Mark Trenter t-as 'Time Rite Onforwarders' v Australian Air Express Pty Limited

Industrial Relations Commission (NSW)|2006-07-31|Before: Staunton J, Mr P, Mr J

CITATION: Mark Trenter t-as 'Time Rite Onforwarders' v Australian Air Express Pty Limited [2006] NSWIRComm 314

APPLICANT: Mark Trenter t/as 'Time Rite Onforwarders' PARTIES: RESPONDENT: Australian Air Express Pty Limited

CATCHWORDS: Application for relief - summary termination of agency agreement - dispute as to the proper charging rate for the services provided by the applicant - applicant's belief as to the long term relationship between the parties - held notwithstanding it's view as to basis of charging rate, respondent had paid applicant at rate applicant believed correct for five and a half years - respondent's explanation of administrative oversight as to charging rate implausible - further, respondent took steps unbeknown to applicant designed to sever agency agreement - held respondent's behaviour arbitary and contractually unfair on two grounds going to charging rate issue and respondent's failure to give applicant proper notice of the intention to terminate the agency agreement - issue as to what would be a reasonable period of notice considered - applicant entitled to be compensated for loss that termination of agency agreement represented to his business - in all the circumstances contract to be varied to provide for six months notice and compensatory money order in lieu - money order to include amounts deducted from applicant by respondent for freight delivered or collected during relevant period as well as vehicle transaction losses - order as to interest and costs.

Evidence Act 1995 LEGISLATION CITED: Industrial Relations Act 1996 Supreme Court Act 1970

CASES CITED: Crawford Fitting Co v Sydney Valve & Fitting Pty Limited (1988) 14 NSWLR 438 Gough & Gilmour Holdings Pty Limited and ors v Caterpillar of Australia Limited and anor (No. 11) 2002 NSWIRComm 354

HEARING DATES: 31/7/2006, 1/8/2006, 2/8/2006 and 3/8/2006

APPLICANT: Mr P Newall of counsel SOLICITOR: Kevin Byrnes Solicitor LEGAL REPRESENTATIVES: RESPONDENT: Mr J Fernon SC SOLICITORS: Back Schwartz Vaughan

Matter No IRC 1512 of 2001 Mark Trenter t/as 'Time Rite Onforwarders' v Australian Air Express Pty Limited

Application under s 106 of the Industrial Relations Act 1996

1 The applicant is a sole trader who operates his business in Port Macquarie. Between October 1994 and April 2001, the applicant's business operated, inter alia, as the agent for the respondent in the Port Macquarie area. The agency work consisted of a parcel freight pick up and delivery service centred around the arrival and departure of planes from Port Macquarie airport. 2 The respondent is a joint venture company with Qantas and Australia Post that operates as an air freight carrier across a national network. At a local level, it utilises the services of persons such as the applicant as it's agent. 3 In or about October 1994, the respondent appointed the applicant as it's Port Macquarie agent. That initial appointment and the accompanying agreement between the parties was made orally, supplemented over time by memoranda and correspondence that passed between the parties. 4 The major part of the applicant's work on behalf of the respondent involved picking up parcel freight from Port Macquarie airport and delivering it to it's ultimate destination in and around Port Macquarie. The applicant also collected items from Port Macquarie to be sent to other destinations and delivered them to Port Macquarie airport for onforwarding. 5 In addition to the agency on behalf of the respondent, the applicant undertook other freight delivery as well as some furniture removal work. Over time, as events transpired, the air freight work undertaken by the applicant for the respondent became the majority of the applicant's work and represented the largest part of his income stream. 6 Initially, the amount of freight dealt with by the applicant on behalf of the respondent was modest. As new business was acquired, the workload of the applicant as agent for the respondent increased quite significantly. This increase in business clearly benefited both parties. As a consequence of the increase in business, the applicant expended money and sub-contracted additional staff. As well, the applicant's agency agreement, on behalf of the respondent, was extended to Kempsey and surrounding areas. 7 Central to the business relationship between the parties was the basis on which the respondent paid the applicant for the services he performed. The applicant contended that, from 1995 onwards, agreement was reached that the respondent would pay a rate of $1.85 for each item of freight handled and delivered or collected. The respondent asserted that the rate of $1.85 was always on a per consignment basis and not on a per item basis. The difference is readily understood when it is explained that one consignment may consist of more than one item or package. That issue is at the nub of the dispute between the parties and will be addressed in more detail further in this judgment. 8 Relations between the applicant and the respondent began to sour in the latter months of 2000. That was when the respondent commenced to actively assert the applicant was wrongly invoicing it for services provided by claiming the rate of $1.85 on a per item rather than a per consignment basis. For his part, the applicant contended there was no difference between the two. That is, he says, an item was a consignment and had always been thus. In short, he said, if a customer sent a consignment consisting of four packages or items, then he was entitled, and always had been, to charge $1.85 for each package. That approach, he said, was part of his agreement with the respondent that had been reached in 1995. 9 As I understand it, from June 1995 until October 2000, the respondent paid the applicant on the basis that reflected the agreement the applicant says he had with the respondent. That is, a rate of $1.85 per item of freight. 10 The respondent says the rate of $1.85 was always intended to be on a per consignment and not a per item basis. In asserting that and demanding the applicant amend his billing practice to reflect that approach, the respondent triggered objections from the applicant alleging it was breaching the long standing agreement between them. 11 When challenged by the respondent, the applicant refused to alter the basis of his service charge to the respondent. There was a spate of correspondence between the parties in late 2000 and early 2001. That exchange took place against the background of the respondent taking steps in November 2000 to call for tenders for it's Port Macquarie agency. As well, in circumstances he claimed was both contractually unfair and in breach of the agreement between them, the applicant initiated the current proceedings in February 2001. The initial summons for relief was subsequently amended in or about July 2001. 12 On 6 April 2001, in circumstances the applicant contended were wholly unexpected, the respondent summarily terminated the agency agreement with the applicant. 13 The initial application for relief having been amended, the applicant seeks orders varying the agreement between the parties in whole or in part either ab initio or some other time in relation to diverse matters relevant to the agreement between the parties. Generally described, those matters go to a specific rate for delivery on a per item basis, a proposed five year fixed term contract between the parties, a 12 month notice period of proposed termination of the agreement as well as matters going to the tender process relating to the appointment of an agent by the respondent. 14 Further, and in the alternative, the applicant seeks a money order pursuant to s 106(5) of the Act as compensation for the contractual unfairness alleged. 15 In seeking such orders, the applicant pleaded that the actions of the respondent in summarily terminating the agency agreement without notice in the circumstances it did rendered the agency agreement unfair within the meaning of s 105 of the Industrial Relations Act 1996. That action by the respondent, he says, effectively destroyed his business such that he had to 'walk away' from it. He had no opportunity to restructure and preserve the true value of the business prior to the termination of the agency agreement by the respondent. Further he asserts, the termination of the agency agreement resulted in a lost opportunity to sell his business as a profitable entity including the value of the goodwill the agency agreement represented. 16 Critical to the circumstances underpinning the alleged unfairness is the applicant's assertion that he relied on representations made by the respondent that the agency relationship was 'long term'. In doing so, he incurred expenses, debt and other liabilities, particularly the construction of a hanger at Port Macquarie airport to facilitate the handling of the respondent's freight. 17 The applicant's ability to mitigate his loss has consisted of moving fully into the furniture removal business and renting out the hanger at the Port Macquarie airport. 18 For it's part, the respondent contended the applicant knew at all times that the proper charging rate for the service provided by the applicant was on a per consignment and not on a per item basis. He had known that since 1995 when it was conveyed to him in writing by the respondent. Notwithstanding that, the applicant continued to charge on a per item basis. Further, the respondent says, when this issue was brought to a head by the respondent in late 2000, the applicant refused to alter his per item charging basis. The respondent says the applicant refused to negotiate any sensible outcome to the dispute between the parties and simply resorted to litigation in February 2001. As well, the applicant did not bother to tender for the agency when tenders were called for in November 2000 despite being specifically invited by the respondent to do so. 19 Given the applicant's response to the matters raised by it, the respondent says it had no choice but to terminate the agency agreement with the applicant. This it did on 6 April 2001. 20 The respondent disputes the extent of the applicant's loss as a result of the termination of the agency agreement. To the extent the applicant claims the loss of the agency agreement as part of the ongoing loss of his business and it's potential sale value, the respondent contends the applicant cannot assert his right to sell the agency as part of his business as it was not his to sell without the knowledge and consent of the respondent. 21 Further, the respondent contends that the applicant's steps to mitigate his loss by moving his business fully into furniture removal significantly offset the loss he sustained by losing the air freight agency with the respondent. 22 The respondent also challenges the extent to which the applicant points to the costs incurred by him in building and establishing the hanger at Port Macquarie airport. The applicant says he did this largely because of encouragement from the respondent to the effect that it would facilitate the more efficient unloading of freight at Port Macquarie airport and his belief that the agency agreement was long term. The respondent acknowledged that it supported the applicant's steps to secure the hanger but disputes the extent of the loss claimed by the applicant and points to the fact that the applicant extended the lease on the hanger after the initial five year lease expired and continues to rent it out. 23 The applicant does not seek any compensatory money order in relation to the hanger. The applicant's main contention in relation to the hanger is that it is indicative of the actions of the respondent in encouraging the applicant to undertake such a substantial investment with a long term projection and then, because of the respondent's actions, leaving the applicant high and dry with it together the ongoing cost it represents. Relevant factual matters and considerations

24 Before his appointment as agent for the respondent in or about October 1994, the applicant had already established his freight business in Port Macquarie. He had started the business after being retrenched by TNT in 1992 where he had worked for ten years as a courier. Using his retrenchment money, he purchased an econovan vehicle and set up his business as Timerite Couriers. He was a sole operator and operated his courier business between Port Macquarie, Camden Haven and Taree. It would seem he gradually developed a network of regular customers sufficient to sustain the business. I understand he also did some furniture removal work. 25 In or about October 1994, he had an approach from Mr Wayne Evans on behalf of the respondent. Mr Evans was the then Regional Manager for the respondent and was looking to appoint a new agent for the Port Macquarie area. Following discussions between the applicant and Mr Evans, the applicant was appointed the respondent's agent in Port Macquarie. That appointment was made and agreed to orally between the parties. Amongst other things, the applicant contends Mr Evans reassured him that the long term prospects for the applicant as the respondent's agent were positive and potentially long term. As the applicant deposed, and I accept, his appointment as the respondent's agent was premised on the following matters being understood between them: (i) his job was to attend the Port Macquarie airport on a daily basis to collect parcels delivered by aeroplanes and then to deliver those parcels within the Port Macquarie area. (ii) his obligation was to ensure that each of the parcels was delivered by 12 o'clock on the same day he collected them from the Airport though the volume of work initially would mean that he would be able to do all deliveries by 10:00 am each day. (iii) he would be able to continue operating his existing courier business between Port Macquarie and Taree. (iv) the volume of work initially was expected to be only small however the number of parcels he would have to deliver would increase rapidly. (v) the amount he would be paid would be on a percentage rate for each parcel and that percentage rate varied depending on the size of the parcel. (vi) he would be getting 'in on the bottom rung' and would be well placed to take advantage of the business as it developed and it would 'lead to bigger things'. (vii) the respondent was keen to establish long term relationships in the industry with its agents. 26 Nothing was put to the applicant in cross examination to suggest the applicant's understanding as expressed above did not properly reflect the basis of his appointment as the respondent's agent. 27 By all accounts, the applicant's work for the respondent grew fairly rapidly. So much so, he sold his Port Macquarie to Taree run. In doing so, the applicant believed the work he was doing for the respondent would continue to grow and he wanted to be part of that. 28 The increasing work flowing to the applicant from his relationship with the respondent is evident in that sometime in early 1995, the respondent asked, and the applicant agreed, to extend his delivery service on behalf of the respondent to Wauchope. 29 By May 1995, the respondent was clearly very satisfied with the service provided by the applicant pursuant to the agency agreement. In that month, the then Regional Manager for the respondent, Mr Charles McLean, visited Port Macquarie and met with the applicant. Following that visit, Mr McLean wrote to the applicant in the following terms, inter alia: Mark, overall we are most impressed with Port Macquarie and the market improvement with the service standard you are providing on our behalf. The early delivery times are of significant importance. This is being reflected in the positive feed back from the Port Macquarie clientele. We believe there has been a rapid and significant improvement in Port Macquarie since your commencement as the ARA agent. 30 In June of 1995, the applicant had discussions with Mr Noel Prosser, the then Regional Manager, New South Wales, for the respondent. The basis for those discussions was that the applicant had sought greater transparency in the rate paid for deliveries. According to Mr Prosser, at that time, payments to agents were 'generally in the order of 10% of revenue on all pickups and 5% on all deliveries'. 31 Following his visit to Port Macquarie on 7 June 1995, Mr Prosser advised the applicant in writing of new pricing rates and attendant conditions as follows: Further to our meeting on 7 June 1995 in Port Macquarie, we are pleased to advise and confirm the following rates for the distribution and collection network within the Port Macquarie zone. 1. $1.75 per consignment for delivery 2. $1.85 per consignment for collection 3. $1.75 per item (collection only) for Australia Post (18:00 hrs p/up) Port Macquarie. NB Australia Post special collection of an item rate is an interim measure to assist with the cost of performing this service each evening. 4. All same day work performed by yourself, that is, where you are required to supply a dedicated run from a customers premises or to a customers premises from the airport within Port Macquarie the rate shall be $5.00 per consignment. Any same day lodged at the airport by the consolidators or a customer shall be at the rate of $1.75 per consignment. 5. Excess weight breaks shall be addressed on an individual basis. Australian Regional Airfreight will also attempt to ensure all airfreight work currently performed by Australia Post on Mondays is to be handed over to the A. R. A. Agent. This process may take some time to change. Uniforms and decals will be supplied by Australian Regional Airfreight at our cost. In return, you agreed to assist Australian Regional Airfreight in building our market share within your zone by using: (a) Late model vehicles to provide an excellent on ground pickup and delivery service to our current and prospective customers. (b) Actively participate in selling our products and gaining new business throughout your zone. (c) Maintain current communications, paperwork and all procedural systems currently in place or as directed. Mark, we are pleased to have you and Pip onboard and trust you share our excitement and enthusiasm for the future. 32 There was obviously further discussion between the parties as to rates, evident by the further letter from Mr Prosser to the applicant on 15 June 2005 as follows: Further to our telephone conversation today (15th June 1995) we wish to confirm the revised remuneration rates for the collection and distribution of freight with the Port Macquarie region. 1. $1.85 per consignment for collection. 2. $1.85 per consignment for delivery. 3. $5.00 for all same day consignments handled through the Port Macquarie airport. The above rates will supersede all other agreements. We thank you for your cooperation with regards to this matter. 33 As is apparent, both of the above letters from the respondent specify a rate 'per consignment' for delivery or collection. According to the applicant, the rate of $1.85 per consignment for delivery (or collection) meant that he was to be paid $1.85 to collect 'an item' from the plane and deliver it or collect 'an item' and deliver it to the plane. In other words, the applicant considered an item of freight was a consignment and charged accordingly. This interpretation is strongly disputed by the respondent. 34 The respondent maintained that, at all times from June 1995 onwards, the charging rate was on a consignment basis and that a consignment could be more than one item. That such a distinction was always the case is apparent from examples of the Delivery Manifest and Consignment Notes used by the respondent and it's agents at the relevant time and produced as evidence in these proceedings. The Consignment Note makes specific reference to the number of items per consignment. As well, the completed Delivery Manifests produced by both parties makes it clear that with each consignment note there is also a note of the number of items or articles per consignment. 35 There can be no doubt, as far as the respondent's approach to this issue is concerned, a consignment is not an item. True it is, a consignment may consist of one item. Equally it may, and as I understand the situation, it often does, consist of two or more items. 36 In expressing that view, it is also apparent that, at least from June 1995 to the termination of the agency agreement and beyond, the respondent's rate of payment for a delivery or collection was $1.85 per consignment, whether that consignment consisted of one item or more. 37 On the part of the applicant, his belief as to the rate to be charged was $1.85 per item. In effect, as he saw it, an item was a consignment. 38 On first consideration, it is difficult to understand how the applicant, over the entire period of the agency agreement between the parties, could have continued to believe there was no distinction between a consignment and an item. Any considered approach to the documentation referred to would, in my view, have at least raised the issue for clarification. For example, in 1996, the applicant received a memorandum sent by Mr Paul Kelly, the then Regional Manager for the respondent. That memorandum said relevantly: We are having a great deal of difficulty reconciling agents returns. The attached procedure guide is to assist us all and especially clarify some of the problems you may be facing when completing your returns.

Any questions please ask. 39 The Procedure guide attached to the memorandum stated, inter alia: Upon receipt of your freight complete the manifest. (1) Date consigned: This is the date that the freight was sent. (2) Port of origin: This is the place where the freight was sent from. (3) Consignment Note Number: This is the number: (i) on the consignment note; (ii) on the bulk user sticker; (iii) on the pre-paid sticker. (4) Items: This is the actual number of items belonging to the consignment . (emphasis added) 40 That the applicant persists in the view that he does can be better understood, I believe, by reference to the applicant's affidavit evidence where he refers to the memorandum and subsequent conversations he had with Mr Prosser in June 1995 when the per consignment rate was struck. The applicant relevantly explains thus: At the time the ... conversations and Memorandums occurred virtually all of the items we received from the respondent consisted of single parcels. It was rare that there were two parcels in the one lot. If there were two parcels in the one lot they usually had separate prepaid consignment notes attached to each of those parcels with separate consignment note numbers on each of those parcels.

At that stage the respondent did not have the larger customers which it subsequently acquired. As is set out below in further detail when those larger customers were obtained there were often multiple parcels sent from the same source and to be delivered at the one address. At the time that the abovementioned conversations and correspondence took place those larger customers had not yet been acquired by the respondent and the vast majority of items which I had to collect and deliver were single items.

Nobody from the respondent ever defined to me the difference between a "consignment" and a "parcel". As noted above, on occasions when two parcels came from the one source and were meant to be delivered to the one address they were usually accompanied by two separate consignment notes. Accordingly I understood each of those two parcels to be a separate item for which I could be paid the $1.85 referred to above. 41 Given the above, I accept it is possible that, initially, the divergent position between the parties as to the correct charging rate was not an issue. That would have been, I believe, because as the applicant explained above, initially all the consignments handled by the applicant consisted of one item (or parcel) or even if there was more than one item (or parcel) sent from the same source, each one had a separate consignment note attached. Accordingly, in the applicant's eyes, a consignment was an item. If that was the case, the respondent would have agreed and paid the rate of $1.85 on the basis that the single item was indeed a consignment. 42 While that may have been the case initially, it is impossible to conceive that from June 1995 until October 2000 the applicant only ever delivered and/or collected single item consignments. The evidence points to the respondent successfully securing air freight contracts from large clients, for example, Harvey Norman and State Mail in 1997. That, by all accounts, generated multiple items per consignment. At all times, the applicant charged and invoiced the respondent at $1.85 per item, not per consignment. On each occasion the respondent paid on that basis. 43 Given that the charging rate per consignment, as distinct from per item, is the genesis of the contractual breakdown between the parties, it is difficult to comprehend that from June 1995 until October 2000, the respondent paid the applicant at the rate of $1.85 for every separate item he was required to deliver or collect. On any view, it would have been expected that, at a relatively early stage of the agency agreement, particularly when the applicant submitted his invoices for payment, employees of the respondent would have been able to verify the charges being invoiced against the consignment notes and/or Delivery Manifests. They had access to that information and it would have been expected, in the normal course of operating it's business, the respondent would take steps to verify invoices received from it's agents before approving them for payment. 44 There is abundant evidence that the respondent not only had the relevant resources in place to check the applicant's charging rate but also to show that from time to time it certainly did so. For example, there is evidence that in late 1996, the respondent introduced a barcode and scanning system for the purposes of tracking and tracing consignments and, within consignments, the number of items per consignment. The applicant introduced the scanning method to his work on behalf of the respondent in early 1997. 45 The importance of the scanning system to the respondent's business, particularly as far as tracking and tracing consignments and items as well as for auditing and ultimately, I would imagine, for financial reconciliation purposes, was emphasised by Mr Prosser on behalf of the respondent, both in his affidavit evidence and in his oral evidence before me. As Mr Prosser explained in his affidavit in relation to the scanning system: After the introduction of scanning equipment by the respondent, each article required an individual number with a barcode so that it could be scanned and the information downloaded into the respondent's track and trace system. Where an agent is equipped with scanning equipment, including scanner and printer, each consignment note is scanned and every article which forms part of the consignment note is also scanned and has an individual article number. Once all consignment notes and articles have been scanned for delivery, a Delivery Manifest will be generated which would show a consignment note number and underneath this, generally to the right, each article which comprised the consignment note bearing an individual article number. 46 Further, there were memoranda and/or letters sent to the applicant during the period of his agency relationship with the respondent that would indicate that the respondent not only had access to detailed invoices and records relating to the applicant's charging rate but also saw fit to draw matters to the applicant's attention in relation to them. In relation to that assertion, I highlight three items of evidence as follows: (i) In June 1999, Mr Paul Kelly, the then Country Manager, New South Wales for the respondent, wrote to the applicant stating, inter alia, as follows: Please find attached a growth pattern identifying how the Port Macquarie/Kempsey region has grown in PUD over the period. The current average rate paid to Time Rite Transport is $2.14 per consignment note. This includes the onforward areas. The average weekly reimbursement is $2,449.85. The average number of consignment notes is 1,146. This is up from 919 consignment notes per week for the same period last year and the redemption is up from $1,983.70 per week. Therefore over the past noted period, there has been an increase in payment of $466.15 per week at an increase in con notes of 227 per week. (ii) The respondent wrote to the applicant on 12 March 1999, 25 March 1999, 6 May 1999 and 12 September 1999. In that correspondence, Mr Paul Kelly, the Country Manager, New South Wales for the respondent, drew the applicant's attention to the fact that his then weekly invoice that had been submitted needed to be addressed and rectified immediately in the following areas: s The weights for the onforwarding areas must be noted on your agent's invoice s The overnight and off-peak weights and consignment notes must be split and entered in the appropriate boxes on the weekly agents invoice. On each occasion, Mr Trenter was asked to rectify the problem immediately on his invoices. (iii) On 13 October 2000, Mr Bill Giannopoulos, the then Regional Manager, New South Wales for the respondent, emailed the applicant in relation to a charging issue in which he stated, inter alia: I have reviewed some historical data on Time Rite's growth through it's relationship with AaER over the last five years, which shows clearly the benefit it has received through this relationship. Example: Time Rite's average weekly invoice to AaER during the following financial years: 1996 - $1,406 1997 - $2,107 1998 - $3,848 1999 - $4,137 2000/01 - $5,293 (average weeks 1-12) 47 On behalf of the respondent, Mr Prosser in his evidence said that 'embarrassingly' the applicant's charging rate of $1.85 per item was not picked up in any audit on a regular or random basis for the whole of the period June 1995 to November 2000. 48 That the respondent had information at it's fingertips that was provided via the scanning process was further developed in evidence in the cross examination of Mr Prosser. Mr Prosser is currently unemployed but on 3 July 2002, he swore an affidavit in which, at that time, he was the Regional General Manager of the respondent. Mr Prosser certainly had dealings with the applicant during the time of the agency relationship with the respondent and it was he who struck the original charging rate with the applicant in June 1995. In relation to the information provided by the scanning process utilised by the applicant for the respondent from early 1997 onwards, Mr Prosser's evidence was as follows: Q. From 1996 on, it was always possible for the company to check the numbers of items - it was always possible for a company to check the number of consignments that were scanned? A. Yes.

Q. And it was also possible for the company to check the number of items associated with, to use your words, or within a consignment that had a sticker on it and was also scanned? A. Providing it was scanned, yes.

Q. This meant it was possible from any time from 1996 on, to see, by comparing the invoice submitted to an agent with a number of deliveries he was claiming, to check that against the manifest and see how many consignments he had dealt with; is that right? A. How many consignments he had invoiced the company for. When you say "dealt with" what do you mean?

Q. The agent invoices the company for what he says he has handled? A. What he has picked up and delivered.

Q. And there was also the records of the scanning on the manifest? A. Yes.

Q. And one could be reconciled against the other to see whether, in a given week, the agent was charging you for you for the number of consignments that he actually picked up and delivered?

Q. And that was the case from 1996 from 2001, that could be done? A. Yes. 49 I simply do not accept Mr Prosser's explanation on behalf of the respondent that, due to some administrative tardiness or otherwise on it's part, the respondent has been 'embarrassingly' unable to verify the applicant's charging rate for the best part of five and a half years. I am satisfied the respondent was aware at all relevant times through it's managers and accounting procedures that the applicant was charging as he was, that is, on a rate per item or, to express it as the applicant does, that he considered each item a consignment. 50 It may be that the number of consignments that consisted of more than one item which the applicant handled was not great. There is no evidence before me, documentary or otherwise, that allows me to be certain. Nevertheless, it would be totally unrealistic to suggest that it was only in November 2000 that the applicant suddenly commenced to handle more than one item of freight per consignment. While initially an item of freight may well have represented one consignment, I do believe that gradually, from 1995 to November 2000, there would have been any number of instances where a consignment consisted of more than one item and the applicant charged accordingly, as he believed he was entitled to. In other words, the applicant was charging on a per item basis and the respondent paid the applicant on that basis. 51 On behalf of the applicant, it was submitted that the real explanation for the respondent's actions in October 2000 in asserting the disputed charging rate was that, at that time, the respondent decided to further reign in their cost structure and believed it necessary to unilaterally change the payment rate to the applicant in the way they did. There is no direct evidence to that effect but certainly the evidence is clear that in October 2000 the respondent took a very hard line position in relation to the applicant's charging rates. Whether that was because of some belated administrative decision on it's part, as Mr Prosser asserts, or whether it was because of some deliberate commercial decision taken relevant to it's costs structure, I cannot be absolutely certain on the evidence I have. However, in the absence of any other explanation, the inference is compelling that the basis for raising the charging issue at the time it did was as alleged by the applicant, that is, because of the respondent's desire to further reign in it's cost structure at the expense of the applicant. 52 One thing I can be certain about is that for five and a half years the applicant charged as he had believed he was entitled to charge, that is, that each item was a consignment. Further, there is no evidence to suggest that he did so in any way attempting to mislead or deceive the respondent. To the contrary, the respondent's auditing and checking procedures were sufficiently detailed to have alerted them to that fact at the very beginning if that was even contemplated by the applicant. No issue to that effect was ever raised by the respondent and one is left with the overwhelming belief that the applicant charged as he did because that was the rate he believed he was entitled to charge pursuant to his agreement with the respondent. That the respondent concurred with that is supported, in my view, by the fact that it paid the applicant on that basis for five and a half years. For the respondent to now suggest that it was all due to an embarrassing oversight on it's part is, in my view, simply implausible in all the circumstances. 53 I accept, given the nature of the business it was operating, it was open to the respondent to seek to amend it's charging rate subject to the usual requirements of good faith and reasonableness in the conduct of it's commercial transactions. As the evidence disclosed, in 1998, the respondent unilaterally reduced the per consignment rate to be paid to the applicant from $1.85 to $1.75 for the collection and delivery of items in the immediate Port Macquarie area while the rate of $1.85 continued to apply in the rest of the agency run. Not surprisingly, the applicant was not happy about the rate reduction and he took it up with Mr Paul Kelly, the then Country Manager for the respondent. As the applicant deposed: I said to Mr Kelly words to the effect of: "Paul my expenses are going up but you expect me to charge less. I don't think that is fair." Mr Kelly said: "Look Mark, we'll look after you in other areas." I found Mr Kelly a very likeable and friendly person to deal with. Because of his comments I accepted the reduction in rate. 54 Nothing was put to the applicant in cross examination to suggest the above rate reduction had not occurred in the manner he recounted. 55 While the applicant may have been prepared, on that occasion, to accept the respondent's unilateral action to effect a limited rate reduction, such acquiescence does not render the respondent's actions on that occasion as acceptable commercial behaviour. 56 Central to the applicant's claim of contractual unfairness is that at all times he operated and made his business plans on the basis that the agency agreement between he and the respondent was a long term one. There is evidence from the applicant and evidence in various letters and/or memoranda that passed between the parties from 1995 up to as late as October 2000 to support the applicant's view, at least on a superficial level, assurances were given on behalf of the respondent that they perceived the agency relationship between it and the applicant as one of ongoing mutual benefit. Indeed, as Mr Prosser said in his evidence before me, the respondent did not terminate it's agency agreements lightly - suggesting in my view that wherever possible, the respondent was happy to establish long standing relationships with agents. I do believe that in doing so, however, it was always on the basis of the respondent's commercial best interests. 57 My reason for expressing that view requires some elaboration. I do accept that both parties in these proceedings would have viewed the agency relationship between them as potentially long term. However, I believe that assessment would be subject to two different considerations as between the respective parties. From the applicant's perspective, I do believe he saw the agency as a long term relationship uncomplicated by the same considerations as those affecting the respondent. In other words, the applicant believed if he delivered the freight expeditiously and on time and continued to promote the respondent's business, the respondent would continue to reward him with the agency on an ongoing basis and he planned that aspect of his business accordingly. 58 From the respondent's perspective, I believe it's view of a long term relationship was quite different. That is, it was a company operating in a highly competitive market which was very price sensitive. In other words, I believe the respondent would always view any relationship with an agent through the prism of competitive pricing structures and would consistently test the market's ability to determine whether there was room to move, so to speak, as far as lower pricing/costs structures that would give them a competitive edge. Mr Prosser confirmed as much in his evidence. There was also evidence before me that there were major competitors of the respondent for the air freight business at Port Macquarie, they being TNT and Mayne Nickless. 59 Notwithstanding those differing perspectives as to long term relationships, the decision taken by the applicant to proceed to lease land and build a hanger adjacent to Port Macquarie airport was reflective of his view of the long term relationship he had with the respondent. I accept in making the decision he did to proceed to lease land from Hastings Council on an initial five year lease with two five year options to renew was reflective as to that belief. I also accept that he received encouragement from the respondent to proceed to do as he did. 60 The extent to which the respondent was aware of the precise details of the leasing arrangements the applicant had with Hastings Council or any financial arrangements that he entered into in order to do as he did, is not known. Ultimately, it was a decision the applicant took with all the attendant risks involved, but I believe he did so with the view he had that his relationship with the respondent was long term with little, if any, consideration as to how the respondent might view such a belief. 61 The respondent cannot walk away from the fact that in encouraging the applicant to do as he did, there was a genuine benefit to it. In other words, it had an agent who had taken the time and the trouble to invest in facilities that clearly assisted the respondent, particularly as far as the handling and sorting of large amounts of freight was concerned. Easy and ready access to the hanger facility adjacent to Port Macquarie airport would have been a bonus both to the applicant in maintaining the agency relationship and to the respondent in having an agent who had such a facility. It was very much a mutual benefit to both parties but the applicant bore the full financial cost of that development. 62 There is evidence, which I accept, that at the time of the agency agreement, the applicant did utilise the hanger, to a limited extent, for purposes other than the air freight business with the respondent. But there seems little doubt that it was built and used primarily for air freight during the time of the agency agreement. 63 As stated earlier, the applicant makes no direct money order under s 106 as to costs incurred in the lease and loan payments relating to the hanger but points instead to the loss he has sustained in building the hanger arising from his reliance on the agency agreement being long term. 64 As part of his claim of contractual unfairness, the applicant points to the absence of any notice from the respondent of it's intention to terminate the agency agreement. For it's part, the respondent says that from the time Mr Giannopoulos, the then Regional Manager for the respondent, raised the anomaly (as the respondent characterised it) in the applicant's charging rate in November 2000, the applicant was always on notice in relation to the agency agreement. I do not agree. 65 The evidence shows that in October 2000, the respondent raised with the applicant the fact that he was charging $80 per day for what was described as a loading and unloading fee. This was an amount, as I understand it, the applicant had been charging for the whole of the agency agreement up to that stage. On behalf of the respondent, Mr Giannopoulos took issue with that and in a two page email to the applicant on 13 October 2000, Mr Giannopoulos raised that issue as well as a number of other issues with the respondent in the following terms: Dear Mark,

Further to our telephone discussion regarding the justification of the $80.00 per day. Time Rite Transport have been charging for the 'Loading and Unloading' of the Freighters and your subsequent letter dated 28/8/2000, I wish to advise you of Australian Air Express Regional's position on this matter.

The $80.00 charge as it appears on your invoice is for the 'loading and the unloading of freighter', it used to be for the 'unloading and loading of tranship freighter am,pm'. There is no longer a tranship freighter coming into or out of Port Macquarie since we started using Hazelton. The only freighter coming in and out of Port Macquarie is the Northern freighter which brings and takes AaER freight from your facility at Port Macquarie airport.

I understand from talking to the pilots that the whole process of unloading and loading the freighter takes approximately 5 minutes in the am and 10-15 minutes in the pm. In addition the pilot also assists in the loading of the aircraft.

When you consider that the freighter aircraft taxis to your hanger facility (just as a road linehaul vehicle would) the time involved to load and unload it and the fact that it is the freight we require you to deliver or pick up which you charge us a set PUD fee for, I am at a loss to understand the $80.00 per day charge.

You state in your correspondence that the $80.00 per day you are charging is to pay for 4 personnel, 1 forklift, lighting and your terminal. In addition you state it also covers Pathology and Gold Mail late pickups that have 'not been priced separately'.

I find this difficult to accept, considering that this, (pricing separately for PUD, onforwarding, miscellaneous and linehaul) is the very basis in which your invoices have always been paid.

Your letter states that you have budgeted for growth based upon revenue provided and have invested in terminals, vehicles, E-Commerce and the like. I would have thought you would have budgeted for growth based on the 'organic growth' provided to your business from AaER and your company's own efforts in gaining 'new business', either directly for AaER which in turn would benefit you through increasing your PUD revenue or identifying and passing on qualified leads to myself to try and maximise the opportunity for AaER and Time Rite's mutual benefit.

I can assure you that Time Rite or any other potential supplier for that matter, would not be enjoying an ongoing business relationship with AaER today if it had not or would not invest in their business as you have described above.

I have reviewed some historical data on Time Rite's growth through its relationship with AaER over the last 5 years, which shows clearly the benefit it has received through this relationship.

Time Rite's Average weekly invoice to AaER during the following financial years. 1996 - $1406.00 1997 - $2107.00 1998 - $3848.00 1999 - $4137.00 2000/01 - $5293.00 (average weeks 1-12)

As a major airfreight business in a constantly changing global environment AaER will continue to question and review it's operations for the best result for its customers and shareholders.

We will continue to strive to improve service levels by investing heavily in and keep abreast of the latest technology, in order to stay ahead of our competitors.

On a final note, we will always be seeking to partner with like minded suppliers as we move forward.

For the reasons I have outlined above, effective Week 15 AaER will no longer be paying Time Rite $80.00 per day to unload and load their own freight from the freighter or any other road linehaul.

In addition we are seeking a cheque of $960.00 as reimbursement of the $80.00 per day we have paid Time Rite for the period in which the previous 'tranship freighter' ceased operating out of Port Macquarie. ie 18/9/00 to 6/10/00.

I look forward to a long lasting and mutually beneficial relationship in the future. 66 The applicant responded on 16 October 2000, making it clear that the $80 charge was a charge that had always been made for the loading and unloading of the freighter twice a day on four days each week. In responding, he said, inter alia, as follows: Your comments and figures regarding the growth of revenue once again sadly fails to have empathy for increasing costs and the provision of a professional service. You also raise the issue of striving to improve service levels. Cutting costs to meet with your demands will ultimately affect service provision. The enclosed memoranda indicate the importance of service. 67 The disagreement over that matter evidenced, if anything, the beginning of tensions emerging between the parties over charging issues that continued until the respondent terminated the agency agreement in April 2001. 68 Disagreement over charging issues continued. As the applicant deposed, on 3 November 2000, Mr Giannopoulos arrived unannounced at the applicant's hanger where the applicant was supervising drivers. In the discussion that followed, Mr Giannopoulos raised the applicant's charging rate as being on a per item basis. According to the applicant, Mr Giannopoulos told him he was only entitled to charge on a per consignment note basis. According to the applicant: I was shocked by what Mr Giannopoulos was telling me. That was the first notice which I had received from the respondent that the amounts which I had been charging them were being charged (in their minds) incorrectly. 69 On 6 November 2000, the applicant received a telephone call from Mr Prosser in which Mr Prosser advised him the respondent would continue to pay him the $80 for loading and unloading the freighter. He also told the applicant the respondent intended to call for tenders for the Port Macquarie agency. According to the applicant, he objected and told Mr Prosser he 'should not have to tender for what is already mine'. 70 On 10 November 2000, somewhat unexpectedly as far as the applicant was concerned, the respondent advertised in the Port Macquarie News calling for expressions of interest for it's agency in the Port Macquarie area. Companies or persons were invited to apply to provide the service and to request 'an information pack' from Mr Giannopoulos. 71 This step by the respondent was, with the benefit of hindsight, the first whiff that the respondent was taking steps to sever it's relationship with the applicant. Alternatively, it could simply have been doing what Mr Prosser referred to as 'testing the market'. There is no suggestion the applicant was not able to tender and it could not be said definitively that if he had done so, he would not have been successful. However, it is clear by the time the advertisement appeared, there were a number of issues between the applicant and the respondent that would require to be resolved if the applicant was to be the successful tenderer pursuant to the notice of 10 November 2000. 72 On 14 November 2000, the respondent, via Mr Giannopoulos, sent to the applicant the first of a series of memoranda, drawing his attention to what was described as anomalies in his charging rate as between consignments and items. In doing so, it stated as follows: The payment arrangements for your area are based on a consignment note basis and not per item. This arrangement has been in place since 7th June 1995. Unless you can produce documentation from an authorised representative of AaER stating a change to these arrangements to an item rate, payment will be made on a per connote basis. 73 Memoranda in a similar vein in relation to this asserted charging anomaly by the applicant continued up to and including March 2001. 74 The applicant's response to Mr Giannopoulos' memorandum of 14 November 2000 was, to put it bluntly, hardly designed to cement an ongoing relationship between the parties. For example, the applicant wrote to Mr Giannopoulos, in part, as follows on 17 November 2000: I refer to your memorandum of 14 November 2000. ...

With reference to your comments regarding payment being made per consignment versus per item and that you will only pay per consignment unless I have a document signed by an authorised representative stating a change to these arrangements: I would suggest you direct that request to my lawyer. You also request that I highlight the consignments on the delivery sheets that I am charging for so that you can process my invoice for payment (copy of my original invoice w/e 3/11/00 sent back to you for payment). I would appreciate you keeping my original at the pay office and not sending it back to me. I find your request to highlight another agent's delivery manifest (sample attached) a little difficult, to say the least. I also note that you managed to send some of mine, however your request is somewhat ambiguous and very time consuming, given the number of consignments/items/manifests. I would like to suggest that, in the interest of Australian Air Express, its shareholders and customers, you let me do my job, that is meeting planes and delivering freight on time and dealing with everyday customer enquiries. I will however make your job easier so that you can get on with forward planning, etc. ...

75 At about this time it is also apparent the applicant had an inkling that events were not travelling well as between he and his sub-contract drivers vis-a-vis the agency agreement. On 15 November 2000, the applicant wrote a letter to Mr Ray Witchard. Mr Witchard was one of three sub-contract drivers the applicant had an agreement with. Mr Witchard, along with the other two sub-contract drivers of the applicant, subsequently became the preferred agent of the respondent when it terminated the agency agreement with the applicant on 6 April 2001. 76 A reading of the letter sent by the applicant to Mr Witchard on 15 November 2000 makes it apparent the relationship between he and his sub-contract drivers was, by that time, more than a little strained. The letter reads as follows: To Ray Witchard

Ref: Items Charging Time Rite's agreement with Aust Air Express is upon the basis of an item rate. You said to me that because Bill Giannopoulos of Aust Air Express Regional said that we should charge per consignment then you would do what he requested. You also said that you thought that this method was wrong and unfair. You said to me words to the effect of "I don't want to go down with you". I took that as you were referring to me going bankrupt because of the advertisement in the paper suggesting that my agency could well be taken and given to some other party/person/company. You also said that 'That manager carries a big stick' - words to that effect. I can understand your concern however it would appear that you are more than interested in the agency and have had discussions with other drivers re a proposition to Aust Air Express Regional. The item rate has been in place for many years and you have been charging this item rate for many years. Until such a time that this agreement is broken please continue to charge an item rate. Regards 77 If nothing else, that letter to Mr Witchard together with the other matters identified is evidence the applicant was aware by 15 November 2000 that a number of events were conspiring against him and that there was a possibility his agency agreement with the respondent was at risk. By 'other matters' I am referring to the appearance of the notice in the Port Macquarie News on 10 November 2000 calling for tenders and the memorandum of Mr Giannopoulos to the applicant of 14 November 2000. Those matters as well as the applicant's need to write to Mr Witchard in the above terms must have, on any view, created concerns in his mind, notwithstanding the unfairness or otherwise of the respondent's actions, that steps had to be taken quickly if he was to put his relationship with the respondent back onto a positive footing. However, the applicant does not appear to have appreciated the implications for him if he continued to be at arms length with the respondent over the charging issue. 78 Memoranda from Mr Giannopoulos to the applicant continued on a regular basis from November 2000 to March 2001 about anomalies in the applicant's charging rate. By all accounts, the applicant ignored them all in that he continued to charge as he had always done for each item of freight delivered or collected. As well, the applicant had taken steps, via his solicitors, as early as 14 November 2000, to formally place the respondent on notice the applicant objected strongly to the agency being advertised in the Port Macquarie News on the basis that the applicant had the agency agreement and that he viewed the agreement as one 'for a long term period'. Further, on behalf of the applicant, it was said that if the respondent should engage another agent to replace the applicant, it was intended to 'institute proceedings against you for the loss he suffers as a result'. 79 The respondent's solicitors replied on 16 November 2000 rejecting any assertion the respondent had caused the applicant to act to his detriment and requesting, to the extent the applicant relied on what he had said was a long term contractual arrangement with the respondent, the applicant provide anything in writing as evidence of that fact. The respondent's solicitors further stated by memorandum to the applicant's solicitors on 28 November 2000, in the following terms: Further to our facsimile transmission of 16 November 2000, our client has provided us with further documentation with respect with relationship with Time Rite Transport. The exchange of correspondence that we have between the parties does not indicate or support any of the allegations made in your facsimile transmission of 14 November 2000 other than that our client has used Time Rite Transport for a number of years. Our client's relationship with yours is no different to any other regional agent. There are no guarantees of consistent levels of work or guarantees that any agent will continue to receive ongoing work. 80 In December 2000, notwithstanding the above correspondence from the respondent's solicitors, the applicant's solicitors, acting on instructions, advised the respondent they were taking steps on behalf of the applicant to file a summons for relief pursuant to s 106 of the Industrial Relations Act. Those steps were undertaken in January 2001. 81 On 27 February 2001 the solicitors for the respondent wrote to the applicant's solicitors as follows: We have to hand your letter of 31 January 2001 enclosing copy of Summons for Relief Under Section 106 of the Industrial Relations Act NSW and advise that we have instructions to accept service of the Summons. In the meantime despite repeated requests by our client to Time Rite Transport to properly invoice Australian Air Express per consignment note, invoices are continually being sent on a per item basis. These invoices involve our client in conducting an extensive review of each invoice to recalculate the correct charges per consignment note. This process is very time consuming and necessitates needless further cost to Australian Air Express. Our client will no longer tolerate your client's persistence in billing 'per item' rather than 'per consignment note' and all future bills will be returned to your client for correction and will not be paid until submitted in the appropriate manner. Australian Air Express reserves its right to withdraw all further work to Time Rite Transport and to pursue your client in respect of any invoices which were rendered on a per item basis and incorrectly paid by our client. 82 When one views the correspondence that went back and forth between the parties from November 2000 up to and including the filing of the initial summons for relief in January 2001, it is not hard to predict what would happen next. Putting aside for the moment any sense of unhappiness the applicant felt about the respondent's actions up to that point, it is obvious the respondent was hardly likely to turn the other cheek in response to the applicant's actions. That is, the applicant commenced formal proceedings against the respondent for contractual unfairness while at the same time continued to carry on the agency and charge the respondent a per item rate rather than a per consignment rate which was the very issue that had brought the relationship to the precarious position it was in by that time. As well, despite his objections, the applicant took no steps to tender for the agency agreement which he was clearly entitled to do and which, on the evidence before me, he was specifically reminded and invited to do by Mr Giannopoulos at least up to as late as December 2000. 83 The applicant said that the letter from the respondent's solicitors to his solicitors of February 2001, in which it made clear it reserved the right to withdraw it's agency agreement with the applicant at any time, was not perceived by him as any notice or expressed view by the respondent of it's intention to do so. On one view, that could be said to be an optimistic view to have, given all that had occurred between the parties up to that point. It also ignores the right of the respondent to withdraw it's agency agreement subject to proper considerations such as notice. 84 Notwithstanding any rights it may have had, if the respondent wished to terminate it's agency agreement with the respondent, it was, in my view, required to put the applicant squarely on notice that it intended to do so from a particular time, particularly against the background of the well established relationship the applicant and the respondent had. Simply issuing a threat as to an asserted right to do so is a different proposition altogether. 85 I believe the tipping point for the breakdown in the relationship between the parties and the unfairness visited upon the applicant at the behest of the respondent was the unilateral decision taken by the respondent in October/November 2000 to change it's approach to the rate charged by the applicant in circumstances where the applicant, without complaint from the respondent, had charged that rate and been paid at that rate for some five and a half years. 86 Against that background, for the respondent to take issue with the applicant in the way it did in October/November 2000 as to a perceived charging anomaly being charged by the applicant between a rate per consignment versus a rate per item was, in all the circumstances, arbitrary and unfair. 87 In my view, the respondent compounded that initial unfairness by moving in the manner it did to terminate the agency agreement with the applicant. That is, it is evident that, some time prior to 6 April 2001, the respondent had formed the view it no longer wished to continue to have the applicant as it's agent in Port Macquarie. The evidence strongly points to the fact that prior to 6 April 2001, the respondent engaged in communication with the then sub-contractors of the applicant to permit them to take over the agency of the respondent as from 6 April 2001. As the applicant said, and I accept, he was completely unaware of the steps taken by the respondent to do as he did. As he described it: [117] On 6 April 2001 my employed drivers went to my hangar to meet the plane carrying the Australian Air Express items. That plane went to a different hangar. The three sub-contractors who were previously sub-contracting to me attended that different hangar and collected the respondent's items. None of those sub-contractors had informed me that they had entered into an agreement with the respondent to commence collecting and delivering items for the respondent. I telephoned Mr Prosser. I said to him words to the effect of: "What's going on. My employed drivers have turned up to collect freight today and the plane went to a different hangar." Mr Prosser said: "Can you leave it with me." I was led to believe from the course of our conversation that Mr Prosser was in Sydney at the time that I telephoned him. Approximately 20 minutes after that phone call, however, I observed Mr Prosser at Port Macquarie Airport. He was with two other men whom I did not know but who were solidly built. Mr Prosser said to me words to the effect of: "We are taking over. As of midday today your agency is finished. We are here to collect some of our equipment from you." Mr Prosser and the two men with him then removed from my hangar certain items which were the property of the respondent. [118] Later that day I received a letter from the respondent ... That letter was headed 'Termination of Services' and read as follows: "Further to our meeting this morning I confirm that after completion of this mornings normal delivery run, the services of Time Rite Transport are no longer required by this company. This morning on our demand you voluntarily yielded by possession of Australian Air Express Regional's scanner, modem and other equipment and you agreed to place the freight cages outside your building to be collected by the company as soon as possible. I request that you deliver up all remaining Australian Air Express scanning equipment and any other company stationery and that you render a final invoice for all remaining work completed which will be paid by this company in the usual course." 88 Nothing was put to the applicant in cross examination to suggest the above sequence of events did not occur as he deposed. 89 Such actions do not happen spontaneously. Clearly, the respondent had engaged in a degree of planning behind the applicant's back in order to have a smooth transfer of it's business from the applicant. In doing so, it was content to treat the applicant in the way it did, which was, given all the circumstances up to that time, clearly unfair. No attempt was made by the respondent to genuinely try to broker a practical resolution to the charging rate issue. It has to be said on that point that the applicant's actions were also not helpful in fostering a relationship between the parties designed to resolve the impasse - perhaps not surprising, on one view, given the respondent's actions. To adopt the cricketing parlance, he went onto the front foot at the outset. 90 On any view, the applicant was entitled to be put squarely on notice of the respondent's intention to terminate it's agency agreement. 91 When considered in totality, the actions of the respondent establishes the applicant's claim of contractual unfairness on two grounds. The first is the respondent's decision to alter the charging rate they had paid to the applicant for the best part of five and a half years and lay the blame for that at the feet of the applicant in circumstances I have found to be implausible. The second is contractual unfairness on it's terms by failing to provide for a proper and adequate notice period in the event the agency agreement was to be terminated, taking into account the circumstances in which the respondent effected that termination. 92 Before I turn to consider what would, in all the circumstances, given the commercial relationship between the parties, be proper notice, the issue arises as to whether or not to exercise my discretion in favour of the applicant in the making of a money order in order to compensate the applicant for the contractual unfairness established. 93 Asserting relevance in the exercise of my discretion, the respondent pointed to certain contractual agreements the applicant had with his sub-contract drivers to show how the applicant would have dealt with them in the event of a sudden cessation of business. During the course of the agency agreement, the applicant had engaged a number of sub-contractors to do part of the work involved in discharging his obligations under the agency agreement. In doing so, the applicant 'sold' a part of the agency agreement in that he sold part of the run he had to undertake on behalf of the respondent. He did so in exchange for monetary consideration of varying amounts and subject to special conditions that formed part of the agreement for the sale of that aspect of his agency work. For example, he sold a part of his run to a Mr Atkins in 1998 and part to a Mr and Mrs Perry in 1996. In addition to the consideration that was paid for the sale of those parts of his agency run, Mr Atkins and Mr and Mrs Perry signed agreements that included the following clause: The purchasers acknowledge and agree that they are aware that the vendor does not have any written contracts with any customers serviced on the above courier runs and all arrangements are of a verbal, and casual, nature and the custom supplied by customers with respect to each of the above courier runs may be withdrawn by any one or more of the existing customers at any time. 94 The respondent pointed to that clause and the sale agreements generally as evidence the applicant was happy to enter into agreements with his sub-contractors which firstly, charged them a fee for undertaking a part of the agency work that he had with the respondent. In that respect, it was pointed out, at no time had the respondent ever charged the applicant any up front fee in order to acquire the agency agreement. Secondly, the applicant was happy to leave his sub-contract drivers unrecompensed without notice should any of the work to be undertaken by them cease at any time. In short, the respondent said, the applicant is happy to treat his sub-contract drivers in the same way that he now comes to this Court to complain about as contractual unfairness on the part of the respondent. 95 Apart from having my attention drawn to the terms of those agreements and the contracts for the sale of the courier runs between the applicant and his sub-contract drivers, there is no other evidence before me as to the facts and circumstances surrounding the agreements entered into. In any event, whatever may be said as to the circumstances of those agreements, they are not, in my view, particularly relevant to my considerations here. My considerations here involve the claim by the applicant as to the contractual unfairness that he says arose as between he and the respondent in relation to the circumstances surrounding the summary termination by the respondent of the agency agreement between them. As I have determined, given the facts and circumstances, a contractual unfairness did arise. 96 I am not satisfied there is any contractual unfairness arising on the basis of any particular steps the respondent was required to take in relation to the calling of tenders for the renewal of the agency agreement or otherwise, particularly given the applicant failed to submit any tender regardless of whether he would or would not have been successful. 97 The applicant bases the loss he says he sustained as a result of the action taken by the respondent to terminate it's agency agreement as being the loss of his business. In that sense, I have understood the applicant to be referring to the whole of his business. I do not agree with that approach as I believe in assessing any loss arising from the respondent's actions, it must be directed solely to the loss the applicant sustained as a result of the termination of the agency agreement between the applicant and the respondent. As the evidence attests, that certainly represented the greater proportion of the applicant's business. 98 The parties both presented expert evidence from respective chartered accountants in order to justify the approach to be taken to any losses sustained by the applicant. On the part of the applicant, evidence was received from Mr Christopher McGeoch. Mr McGeoch is a principal in an accounting practice in Port Macquarie. He is a fellow of the Institute of Chartered Accountants in Australia and has been in practice as an accountant for more than twenty years. In that time he has undertaken numerous valuations of businesses and enterprises. 99 On behalf of the respondent, expert evidence was received from Mr Robert Elliot. Mr Elliot has been a fellow of the Institute of Chartered Accountants in Australia since 1976 and is also admitted as a Certified Practicing Accountant and a member of the Australian Society of Accountants, the latter since 4 August 1970. He is also an official liquidator and a member of the Insolvency Practitioners Association of Australia. 100 Neither Mr Elliot's or Mr McGeoch's evidence was challenged on the basis of their opinion being properly that of an expert in accordance with the provisions of s 79 of the Evidence Act 1995. 101 Mr McGeoch was asked to prepare a report calculating the loss suffered by Mr Trenter as a result of his agreement with the respondent being terminated. In doing so, he says, he approached that task by apportioning the loss between two categories, namely: (i) the loss of income which Mr Trenter has suffered from the date of termination until 30 June 2004; and (ii) the loss which Mr Trenter has suffered as a result of being deprived the opportunity of selling his business. 102 In making his calculations, Mr McGeoch based the value of the business both at the time of termination of the agreement and as at 30 June 2004 on the presumption that the agency agreement with the respondent was still in place. 103 In considering Mr McGeoch's assessment both as to loss of income and the loss of opportunity on the presumption identified above, Mr Elliot expressed his opinion as follows: [3.1] I do not agree with Mr McGeoch's assessment that Mr Trenter suffered a loss of income from April 2001 to 30 June 2004 as well as a loss of the opportunity to sell that part of his business associated with the Australian Air Express contract due to the termination of the Agency Agreement in March 2001. In my opinion the two issues are mutually exclusive. If Mr Trenter suffered a loss as a result of the termination of the Australian Air Express Agency Agreement, it was a loss of the value of the business at that time. This loss is properly assessed by valuing that part of Mark Trenter's business that ceased as a result of the termination of the Agency Agreement. 104 I accept Mr Elliot's opinion as the correct approach in determining the loss sustained by the applicant by the termination of the agency agreement. 105 I say that because, in my view, it is not possible for the applicant to unequivocally assert that the value of his business on an ongoing basis for the purposes of sale up to and including years 2002, 2003 and 2004 included the 'value' of the agency agreement to his business. The agency agreement was not the applicants to sell. The right to grant and withdraw the agency agreement lay with the respondent at all times subject always to good faith and proper commercial considerations. True it is, the applicant had sub-contracted part of his agency agreement but the primary agreement underpinning the agency lay at all times between the applicant and the respondent. In short, the respondent saw the applicant as pivotal to the agency agreement. 106 If the applicant wanted to 'sell' the agency agreement outright, howsoever structured, it could only have been done, as Mr Prosser confirmed, with the knowledge and consent of the respondent. 107 Given the above, there has to be, in my view, a distinction made between the value of the agency agreement the applicant had with the respondent and the value of the applicant's business standing alone from the agency agreement. There is certainly evidence to show the applicant earned income from sources other than the agency agreement during that period. True it is they represented smaller proportions of his overall income but, nevertheless, it cannot be said that the applicant's business was, in toto, his agency agreement with the respondent. 108 In my view, the applicant should be compensated on the basis of notice for any loss arising from the actions of the respondent in terminating the agency agreement in the circumstances and the way that it did. In taking that approach, the applicant is entitled to be compensated on the basis of the loss that the agency agreement represented to his business. In that respect, I accept the opinion of Mr Elliot that 'if Mr Trenter suffered a loss as a result of the termination of the Australian Air Express agency agreement, it was a loss of the value of the business at that time. This loss is properly assessed by valuing that part of Mark Trenter's business that ceased as a result of the termination of the agency agreement.' 109 I am satisfied that the part of his business the applicant lost as a result of the actions of the respondent in terminating the agency agreement in the way it did was the loss of income attributable to freight. In that respect, I agree with the evidence of Mr Elliot when he said, in assessing the applicant's maintainable profits attributable to freight in the 2001 year, if the applicant could not do the respondent's freight work, he also could not do the freight work attributable to Tamax. It was on that basis that he did his calculations. As he said: If you lose the main part of your freight business you could not, I don't think you could keep the other part going. So I made sure that I took all the freight business and calculated my loss in respect of the freight business. 110 In my view, that approach is the correct approach in calculating the loss the applicant sustained as a result of the termination by the respondent of the agency agreement at the time and in the circumstances that it did. 111 On Mr Elliot's calculations in annexure E, and assuming those figures to be correct, the applicant's maintainable profits attributable to freight annualised for the year 2001 shows an overall net profit of $86,794.00 which is based on a percentage of freight sales of 76.51 per cent on a freight income of $291,575.00. 112 Any discrepancy between the figure attributed to freight income in annexure E and the figures attributed to 'other freight' in the income for the years 1999, 2000 and 2001 in annexure D of Mr Elliott's report was explained by Mr Elliot on the basis that 'in other freight there are two components, one is Tamax and the other furniture'. 113 Given the approach I believe should be taken in assessing the applicant's loss, I return to the issue as to what, in all the circumstances, would be a reasonable period of notice. 114 The agency agreement between the parties was a commercial agreement for an indefinite period. There was no provision, written or oral, for termination of the agreement. 115 The issue of notice in commercial agreements was considered in some detail by Boland J in Gough & Gilmour Holdings Pty Limited and ors v Caterpillar of Australia Limited and anor (No. 11) 2002 NSWIRComm 354 at [743] to [757]. In doing so, his Honour made reference to the decision of the Court of Appeal in Crawford Fitting Co v Sydney Valve & Fitting Pty Limited (1988) 14 NSWLR 438. That matter has certain factual similarities with the current proceedings in that Sydney Valve & Fittings had been appointed exclusive distributor of Crawford Products in New South Wales between 1969 and 1984. In March 1984, Crawford gave Sydney Valve six months notice of termination of the agreements. At first instance, the notice period was extended to two years. On appeal, by majority, it was reduced to six months. In that matter, McHugh JA at 444 made the following observations as to the relevant principles to apply in order to determine a reasonable notice period in commercial transactions: ... the reasonableness of the period of notice depends upon the circumstances existing when the notice is given.

When a contract is terminable on reasonable notice, the period of notice must be sufficiently long to enable the recipient to deploy his labour and equipment in alternative employment, to carry out his commitments, to bring current negotiations to fruition and to wind up the association in a businesslike manner. 116 Further, at 448 his Honour said: If, during the contract, a party, acting within the scope of the agreement, engages in extraordinary expenditure or effort, that factor must be taken into account in determining the reasonableness of any notice given. The weight to be given to the factor will vary from case to case and the particular circumstances. 117 In these proceedings, there are a number of factors I consider relevant to what would, given the facts and circumstances, be considered reasonable notice. 118 In the first instance, it is difficult to escape the conclusion that the respondent deliberately precipitated the dispute that arose between it and the applicant over the 'per consignment' as distinct from the 'per item' rate in order to force the applicant to accept the lower rate and thereby advantage the respondent's financial bottom line in the conduct of it's Port Macquarie agency. The unilateral way in which it chose to do that via the precipitate and arbitrary behaviour of Mr Giannopoulos was clearly contrary to good faith and fair dealing in it's commercial operations. 119 Second, when the applicant refused to accept the respondent's unilateral action to reduce the charging rate in the way it did, the respondent took further steps that could only be designed to undermine it's relationship with the applicant to the applicant's ultimate detriment. That is, it opened the agency to tender and set about, unbeknown to the applicant, to liaising with the applicant's sub-contractors in order to set up an agreement with them to award them the agency agreement in place of the applicant. The respondent put all those arrangements in place and then, without warning, as earlier detailed, simply 'pulled the plug' on the applicant when he turned up at the airport to unload a consignment of freight on 6 April 2001. Overall, the respondent's actions, as I have found them to be, are deserving of the utmost criticism. 120 Further, there is no evidence to suggest that the work undertaken by the applicant for the respondent in the course of the agency agreement was anything other than of a high standard. There is considerable uncontradicted evidence from the applicant as to the high regard in which he was held by the respondent as it's agent. As he stated: I was complimented in relation to my service standard on numerous occasions during the course of my relationship with the respondent. 121 Additionally, there seems little doubt the applicant applied himself to what he perceived was his obligation under the agency agreement, that being, providing a reliable and efficient service to the respondent. A good example of that, in my view, was the efforts undertaken by the applicant to secure land adjacent to the Port Macquarie Airport and then construct a hangar in order to facilitate the easier storage and sorting of the respondent's freight. All this was done at his own expense, encouraged at all times by officers of the respondent. Such an undertaking may, in my view, be properly characterised as 'extraordinary expenditure and effort' undertaken by the applicant as contemplated by McHugh JA in Crawford Fitting v Sydney Valve. It is a factor of considerable weight, in my view, in determining a reasonable notice period. 122 The work undertaken by the applicant as part of the agency agreement, when taken together with the Tamax freight work, constituted close to 80 per cent of his income. I accept the termination of the agency agreement by the respondent, in the circumstances I have detailed, would have had a profound impact on the applicant's business in the short to medium term. 123 The applicant says, as a result of the respondent's actions, he had to 'walk away' from his business - inferring, in my view, that his business, as distinct from the agency agreement, also came to an end. That is not the case. What the applicant did was to divert his business away from freight into furniture removal in order to mitigate his loss. That change in direction was not without financial cost. Comparison of the applicant's trading revenue, particularly over the 2000, 2001 and 2002 years shows the turnaround in the applicant's income as well as the percentage of the applicant's income attributable to furniture as distinct from air freight (including Tamax). That analysis and comparison is as follows:

2000 9 months to 31/3/01 3 months to 30/6/01 2001 2002 (full year) Airfreight 243,295 62.2% 193,902 67.8% -6,082 -27.8% 187,820 61.0% Furniture 28,522 7.3% 30,463 10.6% 19,387 88.9% 49,850 16.2% 143,840 92.0% Tamax 28,235 7.2% 19,999 7.0% 606 2.7% 20,605 6.7% Sales -other 90,952 23.3% 41,528 14.6% 7,907 36.2% 49,435 16.1% 12,488 8.0%

124 As the above figures show, the applicant's income from furniture in the full financial year of 2002 increased considerably when compared to his income from that area of activity in the financial years 2000 and 2001. Nevertheless, the applicant still sustained a significant overall drop in income when compared with the applicant's maintainable income attributed solely to freight annualised by Mr Elliott in annexure E to his report. That shows the applicant's freight income for the 2001 year to be $291,575 before expenses. The applicant's income from furniture removal for the 2002 year, as the above figures show, was $143,840. 125 As part of losing the agency agreement, the applicant asserted he had been required to dispose of a number of items of equipment at a loss. He stated: As a result of losing the respondent's agency I had a number of items of equipment and vehicles which were no longer of any use to me. I sold two motor vehicles, a truck, a courier van and a forklift. Some of those items I had purchased on lease or hire purchase and I could no longer afford the repayments. … Because my commitments did not cease on the respondent terminating my agency (but my income was greatly reduced because of it) I was in desperate financial circumstances for a period of time. As a result I could not hold out for the best price available for the various items which I sold. 126 According to the report of Mr McGeoch, the losses sustained by the applicant on the disposal of redundant assets was $22,224. That amount was calculated as follows: Book Value Actual Proceeds Loss Motor Vehicles - Trucks 34,654 19,363 (15,291) Fork Lift 7,651 7,273 (378) Office Equipment Special Printer 795 Office Copier 1,339 Office Fax & Radio Network 1,318 Office Furniture & Lighting 1,204 Computer 933 Total Office Equipment 5,589 250 (5,339) Radio Transceiver Equipment 1,466 250 (1,216) Prepaid Air Express Satchels 390 390 - Total 49,750 27,526 (22,224)

127 In cross examination, Mr McGeoch stated that the book value figures in the above schedule had been given to him by the applicant's accountant. There was no independent verification of those figures. 128 Mr Elliott's opinion as to this aspect of the applicant's loss was: I have been unable to confirm the amount of loss suffered by Mr Trenter as documents on sale and purchase of many of the items have not been made available to me. The only documentation made available is the sale document for 3 motor vehicles and a depreciation schedule. The depreciation schedule fails to include details of one of the motor vehicles and a printer included in Mr McGeoch's calculations. 129 In his cross examination, the applicant conceded he had used the trucks from the freight business as trade-ins on a truck for furniture removal work. His evidence as to this issue was as follows: Q. Of volume 1, I'm sorry, page 383. That's a letter to you from "the big truck people" of Brown & Hurley of 24 May 2001? A. Yes. Q. That is a letter about six weeks after the termination of your agency with the respondent, isn't it? A. Yes. Q. And that was a quote to you for the purchase of a new truck for the purposes of work in your furniture business, wasn't it? A. Yes. Q. The quote took into account trade-ins on three vehicles, is that not right? A. Yes. Q. Were those the three vehicles you used in works you had done for the respondent? A. Yes.

Q. And what you were putting forward was using vehicles that had been involved in the work that you did for the respondent for the purposes of purchasing a truck to do furniture removal work? A. Yes. Q. Did you go ahead with this purchase? A. Yes. 130 Reference to the quotation from Brown & Hurley discloses that the applicant traded in three vehicles towards the purchase of a Hino van for his furniture removal work. He obtained a trade-in of $21,300 for the three vehicles, leaving him a balance of $29,350 towards the purchase of the new truck. 131 Apart from the above and the items identified in Mr MeGeoch's report, there is no independent evidence to rely upon in relation to the assorted items of office equipment claimed by the applicant in relation to the disposal of redundant assets. I am not persuaded that any provision should be made for such items given that, as I understand it, the applicant continued in business after the termination of the agency agreement albeit predominantly in furniture removal. 132 The trade-in of second hand and purchase of new vehicle(s) undertaken by the applicant following the termination of the agency agreement is understandable. I accept such a change of vehicles was necessary and, as a result, the applicant would have incurred additional expense flowing directly as a consequence of the respondent's actions. 133 I am somewhat at a loss in being able to identify the precise extent of the applicant's loss arising from the vehicle transactions undertaken. This is particularly so given the conflicting evidence of Mr McGeoch and Mr Elliott on this issue and given that the 'book value' of the vehicles identified by Mr McGeoch was a composite figure given to him by the applicant's accountant which has not been independently sourced for the purposes of his report. 134 There is, however, the quotation from Brown & Hurley of 15 May 2001 which the applicant said he proceeded with which left the applicant with a shortfall of funds for a new furniture removal truck of $29,350.00. I am satisfied the applicant used that vehicle to generate income and to assist in mitigating his loss arising from the termination of the agency agreement. 135 In accepting as I do that the applicant was required to find additional funds to purchase the truck he required in May 2001 in the circumstances and for the reasons he did, I am satisfied that any money order made should include a component as compensation for his losses in relation to the vehicle transactions. 136 Having regard to all of the circumstances surrounding the contractual unfairness I have found and what this represented to the applicant, the contract should be varied to correct the unfairness I have found. That is, the contract is to be varied to provide for a notice period of six months and a money order in lieu thereof. The six months notice period is to date from 6 April 2001 which is the date on which the respondent took the steps it did to summarily terminate the agency agreement which, in all the circumstances, I have found to be unfair. The money order for that notice period should be based on the approach set out by Mr Elliot in annexure E to his report where he identifies the maintainable profits of the applicant's business attributable to freight, including the income earned from Tamax freight for 2001 annualised to 30 June 2001. 137 Further, such money order should include an amount to represent the monies owed to the applicant for freight delivered or collected on behalf of the respondent between the period of 14 November 2000 up to an including 6 April 2001 charged at the rate relied upon by the applicant up to that time. That amount, I understand, is an amount of $12,283.83 represented by amounts deducted by the respondent from invoices submitted by the applicant during that time. 138 Doing the best I can on the material before me and relying on the Brown & Hurley quotation showing a shortfall of $29,350 which the applicant had to find, such money order should also include an amount of $12,000 as loss occasioned to the applicant in relation to vehicle transactions arising from the respondent's actions in summarily terminating the agency agreement which, in all the circumstances, I have found to be unfair. 139 I also order the respondent to pay interest in accordance with the relevant provisions of the Supreme Court Act 1970 and that the respondent pay the applicant's costs of the proceedings as agreed or assessed in accordance with the Rules of the Court. 140 The parties are requested to prepare orders to reflect the findings I have made and file same within 28 days from the date of judgment.

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

At a glance

Court

Decision date

Before

Source

Judgment (45 paragraphs)

Parties

Cases Cited (1)

Cited By (3)