Mushroom Composters v IS & DE Robertson Family Trust

Supreme Court of NSW|2014-03-04|Before: McDougall J

Judgment 1HIS HONOUR: The plaintiff (Composters) manufactures and sells mushroom compost. It needs assured supplies of substantial quantities of straw. For a time, the defendant (Robertson) was Composters' principal supplier of straw. The parties fell out. Each accuses the other of breach of what it says was the contract between them. 2The "season" for harvesting and baling straw extends from about December in one calendar year to April in the next. Thus, straw seasons are referred to as, for example, "the 2008/2009 season". 3Composters says that it entered into a straw supply contract with Robertson for the 2008/2009 season, and another for the 2009/2010 season. Robertson says that the contract was a 4 year contract, to embrace both those seasons and the two following seasons. 4Composters says that it was not contractually obliged to take straw from Robertson after the 2009/2010 season. Further, it says, Robertson breached the contracts made (on Composters' case) for the 2008/2009 and 2009/2010 seasons in various ways. By contrast, Robertson says that Composters repudiated what Robertson says was the four year contract and its obligations thereunder, and that Robertson accepted that repudiation as discharging the contract. 5Composters says that the price per tonne payable by it to Robertson comprised two elements. The first was what Composters calls a "royalty", of $60.00 per tonne. The second was a "baling fee", initially of $80.00 per tonne for the 2008/2009 season, and [to be increased according to movements in the consumer price index (CPI) thereafter.] On Composters' case, the royalty payment represented the amount payable by Robertson to farmers to secure the right to harvest and bale their straw, and to sell the baled straw on its own account. 6Robertson says that the price was simply the overall amount per tonne. It accepts that the price was calculated by reference to the two elements of royalty (I use this form for convenience) and baling fee. The difference between its position and Composters' is as to whether Robertson is entitled to keep, for its own benefit, the amount (if any) by which the royalty exceeds the amount actually paid or allowed to farmers. 7The parties agreed that, at least for the 2008/2009 and 2009/2010 seasons, the royalty figure of $60.00 per tonne was payable in advance by six monthly instalments each of $100,000.00 (from which it will be seen that each contract was for the supply of 10,000 tonnes of straw overall).

The real issues in dispute 8The parties agreed that, on the facts that I have briefly summarised them, the real issues were as stated by Mr Katekar of Counsel, who appeared for Robertson. I set out those issues, excluding one relating to misleading or deceptive conduct (which was abandoned late in the hearing): 1. What was the term of the agreement: 4 years (2008/2009 to 2011/2012) or 1 year for each of 2008/2009 and 2009/2010? In particular, was it agreed that: (a) 10,000 tonnes of baled straw was required to be supplied for each of the 4 years? (b) The pricing regime of $60 plus GST pre-payment plus $83.60 per tonne plus GST, with an annual CPI increase after January 2008, applied for each of the 4 years? 2. Was the $60 per tonne pre-payment repayable by the defendant to the extent that the defendant did not make cash payments to farmers for that full amount? 3. Did the plaintiff repudiate the agreement (as alleged by the defendant)? 4. If questions 1 to 3 are resolved in favour of the defendant, what is the quantum of the defendant's loss (under the cross claim)? 5. If there was no 4-year agreement but there was an agreement for the 2009/2010 season only, was that agreement breached by Mushroom Composters and if so, what damages has Robertson suffered? 6. If questions 1 to 3 are resolved in favour of the plaintiff, what is the quantum of the plaintiff's loss (in addition to 7 to 10 below)? 7. Whose obligation was it to set up the Gilgandra Depot (the alleged "Gilgandra Depot Term")? In this regard: (a) if it was the plaintiff's obligation, what, if any, liability does the defendant have to the plaintiff for freight from north of the Tahrone turnoff on the Castlereagh Highway (the alleged "Additional Freight Term")? (b) if it was the defendant's obligation, what, if any, liability does the defendant have to the plaintiff under the Additional Freight Term, or for weather damage to straw which otherwise would have been deposited at that depot? 8. Was there any obligation on the defendant to bear the cost of freight further than 430 kilometres from the plaintiff's premises at Singleton (the alleged "Long Distance Freight Term")? If so, what, if any, liability does the defendant have to the plaintiff in this regard? 9. Was there any obligation on the defendant to meet particular average bale weights (the alleged "Baling Term")? If so, what, if any, liability does the defendant have to the plaintiff for its alleged failure to meet those average bale weights. 10. Was there any obligation on the defendant to load the trucks in a particular configuration to maximise loading capacity (the alleged "Trucking Term")? If so, what, if any, liability does the defendant have to the plaintiff in this regard?

The witnesses in the case 9The principal witness called by Composters was its General Manager, Dr Geoffrey Martin. Composters also called a director, Mr Derek Marland, who had been involved, although to a lesser extent than Dr Martin, in some of the relevant events and meetings, and two less significant witnesses, Mr Michael McCulloch (a haulage contractor) and Mr Rod Brines (a driver employed by Mr McCulloch's company). 10The principal witnesses called by Robertson were its directors and principals, Mr Ian Robertson and Mrs Donna Robertson. Robertson, too, called some less significant witnesses. They included farmers who supplied straw (such as Mr James Davidson) and others who had peripheral involvement in the relevant events (including a Mr Norman Moeris, whose property outside Gilgandra was suggested to be an appropriate location for a depot at which straw baled for Composters could be stored). 11There were significant conflicts in the evidence, in particular relating to conversations which were said to be relevant, one way or another, to the contractual arrangements into which the parties entered, and on breach. In particular, there was a conflict between the evidence of Dr Martin on the one hand and Mr and Mrs Robertson on the other. 12In general, to the extent that there is a conflict, I prefer the evidence given by Mr and Mrs Robertson to that given by Dr Martin. I say that for a number of reasons. 13I start by observing that I do not think that either Dr Martin (with a few limited exceptions) or Mr and Mrs Robertson sought to mislead the Court, or to give evidence that was knowingly untrue. However, each could be seen to have a significant interest in the outcome of the proceedings. 14Dr Martin was responsible for the conduct of all aspects of Composters' operations, subject to the overall supervision of the Board. (I interpolate that if the attitude evinced by Mr Marland in the witness box is any guide, the Board's oversight could best be described as light; non-existent might be another way of putting it.) An essential part of Composters' business, and one for which Dr Martin took personal responsibility, was the procurement of reliable supplies of straw. If Robertson is right in the case it seeks to make out, the contractual arrangements into which Dr Martin caused Composters to enter became disadvantageous to Composters in a substantial way. 15So far as Mr and Mrs Robertson are concerned, the financial consequences of their dealings with Composters have been disastrous. They have lost their contracting and baling business. Their equipment has been sold. Mr Robertson has been forced to seek work as a truck driver in the mining industry in Western Australia. 16Thus, I accept, the evidence of each of the principal witnesses must be assessed with care. 17Although I acknowledge that demeanour is, at best, an unsure guide to truth, there were aspects of Dr Martin's demeanour in the witness box that were not impressive. He was, in general, slow to make concessions where (as subsequent evidence showed) concessions should properly have been made. For example, although it was Composters' case (and Dr Martin's evidence) that it (and he) believed at all times that the royalty figure of $60.00 per tonne was in fact demanded by and paid in cash to farmers, it became clear that (as Mr Robertson in particular said), the practice was for Mr Robertson to do a deal with farmers - for example, harvesting their crop at no cost to them, in exchange for the right to cut and bale straw. Dr Martin conceded, not without some reluctance, that he had become aware of these "barter" arrangements during the course of performance of the contracts. In my view, he was aware of them at all material times, including when the, or the first relevant, contract was made. 18Again, there was a question as to whether the different kinds of bales that Robertson was to provide were to be available at all farms, or only at selected farms, in particular areas. Dr Martin said that he expected that Robertson would provide (and he thought that Robertson was required to provide) bales of both dimensions at each farm, to facilitate loading. That would require Robertson to use two different kinds of baler on each farm since (as Dr Martin was well aware) one baler could not produce two different sizes of bale. That would have been totally impractical, as in my view Dr Martin was well aware. 19It is unrealistic to think that a contractor in the position of Robertson would have agreed to such a requirement, particularly where, as was the case at least for the 2008/2009 contract, the circumstances in which the contract was made gave the contractor the upper hand in negotiations. South Eastern Australia was still in the grip of a very severe drought at that time; the demand for straw was high; supplies were short; and prices were at record high levels. Further, in this respect, Dr Martin's evidence was critically undermined both by the evidence given by Mr McCulloch and by the failure of Composters to lead evidence on the same topic from Mr Brines, who on any view had been a party to a subsequent discussion in which the relevant arrangements were discussed. 20Mr and Mrs Robertson impressed me as witnesses who sought to tell the truth, notwithstanding their real and evident sense of grievance at the way (in their view of things) their company had been treated by Composters. Further, in a number of respects, there was significant corroboration for Mr Robertson's evidence: including that Mrs Robertson was a party to, and gave evidence corroborative of, many of the conversations that were in dispute; and from contemporaneous notes that she made. 21I should note that Mr Sirtes of Senior Counsel, who appeared with Mr Duggan of Counsel for Composters, sought to impugn the evidence of Mrs Robertson by pointing out what he said were very significant similarities between her principal affidavit and that of her husband. There is no doubt that those similarities exist. They extend not only to matters of form and structure but also, in at least one case, to their accounts of conversations. 22Mr Sirtes started to cross-examine Mrs Robertson on one such similarity. It turned out that the conversation was one which had taken place by telephone, in which Mr and Mrs Robertson had each participated, using different extensions within their house. Mrs Robertson had made notes of the conversation. I have no doubt that both she and Mr Robertson had relied on those notes for the purposes of refreshing their recollections before swearing their affidavits. 23In circumstances where there was an innocent explanation for the similarity, and in particular taking into account that no challenge had been put to Mr Robertson based on the asserted similarities between his affidavit and that of his wife, I took the view that the cross-examination of Mrs Robertson on the particular paragraph was prejudicial and would be likely to result in an undue waste of time, and thus stopped it. 24I made it clear that my ruling was not of universal application. However, although Mr Sirtes asserted that there were other conversations where the same innocent explanation was not available (and in a table to his written closing submissions, Mr Sirtes identified the suggested correspondences between the two affidavits), no further attempt was made to cross-examine Mrs Robertson on those similarities. Nor was any application made to recall Mr Robertson to put the relevant matters to him. 25In those circumstances, I do not take into account, in a way adverse to the credibility of Mr or Mrs Robertson, the correspondences between their principal affidavits to which Mr Sirtes pointed. 26Further, in at least some instances, the evidence given by Mr and Mrs Robertson was supported either by contemporaneous notes or by other contemporaneous records. 27Again, in important respects, the evidence given by Mr and Mrs Robertson seems to me to coincide more closely with the probabilities, viewed objectively, than does that of Dr Martin. As I have observed already in relation to the location of the different sizes of bale, Dr Martin's evidence is commercially and objectively implausible, whereas that given by Mr and Mrs Robertson is, commercially and objectively, entirely plausible. 28Finally, for present purposes, the evidence given by Mr and Mrs Robertson received some support, although for the most part on peripheral rather than central matters, from the evidence given by other witnesses called on their company's behalf. There is no such support for Dr Martin's evidence. On the contrary, as I have noticed, in respect of one important conversation, his evidence received no support from those called to corroborate it. 29Mr Marland might have been expected to provide some support for the evidence of Dr Martin. However, Mr Marland was not an impressive witness. His evidence in chief was non-specific to the point of blandness. In the witness box, Mr Marland professed non-recollection of almost everything that was put to him, including some things that, one might think, he should have recalled. For example, he was questioned on a number of board meetings, and on reports from Dr Martin that had been provided to board members before the meeting. Mr Marland said (and I can accept) that he had no particular recollection of the meetings or of the contents of Dr Martin's reports. However, that memory did not improve even when Mr Marland was shown the relevant documents. Further, Mr Marland was unable to recall even as a matter of general practice whether (for example) he would normally read Dr Martin's reports before the board meetings, in anticipation of which they were submitted. 30In general, I do not give any substantial weight to Mr Marland's evidence. 31There is no need to deal with the other witnesses of fact who were called. To the extent that it is relevant, I shall discuss their evidence in the context of the issues to which it is relevant.

First issue: the contract or contracts The pleaded cases 32To understand the way in which the arguments developed, it is necessary to look at the way in which each of the parties pleaded its case. The essential difference between the parties on this issue is whether a letter of 25 January 2008 sent by Composters to Robertson, under which Composters agreed "in principal [sic]" to the supply of 10,000 tonnes of wheaten straw per annum for a period of four years (i.e., four seasons), had contractual effect. 33The case pleaded by Composters was that, before the start of the 2008/2009 season, it made a contract for that season with Robertson, which contract was partly written and partly oral. The written part of the contract was a "heads of agreement" sent by Composters to Robertson as an attachment to an email dated 22 October 2008. The sending of that document followed, and it purported to summarise, conversations between Dr Martin and Mr and Mrs Robertson in the preceding weeks. 34Composters pleads that the terms of the heads of agreement were accepted by conduct when Robertson issued invoices for the royalty prepayments for which it provided (that is to say, six prepayments of $100,000.00 per month, commencing in December 2008), and accepted payment of those invoices. 35The oral terms of the agreement are said to have been agreed in the preceding discussions. As a matter of background: those discussions started when Dr Martin and Mr Robertson went on a road trip, in which Mr Robertson showed Dr Martin various farms from which he proposed to harvest and bale straw. Following that road trip, Dr Martin stayed with the Robertsons overnight and they continued their discussions. 36Thus, even on Composters' pleaded case, the heads of agreement supplemented, rather than superseded, the preceding discussions. And on that pleaded case, the letter of 25 January 2008 formed no part of the contract that was made. 37Composters pleads that the 2009/2010 contract arose from conduct. The particularised conduct is Robertson's issuing of invoices for the monthly prepayments of royalties (again, $100,000.00 per month, commencing in December, although of 2009) and the payment of those invoices. Composters pleads that there were implied terms of the 2009/2010 contract that the oral and written terms of the 2008/2009 contract would apply to it. 38It is convenient to note at this point three particular pleaded terms of the two agreements on which Composters relied. The first was called "the additional freight term". It derives from numbered paragraph 7 of the heads of agreement, which states: For straw uplifted north of the Tahrone turn-off on the Castlereagh Highway Ian Robertson will bear the extra freight cost involved. 39It is not necessary at this stage to do more than note that Robertson accepts that this term had been agreed. 40The second alleged term was called "the long distance freight term". That is said to be either something agreed orally in the discussions that preceded the sending of the heads of agreement or, alternatively, to be an implied term. It is to the effect that Robertson would bear the additional freight cost of any straw that was located more than 430km from Composters' premises at Singleton. Robertson denies that this was a term of the (or any) contract. 41The third alleged term was called "the Gilgandra depot term". That derives from numbered paragraph 8 of the heads of agreement, which states: Ian Robertson will haul straw from the Come by Chance area to a depot in Gilgandra. Straw uplifted from Gilgandra will bear an additional charge for freight from the Tahrone turn-off to Gilgandra. Straw uplifted from Gilgandra will be charged at $167.80 per tonne. Base price plus $24.20 freight. 42Robertson accepts that this term, so worded, was discussed and agreed. 43Composters pleads that the Gilgandra depot term, either on its proper construction or by necessary implication, required Robertson to construct or make available a depot in the Gilgandra area at which straw hauled by it for Composters could be stored. Alternatively, Composters says that the term (including the obligation on Robertson to construct or make available a depot) was agreed in the discussions that preceded the sending of the heads of agreement. 44Robertson agrees that a depot at Gilgandra was discussed. However, it denies that it was required to establish the depot. It says that the discussions were to the effect that Composters would establish the depot. Robertson accepts that, if a depot were made available and if it did haul straw there, it would be entitled to an extra payment. That extra payment would reflect the cost saving to Composters of having the straw available at Gilgandra rather than from a point further distant from Singleton. 45Robertson pleads (in its defence and in its cross-claim) that there was one contract (the four year supply contract), for a term of four years. The contract is pleaded as one that was partly written and partly oral. The written component comprises the letter of 25 January 2008 and the heads of agreement. The oral component comprises conversations between Dr Martin and Mr and Mrs Robertson in January 2008 and from there through to October 2008. 46Robertson pleads various terms of the contract that it alleges. Of particular relevance, it pleads that: (1) the contract was for a period of four years commencing with the 2008/2009 season; (2) the price per tonne would be $143.60 for the first season, with the baling charge ($83.60 per tonne for that season) to be adjusted annually thereafter in accordance with movements in the CPI; (3) Composters would prepay $60.00 per tonne, at the rate of $100,000.00 per month, for each month from December to May of the relevant season; and (4) the balance of the price would be paid upon receipt of the straw at Composters' premises in Singleton. 47Although no express or implied term to this effect is pleaded, Robertson conducted its case on the additional basis that there were (presumably implied) terms of the contract that: (1) Composters would collect straw baled for it either during the currency of the straw season or thereafter, and before the commencement of the next season; and (2) once straw had been harvested and baled for Composters, and Composters had been informed that the straw was ready for collection (with Robertson giving Composters details of the places at which and quantities in which baled straw was located), the baled straw was at Composters' risk. 48Mr Sirtes submitted that it was not open to Robertson to conduct its case this way: in particular, as to the first of the suggested implied terms. However, it does not seem to me that there is any prejudice to Composters in dealing with the case on the basis that these implied terms were in issue, as though they had been pleaded. 49Mr Sirtes suggested, somewhat faintly, that it might have been open to his client to lead evidence on the point. Whilst I accept that at the level of principle, the reality seems to me to be that the case for implication stands or falls upon a consideration of all relevant matters of context and dealings, and of the relevant documents. The parties have had ample opportunity to put on such evidence as they wished in relation to those matters, and have taken full advantage of that opportunity. 50Having regard to the mass of the evidence, I am confident that the Court is as fully informed as ever it is likely to be, in the context of adversary litigation, as to the facts and circumstances against which the question of implication is to be decided. Chronology of events 51In what follows, I deal with the events leading up to the formation of the contract that each party contends was made prior to the commencement of the 2008/2009 season, and with some significant events thereafter. To the extent that it is necessary, I set out my findings where the evidence differs in any marked and material way. 52As I have said, straw is an important element in the manufacture of mushroom compost. Wheaten straw, which was the subject of the parties' dealings, is the particular kind of straw with which I am concerned. The evidence suggests that straw comprises between 35% and 40% by weight of the finished mushroom compost product. 53Composters' operations were conducted at Singleton. Straw is generally available in the central western region of New South Wales. The areas from which straw was harvested for supply to Composters ranged from Walgett in the north to around Canowindra or Cowra in the south. Gilgandra is approximately at the centre of that region. (It seems that Composters also procured straw from supplies at, or who obtained it from, the Griffith region, but that can be put to one side.) 54Freight costs were substantial. For obvious reasons, Dr Martin wished to minimise them. Where straw was available from what might be called the central area (in broad terms, the area bounded by Dunedoo, Gilgandra, Narromine and Peak Hill), haulage costs would be lower. The further north that straw was procured, the greater the haulage costs would be. At all material times, the price charged to Composters for straw was "ex farm". In general, transport of the straw from the farm to Singleton was arranged by Composters, at its own expense. 55Robertson had supplied straw to Composters over the years 1996 to 2004, in quantities that varied (leaving aside the first year) from 2500 tonnes to 7200 tonnes annually. For a while after 2004, Composters procured its straw from a Mr Steve Keir. Apparently, Mr Keir supplied the straw ex farm, and Composters arranged for its collection and transport to Singleton. On 10 October 2007, Mr Keir advised Dr Martin (according to a board report of November 2007) "that unless he could transport our straw he would not supply". That occurred at a time when the State was in the grip of a drought. Straw was in short supply. There were numerous competing users, including graziers who were desperate to feed their remaining livestock. 56Dr Martin contacted the Robertsons and arranged for their company to supply 7000 tonnes of baled straw for the 2007/2008 season. 57According to the Robertsons, it was while straw was being cut and baled for Composters that they began to discuss, with Dr Martin and Mr Marland, the possibility of entering into a longer-term contract for the supply of straw. The records of Composters show that, given the drought, the shortage of straw, and its pressing need for continuity of supply (in excess of 12,000 tonnes per annum), it was extremely anxious to find a reliable source of supply. 58There is a practical matter that requires a little explanation. Straw was baled in two different sizes, which are described by their imperial measurements in feet: 8x4x4, and 8x4x3. It was common ground, and everyone knew at all material times, that the same baler could not produce both 8x4x4 and 8x4x3 bales. Obviously, assuming that the straw is of the same density and is compacted in the same way, an 8x4x4 bale will weigh more than an 8x4x3 bale. 59In or at some time before 2007, the then Roads and Traffic Authority (RTA) amended the regulations relating to the carriage of goods. As a result, it was not permissible for (among other things) baled straw to overhang the sides of the vehicle in or on which it was transported. 60To achieve optimum loading (that is to say, to fit as much straw as possible onto a truck or trailer, to maximise its carrying capacity), a slightly different kind of bale, known as "8x4x4 modified", began to be used. As I understand it, one of the 4 foot sides was reduced by about 3 inches. The result was that the 8x4x4 modified bales could be stacked wholly within the confines of the carrying vehicle. To do that, it was necessary that existing 8x4x4 balers be modified. 61It also appeared to be common ground that, for a truck or trailer to be loaded to maximum capacity, it was necessary to use a combination of 8x4x4 (it is generally unnecessary to continue to repeat "modified") and 8x4x3 bales. 62Mr and Mrs Robertson had discussions with Dr Martin in January 2008, before Composters sent Robertson the letter of 25 January 2008. In the course of those discussions, they talked about entering into a longer term agreement. Mrs Robertson listened in by telephone to one of those discussions, using another extension in the Robertsons' house. Mr Robertson said in effect that Robertson would like to enter into a "longer term contract... of say four years". The Robertsons say, and I find, that Dr Martin said that if that were to happen, it would "be conditional on you baling mostly modified 8x4x4 bales and some 8x4x3 bales so we can comply with the RTA regulations and keep freight to a minimum". 63The Robertsons say, and again I find, that Mr Robertson replied in effect that to make it worthwhile for Robertson to do so, and to enable it to go out and buy the necessary machinery, Robertson would need a four year contract to supply 10,000 tonnes per year. 64Dr Martin denied that there was discussion of purchasing specific items of machinery. Nonetheless, I find, he was told, and knew as a result, that to comply with Composters' requirements for 10,000 tonnes comprising mainly 8x4x4 modified bales, Robertson would need to acquire new machinery. I find, further, that Dr Martin was told, and thus understood, that Robertson said that his company would need a four year contract to justify the outlay on new machinery. 65Mr and Mrs Robertson each say that, in the course of a further conversation on 25 January 2008, Dr Martin said works to the effect: I'll send you a letter today confirming that four year contract so you can take it to the banks. 66I find that Dr Martin did say words to this effect. I find that he was aware not only that Robertson (or Mr and Mrs Robertson personally) needed to acquire new machinery, but also that they needed finance to enable it (or them) to do so. That, in my view, is the reason why Dr Martin caused Composters to send Robertson the letter of 25 January 2008. 67Mr Robertson said, further, that he told Dr Martin that the prepayment would mostly exceed the amount payable to farmers for the right to take and sell their straw, and was used more generally to fund the harvesting and baling operations. Mrs Robertson corroborated this evidence. Although Dr Marin denied that he was told these things, I find that he was. I prefer the evidence of Mr and Mrs Robertson to his on this point also. 68I should note that this is one area where it cannot be said that Mr and Mrs Robertson give evidence of the conversation in exactly corresponding terms. They differ to some extent, but are clear as to the central themes, as I have outlined them. To the extent that Dr Martin suggests that the conversation in essence was otherwise, I prefer the core or thrust of the Robertsons' version. 69Dr Martin then sent Robertson the letter of 25 January 2008. Since that letter is crucial to the case put by Robertson, I set it out in full (omitting only formal parts): RE: CONTRACT FOR SUPPLY OF WHEATEN STRAW Further to our telephone conversation of this morning I am able to agree in principal to your supplying 10 000 tonnes of wheaten straw per annum to our mushroom composting operation in Singleton. On the basis of current production this would amount to over 90% of our annual requirement. The contract would in the first instance be for a period of four years to commence with the 2008/9 season. The baled price is to be $80 per tonne on field, such price to be adjusted annually after the first season using a CPI index suitable to both parties. In terms of the farmers' royalty payment, a cost of $60 per tonne is anticipated, but if there is an over abundance of straw in one season, then it would be reasonable to expect that a proportion of the supply could command a lower royalty. Mushroom Composters is prepared to pay a proportion of the royalty payment at baling time and possibly the balance before the close of the financial year. Details of such pre payment arrangements are to be subject to further discussion. Mushroom Composters is the largest supplier of Phase 1 mushroom compost in NSW, producing 1 000 tonnes of compost per week which represents 20% of the total compost requirement used for commercial mushroom growing throughout Australia. Mushroom Composters is jointly owned by Powes' Mushrooms in Windsor and Gromor Enterprises Pty Ltd, owned by the Marland Family in Singleton. Both families have been engaged in mushroom growing since the 1950's and are well respected in the Australian mushroom industry. I understand that the Marlands use Westpac as their banker. I intend to visit you in early February when we can discuss this matter further and draw up a heads of agreement for the contract. 70Before moving on, I note that Mr Marland, through his family's company Gromor Enterprises, was both a half owner and a major customer of Composters. In addition, through the same company, Mr Marland supplied haulage services to Composters. His company, Gromor, and Mr McCulloch's company, McCulloch Bulk Haulage (MBH) were the entities that carted straw from the locations where Robertson had baled it to Composters' premises at Singleton. 71Mr and Mrs Robertson bought the new machinery in their own names, and in effect leased it to Robertson for use in its harvesting and baling business. They say, and I accept, that they used the letter of 25 January 2008 in support of their application for finance. 72There is a dispute between Dr Martin and Mr Robertson as to whether they discussed that part of the letter that referred to "the farmers' royalty payment". Mr Robertson says that he told Dr Martin that the payment was used not only to satisfy Robertson's obligations to farmers but also, in effect, to fund the operation of harvesting and baling the straw. That (Mr and Mrs Robertson say in their evidence) was necessary because Robertson incurred very substantial costs in that activity, but would not receive the baling fee until the straw was actually collected on behalf of Composters and delivered to its premises at Singleton. 73Taking into account not just this aspect of Mr Robertson's evidence but the material as a whole and the realities, objectively viewed, I find that Dr Martin was well aware, before the commencement of the 2008/2009 straw season, that Robertson did in fact need, and would use, the prepayment of $60.00 per tonne both to enable it to meet its obligations to farmers and to fund its harvesting and baling operation. 74Nothing much appears to have happened thereafter until about September or October 2008. Dr Martin expressed some concern at the high nitrogen levels in straw that was being delivered from the 2007/2008 season. Mr Robertson said, in effect, that he could supply straw from further north, in the area from Coonamble to Walgett. He and Dr Martin undertook the road trip to which I have referred at [35] above. 75Dr Martin was, understandably, concerned at the greater freight cost of hauling straw from that area to Singleton (compared, for example, to the cost of hauling straw from Narromine or Peak Hill). According to Mr Robertson, he and Dr Martin discussed this question during the road trip. One of the things they discussed was that a depot might be established at Gilgandra. Mr Robertson's evidence is that he said that, if Composters did this, he could haul straw from the Walgett area to Gilgandra by road train, thus minimising the cost of haulage for Composters. (Apparently, road trains are a more efficient way of hauling straw then the B Double vehicles used by Gromor and MBH, but the road trains could not operate all the way to Singleton.) 76Dr Martin agrees that there was discussion of setting up a depot at Gilgandra. However, he says, it was Mr Robertson who agreed to do this. 77I prefer Mr Robertson's account of this aspect of conversation, to the extent that it differs from Dr Martin's. There are three reasons. 78The first is that, in my view, Mr Robertson's account accords with the probabilities, regarded objectively. Robertson did not need a depot at Gilgandra, although, for the reasons given at [83] below, such a depot would be to Robertson's advantage. Its obligation was to cut and bale the straw, and to stack it on the farms for Composters' haulage contractors to collect. That exposed the straw to the risk of deterioration. Setting up a depot (under cover) at some central location such as Gilgandra would minimise the risk of deterioration, if (as Mr Robertson said he would do), Robertson hauled the straw from the farms to that depot. 79Conversely, it would be to Composters' advantage to have a relatively central depot where other suppliers could deliver straw. Although it was envisaged that Robertson would be Composters' principal supplier of straw, there can be no doubt that the parties contemplated that Robertson would obtain some straw from other suppliers. 80Thirdly, Mr Robertson's account is corroborated by Mrs Robertson's evidence of a discussion between the three of them at the Robertson's house when Dr Martin was staying there after the roadtrip. 81Mr Sirtes referred to Mr Robertson's conduct in searching for appropriate locations in and around Gilgandra where a depot might be established. Mr Sirtes submitted that it was inherently implausible that Mr Robertson would have so acted unless, as he submitted was the case, Robertson was obliged to establish the depot. 82I do not accept that submission. There is no doubt that Mr Robertson spent some time in looking at possible sites for a depot. He located what appears to have been a suitable site: a shed on Mr Moeris' farm. Mr Robertson reported this to Dr Martin. 83However, if a depot were established at Gilgandra, Robertson would also benefit. It would not be liable for freight costs incurred by Composters for straw hauled from north of the Tahrone turn-off. On the contrary, Robertson would derive extra income by hauling that straw to the depot. That having been said, there is no reason to think that these benefits would have outweighed the cost of establishing and maintaining the depot. 84In substance, I accept Mr Robertson's evidence on this point. I accept that he was looking for appropriate sites for Composters to establish a depot, and that he reported on those sites to Dr Martin. This aspect of Mr Robertson's evidence is corroborated by Mr Moeris, who said in substance that Mr Robertson told him the decision was up to Composters, and that it was likely that he (Mr Moeris) would hear from Composters in relation to the proposed depot. 85Dr Martin gives a somewhat different account of those discussions to Mr Robertson's or Mrs Robertson's. However, it is common ground that Dr Martin pointed out that the trucks used by Gromor were of different capacities and had different loading requirements, compared to those used by MBH. It is common ground also that Dr Martin pointed out the need for Robertson to make available both 8x4x4 bales and 8x4x3 bales. 86According to Mr and Mrs Robertson, Mr Robertson pointed out that he could not provide both bales at the one farm, because it was not economical to take two balers to one property. I find that Mr Robertson did say words to that effect. It was a matter of plain common sense. Dr Martin accepted that he knew at the time that different balers were needed to produce the different sized bales. It was manifestly impracticable (and uneconomic) for Robertson to transport two balers to every farm, and to produce 90% 8x4x4 bales and 10% 8x4x3 bales on each farm. 87There were two matters that were agreed. One was that Robertson would bear the cost of freight of straw "uplifted north of the Tahrone turn-off". Another was that, if Robertson hauled straw from north of the Tahrone turn-off to Gilgandra, it would be allowed an extra $24.20 for the freight charges. Both are found in the heads of agreement. 88Dr Martin appears to have been concerned not to bear any freight costs for straw that was collected more than 430 kms (by road) from Composters' premises at Singleton. Come by Chance and Walgett fall outside that distance. The Tahrone turn-off is located (by very rough scaling) about 20 kms north of Coonamble, on the way on Come by Chance and Walgett. It appears to be accepted that the Tahrone turn-off was 430 kms, by road, from Singleton. 89Mr Robertson accepts that his company agreed to bear that cost. He says that he did so because he thought that Composters would establish a depot at Gilgandra, and that he would haul the straw by road train to that depot, and be paid $24.20 per tonne for doing so. Thus, I do not see Mr Robertson's acceptance of the term as detracting from his insistence on the base price to be paid. 90Dr Martin said that it was discussed, and agreed, that if the bales were of such weight that the trucks (properly stacked) could not achieve the nominal weights set out in paragraph 6 of the heads of agreement (see at [100] below), Robertson would allow some discount. Mr and Mrs Robertson say that they did not do so. I prefer their evidence. There are a number of reasons for doing so. 91First, bale weights were beyond Robertson's control to a large extent, assuming that the straw was baled correctly. One variable was the quality of the straw. Another was its moisture content. 92Secondly, the baled weights would vary according to the length of time between the baling of the straw and its collection. If the straw dried out, or deteriorated, the bale weight would drop. Collection was a matter for Composters, not for Robertson. 93Thirdly, and obviously, the weight of any truck's load would depend on the ability of the driver to stack it effectively. Provided that Robertson made reasonably available, and in the correct ratio, both 8x4x4 and 8x4x3 bales, it was up to the truck driver to achieve the optimum loading. 94Fourthly, and to the extent that it is relevant, other contracts that Composters made with other straw suppliers provided for a target bale weight, but did not make it a term that the target should be achieved. I acknowledge, however, that the relevance of this particular matter may relate more to Composters' alternative submission that a term as to bale weights, or loading capacity, should be implied to give business efficacy to the contract. 95Fifthly, Robertson was to use new equipment to be purchased by Mr and Mrs Robertson. So far as Robertson was concerned, that equipment was untried. Mr Robertson (who appears to have done much of the work of harvesting and baling) did not know how the new machines would operate or how effective, or efficient, they would be. In those circumstances, it is inherently implausible that he would have agreed to a minimum weight condition without having some rational basis on which to be satisfied that (assuming the straw were of appropriate quality) his new and as yet unproven machinery could satisfy it. 96Finally, as the contract for the 2008/2009 season worked out (and also as the contract for the 2009/2010 worked out), Composters, through Dr Martin, was well aware that the Gromor and McCulloch Bulk trucks were not achieving their optimum, or "nominal" loading weights. At no time, however, did Composters suggest, let alone require, that Robertson should allow some discount. 97I shall return to the debate between the parties as to the extent to which post-contractual conduct is relevant in considering what were the terms of the contract actually made. For present purposes, it is sufficient to say that, in my view, there is an available inference, from the sustained failure of Composters to seek a discount in respect of trucks that to its knowledge at the time were loaded to less than their optimum or nominal capacity, that Composters through Dr Martin well knew there was no contractual term requiring Robertson to provide bales of sufficient weight to enable this to be done. 98Relatively soon after the discussions to which I have referred, Dr Martin sent the email of 22 October 2008, attaching the draft heads of agreement, to Robertson. The email read as follows (omitting formal parts): Attached what we discussed regarding the forthcoming straw season arrangement. Have a look and see if it reflects what we agreed and if you want to add or change anything let me know. I will have the straw incorporation document typed up the end of the week [sic], not easy to put into words, but on good irrigated crops there is almost too much straw to handle and incorporate successfully without leading [sic] some straw off or burning. 99No "straw incorporation document" was ever provided. 100The attached document reads as follows: HEADS OF AGREEMENT FOR SUPPLY OF WHEATEN STRAW TO MUSHROOM COMPOSTERS FOR THE 2008/9 SEASON BY IAN ROBERTSON 1. Price of straw to be made up of $60 per tonne royalty and $83.60 per tonne baling cost. Total of $143.60 per tonne plus GST. 2. Contract to be for 10 000 tonnes straw, 9 000 tonnes as modified 8x4 bales and the balance as 8x3 bales. 3. Royalty of $600 000 to be paid at the rate of $100 000 per month upfront, first payment to commence on the 1st December 2008 and on the 1st of each subsequent month until paid. 4. Balance of $83.60 per tonne to be paid when straw is received at Mushroom Composters. 5. Minimum bale weights to be achieved 550kg for 8x4 and 350 Kg for 8x3. 6. Optimum loading of trucks, MBH 45 8x4 & 6 8x3. Gromor 51 8x4 & 3 8 x3. Nominal truck weights MBH 26.85 tonne and Gromor 29.10 tonne. If the monthly average falls below these nominal weights then Ian Robertson to discount the landed straw price by the difference between the actual and nominal per tonne freight rate. 7. For straw uplifted north of the Tahrone turn-off on the Castlereagh Highway Ian Robertson will bear the extra freight cost involved. 8. Ian Robertson will haul straw from the Come by Chance area to a depot in Gilgandra. Straw uplifted from Gilgandra will bear an additional charge for freight from the Tahrone turn-off to Gilgandra. Straw uplifted from Gilgandra will be charged at $167.80 per tonne. Base price plus $24.20 freight. Ian, the Directors would like me to add that you acknowledge that in pre-paying the straw royalty, that at any point in time we hold a lien on the straw to the value of the up-front royalty paid on straw which has yet to be delivered. 101According to Dr Martin, the Robertsons did not raise any objection to the draft heads of agreement. The Robertsons say otherwise. They give evidence of another conversation which occurred by telephone, between Mr Robertson and Dr Martin, to which Mrs Robertson listened in. 102Mr and Mrs Robertson say that Mr Robertson pointed out to Dr Martin that he had not agreed to paragraphs 5 and 6 - minimum bale weights and discount for underweight trucks. They say that Mr Robertson said that Robertson could not agree to this, and pointed out (as in my view was factually correct) that bale weights were largely out of their control. They say that Dr Martin acknowledged this point, and said "it was only in there to please the Marlands". 103Mr and Mrs Robertson say, further, that Mr Robertson said that Robertson would agree to paragraph 8 - Haulage to Gilgandra - on the basis that Composters would set up a depot there. 104Dr Martin denies that there was a discussion to the effect alleged by Mr and Mrs Robertson. I do not accept his denial. I find that there was a conversation, in substance as Mr and Mrs Robertson say it took place. 105It is common ground that Robertson did not ask for a revised version of the heads of agreement, and that none was sent. 106Starting with 1 December 2009, Robertson issued six monthly invoices to Composters, each for $110,000.00 (including GST), on account of the royalty prepayments. Composters paid each of those invoices. To the extent that it is relevant, Mr and Mrs Robertson say, and I accept, that they used the payments to meet various costs including their obligations to farmers, wages, fuel and other consumables, and the finance costs on their new equipment. 107Thereafter, and over the 2008/2009 season, Robertson cut and baled straw for Composters, and left it stacked at various farms. Mr Robertson says, and I accept, that frequently his arrangements with farmers were that he would harvest their crop at no charge to them, using a particular kind of header which, although it was efficient at removing the grain, left the stalks in good condition to be harvested for straw. I accept also, again, as Mr Robertson said, that in many cases his obligations to farmers included a mixture of cash and kind: including, in one case (for example), using a bulldozer to grub out a tree for a farmer. 108As I have noted, it is Composters' case that what it characterises as a separate contract for the 2009/2010 season arose by conduct, from the sending and payment of invoices for the upfront royalty figure. On Robertson's case, the 2009/2010 season was the second season of the four year supply contract. On neither case, therefore, are there any relevant conversations (because, in respect of the 2009/2010 season, no one alleges a separate oral contract). 109Nonetheless, Dr Martin gave evidence of discussions with Mr and Mrs Robertson in about July 2009. Mr and Mrs Robertson did not respond directly to all of this evidence. They do however dispute the substance of part of it, relating to a Krone bailer. 110According to Dr Martin (affidavit sworn 5 March 2012, para 47): The 2009/10 season was to be the second season in the four year straw supply agreement. Ian and I first began discussing the terms for the 2009/2010 straw supply agreement in around late July 2009 when Ian, Donna, Derek and I met at Dunedoo to discuss issues relating to the quality of and the additional straw [sic] costs associated with the straw in the Come by Chance area. 111Dr Martin said that he and Mr Robertson had a conversation to the following effect. Mr Robertson wanted to "talk about the coming season". He said that the farmer royalty payment was $60.00 per tonne again and that he would leave his baling fee at $83.60. According to Dr Martin, Mr Robertson also said that, given the amount of the royalty payment, he would need some upfront payment. Dr Martin replied that Composters would take another 10,000 tonnes, and would accept the royalty payment "if that is what the farmers are commanding", and the baling fee. Dr Martin said that Composters would pay the royalty upfront. 112There was then discussion of freight and straw quality. According to Dr Martin, Mr Robertson offered to store straw in "my shed at Trewilga". 113According to Dr Martin, there was then discussion about a new baler. Mr Robertson said that he was intending to buy a Krone baler. Dr Martin inquired why Mr Robertson would be doing this, having just bought and modified two new balers. 114Mr and Mrs Robertson gave evidence of conversations with Dr Martin concerning balers generally, and the purchase of a Krone baler. Bale weights had been a cause of concern. Mr and Mrs Robertson had caused their balers to be checked by the dealer. The dealer had gone so far as to update the software package. The dealer had confirmed, they said (and they told Dr Martin), that the balers were operating satisfactorily. 115According to Mr and Mrs Robertson, it was Dr Martin who raised the question of buying a Krone baler. They said, in effect, that Dr Martin said that another straw supplier who used a Krone baler had been getting average bale weights of 485 kg, and that the Robertson's would "have to get one of these if you want to keep your contract". Dr Martin denied that he had said any such thing. 116Mr and Mrs Robertson produced and referred to a copy of an invoice from the other supplier, Driftway Pastoral Company (a business operated by Mr Barry Keir, the brother of Mr Steve Keir). They said that Dr Martin had given them this invoice in the course of the discussion. Dr Martin accepted that he had given the invoice to Mr and Mrs Robertson and that, before he did so, he had written on its reverse the words: KRONE 1290HDP 8X4X3 Average 485 kg 117Dr Martin's affidavit account of the "Krone baler" conversation included no reference to this document. 118Dr Martin denied that he had had any involvement in the Robertsons' purchase of the Krone baler (T48.18-.34). He was then shown the invoice. He gave the following evidence (T49.4-50.48): Q. On the left hand side [as the document had been photocopied] it has Krone 1290HDP? A. Correct. Q. That is in your handwriting? A. Absolutely. Q. And it refers to in the right hand side from Driftway Pastoral? A. Correct. Q. That was another company that supplied Mushroom Composters with straw? A. Correct. Q. That is Barry Keir's company? A. Correct. KATEKAR: To assist your Honour it is an invoice, from the righthand side, from Driftway Pastoral dated 6 February 2009 to Mushroom Composters and it says, "Bales numbers 70, 4 x 3". Q. I ask you to confirm, Mr Martin, this refers to an invoice from Driftway Pastoral Company to Mushroom Composters for the delivery of 70, 8 x 4 x 3 bales? A. That is correct. Q. It refers to weight, it says, "gross kilo net"? A. Hmm. Q. It was a net weight of 33 tonnes .94? A. Correct. Q. Across 70 bales? A. Yep. Q. Which gives you an average 485 kilograms per bale? A. Correct. Q. You gave this to the Robertsons to say, your competitor, Driftway Pastoral Company, is doing 8 x 4 x 3 bales at 485 kilograms per bale? A. I gave them that docket, yes. Q. Can you answer my question? A. Which was? Q. You told them that Driftway Pastoral is producing 8 x 4 x 3 bales at an average of 485 kilogram per bale? A. This particular document refers to a trial that Barry Keir did in Victoria. Q. Can you answer my question please? A. Sorry? Q. You gave this to the Robertsons and said to them, Driftway Pastoral Company is producing 8 x 4 x 3 bales at 485 kilograms per bale? A. Yes. Q. And that if the Robertsons wanted to be competitive they needed to do the same? A. I didn't say that. Q. And in order to do they needed to buy a Krone baler? A. I refute that. Q. If they wanted to keep the contract that's what they needed to do? A. I absolutely and totally refute the last question. 119A little later, Dr Martin agreed that his handwriting was already on the back of the invoice when he handed it to Mr and Mrs Robertson, but said that there was no reason why he had written on the invoice before he gave it to the Robertsons (T52.4-.17): Q. You gave the invoice or a copy of it to Mr and Mrs Robertson, did you? A. I did indeed, sir. Q. Did you have the handwriting on it when you gave it to them or was that applied A. I believe Q. Later? A. I believe that was on the back of that docket when I showed the Robertsons, yes. Q. Was there a reason why you had written that on the back of the invoice, before you show gave the copy to the Robertsons? A. I don't believe so, no sir. 120That evidence is difficult to accept. It suggests, in effect, that it was merely coincidental, or accidental, that Dr Martin had the invoice with him when he spoke to the Robertsons. And it suggests, as a further coincidence or accident, that Dr Martin had written on the back of the invoice before he put it (for no particular reason) into his pocket or brief case. 121To my mind, Dr Martin was well aware of the significance of the document, and of the fact that he had given it to the Robertsons. I think that he appreciated that the document, and the fact of its having been given to the Robertsons, were corroborative of the Robertsons' evidence on this point. Thus, I think, Dr Martin sought to dissemble. 122In my view, the document is strongly corroborative of the version of the conversation given by Mr and Mrs Robertson. There would have been no need whatsoever for Dr Martin to give them a copy of the document, with the notation on its reverse to which I have referred, if (as he said) the topic of the Krone baler had been raised, in a casual and almost offhand way, only by Mr Robertson and only at the tail end of another conversation. 123If, however, Dr Martin had intended to raise with the Robertsons the issue of a Krone baler, it would make sense for him to show them an invoice from a competitor, and to drive home (by the handwritten notation which he wrote on the reverse of that invoice) the point that their competitor was providing better bale weights than they were. It is common ground that higher bale weights effectively lower transport costs, because they facilitate the loading of trucks to their maximum capacity. 124I prefer, and accept, Mr and Mrs Robertson's account of the substance of the conversation concerning the Krone baler. I find that it was Dr Martin who raised the topic of purchasing a Krone baler, and that in the course of discussing this, Dr Martin (having referred to Mr Barry Keir's average bale weights) told them that they were at risk of losing the contract unless they themselves bought one. Post-contractual conduct and admissions 125Mr Katekar pointed to what he said what was conduct on the part of Composters that was consistent with the agreement having been (as he submitted it was) one for a period of four years, and to admissions by Dr Martin (in particular) to the same effect. I have referred already to one such matter: Dr Martin's statement, in para 47 of his principal affidavit, that the July 2009 discussions concerned "the second season in the four year straw supply agreement" (see at [110] above). 126Before I turn to the material on which Mr Katekar relied, I should set out my understanding of the extent to which post-contractual conduct may be considered for the purpose of ascertaining whether or not a contract was made and what were its terms. The relevant principles 127In some case, it is necessary to look at the conduct of the parties, at a time when or after when one of them says a contract was formed, to see if indeed a contract was formed at all. That will be so, for example, where it can be seen that one party made an offer, intended to lead to the formation of a contract to the other, and where the other is said to have accepted that offer not expressly but by its conduct, subsequent to the making of the offer. Its conduct may show that "it agreed to all the conditions contained in the offer" (to quote Ipp AJA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [173]). The same point was made by Heydon JA in the same case at [81] to [85]. 128An examination of conduct for that purpose is particularly relevant where offer and acceptance analysis is inconclusive. As Heydon JA said in Brambles at [71], offer and acceptance analysis "is neither sufficient to explain all cases nor necessary to explain all cases" of contract formation, and "does not work well in various circumstances". 129Although, as will be seen, the present case does require analysis of the circumstantial evidence to see whether (and if so on what terms) a contract was formed, I am for the present looking at a narrower application, or use, of post-contractual conduct. 130For that more narrow purpose, the authorities seem to me to establish two, related, propositions. The first is that post-contractual conduct may be relevant to prove whether a contract of the kind for which one party contends was made. The second is that such conduct may be relevant to prove an admission by the other party of such a contract, or of (some of) its terms, or of a fact relevant to the existence of such a contract. 131The first point was stated clearly by Heydon JA in Brambles at [25]: ... post-contractual conduct is admissible on the question of whether a contract was formed... . 132Allsop J (with whom Drummond and Mansfield JJ agreed) had made a similar point in Branir Pty Ltd v Owston Nominees (No.2) Pty Ltd (2001) 117 FCR 424 at [369]. And the same point was made by Giles and Basten JJA in Hendriks v McGeoch [2008] NSWCA 53 at [10], [39] respectively. 133In County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193, Spigelman CJ considered the principles at [7] to [28]. His Honour concluded that post-contractual conduct could be taken into account in determining the subject matter of a contract and, seemingly, its terms. That was a case where it was common ground that a contract had been made, and that the contract was not wholly in writing. Spigelman CJ referred with approval to the judgments of Megaw and Browne LJJ in Ferguson v John Dawson & Partners (Contractors) Ltd [1976] 1WLR 1213 at 1221, 1229 respectively. Their Lordships there concluded that evidence of conduct could be admissible to show, among other things, what were the terms of a contract which was not wholly expressed in writing. 134McColl JA (with whom Beazley JA generally agreed) appeared to express the position more narrowly, in her judgment in County Securities. 135McColl JA said at [161] that authority in the Court of Appeal favoured the view that conduct after a contract was said to have been made "can be looked to as an aid to deciding whether a contract has been entered into". Her Honour said at [162] that subsequent conduct could constitute "an admission of the state of the parties' rights", although her Honour cautioned that "care must be taken about identifying the fact said to have been admitted". 136I do not see any difference in principle between the approach taken by Spigelman CJ and that taken by McColl JA. The point made by Spigelman CJ is, in my view, recognised by what McColl JA said at [161]. Her Honour's observation at [162], as to the relevance of conduct as an admission of rights (or facts relevant to the creation of rights) builds on that proposition. 137Campbell JA considered the question in detail in Lym International Pty Ltd v Marcolongo [2011] NSWCA 303. Basten JA (with a presently irrelevant qualification) and Sackar J agreed with the reasons given by Campbell JA. 138Campbell JA's reasons ranged well beyond the limited problem with which I am confronted. However, at [143], his Honour said that post-contractual conduct could be relevant to identifying what it was that the parties had agreed. It is clear that this could extend to ascertainment of some of the terms of their agreement: 143. By contrast, the task in ascertaining what are the terms of a contract that is not wholly in writing is quite different - the task is finding as a fact what the parties have agreed. A range of post-contractual conduct could be relevant to ascertaining what the parties have agreed. For example, their conduct in carrying out the contract could itself be objective evidence of what they had agreed, an admission of one of the parties could assist in ascertaining what they have agreed, and business records created to record or report on the contract rather than carry it out could also assist in that task. 139I should note also that Campbell JA pointed out the need, when considering whether conduct could amount to some sort of admission: (1) (echoing McColl JA in County Securities at [162]) to identify precisely what admission was said to have been made; (2) to ascertain (in the case of an admission said to have been made on behalf of a party) the capacity of the person to make the admission; and (3) to consider the weight to be attributed to the admission. 140His Honour's reasons deal with those matters at [150] to [165]. It is not necessary, for present purposes, to set out what his Honour said. 141The last case to which I wish to refer is the decision of the Court of Appeal in Cooper v Hobbs [2013] NSWCA 70. McColl JA (with whom Bergin CJ in Eq agreed) said at [54] that post-contractual conduct could be relevant to and admissible on the question, whether the contract for which a party contended was formed, if it constituted admissions adverse to that party's interest. The authorities cited by her Honour included Heydon JA in Brambles and Campbell JA in Lym. 142The key issue in that case was whether a letter written by a party's solicitor, from which it could be inferred that the party admitted the existence of a contract, was admissible as an admission to prove that fact. That was the point to which the observation of McColl JA was directed. 143I do not read anything said by her Honour as detracting from the more general proposition that, in some cases, post-contractual conduct may be relevant, not necessarily as an admission, to see whether a contract was made as one party contends, and, if so, what were its terms. 144That having been said, I think it is fair to say that most if not all of the matter on which Mr Katekar relied was material which (he submitted) should be considered by way of admission of a contract of the kind for which his client contended. The conduct and admissions relied upon 145In para 20 of his principal affidavit, Dr Martin says that he told Mr Robertson: We were [sic] prepared in principle to enter into a four year contract for 10,000 tonnes per annum. Assuming the royalty payments stays [sic] up we will agree to prepay some of the royalty for the coming season. We can discuss the details before next season. 146In the same paragraph, Dr Martin explained his intention as being: ... I meant that Mushroom Composters was prepared to commit to an extended term arrangement assuming that the other particulars of a straw supply agreement could be negotiated in terms agreeable to both parties. 147Mr Sirtes did not read the explanation. However, Mr Katekar cross-examined Dr Martin, who agreed that the portion that I have just set out was correct. 148In para 22, Dr Martin gave evidence of a meeting with Mr Robertson at the Robertsons' home. He said that their discussions related to the 2008/2009 straw season, and then said: The 2008/2009 season was to be the first season in the four year straw supply agreement. 149Again, those words were not read. Again, Dr Martin agreed in cross-examination that they were correct. 150Paragraph 47 of Dr Martin's affidavit contains the passage to which I have referred at [110] above. 151In para 99 (and preceding paragraphs), Dr Martin gave evidence of a meeting that he and Mr Marland had with Mr and Mrs Robertson at the White Rose Café, Dunedoo. In the course of that meeting, Dr Martin said, he and Mr Marland impressed on the Robertsons that Composters could not continue to take 10,000 tonnes, and that for the coming season it would need 5,000 tonnes only. That arose, he said (quoting himself speaking to Mr and Mrs Robertson), because "when we organised this agreement we anticipated an output of 1,200 tonnes [of mushroom compost] per week. We are now down to 800 because we lost a customer in Queensland and Gromor has lost customers as well". 152If it be correct to say, as Composters now submits, that there were only single season agreements, the words "when we organised this agreement" do not make sense. On the other hand, if there were, as Robertson submits, a four year agreement, they make perfect sense. 153According to Dr Martin, Mrs Robertson raised the issue of Robertson's cash flow. He said that this provoked the following from Mr Marland: Donna I'm sick of hearing about your cash flow problems. We're paying good money for poor straw and we have our cash flow issues too. No one could have foreseen what this downturn would do to their businesses. At least we are telling you in good time what our requirements are for the next season. Look, we'll go back to the original 10,000 tonnes and we'll pre-pay you the royalty for the final season of the contract but for next we only need 5,000 tonnes and we cant pay the royalty payment upfront. You've got $600,000.00 of our money and you're about to go bust. 154Again, Mr Marland's reference to "the final season of the contract" does not make sense if there were only year by year contracts, but makes perfect sense if there were a four year contract. 155In para 100, Dr Martin summarised his understanding of the Dunedoo meeting as follows (so far as it is relevant): I understood from the above discussion that the Defendant and Mushroom Composters had agreed that for the 2010/11 straw season, that is the third year of the four year straw supply agreement, the Defendant would supply Mushroom Composters with a minimum of 5,000 tonnes of straw and that Mushroom Composters would not make prepayment of the farmer royalty sum... 156Dr Martin gave the following evidence in cross-examination, in relation to the Dunedoo meeting (T64.19-.42): Q. And when you met with them in Dunedoo you said, "We only want 5,000 tonnes for next year." You did that, didn't you? A. I said the 5,000 tonne was the minimum. Q. And then after that in year four you would go back to normal for the 10,000 tonnes? A. That is correct. Q. Because you knew that you had committed to order 10,000 tonnes per year? A. We had an arrangement for four years. Q. At 10,000 tonnes per year. HIS HONOUR Q. Did you agree with that or not? A. No, I don't agree with that. KATEKAR Q. And when you originally entered into the four year agreement in 2008 you were expecting 1200 tonnes per week in sales of compost? A. Yes, 11,050, yep 1150. 157Not of present relevance, but not insignificant on the point of damages, Dr Martin notes in the same paragraph that his expectation was that Robertson would supply to third parties 2009/2010 season straw that Composters had not yet collected, and would supply fresh straw, from the 2010/2011 season, to Composters (including some thousands of tonnes in substitution for the untaken 2009/2010 season straw). 158In para 114 of his affidavit, Dr Martin deals with a meeting that took place between him and the Robertsons at McDonalds at Singleton. In the course of that meeting, Dr Martin said, he said the following to the Robertsons: .... We only need 5,000 tonnes and we're not paying upfront. That's what we agreed. You said in Dunedoo in June that you would flick off 5,000 tonnes of last year's straw to feed lots, then bale 10,000 tonnes this season. Then we would be back to normal for the final year. 159The strong impression from those parts of Dr Martin's affidavit is that, when he swore the affidavit, he was of the view that there was a four year contract between Composters and Robertson. The strong impression from the comments that Dr Martin attributes to himself and to Mr Marland is that, at the time the relevant conversations took place, they had the same understanding. 160Mr Katekar relied on what he said was a concession made by Dr Martin in cross-examination, as to the words "in principal". I set out the relevant passage (T29.28-30.7): Q. Well, in January 2008 you agreed with Mr Robertson that Mushroom Composters would order 10,000 tonnes of straw from Mr Robertson for four years? A. I didn't say that. We agreed in principle that we would enter into an arrangement. Q. Well, I'm picking up on that answer; when you say that you agreed in principle, Dr Martin, what you mean is you agreed to do it? A. I'm not sure that's in principle, is it? Q. Well, I'm suggesting to you, Dr Martin, that in your conversation with Ian Robertson you weren't splitting hairs as to what "in principle" meant, were you? A. No. Q. You were telling him he could expect that you would order 10,000 tonnes of straw for four years, that's right? A. I looked at it as an arrangement because Robertson was to go out and purchase bales and modify them, that I would commit to taking straw from Robertson for that period for four years. Q. Yes, 10,000 tonnes per year. A. I didn't say that. Q. Have a look at page 206. A. I said "in principle". Q. You were committing to 10,000 tonnes of straw per annum for four years, weren't you? A. No. 161Mr Katekar relied in particular on Dr Martin's agreement that he was not splitting hairs as to what "in principle" meant. 162I do not think that this supposed concession has any evidentiary weight. If Mr Katekar intended to suggest that Dr Martin did not regard the words "in principal" as denying the existence of a concluded contract (were the Robertsons to accept the terms of the letter of 25 January 2008), I think it should have been put more squarely than was done. Further, when one reads the whole of the passage that I have extracted, Dr Martin was not prepared to concede in it the existence of a firm offer, capable (in legal terms) of giving rise, on acceptance, to a concluded contract. 163Mr Katekar referred to another passage of Dr Martin's evidence at T59.3-.5. I set out the longer passage from which those lines were taken (to give some context, Dr Martin had been shown a document prepared by him showing, as at July 2009, Composters' projected needs for straw) (T58.35-59.5): Q. At the top it has got your original budget of about 14 and a half thousand per annum? A. Correct. Q. You expected another 2,000 due to the Gromor expansion? A. I think it says there, 2,000 tonnes to take us through to Easter 2010. Q. I see, thank you. But because of the loss of the granite belt and the late start the Gromor expansion had gone down to 1,700 tonnes per annum? A. Correct. Q. At that stage you had less needs for the 09/10 season? A. Correct. Q. Than you had originally budgeted for, but still in June 2010 you had contracted for 10,000 tonnes from the Robertsons? A. Correct. Q. You knew that because that was the second year of the four year agreement? A. Correct. 164The last two questions, and the answers to them, could be read as acceptance by Dr Martin of the proposition that Composters' conceded obligation to take 10,000 tonnes of straw from the Robertsons as at June 2010 flowed from "the four year agreement". 165There are two other passages in Dr Martin's cross-examination that require consideration in this context. The first passage arose in the context of Dr Martin's evidence that, as at April 2010, Composters was operating at a loss for various reasons, and had resorted to its overdraft facility to fund its operations. Dr Martin then gave the following evidence (T61.24-62.4): Q. The situation was, in April 2010, is that you knew that unless things changed you were not going to be able to pay the Robertsons their $600,000 upfront payments? A. I couldn't be certain whether I could or not at that point. Q. You were concerned that you wouldn't be able to? A. I didn't say that. Q. No, but you were aware in April 2010 that you had just finished paying the Robertsons six instalments of $100,000? A. Correct. Q. And you were aware that you had a four year agreement with the Robertsons? A. I had a four year agreement. Q. Yes, that you had a four year agreement with them? A. I did. Q. And you expected that you would need to pay the Robertsons $100,000 a month starting in December 2010? A. I didn't know that at all. Q. Where you said "the requirement to part pay for new season's straw has placed a strain on cash flow", do you see that under the heading "financials" in the first sentence? A. Correct, and also in relation to lower sales. Q. But you're referring there to the payments you've just been making to the Robertsons? A. Correct. 166Finally (in this context), Dr Martin gave the following evidence in relation to the Dunedoo meeting (T64.19-65.1): Q. And when you met with them in Dunedoo you said, "We only want 5,000 tonnes for next year." You did that, didn't you? A. I said the 5,000 tonne was the minimum. Q. And then after that in year four you would go back to normal for the 10,000 tonnes? A. That is correct. Q. Because you knew that you had committed to order 10,000 tonnes per year? A. We had an arrangement for four years. Q. At 10,000 tonnes per year. HIS HONOUR Q. Did you agree with that or not? A. No, I don't agree with that. KATEKAR Q. And when you originally entered into the four year agreement in 2008 you were expecting 1200 tonnes per week in sales of compost? A. Yes, 11,050, yep 1150. Q. Go to page 38 of your affidavit? A. Yeah, it says 1200. Q. "1200 tonnes per week, we're now down to 800"? A. Yes. Q. "And we're not in a financial position to keep paying upfront like this."? A. That's what was said. 167My impression of this passage of Dr Martin's evidence is that he was all too aware of the significance, in terms of concession of an aspect of the Robertsons' case, of what had been said at the Dunedoo meeting. In my view, on this topic also, Dr Martin sought to dissemble. Authority to make admissions 168The significance of those admissions (if it is convenient to call them that for the moment, without deciding their precise status) is a matter to be considered in the context of all the other available evidence. But a primary question is the authority of Dr Martin and Mr Marland to make the admissions. 169As to Dr Martin, I think, it is clear that he did have that authority. He was the general manager of Composters, responsible, subject to the Board's supervision, for running all its business operations. I have observed already that there is some reason to think that the burden of supervision was light. Undoubtedly, Dr Martin's duties included negotiating contracts for the supply of straw, and committing Composters to them. It has not been suggested that he required the authority of the Board to enter into such contracts. On the contrary, his reports to the Board describe the contracts that he has caused Composters to make. 170Given the wide-ranging nature of Dr Martin's executive role, and his ability to bind the company to at least some kinds of contract, he must be taken to have had authority, at all material times, to make coterminous admissions on behalf of Composters. That is so in particular in relation to contracts for the supply of straw. It would be quite extraordinary if Dr Martin had authority, on his own and without the need for approval from anyone else, to make such contracts, but lacked authority to make admissions as to their existence or terms. 171As to Mr Marland: Composters was controlled by two families, his being one and the Powe family the other. He and a representative of the Powe family were the only two directors of Composters. It is plain that Mr Marland took an active interest in Composters' affairs at the relevant time (he has since retired). Indeed, as I have noticed, he was directly involved, with Dr Martin, in some of the negotiations with Mr and Mrs Robertson. 172It seems to be clear, as a matter of fact if not as a principle of law, that Mr Marland had authority to participate in the negotiation of contracts for the supply of straw. That being so, what I have said as to the corresponding authority to make admissions (in the case of Dr Martin) must apply also to Mr Marland. 173Thus, I conclude that to the extent that the matters to which I have referred are to be taken into account as admissions, they should be regarded as admissions made on behalf of Composters by people having at least implied authority to do so. The parties' submissions 174Mr Sirtes submitted that the letter of 25 January 2008 was not couched in terms of an offer to enter into a contract. He emphasised the words "in principal", the use of the future conditional tense throughout, and the stated need for various matters to be resolved. 175Further, Mr Sirtes submitted, no contract was concluded until the heads of agreement document (sent on 22 October 2008) was accepted by conduct, the conduct being delivery of invoices for prepayment of royalties and payment of those invoices. 176Mr Sirtes' submissions appeared to put to one side the contract pleaded by Composters: a contract partly oral and partly written, comprising both the discussions preceding the sending of the heads of agreement and those heads of agreement themselves, as well as acceptance by performance. As I have observed already, once it is acknowledged (as Composters' pleadings do) that the contract is not to be found wholly and only in the heads of agreement (or in that document combined with acceptance by performance), the field of debate is enlarged. 177Mr Katekar laid stress on the conversations that had occurred both leading up to the letter of 25 January 2008 and leading up to the preparation of the heads of agreement. Mr Katekar submitted, in substance, that the parties had always discussed a four year contract. He submitted that such an agreement was in the commercial interests of both parties. 178For Composters, a four year contract would offer security of supply. This was an important consideration at the time. There was a drought. Straw was in short supply. Demand, and therefore prices, were high. At Composters' projected rate of production of mushroom compost of 1,150 tonnes per week, it would need (as Dr Martin's calculations showed) between 14,000 and 17,000 tonnes of straw annually. Further (and as Dr Martin's reports showed), Composters had run down its reserves of straw, presumably because of the withholding of supply by Mr Steve Keir. 179As to Robertson, Mr Katekar submitted, a four year contract was imperative because it needed to have new, and expensive, equipment to enable it to satisfy the requirement for 10,000 tonnes per year. It would need some time to recover that cost from the proceeds of sale of straw. 180Thus, Mr Katekar submitted, it was objectively likely, and commercially understandable, that each of the parties sought a four year contract. 181Further, and as I have indicated, Mr Katekar laid stress on what he said were the admissions made from time to time by Composters. Decision 182I accept Mr Sirtes' submission that the letter of 25 January 2008 was not, in terms, an offer to enter into a contract; an offer that, upon acceptance, would have led to the formation of a contract. The matters that Mr Sirtes referred to, as I have summarised them, support that conclusion. 183However, to my mind the letter provides a strong evidence of the contractual arrangements towards which the parties were negotiating. To put it another way, it seems to me that the letter should be read as saying that although Composters was not prepared at that point to enter into a four year contract for the supply of 10,000 tonnes of straw on the terms set out, nonetheless it was seeking some such contract, and prepared to negotiate to achieve it. 184The objective commercial realities to which Mr Katekar pointed support that conclusion. Each party needed (or thought that it needed) a four year contract. Their reasons may have differed, but their aim, objectively speaking, was the same. 185In this context, it is not insignificant that Mr Robertson (as I find he did) had the conversation with Dr Martin to which I have referred at [63] above. 186It is significant, in particular, that (as I find happened) Mr Robertson required a letter from Composters to enable him to negotiate finance for the new machinery that, he told Dr Martin, Robertson would need to perform the proposed contract. 187It is clear from Dr Martin's own evidence that Mr and Mrs Robertson (the former in particular) were well aware of the difficult situation that Composters had found itself in, and of its need for reliable supplies of large quantities of straw. It is equally clear, from Mr Robertson's evidence, that Dr Martin (and through him Composters) was aware of Mr and Mrs Robertson's need for a long term contract to justify the very substantial outlay that they proposed to undertake. 188Thus, I find, in and around January 2008, the parties were negotiating to enter into a four year supply contract, for a fixed tonnage of straw, at the indicative price stated, and on other terms to be settled. 189The ensuing negotiations need to be looked at in the light of that conclusion. Neither party told the other that it had changed its initial requirement for a four year contract, for fixed quantities of straw. Instead, the parties continued to negotiate on the outstanding questions, including the way in which the price for straw would be paid, how and where the straw would be made available to Composters, and the like matters. 190Thus, when the parties had the discussions that led to the heads of agreement, it seems to me that what they were doing was finalising their requirements for the first year of supply under the proposed four year supply contract. That is what the covering email says, when it refers to "the forthcoming straw season arrangement". That is why the heads of agreement referred expressly, in their title, to "the 2008/9 season". That can be seen as a resolution of the matters as to price and prepayment left outstanding in the letter of 25 January 2008. 191I accept that the letter concluded with a stated intention "to draw up a heads of agreement for the contract", and that the only document that answers this description is the heads of agreement sent some 9 months later. As Mr Sirtes submitted, that could suggest that Dr Martin had changed his mind, and decided to scale back from a four year supply contract to a situation of supply year by year, by individual annual contracts. However, that submission seems to me to be inconsistent with the facts as I have summarised them: in particular, with the proposition that at no time, on any view of the evidence, did Dr Martin tell Mr and Mrs Robertson that he was thinking of changing from a four year supply contract to a possible series of single season supply contracts. 192The reality, I think, is that Dr Martin overlooked preparing, or for some other reason did not prepare, the heads of agreement that would reflect what had been accepted "in principal" in the letter; and that when he came to the arrangements for the first season, he used the term "heads of agreement" to describe those seasonal arrangements. 193To my mind, the letter of 25 January 2008 should be regarded as setting out the basic terms of an agreement that the parties hoped to conclude. To put it another way, the letter should be regarded as setting out what might be called a "deal" to which the parties had agreed in principle, but without intending at that stage to be legally bound. Objectively, the intention of the parties thereafter was to continue their negotiations, in an attempt to convert their in principle deal to a binding contract. 194It is implicit in that characterisation of the letter, and of the state of negotiations at the time it was written that: (1) no binding contract then existed, nor did the letter evidence one; and (2) the parties might negotiate thereafter to reach a contract that was partially or substantially different from that which they had envisaged in January 2008; or (3) the parties might negotiate to a point where they felt that they could not reach any contract at all. 195The third of those possibilities may be discarded, because both parties agree that they did thereafter enter into a contract. The second possibility recognises that the parties may have come to the view that they could not reach a concluded contract in the terms that they had contemplated in January 2008. But, as I have said, one would expect to find some clear shift away from that in principle deal in the course of the negotiations thereafter. There is no such shift disclosed in the evidence. For the reasons I have given, I do not regard the heads of agreement sent by Dr Martin to Mr and Mrs Robertson on 22 October 2008 as evidencing a sudden change in the parties' negotiating position. On the contrary, I regard it as fulfilling the evident intention of the parties that detailed terms might be negotiated from year to year. 196Taking that approach, it seems to me, the proper way to consider the letter of 25 January 2008 is that, although it does not of itself record, or embody, a concluded and binding contract, nonetheless, it formed the basis, or provided the essential or framework terms, of the contract that, ultimately, emerged from the parties' dealings. 197This is a case where it is difficult, if not impossible, to apply conventional offer and acceptance analysis. But inability to specify the moment or fact of offer, and the moment or fact of acceptance, does not mean that there can be no contract. It means simply, and as Heydon J had pointed out in Brambles, that offer and acceptance analysis is neither necessary nor sufficient in all cases of formation of contractual relationships. 198Viewing the whole of the material, it seems to me that the contract which came into existence was that towards which the parties had been negotiating at least from January 2008. There is no basis in the evidence for concluding that, at some stage along their negotiations and before the contract can be seen to have been formed, the parties shifted their focus from a four year supply contract to annual supply contracts. 199In this context, I take into account as significant the admissions, or concessions, to which I have referred. Leaving aside the few matters in cross-examination on which Mr Katekar relied, none of those admissions or concessions can be said to have been forced from Dr Martin or Mr Marland. On the contrary, they come (with the same qualification) from Dr Martin's evidence in chief, as reflected in his principal affidavit. That affidavit gives the very strong impression that, both when it was sworn and when the relevant conversations that I have extracted took place, Dr Martin considered that Composters had entered into a four year contract with Robertson, for the supply of 10,000 tonnes of straw per annum. It is apparent, from Mr Marland's contribution to the Dunedoo meeting (as given by Dr Martin), that he was of the same view. 200In circumstances where the person with principal responsibility for negotiating the contract on behalf of Composters understood that what he had negotiated was a four year contract for the supply of 10,000 tonnes per annum, it seems to me that one would need powerful reasons to come to a different view. No such reason has been shown. 201Whether the remarks are to be regarded as admissions strictly speaking, or as concessions, their effect in my view is powerful. 202The same may be said, although with less force (because of his lesser involvement) in relation to Mr Marland's view, as it appears from what he said to the Robertsons at the Dunedoo meeting. 203Thus, I conclude, Composters and Robertsons did make a contract for the supply of straw, by the latter to the former, over four straw harvesting seasons, commencing with the 2008/2009 season. 204That leaves for resolution the disputes as to the tonnage and price, which are subsumed within the first issue. Tonnage 205On the view that I take of the significance of the letter of 25 January 2008, and of what followed it, it is clear that the contract that in my view was made, for a period of four years, was for the supply of 10,000 tonnes of straw per year. That was what Composters had sought "in principal". That was what Robertson had sought, to justify the outlay on new equipment. Nothing in the negotiations thereafter suggested that either party withdrew from the "in principal" position. 206What was said at the Dunedoo meeting is significant in this context. To my mind, the statements that Dr Martin attributes both to himself and to Mr Marland are consistent with an appreciation on their part that the contract was indeed one to take 10,000 tonnes of straw per year, and that they needed to find some way to persuade Robertson to consent to a variation in that requirement for the forthcoming straw season. Price 207In my view, the evidence shows that, the parties agreed on a price of $140.00 per tonne, subject to two qualifications. 208The first (and non-contentious) qualification is that the parties agreed that the baling cost of $80.00 per tonne would be increased according to movements in the CPI. 209The second relates to the "royalty" component of $60.00 per tonne. For reasons that I will indicate in dealing with the second issue, I do not regard the royalty as being payable only to the extent that Robertson paid farmers for the right to take and sell their straw. However, I do not accept - at least without qualification - the case advanced for Robertson, that the "royalty" component was fixed for the four years of the contract. 210Mr Robertson's evidence was to the effect that Robertson needed a fixed four year price (leaving aside, as of no present moment, increases in the baling charge referable to movements in the CPI). He said that Robertson needed the security of a fixed price in order to justify, and repay, the financial commitment necessary to acquire new machinery. 211I accept, further, that Mr Robertson said words to that effect to Dr Martin. However, Dr Martin's response, as evidenced in the letter of 25 January 2008, was that the royalty price should be regarded as negotiable. 212Composters had competing objectives. On the one hand, there was the imperative need to ensure continuity of supply: a need made obvious by Mr Steve Keir's abandonment of his contract for the 2007/2008 season. On the other hand, as a person undoubtedly familiar with the effect of weather on agriculture in general and prices for produce in particular, Dr Martin must have been aware that a shortage could become a glut, with obvious impact on prices. Further, Dr Martin was was negotiating in the context of a prolonged period of drought. No doubt, he understood that, if the drought broke, straw might indeed become available (as he put it in the letter) in "over abundance". He must have understood, as anyone with even a fleeting knowledge of matters agricultural would, that over-abundance of supply would drive down prices. Thus, Dr Martin reserved the expectation of a lower royalty in the event of an over-abundant supply of straw over the life of the contract. 213To my mind, the contract is to be viewed as one which fixed a price of $140.00 per tonne, subject to: (1) CPI increases in the baling component; and (2) review of the "royalty" component in the event that straw prices decreased substantially over the life of the contract. 214The second qualification, in my view, arises by necessary implication from the paragraph of the letter that reads: In terms of the farmers' royalty payment, a cost of $60 per tonne is anticipated, but if there is an over abundance of straw in one season, then it would be reasonable to expect that a proportion of the supply could command a lower royalty. 215As a matter of construction, or by implication from the words used, that paragraph imposed on the parties an obligation to negotiate in good faith, as to the amount of the royalty payment, in the event that conditions of over-abundance prevailed. 216Strictly speaking, it is unnecessary to express a concluded view on this. Composters does not contend for such a term (nor does Robertson). Nor does Composters contend that any such term was breached. Composters did not seek to negotiate with Robertson a lower royalty component. What it sought to do (at the Dunedoo meeting) was to reduce its commitment from 10,000 tonnes to 5,000 tonnes for the 2010/2011 straw season. 217Robertson does not contend for further CPI increases in the baling cost. Composters does not contend that the royalty component should be discounted or reduced in some way. The result is that, for the second, third and fourth years of the four year agreement, the price must be taken to be $143.60 per tonne, subject to any renegotiation in the event of a glut of straw on the market.

Second issue: was the prepayment repayable? 218Composters' case is that the contract included a term to the effect that Robertson would only invoice Composters for the actual royalties paid by Robertson to farmers. That term is said to be express or implied. Specifically, it is said to be an express term arising on the proper construction of, or alternatively by implication from, the third paragraph of the letter of 25 January 2008 (see at [214] above). 219Further, Composters pleaded, "the term was implied by the nature of and purpose of the royalty payment". 220In passing, it might be observed that the pleading seeks to give contractual effect to the letter; effect that was denied by the submissions for Composters on the first issue. 221In any event, it seems to me, the pleaded case, as to repayment, must fail. The third paragraph of the letter does not say that, if Robertson can obtain straw for less than $60.00 per tonne, then the price should be reduced, or the payment on account of the royalty refunded. What it says is that, in those circumstances, "a proportion of the supply could command a lower royalty". 222For the same reason, the alleged term cannot arise by implication from the words of the third paragraph of the letter. 223Nor, in my view, is the term available by the alternative process of implication from "the nature of and purpose of the royalty payment". That argument assumes that the sole purpose of the royalty payment was to meet the cost payable by Robertson to farmers for the right to take and sell their straw. But, as I have found, from Robertson's perspective, the nature and purpose of the royalty payment was to fund its harvesting and baling operations. Further, as I have found, Mr Robertson made that purpose known to Dr Martin before Dr Martin prepared and forwarded the heads of agreement document on 22 October 2008. 224It is also of some significance, and not at all helpful to Composters' case, that the heads of agreement document (which, in relation to the first issue, Composters submitted did have contractual effect) does not contain any reference to repayment in the event that a lower royalty figure was in fact paid to farmers. Nor does Composters plead that any such term is to be implied from what is contained in the heads of agreement. 225There are two other points. The first, which is not of great significance, is that from time to time Composters did include in the agreements that it made with other straw suppliers, a requirement that the supplier warrant that the royalty figure was actually paid to farmers. It did not demand any such warranty in this case. 226The second point is that in any event Composters has not shown that Robertson breached any such term. Robertson's case is that it satisfied its payment obligations to farmers in part by the provision of services and in part by the payment of cash. Dr Martin was aware of that, at least from about May 2009. (That date is fixed by reference to articles in "The Land" on May 7, 2009, which Dr Martin acknowledged he had read about that time.) Composters' proof of overpayment is based on what it says were actual dollar figures of royalty payable from time to time. It has not proved that the value of the services provided by Robertson to farmers, taken in conjunction with such cash payments as were made, falls short of $60.00 per tonne in any given case. 227Thus, even if there were a term to the effect for which Composters contends, it has not proved breach.

Third issue: repudiation 228Mr Sirtes accepted that if the court were to find that the contract was in substance that for which Robertson contends, then Composters repudiated it by its conduct at and following the Dunedoo meeting in June 2010. That concession was properly made.

Fourth and fifth issues: damages 229I combine these issues because Robertson's claim included: (1) damages for what it said was Composters' failure to collect straw harvested and baled for it during the 2009/2010 season; and (2) damages for loss of the benefit of the contract for the 2010/2011 and 2011/2012 seasons. The 2009/2010 season 230Robertson's evidence (which, at least on this point, was not really controversial) satisfies me that Robertson did cut, bale, stack and otherwise make available for collection by (or on behalf of) Composters, 10,000 tonnes of straw during the 2009/2010 season. 231It is common ground that Composters has collected, in whole tonnes, only 331 tonnes of that straw. 232Robertson asserts that Composters was obliged to collect the straw either during the season, or before the commencement of the next season, or, at worst, within 12 months after the end of the season. 233Composters denies that it had any such obligation. It says further, and alternatively: (1) some of the straw was of inferior quality; (2) the straw was not baled so as to achieve the suggested minimum weight turn; (3) in any event, much of the straw has spoilt and become worthless; and (4) some of the straw was sold to others or, alternatively, Robertson failed to mitigate its loss by not doing so. 234There is no evidence as to the inferior quality of the straw. For reasons that I give in dealing with issue 9, there was no minimum weight requirement. And as to the third point: to the extent that the straw has spoiled or deteriorated, that is the inevitable consequence of its being left in the paddocks for some period of years. Composters tried to deflect this conclusion by suggesting that Robertson was obliged to haul the straw to the Gilgandra depot (and was obliged to set up that depot). For the reasons I give in dealing with issue 7, I do not agree. I elaborate on these conclusions at [262] to [271] below. 235In short, to the extent that Composters raises alternative arguments in relation to the quality or condition of the straw, I reject them. 236That leaves the central issue: the suggested obligation on Composters to collect the straw within some period after harvesting. 237Robertson pleads in its cross-claim that the supply agreement made between it and Composters was partly written and partly oral. The written part comprises the letter of 25 January 2008 and the heads of agreement document. The oral part comprises the discussions between Dr Martin and Mr and Mrs Roberson to which I have referred. 238Robertson then pleads that the supply agreement contained a number of terms, including (of present relevance) terms to the effect that: (1) Composters would collect baled straw from the fields of farmers from whose land the straw had been harvested; and (2) the baling cost (or the balance of the price after the prepayment of $60.00 per tonne) would be paid by Composters to Robertson on receipt of the straw at Composters' premises in Singleton. 239The pleading is silent as to whether these terms (and others that are pleaded) are express or implied. Presumably, given the pleading of the way in which the agreement was made, they are said to be express terms and either written or oral, depending on their source. 240Robertson does not plead any term as to the time within which the baled straw was to be collected. 241Mr Katekar submitted, among things, that since the supply agreement "was a year on year agreement, ... Composters would collect the straw bailed each year by Robertson during the course of that year or in the few months following (February to February)". 242Mr Sirtes submitted that there was no term obliging Composters "to collect the straw within any time period" nor "on [Robertson's] request". He submitted that Composters had a complete discretion as to when it would collect the straw. Thus, he submitted, Composters "did not agreed to any obligation, nor was one sought to be imposed on it by [Robertson], that the straw needed to be collected within a confined timeframe". 243The quotations from counsel's submissions come from their respective written submissions provided at the conclusion of the evidence. 244To my mind, when one considers the nature of the contract (one for four years, providing for the delivery of 10,000 tonnes of straw in each of the four straw seasons that it encompassed), it is difficult to accept that Composters had an absolute discretion whether or not, and if so when, to collect straw that had been baled for it. 245That view is reinforced, in my view, by the circumstance, known to both parties and indeed forming part of their bargain, that a significant part - well over 50% - of the purchase price would be paid only on receipt of the straw at Composters' Singleton premises. The significance of this factor is reinforced by the circumstance, again known to and bargained for by the parties, that (leaving aside for a moment the possibility of delivery to a Gilgandra Depot), the price quoted was ex farm, and it was Composters that was required to arrange for the straw to be collected. 246Whether one accepts Dr Martin's evidence as to the purpose of the royalty payments, or Mr Robertsons (and for the reasons I have given I prefer Mr Robertson's), it is apparent that Dr Martin, and through him Composters, understood that the royalty would be used for the purpose of defraying Robertson's costs of acquiring, harvesting and baling the straw, and making it available for collection. 247On Mr Robertson's view, the cost of harvesting and baling would be subsidised to some extent by the prepayment. On Dr Martin's view, that cost would only be recouped if and when, the straw having been received at Composters' Singleton premises, Composters paid the baling charge. 248On any view of the evidence, therefore, whatever profit there might have been for Robertson would be derived only upon receipt of and payment for the straw. And on any view of the evidence, receipt of and payment for the straw was necessary not only to provide whatever profit there might have been in the arrangement, but also to meet whatever costs had not been recouped already out of the prepayments. 249In those circumstances, it seems to me, the suggestion that Composters had an absolute and uncontrolled discretion whether or not to collect the straw, and, if it decided to collect it, when, lacks any shred of commercial plausibility. The suggested discretion would leave it wholly within the power of Composters to deprive Robertson of the real benefit of the bargain that had been struck. 250Further, at least for the first three straw seasons, the obvious fact that the parties expected another 10,000 tonnes to be harvested, baled and made available for collection makes a nonsense of the proposition that straw from the previous season (or seasons) could be left, mouldering on the farms, while the current season's activities were under way. 251In those circumstances, I think that a term similar to that for which Mr Katekar contended is implied. In the absence of such a term, it would be in the sole discretion of Composters as to when Robertson would be paid the "baling" component of the overall cost. The obvious answer to this problem is that a term should be implied to the effect that straw harvested in any one season should be collected, at the latest, before the commencement of the next harvesting season. Without such a term, straw could be left to moulder, and Robertson, having done all that it was required to do, could be deprived of the greater part of the price. Such a term is clearly necessary to give business efficacy to the supply agreement. 252It may not be necessary to go so far as Mr Katekar submitted, and imply a term for collection before February of the following year. What must be implied is a term that the straw be collected within a reasonable time. On the facts of this case, a reasonable time would be some time between completion of baling (and notification by Robertson to Composters of where the straw was available for collection) and the commencement of operations for the following season. 253Thus, in principle, I conclude that Robertson has made good its case. 254That leaves for decision the amount of damages, and the subsidiary submissions put for Composters as to the quality of the straw and other matters. 255As I have said, it is, if not common ground, at least shown on the basis of Composters' own documents that it collected no more than (in round figures) 331 tonnes of straw that had been bailed for it in the 2009/2010 season. Robertson's claim for damages is for loss of the revenue that would have accrued to it for the remaining 9,669 tonnes. 256Mr Katekar submitted that Robertson was entitled to the full amount of the unpaid baling fee. He submitted that there was no need to allow for any costs that would have been incurred in deriving the revenue. 257In my view, that submission is in principle correct. All the work of harvesting and baling had been done. Robertson has either paid farmers for the straw that it has harvested, or remains liable to pay them. The terms of sale were ex farm. Thus, with two exceptions to which I will turn in a moment, the costs of collection and transport were to be borne by Composters. 258One of those exceptions relates to straw harvested north of the Tahrone turn-off. Robertson accepts that it was required to allow, against the amount payable by Composters, the cost of transporting the straw from wherever it was available to the Tahrone turn-off. There is no evidence as to how much of the 2009/2010 straw came from that area. It was not a matter addressed in Composters' submissions. It was addressed only in relation to straw from the 2008/2009 season that was actually collected from north of the Tahrone turnoff (see at [308] below). 259The second qualification concerns straw that might have been hauled by Robertson to the proposed Gilgandra depot. Since no Gilgandra depot was established, no issue of quantification is posed by this qualification. 260Subject to the remaining issues, the quantum of damages is therefore $808,328 (9,669 tonnes at a rate of $83.60 per tonne). 261I am unsure if Robertson claimed interest on this sum. It did not, in relation to its claim for damages for loss of the benefit of the contract for the last two seasons. Whether that concession applied to the loss in respect of the 2009/2010 season is unclear. Accordingly, I do no more than record that there may be an issue as to pre-judgment interest on this amount. 262The principal remaining issues raised by Composters related to the quality of the straw, the possibility that some of it may have been sold elsewhere, and an asserted failure to mitigate. 263It may be accepted that the straw had deteriorated. There is however no evidence that whatever deterioration has been observed was the result of anything other than exposure to the weather for an inordinate length of time. To put it another way, there is no evidence that would support the conclusion that the straw was in poor condition, or of inferior quality, at a time when it should have been collected (that is to say, before the commencement of the next harvesting season). The evidence is that straw will deteriorate if it is left exposed to the elements. Such deterioration as there is seems to me to be an inevitable consequence of Composters' decision not to collect the straw. 264Robertson harvested and baled over 14,600 tonnes of straw during the 2009/2010 season. It took steps to sell so much of that straw as was not required to satisfy its obligation to Composters, as well as straw harvested by it during the 2010/2011 season. The records do not enable any finding to be made as to whether any part of the straw from the 2009/2010 season that was sold was straw allocated to Composters, or straw surplus to the 10,000 tonnes allocated to Composters. 265Thus, there is no basis for deducting, from the damages claimed, some amount to allow for straw earmarked for Composters that has been sold to other users. 266I turn to the suggested failure to mitigate. There was a glut of straw on the market in and following the 2009/2010 season. Prices were falling. Any question of mitigation must take those matters into account. 267Robertson was placed in an invidious situation. On the one hand, on any view of the facts, it had a contract with Composters, for the sale to Composters of 10,000 tonnes of straw from the 2009/2010 season. On any view, it had harvested and baled that quantity of straw for Composters. On any view, it had been prepaid $600,000.00 towards the total cost of that straw. It expected that Composters would make arrangements to collect that straw over the month leading up to the commencement of the 2010/2011 season. 268It was not until the Dunedoo meeting in June 2010 that Composters made Robertson aware that Composters was not prepared to take 10,000 tonnes of straw for the 2010/2011 season. But even on the evidence of Dr Martin and Mr Marland, Composters did not tell Robertson, at that meeting or thereafter, that it would not take straw from the 2009/2010 season. On the contrary, on Dr Martin's evidence as to the conversation, he said that he would take that straw "and not raise any issue about the quality despite its poor condition". 269Had Robertson sold the straw to others, it could have been subjected to a claim by Composters for damages for breach of contract, including (one might think) a claim for return of the $660,000.00 (including GST) that had been prepaid. 270Had Composters repudiated its unperformed obligations in respect of the 2009/2010 season straw, then a question of mitigation might arise. But in circumstances where Composters (on its own evidence) stated that it would perform the agreement, it could hardly have been reasonable for Robertson to have taken any step to thwart that performance. 271Accordingly, in my view, there was no basis on which Robertson could consider the question of mitigation until it became clear that Composters had no intention of collecting the straw. By then, of course, Composters had repudiated its obligations under the supply agreement, and Robertson was left with the task of disposing of the straw that it had committed to take from farmers for the 2010/2011 season. Understandably, that was a matter which consumed its attention. 272There was a subsidiary dispute between the parties, in late 2010 when Robertson prevented (or purported to prevent) Composters from collecting the straw. This occurred after the relationship between them had broken down. Robertson said that any authority that Composters had to collect the straw was withdrawn. It communicated that to farmers. It said that it would only permit collection if a number of ancillary demands were met. 273There was a stand-off for a little under two months. However, on 21 December 2010, Robertson retreated from its position. It informed Composters that the straw was available for collection, without any condition as to payment other than the contractual payment of $83.60 per tonne upon delivery. 274Composters claims, further, that it was prevented from collecting the straw after 17 January 2011 by Robertsons' termination of the supply agreement (by acceptance of Composters' repudiation). That argument is specious. I have no doubt that, if Composters had wished to collect the straw from the 2009/2010 season, Robertson would have agreed. After all, it was not until the straw was collected that Robertson was entitled to be paid. But in any event, termination of the agreement by accepted repudiation discharges each party from future performance (subject to the guilty party's secondary obligations in damages). It does not affect accrued rights and obligations. As a matter of principle, the accepted termination was no impediment to collection. 275I conclude that, subject to the question of pre-judgment interest, Robertson is entitled to damages in the sum indicated, $808,328.00, for damages for breach of the supply agreement in respect of the 2009/2010 season. Loss of bargain damages: 2010/2011 and 2011/2012 seasons 276It was common ground that Robertson's claim was one for damages for loss of the opportunity to earn profit from the supply agreement for the two seasons in question. 277Robertson sought to quantify its damages by assuming that it would have sold to Composters, in each season, the full 10,000 tonnes of straw at a price of $143.60 per tonne. This figure made no allowance for CPI increase in the baling charge. Nor did it make any allowance for the possibility that the "royalty" component might have been reduced. In part, that reflected Robertson's position that the price was fixed, and that there was no obligation to renegotiate in good faith if the price of straw dropped substantially. 278The next step in Robertson's quantification was to seek to assess the expenses that would have been incurred in producing that income. This step involved making a number of assumptions as to what expenses were referable, in whole or in part, to the harvesting and baling operations. In the case of expenses partially attributable to those operations, it involved further assumptions as to the proportion that should be attributed to those operations. 279The exercise of isolating and quantifying expenses was undertaken by Mrs Robertson. For entirely understandable financial reasons, Robertson did not have the benefit of expert assistance on the point. 280There were however many concerns in the way that Mrs Robertson went about this task. (In saying this, I do not mean to suggest that she was being in any way underhanded, or unfair, let alone dishonest. The simple point is that her methodology was, in my view, seriously open to question.) 281In brief, the methodological difficulties include the following: (1) Mrs Robertson's methodology sought to isolate expenses that were directly attributable to the harvesting and baling operations, but ignored general expenses (such as accounting costs) which must have been referable to all income-earning activities, including the selling of baled straw. (2) Mrs Robertson's apportionment of expenses between the operations of harvesting and baling on the one hand, and other business operations on the other, was, at base, purely arbitrary or speculative. (3) Mrs Robertson's methodology assumed that there was no "marginal cost" issue: i.e., that a reduction of turnover might not have led to some proportionate reduction of expenditure. (4) Further, Mrs Robertson's methodology allocated, as an expense, capital repayments in respect of the equipment that had been bought. There may be some justification for this, but if there is, it was not elucidated in submissions. (5) Finally, there were a number of items of expense that were inconsistent with the records (or some of the records) of the company. In some cases, there was a rational explanation. In others, there was not. 282In those circumstances, it seems to me, the better approach is to take the 2008/2009 financial year as a base year, and then to undertake the following steps: (1) identify and deduct if necessary any items of income in respect of which, it can be assumed, significant expenses would not have been incurred; (2) calculate the ratio between income from straw sales and the total (if necessary, so adjusted) income for that year; (3) on the assumption that expenses were incurred in the rough proportion that income from straw sales bears to total adjusted income, apply that ratio to expenses to derive a notional expense figure for all harvesting and baling of straw; had the contract been performed according to its terms; (4) calculate the ratio between straw harvested and baled for Composters and all straw harvested and baled; (5) apply this latter ratio to the notional expenses referable to the harvesting and baling of straw; (6) use that notional expense figure to calculate a notional profit on the sales that should have been made to Composters for the 2010/2011 and 2011/2012 years; and (7) consider whether some discount for contingencies (including reduction in price by reason of good faith negotiations as to the royalty component) should be allowed and, if so, quantify that discount; 283I accept that there are difficulties with this methodology. One is that it assumes that the relationship between the income attributable to straw sales and the income attributable to other activities would have remained more or less constant. The other is that the relevant expenses would have remained more or less constant. But in the absence of any other methodology, it seems to me that the suggested methodology possesses a sufficient degree of logic to justify the conclusion that it is more than sheer (or mere) speculation. 284In case it is not clear, the reason for treating the 2008/2009 financial year as the base year for establishing the ratio between straw and other income is that all (or substantially all) of the 10,000 tonnes of straw baled by Robertson for Composters were sold, delivered and paid for. 285For that year, Robertson's total income was $2,251,256.00. Of that sum, $363,950.00 was attributable (according to the profit and loss statement) to "increase in stock on hand (market value)". Since it is unlikely that any significant proportion of the expenses should be treated as referable to that accounting income, it should be excluded. There are also other items which perhaps should be excluded, but since they are minimal, I do not propose to take up time dealing with them. 286Adjusted income for the year is thus $1,887,306.00. 287Straw sales for that year produced $1,149,702.00 in revenue. That sum is 61% of the total adjusted income. 288Mr Katekar submitted that the expenses for the 2009/2010 year could be taken as representative, in the sense that they should be taken to provide a safe guide to expenses that would have been incurred in the subsequent years. That, I think, is correct. By then, the Robertsons had acquired, and made available to Robertson on hire, all the equipment that it needed. 289For the 2009/2010 year, expenses were $2,504,826.00. Those expenses were substantially higher than those for the previous year. They include a significant amount, $800,000.00, for plant hired by Mr and Mrs Robertson to their company. Although that appears to include a component of repayment of capital expenditure, there is no basis on which it could be adjusted to reflect what might be regarded as a commercial rate of hire. Nonetheless, inclusion of the full amount is a conservative approach for present purposes. 29061% of the 2009/2010 financial year expenses is $1,527,944.00. 291For the 2009/2010 year, Robertson harvested and baled about 14,600 tonnes of straw. The notional expense that I have calculated is referable to the whole of that activity. However, the portion attributable to straw harvested and baled for Composters would be 10,000/14,600, or 68.5%. Applied to the calculated "straw" expenses, that would suggest that $1,046,537.00 of those expenses should be attributed to straw harvested and baled for Composters. 292If those figures are to be taken as a guide, then the lost profit is of the order of $389,463.00 for each of the years. 293Stating the outcome in that fashion produces an impression of certainty that is essentially spurious. It is the result of applying layers of assumptions to the base figures. In my view, it is appropriate to allow a discount to compensate for the imprecision that is a necessary concomitant of multi-layered assumptions, and then a further discount to allow for the prospect that the income might not have been earned, either in the amount claimed or at all. 294I should note that Mr Katekar's calculations (which produced claimed losses of, respectively, $607,000.00 and $704,000.00 for the 2010/2011 and 2011/2012 years) embodied what he asserted were elements of conservatism. Further, in this area, it is quite clear that Robertson does not make any claim for interest. Mr Katekar submitted that this introduced a further element of conservatism. 295It is correct to say that, if one accepts Mr Katekar's methodology, there are conservative elements within it, compounded by the ultimate conservatism of not seeking interest. But if one does not accept the methodology (and for the reasons I have given, I do not), the fact that its conservative application produces a higher figure than one that seems to me to be justifiable on the basis of such evidence that there is does not mean that the figure produced by what I consider to be a more appropriate methodology should be left undiscounted. 296The selection of a discount for inherent uncertainties in (and in the application of) the underlying assumptions is inherently arbitrary. Acknowledging that it is a matter of impression rather than the result of any logical analysis, I propose to allow a discount of 20%. 297There is then the question of a further discount to reflect the inherent uncertainty in the assumption that the income would have been earned in full. For the 2010/2011 season, it does not seem to me that any discount should be allowed. Composters did not seek to negotiate a reduction in the price per tonne by reference by what it claims as the lower royalty figure that is appropriate. Its approach was to say that it would not take the full 10,000 tonnes that, on my view, it was obliged to take. 298However, it seems to me, if Composters had been made aware of its legal obligations, there is a real likelihood that it would not have taken any straw for the last season except upon the basis of a reduced price. The evidence is, as I have said, that there was then an abundant supply of straw, and that prices were dropping. To my mind, there is a real likelihood that Composters, acting in good faith and taking into consideration market conditions, would have been entitled to insist on a substantially lower straw price. 299Robertson's reaction, if that position had been taken, is speculative. Of course, Mr and Mrs Robertson though that they were entitled to receive the full negotiated price for the full four years. If what in my view is the correct operation of the contract had been explained to them, they would have appreciated the obligation to negotiate in good faith where market conditions required or justified such negotiation. Presumably, so advised, their attitude would have been that it was better to get something than nothing, particularly having regard to the heavy capital expenditure that they had undertaken. 300Thus, in my view, it is likely that the parties (properly advised, and intending to perform their obligations in good faith) would have negotiated a lower price for the last season to which the supply agreement applied. 301What that price might have been is difficult to assess. There is some evidence of prices around $100.00 per tonne ex farm. Doing the best I can, an appropriate reduction, in relation to the 2011/2012 season, to allow for the contingency that a lower price might have been negotiated is of the order of 35% off the otherwise appropriate figure for damages. In case it is not clear, that is a further reduction of 35%, not a reduction of 35% that incorporates the reduction of 20% to which I have referred already. However, as with that earlier reduction, I acknowledge that the figure is the result of impression rather than logical analysis. 302Accordingly, I would propose to assess damages for loss of bargain as follows: (1) in respect of the 2010/2011 straw season, in the sum of $311,570.00; and (2) in respect of the 2011/2012 straw season, in the sum of $202,521.00 303I have said "I would propose to assess" for two reasons. One is that I indicated to the parties, in the course of submissions, that if I thought a different methodology to that propounded by Mr Katekar was appropriate, I would give them an opportunity to speak to it. The other is that even if the methodology be accepted in principle, there may well be arithmetical errors in what I have done. 304Finally, since Robertson's abandonment of a claim to interest was premised on rendering more conservative the damages that it calculated, fairness demands that it should have an opportunity to reinstate that claim, and to calculate interest, if it wishes.

Sixth issue: Composters claim for damages (excluding damages dealt with under issues 7 to 10) 305Since this issue is premised on Composters' succeeding on issues 1 to 3, it does not arise.

Seventh issue: the Gilgandra depot 306Essentially for the reasons that I have give at [75] to [84] above, I conclude that it was Composters' obligation to establish the Gilgandra depot. 307It follows that paragraph 7 of the heads of agreement, relating to straw hauled from north of the Tahrone turn-off, is engaged. 308Composters quantifies its loss, or perhaps more accurately the additional cost of hauling straw from north of the Tahrone turn-off, at $27,815.00 exclusive of GST. That amount is assessed on a rational basis. To the extent necessary, the underlying figures are supported by appropriate records. Robertson does not dispute this quantification. 309Robertson's answer is that, had the Gilgandra depot been established, it would have hauled straw from areas north of the Tahrone turn-off to the depot. Two consequences would have followed. One is that Composters would not have recovered the additional charges. The other is that Robertson would have derived additional income, for so much of the haulage as related to the distance from the Tahrone turn-off to the depot. 310Mr Robertson said, in substance, that he was not worried about paragraph 7 of the heads of agreement, because he always expected that the Gilgandra depot would be established and that he would haul straw to it. But that expectation does not seem to me to be relevant. 311Undoubtedly, the parties contemplated that there would be established a depot at Gilgandra. But the contract that they negotiated involved two elements. One was that Composters might cause the straw to be collected and taken straight to Singleton. In that event, Robertson was responsible for the additional freight cost, in respect of straw collected from areas north of the Tahrone turn-off. 312The other alternative contemplated was that Robertson would haul the straw to the depot, and be paid something for it. That did not happen, because the depot was not established. 313Accordingly, in the events that happened, paragraph 7 has been engaged. Robertson is liable to bear the extra freight cost involved: $27,815.00. 314In addition, Composters is entitled to interest on that amount.

Eighth issue: the additional freight term 315Proof of this term depends on acceptance of Dr Martin's evidence. Mr Robertson did not accept that any such term had been agreed. I prefer Mr Robertson's evidence. 316The parties discussed additional freight charges in the context of Mr Robertson's proposal to obtain straw from areas north of Coonamble: specifically, from around Come by Chance and Walgett. They reached an agreement as to the way in which the additional cost of haulage would be treated. That was documented in the heads of agreement. 317I have no doubt that if, either then or subsequently, Mr Robertson had proposed to make straw available at some other relatively remote area (for example, the Griffith region), a similar allowance would have been discussed and agreed. 318In circumstances where the issue was raised in a specific context, and dealt with by agreement in that context, I think that the evidence is against the wider term for which Composters contends. 319If I were wrong in this, I would assess damages in the amounts claimed by Composters. Exclusive of interest (and GST) those amounts are: (1) $8,470.00 for the 2008/2009 straw season; and (2) $7,165.00 for the following season.

Ninth issue: bale weights 320Mr and Mrs Robertson's evidence is that this provision (paragraph 5) of the heads of agreement was not agreed, and that Mr Robertson informed Dr Martin of that in a conversation a day or so after he received the heads of agreement. I accept that evidence. It follows that there was no such term.

Tenth issue: optimum loading of trucks 321Composters' pleaded case is that this is the term recorded in paragraph 6 of the heads of agreement. As I have said already, I accept the evidence of Mr and Mrs Robertson that they rejected this term. Accordingly, I do not find that there was any such obligation as pleaded. 322Were I wrong in this, I would assess damages in the amount claimed by Composters (exclusive of GST and interest): $81,189.00. As with the other calculations, there is a rational basis for deriving the figure and it is supported by underlying contemporaneous records. 323Nonetheless, Composters called evidence of a conversation at which, it asserts, there was discussion on the topic of the optimum loading of trucks. It is not clear what (if any) significance Composters attaches to that conversation. On the pleaded case, it cannot have any contractual effect. However, less the matter go further and it should transpire that the conversation does have some significance that at present escapes me, I think the better course is to deal with the facts. 324Were I wrong in this, I would assess damages in the figure of $81,189.00, exclusive of GST and interest. It should be noted, however, that if I were wrong in respect of both this issue and issue 9, that sum should be allowed once only and not twice. Composters' submissions on damages made it clear that those two claims were alternatives. 325Dr Martin said that he met Mr and Mrs Robertson at the Milestone Hotel in Dubbo. According to Dr Martin, Mr McCulloch and Mr Brines were present. According to Dr Martin, he said to Mr and Mrs Robertson, in the course of their discussion, words to the effect that: Given we'll have the two bale sizes this year and we'll need to load bales of each size on each truck you'll need to have sufficient smaller bales available at each stack on each farm for loading. ... if we don't get these issues of stacking and access right the freight is going to kill me. I know these issues will be resolved once you've set up the Gilgandra Depot... . 326According to Dr Martin, Mr Robertson replied to the effect: Yeah we will try and do what you want us to do with the stacks... . 327Mr McCulloch said in his affidavit evidence that the discussion included some but not all of what Dr Martin had asserted. (Mr McCulloch did not say that a Gilgandra depot was discussed.) However, in cross-examination, Mr McCulloch gave a different account of the relevant part of the discussion (T165.34-166.28): Q. Mr McCulloch, in your affidavit you've sworn that in around January 2009, "I attended a meeting with the Geoff Martin of Mushroom Composters at Dubbo"? A. That is correct. Q. That was at the Milestone Hotel? A. That is correct. Q. It was later than January 2009, wasn't it? A. The time, date I couldn't confirm. But we definitely had a meeting at that hotel and in attendance at that hotel was Geoff Martin, Ian and Donna Robertson and my driver Rod Brines. Q. Yes. And at that time the price of diesel fuel was particularly high? A. Correct. Q. Mushroom Composters in particular, Geoff Martin, was concerned to optimise truck weights? A. That is correct. Q. He was concerned that your haulage driver, Rod Brines, was not loading the truck correctly? A. Yeah, what the meeting was about was topping the front of the A trailer up or loading the A trailer of the Bdouble with smaller bales to optimise the maximum weight that the Bdouble could carry rather than being light Q. Did I interrupt you? A. And that meant most probably loading the bigger bales at one stack and going to a different location to load the smaller bales. Ian Robertson agreed at that meeting that he would put the little bales at a suitable place for the driver to be able to get them. Q. He said that he would cart, he would put some 8 x 4 x 3 bales at a shed at Trewilga, didn't he? A. Correct. Q. He didn't say that he would cart smaller bales to each of the farms? A. I don't recollect exactly, but if he was going to take it he was going to put them in a suitable place to make it easier on the drivers to obtain them. HIS HONOUR Q. That was the shed at Trewilga, was it? A. I can't recollect if that was what was said, but it was a suitable place. If that's the place that he said, well, he signed it. I can't recollect the exact place. 328A little later in his cross-examination, Mr McCulloch gave the following evidence (T167.5-.35): Q. A minute ago I asked you a question about carting the smaller bales to each of the farms, do you remember that question? A. Yes. Q. What you have put in your affidavit is this statement that is, you in your affidavit have attributed these words to Mr Robertson, if you can just follow me here, this is what you've said that Mr Robertson said, "I'll cart smaller bales to each of the farms and they will be available at the stacks with the big bales." The question I want to ask you, Mr McCulloch, is that wasn't said by Mr Robertson, was it? A. I would assume that it was said, but in saying that I can't recollect the exact words, it was too long ago. HIS HONOUR Q. When you say you would "assume" it was said, Mr McCulloch, what do you mean? A. Well, it was definitely said that he would make access to those bales that he picked up easily, whether that meant taking them to the stacks where the other ones was located or putting them in a different shed where we could pick them up on the way or afterwards. So it was definitely organised so to put those smaller bales to be easily accessed, whether that meant to go where the straw stacks were or for another shed on the highway. I suppose that would depend on where the small bales have come from. HIS HONOUR Q. Your memory of the outcome is that Mr Robertson agreed to make the small bales available whether at farms individually or at a convenient collection point, you can't now recall, is that correct? A. That is correct. 329Mr Brines swore an affidavit. He was not required for cross-examination. The salient feature of that affidavit is that, although it makes numerous complaints about the way in which (according to Mr Brines), Robertson stacked straw on farms, it does not refer to, let alone give any account of, the meeting at the Milestone Hotel. 330Mr and Mrs Robertson did not refer to the meeting in their affidavits. They did deal with a meeting at Cudal, which, they said, happened at around the same time as Dr Martin said the meeting at the Milestone Hotel took place. Mr Robertson was cross-examined to suggest that in fact the Cudal meeting to which he had referred was the Dubbo meeting to which Dr Martin referred. He did not agree. 331However, Mr Robertson agreed, there was (on his view also) a meeting at the Milestone Hotel at which he and Mrs Robertson and Dr Martin, Mr McCulloch and Mr Brines attended. 332In substance, Mr Robertson denied Dr Martin's account of the conversation. Specifically, Mr Robertson denied that he had agreed to stack both 8x4x4 and 8x4x3 bales on each farm. 333To the extent that the Milestone Hotel conversation is relevant, I do not find that it occurred in the terms asserted by Dr Martin. Specifically, I do not find that Mr Robertson agreed that he would stack both 8x4x4 and 8x3x3 bales at each farm. There are several reasons. 334First, looking at the matter objectively, it is extremely unlikely that Mr Robertson would have agreed to such a requirement. It was commercially impractical (if not impossible). I refer to what I have said at [18], [19] above. 335Secondly, Mr McCulloch's account of the conversation does not support Dr Martin when one takes his evidence in cross-examination into consideration. On Mr McCulloch's evidence as a whole, Mr Robertson agreed only to stack 8x4x3 bales at some convenient point, such as "his shed at Trewilga". Mr Robertson accepted that he was prepared to do this. 336Thirdly, although Composters called Mr Brines as a witness, it did not seek to adduce any evidence from him as to the meeting in question. The obvious inference is that it feared to do so (see Handley JA in Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418).

Conclusions and order 337Composters succeeds on its claim, but only in respect of the cost of hauling freight from north of the Tahrone turn-off. Its damages are quantified at $27,815.00 (exclusive of GST), before interest. Since Robertson has not pleaded a defence by way of set off, Composters is entitled to judgment against Robertson in that sum together with interest to the date of judgment. 338Robertson succeeds against Composters on its cross-claim. Its damages comprise the following amounts: (1) in respect of the 2009/2010 season: $808,328.00. (2) in respect of the 2010/2011 season: provisionally (and subject to what follows), $311,570.00. (3) in respect of the 2011/2012 season (again provisionally, and subject to what follows), $202,521.00. 339The parties are to have an opportunity to consider the basis on which I have provisionally assessed damages in respect of the 2010/2011 and 2011/2012 seasons. If the parties accept the methodology that I have proposed then, subject to correction of any arithmetic errors, damages will be assessed accordingly. 340If the parties do not accept the methodology then it will be necessary to deal with the dispute. I would propose to do so by way of written submissions. 341There is also the question of interest. Robertson is to clarify whether it claims interest in respect of the 2009/2010 season damages, and whether (because of the view that I have taken as to the appropriate methodology for the last two season) it wishes to claim interest for those seasons. 342Again, if necessary, those matters (if disputed) should be dealt with by way of written submissions. 343Once those issues are resolved, Robertson should have judgment on its cross-claim for whatever is the outcome. It would be appropriate for this judgment to be set off against the judgment to be entered in favour of Composters. 344There will also be questions of costs. Again, unless the parties persuade me to the contrary, I would propose to deal with costs on the basis of written submissions. 345The most efficient (or least inefficient) way of achieving a final resolution is to stand the matter over for directions. If the parties are in substance agreed on the orders to be made, they should submit them in advance and I will make them, and deal with any outstanding (insubstantial) disputes. If there is to be a significant dispute, I will give directions for submissions (and any necessary affidavits) to be filed and served, with copies provided to my associate. 346For those reasons, the only order that I make is to stand the matter over for directions to 9:30am on 25 March 2014.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 March 2014

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