause 30.2.2 as meaning: the relevant Model Code of Practice for the Welfare of Animals, FSANZ standards, RSPCA standards and any other animal welfare standards, codes, guidelines, laws or requirements relevant to Chickens, the activities contemplated by this Agreement and/or nominated by Inghams and which apply to all Growers…

[10]

Burden of proof

This issue has arisen as a result of the restricted nature of the relief claimed by Mr Hannigan, being only the two declarations in prayers 3 and 4. Prayer 3 is, in substance, a claim for a declaration that the parties are bound by an agreement in the terms of the Inghams Agreement. Prayer 4 claims a declaration that the agreement constituted by the Inghams Agreement was not terminated by a particular letter written by Inghams.
Mr Hannigan submits that Inghams bears the burden of establishing that it had a valid basis for terminating the agreement, if Mr Hannigan succeeds in establishing that the agreement became binding. As I understand it, Inghams submits that, because Mr Hannigan seeks a declaration that the agreement remains in effect and that there were no valid grounds to terminate it, Mr Hannigan has the burden of proving all matters necessary to establish the legal rights that he seeks to have declared, and that the burden extends to negativing the validity of all grounds that may have been available to Inghams to terminate the agreement.
As his Honour has so often done, McLelland CJ in Eq has captured the essence of the legal principles that govern this question in Massoud v NRMA Insurance Ltd (1995) 62 NSWLR 657 (Massoud). His Honour said, at 660: … These decisions illustrate what I consider to be the principles by which the incidence of the onus of proof is to be determined, namely: (1) a party who seeks relief has the burden of satisfying the Court of facts which (in the absence of proof of other facts) would justify the grant of that relief; (2) what those facts are depends principally upon: (a) the nature of the relief sought; and (b) the operation of any relevant presumptions; (3) in the case of relief by way of declaratory order, the precise terms of the declaration assume particular significance in that (subject to any relevant presumption) the party seeking the declaration has the burden of proof of any matter which is a necessary element of the declaration sought (even if in proceedings by that party for relief of another kind, or in proceedings by the other party, that matter would not arise unless raised (and the burden of proof consequently assumed) by the other party).
His Honour preceded this distillation of principle with a survey of the cases, which Campbell J (as his Honour then was) in Sanpine v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365 (Koompahtoo) described, at [177], as ostensive definition, where the giving of examples of the practical operation of the law provides an understanding of what its principles are. One of those cases, of particular relevance to the present, was Hume v Munro (No 2) (1943) 67 CLR 461, about which his Honour said, at 658: In Hume v Munro (No 2) (1943) 67 CLR 461, the plaintiffs sought a declaration to the effect that one of them was not under any liability to the defendant in respect of any agreement for a lease of certain lands. Latham CJ said (at 474): "… In an action for a declaration that a right alleged to be claimed by the defendant does not exist the onus rests upon the plaintiff of establishing first that a claim sufficiently definite and intelligible in its terms to be a proper subject of adjudication has been made against him by the defendant. … Next, the plaintiff seeking a declaration denying any possible foundation for the alleged claim of right must exhaust the possibilities and show that the claim cannot possibly be supported. It is not for the defendant in such a proceeding to make a claim and to justify that claim."
Prayer 4 claimed by Mr Hannigan is, in substance, a negative assertion that the agreement between Mr Hannigan and Inghams was not terminated by the letter referred to. Considered in isolation, prayer 4 could not be granted unless Mr Hannigan satisfied the burden of proving that there was no ground that could support the termination of the agreement by Inghams. The grounds would not be limited to those relied upon by Inghams in the letter as, if other grounds existed, Inghams would be entitled to rely upon them to support the termination: see Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 at 373 and 378.
In Massoud, the plaintiff sought a declaration that was, in substance, of the same nature as prayer 3 in this case. However, for reasons that are not presently material, the plaintiff was not entitled to that declaration. The plaintiff failed to persuade his Honour to make the declaration that was structurally equivalent to prayer 4, because the plaintiff did not satisfy the burden of affirmatively proving that the avoidance of the insurance policy in that case by the defendant "…was wrongful and without proper foundation…" (at 661).
McLelland CJ in Eq nonetheless made the following observations concerning the plaintiff's claim (equivalent to order 3 in the present case) for a declaration that the insurance policy remained in full force and effect, at 661: … Although the terms of order 3 include an implicit assertion that nothing has happened since the issue by the defendant of the plaintiff's policy to terminate its operation, and the plaintiff has the burden of satisfying the Court of the truth of that assertion, that would in the circumstances involve no more than proof that the policy was issued in respect of a period which has not expired by effluxion of time, since there is a presumption that a contract once made continues in existence. (Such a presumption may of course be rebutted by proof of termination of the contract, for example, by a valid cancellation thereof, but the burden of proof of such a termination would rest on the party alleging it.) A presumption of continuance of this kind is ordinarily relied on in any proceedings to enforce a contract, since the making of the contract invariably precedes its enforcement, and generally speaking the plaintiff has the burden of proving the making of the contract whereas the defendant has the burden of proving any matters alleged to have resulted in the termination of the contract subsequent to its formation. It is immaterial in such a case whether declaratory relief is claimed or not: for example, an order for specific performance of a contract is traditionally preceded by an order declaring the present existence and/or enforceability of the contract. …
Massoud was followed by Young CJ in Eq (as his Honour then was) in Blanch v British American Tobacco Australia Services Ltd (2005) 62 NSWLR 653 at [7]; and the extract from Massoud in the paragraph immediately above was explained by Campbell J in Koompahtoo in the following terms: … [181] In the present case, the only relief which the plaintiffs seeks [sic] is a declaration that the Joint Venture Agreement remains on foot, injunctions to restrain an alleged breach of contract, and damages for breach of contract. To obtain each of those types of relief, so far as the element of the cause of action involving proof that the contract exists is concerned, all that the plaintiff need do is to prove that the contract was entered, that its terms are such that it has not come to an end through effluxion of time, and otherwise to rely upon the presumption of continuance. In relation to each of those causes of action, if the defendant wanted to prove that the contract had come to an end through being validly terminated, it would be for the defendant to allege and prove that matter. Thus, the allegation in paragraph 20 of the Statement of Claim (para [167] above) is an unnecessary allegation for the plaintiff to make. If the plaintiff had never made that allegation, it would be quite clear that the onus of proving a justification for termination of the contract was on the defendant. [182] I do not see how the plaintiff having made the unnecessary allegation makes any real difference. Of course, having made it, if at the end of the case the plaintiff is still urging the Court to make a declaration, or a positive finding, that there was no justification for the termination of the contract, the plaintiff would bear the onus of establishing it. But if it fails to discharge that onus, or if, as happened here, the plaintiff was asserting from the time of its opening submission at the hearing that it was the defendant who had the onus of proving there was a justification for termination of the contract, so far as obtaining a declaration that the contract is on foot, an injunction to restrain a breach of it, or damages for its breach, the plaintiff is back in the same situation it would have been in if it had never made the allegation in the first place. … [185] In the present case, where the remedy of declaration which the plaintiff seeks is in the particular form it is, the defendants bear the onus of establishing that the termination of the contract was justified, even though the plaintiff has made the unnecessary allegation in paragraph 20 of the Statement of Claim (para [167] above). …
One or all of Massoud, Blanch and Koompahtoo have been approved in many cases, including Stapley v Towing Masters Pty Ltd (trading as Dynamic Towing) [2009] NSWCA 382 at [4], [107] and [120]; Fulham Partners LLC v National Australia Bank Ltd [2013] NSWCA 296; (2013) 17 BPR 32,709 at [51], [110] and [111]; White v Johnston (2015) 87 NSWLR 778; [2015] NSWCA 18 at [1]-[3], [18] and [108]; Gooley v Motasea Pty Ltd [2015] NSWCA 31 at [1], [5] and [57]; and In the matter of Asia Pacific Data Centre Limited [2018] NSWSC 1375 at [48]. In A v N [2012] NSWSC 354, Ward J (as her Honour then was) at [388], and, in Re Idoport Pty Ltd (in liq) (recs apptd) [2012] NSWSC 524, Ball J, at [68], applied the principle stated in Massoud that, where a plaintiff seeks an order that a contract remains on foot (the burden being on the defendant to prove a right to terminate) the making of a superfluous allegation by the plaintiff that the defendant had no right to terminate does not affect how the burden of proof lies.
The present case is relevantly similar to Koompahtoo, given that, by prayer 3, Mr Hannigan claims a declaration that an agreement remains in effect; and then, in support of the claim for a declaration that the agreement has not validly been terminated by Inghams, Mr Hannigan made the allegations in pars 13 and 14 of Mr Hannigan's statement of facts and contentions that I have set out above, to the effect that there were no grounds that entitled Inghams to terminate the agreement, and the purported termination was invalid.
The Inghams Agreement was expressed in clause 1.1 to expire on 6 February 2021, so Mr Hannigan has the benefit of the presumption of continuation in this case (assuming that he proves in the first place that the parties did enter into that agreement).
The authorities considered above establish that the burden of proof will fall upon Inghams to establish that the agreement has validly been terminated for breach by Mr Hannigan, if Inghams is to successfully resist Mr Hannigan's claim in prayer 3 that the parties are bound by the agreement.
A question may arise as to what is the legal significance of the fact that, in this case, Inghams has positively alleged the grounds upon which it claims it was entitled to terminate the Inghams Agreement, if that agreement was made. In the extract from the judgment of Latham CJ in Hume v Munro (No 2) set out by McLelland CJ in Eq in Massoud, the Chief Justice referred to the need for the plaintiff to "…exhaust the possibilities and show that the claim cannot possibly be supported." His Honour then said: "It is not for the defendant in such a proceeding to make a claim and to justify that claim." The question is: what, if anything, is the forensic effect of the defendant in fact specifying the grounds upon which the defendant relies to justify its actions, and then, in an attempt to defeat a claim for a declaration in the form of prayer 3 in this case, failing to satisfy the burden of proof?
Ordinarily, the plaintiff must "exhaust the possibilities" and disprove all of the grounds that may have been available to the defendant to terminate the contract. But if, in response to the Court's case management processes, the defendant specifies in detail the grounds upon which it relies to justify termination, the Court may be entitled to infer that there are not any other grounds. Inghams' action in specifying the grounds may do Mr Hannigan the service of defining the available grounds for Inghams to terminate the agreement for breach, and free him from the need to identify all possible breaches and then negative them.
The parties in the present case did not make submissions on the question of whether Mr Hannigan may be entitled to a declaration in the form sought in prayer 4, if Inghams fails to defeat the claim for the declaration in prayer 3, because it fails to establish that it had a right to terminate the Inghams Agreement. I will revisit this issue below, after I have dealt with Inghams' claim that it was entitled to terminate any agreement that is proved to have been made between Inghams and Mr Hannigan.

[11]

Creation of contract by the parties' conduct

A key issue between the parties is whether the effect of their conduct was that a contract was created between them on the terms of the Inghams Agreement, notwithstanding that they both contemplated that a copy of the document would be signed if acceptable, and neither ever signed the document.
Mr Hannigan relied upon the decision of Vickery J in Ying Mui Pty Ltd v Hoh (No 3) [2017] VSC 29; (2017) 349 ALR 296; (2017) 119 ACSR 577 at [151]-[157] as a sufficient encapsulation of the effect of prior authority. Inghams also relied upon this case, on the issue of when conduct is sufficient to establish agreement, as well as on the decisions in Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499 at [39]; and Apple and Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280; (2016) 343 ALR 112 at [221].
It will be convenient to set out the part of the judgment of Vickery J that was extracted in Mr Hannigan's written submissions, in order to demonstrate the difference in position between the parties. His Honour said (footnotes omitted): … [151] It is now well established that a 'contract need not be made by formal offer and acceptance'. Indeed, it has been said that 'it is sufficient to ask whether the existence of a contract has been established on the evidence'. [152] A contract may be inferred from words, acts or conduct. The conduct to which the Court can have regard in assessing whether a contract has been formed includes 'post-contractual conduct'. Thus, it has been observed that: [W]here there is a dispute as to the existence of a contract, or the contract is oral or there is a question as to how the contract is to be characterised or there is a question of whether a term was incorporated into a contract, or where there is a question of an implied term, the parties' subsequent conduct may be relied upon to establish the existence of that contract, and what the terms of the contract were. [153] In a passage which has been often cited with approval, Allsop J (Drummond and Mansfield JJ agreeing) in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd held that: I would see it as the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: "and we hereby agree to be bound in this or that respect. The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract. [154] Thus, it is accepted that it is open to a court to infer the existence of a contract from the parties' conduct on the basis of the objectively ascertained manifestation of mutual assent. [155] However, such cases are rare and it will only be 'in a very clear case that a promise will be implied from facts which do not involve written or oral communication from which a promise appears'. [156] As noted recently by Tate JA in Apple and Pear Australia Ltd v Pink Lady America LLC, commenting upon the observations of McHugh JA in Integrated Commercial Services Pty Ltd v Digital Equipment Corp (Australia) Pty Ltd: … in the "unrefined" commercial context the benchmarks of the classical theory of offer, acceptance, consideration and intention to create legal relations may not readily apply, and instead courts may infer a contract from conduct, [McHugh J] still insisted that it is necessary to draw from those circumstances "a tacit understanding or agreement" and that the parties' conduct "must be capable of proving all the essential elements of an express contract". Moreover, it is "not enough that the conduct is consistent with what are alleged to be the terms of a binding agreement. The evidence must positively indicate that both parties considered themselves bound by that agreement". [157] Thus, in assessing the evidence relied upon to establish a manifestation of mutual assent, which in turn points to an intention to be legally bound to the essential elements of a contract, the conduct must be capable of satisfying the Court on the balance of probabilities that a contract is to be inferred. The evidence must positively indicate that both parties considered themselves bound by that agreement. Equivocal conduct, or conduct which, when looked at as a whole, falls short of providing the requisite degree of satisfaction, will not result in a contract being proven. …
At par 10 of his submissions, Mr Hannigan employed the terminology of Allsop J (as his Honour then was) in the extract from Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 at [369], set out by Vickery J, of "…a body of conduct…" that "…reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be bound by the terms of a contract." Mr Hannigan submitted that the terms of what I have called the Inghams Agreement, and only that document, are the terms by reference to which the "body of conduct" is explicable. In this way, Mr Hannigan submitted that, objectively, there was a body of conduct that is only explicable on the basis that Mr Hannigan and Inghams had reached a position of mutual assent that they would be bound by the Inghams Agreement.
Inghams, on the other hand, focused, at par 61 of its written submissions, on the proposition that it is not enough that conduct is consistent with what are alleged to be the terms of a binding agreement (Inghams' emphasis), and submitted: "The evidence must positively indicate that both parties considered themselves bound by that agreement". This is a reference to [221] of the judgment of the Victorian Court of Appeal in Apple and Pear Australia Ltd v Pink Lady America LLC, where Tate JA (with whom Ferguson and McLeish JJA agreed) said: "…Moreover, it is 'not enough that the conduct is consistent with what are alleged to be the terms of a binding agreement. The evidence must positively indicate that both parties considered themselves bound by that agreement.'" Tate JA adopted the statement of Sundberg J in Adnunat at [39] in making that statement of principle.
In taking this approach, Inghams stressed the proposition that the evidence must positively indicate that both parties considered themselves to be bound, and submitted that the conduct of the parties that was established by the evidence, although substantial, simply did not establish that either party considered themselves to be bound. Inghams appeared to focus on the difference between objective conduct, however consistent it may be with the parties acting in accordance with the terms of a written document, and the subjective consideration of the parties as to whether or not the document binds them as a contract. No amount of proof of the former will be sufficient, according to Inghams, if there is no evidence to establish in addition that the parties actually considered themselves to be bound.
The principles that govern the determination of whether parties have entered into a contract have been set out in a manner binding on this Court by the Court of Appeal in Kriketos v Livschitz [2009] NSWCA 96; (2009) 14 BPR 26,717. McColl JA (with whom relevantly Allsop P and Macfarlan JA agreed) stated the relevant principles extensively at [106]-[120]. I will respectfully limit my extract from those paragraphs to those that are more directly pertinent to the question of when a contract may be formed in cases where formal offer and acceptance cannot be demonstrated. Her Honour said: [111] The respondent accepts that the clear indications called for by the conventional approach cannot be identified in the three letters. In particular, he concedes that the only letter from Mr Roth, that of 2 May 2002, contains no words of acceptance. He relies, however, on the authorities which support the proposition that some, albeit limited, recognition has been given to finding a contract even though it is not easy to locate an offer and/or acceptance: Brambles (at [71], [74]) per Heydon JA. As Giles JA said in Hendriks v McGeoch [2008] NSWCA 53 ; (2008) Aust Torts Reports 81-942 (at [10]), "[a] contract need not be made by formal offer and acceptance, or by an overt course of negotiation [and] [e]ntry into a contract can be found in the conduct of the parties, in what they said and did towards each other." [112] In Empirnall (at 534) McHugh JA observed "communication of acceptance is not always necessary", giving as an example cases where the offeror will be bound if he dispenses with the need to communicate the acceptance of his offer: see Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 (at 269). There is no suggestion there had been any such dispensation in this case. It was necessary, therefore, on the respondent's pleaded case, to identify from the letters some communication on the appellant's part of his acceptance of an offer communicated to him by EML. … [115] McHugh JA (Hope and Mahoney JJA agreeing) discussed the approach to the inference of a contract from conduct in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 (at 11,117-11,118) as follows: … [A] contract may be inferred from the acts and conduct of parties as well as or in the absence of their words … The question in this class of case is whether the conduct of the parties, viewed in the light of the surrounding circumstances, shows a tacit understanding or agreement … The conduct of the parties, however, must be capable of proving all the essential elements of an express contract … Care must also be taken not to infer anterior promises from conduct which represents no more than an adjustment of their relationship in the light of changing circumstances … Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed. (emphasis added) See also Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424 (at [369]) per Allsop J (Drummond and Mansfield JJ agreeing); Laidlaw v Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44 (at [5]-[9]) per Macfarlan JA; (at [58]) per Handley AJA. [116] In Empirnall (at 528, 531), Kirby P described the process by which acceptance of an offer can be inferred notwithstanding absence of specific assent as one of "implied acceptance". [117] In Integrated Computer Services (at 11,117) McHugh JA approved the statement in W Howarth, "Contract, Reliance and Business Transactions" (1987) Journal of Business Law 122, 127 that it is an error "to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed". As the passage I have already cited from Integrated Computer Services demonstrates, his Honour went on to explain the circumstances in which a contract could, nevertheless, be inferred from the acts and conduct of the parties and even from silence. However, for conduct to amount to implied acceptance of an offer, it must be "of such a character as necessarily to lead to the inference on the part of the defendants that the agreement had been accepted on the part of the Plaintiffs, and was to be acted upon by them": Brambles (at [162]) per Ipp AJA (Mason P agreeing), citing Lord Hatherley in Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 (at 686). Other adjectival phrases used in Brogden as descriptive of the degree of satisfaction which must be attained to lead to a conclusion of contractual formation in the absence of specific assent were collected by Macfarlan JA (Beazley JA agreeing and Handley AJA relevantly agreeing (at [93]) in Laidlaw (at [5]-[6]): per Lord Cairns LC, "no explanation can be given of it unless it refers to the contract in question" (at 678) and that the conduct was "referable in my mind only to the contract … " (at 680) and Lord Selborne (at 689), "it appears to me that every single circumstance points quite unequivocally to this agreement". (emphasis added) It is necessary that the conduct "point to the existence of a contract in the terms alleged in the proceedings": Laidlaw (at [9]). [118] In Empirnall (at 534-535) McHugh JA discussed the circumstances in which the silence of an offeree in conjunction with the other circumstances of the case may indicate that the offer has been accepted…It is useful, in those circumstances, to set out McHugh JA's remarks which cast light on the relevance of silence in contractual analysis: Under the common law theory of contract, the silent acceptance of an offer is generally insufficient to create any contract: Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 at 692 and Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 at 1432; [1966] 3 All ER 128 at 131-132. After a reasonable period has elapsed, silence is seen as a rejection and not a acceptance [sic] of the offer. … Nevertheless, the silence of an offeree in conjunction with the other circumstances of the case may indicate that he has accepted the offer: Rust v Abbey Life Assurance Co Ltd [1979] 2 Lloyd's Rep 334 at 340. The offeree may be under a duty to communicate his rejection of an offer. If he fails to do so, his silence will generally be regarded as an acceptance of the offer sufficient to form a contract … But more often than not the offeree will be bound because, knowing of the terms of the offer and the offeror's intention to enter into a contract, he has exercised a choice and taken the benefit of the offer. In Laurel Race Course Inc v Regal Construction Co Inc 333 A 2d 319 (1975) a contractor proposed that it would do additional work upon the basis that, if the work was the result of its defective workmanship under the original contract, there would be no charge. Otherwise the work would be charged on a 'cost-plus' basis. The building owner made no reply to this offer. The contractor commenced work on the job to the knowledge of the building owner who was held bound by the terms of the offer. Speaking for the Court of Appeals for Maryland, Judge Levine said (at 329): … Where the offeree with reasonable opportunity to reject offered services takes the benefit of them under circumstances which would indicate to a reasonable person that they were offered with the expectation of compensation, he assents to the terms proposed and thus accepts the offer. This formulation states acceptance in terms of a rule of law. However, the question is one of fact. A more accurate statement is that where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms. A useful analogy is to be found in the "ticket cases" where an offeree, who has or ought to have knowledge of the terms of a contract of carriage or bailment, is generally bound unless he raises objection: cf Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 at 169 and MacRobertson Miller Airline Services v Cmr of State Taxation (WA) (1975) 133 CLR 125 at 136-140. The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted. (emphasis added) [119] In each case "the inference from silence, if any, must depend on the facts of the case and on common sense": Barrier Wharfs (at 661-662) per Higgins J. [120] In Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 (at 326) Mahoney JA identified three questions to consider in determining whether parties have made a binding contract: " … did the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract?"
It is necessary to bear in mind, by reference to what McColl JA said at [112], and what Allsop P found at [13], that the Court of Appeal found that the question of whether or not a contract had been formed in that case depended upon the effect of three emails that had been exchanged, and that it was too late for the respondent to claim that the contract had arisen out of the conduct of the parties after the exchange of the emails. The case is therefore different from the present, in which Mr Hannigan relies exclusively on the conduct of the parties after the provision of the draft Inghams Agreement to establish the contract.
The present is not a case where the parties have exchanged communications, and the question is whether those communications should be interpreted as signifying mutual consent of the parties to be bound by the terms of some agreement. This is a case where the question is whether the conduct of the parties, in the context of silence as to whether they accepted that they would be bound by a document containing contractual terms, has given rise to a binding contract on its terms.
In my view, the principles extracted by McColl JA at [118] from the judgment of McHugh JA (as his Honour then was) in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 are particularly relevant. As McHugh JA said (see [118]): "…However, the question is one of fact. A more accurate statement is that where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms…" The following statement by Higgins J from Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647; [1908] HCA 88, extracted by McColl JA at [119], is also significant: "…the inference from silence, if any, must depend on the facts of the case and on common sense."
In the earlier decision of the Court of Appeal in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61, Heydon JA (as his Honour then was) approved the statement by McHugh JA in Empirnall Holdings Pty Ltd at 535, which was also approved by McColl JA. His Honour also made the following observations, which are of particular relevance in my view to the present case: … [78] A similar principle was enunciated in Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 at 682, where Lord Hatherley adopted the language of a concession by Mr Herschell QC as sound: "he says that he will not contend that this agreement is not to be held to be a binding and firm agreement between the parties, if it should be found that, although there has been no formal recognition of the agreement in terms by the one side, yet the course of dealing and conduct of the party to whom the agreement was propounded has been such as legitimately to lead to the inference that those with whom they were dealing were made aware by that course of dealing, that the contract which they had propounded had been in fact accepted by the persons who so dealt with them." Thus if a vendor of property, having been informed of its real estate agent's scale of fees, permits the real estate agent to continue endeavouring to sell the property, the vendor will be taken to have agreed to that sale by conduct (Way & Waller Ltd v Ryde [1944] 1 All ER 9 at 10). …
Heydon JA added: … [80] If offer and acceptance analysis is not always necessary or sufficient, principles such as the general principle that a rejection of an offer brings it to an end cannot be universal. A rejected offer could remain operative if it were repeated, or otherwise revived, or if in the circumstances it should for some other reason be treated, despite its rejection, as remaining on foot, available for acceptance, or for adoption as the basis of mutual assent manifested by conduct. [81] In the light of the above cases, it is relevant to ask: in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the Council and a reasonable person in the position of the defendant think as to whether there was a concluded bargain? …
Finally, Heydon JA expressed the applicable test in the following way: … [85] One way of putting the applicable test is the way that Scrutton LJ put it in Sullivan v Constable (1932) 48 TLR 369 at 370: "If the [defendant] had so acted that the plaintiff was reasonably entitled to believe that [the defendant] was assenting to the position which had been asserted by the plaintiff, the [defendant] was bound." A similar test was stated by Chitty on Contracts (28th ed, 1999) Vol 1, para 2-027: "conduct will only amount to acceptance if it is clear that the offeree did the act with the intention (actual or apparent) of accepting the offer" (emphasis added). A reasonable person in the Council's shoes would, in the light of the defendant's decision to charge the higher fees of which the Council speedily learned, have been reasonably entitled to believe that the defendant was assenting to the position asserted in the 19 September 1991 letter despite its initial rejection. That was the apparent intention underlying its conduct. …
In Broadlex Services v RCR Resolve FM (No 2) [2015] NSWSC 1514, McDougall J stated the test of whether a contract has been created by the conduct of the parties in the following terms: … [134] … The ultimate issue is whether a contract has arisen on the proved dealings of the parties. Where those dealings comprise the making of an offer by the tender of a printed form of agreement and conduct said to amount to acceptance of that offer, the test is whether an objective bystander, considering those facts, would conclude that there had been acceptance of the terms stated in the printed document. … [136] The test stated by McHugh JA in Empirnall Holdings was applied by Heydon JA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [82]. His Honour made the point that "it is the reaction of reasonable parties, not the actual parties, which must be analysed"… …
The question must be asked: is there some inconsistency between the statement of Tate JA above that the "…evidence must positively indicate that both parties considered themselves to be bound by that agreement…", and the observations of McHugh JA and Heydon JA that, where the response to an offer is silence, but there is conduct by a party consistent with an understanding that a contract has been made, the existence of the contract depends upon what reasonable people in the shoes of the parties would understand the effect of the conduct to be? In the latter case, the determination of the question depends upon inference and common sense and whether reasonable people would infer from the conduct an apparent intention of the parties to be bound. Positive evidence of intention to be bound is not required.
In my view, these approaches are not inconsistent, and are in reality different expressions of the overarching test, as observed by Vickery J in Ying Mui Pty Ltd v Hoh (No 3) at [151]: "It is now well established that a 'contract need not be made by formal offer and acceptance'. Indeed, it has been said that 'it is sufficient to ask whether the existence of a contract has been established on the evidence'." Where the parties exchange communications, but those communications do not clearly demonstrate the acceptance of an offer, the question will be whether the evidence nonetheless positively indicates that both parties considered themselves to be bound by an agreement. In other cases, the parties' conduct may go beyond the exchange of communications and they may conduct themselves so consistently with the terms of a document containing contractual terms, that the effect of their conduct, as viewed by reasonable observers, may become paramount in the determination of whether either party remains able to assert against the other that a contact has not been created. As time goes by, ever more consistent adherence to the conduct required by a contractual document may come to overwhelm the effect of initial inconclusive communications, in the objective determination of whether a contract has been created. When it becomes unreasonable, because of a party's conduct, to claim that there is no agreement, the other party will be entitled to assert the enforceability of that agreement, notwithstanding the absence of positive evidence that they both initially considered themselves to be bound by the agreement.

[12]

Effect of breach by terminating party on right to terminate

The principal ground relied upon by Inghams for terminating the agreement is its claim that Mr Hannigan failed to provide feed for thousands of chickens for periods in excess of the periods allowed for in the relevant Animal Welfare Standards.
Mr Hannigan relies upon the terms in the Inghams Agreement whereby Inghams was required to provide all feed at no cost to Mr Hannigan, and Mr Hannigan was obliged to use only that feed. Inghams had a standing arrangement with a carrier to deliver feed to Mr Hannigan following orders made by him. Brett Hannigan made an order with the carrier that the carrier failed to satisfy. The carrier was Inghams' agent for the purpose of complying with its duty under the agreement to supply feed. If the ordered feed had been supplied in due time, Mr Hannigan would not have run out of feed (assuming Inghams' claim in that regard is established).
Mr Hannigan argues that, if it is proved that the chickens were without feed for a period that put him in breach of the Animal Welfare Standards, the breach was caused by Inghams through the conduct of its agent. Inghams responds that the default remained the conduct of Mr Hannigan, because the carrier's failure to deliver occurred at a time when compliance by Mr Hannigan with the Manual would have caused him to inform Inghams of the non-delivery, which, if done, would have led to the delivery of the missing load of feed in time to remove the risk that the chickens would run out of feed.
In these circumstances, the question is whether breach of contract by a party who purports to terminate the contract for breach by the other party (whether the right to terminate arises under the terms of the contract or under the law of contract relevant to the consequences of breach), precludes a valid termination. In this case, Inghams has claimed that any contract between Inghams and Mr Hannigan was validly terminated (1) by Inghams exercising contractual rights of termination; and (2) at general law for breach by Mr Hannigan of terms of contract that were fundamental or essential in their nature, such that any breach by Mr Hannigan entitled Inghams to terminate.
Mr Hannigan's primary submission (at par 30 of his written submissions) is that a party whose breach of contract causes a breach by the other party is not entitled to terminate the contract for non-performance by that other party. He relies for this proposition on Armstrong Strategic Management and Marketing Pty Ltd v Expense Reduction Analysts Group Pty Ltd (No 9) [2016] NSWSC 1005 at [172]. In that case, Ball J said: [172] A party in breach of a non-essential term is not prevented by that breach from terminating the contract for a fundamental breach or repudiation by the other party. An exception exists where the breach or the repudiation was caused by the terminating party's breach. A party whose breach causes a breach by the other party or makes performance by the other party futile is not entitled to terminate the contract for non-performance by that party: Nina's Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613 at 632; Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (rec and mgr apptd) (1997) 42 NSWLR 462, 479ff per Gleeson CJ, Handley JA and Brownie AJA.
Mr Hannigan submits that the proposition is an application of the principle that a party to a contract is not entitled, as against the other party, to rely upon an event resulting from the first party's wrongful act, as established by Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 440 to 442; [1950] HCA 35, and other cases cited.
I accept Mr Hannigan's submission that there is a principle of construction whereby the Court will strain against construing a contractual right to terminate an agreement in a manner that will permit a party whose default has created the apparent right to terminate to do so in the exercise of that contractual right.
In this regard, I accept the following statement of principle by Young J in Beneficial Finance Corporation Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510 at 534, which was relied upon by Mr Hannigan: … It has been argued before me that there is a corresponding common law principle which flows from the maxim that no-one can take advantage of his or her own wrong. It is clear that such a principle exists. However, on closer examination, the maxim really comprehends three principles. … The second principle is one of construction, that there is a presumption that a party to a contract should not be permitted to take advantage of his or her own wrong against the other party: New Zealand Shipping Co Ltd v Societe des Ateliers et Chantiers de France [1919] AC 1 at 9; Cheall v Association of Professional Executive Clerical and Computer Staff [1983] 2 AC 180 at 189; Alghussein Establishment v Eton College [1988] 1 WLR 587; TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130; Micklefield v SAC Technology Ltd [1990] 1 WLR 1002; Thornton v Abbey National plc [1993] TLR 111 and Little Hayes Nursing Home Ltd v Marshall (1993) 66 P & CR 90. This principle of construction will yield in at least two instances namely: (a) where there are clear express provisions to the contrary (Cheall (at 189)); or (b) where no damage would be caused to the innocent party (Thornton's case). Furthermore, one must be very careful to define what is the "wrong" of which the wrongdoer cannot take advantage and to whom a duty has been breached which causes that conduct to be wrong: Cheall (at 189). …
The authorities relied upon by his Honour clearly support the principle stated, and also demonstrate the width of the circumstances in which it applies. The expression of the rule of construction that a party to a contract must not be permitted "…to take advantage of his own wrong…" is found in the speech of Lord Atkinson in New Zealand Shipping Co Ltd v Societe des Ateliers et Chantiers [1919] AC 1 at 9, and in the judgment of Latham CJ and Williams and Fullagar JJ in Suttor v Gundowda Pty Ltd at 441.
There was no suggestion by Inghams in the present case that the rule of construction was displaced by any wording in the Inghams Agreement.
It is then necessary to consider whether there exists, in parallel with the rule of construction, a substantive principle of law that a party to a contract cannot terminate the contract in reliance upon the general principles of the law of contract, when the event that would justify termination is caused by the terminating party's own default.
A number of decisions of the Court of Appeal of New South Wales, in my view, support the summary of the law made by Ball J in Armstrong Strategic Management and Marketing Pty Ltd v Expense Reduction Analysts Group Pty Ltd (No 9), which I have extracted above.
In Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (recs and mgr apptd) (1997) 42 NSWLR 462, the Court (Gleeson CJ, Handley JA and Brownie AJA) said at 479-480: … The decision in this appeal does not require a comprehensive analysis of the effect of a breach on a party's right to rescind. This is not a case where the party attempting to rescind was in breach of a condition or had otherwise repudiated: compare Morris v Barron & Co [1918] AC 1 at 9, Nina's Bar Bistro Pty Ltd (formerly Mytcoona Pty Ltd) v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613 at 632-633, per Priestley JA and Fercometal Sarl v Mediterranean Shipping Co SA (The Simona) [1989] AC 788. Timely payment by Roadshow was not a condition precedent to be performed before CEL/Vision became bound to perform the obligations repudiated by the sale and was independent of those obligations: compare Foran v Wight (1989) 168 CLR 385. As a general rule, a party in breach of a non-essential term is not prevented from rescinding for a fundamental breach or repudiation by the other party: see J W Carter, Breach of Contract, 2nd ed (1991) at 347 and Halsbury's Laws of Australia, vol 6, "Contract" (1992) par 110-9520, by the same author. The question is whether there is an exception or qualification to this general rule which prevented Roadshow from rescinding. Such an exception or qualification might exist if there were a causal relationship between the breaches of non-essential terms by the party attempting to rescind, and the fundamental breach relied upon: see Nina's Bar Bistro Pty Ltd (formerly Mytcoona Pty Ltd) v MBE Corporation (Sydney) Pty Ltd (at 614, 620-621, 632); and compare Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 440-442. …
As appears from the first sentence of this extract from the Court of Appeal's judgment, the Court did not embark upon a comprehensive analysis of the effect of a breach on a party's right to rescind. Consequently, it may be that the Court's observation, in the second paragraph, that there may be an exception to the general rule that a party in breach of a non-essential term is not prevented from rescinding for a fundamental breach, in cases where there is a causal connection between the terminating party's breach and the fundamental breach by the other party, was not intended to be authoritative.
However, in Kyrwood v Drinkwater [2000] NSWCA 126, Powell JA (with whom Meagher JA agreed) said (footnotes omitted): … [154] I agree with Young J that the breach by the Messrs. Drinkwater of the provisions of cl 12 did not disentitle them to determine the Agreement. In Nina's Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd. it was held by this Court that, if non-compliance with a contractual obligation is to take away the defaulting party's right to terminate, there must be a direct causal relationship between the non-compliance and the failure to complete, the onus of proving which lies on the non-defaulting party, and there must be an absence of repudiation by the defaulting party prior to that time. The same approach was taken by this Court in Roadshow Entertainment Pty Ltd v CEL/Vision (ACN 053 006 269) Pty Ltd. where in the Judgment of the Court, the following passages appear:… [His Honour then set out an extract from the judgment that included the extract that has been set out in these reasons above.] …
Powell JA accepted the statement made by the Court of Appeal in Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (recs and mgr apptd), to the effect that a party in breach of a non-essential term is prevented from terminating for fundamental breach by the other party, if there was a causal relationship between the terminating party's breach and the breach by the other party, as an established principle of law.
The relevant principles have perhaps most clearly been stated by Hodgson JA in Sharjade Pty Ltd v Commonwealth of Australia [2009] NSWCA 373; (2009) 15 BPR 28,443: … [54] A further and more difficult question is whether, when one party has committed a breach satisfying one or more of the three categories, but the other party is also in breach of the contract, the latter can terminate despite its own breach. The answer is that generally it can, at least unless the obligations breached are interdependent or the breach by the party wishing to terminate has caused the breach that this party wishes to rely on. … [56] As regards the latter exception, it seems clear that a party cannot rely on an event as a ground for terminating a contract if that event has been caused by that party's own breach of contract: see for example Suttor v Gundowda Pty Ltd [1950] HCA 35 ; (1950) 81 CLR 418 at 440-442, Nina's Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613; Plumor Pty Ltd v Handley (1996) 41 NSWLR 30. The latter two cases also decided, correctly in my opinion, that the onus of proof lies on the party resisting termination, that is, the party who wishes to assert that the event that would otherwise justify termination was caused by the party seeking to rely on that event. [57] In the absence of such interdependence or a proved causal link, the circumstance that a party is itself in breach does not generally disentitle it to rely on the other party's breach of contract, if that breach would otherwise entitle the former to terminate: Nina's Bar, State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyds Reports 277; Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (1997) 42 NSWLR 462. This position is assumed in the decision of the High Court of Australia in Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64. Even if the terminating party's breach were itself sufficient to justify termination, in my opinion the better view is that this would not of itself preclude termination by that party, so long as the terms breached were independent and the causal link referred to earlier was not established: see Golodetz at 285-287, Roadshow at 481. (This passage from Roadshow was quoted with approval by Powell JA, with whom Meagher JA agreed, in Kyrwood v Drinkwater [2000] NSWCA 126 at [154]; although opposing views have been expressed by Fitzgerald JA in dissent in that case, and by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 143-144 and White J in Rona v Shimden Pty Ltd [2005] NSWSC 818; (2005) 12 BPR 23,287 at [92].) However, since entitlement to damages for loss of the bargain would generally require proof of readiness, willingness and ability to perform on the part of the party claiming damages, the party terminating in those circumstances may be unable to claim damages for loss of the bargain. …
Hodgson JA's reliance, at [56], on Suttor v Gundowda Pty Ltd tends to support the conclusion that the distinction between the principle being one of construction or of law is not of great significance. In any event, the Court of Appeal decisions that are considered above have, in the result, accepted that the principle of construction applied in Suttor v Gundowda Pty Ltd and the other cases referred to above in that connection extends to support the proposition that a party whose breach of contract has caused a breach of contract by the other party is not entitled to exercise a right to terminate the contract that would otherwise be available under the general law of contract.
It is necessary, in the present case, to consider the principles that are to be applied where there may be breaches by both parties that have caused the event relied upon by one of them as a ground for terminating the contract, and where the terminating party claims that its own breach has ceased to be an effective cause of the event because of the conduct of the other party.
The learned editors of Cheshire and Fifoot Law of Contract (11th, Australian edition) at [23.37] state the following principle concerning concurrent causes (footnotes omitted): The law accepts that events are determined by multiple causes. A breach that is only one cause among others may nevertheless attract legal liability. It is not necessary for the breach in question to be the exclusive or dominant cause of the loss complained of. The question is whether the breach "materially caused or contributed to the harm suffered".
As McHugh J said in Chappel v Hart (1998) 195 CLR 232; [1998] HCA 55 at [27] (footnotes omitted): Before the defendant will be held responsible for the plaintiff's injury, the plaintiff must prove that the defendant's conduct materially contributed to the plaintiff suffering that injury. In the absence of a statute or undertaking to the contrary, therefore, it would seem logical to hold a person causally liable for a wrongful act or omission only when it increases the risk of injury to another person. If a wrongful act or omission results in an increased risk of injury to the plaintiff and that risk eventuates, the defendant's conduct has materially contributed to the injury that the plaintiff suffers whether or not other factors also contributed to that injury occurring. …
As will be seen, Inghams' primary response to Mr Hannigan's argument that it was Inghams' agent's failure to deliver the last load of feed that was the cause of any failure by Mr Hannigan to ensure that the chickens were fed in compliance with the relevant Animal Welfare Standard, was to argue that it was Mr Hannigan's own failure to follow up the missing delivery that was the real cause of the breach. That argument is one of intervening or supervening cause. Relevant to the availability of that argument is the following statement of principle by Mason CJ in March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506; [1991] HCA 12 at 518-519: … As a matter of both logic and common sense, it makes no sense to regard the negligence of the plaintiff or a third party as a superseding cause or novus actus interveniens when the defendant's wrongful conduct has generated the very risk of injury resulting from the negligence of the plaintiff or a third party and that injury occurs in the ordinary course of things. In such a situation, the defendant's negligence satisfies the "but for" test and is properly to be regarded as a cause of the consequence because there is no reason in common sense, logic or policy for refusing to so regard it. …
Thus, if Inghams by its agent committed a breach of the agreement by failing to deliver a load of feed ordered by Brett Hannigan, and that breach generated the risk that Brett Hannigan would fail to respond by reordering the load in order to avoid Mr Hannigan not complying with the Animal Welfare Standards, Inghams' breach will remain a cause of the non-compliance, even if Brett Hannigan's conduct also had the effect that Mr Hannigan was in breach of the agreement.

[13]

Parties' contentions concerning the nature of the arrangement

It will be convenient to address in broad terms how the parties put their cases concerning the legal nature of the relationship between them, before I analyse the evidence relevant to the question of whether an agreement was created in the terms alleged by Mr Hannigan.
Mr Hannigan's case was relatively straightforward. According to Mr Hannigan, the Inghams Agreement is the only candidate as the basis for the formation of a contract between Mr Hannigan and Inghams. This is not a case where there can be any doubt about the documentary basis of the contract. Mr Hannigan accepts that the parties did not both execute a document, and that it is necessary for him to establish that the parties by their conduct adopted the Inghams Agreement as binding upon them.
Mr Hannigan submits that both parties so comprehensively and repetitively acted on a basis that is only consistent with their mutual belief that the Inghams Agreement constituted a contract between them that the contrary argument is simply not realistic.
Although Mr Hannigan initially contended for the original Inghams Agreement and the Inghams Agreement with the hand-written amendment to clause 28 in the alternative, he abandoned the latter claim. As to that, he submitted that the hand-written amendment was inconsequential and did not alter the substance of the Inghams Agreement, so the inconclusive communications as to whether the amendment should be made were also inconsequential. He submitted that all of the significant terms of the agreement were to be found in the Inghams Agreement.
As I have noted above, Inghams described the arrangement between the parties as being a "chicken growing relationship" that could be terminated by Inghams, either at will or on notice.
Intrigued as to what the chicken growing relationship meant as a matter of law, I sought to clarify the matter with counsel for Inghams at the beginning of his oral submissions.
The reason for my particular interest was that it appeared clearly from the evidence that the growing of chickens by mass production must be a highly organised operation, with Inghams being entitled to meticulously control the activities of the Growers, for the protection of Inghams' financial position and brand reputation, as well as the preservation of the public health. A moment's contemplation of what would be involved in delivering 200,000 baby chickens to a Grower without any detailed contractual arrangements, and then hoping that, in due time, the Grower would redeliver mature chickens in optimal condition for processing, will cast substantial doubt over the amorphous arrangement apparently contended for by Inghams.
Counsel for Inghams put a number of propositions, which I have distilled from the transcript beginning at T 278: (1) Some of the things that the parties have done are consistent with some of the clauses in the Inghams Agreement, but that consistency does not mean that the entire document became binding on the parties. (2) Whatever parts of the Inghams Agreement may have come to be included in a contract between the parties, there was no conduct that created any binding duration of the relationship, or the basis upon which it could be terminated. (3) Inghams' "core position" was that there may be a contract, but it was "not this contract", meaning the Inghams Agreement. (4) Inghams did not attempt to define the metes and bounds of the relationship. (5) The Court cannot identify with any degree of certainty what governed the relationship. (6) Whatever the conduct of the parties may have been, they reserved to themselves the right of ongoing negotiation and the negotiation never came to fruition. (7) In response to an inelegantly worded alternative description of the relationship put by the Court, counsel adopted the description that "…it was a de facto relationship rumbling along."

[14]

Consideration of whether the parties reached agreement by conduct

By letter to Mr Hannigan dated 14 May 2015, Inghams reminded Mr Hannigan that the Sunnybrand agreement would expire in late 2015 (in fact on 1 December 2015). Inghams advised Mr Hannigan that it was willing to enter into negotiations for a new 5 year agreement, to be based on the terms and conditions in Inghams' standard agreement. Inghams asked whether Mr Hannigan was willing to enter into negotiations for a new broiler growing contract.
Mr Hannigan wrote to Inghams on 20 May 2015, to advise it that he was open to negotiations for a new contract.
Mr Andrew Walsh, the Queensland Farming Manager of Inghams, sent a letter to Mr Hannigan on 5 January 2016, to which he attached a draft Inghams Agreement for the Avoca Vale Farm. Materially, the letter said: … As per our discussions and your correspondence, it is hoped that this new agreement be signed by both parties ready for the batch that is planned to be placed at the farm from 12 February 2016. The commencement date of the agreement is listed as 6 February 2016 which is the midway point of the cleanout between the last batch on the current agreement and the first batch on this new agreement, which is usual practice. In a discussion with Inghams' legal counsel, it was advised that Inghams has not contractually guaranteed a minimum payment to cover the costs of interest, depreciation and fixed costs in the past, and so an inclusion to that effect has not been written into the agreement. I have also noted your advice that you have a live DA for 6 further sheds. Please review the agreement, and sign and return to me at your earliest convenience if there are no issues. Inghams looks forward to continuing to work together. …
This letter expressed Inghams' hope that the new agreement would be signed by both parties before the first batch under the new agreement would be placed at the Farm from 12 February 2016. It asked Mr Hannigan to sign and return the agreement at his earliest convenience, if he had no issue with it.
Inghams made two submissions about this letter (written submissions par 26). First, it submitted that the letter required Mr Hannigan to communicate his acceptance by signing and returning the document. In my view, "required" is too strong a word. The letter clearly requested that Mr Hannigan signify his acceptance by signing and returning the document. Secondly, Inghams suggested that the use of the word "hoped" conveyed that Inghams contemplated the possibility that the contractual negotiations might extend beyond the delivery of the next batch of chickens. That is, Inghams recognised that negotiations may not be concluded before the next delivery of chickens, and that "…Inghams did not require the chicken-growing process to be put on hold while the contractual negotiations continued." Inghams also noted that Mr Hannigan did not say that he would not accept further batches of chickens until some mutually acceptable agreement had been reached.
In my view, Mr Walsh's meaning does not appear clearly from the wording of the letter, and I would not attribute to it a positive meaning that Inghams was prepared to deliver a batch of chickens to Mr Hannigan, whether or not there was any enforceable agreement that regulated the parties' rights and obligations. The use of the word "hoped" could equally convey the meaning that Mr Walsh desired a mutually satisfactory contractual document to be signed before the delivery of the next batch of chickens on 12 February 2016, so that it would not be necessary for Inghams to defer delivery of that batch if there was no agreement in time.
Mr Walsh's letter expressed, in a conventional way, the expectation that Mr Hannigan's agreement would be proved by his signing the Inghams Agreement, and that, ultimately, both parties would have copies of the document signed by the other. However, it does not follow that Inghams could not be bound by the terms of the Inghams Agreement unless and until it was signed by Mr Hannigan, if the parties in the interim conducted themselves in a manner that would cause the reasonable observer to conclude that they must have accepted that their relationship was governed by the Inghams Agreement.
Mr Hannigan replied to Mr Walsh on 15 January 2016. The relevant part of his reply said: … As discussed we desire a clause to the effect that "The Fee" paid shall not be less than any other grower. Please forward a draft. Whilst we are not comfortable with some clauses, nor not having a minimum payment clause we shall execute the contract conditionally upon our monthly payment being continued until 12 February 2016. Accordingly please confirm you shall pay (in February) i) Normal RSPCA payment per batch, and ii) 12th/29 of the monthly payment of $83,481.92 being $34,544.24 + GST being a total of $37,998.66 as per our normal arrangement, for the month of February 2016. …
By this letter, Mr Hannigan appeared to accept, in principle, the balance of the terms of the draft offered by Inghams, although he was not entirely happy with them. Mr Hannigan did not, however, sign the document. The significance of Mr Hannigan's request concerning monthly payments continuing until 12 February 2016 was not explained in the evidence.
Mr Walsh replied to Mr Hannigan on 18 January 2016. Mr Walsh referred to having consulted Inghams' legal counsel regarding Mr Hannigan's request for a clause about "The Fee", and continued: … The "Fee" is a collectively-negotiated fee payable to all commercial growers across Queensland, and that is reflected in para 2 of Annexure 1, which says "On 1 July 2016 and annually thereafter ("Variation Date") the Fee will be varied to reflect the amount agreed by Inghams and the Grower Representative as being the new fee applicable to all Pool Growers." This confirms that the "Fee" would be the same for you as for all other Growers under the Growing Agreement. I can also confirm that we shall pay you (in February) the normal RSPCA payment per batch, and 12/29th of the normal monthly payment as per the current arrangement as detailed in your letter of 15 January. We look forward to receiving the executed agreement and to continuing to work together. …
Mr Walsh's explanation was to the effect that Mr Hannigan would receive the same fee as all other commercial growers, as that flowed naturally from the provisions of the Inghams Agreement that dealt with the calculation of the Fee, and that Mr Hannigan would receive the February payments that he wanted to have confirmed.
The practical effect of this response was that the parties were, in substance, in agreement about the terms of the contract, although perhaps not its form. Mr Hannigan's only expressed reservation about the provisions of the Inghams Agreement was his concern that he may not be entitled to the same Fee as all other Growers. In his letter, Mr Walsh explained why the Inghams Agreement had the effect that all Growers would be paid on the same basis.
Mr Hannigan replied to Mr Walsh on 20 January 2016. Materially, he said: … Please see amendment to clause 28 of the agreement. The amendment refers to letters received from you, which are annexed to the back of the agreement. We have now signed the contract and we look forward to receiving a copy of the executed agreement. …
The contract enclosed with Mr Hannigan's 20 January 2016 letter was in the terms of the draft provided by Inghams on 5 January 2016, save that clause 28, the "Entire Agreement" clause, had been amended in handwriting by Mr Hannigan and signed by him. The clause as amended read as follows, with the words added by Mr Hannigan underlined: 28. Entire Agreement This Agreement (including Annexures) contains the entire agreement between the parties about its subject matter, excepting the letters dated 5/1/16 and 18/1/16 from Inghams and to the Grower. (Annexed hereto)
The agreement was signed by Mr Hannigan and dated 20 January 2016.
Inghams' letters to Mr Hannigan dated 5 and 18 January 2016, to which I have referred above, were annexed by Mr Hannigan to the copy of the draft agreement that he signed.
It is not clear why Mr Hannigan thought he should amend clause 28. It seems that he acted for more abundant precaution, in order to seek to bind Inghams to the interpretation of the agreement that they stated in their 18 January 2016 letter. It is probable that Mr Hannigan thought that the amendment he had made was in conformity with Inghams' understanding of the effect of the original draft. It is debatable whether the addition to clause 28 made by Mr Hannigan changed the effect of the agreement. If it did, it does not appear that the change was substantial. There is an argument that Mr Hannigan's addition was mere surplusage.
As I understand it, it is accepted by the parties that the first batch of chickens, Batch 159, comprising 212,244 chickens, was delivered by Inghams to Mr Hannigan on about 16 February 2016. I have taken this date from Mr Hannigan's chronology. Inghams did not challenge the date and, in any event, the delivery must have taken place in February. Inghams did not suggest that Mr Hannigan's 20 January 2016 letter was not received before it caused Batch 159 to be delivered to Mr Hannigan.
Although Inghams had indicated, in its 5 January 2016 letter to Mr Hannigan, that it hoped that the new agreement would be signed by both parties before the first batch was delivered, Inghams delivered that batch after it had received a version of the agreement signed by Mr Hannigan, but before it had either signed the agreement or advised Mr Hannigan that it did not accept his suggested amendment to the draft.
The evidence does not disclose the management processes within Inghams that led it to deliver Batch 159 to Mr Hannigan, before it had received a copy of the Inghams Agreement signed by him, and before Mr Hannigan's request in his 20 January 2016 letter had been dealt with by Inghams. Although Mr Walsh was not asked questions on the subject in cross-examination, I would infer that Inghams, as a corporation, was aware, when it delivered Batch 159 to Mr Hannigan, that there was no agreed contractual document signed by both parties. First, it is improbable that the batch would have been delivered without the knowledge of Inghams' Queensland Farming Manager. Secondly, Inghams did not suggest that its officers who organised the delivery of the chickens in Batch 159 acted in ignorance of the position concerning the absence of a signed contract.
The evidence does not deal with the practical arrangements that were made by Inghams to deliver the chickens in Batch 159 to Mr Hannigan. Internally, the necessary practical arrangements must have been made, but I would infer that Inghams or its agent, the carrier, informed Brett Hannigan of the expected date of delivery of the chickens. It is not rational to infer that Inghams' carrier simply turned up at the gate of Avoca Vale Farm with 212,244 day-old chickens. It is also not known what arrangements Brett Hannigan made to receive the chickens but, given that six sheds had to be made ready to receive them, and the proper quantities of feed had to be obtained, it is reasonable for the Court to infer that relatively detailed practical arrangements were made to receive Batch 159.
It is necessary to address the question: what, if anything, was the legal effect of Inghams arranging to deliver Batch 159 to Mr Hannigan, and Brett Hannigan, on Mr Hannigan's behalf, agreeing to accept the delivery and to take responsibility for the care of the chickens?
I have already made the observation that the mass-production nature of the operation, and the potential consequences for Inghams' financial position and brand reputation, as well as public health and animal welfare considerations, not to forget the cost of growing the chickens and the remuneration to which Mr Hannigan would become entitled, required that the terms upon which the chickens were delivered to Mr Hannigan and grown by him be regulated meticulously. As the Sunnybrand agreement had expired, the most rational candidate for the source of the detailed arrangements necessary between Inghams and Mr Hannigan in all of the circumstances was the Inghams Agreement, either in its original form or with the hand-written amendment to clause 28.
The legal effect of these circumstances may be tested by notionally asking appropriate questions of reasonable persons in the position of Inghams and Mr Hannigan, with the knowledge of those parties as to what the consequences of the delivery of Batch 159 and the acceptance by Mr Hannigan of practical responsibility for the growing of those chickens were. If the question was: according to what arrangements was Mr Hannigan required to grow the chickens, the answer would have to be in accordance with the Inghams Manual. The answer could not be that Mr Hannigan was free to grow the chickens in whatever manner he saw fit. If the question was: who was to provide and pay for the feed for the chickens, the answer would have to be Inghams. There could not be a lacuna as to the feeding of the chickens. If there was any doubt about the answer, as Inghams started and continued to provide the feed necessary for the chickens, the most rational answer would become obvious. If the question was: what was Mr Hannigan to do with the chickens, the most logical answer would have to be to grow them in accordance with Inghams' instructions and to allow them to be collected at the time and in the manner of Inghams' choosing. If the question was: to what remuneration would Mr Hannigan become entitled, the best answer would have to be the Fee calculated in accordance with the Inghams Agreement. The reasonable observer could not have thought that there was no formula for calculating the Fee, and that the parties would have to argue about the amount of reasonable remuneration that was payable to Mr Hannigan. This series of questions could be continued indefinitely, at an ever more detailed level, concerning what was involved in the whole process of growing the chickens between delivery and collection by Inghams. The better view is that the commercially rational response of the reasonable observer would be that the parties had committed themselves to the terms of the Inghams Agreement, and effectively dispensed with the signing of the document being essential.
It is necessary to deal with the issue of whether the subject of the agreement would have been understood by the reasonable observer to be the original or the amended Inghams Agreement. Although this is an issue that cannot clearly be resolved, the better view is that the agreement was constituted by the original Inghams Agreement. The terms of that agreement were proffered by Inghams to Mr Hannigan on the basis that they were acceptable to Inghams, and Mr Hannigan responded to Inghams that he was prepared to contract on those terms. Even though the amended Inghams Agreement was signed by Mr Hannigan, and forwarded to Inghams before the delivery of Batch 159, the terms of Mr Hannigan's 20 January 2016 letter should be construed as leaving it open to Inghams as to whether or not it would accept the amendment. As the amendment either did not change the substance of the original Inghams Agreement, or only did so in an insignificant way, I do not think that the reasonable observer would conclude that the mere delivery of Batch 159 by Inghams foreclosed its entitlement to reject the amendment suggested by Mr Hannigan. If that conclusion is wrong, and the agreement was constituted by the amended Inghams Agreement, the difference will not affect the outcome of these proceedings.
I share the view expressed by McDougall J in Broadlex Services v RCR Resolve FM (No 2) that, if the evidence justifies a conclusion that the reasonable observer would consider the parties by their conduct to have adopted a contractual document as binding them, the proper conclusion is that they had committed themselves to all of the terms. His Honour considered this issue in a different context, being whether conduct that would signify to the reasonable observer that a party had entered into a contract on the basis of the general conditions proffered by the other party, meant that all of the conditions would be incorporated into the contract, including exclusion clauses. McDougall J said: … [134] I have some difficulty in accepting the proposition that, in circumstances such as those under consideration, some parts of standard terms and conditions of contract, referred to but not expressly set out in an offer to contract (and not accepted by signature), can be incorporated into a contract made by acceptance of that offer, but that other parts may not be. …
In my view, the parties' conduct in dealing with Batch 159, in a manner that was only referable to the Inghams Agreement, would make the provisions of that agreement dealing with its duration as much a part of the contract as the other written terms.
By letter dated 21 March 2016, Mr Hannigan wrote to Mr Walsh saying: … We refer to our letter dated 20th January last enclosing our signed contract with you for your execution. We are yet to receive a copy of the executed contract and ask that you forward same without delay. …
This enquiry by Mr Hannigan is not inconsistent with the contract already having been made by conduct in the manner that I have described above. It is natural for commercial parties to want a copy of the contractual document signed by the other party to remove the scope for argument as to whether or not a contract has been made.
Inghams created a Recipient Created Tax Invoice, a Contract Remittance Worksheet and an EFT Remittance concerning Batch 159, which it apparently sent to Mr Hannigan, together with a schedule called "Queensland Farming Pool Payment Statistics", which contained statistics for 11 growers in weeks 40 to 42 including Avoca Vale Farm.
The Recipient Created Tax Invoice stated for Batch 159 that it related to 209,520 birds at 88.57 cents per bird, so that the cost was $185,580.08, plus $18,558.01 GST, giving a total of $204,138.09.
The Contract Remittance Worksheet set out technical data concerning Batch 159, including number of birds placed, number of birds picked up, total kilograms of feed, average weight, and percentage mortality. The technical data were provided for Avoca Vale Farm and the Pool Average.
As I have noted above when considering the provisions of the Inghams Agreement, clause 9.1 of the agreement provided that, for each batch raised by the Grower, Inghams would pay the Payment calculated on the basis of the Fee, but varied as required by clauses 9, 10 and 11 and Annexure 1. Clause 10.1 required Inghams "[f]rom the commencement of this agreement…" to "…make [p]ayments to the Grower calculated in accordance with Annexure 1 and Annexure 2." Annexure 2 contains a complicated formula and defined terms to allow Inghams to calculate the amount payable per Batch to each Grower by reference to the performance data for the Grower in comparison to the performance data for the whole pool of Growers to which the Grower belonged.
The formula in Annexure 2 is opaque, but Mr Hannigan contended, and I do not understand it to have been disputed by Inghams, that the data in the Contract Remittance Worksheet is consistent with the information in the Queensland Farming Pool Payment Statistics document, which appears to set out the numerical value of the variables in Annexure 2 for the 11 Growers in the pool to which Avoca Vale Farm belonged. If so, the payment for Batch 159 made to Mr Hannigan was calculated in accordance with the Inghams Agreement.
I have already set out above my reasons for concluding that the parties' conduct in respectively delivering Batch 159, and taking responsibility for the welfare and growing of the chickens in that batch, would have signified to the reasonable observer that the parties had elected to be bound by the terms of the Inghams Agreement. Although no further conduct on the parties' behalves was necessary to justify that conclusion, it is justifiable for the Court to conclude that the parties' continuing behaviour, as if they were bound by the Inghams Agreement, would make the conclusion more and more clear to the reasonable observer. By the time Inghams itself calculated the amount payable to Mr Hannigan for Batch 159 in minute detail in accordance with the Inghams Agreement, the likelihood that the reasonable observer would have concluded that Inghams understood that it was bound by that agreement becomes overwhelming. This reasoning is reinforced by the fact that clause 10.1 of the Inghams Agreement provided that, from the commencement of the agreement, Inghams would make payment in the complex way provided for in Annexures 1 and 2.
Furthermore, by paying Mr Hannigan for Batch 159 in a manner that was transparently referable to Annexures 1 and 2 of the Inghams Agreement, Inghams plainly represented to Mr Hannigan that, if he accepted later batches of chickens, the terms of the Inghams Agreement would apply. These circumstances fall squarely within the principles enunciated by McHugh JA and Heydon JA that have been discussed above, as to how a party who accepts a benefit, knowing that the benefit is only offered by the other party on the basis that there is a particular contract between them, can be bound to that contract by the first party's conduct.
On 19 May 2016, Mr Walsh sent an email to Ms Katie Berry, who was Mr Hannigan's accounts manager, concerning an issue as to Mr Hannigan's entitlement to receive CPI increases under the former Sunnybrand agreement. However, Mr Walsh added: … I acknowledge also the letter of 21 March 2016 and I am in discussion with Ingham's Group General Counsel on this matter. …
Between about 21 April and 3 October 2016, Inghams supplied chickens in Batches 160, 161 and 162 to Mr Hannigan. Inghams supplied feed for these chickens, as well as I assume any technical services that may have been necessary. These batches of chickens were grown by Mr Hannigan, and collected by Inghams in the ordinary course when they were ready for processing. Inghams paid Mr Hannigan a total of $602,169.60 for his services in growing these chickens.
Inghams, on or about 20 June and 22 August 2016, produced Recipient Created Tax Invoices, and the other types of documents mentioned above in relation to Batches 160 and 161. Save that the documents contained different information that was pertinent to the different batches, they were in identical form to the documents that related to Batch 159. Inghams paid Mr Hannigan $207,662.71 for Batch 160 on 23 June 2016 and $198,129.79 for Batch 161 on 25 August 2016.
On or about 3 October 2016, Inghams prepared and sent to Mr Hannigan a Recipient Created Tax Invoice and an EFT Remittance, in the same form as has been discussed above, for Batch 162.
The only effect of the parties' conduct concerning these additional batches could be to make it more and more obvious to the reasonable observer that the parties had accepted that they were bound by the terms of the Inghams Agreement.
On 7 October 2016, Mike Rozen, the Farming and Primary Processing Director of Inghams, wrote a letter to Frank and Brett Hannigan that was apparently received on 20 October 2016. The letter dealt with two subjects. The first was an alleged significant loss of broiler chickens in January 2016. That was a matter governed by the former Sunnybrand contract. The letter alleged that, on 16 January 2016, 24,067 birds were lost due to a smother event. Mr Rozen claimed that Inghams was entitled to $57,205.13 plus GST in relation to this event, and required that the sum be paid immediately. Mr Rozen added: … An ongoing relationship with Inghams is conditional upon payment of the above sum and major improvements in the way the Farm is managed. Given the seriousness of the matter and that this is the second serious incident in less than two years, it is important that you provide to us an assurance program involving: [Various requirements are then set out.] …
One of the requirements was: … 4. Satisfying ourselves that the management and operation of the farm are satisfactory so that the placement of further birds and/or entry into a new contract do not result in significant commercial losses to Inghams. …
Mr Rozen added: … It is imperative that the performance on farm improves so that we can be sure that there is not another smother event or some other serious incident. We are willing to work with you so that the Farm continues to grow for Inghams. However this will require a significant commitment to improvement in performance on your part. If such an improvement is not possible then we will need to consider whether it is appropriate for the Farm to continue to grow chickens for Inghams. …
The import of the final part of par 4, and the last paragraph set out above, may not be clear. It seems that Mr Rozen was suggesting that it was still open to Inghams to decide whether to place any further birds with Mr Hannigan or to enter into a new contract with him.
The Court has no evidence concerning the circumstances in which Mr Rozen wrote the letter, or what he understood the existing basis of the legal arrangements between Inghams and Mr Hannigan was. Of course, nothing in the letter could affect the position, if Inghams' conduct had already led to it being bound by the Inghams Agreement.
The second subject dealt with by Mr Rozen was described as "New Contract terms". Mr Rozen wrote: Last year we issued you with a proposed new contract, which you have signed and returned with amendments indicating that two letters from Ingham's [sic] form part of the contract. It is not appropriate to change the terms of the contract by reference to those letters and the contract should remain unaltered. The change to clause 28 is not acceptable and the two letters attached do not form part of the contract and should not be relied upon by you as part of the contract. The first letter relates to fees, and these will be paid under the terms of the contract in the normal course, with any RSPCA payments being included in the overall fee. The second letter should also not be relied upon as altering or adding to any of the terms of the contract. We have provided a further clean copy of the contract for you to sign. If you agree with these terms please sign and return this contract to us without alterations. Please call me if you would like to discuss either of the above issues. …
Mr Hannigan did not sign the further clean copy of the Agreement or return it to Inghams.
Between late October 2016 and 15 June 2017, Inghams supplied chickens to Mr Hannigan for Batches 163, 164, 165 and 166. These batches were grown by Mr Hannigan, using feed and services provided by Inghams, and delivered to Inghams on maturity in the same way as were the previous batches. Inghams paid Mr Hannigan a total of $798,515.85. Each payment was calculated by Inghams using the formula in Annexures 1 and 2 of the Inghams Agreement.
On or about 5 December 2016, Inghams prepared a Recipient Created Tax Invoice, a Contract Remittance Worksheet, a Queensland Farming Pool Payment Statistics and an EFT Remittance, in the same form as the documents discussed above, in respect of Batch 163.
On 5 December 2016, Matthew Easton, Inghams' Farming Optimisation Manager, sent a letter to Brett and Frank Hannigan in which he referred to the letter of 7 October 2016, and wrote (Exhibit D1): … We have not received the signed contract indicating your acceptance of the contract sent over eight weeks ago. The offer is now withdrawn with immediate effect. We will continue to operate under the existing contractual terms. …
This letter at the one time purported to withdraw what was described as the offer made in the 7 October 2016 letter, and also to indicate that Inghams would proceed to operate under the existing contractual terms. The letter did not identify those terms.
Mr Hannigan's response to this letter, in his evidence during the hearing, was that it did not make sense.
In its written submissions, at par 48, concerning the reference in the 5 December 2016 letter to the "existing contractual terms", Inghams observed that this "…presents a minor conundrum, but in large part it is a distraction from the real issue." Inghams submitted that "…whatever the author intended those words to mean, they did not refer to the terms contained in the document which had been sent on 7 October 2016, and therefore they did not refer to the terms for which the plaintiff now contends" (emphasis in submissions). Whether the conundrum is minor or not, it must be accepted that the author of the letter does not appear to have understood the context in which the letter was written. I do not think the letter is of great significance in that circumstance. To the extent that it reflects the author's belief that there must have been some contract in existence between the parties, it is an acknowledgement of the obvious reality.
Inghams prepared a Recipient Created Tax invoice, a Contract Remittance Worksheet, a Queensland Farming Pool Payment Statistics and an EFT Remittance with an invoice date 6 February 2017 for Batch 164. Similar documents were prepared for Batches 165 and 166 with invoice dates 10 April 2017 and 30 May 2017 respectively.
Inghams delivered the chickens for Batch 167 shortly after 8 June 2017. Issues that arose out of the growing of this batch led to Inghams purporting to terminate its arrangement with Mr Hannigan. I will return to consider these matters when I deal with the issue of whether Inghams validly terminated any agreement that was created between Inghams and Mr Hannigan.
On 31 July 2017, Mr Walsh of Inghams sent an email to Brett Hannigan concerning the weights that had been measured for the birds collected from shed 3, which were less than what was predicted. Part of Mr Walsh's email read: … Additionally, I was advised that we did not receive any pre-pickup test weights for these birds. This is completely unacceptable. It is NOT the responsibility of Ingham's staff to have to chase you for this data. You have a contractual requirement to supply the weight and mortality data as required - weekly and pre-pickup. As I understand it, there is a history of having to contact you in order to obtain the information we require - this cannot continue. [Emphasis added] …
Mr Walsh then demanded that Brett Hannigan supply updated test weights for sheds 4, 5 and 6. The only contractual requirement that could have existed at this time, whereby Mr Hannigan was required to supply weight and mortality data to Inghams, was the very term of the Inghams Agreement upon which Inghams has relied in these proceedings to terminate the agreement for failure by Mr Hannigan to provide the data. Almost the last act of Inghams, before it purported to terminate the agreement, was to insist that an agreement existed, and the only possible agreement that contained the term insisted upon was one based upon the Inghams Agreement. In my view, Inghams could not insist upon performance of the agreement, and cause Brett Hannigan to comply with its demand, and then be heard to say that it was not bound by the agreement.
For these reasons, I find that, by about the time that Inghams delivered Batch 159 to Mr Hannigan, the parties became bound by an agreement in the terms of the Inghams Agreement.

[15]

Inghams' case that the contract was validly terminated

Inghams' amended statement of facts and contentions contains a series of allegations to support its claim that if, contrary to its case, the Court finds that it entered into a contract with Mr Hannigan on the terms of the Inghams Agreement, it validly terminated that agreement by its letter dated 8 August 2017.
The letter purported to terminate "…the Growing relationship…" immediately. Inghams primarily relied on an allegation that a significant number of the birds in shed 3 had not had feed for approximately 19 hours before they were picked up late on Sunday, 30 July 2017, and that a significant number of the birds in shed 4 were without feed for approximately 42 hours before a feed delivery arrived late on Monday, 31 July 2017. That was said by Inghams to be a completely unacceptable breach of the Animal Welfare Standards. Inghams also asserted: "…The incident demonstrates gross negligence on your part and a number of fundamental breaches of the Growing arrangements between Ingham's and you as a Grower…"
However, relying on Shepherd v Felt and Textiles of Australia Ltd (referred to above), Inghams also relied on a number of different justifications for their termination of the agreement, as set out in the amended statement of facts and contentions.
One aspect of Inghams' 8 August 2017 letter that is of some moment is that Inghams wrote "…we have reported the issue to the RSPCA…" I will take Inghams at its word. Inghams did not lead any evidence that the RSPCA made any response to the report, and there is no suggestion that there were any consequences at all from any non-compliance with the Animal Welfare Standards. It is consistent with Inghams' case that the chickens may have weighed slightly less than they would otherwise have done by reason of being taken off feed too early, but Inghams has not put its case on this ground.
Inghams encapsulated the factual basis of its claim to have validly terminated the agreement in par 42 of its amended statement of facts and contentions, by saying that it was entitled to terminate because Mr Hannigan: … (a) failed to feed many thousands of chickens under his care for periods between 18.5 and 41 hours, a breach of various animal welfare standards, particularly the relevant RSPCA requirements; and (b) failed to keep and provide to Inghams certain important documents relating to the weights of the chickens from time to time.
It is significant that Inghams framed the claim set out in sub-par (a) above in the positive way that the chickens were off feed for between 18.5 and 41 hours. It will be seen that this means that the chickens in shed 3 were off feed for 18.5 hours and the chickens in shed 4 were off feed for 41 hours. This case was conducted upon the basis of a forensic position adopted by Inghams that the time when the feed ran out for both sheds could be calculated with relative precision, based upon admissions made by Brett Hannigan on behalf of Mr Hannigan. Inghams, in effect, put a case that, assuming the feed ran out at the time asserted by Inghams, it followed naturally that Mr Hannigan had failed to comply with the several Animal Welfare Standards relied upon by Inghams.
The point of these observations is that Inghams did not run any alternative case, to the effect that, if it failed to prove that the feed ran out at the time claimed by it, the feed nonetheless ran out at some particular later time or times, so that there was a material non-compliance by Mr Hannigan with the Animal Welfare Standards in any event. Inghams simply asked the Court not to accept the evidence led by Mr Hannigan to prove that the feed did not run out at the time asserted by Inghams. Consequently, there was no forensic examination during the hearing of the question whether, if the feed in fact ran out at some later time, what that time was, and whether that circumstance involved some different non-compliance with the Animal Welfare Standards. This is a significant forensic matter, because when I come to analyse the Animal Welfare Standards, it will be seen that they are formulated in very general terms. It is also significant because, before clause 20.1.9(g) of the agreement may be invoked, the non-compliance must be material. As a matter of logic, the shorter the time that the chickens were off feed, the less likely it would be that any non-compliance was material.
Inghams identified the provisions of the Inghams Agreement upon which it relied in par 45. The most relevant provisions appear to be those that were identified as follows: … (d) the Grower must raise the birds in accordance with the "Manual" … (clause 4.2); (e) the Grower must maintain all such records as Inghams and the Manual reasonably require, and allow Inghams' representatives full and free access at all reasonable times to the records (clauses 4.14 and 4.16); (f) the Agreement may be terminated by either party notifying the other party in writing if that other party commits a fundamental breach of the Agreement (clause 20.1.5); … (h) the Agreement may be terminated immediately by Inghams notifying the Grower in writing if the Grower is negligent in the performance of its duties and obligations under this Agreement (clause 20.1.6); (i) the Agreement may be terminated immediately by Inghams providing notice in writing to the Grower if the Grower commits any material breach of, or is in material non-compliance with, Animal Welfare Standards (clause 20.1.9(g).
Inghams also referred to a number of other clauses of the agreement, being clauses 3.1, 3.2 and 3.9, which gave Inghams a right to decline to supply batches of chickens to Mr Hannigan in certain circumstances, but Inghams does not appear to have sought to enforce those rights either at the time or in these proceedings.
A brief elaboration of Inghams' claim to have validly terminated the agreement, as explained in its final written submissions, is required.
Inghams submitted, at par 83, that "…the terms [of the agreement] requiring the Grower to comply with each of the Animal Welfare Standards and the Manual were fundamental or essential terms, being of such importance to Inghams that it would not otherwise have entered into the Agreement. A breach of those terms by Mr Hannigan would entitle Inghams to terminate the Agreement." The reasons why the terms were claimed to be fundamental were set out in pars 81 to 84.
Inghams claimed, in par 143 of its final written submissions, that it was entitled to terminate the agreement under clause 20.1.9(g) because Mr Hannigan committed breaches of the Animal Welfare Standards set out in par 144.
Then, in pars 145 to 149, Inghams identified a number of alleged failings by Mr Hannigan, which may individually and cumulatively have been the cause of Mr Hannigan failing to comply with the Animal Welfare Standards. These claims would appear to be superfluous, unless they are intended to be particulars of the negligent performance by Mr Hannigan of a contractual duty to comply with the Animal Welfare Standards.
Inghams does submit, in par 150, that there "…was at least an implied obligation under the Agreement to feed the chickens in compliance with the Animal Welfare Standards…", which Inghams claimed gave it a separate right to terminate under clause 20.1.6, on the ground that Mr Hannigan's performance of his duties under the agreement had been negligent.
In par 151, Inghams submitted that Mr Hannigan had breached clauses 4.2, 4.14 and 4.16 of the agreement because he "…failed to (1) raise the Birds in accordance with the Manual (clause 4.2); (2) maintain all such records as Inghams and the Manual reasonably require ("Records") (clause 4.14); and (3) allow Inghams' representatives full and free access to the Records, by failing, contrary to [an identified part of] the Manual, to sample weigh the chicken flock weekly and compare the average weight obtained thereby with the current weight-for-age standard, and forward the weights to the Inghams farming staff, on a weekly basis…" Inghams gave particulars of the breaches alleged, which involved the failure to obtain and provide the data on seven occasions between 7 July 2017 and 2 August 2017.
Inghams then submitted, in par 154: "The reasons why the breaches were fundamental is addressed at paragraphs [82-83] above."
Finally, in par 155, Inghams asserted a right to terminate the agreement under clause 20.1.6, on the ground that Mr Hannigan's failure to comply with the Manual was negligent.
It will be appropriate, before proceeding further, to note an element of confusion that may have intruded into the way in which Inghams put its case. As appears above, Inghams listed clause 20.1.5 as one of the provisions that gave it a contractual right to terminate the agreement. Inghams' right to terminate under this provision depended upon Mr Hannigan committing a fundamental breach of the agreement, and not remedying the default where the breach was capable of remedy. As noted, Inghams submitted at par 154 that the breaches of the obligation to comply with the Manual were fundamental. However, in identifying the reasons for that submission as being those addressed at pars 82 to 83, Inghams referred to reasons why the terms were fundamental or essential terms, and not to why the particular breaches alleged against Mr Hannigan were fundamental breaches by reason of their consequences and effect.
In the circumstances, I have taken Inghams to be asserting that the relevant terms were fundamental or essential terms, such that any breach by Mr Hannigan would justify termination, whether or not the consequences of the breach would justify termination on the ground that it was a fundamental breach.
In this context, Mr Hannigan cited Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14, as setting out the relevant test for whether a particular breach of a contract is fundamental. Mr Hannigan was understandably responding to Inghams' apparent reliance on clause 20.1.5 of the agreement. In that case, Mason J (as his Honour then was) said, at 31 (footnotes omitted): … It is often said that repudiation or fundamental breach - in the sense of breach of a condition or breach of another term or terms which is so serious that it goes to the root of the contract, and thus deprives the other party of substantially the whole benefit of the contract…entitles the innocent party to rescind the contract and sue for damages for loss of the bargain… …
Therefore, to rely upon clause 20.1.5 as the basis for terminating the Inghams Agreement, Inghams would have to show that the particular breach relied upon was so serious that it went to the root of the contract and deprived Inghams of substantially the whole of the benefit of the agreement.
As I understand the evidence, Inghams has not attempted to prove what the direct consequences of any of the breaches alleged against Mr Hannigan actually were, and consequently has not tried to establish that the effect of the breaches was so serious that it deprived Inghams of substantially the whole benefit of the agreement. I am, accordingly, reinforced in my understanding that Inghams' case is not based on clause 20.1.5, but is based on a claim that the obligations in the agreement that were breached were fundamental or essential.
Mr Hannigan responded to Inghams' claim that it was entitled to terminate the agreement because of Mr Hannigan's conduct in leaving chickens unfed for an excessive period by saying that, if, contrary to his case, Inghams' premise that the chickens were unfed is proved, then the cause of that outcome was the failure by Inghams, by its contractor for the supply of feed, Chambers Bulk Transport, to deliver an order for feed made by Brett Hannigan in a timely manner.
In par 69 of its amended statement of facts and contentions, Inghams sought to respond to this defence in the following way: … The failure to feed the chickens in sheds 3 and 4 under the heading "unfed chickens" above is not an event resulting from any failure by the defendant and/or Chambers Bulk Transport to deliver chicken feed, since: (1) the failure to deliver chicken feed did not impact on sheds 3 and 4; and (2) in the alternative, there was ample time between 21 and 29 July 2017 for Mr Hannigan to obtain further feed for those sheds, which he could and should have done. PARTICULARS - (1) Mr Hannigan is responsible for the ordering of sufficient feed; (2) Feed can be obtained at short notice. On 31 July 2017, feed was ordered at around 5 PM and delivered by around 11 PM.
As I have explained above, Inghams has the burden of proving that it validly terminated the agreement by exercising a contractual right, or terminating under the general law for breach by Mr Hannigan, if it is to resist the making of the declaration sought by Mr Hannigan in prayer 3 of the summons.

[18]

RSPCA Standards

Inghams relied on the RSPCA Standards, and stated that it was a requirement of the RSPCA Standards, by clauses 2.5 and 2.6, that feed must be available in sufficient quantity and quality to meet the birds' requirements, and birds must have unrestricted access to feed, and that by clause 8.4 birds being prepared for catching must not be off-feed for more than 18 hours prior to slaughter. These clauses are in the following terms: 2 Food and water … Feed 2.5 Feed must be available in sufficient quantity and quality to meet the birds' requirements. 2.6 Birds must have unrestricted access to feed, with the exception of birds being treated under veterinary advice or birds being prepared for catching. … 8 Catching … 8.4 The timing of catching and transport must be co-ordinated between the grower, catching crew, transporter and processor in order to ensure that birds are not off feed and water for more than 18 hours prior to slaughter and to minimise time birds spend waiting on the vehicle. …
Mr Walsh gave evidence that chickens generally eat every four hours. The combined effect of clauses 2.5 and 2.6 would be that there would be a breach of the RSPCA Standards if there was insufficient feed to enable the chickens to eat every four hours, except, for present purposes, when the birds were being prepared for catching. The terms of clause 8.4 would suggest that the permitted time for commencement of the preparation of the birds for catching would be 18 hours prior to slaughter. The circumstances in which the absence of feed at a time before the commencement of the preparation period would be material were not addressed in the evidence.
As I have noted above, Mr Hannigan did not submit that the particular non-compliance with the RSPCA Standards alleged by Inghams was not material. However, the Court could not find that any particular lesser period of non-compliance with clauses 2.5 and 2.6 was material. To do so would involve the Court making an uneducated, lay judgment about the significance of the absence of feed. This is particularly so as the evidence showed that it is the practice to stop the birds' feed at some point close to the time of their collection.
Mr Hannigan submitted that a finding of non-compliance with clause 2.6 could not be made, as it does not apply where the birds are being prepared for catching. Inghams did not lead evidence to identify the beginning of the period when the birds were being prepared for catching.
Clause 8.4 did not impose a standard of conduct on Mr Hannigan alone. It did not require him alone to ensure that the birds were not off feed for more than 18 hours prior to slaughter. In any event, once the birds were collected by Inghams' agent, Mr Hannigan would have no means of controlling, or even knowing, what time would be taken between collection and slaughter. As Mr Hannigan submitted, clause 8.4 imposes a standard that requires coordination between the Grower, the catching crew, the transporter and the processor. The only party who had a practical level of control over all four was Inghams. Inghams was required by the standard to give instructions to the catching crew, the transporter and the processor to coordinate with Mr Hannigan to ensure that the birds were not off feed and water for more than the stipulated 18 hours. That would require Inghams, either by itself or by the catching crew or transporter, to inform Mr Hannigan of the precise time when the birds should be taken off feed to comply with the 18 hours stipulated. Brett Hannigan gave evidence, which I accept, that he was not told the necessary time for the chickens in shed 3 to be taken off feed.
This is a convenient place to mention one of Mr Hannigan's submissions that I do not accept. Mr Hannigan referred to the expression "feed and water" in clause 8.4, and submitted that the standard could be satisfied if the chickens did not have feed for a period longer than the 18 hours that was permitted, provided that they had water during that period. In my view, the proper construction of the clause is that it required that the chickens have both feed and water within the requisite period. There is no reason why the RSPCA would be satisfied by the chickens having water and be unconcerned with their not having feed.

[21]

Inghams' evidence of non-compliance by Mr Hannigan

I will start by considering the evidence on which Inghams relies to establish the alleged non-compliance by Mr Hannigan. As will be seen, Inghams primarily relies upon admissions that it claims were made by Brett Hannigan, which have been the basis upon which Inghams has alleged the precise periods for which the chickens in sheds 3 and 4 were without feed prior to their collection in the case of shed 3, and the delivery of a load of feed late on Monday, 31 August 2017 in the case of shed 4.
This aspect of Inghams' case substantially depends upon whether the Court finds that the statements attributed by Inghams to Brett Hannigan were made in the terms and with the meaning claimed by Inghams, and whether, if so, the conclusion propounded by Inghams as to when the feed ran out for the chickens in both sheds is reasonably substantiated.
Mr Walsh, who as I have noted above was the Queensland Farming Manager of Inghams, gave evidence that he learned on 31 July 2017, by being told by Mr Dananja Nillegoda, Inghams' New South Wales Breeder Manager, that the weights of the chickens from shed 3 after processing were very poor, and that Brett Hannigan had not supplied test weights before the chickens were picked up. Mr Walsh then wrote an email to Brett Hannigan in which he said, among other things, that the failure to provide the pre-pickup test weights was completely unacceptable, and that there was a contractual requirement to supply the weight and mortality data as required, both weekly and pre-pickup. This is the email to which I have referred above in the context of deciding whether there was a contract between the parties, in which Mr Walsh insisted that Mr Hannigan comply with the terms of the Inghams Agreement.
Mr Walsh then gave the following evidence in his affidavit: … 157. On Tuesday 1 August 2017, at approximately 10:00 am, I telephoned Brett Hannigan and had a conversation with him. 158. During that conversation, I took notes of what was said by him and by me, which I used to write my e-mail to him on Wednesday 2 August 2017, following that conversation. I no longer have those notes. 159. Our telephone conversation was to the following effect: Me: "Mate, we've had low live weight birds into the plant from Avoca Vale on Monday, which we didn't receive any pre-pickup test weights for. Then I hear you ran out of feed in the silos over the weekend, but you didn't tell anyone at Inghams about the problem." Brett: "I noticed the feed was out in the silos for Sheds 3 and 4 on Saturday [29 July 2017] afternoon at 5:30 pm, so I sent a text message to Brant Chambers to see if a delivery was available. Me: "If that's correct, your feed would have run out in the Sheds by 5.30 am Sunday morning and the birds in there would have been off feed for hours before they were picked up. It's absolutely inexcusable." Brett: "Yeah, I may have made an error in calculating the feed we needed." (emphasis added)
Inghams primarily relied on the part of the evidence of the conversation given by Mr Walsh that I have underlined as being the admission made by Brett Hannigan on behalf of Mr Hannigan. Mr Walsh then continued: 160. I estimated that, for sheds of the size and with a chicken flock density of those at Avoca Vale Farm and based on the capacity of the feed pans in those sheds and the level of feed normally in those feed pans for large birds, the maximum time for the feed pans to be emptied completely by the chickens, if they were not constantly replenished by the automatic auger system, would have been no longer than approximately 11 hours. I believed, however, that it was highly possible that the feed pans might have been emptied several hours earlier than 11 hours. I deliberately gave Brett a generous estimate of half a day for the time in which the feed pans would have been eaten out. … 163. Chickens do not feed continuously, but they follow a regular pattern in normal conditions. Normally, at night chickens feed every four hours: they eat a golf-ball sized amount of feed, then drink immediately and then sit for a period before returning to feed again. They do not all feed at once, so that at all times usually some of the chickens in each shed are feeding. The feeding pattern is slightly faster in daylight hours than at night. Chickens also favour pellets over dust when feeding. 164. I took all these factors into account when calculating my rough estimate of the time by which the chickens would have eaten out full feed pans if they were not being replenished constantly from the silos.
Inghams relied upon this evidence to establish, based upon the alleged admissions by Brett Hannigan, the time when the feed for the chickens in the two sheds must have run out. Mr Walsh then continued: 165. At no point during our telephone conversation did Brett deny or question my estimate that the feed probably ran out in the feed pans inside the Sheds by 5.30 am on Sunday morning if he had found the silos empty at 5:30 pm on Saturday evening. 166. Brett did not say at any point that, though he had run out of feed pellets, there was still feed "dust" left in the silos at 5:30 pm on Saturday 30 July 2017. There was no mention of "dust" at all during our telephone conversation. 167. During our telephone conversation, apart from my telling Brett that I thought that, if the silos were empty by 5:30 pm on Saturday 29 July 2017, the feed pans inside Sheds 3 and 4 would have been empty by 5:30 am on Sunday 30 July 2017, I did not express any estimate of the number of hours for which the chickens in Shed 3 would have been off feed before they were collected for transport to the processing plant or the number of hours for which the chickens in Shed 4 would have been off feed until Chambers delivered a load of feed to Avoca Vale Farm late in the evening of Monday 31 July 2017. …
On 2 August 2017 at 4:52 PM, Mr Walsh sent an email to Brett Hannigan in the following terms: Hi Brett, I took some notes during our call yesterday morning, which I have set out below. Please let me know if any of the detail I have listed is incorrect/inaccurate, and if so, please supply the correct detailed by COB tomorrow please. If I do not receive a reply, I will assume the below to be accurate. You first noticed the silos supplying sheds 3 and 4 were empty late on Saturday afternoon 29 July (5:06 PM). There was feed in the pans at that point, but none in the silos. Other sheds still with birds were okay. Your calculations on feed requirements may have been incorrect. You sent a text message to Brant Chambers (Chambers Bulk Transport) at that same time (i.e. around 5 PM, 29/07) requesting a feed delivery for the next day. No reply from Brant at that point. Feed is estimated to have run out in the feed pans in sheds 3 and 4 sometime during early Sunday morning (30/07) - approximately 5 AM. You spoke with Brant Chambers on Sunday morning (30/07) where you again requested a load of feed be delivered for that same day as you were low on feed. Brant advised that it is difficult to reach anyone on a Sunday morning, and that a load would not be able to be delivered until Monday night (31/07). You forgot to follow-up and notify anyone from Inghams that birds were out of feed because you were busy in the sheds. Birds in shed 3 were picked up late on Sunday night (30/07) for Monday morning processing - no pre-pickup test weights had been supplied to Inghams QLD Planning for the shed, despite Planning requesting them late in the prior week. Birds in shed 3 would have had no feed for approximately 19 hours (estimated) before pickup commenced. Shed 4 was planned for pickup on the night of 31/07 for processing on Tuesday morning (01/08). No pre-pickup test weights had been supplied to Inghams QLD Planning for sheds 4, 5 and 6 - QLD Planning had called several times on Monday 31/07 for these weights but could not contact you. I sent you an email on Monday 31/07 (12:39 PM) advising of poor weights into the plant from shed 3, and urgently requesting test weights from sheds 4, 5 and 6 using our usual weighing procedure (defined in the Manual) be supplied to QLD Planning, and to me by email before 4 PM of that day. You spoke with Dan Nillegoda around 5 PM on Monday 31/07 where you advised that the birds in shed 4 had run out of feed - at that point, the birds in shed 4 had been off feed for approximately 36 hours. This was the first notification to Inghams that birds had run out of feed. Pickup plan was altered - birds from sheds 5 and 6 were to be picked up Monday night (31/07) for Tuesday processing. The feed load arrived approximately 11:15 PM on Monday 31/07 - shed 4 birds received feed after approximately 42 hours off feed. Test weights from shed 4 were supplied by you as per my request on Tuesday 01/08 12:22 PM. Please note I also took away from the call the below comments: The chickens you received at placement were white. This may be linked to the cause of Aspergillus infection that occurred this batch [sic], in your opinion. Generally, you feel there is a problem with lack of communication from Inghams - people can be hard to contact and/or do not return phone calls. (In this instance, however, you did not call Inghams until Monday 31/7 at 5 PM.) Notifications of placement and pickup could be improved. Email is your preferred method of communication. An internet-based method of supplying weights would be useful. Regards
Brett Hannigan responded to this email in the following terms on 3 August 2017 at 7:44 AM: Hi Andrew, Bullet point 6 planning's request for weights was at 7:37 PM on Friday night although they should not have needed it that is an odd time to realise they have not received the information they need, I have sent requests many times to Inghams during normal working hours to have no reply and/or a reply many days/week later. When I am in cleanout I am rarely near the computer or phone as we intend to clean and wash sheds as good as possible given the amount [of] time we are usually given. You guys at Inghams seem to think this work magically happens quickly (zero days birds on farm). Bullet point 7 QLD planning started contacting me at 2:38 PM on Monday surely earlier would have been more appropriate under the circumstances - even though I know they should not have had to just like two batches ago I should not have had to be trying to get hold of someone about my batch turn arounds 4 days before they were due to happen (no return phone calls) and then the batch turnaround was adjusted after that where by [sic] the placement dates were brought forward by 2 days throwing the biosecurity out the window (walked out of shed 6 pick up at 5 AM into shed 1 placement at 10 AM). Then from that turn around I have high mort's in that batch ring Inghams part way through batch [obscured] I have aspergillus and no nothing happens on Inghams end. One thing I forgot to bring up in the conversation and it relates to Inghams ability to communicate is why during a batch is it okay for the growers not to be notified that the feed mill [h]as broken down or is undergoing maintenance and the anticipated arrival of feed is not going to happen when the grower expects it to? Surely you can see welfare issues arising from this practice. Regards Brett
It is evident from this response that Brett Hannigan did not attempt to deal with all of the assertions made by Mr Walsh.
As to the first bullet point in Mr Walsh's email, Brett Hannigan accepted in cross-examination that he told Mr Walsh that the silos were "empty" late on Saturday afternoon. Brett Hannigan did not claim that he had only said that the silos were "empty of pellets". Brett Hannigan said that he told Mr Walsh that there was feed in the feed pans but none in the silos. He accepted that he told Mr Walsh that his calculations on feed requirements may have been incorrect.
Brett Hannigan, at par 69 in his primary affidavit, said, relevantly to the third bullet point in the email, that his conversation with Mr Walsh on the Tuesday morning included words to the following effect: … [Walsh:] "If you had no feed in the silo's [sic] on Saturday night you would have been out of feed sometime on Sunday morning, around 5 AM?" … [B. Hannigan:] "Yeh [sic] whatever." …
Brett Hannigan explained his response in his affidavit by saying that he was not certain when the feed had run out in sheds 3 and 4.
Mr Walsh's bullet point 6, extracted above, contains the statement: "Birds in shed 3 would have had no feed for approximately 19 hours (estimated) before pickup commenced."
Mr Walsh accepted in his evidence that, contrary to his plain suggestion at the beginning of his email that all of the statements in the bullet points were taken from notes of his conversation with Brett Hannigan on Tuesday, 1 August 2017, the statement extracted immediately above was not actually discussed in the telephone conversation. The email was, in that respect, misleading.
Mr Nillegoda gave the following evidence in his affidavit concerning a conversation that he had with Brett Hannigan on 31 July 2017: … 77. I then telephoned Brett Hannigan again at approximately 4:30 pm on the same day and had a conversation with him to the following effect: Me: Have you seen Andrew Walsh's e-mail asking for the test weights? We need them because the birds from Shed 3 were very underweight, by about 3 or 4 days. Brett: I haven't done any weights yet because I've been in the sheds all day cleaning for the next batch. Me: Why were the weights so bad? Brett: They didn't have feed all day on Saturday. We ran out of feed on Saturday. (emphasis added) …
Inghams also relied upon the underlined part of this evidence as being an admission made by Brett Hannigan.
Mr Brant Chambers, of Chambers Bulk Transport (Chambers), gave the following evidence in his affidavit: … 72. On Monday, 31 July 2017, during the afternoon whilst I was returning to Brisbane from Casino, I received a telephone call from Brett Hannigan and we had a conversation to the following effect: Brett: Inghams has told me the birds that went out last night were not acceptable due to low weight. We ran out of feed a couple of days ago. I really need a load. Inghams may not be taking my birds from Shed 4 tonight because they are underweight. Can you arrange an emergency delivery of withdrawal feed? (emphasis added) Me: We do not have any withdrawal feed coming out today. I will call the feed mill to see what they can do. …
Again, Inghams relies upon the statement by Brett Hannigan that is underlined in the above evidence of the conversation with Mr Chambers as being an admission by Brett Hannigan.
At 5:06 PM on Saturday, 29 July 2017, Brett Hannigan sent a text to Mr Chambers asking whether there was any chance that Chambers could deliver a load of feed, or part of a load, on the Sunday. Mr Chambers' response, at 8:10 AM on Sunday 30 July 2017, was that a load of feed could be delivered on the Monday. Brett Hannigan responded almost immediately as follows: "No mate that will be to [sic] late will have to go without".
Mr Chambers made the following observation about Brett Hannigan's response, at par 67 of his affidavit: "…When I read his reply text message, I believed that he did not have an urgent need for withdrawal feed. His two messages did not cause me to fear that he had run out of withdrawal feed."
After the series of text messages, Mr Chambers had a telephone conversation with Brett Hannigan. Mr Chambers gave the following evidence in his affidavit: … 70. During that telephone conversation, Brett did not say to me that any of the silos or sheds at Avoca Vale Farm had run out of withdrawal feed and he did not give any indication that he had an urgent need for a further load of withdrawal feed before Monday evening, 31 July 2017. He also did not say any words to me to indicate that one of his recent withdrawal feed orders had not been supplied or that any of his recent orders for withdrawal feed had been short-supplied. …
Mr Chambers also produced a written record, dated 2 August 2017, of his communications with Brett Hannigan, which was tendered in Inghams' case. In this document, Mr Chambers said of his communications with Brett Hannigan on the morning of Sunday, 30 July 2017: … At that time Brett did not indicate any desperation with regard to levels of feed and I was therefore under the impression that the matter would be resolved in a timely manner early this week. …
It may be that Inghams tendered the evidence of Mr Chambers in support of its case that Brett Hannigan's failure to order more feed for the chickens in time was the real cause for the feed running out. In my view, however, Mr Chambers' evidence is contemporaneous support for a finding that, at about 5:06 PM on Saturday 29 July 2017 (the time of Brett Hannigan's initial text request of Mr Chambers), Brett Hannigan was sufficiently concerned about the feed running out to try to get a load of feed delivered on Sunday, but at 8:10 AM on Sunday Brett Hannigan was not so concerned about the feed actually running out that there was an urgent need for a further load of feed, or reason for desperation about that possibility. Brett Hannigan's apparent state of mind when he spoke to Mr Chambers provides some support for a finding that, at the time, Brett Hannigan thought that there was not a desperate risk that the chickens' feed, including dust, would entirely run out.

[22]

Mr Hannigan's evidence on non-compliance issue

Brett Hannigan said, at par 46 of his primary affidavit, that, at about 5 PM on Saturday, 29 July 2017, he was checking the sheds and noticed that the "feed" for the chickens in silos 4, 5 and 6 was "low", meaning that "…the red clear plastic cone at the bottom of the silo had just dust in it…" As a result, at par 47, Brett Hannigan states that he turned off the augers running into sheds 3 and 4 "…in an effort to prolong the feed for the chickens…" He turned down the lights in sheds 3 and 4 to lower the feed consumption by the chickens shortly after 5 PM.
At pars 52-53 of his affidavit, Brett Hannigan said that he observed pellets in the feed pans and augers for sheds 3 and 4 at about 6 AM on Sunday, 30 July 2017, and he operated the augers manually so as to empty the silos and deliver more feed into the augers. He said that he left a note for Anthony Roy Austin and Reno Gava, who were farmhands who assisted him in operating Avoca Vale Farm, to tell them that the feed in sheds 3 and 4 was low. At about 8 AM, Brett Hannigan left Avoca Vale for Sydney.
Mr Austin gave oral evidence, found at T 59 and T 61-62, that, at about 11 AM on Sunday, 30 July 2017, he observed that the feed in sheds 3 and 4 was low because there was about 3 inches of dust in the feed pans for the chickens to eat. Mr Austin said that when the feed pans are full, there is about 5 inches of feed in them.
Mr Gava gave evidence, from T 68 onwards, that he checked the chickens in sheds 3 and 4 at about 2 PM on the Sunday and observed them eating dust.
Mr Austin next checked the chickens in sheds 3 and 4 at about 10:30 PM on Sunday, 30 July 2017. He said, at T 61-62, that he observed that there was still dust in the feed pans, and he estimated that the quantity of dust in the feed pans at that time was about 3 inches. That evidence could not be reconciled with Mr Austin's previous statement that there was no more than 3 inches of dust in the feed pans for the chickens at about 11 AM on the Sunday.
Brett Hannigan, at par 5(f) of his second affidavit, and Mr Austin, at T 63, both gave evidence, which was not directly challenged, that there was dust in the feed pans for shed 3 when the pans were cleaned on Tuesday, 1 August 2017, following collection of the chickens from that shed.

[23]

Consideration of whether there was a material non-compliance

The Court is required on the evidence to try to make findings as to whether, and if so in relatively precise terms when, the chickens in sheds 3 and 4 ran out of feed. That is a problematic forensic exercise given the nature of the evidence before the Court.
There was no mechanism for any actual measurement of when feed was in the chickens' feed pans, and when, if at all, it ran out. The Court must make findings based upon inferences and the observations of witnesses that may not be entirely reliable.
Inghams has not led any direct evidence that the feed in the chickens' feed pans ran out, and if so when that happened.
Evidence was given about the behaviour of chickens that have been deprived of adequate food for a significant period.
Mr Walsh gave evidence (T 187.24-188.50) on this subject. He said that, after two hours without feed, the birds "…become quite agitated that there was no feed present, and they would go and maybe eat some litter to try and fill that need in their crop. They would also be quite agitated they had not been able to eat…" He said that, if the birds were eight hours without feed, that would mean that all of the birds present had missed two meals. He said: "…And so that agitation would be enhanced, because they have not been able to fulfil that need to feed…" The following evidence was given when I asked Mr Walsh to explain what he meant when he said the chickens become agitated (T 188.43-188.50): Q. Could you elaborate on what the appearance would be for a shed with 15,000 to 20,000 chickens that were agitated as a result of being off feed for eight hours? If a lay person walked up and looked in, what would they see? A. They'd see a large proportion of the flock pecking at the floor, because they're trying to, they're trying to fill that crop and fill that need to eat. And if they did hear the sound of the augers, which brings the feed into the sheds, they would rush the pans in a state of like, panic, agitation, to try and be first to get the feed.
Mr Rino Gava, who was a voluntary farmhand at Avoca Vale Farm, gave the following evidence in his affidavit: … 9. Usually when the chickens have low feed and are hungry, they are squawking and jumping around. The chickens in sheds 3 and 4 were not behaving in this manner and did not appear to be distressed or hungry. …
This evidence referred to Mr Gava's observations at about 6:30 AM on 30 July 2017. Mr Gava added in cross-examination (T 70.15-70.28): Q. You say the chickens in sheds 3 and 4 did not appear to be distressed or hungry? A. No, no. Q. How do you tell a hungry chicken? A. God, they squawk. They go mad if you don't give them an amount of tucker. Q. They weren't doing that at 6.30? A. No, no way. Q. Would that perhaps have been a consequence of the fact that the lights had been turned down? A. No.
Inghams has not called any evidence from any member of the catching crew or the carrier that it was noticed that the chickens had no feed, or that they were behaving in an excitable manner, as if they had been deprived of feed for an excessive period. It may be of no consequence that there was not positive evidence that the feed in the feed pans had been exhausted, because it is general practice to take the chickens off feed some time before they are collected. However, Mr Hannigan's witnesses gave positive evidence that there was dust (that is, feed pellets broken down into feed dust, which the chickens were able to eat) remaining in the feed pans after the chickens in shed 3 had been collected, when the sheds were being cleaned out. No evidence was called by Inghams to contradict this evidence.
As to the chickens' behaviour, there was only brief evidence that chickens behave in a very excitable way when deprived of feed, but this evidence is easily accepted. The simple fact is that Inghams did not call any evidence from the catching crew or the carrier to establish that they were required to catch tens of thousands of feed deprived chickens.
The absence from Inghams' case of any direct evidence concerning the state of the chickens in shed 3, when they were collected for processing, is troubling, because there was contemporaneous documentary evidence as to the circumstances of the collection.
It will be appropriate, however, to go first to the terms of the Manual that govern pick up management and procedures. At page 50, the Manual states that the Grower must be present to raise, remove or adjust shed equipment on arrival of the pickup team. The following instruction is given to the Grower (at page 50): … Remove feed from birds 8-12 hours before processing. The time of feed withdrawal and approximate time of processing are to be marked on the pickup sheet and the grower notified of the time of feed withdrawal and expected time of catching. …
Brett Hannigan gave evidence, which was not challenged, that he was not notified by Inghams of the proposed time of processing or the time of feed withdrawal for the chickens in shed 3.
Given that clause 8.4 of the RSPCA Standards required the processor to participate in co-ordination to ensure that the birds are not off feed and water for more than 18 hours prior to slaughter, it hardly lies in the mouth of Inghams to complain if it did not provide this information to Brett Hannigan.
In any event, the evidence included the pick-up sheets for the collection of the birds from sheds 1, 2 and 3. The pick-up sheets are pro forma documents with the heading "Inghams Enterprises Pty Ltd pick-up report". They are completed in handwriting by a representative of the contractor who collects the chickens. The chickens in the three sheds were collected on 28 July, 27 July and 31 July 2017 respectively, according to the pick-up reports.
The forms have provision for the insertion of feed withdrawal time, water withdrawal time, advised pick-up time and actual pick-up time.
For shed 1, the feed withdrawal time is given as "500" and the advised pick-up time between "1100" and "400". The actual pick-up times were slightly different. The Grower could, of course, only make plans in relation to the advised pick-up times. On that basis, the chickens would have been expected to be off feed between six hours and 11 hours before they left the farm.
The pick-up report for the chickens in shed 2 states the feed withdrawal time at "600" and the advised pick-up times between "1200" and "430".
For the chickens in shed 3, the feed withdrawal time is stated to be "600" and the advised pick-up time is stated to commence at "1220".
The time difference between the feed withdrawal time and the advised pick-up time for shed 3 is consistent with the equivalent information in the pick-up reports for sheds 1 and 2.
There was no evidence to explain how the entry in the pick-up reports for feed withdrawal time was made. It is possible that it was not the actual feed withdrawal time advised by the Grower to the contractor but only the proposed feed withdrawal time advised by Inghams to the contractor.
However, the pick-up report form contains a number of questions evidently intended to ensure that the carrier turned its mind to relevant questions. Question 3 is as follows: 3. FEED WAS REMOVED AS PER COMPANY NOTIFICATION TO ACHIEVE 8-10 HOURS FEED WITHDRAWAL TIME.
There is provision for the form to be signed. Although it looks like the three pick-up forms were completed by the same person, in no case has Question 3 been answered, and the forms are not signed.
Although this evidence is inconclusive, it does demonstrate that Inghams had a procedure in place that ought to have caused a representative of the contractor to make enquiries to ensure that the feed was removed in accordance with Inghams' instruction.
The absence of direct evidence in Inghams' case about the time when feed was withdrawn and the state of agitation of the chickens, is made more significant when it is appreciated that there was a procedure in place to investigate these matters.
This highlights the fact that Inghams' case was substantially based upon alleged admissions made by Brett Hannigan, that bind Mr Hannigan, as to the fact that the feed for the chickens ran out, and when it ran out. For reasons that I will now consider, there are grounds for finding that Brett Hannigan did make relevant admissions, but the real question is the true meaning of the admissions and whether they, to the requisite degree of confidence, establish the non-compliance with the Animal Welfare Standards upon which Inghams relies.
A further matter that must be addressed is the meaning of the word "feed", as that is highly relevant to a proper understanding of whether any statements made by Brett Hannigan constituted admissions that the chickens were without feed for any period.
Chicken feed comes in the form of pellets that have been manufactured to different formulae for consecutive periods in the chickens' growth cycles. However, as a result of the pellets being stored in the silos and transported from the bottom of the silos by augers into the sheds and ultimately to the feeding pans, the pellets tend to break down into dust. Brett Hannigan gave evidence, which I accept, that the proportion of dust produced by different pellets will depend upon the composition of the pellets.
Although chickens apparently prefer to eat pellets, they will eat the dust when that is what is available. The Manual (at page 38) gives a direction about what the Grower should do, as follows: "…If dusty feed is accumulating in the pans…", then the Grower should let "…the birds consume the fines..."
The point of these observations is that there is scope for misunderstanding, if the statement is made that: "There was no feed in the silos", or "The birds ran out of feed". The word "feed" could have been meant in the sense of the feed that is ordered and delivered, being the pellets. When there is no feed in this sense, there may still be food for the birds in the form of residual dust.
Inghams urged the Court to find that, when, in the various statements that he made to Mr Walsh, Mr Nillegoda and Mr Chambers, Brett Hannigan said words to the effect that the chickens had run out of feed, he meant that there was no food at all for the chickens, including in the form of dust. A finding to that effect is crucial to Inghams' case, because Mr Walsh's calculation in his 2 August 2017 email extracted above that "Feed is estimated to have run out in the feed pans in sheds 3 and 4 sometime during early Sunday morning (30/07) - approximately 5 AM", was based upon the premise that Brett Hannigan meant by his statements that the feed had entirely run out.
It was this calculation by Mr Walsh that led to Inghams' assertion, in par 61 of its amended statement of facts and contentions, that: "By no later than around 5:30 AM on Sunday, 30 July 2017 (and probably sooner), there was no, or insufficient, feed for the chickens in sheds 3 and 4 to eat."
Mr Hannigan, on the other hand, asked the Court to accept the distinction between chicken feed, meaning pellets in the form that is ordered and delivered, and feed dust, which is something that the chickens can continue to eat. Mr Hannigan submitted that, when Brett Hannigan referred to feed running out, he meant the pellets, and did not mean to convey that food had completely run out. To this end, Brett Hannigan, Mr Austin and Mr Gava gave the evidence that they did concerning seeing the chickens in sheds 3 and 4 eating dust well after 5:30 AM on Sunday, 30 July 2017.
Brett Hannigan insisted that the feed for the chickens in shed 3 never actually ran out completely. His evidence was supported by the evidence of Mr Austin and Mr Gava.
While I considered all three witnesses to be generally truthful witnesses, I am not entirely confident about their evidence concerning dust remaining in the feed pans, and in particular I do not consider their evidence to be reliable about the quantity of the dust that was available in the feed pans that serviced all of the chickens. Certainly, as I pointed out in [249] above, Mr Austin's evidence could not have been entirely accurate. I consider that it is likely that, even if there was some dust remaining when shed 3 was cleaned out, the dust probably ran out for a substantial number of chickens at some stage between the time when Brett Hannigan noticed that the feed pellets were running out and when the chickens in shed 3 were collected. It is also most likely that, even if the chickens in shed 4 were able to eat dust for a significant number of hours after 5:30 AM on Sunday, 30 July 2017, they were without food for many hours, as Inghams decided to defer their collection to another day because they were underweight, and Chambers did not deliver a further load of feed until about 11 PM on Monday, 31 July 2017.
I am more confident with the evidence of Mr Austin and Mr Gava that, when they inspected the chicken sheds, they did not notice anything unusual and, in particular, did not notice that a substantial number of chickens were behaving as if they had been deprived of feed for a number of meals. If it appeared to Mr Austin and Mr Gava that nothing was amiss, it is unlikely that they would have looked carefully at the level of dust in all of the feed pans.
I consider it to be significant that all of the chickens in shed 3 were apparently collected by the carrier without any suggestion being recorded that the chickens were highly agitated, as if they had been deprived of feed for 19 hours (which, on the evidence given by Mr Walsh that the chickens would feed every four hours, would mean that the chickens had missed more than four meals).
I am satisfied that there is a difference between feed pellets and feed dust, and that the chickens were able to eat the dust. I accept that there is scope for misunderstanding when a person in Brett Hannigan's position simply uses the word "feed". The optimal feed for the chickens was pellets, and a farmer like Brett Hannigan would naturally be concerned to ensure that appropriate quantities of feed pellets were stored in the silos.
With due respect to Brett Hannigan, it appeared to me to be clear from the way that he gave his evidence that he is a man of few words. He was also very tired at the time the chickens in shed 3 were collected, because he had had to clean out the sheds from which chickens had recently been collected by Inghams, and it is unlikely that he was thinking entirely clearly at the time of his discussions with the representatives of Inghams and Mr Chambers.
I accept that Brett Hannigan made statements to Mr Walsh, Mr Nillegoda and Mr Chambers as to when the feed ran out, but that he intended to refer to feed pellets. Statements of that nature are not necessarily inconsistent with there being feed dust available for the chickens to continue eating.
While I do not accept that the evidence given by Mr Hannigan, Mr Austin and Mr Gava provides a sound basis for the Court to make positive findings as to the amount of feed dust that was available throughout sheds 3 and 4 after 5:30 AM on the Sunday, I accept their evidence that at times after the feed pellets ran out there was dust available to feed the chickens.
While Mr Walsh's "rough estimate" as to when the feed for the chickens ran out must be given some weight, I do not consider that Mr Walsh's bare assertion of an opinion provides a proper foundation for a positive finding as to when the feed for the chickens actually ran out. Not only was Mr Walsh's estimation a rough one, but it appears to have been made on the spot. It was a response to Brett Hannigan's statement to Mr Walsh as to when the feed ran out, and did not make any allowance for the possibility that, in fact, Brett Hannigan was talking about feed pellets, so that there may have been feed dust available after the pellets ran out. Mr Walsh may be forgiven for that possible error, as Brett Hannigan did not make his meaning clear.
In its submissions, Inghams relied heavily on the fact that, in his 3 August 2017 response to Mr Walsh's 2 August 2017 email, Brett Hannigan did not reply to many of the bullet points in Mr Walsh's email.
Brett Hannigan responded primarily to bullet points 6 and 7, in-so-far as they concerned the pre-pickup test weights. Brett Hannigan provided an explanation concerning his failure to provide the test weights, and made observations concerning difficulties in dealing with Inghams.
While it is true that Brett Hannigan did not respond to many of the assertions made by Mr Walsh, his reply does not have the characteristics of a comprehensive response to all of Mr Walsh's assertions.
Brett Hannigan explained his failure to contradict Mr Walsh's estimate of the time when the chickens would have been without food in the following way (T 112.34 - 113.2): Q. Mr Walsh, in this email, made the assertion in the last sentence at bullet point 6, "Birds in shed 3 would have had no feed for approximately 19 hours (estimated) before pick up commenced." Do you see that? A. Yes. Q. You didn't reply contradicting that last sentence in your email at page 1294, did you? A. No. Q. The reason you didn't reply is that you agreed with Mr Walsh's estimation of 19 hours? A. No. Q. If you hadn't agreed at the time with that estimation, you would have contradicted it? A. No. Q. Why would you have not bothered to contradict that estimation? A. Like I said yesterday, sleep deprivation.
Brett Hannigan was not asked whether he was an efficient typist. I would not assume that he was, or that he was in the habit of typing lengthy emails. I accept that Brett Hannigan was probably suffering from sleep deprivation. I do not accept that Inghams was entitled to put Brett Hannigan in the position that he was obliged to respond chapter and verse to Mr Walsh's email, or be taken to have accepted its accuracy.
Furthermore, Mr Walsh's assertion that everything in the bullet points in the email came from notes of what was said in the conversation that he had had the previous day with Brett Hannigan was wrong as to bullet point 6, and misleading. I do not accept that Brett Hannigan's failure to respond to bullet point 6 could, in the circumstances, be taken to signify his acceptance of its accuracy.
For these reasons, I conclude that Inghams has failed to establish that the chickens in sheds 3 and 4 completely ran out of feed no later than 5:30 AM on Sunday, 30 July 2017, or even, making some allowance for unavoidable inaccuracy of estimation, within a few hours after that time.
Accordingly, I find that Inghams has failed to make out the case that it propounded as to its justification for terminating the contract under clause 20.1.9(g) of the Inghams Agreement.
I would find, if it were necessary, that the feed in shed 3 more probably than not ran out for a substantial number of chickens at some time before the due time for those chickens to be taken off feed. The evidence does not permit any precision as to when that happened. The chickens in shed 4 would have run out of feed at about the same time, so that those chickens would have been without feed for a considerably longer time than the chickens in shed 3. It is possible that the time that the chickens in shed 4 were without feed for was longer than 24 hours.
However, even if I were to make those findings, in the circumstances of how this case was argued they would not justify the Court holding that the termination of the contract by Inghams was justified. As I have noted above, Inghams did not propound an alternative case based upon the chickens being without feed from some time significantly after 5:30 AM on the Sunday morning. Had it done so, questions of materiality would have arisen. For example, if chickens are required to have food at least once in every 24 hours, there would be a real issue as to whether it would be material if they were without food, say, for an additional 3 hours.

[25]

Meaning and effect of clause 20.1.6

The issue of what is meant by "negligent" in this context gave rise to a dispute between the parties.
Inghams submitted that all that is required to establish that a breach is negligent is to show that Mr Hannigan acted in a manner that was "neglectful" or "inattentive" (written submissions par 157). At par 158, Inghams submitted: The effect of clause 20.1.6, on its proper construction, is to give Inghams the power to terminate for a breach of [a] non-fundamental term, or warranty, if that breach occurs "negligently", in the sense of neglectfully or inattentively.
It should be noted that this submission translates the wording in clause 20.1.6 "negligent in the performance of its duties and obligations under this Agreement" into "breaches a term of the agreement negligently", and then equates negligence to being neglectful or inattentive.
Mr Hannigan's response to Inghams' submission concerning the proper construction of clause 20.1.6 emerges from his response to the various allegations of negligence upon which Inghams relied. However, it appears to me that Mr Hannigan's argument was that the reference to "negligent" in the clause requires that Mr Hannigan's conduct be negligent as understood in the context of the common law tort of negligence. That is, that there must be a duty to take reasonable care which is breached. Negligence by omission is a failure to do something which a reasonable person would do in the relevant circumstances; not the failure to procure a specified outcome irrespective of whether the person acts reasonably. Mr Hannigan submitted that a cause of action in negligence does not arise unless and until the plaintiff suffers damage; so that the fact that Inghams suffered no damage is fatal to its claim based upon negligence.
I do not accept Inghams' submission that any breach of the agreement that involves conduct that is neglectful or inattentive is sufficient to trigger a right to terminate under clause 20.1.6. Although the meaning of "negligent" may be diffuse, and dependent upon context, it is a different and stronger notion of default than being merely neglectful or inattentive. If clause 20.1.6 permitted termination when any breach occurred by reason of neglect or inattention, Inghams could terminate for almost any breach; save perhaps intentional breaches. Put another way, most breaches of contract that are not intentional involve neglect or inattention.
Clause 20.1.6 must be construed in the context of the contract as a whole. Clause 20.1.5 gives Inghams a right to terminate for fundamental breach by Mr Hannigan, save that, where the breach is capable of remedy, the right to terminate can only be exercised if the breach is not remedied after notice is given. If clause 20.1.6 had the effect suggested by Inghams, then clause 20.1.5 would be rendered ineffective wherever any breach was the result of neglectful or inattentive conduct by Mr Hannigan. The contract could be terminated even if the breach was not fundamental, and it would not be necessary for Inghams to give Mr Hannigan an opportunity to remedy the default.
An equivalent process of reasoning would apply to clause 20.1.9(g), which gives Inghams a right to terminate if Mr Hannigan commits any material breach of the Animal Welfare Standards. Inghams' submission would have the effect, if correct, that it could terminate for any neglectful or inattentive breach of the Animal Welfare Standards, even if the breach was not material.
On the other hand, I do not accept that it is appropriate to import the entire body of law and principles relating to the tort of negligence into the proper construction of clause 20.1.6. In particular, I do not accept that proof of damage is required before termination may occur under clause 20.1.6. The duties and the obligations of the Grower under the contract may be performed negligently even though damage does not occur. In the tort of negligence, the requirement for damage is an element of the cause of action that is not transposed into a claim based on contract. Expressly, clause 20.1.6 refers to negligence in the performance of duties and obligations under the contract, and those duties will not arise by reason of a common law duty to exercise reasonable care.
In my view, the word "negligent" in clause 20.1.6 must be given a meaning that makes due allowance for the fact that the relevant negligence in the performance of Mr Hannigan's duties and obligations gives Inghams an immediate right to terminate the contract. That will require that Mr Hannigan's conduct constitutes a serious failure to perform his duties and obligations under the contract in such a manner as would be performed by competent Growers acting reasonably. A failure to perform the Grower's duties and obligations with reasonable care is likely to be sufficiently serious to justify termination by Inghams, if it demonstrates such a want of reasonable attention to those duties and obligations as would justify a conclusion that Inghams should not be required to continue to be bound by the contract, with all the risks that that imposes upon Inghams.
If the right to terminate granted by clause 20.1.6 is to fit coherently into the scheme of the contractual rights of termination found in the Inghams Agreement, there is a positive reason for not construing the provision as requiring the occurrence of damage in the manner submitted by Mr Hannigan. If a breach is committed by Mr Hannigan that has sufficiently serious consequences for Inghams, clause 20.1.5 will provide a foundation for termination if the breach is fundamental. However, in the commercial context of the agreement under consideration, Inghams effectively outsources the growing of hundreds of thousands of chickens to Growers, in circumstances that put Inghams at great commercial and reputational risk, if the Growers do not perform their obligations in a reasonably competent manner. Where Growers are relevantly negligent, in the sense explained above, there will be good commercial reason for Inghams to have a right to terminate the agreement, not because of the consequences of an actual breach, but because of the negligent performance of the Grower's duties and obligations. It is commercially reasonable that Inghams is given a right to terminate in those circumstances before any actual breach by the Grower can have fundamentally damaging consequences for Inghams, so that clause 20.1.6 gives Inghams a right to terminate independently of whether or not damage has yet been suffered. Clause 20.1.6 focuses on negligent performance of duties and obligations generally, and not the commission of a breach in a manner that is negligent. Clause 20.1.6 may apply where there has been a single negligent breach, but the intent of the provision is to give Inghams a right to terminate where the Grower's performance is negligent in a manner that is sufficiently serious that Inghams should not have to wait and suffer the consequences of a fundamental breach.
I accept Mr Hannigan's submissions that (1) the obligation to take care is in respect of the performance of the duties and obligations imposed by the contract, and not in respect of any new duty or obligation that is inconsistent with those imposed by the contract (see Hevilift Ltd v Towers [2018] QCA 089 at [59]); and (2) the obligation to take care in respect of the performance of the duties and obligations under the contract is not an obligation to procure a stipulated outcome, but only an obligation to act reasonably (see State of New South Wales v Fahy (2007) 232 CLR 486; [2007] HCA 20 at [7]).

[26]

Negligent performance of obligation to comply with Animal Welfare Standards

In par 161 of its written submissions, Inghams made a broad submission that Mr Hannigan's failure to comply with the Animal Welfare Standards was a result of his neglect and inattentiveness as well as that of Brett Hannigan. Inghams did not develop this submission, but relied upon the circumstances contained in its submissions as to how these matters constituted breaches of other terms of the Inghams Agreement.
As I have said above, clause 20.1.6 of the Inghams Agreement only gave Inghams a right to terminate if Mr Hannigan was negligent in the performance of his duties and obligations under the agreement.
Inghams did not point to any specific contractual obligation upon Mr Hannigan to comply with the Animal Welfare Standards. Clause 20.1.9(g) gave Inghams a specific contractual right to terminate if Mr Hannigan committed any material breach of, or was in material non-compliance with, the Animal Welfare Standards, but it did not impose upon him a duty or obligation to comply.
Inghams submitted that Mr Hannigan was under an implied contractual obligation to comply with the Animal Welfare Standards, but did not in its submissions explain why the Court should find that such an implied duty arose.
I find that no such implication should be made. As Mason J (as his Honour then was) said in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 346; [1982] HCA 24, "…the courts are slow to imply a term…", and: "…The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue…" Given that the contract included clause 20.1.9(g), and the parties did not choose to include a term that expressly required Mr Hannigan to comply with the Animal Welfare Standards, I am not satisfied that the term suggested by Inghams satisfies the following part of the generally accepted test as to when terms should be implied into contracts in fact in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283: "…for a term to be implied, the following conditions (which may overlap) must be satisfied… (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'…"
Consequently, I reject the claim that any non-compliance with the Animal Welfare Standards that may have occurred was the result of the negligent performance by Mr Hannigan of his duties and obligations under the contract.
The claim that Mr Hannigan was negligent seems to have caused Inghams to make a number of subsidiary allegations concerning the reason why Mr Hannigan ran out of feed for the chickens. Those allegations are (1) failing to accurately calculate in advance the feed that chickens would require, and to keep records of feed consumption by chickens; (2) failing to follow up a missed delivery of feed from Chambers within a reasonable time or at all, as required by the Manual, or to submit new orders in place of the deliveries; (3) failing to keep adequate or any records of deliveries received and pending, or the allocation of received deliveries between silos; (4) failing to monitor and keep stock feed levels in silos, including by transporting feed between silos if required; and (5) failing to ensure that the feed supply to each shed would enable the chickens to be fed until feed was to be withdrawn from them in preparation for collection.
It is not necessary for the Court to decide whether Mr Hannigan was negligent in the manner claimed. However, in case it may become important in the future, I will state briefly why I am not satisfied that Inghams' claims that Brett Hannigan was negligent on Mr Hannigan's behalf are made out.
First, I do not accept that Mr Hannigan failed to calculate in advance the feed that the chickens would require. As I understand the evidence, Brett Hannigan made calculations and if the load that he ordered but was not delivered had been received, the feed for the chickens would not have run out.
Secondly, nothing in the contract obliged Mr Hannigan to keep any formal records of feed consumption, and it was not negligent for Brett Hannigan to rely solely on daily inspections of the silos through the viewing ports that existed for the purpose of monitoring the amount of feed in the silos.
Thirdly, although there is an argument that Brett Hannigan should have acted more quickly in noting the missed feed delivery and following it up, the source of the problem was the failure of Inghams' carrier to act on Brett Hannigan's order and to deliver it in a timely way. I will have more to say about this issue below, in the context of whether Inghams was precluded from terminating the contract because of its own breach.
Fourthly, Inghams' claim that Brett Hannigan failed to keep adequate or any records of deliveries received and pending, or the allocation of received deliveries between silos, is baseless. The information needed could readily be obtained from Brett Hannigan's retained copies of the orders and his copies of the delivery dockets. Brett Hannigan controlled the allocation of the delivered feed between the silos.
Fifthly, I am not satisfied that Brett Hannigan failed to monitor the feed in the silos. There was a factual dispute about whether it was feasible for Brett Hannigan to transfer feed from one silo to another, but I am not satisfied that Inghams established that such a course was feasible. In any event, when Brett Hannigan discovered that the feed was short, there was little scope left for transferring the relevant type of feed from any silos to the silo that served sheds 3 and 4.
Finally, the last allegation by Inghams is a general assertion that Mr Hannigan failed to ensure that the feed supply to each shed would be sufficient. I reject this claim for the reasons generally given above.

[27]

Responsibility for shortfall in feed for chickens

The following part of these reasons will be relevant to the determination of the dispute before the Court if a finding is justified that, by reason of the feed for the chickens running out in either or both of sheds 3 and 4, Mr Hannigan was responsible for a material non-compliance with one or more of the Animal Welfare Standards, so that Inghams will have validly terminated the agreement under clause 20.1.9(g) unless precluded from so. The question is whether Inghams is precluded from exercising its right to terminate under that clause because Inghams' own breach of contract "caused" the insufficiency of feed in the relevant sense.
As I have recorded above, clause 3.5.2 of the Ingham's Agreement obliged Inghams to provide feed for the birds, and clause 4.13 obliged Mr Hannigan exclusively to use that feed.
There was no issue between the parties that Chambers was Inghams' agent for the purposes of receiving orders for feed from Brett Hannigan, processing those orders, collecting the loads of feed from Inghams' feed mill and delivering those loads to the Farm. The feed orders were made on forms under Inghams' letterhead, although sent by email to Chambers.
Brett Hannigan, in his primary affidavit at par 92, explained the amount of feed required by chickens at various stages of their lives, and claimed that he had properly estimated the amount of feed that would be needed, having regard to the ages and the numbers of chickens in sheds 3 and 4. I am prepared to accept that any shortfall in the feed available to the chickens was not caused by any under-estimate by Brett Hannigan. He also explained in detail how, of the 697 tonnes of feed that he ordered in July before the chickens in shed 3 were collected, Chambers only delivered 578.58 tonnes, a total shortfall of 118.42 tonnes. The shortfall in delivery was explained for six loads because Chambers delivered about 35 tonnes rather than the 41 tonnes that were ordered. The explanation for the short deliveries by Chambers was the size of the trailers that Chambers had available to deliver feed to farmers on a particular day. Chambers also failed to deliver one whole 41 tonne load.
It is necessary to consider Brett Hannigan's evidence in a little more detail.
On 10 July 2017, Brett Hannigan ordered four 41 tonne loads of withdrawal feed, two of which were for sheds 3 and 4. In addition to the expected 82 tonnes for those two sheds, Brett Hannigan was aware that there was about 6 tonnes of feed available for the chickens from the previous batch of chickens. Chambers delivered the four loads, but two deliveries were about 35 tonnes. Of the shortfall of 12 tonnes, 6 tonnes could be attributed to sheds 3 and 4.
Brett Hannigan ordered a further three 41 tonne loads on 13 July 2017. Two of these loads were for sheds 5 and 6, and even though there was a shortfall in delivery of about 12 tonnes, that shortfall is not relevant to the present case. However, according to his primary affidavit at par 86, Brett Hannigan also ordered a third load of 41 tonnes, to "…cover any shortfalls in feed that looked like happening for any of the sheds." During the course of the proceedings, this load came to be known as the "swing load". It was ordered to protect Mr Hannigan from the risk that, for one reason or another, the chickens would eat more feed than had been delivered.
The swing load was ordered to arrive on 21 July 2017, but was not delivered by Chambers at all. Mr Brandt Chambers confirmed in cross-examination that he omitted to send notice of this order to Inghams' feed mill, so it was not processed for delivery in the ordinary course.
The consequence of the manner in which deliveries of feed were actually carried out was that the available feed was reduced by a number of shortfalls in deliveries, and then the swing load that was intended to be a buffer against the unexpected was not delivered at all.
It was possible for Brett Hannigan to tell what loads of feed had been delivered, and how they had been allocated between the silos, by looking at his copies of the delivery dockets left by the Chambers drivers.
Brett Hannigan did not keep formal records of feed consumption by the chickens. He monitored the feed levels in the silos every day by looking through the viewports that were spaced at two equal heights up the side of the silos. He kept a mental note of the feed levels.
Brett Hannigan gave evidence, which I accept, that 26 tonnes of the missing load was intended for the chickens in sheds 3 and 4.
Brett Hannigan said in evidence, at T 129.19-.24, that, at about 5 PM on Saturday, 29 July 2017, he was checking the sheds and noticed that the "feed" for the chickens in silos 4, 5 and 6 was "low".
At 5:06 PM on the Saturday, Brett Hannigan sent a text message to Mr Chambers that said: "Mate any chance of getting a load or part of a load tomorrow?"
Mr Chambers did not respond until 8:10 AM on Sunday, 30 July 2017, when he said: "I can get a load to you Monday night. Just send a order [sic] through, you can have a split load if that makes it easier Thanks".
Brett Hannigan responded: "No mate that will be to [sic] late will have to go without".
In his affidavit, from par 69 onwards, Mr Chambers gave the following evidence of what happened after he received Brett Hannigan's second text message on Sunday, 30 July 2017: 69. Some minutes after Brett Hannigan's second text message to me on Sunday 30 July 2017, I received a telephone call from him and we had a conversation to the following effect: Brett: Can you get me a load of withdrawal feed today? Me: No. As I said, I can make sure you receive a load of withdrawal feed tomorrow evening. There are no loads of withdrawal feed scheduled to go out today or tomorrow at the moment. I do not know if they have withdrawal feed at the mill at the moment. If you really need it, I can call the mill to see if they have got a load available that we can deliver to you". Brett: Do not worry, mate. It does not matter. They will be going out tonight anyway. … 71. After that telephone call, I did not receive a further order for withdrawal feed from Brett Hannigan. 72. On Monday 31 July 2017, during the afternoon whilst I was returning to Brisbane from Casino, I received a telephone call from Brett Hannigan and we had a conversation to the following effect: Brett: Inghams has told me the birds that went out last night were not acceptable due to low weight. We ran out of feed a couple of days ago. I really need a load. Inghams may not be taking my birds from Shed 4 tonight because they are underweight. Can you arrange an emergency delivery of withdrawal feed? Me: We do not have any withdrawal feed coming out today. I will call the feed mill to see what they can do. 73. Following that telephone call, I immediately telephoned Monica Harvey at the feed mill and arranged a load of withdrawal feed for Avoca Vale Farm to be delivered urgently that evening of Monday, 31 July 2017. …
Brett Hannigan's version of the conversation that took place with Mr Chambers on the Sunday was, as per par 55 of his primary affidavit, as follows: … [I said:] "Are you able to deliver a load of feed today?" … [He said:] "I do not think I can get a load of feed to you today, it should be there by Monday night. I will ring the mill to see if Inghams can assist you. I do not think the mill has made any withdrawal feed."
40.32 tonnes of withdrawal feed was then delivered to Avoca Vale Farm at approximately 11 PM on the evening of Monday, 31 July 2017. That feed was used to feed the chickens in shed 4 that had not yet been collected for processing.
As I understand it, Inghams did not challenge Mr Hannigan's assertion that, if the swing load had been delivered, the problem of the chickens in sheds 3 and 4 running out of feed, whenever that happened, would not have occurred.
Nonetheless, Inghams submits that the only real cause for any material non-compliance by Mr Hannigan with any Animal Welfare Standards was Brett Hannigan's failure to respond to the non-delivery of the swing load by acting quickly enough to place a new order with Chambers, in time for a further delivery to be made to cure the problem of the missed delivery. Inghams' claim was that this failure by Brett Hannigan broke the chain of causation, and was, to use the technical term, a novus actus interveniens.
I reject Inghams' submission for the following reasons, and conclude that Inghams' breach of the agreement by failing, through its agent Chambers, to deliver the swing load, was a material cause of any non-compliance by Mr Hannigan with relevant Animal Welfare Standards.
Inghams' case was based upon the submission, which was accepted by Mr Brett Hannigan, that the swing load that was ordered on 13 July 2017 for delivery on 21 July 2017 could be expected to be delivered within a 36 hour window of time. That would mean that Brett Hannigan had the opportunity to telephone Mr Chambers at any time between 23 and 28 July 2017. Brett Hannigan agreed in cross-examination that he could have done so, and that he did not know why he had not. He accepted that there was no reason for optimism that the swing load would simply turn up late. However, equally, it would be unreasonable to expect Brett Hannigan to appreciate immediately when the load became overdue that it was not going to be delivered at all, and he would be entitled to some period of grace before it would be reasonable to expect him to become concerned about the non-delivery.
Further, it does not follow that it is so obvious that Brett Hannigan could have cured the problem by ordering a further load of feed that it is proper to treat Inghams' failure to deliver the swing load as having no causal consequence for the feed running out.
It is proper to judge the significance of Brett Hannigan's conduct in the context in which these events occurred.
First, even though, as the days went by, any basis for optimism that the swing load would be delivered late would naturally diminish, Brett Hannigan could not reasonably be expected to have appreciated immediately that the load would not be delivered at all. It would be natural for Brett Hannigan to wait for perhaps a number of days before the thought impinged upon him that the swing load might not be delivered. The expected date for delivery of the swing load, 21 July 2017, was a Friday, and Brett Hannigan could understandably not expect delivery to occur on the weekend. It would be reasonable for him not to appreciate a real risk that the swing load would not be delivered at all until about the middle of the next week.
The measurement of the feed in the silos was not an exact science, because the viewing ports were placed about one third and two thirds respectively up the sides of the silos, and, as the swing load was only required as a fall back, Brett Hannigan would not have had a precise measure of the feed that was available, or be able to precisely gauge the risk that the existing feed would run out before the birds in sheds 3 and 4 were collected.
The chickens in shed 2 were collected on 27 July 2017, and Brett Hannigan began the process of cleaning shed 2 on that date. The chickens in shed 1 were collected on 28 July 2017. Brett Hannigan was occupied for part of the Thursday and the Friday in the work of cleaning out shed 2.
I accept Brett Hannigan's evidence that he did not in fact notice that the feed for the chickens was low until about 5 PM on Saturday, 29 July 2017, when he noticed that the clear red plastic cones at the bottom of the silos had only dust in them. Although Inghams submitted that Brett Hannigan should have been able to make more precise calculations of the quantity of feed that was necessary, I view that as too extreme an expectation of what Brett Hannigan should have been able to achieve, given the practical realities of the chicken farming operation.
It is also material that the short deliveries made by Chambers would have had the tendency to progressively throw out Brett Hannigan's calculations, and create a variance between his expectations and the actual level of feed available. It is possible that Brett Hannigan's failure to monitor and appreciate the possible consequences of the short deliveries of feed, and the somewhat imprecise means available to him to check how much feed remained in the silos, may have been a contributing cause of the feed for the chickens running out, to the extent that it did so. However, the question is not simply whether any default by Brett Hannigan on Mr Hannigan's part was a cause of the feed running out. The question is whether, the feed having run out because of short deliveries and the failure to deliver the swing load for which Inghams was ultimately responsible, Brett Hannigan's default was so significant that no continuing effect should be attributed to Inghams' own defaults.
Inghams relied upon the fact that the Manual, at page 48, contains the statement: … If you have problems with feed or feed delivery, you should contact your Feedmill or Feedmill Transport Company. …
In his affidavit, Mr Walsh gave the following evidence of what he would have done if Brett Hannigan had called him to warn him of the likelihood that the feed for the chickens would run out: … 169. If Brett had informed me after 5:00 pm on Saturday 29 July 2017 or on Sunday 30 July 2017 that he had run out of feed (or even that the feed was about to run out soon), I would have telephone [sic] the manager of the regional feed mill at Hemmant, Richard Sevil, to organise a load of withdrawal feed to be processed (or diverted from another Grower's order) and delivered to Avoca Vale Farm as soon as possible on Sunday 30 July 2017. 170. If Inghams' feed transport contractor, Chambers Bulk Transport, could not make the delivery, I would have organised another of Inghams' feed transport contractors who supply feed to other Growers from that feed mill to deliver the load. …
The implication from this evidence is that Mr Walsh held himself out as being constantly available on the weekend to receive sundry calls from growers, if they needed assistance from Inghams. I would not find that Mr Walsh, as the Queensland Farming Manager of Inghams, offered that availability to growers, unless there was specific evidence to establish that fact. Brett Hannigan gave some general evidence that he found it difficult to communicate with Inghams' staff and that, when he did send messages, they were often not responded to in a timely way.
Mr Chambers gave evidence, at par 10 of his affidavit, that the feed mill operated 6 1/2 days a week, and usually did not operate after midday on Saturday. He added, at par 69, that there were no loads of withdrawal feed scheduled to go out from the feed mill on Sunday or Monday, and that he did not know if there was withdrawal feed at the mill.
The evidence given by Mr Chambers suggests that, for Brett Hannigan to have secured a replacement load for the missed swing load, he would have had to have placed a new order with Chambers early enough to have had the order processed and the feed delivered on Friday, 28 July 2017, in the same manner as would any Grower who needed a delivery of feed before the weekend.
If a reasonable view is taken of Brett Hannigan's response to the failure of Inghams, through Chambers, to deliver the swing load on or shortly after 21 July 2017, there would as a practical matter only have been a small window for him to have averted the shortage of feed for the chickens that eventuated. He might reasonably not have appreciated the reality of the problem until Tuesday or Wednesday, and then, notwithstanding all of his other duties, it would be necessary for him to have made the new order on Wednesday or Thursday in time for delivery on Friday.
I have concluded that the primary cause of the chickens running out of feed, to the extent that that may have happened, was Chambers' failure to deliver the swing load at all, and that that failure by Inghams' agent was a breach of clause 3.5.2 of the contract, and the primary cause of any non-compliance with the Animal Welfare Standards that may have occurred.
The failure by Brett Hannigan to cure Inghams' breach was not a novus actus interveniens that had the effect that Inghams' breach ceased to operate. Inghams' breach created the risk that the chickens would run out of feed, and did so in a context where Brett Hannigan was in fact absorbed in other essential and pressing activities necessary for the performance by Mr Hannigan of his obligations under the contract. Once Inghams' breach had created the conditions necessary for the non-compliance with the Animal Welfare Standards, Inghams could not in the circumstances argue that Brett Hannigan's failure to appreciate the magnitude of the risk caused by that conduct should be held against Mr Hannigan, as absolving Inghams from being the true cause of the non-compliance.
Consequently, even if it had been established that Mr Hannigan was in material non-compliance with any relevant Animal Welfare Standards, I would have concluded that Inghams was the primary cause of that non-compliance, in breach of the contract, so that it would be precluded from exercising any contractual entitlement to terminate the contract, or relying upon any principle of contract law for the same purpose.

[28]

Fundamental or essential terms of the contract

The next issue that must be addressed is Inghams' claim that a number of terms in the Inghams Agreement were fundamental or essential terms, such that any breach by Mr Hannigan justified termination of the agreement, irrespective of the seriousness of the consequence of the breaches.
Inghams submitted, at par 83 of its written submissions, that: "…the terms requiring the Grower to comply with each of the Animal Welfare Standards and the Manual were fundamental or essential terms, being of such importance to Inghams that it would not otherwise have entered into the Agreement. A breach of those terms by Mr Hannigan would entitle Inghams to terminate the Agreement."
As I have found above that there was not an implied term requiring Mr Hannigan to comply with each of the Animal Welfare Standards, it will only be necessary for the Court to deal with this submission in relation to Inghams' claim that the requirement that Mr Hannigan comply with the Manual was a fundamental or essential term.
The parties do not appear to have addressed the principles that govern whether a term of a contract should be treated as fundamental or essential, so that the party with the benefit of the term may terminate the contract for any breach.
The Court of Appeal in Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (recs and mgr apptd) (1997) 42 NSWLR 462 made the following observations on the test of whether a term in a contract is essential, at 478: … The test of whether a term is essential, so that a breach will give rise to an immediate right of rescission, is that stated by Stephen J, Mason J and Jacobs J in DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 431: "… the quality of essentiality depends … on a judgment which is made of the general nature of the contract and its particular provisions, a judgment which takes close account of the importance which the parties have attached to the provision as evidenced by the contract itself as applied to the surrounding circumstances." One of the decisions they referred to was Bentsen v Taylor, Sons & Co [1893] 2 QB 274 at 281, where Bowen LJ said: "… There is no way of deciding that question except by looking at the contract in the light of the surrounding circumstances, and then making up one's mind whether the intention of the parties, as gathered from the instrument itself, will best be carried out by treating the promise as a warranty sounding only in damages, or as a condition precedent by the failure to perform which the other party is relieved of his liability." As Kerr LJ said in State Trading Corporation of India Ltd v Golodetz Ltd [1989] 2 Lloyd's Rep 277 at 283: "… the Court may have no alternative but to follow the general statement of Lord Justice Bowen in Bentsen v Taylor … by making what is in effect a value judgment about the commercial significance of the term in question." Earlier (at 282) he had cited the statement by Fletcher Moulton LJ in Wallis v Pratt [1910] 2 KB 1003 at 1012 that conditions are terms: "… which go so directly to the substance of the contract, or in other words, are so essential to its very nature that their non-performance may fairly be considered by the other party as a substantial failure to perform the contract at all." …
Later, in Kyrwood v Drinkwater [2000] NSWCA 126, Powell JA said (footnotes omitted): … [137] The general test to be applied in determining whether or not a term of a contract is to be regarded as essential may be found in the judgment of Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd. where his Honour said: The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor: Flight v Booth ((1834) 1 Bing. (NC) 370, 377; 131 ER 1160, 1162-1163), Bettini v Gye (1876) 1 QBD 183 at 188), Bentsen v Taylor, Sons & Co (No 2) [1893] 2 QB 274 at 281), Fullers Theatres Limited v Musgrove (1923) 31 CLR 524 at 537-538), Bowes v Chaleyer (1923) 32 CLR 159), Clifton v Coffey (1924) 34 CLR 434 at 438 and 440). If the innocent party would not have entered into the contract unless assured of a strict and literal performance of the promise, he may in general treat himself as discharged upon any breach of the promise, however slight. …

[29]

Were clauses 4.2, 4.14 and 4.16 fundamental or essential terms?

Inghams relied upon clause 4.2, which obliged Mr Hannigan to raise the birds in accordance with the Manual; and clauses 4.14 and 4.16, which required the Grower to maintain all such records as Inghams and the Manual reasonably required, and to allow Inghams' representatives full and free access at all reasonable times to the records. It is these provisions that Inghams submits were fundamental or essential.
As I understand Inghams' submissions, the factual basis of its complaint is set out in par 151 of its written submissions, which is as follows: In breach of clauses 4.2, 4.14 and 4.16 of the Agreement, Mr Hannigan failed to (1) raise the Birds in accordance with the Manual (clause 4.2); (2) maintain all such records as Inghams and the Manual reasonably require ("Records") (clause 4.14); and (3) allow Inghams' representatives full and free access to the Records, by failing, contrary to Page 39 Point 3 of the Manual, to sample weigh the chicken flock weekly and compare the average weight obtained thereby with the current weight-for-age standard, and forward the weights to Inghams farming staff, on a weekly basis and in particular… …
Inghams went on to give particulars in its submissions of seven breaches between 7 July and 2 August 2017, one for each of five sheds and two for one of the sheds. The relevant part of the Manual required Mr Hannigan to determine sample weights for the chickens "weekly", and to forward the weights to Inghams' farming staff. The allegation is that Mr Hannigan delayed in weighing the chickens in the various sheds between 12 and 16 days.
There may be scope for argument about whether these failures only constituted a breach of clause 4.2, and not in addition clauses 4.14 and 4.16. It may be that the requirement in the Manual to weigh the birds weekly did not amount to a requirement that Mr Hannigan maintain records of same, and his failure to send the weight records to Inghams may not have involved any failure by him to give Inghams' representatives full and free access to the records. I consider that, in fact, the failure during the specified periods to weigh the chickens and to provide the weights to Inghams constituted breaches of clause 4.2, as is admitted by Mr Hannigan.
The issue is whether those breaches provided a separate justification for Inghams to terminate the contract on the basis that clause 4.2, or all of the clauses relied upon, were fundamental or essential terms of the contract.
It appears from page 39 of the Manual that the need for regular weighing of the birds during their growth cycle is required because "…[b]ird weights are the most accurate guide to flock health and progress. Changes in weight gain often precede or accompany clinical symptoms in the flock. Early action can minimise loss of birds and performance…" However, the period the subject of Inghams' complaint in the present case was the period immediately before Inghams was due to collect the birds for processing. Inghams' need to be supplied the weights for the birds at that time was different to the reasons for regular weighing of the flock during the growing period.
Mr Nillegoda, the New South Wales Breeder Manager for Inghams, explained in his 29 November 2017 affidavit the purpose for weighing the chickens as follows: … Livestock Planning … 11. Two sizes of chickens are grown by Inghams' Growers, referred to as "small birds" and "large birds". For Ross chickens, the target weight for small birds is 1.95 kg and the target weight for large birds is 3.4 kg. 12. Small birds are expected to reach their target weight at 33 or 34 days of age. Large birds are expected to reach their target weight at between 45 and 47 days of age. Sometimes, the birds reach their target weights before those ages and sometimes some days later than the expected age. Our job as livestock planners was to arrange the pick up of the chickens from the Growers in our region once they reached their target weights. … 17. Kristen and I were responsible for planning the timetable for thin-outs and clean-outs of sheds on the farms of the Growers in Andrew Walsh's region. Each week, we prepared a plan for the collection of small and large chickens from the Growers' farms and their transportation to the local Inghams processing plant. 18. As livestock planners, Kristen and I had access to the Broiler System in Inghams' computer system, which was a database programme into which was inputted all information about the Growers, their farms and chicken-growing set-up and the batches of chickens in their care. 19. The Broiler System held all information relating to each batch of chickens, including in respect of each shed on each Grower's farm the parentage and birth dates of the chickens, the dates of their placement with the Growers, the number of chickens placed, and the information provided in relation to each batch by the Growers, the Broiler Service Team and others at Inghams, the live-haul contractors, the processing plant and others involved with the batch. 20. Information in the Broiler System was used in a Mid-Term Planning system, which we used to plan in advance over the next 13 weeks all the batch placements with and pick-ups from the Growers in Queensland and northern New South Wales. Information from that system was pulled into a third database programme which we called the Weekly Pick Up System, which we used to set the next week's schedule or plan for thin-outs and clean-outs of the Growers' sheds. 21. We were also provided with standard growth and mortality charts for Ross and Cobb chickens, showing the standard for weight for age of the chickens and standard mortality rate in percentage terms per shed according to the age of the chickens. … 28. Using the 7, 14, 21 and 28-day birthday weights from the Grower as entered into the Weekly Pick-Up System and the growth standards chart, we estimated the number of days of age at which the chickens in any given Grower's shed would reach the target weight for small birds and set the date for "thin-out" or "clean-out" of the shed. 29. We did the same in relation to large birds, relying also on the 35 and 42-day birthday weights from the relevant Growers, to set the dates for "clean-out" of the shed. 30. If the birthday weights from a Grower showed that the chickens were growing faster or slower than the standard expectation, we adjusted the thin-out or clean-out date, either bringing it forwards or pushing it back. 31. We then confirmed the pick up dates for the birds and finalised in the Weekly Pick-Up System the plan for the next week… … 37. If the Grower failed to provide the check weights and mortality count for their sheds due for thin-out or clean-out due to be collected from the Grower's farm were underweight, it was not possible for us to confirm that the birds were likely to be ready for a thin-out or clean-out of their shed. 38. In the case of clean-outs of large birds, it is difficult to estimate the weights of large birds based only on the earlier weights sent by the Grower for the small bird pick up. 39. Chickens' growth rates can change significantly within the period of seven days and therefore can can [sic] grow from being one to two days behind to two days in front or slow to more days behind… …
Mr Nillegoda also gave the following evidence concerning how it came to the attention of Inghams that Mr Hannigan may have run out of feed for the birds: … 73. On Monday 31 July 2017 at approximately 9:30 am, I had a conversation with Kristen Bettridge to the following effect: Kristen: I just got a call from the processing plant. The weights of the birds from Avoca Vale Farm were pretty poor. Me: How bad were they? Kristen: About 4 to 5 days behind. They say they weighed a significant number at 2.82 kg, 2.75 kg and 2.72 kg. …
This evidence, albeit hearsay, suggests that the birds were large birds with a target weight of 3.4 kg, and that a significant number of them weighed between 2.72 kg and 2.82 kg at the time of slaughter.
The question is whether, taking into account the principles that have been considered above concerning the circumstances in which a term of a contract will be found to be a fundamental or essential term, clause 4.2, either considered separately or together with clauses 4.14 and 4.16, should be found to be a fundamental or an essential term.
Having regard, in particular, to the test laid down by Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632, at 641-642, whereby the promise must be of "…such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor…", I conclude that neither clause 4.2 nor the other clauses relied upon in the Inghams Agreement were fundamental or essential terms.
While I have not attempted to set out the terms of the Manual, I note that it is a document of some 226 pages that contain specifications that govern all aspects of the growing of chickens in the minutest technical detail. For clause 4.2, which requires the Grower to "…raise the Birds in accordance with the Manual…" to be a fundamental or essential term, it would be necessary for the Court to find that Inghams would not have entered into the contract at all unless it had been assured of strict or substantial performance of the prescriptions in the Manual in their entirety. The argument that Inghams did so, or that it ought to have been apparent to Growers that they would be required to ensure strict or substantial performance of every single requirement of the Manual, or risk the contract being terminated by Inghams, is not sustainable.
Using the part of the Manual that dealt with the requirement for the weighing of birds merely as an example, I do not accept that there was anything in the contract as a whole, or the surrounding circumstances, that would justify a conclusion that Inghams only entered into the contract on the basis that Growers would strictly or substantially comply with the requirement every single week during the growing cycle of every single batch of chickens.
One reason for that conclusion arises out of the formula for the calculation of the Payment due to Growers, which has been considered above. Appendix 2 contained a formula that would lead to the amount payable to Growers being reduced in the proportion that the weight of the Grower's chickens that were processed fell short of the average weight of the chickens grown by all Growers in the Pool.
As Inghams provided for the consequences of undersized chickens being processed in the formula for the Payment, which would tend to protect Inghams from the consequences of any conduct on the part of the Growers that led to Inghams collecting chickens for processing early, the argument that, in respect of that part of the Manual, Inghams would not have entered into the contract at all unless assured that the Grower would strictly or substantially comply with the weighing requirement in the Manual on all occasions, is untenable.
Consequently, even though Mr Hannigan admitted that he had failed to comply with the Manual in the manner asserted by Inghams in respect of the weighing of the chickens on seven occasions in July and August 2016, that breach (whichever terms of the Inghams Agreement applied) did not provide a basis for Inghams' termination of the contract.

Francis Gregory Hannigan v Inghams Enterprises Pty Limited

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Judgment (31 paragraphs)

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Cases Cited (61)

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