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[2019] VSC 104
Supreme Court of Victoria
2019-03-08
CROFT J
Original judgment source is linked above.
CONTRACT - Supply agreement - Proper construction - Implied terms - Good faith in contract - BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 - Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 - Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 - Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 - -
1 In this proceeding, declarations are sought by Primary Flooring Pty Ltd (ACN 615 172 097) ("Primary Flooring") against the Defendants, Australian Comfort Group Pty Ltd (ACN 098 742 584) and Australian Comfort Group Holdings Pty Ltd (ACN 143 785 522) ("Comfort Group") with respect to the proper construction of a Scrap Foam Supply Agreement dated 30 October 2010 ("the Supply Agreement"). The essence of the controversy between the parties concerns the circumstances in which the Supply Agreement may be terminated by the parties.
2 The Plaintiff seeks the following declarations:[1]
(a) that upon request by one party to the Supply Agreement for consent to termination of the Supply Agreement, the other parties may not unreasonably withhold their consent ("First Declaration");
(b) that upon request by one party to the Supply Agreement for consent to termination of the Supply Agreement, the other parties must act in good faith ("Second Declaration");
(c) that upon request by one party to the Supply Agreement for consent to termination of the Supply Agreement, the other parties must consent to termination following the passing of a reasonable period of time ("Third Declaration");
(d) that upon request by one party to the Supply Agreement, the other parties are required to identify a date on which they would consent to termination of the Supply Agreement if, acting reasonably and/or in good faith, they do not consent to the requesting party's proposal ("Fourth Declaration");
(e) that in not providing consent for the Supply Agreement to terminate on 31 December 2018, the Defendants unreasonably withheld their consent and/or did not act in good faith ("Fifth Declaration");
(f) that the defendants acted in breach of their obligation to act reasonably and/or in good faith by not identifying a date on which they would consent to termination of the Supply Agreement ("Sixth Declaration"); and
(g) further or in the alternative to the Sixth Declaration, a declaration of the date on which the Supply Agreement shall terminate ("Seventh Declaration").
3 Primary Flooring says that the First to Fourth Declarations are intended to identify and give content to the terms that its claims ought to be implied in the Supply Agreement and the Fifth and Sixth Declarations seek to establish the way in which Comfort Group is claimed to have breached the relevant implied terms.
4 The position of Primary Flooring is that Comfort Group would have complied with the terms of the Supply Agreement if they had allowed for the Supply Agreement to be terminated within 18 months, as proposed by Primary Flooring in its letter of 29 June 2017. Primary Flooring seeks the Seventh Declaration, which allows the Court to set an alternative timeframe, in the event that the Court declines to make the Sixth Declaration.
Circumstances of entry into the Supply Agreement
5 The Defendants are both members of "the Comfort Group", a family owned business with operations in Australia and New Zealand. The Comfort Group has approximately 575 full time employees, annual consolidated revenue in excess of $175 million, and total consolidated assets in excess of $100 million. The Group has, since 2011, owned and operated the "Dunlop Foams Australia" business ("Dunlop Foams"), which produces polyurethane foam used for bedding and furniture, and also the "Sleepmaker Australia" business ("Sleepmaker"), which produces bedding products, predominantly mattresses. These businesses produce, as a by-product of their operations, scrap polyurethane foam in the form of off-cuts. This "scrap foam", as it is conveniently described, is produced in very significant quantities.[2]
6 For over 17 years, the scrap foam generated by Dunlop Foams and Sleepmaker has been exclusively supplied to, and purchased by, the "Dunlop Flooring Australia" business ("Dunlop Flooring"). Dunlop Flooring, which is presently owned and operated by the Plaintiff, Primary Flooring, manufactures and sells carpet underlay, for which scrap foam is the key raw material.
7 For well over ten years, there had been an arrangement in place whereby Dunlop Foams would sell all of its scrap foam to Dunlop Flooring. There was, however, no formal written contract that governed that arrangement. Rather, it was recorded pursuant to an intercompany accounting entry, and Dunlop Foams would issue invoices to Dunlop Flooring. No funds were exchanged between the companies in relation to this arrangement. This longstanding supply arrangement has, since March 2011, been the subject of a formal arrangement in the form of the Supply Agreement.
8 On 31 March 2011, The Comfort Group completed its acquisition of Dunlop Foams and Sleepmaker from the Pacific Brands Group. At the time of this acquisition, Dunlop Foams and Sleepmaker were held by Pacific Brands Household Products Pty Ltd. All of the shares in that company were, in turn, acquired by the Second Defendant, Australian Comfort Group Holdings Pty Ltd (ACN 143 785 522). At the time of acquisition, that company was known as ACN 143 785 522 Pty Ltd. At the time of the acquisition, the Pacific Brands Group also owned Dunlop Flooring, which then, as now, relevantly produces carpet underlay. Dunlop Flooring was held by Pacific Brands Clothing Pty Ltd ("Pacific Clothing").
9 A component of the acquisition was the entry into the Supply Agreement, which served to formalise the arrangement that had been in place between the related businesses for many years; namely, the supply of scrap foam by Dunlop Foams and Sleepmaker which, post-acquisition, would no longer be part of the Pacific Brands Group, to Dunlop Flooring, which was to remain part of the Pacific Brands Group.
10 The commercial significance of the obligations arising under the Supply Agreement was discussed during the negotiations that culminated in the acquisition of Dunlop Foams and Sleepmaker by the Comfort Group. The parties agreed that it was necessary to formalise the arrangements for the sale of purchase of scrap foam between the businesses in order to provide Dunlop Flooring with continued access to high quality scrap foam and to provide Dunlop Foams and Sleepmaker with both an outlet for the scrap foam generated by their businesses and revenue from the sale of that scrap foam.
11 In February 2017, Pacific Clothing, which had by then become Hanes Innerwear Australia Pty Ltd ("Hanes"), sold the Dunlop Flooring business to Primary Flooring. On 19 May 2017, Primary Flooring became a party to the Supply Agreement by taking an assignment of the rights and obligations of Hanes under the Supply Agreement, effective from 1 May 2017. Since it took an assignment of the Supply Agreement, Primary Flooring has purchased and continues to purchase scrap foam on a daily basis from the Comfort Group pursuant to the Supply Agreement.
The terms and operation of the Supply Agreement
12 Prior to the acquisition of Dunlop Flooring, the Plaintiff's representatives were aware that completing the acquisition would entail taking an assignment of the Supply Agreement and another scrap foam supply agreement with Joyce Foam Pty Ltd ("the Joyce Agreement"). The Joyce Agreement had an "initial term" of ten years from commencement and at least seven years to run at that stage.
13 Primary Flooring was aware of the terms of those agreements, including as to the duration, the price payable for scrap foam and the inability of parties to terminate the Supply Agreement by provision of notice. Primary Flooring was also aware of the differences between the contracted price and the prevailing market price at the time.
14 In an email sent on 3 November 2016, Mr Phil Smith, a director of Primary Flooring, said:[3]
These contracts are unusual as they were derived to protect the Underlay business and did not entertain a scrap price below $1 / kg which has only been the case over the past 12-15 months for the imported products. Termination of these agreements can only be by agreement of both parties or if a party ceases to exist or does not fulfil obligations under the contract.
15 In a previous email, on 2 November 2016, Phil Smith made reference to the "scrap foam contracts", noting as follows:[4]
The down side is that the long term supply is locked in at prices which are currently 30-35% above the world scrap price for foam and reflect approximately 43% of their total scrap foam purchases. Ideally we need these contracts to be assigned at terms acceptable to us but that difference in price represents approx. $1.25m difference in purchase costs which I am sure Pac Brands or the scrap suppliers are not going to be keen to give up on. ... The Joyce Agreement expires in 2024 with further options (2 X 5) beyond whilst the Comfort Group has no expiry date. Out of all the issues we face I see this being the most contentious and expect most difficult to overcome. ... Of course if the world price for foam scrap increases beyond the $1 /kg then the local contracts do not create a problem as a price mechanism would apply above $1 /kg and equalise with the world price effectively.
16 Despite the perceived significance of the obligations arising under the Supply Agreement, the representatives of Primary Flooring went ahead and determined not to not make a "big issue" with the vendor, Hanes, but, rather, to "try to win the auction and move into exclusive final negotiations, during which we can consider a legal (or if necessary commercial) solution"[5] and to consider "potential (subtle) legal ways to void" the obligations under the agreements.[6]
The terms and operations of the Supply Agreement
17 Under the terms of the Supply Agreement, scrap foam is bought by the "Customer", now Primary Flooring, at the price of $1 per kilo (exclusive of GST and freight costs). This price was selected at the time of the Supply Agreement because it was the price at which the Dunlop Foam's business had been invoicing the Dunlop Flooring business for many years under the existing arrangement between them, to which reference has already been made.
18 The cost of freight - that is, the delivery to Primary Flooring - from each location is paid by Primary Flooring in addition to the price paid per kilo for the scrap foam. Freight cost ranges, in approximate terms, from $0.05 to $0.15 per kilo.
19 The average price of scrap foam paid by Primary Flooring to Comfort Group from 2013 to 2018 was $1.0363 per kilo. In contrast, the average price of scrap foam paid by Primary Flooring to other local producers is $0.57 per kilo, and the average price paid to overseas producers is $0.54 per kilo (inclusive of freight/FOB).
20 Clause 3.1 of the Supply Agreement requires that Dunlop Flooring (being the "Customer") purchase from Comfort Group (being the "Suppliers"):[7]
The Customer must purchase, and the Suppliers must sell and promptly supply to the Customer, all scrap foam produced by the Suppliers, other than where clause 2(b) applies.
21 Of critical significance in the context of the present proceedings is clause 6 of the Supply Agreement, which makes provision for both its duration and the circumstances which enliven the right to terminate. The provisions of clause 6 are as follows:
6 Term and Termination
6.1 Duration of agreement
This agreement commences on the Commencement Date and will continue until terminated by mutual consent in writing, or as a result of this clause 6. For the avoidance of doubt, it is the parties' intention that this agreement continue to bind the parties' successors or assigns, and it may not be terminated, whether by a party giving reasonable notice or by any other means or on any other grounds, except as provided by this clause 6.
It is an Event of Termination if:
(a) there is a failure by a party (Defaulting Party) to perform or observe any material undertaking or obligation of the party (not caused by the other party (the Non Defaulting Party)) in this agreement, being a failure which is or is reasonably likely to cause material loss, damage or disruption to the Non Defaulting Party, and the Defaulting Party does not rectify the failure (where the failure is rectifiable) or otherwise remedy, make good or compensate the Non-Defaulting Party within 30 Business Days, or a longer period determined by the Non Defaulting Party, after receipt by the Defaulting Party of a notice from the Non Defaulting Party specifying the failure.
(b) a receiver, receiver and manager, administrator, trustee, mortgagee or similar official is appointed over any of the assets or undertakings of a party, an application or order is made for the winding up or dissolution of a party or any steps are taken to pass a resolution for the winding up or dissolution of a party; or
a party enters into, or resolves to enter into, any arrangement, composition or compromise with, or assignment for the benefit of, its creditors or any class of them. In this clause 6.2 and clause 6.3, the party in default is referred to as the 'Defaulting Party' and the party not in default is referred to as the 'Non Defaulting Party'.
22 I accept that, as Comfort Group contend, the terms of the Supply Agreement show the parties to it turned their minds to the duration of the agreement and its termination, and made express provision for the circumstances in which termination might occur; excluding, specifically, the ability to terminate by the giving of reasonable notice. Moreover, Mr Craig Turner, a director of Comfort Group and a person who was involved in the negotiations for the purchase of Dunlop Foams and Sleepmaker by Comfort Group, gave evidence is as follows:[8]
The existence and terms of the Scrap Foam Supply Agreement, which meant there was a guaranteed outlet for scrap foam at a specified price, were an essential part of the negotiations in relation to the acquisitions, and an important part of both the Comfort Group's decision to acquire the Dunlop Foams and Sleepmaker Australia businesses and the amount that it agreed to pay to acquire the businesses.
23 In the period following the completion of the acquisition, Dunlop Foams and Sleepmaker have supplied scrap foam to Dunlop Flooring in accordance with the Supply Agreement. Since the Supply Agreement commenced operation, in the order of 2,000 tonnes of scrap foam have been supplied each year. For example, in the 2017 financial year, Comfort Group sold and supplied approximately 2,532 tonnes of scrap foam to Dunlop Flooring under the Supply Agreement and in the 2018 financial year the volume of scrap foam supplied was approximately 2,323 tonnes.[9] The evidence indicates that, given the volume of scrap foam generated, the finding of an alternative means of disposing of the scrap foam would present considerable difficulty for Comfort Group.
Earlier proceedings with respect to the Supply Agreement
24 On 12 April 2017, following the transfer of Dunlop Flooring to Primary Flooring but prior to the assignment of the Supply Agreement, Hanes purported to give notice to Comfort Group that, effective 13 May 2017 and for a period of 12 months, Dunlop Flooring would have no requirement for any scrap foam under the Supply Agreement.[10] The sending of this notice occurred at the request of Primary Flooring. Comfort Group contends that this was the first of Primary Flooring's post-acquisition attempts to avoid the contractual obligations arising under the Supply Agreement; further observing that the "attempt" was not successful because, on 21 April 2017, Hanes rescinded the notice.[11]
25 Between 21 April 2017 and 19 May 2017, the then General Manager of Australian Comfort Group Pty Ltd, the first Defendant, Mr Anton McKernan, attended a meeting with Mr Smith. Mr Smith told Mr McKernan that, given the market price for scrap foam, Primary Flooring wished to renegotiate the Supply Agreement, rather than take an assignment of the Supply Agreement. Nevertheless, on 19 May 2017 Primary Flooring did execute an assignment in respect of the Supply Agreement and it was assigned to Primary Flooring with effect from 1 May 2017.[12]
26 Shortly after this assignment, Primary Flooring purported to give a notice dated 29 May 2017 to Comfort Group that, if effective, would have operated to suspend, from 28 June 2017, the supply of any scrap foam by Comfort Group to Primary Flooring for a period of 12 months.[13]
27 On 15 June 2017, Comfort Group commenced a proceeding in this Court seeking a declaration that the 29 May 2017 Notice was invalid and, alternatively, damages for breach of the Supply Agreement. Comfort Group also sought an injunction restraining Primary Flooring from acting in reliance upon the 29 May 2017 Notice. Prior to the hearing of this application for injunctive relief, Primary Flooring withdrew the 29 May 2017 Notice.[14]
28 In support of the proceedings, Mr McKernan swore an affidavit from which, Primary Flooring submits, can be established the following propositions, as at June 2017:[15]
(a) the production of foam was an inevitable result of the Defendants' foam production and bedding business continuing to operate and if the Supply Agreement was terminated, it would have been necessary for the Defendants to put in place alternative arrangements for disposal of the scrap foam, including:
(i) sale to a related company in New Zealand,
(ii) sale to a third party, and
(iii) landfill;
(b) sale to a related company in New Zealand, which would have taken several months to arrange, would have allowed the Defendants to dispose of approximately 800 tonnes of scrap foam per year;
(c) sale to a third party, which would have taken at least several months, would have given the Defendants a reasonable probability of disposing 100 tonnes of scrap foam per year to Underlay King, a low possibility of disposing of 250 tonnes of scrap foam per year to Airstep, as well as the possibility of selling scrap foam to customers in foreign markets;
(d) landfill options would take at least two months to put in place;
(e) it was not possible for the Defendants to put in place any practical arrangement for disposal of the scrap foam sold to Primary Flooring for at least three to four months.
29 As a result of the withdrawal of the 29 May 2017 Notice, those proceedings were discontinued. In the period following the assignment of the Supply Agreement to Primary Flooring, it has purchased scrap foam on a "daily" basis from Comfort Group.
Primary Flooring's request for consent to terminate the Supply Agreement
30 On 29 June 2017, the day after the 29 May 2017 Notice was formally withdrawn, the solicitors for Primary Flooring sent a letter to the solicitors for Comfort Group proposing the termination of the Supply Agreement with effect from 31 December 2018, and requested Comfort Group's consent to the proposed termination.[16] Thus, as Primary Flooring observes, the proposal in this letter would give Comfort Group an 18 month period in which to make alternative arrangements before the Supply Agreement was terminated. This period of time, Primary Flooring submits, was conservative in the circumstances and took into account the information contained in the affidavit of Mr McKernan as to the position in June 2017, from which Primary Flooring submitted various propositions were established, as set out above.[17] Moreover, Primary Flooring contended that this proposal also took account of the period for which the Supply Agreement had already been operating.
31 On 5 July 2017, Comfort Group sent a letter to Primary Flooring declining to consent to the termination of the Supply Agreement on 31 December 2018.[18]
32 As at July 2017, Mr Stefan Geertsema was Chief Financial Officer of the Comfort Group. His evidence is that, following receipt of the June 2017 letter, senior personnel of the Comfort Group gave consideration to the proposed termination of the Supply Agreement. At that time, Mr Geertsema says that he determined that it would not be feasible for Comfort Group to consent to the Proposed Termination. In particular:[19]
(a) There was no logical party, other than the Plaintiff, that could take the volume of scrap foam generated by Dunlop Foams.[20] In the previous month (June 2017, following receipt of the May 2017 Notice), another senior Comfort Group employee, Mr Anton McKernan, had assessed the alternatives for disposing of the scrap foam that was supplied to the Plaintiff under the Supply Agreement. Mr McKernan's expectation was that the Defendants would produce approximately 210 tonnes of scrap foam per month in the ensuing months. Even after compression, that monthly output would fill fourteen 40-foot shipping containers (more than 940 cubic metres).[21]
33 In the 5 July 2017 letter whereby Comfort Group informed Primary Flooring that it declined to consent to the proposed termination, the following points were made:[24]
...it could hardly be said to be unreasonable for us to decline consent simply because you do not like the terms of the contract that you acquired as part of your purchase of the business.
Furthermore it is not unreasonable for us to take the commercial view that we wish to continue to receive the benefit of our long term supply contract and that doing so is in our best interest.
There was no response to this letter from Primary Flooring and, in spite of this, the letter is now relied upon in support of its case that Comfort Group acted or sought to prevent the termination of the Supply Agreement by mutual agreement.[25] More particularly, Primary Flooring submitted in closing:[26]
In my view, the submissions of Primary Flooring in this respect are not supported by the evidence. First, the response from Comfort Group was, on any view, entirely reasonable in the circumstances; particularly having regard to the position which it affirmed in response with respect to its ongoing contractual rights and prejudice in the event of loss of those contractual arrangements.[32] Moreover, Primary Flooring made no attempt to address the commercial issues with respect to termination from Comfort Group's point of view; whether in response to the 5 July 2017 letter or otherwise. One might have expected a party in Primary Flooring's position seriously negotiating, or attempting to do so, with a view to terminating the Supply Agreement by mutual agreement, to have addressed these issues. Now to suggest that Comfort Group should have, in effect, made a bid against its own interests and nominated a termination date or period absent its own commercial concerns being addressed in some way by Primary Flooring is itself unreasonable in the circumstances and provides no support to the position of Primary Flooring.
Principles applicable to construction of the Supply Agreement
34 The parties are not at odds with respect to the principles applicable to the proper construction of the Supply Agreement. Rather, the controversy between them is to the application of those principles. The applicable principles, which the parties accept, are helpfully set out in submissions of Primary Flooring.[33] It is, nevertheless, desirable to set those principles out in these reasons and, in so doing, I principally rely upon these submissions.
35 Primary Flooring's case is that the Supply Agreement contains an implied term that was breached by the Defendants. The nature of that term and the application of these principles in that context is discussed further below. Before doing so, attention is given to the relevant legal principles that apply to the implication of terms: the principles that apply when construing a commercial contract and the principles that apply to termination of an agreement.
36 First, the proper construction of a contract is to be determined objectively by reference to its text, context and purpose. The objective approach is to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. It will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating. Unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption that the parties intended to produce a commercial result. A commercial contract is to be construed so as to avoid it making a commercial nonsense or a working commercial inconvenience.[34]
37 Secondly, the question as to whether an indefinite commercial agreement may be terminated by a party to the agreement depends upon whether the agreement contains an implied term to that effect. This is a question of construction that depends not only upon a textual examination of the words or writings of the parties but also involves consideration of the subject matter of the agreement, the circumstances in which it was made, and the provisions to which the parties have or have not agreed.[35] Although there is a presumption against implying a term that an agreement is terminable, ordinarily the nature of a commercial agreement will lead to the conclusion that the parties must have intended it to be terminable on notice.[36] Further, there is an argument that even if an agreement is expressed as operating in perpetuity, it may nevertheless be terminated if the situation changes radically since the contract was entered into in a way that was not initially intended by the parties.[37]
Implying a term of good faith and reasonableness
38 As a general proposition, it is the position that a commercial agreement may contain an implied obligation of good faith and reasonableness.
39 The contractual duty to act reasonably and in good faith encompasses the basic obligations: (a) to act honestly and with fidelity to the bargain; (b) not to undermine the bargain or the substance of the contractual benefit bargained for; and (c) to act reasonably and with fair dealing having regard to the interests of the parties (which will, commonly, at times be in conflict), and to the provisions and objectives of the contract, objectively ascertained. The obligation does not require that a party subordinate its legitimate interests to those of the other party. The content of the obligation is informed by the contractual, commercial and factual context.[38]
40 There cannot be a want of good faith in the exercise of a power which can serve only the interests of the party upon whom the power is conferred.[39]
41 The concept of reasonableness has much in common with the concept of good faith and there is little distinction of substance between the implied term of reasonableness and that of good faith.[40] In the case of Virk Pty Ltd (in liq) v YUM! Restaurants Australia Pty Ltd, the Full Court of the Federal Court said:[41]
(a) The notion of reasonableness within the composite phrase of "good faith and reasonableness" is not to be viewed distinctly from the obligation of good faith.[42]
(b) Reasonableness is not to be approached as akin to a tortious duty to exercise due care and skill or to produce a reasonable outcome. Rather it goes to the quality of the conduct to discern whether it was capricious, dishonest, unconscionable, arbitrary or the product of a motive which was antithetical to the object of the contractual power. Conduct attended by any of those qualities could never be said to be in good faith.[43]
(c) Reasonableness is referrable to the standard of a party's conduct or behaviour in relation to the performance of a contractual obligation or exercise of a contractual power. It may, for example, include consideration of a party's real intention or purpose in exercising a contractual power. It calls into consideration, for example, whether that conduct is or is not honest, capricious, arbitrary or for an extraneous purpose.[44]
42 Questions about when, and by what legal method, an obligation of good faith and reasonableness in a contract will be implied have not been settled in Australia, nor has the question of whether such an obligation is to be implied or arises as a matter of construction of a given contract.[45]
43 There is a long-established duty on contracting parties to act reasonably in enforcement and performance and it is well settled that a contracting party must comply with reasonable requests for performance made by the other party where the performance of their obligations requires co-operative acts.[46] Separately, the Court of Appeal in New South Wales has decided in numerous cases that a duty of good faith, both in performing obligations and exercising rights, may by implication be imposed on the parties to a contract, including as a legal incident of commercial contracts.[47] As well, in Renard Constructions (ME) Pty Ltd v Minister for Public Works, Priestley JA said that there was nothing in the slightest novel in the implication of terms requiring reasonableness by parties to a contract in implementing terms of the contract.[48]
44 The Court of Appeal in Victoria has not accepted that an implied term of good faith is a necessary legal incident of all commercial contracts or that it applies indiscriminately to all the rights and powers conferred by a commercial contract. Rather, it has said that whether a term requiring the exercise of good faith is to be implied depends upon the principles of ad hoc implication.[49] The conditions necessary to ground the implication of a term on this basis are that: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; and (5) it must not contradict any express term of the contract.[50]
45 Where an agreement does not otherwise regulate or restrict its termination, a party purporting to terminate an agreement has acted reasonably in giving notice is determined in light of the circumstances at the time of the giving of the notice.[51] Any period of notice must be sufficiently long to enable the recipient to deploy their labour and equipment in alternative employment, to carry out their commitments, to bring current negotiations to fruition, and to wind up the association in a businesslike manner.[52] If a person in the initial stages of a business arrangement expends money or effort in developing the business, it provides a ground for implying a term that the business is to continue for a reasonable period. It is not to be presumed that the parties intended that the agreement could be put to an end before the person incurring the expenditure or effort has had an opportunity to recoup their initial expenditure or effort.[53] Moreover, the possibility of a contractual obligation of indefinite duration is a position the law will entertain.[54] Whether and in what manner such an obligation may be terminated is a separate consideration and a matter to be resolved having regard to the terms of the particular agreement.[55]
46 An obligation to act reasonably or in good faith with respect to a power conferred by the provisions of an agreement would prevent the fixing of a period of time for an extraneous purpose or one which could not on any view be justified as reasonable having regard to the purpose for which such a notice is given - namely, to enable the parties to end their existing relationship and have a reasonable time to make alternative arrangements.[56] But, again, this position is dependent upon and is framed by the contractual provisions contained in the agreement.
Proper construction and operation of the Supply Agreement
47 At the outset in considering the position put by Primary Flooring, reference should be made to that which was made clear at the hearing of closing submissions in the trial of this matter. That position, which is critical, is that clause 6.1 of the Supply Agreement in the words "... and will continue until terminated by mutual consent in writing ..." is not merely stating the position with respect to any agreement but is imposing a contractual obligation on the parties with respect to termination on this basis. It is not entirely clear how Primary Flooring puts the content of such an obligation - whether as an obligation on the parties "...acting reasonably and in good faith, must attempt to resolve any differences they may have..."[57] for the purpose of reaching a mutually agreed termination date, or otherwise. In any event, the position put, expressly, by Primary Flooring is that if the Court finds no obligation on the parties of this kind with respect to termination of the Supply Agreement by mutual consent, the Primary Flooring case fails, there being no room for the application or implication of any good faith requirement with respect to termination.[58] As the reasons which follow explain, I find no such obligation of the kind contended for in this respect.
48 On the basis that the parties are under an obligation with respect to mutually agreed termination of the kind to which reference has been made, Primary Flooring contends that, with respect to the potential termination of the Supply Agreement:[59]
(1) Comfort Group is subject to an obligation of reasonableness as a legal incident of the contract or as a matter of construction;
(2) further or in the alternative, Comfort Group is subject to an obligation of good faith and reasonableness as a matter of fact.
In relation to the first contention, Primary Flooring says that there is an implied term of the Supply Agreement that a party may not unreasonably withhold their consent to termination of the Supply Agreement.[60] Further, in relation to the second, it says that it is implied that when a party receives a request to terminate the Supply Agreement, it will act reasonably and in good faith. As already observed, Primary Flooring concedes that in the absence of a finding of an obligation on the parties with respect to agreed termination, there is no basis for these contentions.
49 In relation to these contentions, Comfort Group responds that:[61]
(1) the Court should find that an obligation of reasonableness does not arise as a legal incident of the contract or as a matter of construction;
(2) the Court should find that the Defendants were not subject to an obligation of good faith and reasonableness as a matter of fact;
But if the Court finds for Primary Flooring in either of these respects, that:
(3) the content of any obligation to act in good faith and reasonably is constrained to the extent contended for by Comfort Group;[62] and
(4) the Defendants did not breach any implied obligation of good faith and reasonableness.
Implication as a legal incident of the contract or as a matter of construction
50 Comfort Group contends that the implication of a term that a party may not unreasonably withhold their consent to termination of the Supply Agreement is not permissible in the circumstances of this case because it would expressly contradict the terms of the agreement, in particular, clause 6.1; and it is contrary to the intention of the parties at the time the agreement was entered into. Moreover, the position is, as Comfort Group observes, that the Supply Agreement was negotiated between independent parties who turned their minds to the circumstances in which the Supply Agreement could be terminated and expressly rejected the ability to terminate on reasonable notice.
51 Additionally, Comfort Group contends that the construction for which Primary Flooring contends does not conform with orthodox principles of construction because it involves re-writing the contract; it is contrary to the express terms and intention of the parties at the time the contract was entered into; and it does not involve an interpretation of the contract to ensure the contract meets its contractual goals and makes commercial sense but, rather, would effect an outcome that is consistent with Primary Flooring's commercial goals and that would make commercial sense to Primary Flooring. In the course of closing submissions, Comfort Group emphasised, and quite correctly, that any consideration whether the contract meets its contractual goals and makes commercial sense must focus on the bargain actually struck between the parties - and as contained in clause 6 - not by reference to commercial considerations, previously or now.
52 Primary Flooring, on the other hand, contends that because termination of the Supply Agreement expressly requires a co-operative act, and, or alternatively, because the parties to an agreement are required to act reasonably in implementing the terms of their contract, there is an implied term of the Supply Agreement that a party may not unreasonably withhold their consent to termination of the Supply Agreement.[63] As has been discussed, the basis for that contention is that there is a duty on contracting parties to act reasonably in enforcement and performance and that a contracting party must comply with reasonable requests for performance made by the other party where the performance of their obligations requires co-operative acts.[64]
That is a conception that has been recognised (though not by all courts in Australia) as an implication or feature of Australian contract law attending the performance of the bargain and its construction and implied content...
Thus, if Party A cannot perform (or take the benefit of the contract) unless Party B performs, performance requires co-operative acts and an obligation to act reasonably in the performance of the contract may arise. However, in my view, clause 6.1 of the Supply Agreement does not require co-operative acts and is concerned with termination, not performance, of the contract.
54 Comfort Group submits that the Court should find that Primary Flooring were not subject to an obligation of good faith and reasonableness as a matter of fact because the requirements of BP Refinery (Westernport) Pty Ltd v Shire of Hastings[67] are not satisfied.
55 Comfort Group submits that clause 6.1 of the Supply Agreement deliberately confers on each party a broad discretion whether or not to consent to termination; hence, to imply a term of good faith or reasonableness would fetter the discretion. Whilst this characterisation of these provisions supports the position put by Comfort Group, I am of the view, as discussed in the reasons which follow, that there is no need for the conferral of such a discretion - rather it is the position with all agreements and arrangements that they are subject to variation, modification or termination by agreement of all parties, in spite of their terms. And, in the present context - particularly the provisions of clause 6 of the Supply Agreement - I am of the view that express reference to the obvious and universal possibility of termination by express agreement is to make clear and provide emphasis that these provisions mean what they say - that the agreement is only otherwise terminable in accordance with its express provisions. The further emphasis in this vein is, in my opinion, provided by the express exclusion of the possibility of termination on reasonable notice. Moreover, there is no room or warrant in the language of clause 6 to construe the reference to the possibility of termination by express agreement as imposing any party obligation. Indeed, importing such an obligation would be at odds with the language and structure of clause 6. More particularly, it could, as Primary Floor seeks now to do, tend to bring with it notions of reasonableness with respect to notice of, or the time for, termination, which is at odds with the language and express exclusion of the possibility of termination on reasonable notice in the provisions of clause 6.
56 Furthermore, Comfort Group submits that the Court should find that:[68]
(1) there is no evidence that it is "reasonable and equitable" in circumstances where the existence and terms of the agreement were material to the Defendants' decision to acquire the Dunlop Foams and Sleepmaker businesses and Primary Flooring was aware of the existence and terms of the agreement when it decided to purchase the Dunlop Flooring business;
(2) the implied term is not "necessary to give business efficacy" to the agreement because the parties turned their minds to termination of the agreement. Furthermore, "necessary to give business efficacy" means necessary to give business efficacy to the agreement, not the business or commercial goals of one of the parties, in this case, Primary Flooring;
(3) the implied term is not obvious because it is contrary to the discretion with respect to termination provided for in clause 6.1;
(4) the implied term is not capable of clear expression; and
(5) the implied term expressly contradicts the express terms of the agreement.
In my view, the evidence and the provisions of the Supply Agreement do support such a finding on the various aspects as submitted by Comfort Group.
57 In David A Harris Pty Ltd v AMP Financial Planning Pty Ltd[69], a case which in my view is analogous to the present case_,_ the contract set out specific circumstances in which the contract could be terminated, which included the ability to terminate by giving not less than 90 days' written notice. The plaintiff in that case submitted that the express rights to terminate and revoke were fettered or qualified through an implied term of good faith and that, even if the defendant had a right to bring the agreement to an end at its convenience, the defendant must act in "good faith" and "fairly" in deciding to exercise that right vis-à-vis the plaintiff.[70] Digby J rejected the plaintiff's contentions on the basis that the putative term was at odds with the broad discretion to terminate or revoke enjoyed by the defendant as evidenced by the wording of the termination clauses. Further, the parties had taken care to reduce their agreement to writing and set precise requirements for exercising the right to terminate.[71]
The obligation of good faith and reasonableness
58 It is common ground that the contractual duty to act reasonably and in good faith encompasses the basic obligations, to which reference has already been made:[72] (a) to act honestly and with fidelity to the bargain; (b) not to undermine the bargain or the substance of the contractual benefit bargained for; and (c) to act reasonably and with fair dealing having regard to the interests of the parties (which will, commonly, at times be in conflict), and to the provisions and objectives of the contract, objectively ascertained. The obligation does not require that a party subordinate its legitimate interests to those of the other party. The content of the obligation is informed by the contractual, commercial and factual context.[73]
59 Comfort Group submits that, if they are subject to obligations to act in good faith and reasonably:
(2) the standard of fair dealing or reasonableness that is to be expected "must recognise the nature of the contract or relationship, the different interests of the parties and the lack of necessity for parties to subordinate their own interests to those of the counterparty";[75]
(3) the assessment of the Comfort Group's response to the request from Primary Flooring for consent to termination must take account of the terms of the Supply Agreement and the circumstances in which the request was made;
(4) the question whether Comfort Group acted in good faith and reasonably is concerned with the process, not the outcome.[76]
...the question whether the 'conduct' of a contracting party is capricious or arbitrary or dishonest or for a purpose foreign to the objective of the contractual obligation or power and thus exhibiting a lack of good faith will instead be adjudicated upon the evidence in a particular case and in the context of the particular contract, having regard to acceptable norms of commercial conduct.
The Defendants acted in good faith and reasonably
60 I accept that, as submitted by Comfort Group, the evidence is that they gave due and proper consideration to the request for termination from Primary Flooring in that:[79]
(a) senior personnel of Comfort Group consulted each other regarding the Proposed Termination, the operational and financial implications and the appropriate response;[80]
(b) the Chief Financial Officer of Comfort Group considered that the Proposed Termination would result in significant financial loss;[81]
(c) senior personnel of Comfort Group considered that it would be difficult to put in place alternative arrangements;[82] and
(d) the response of Comfort Group was designed to uphold the contractual bargain.[83]
61 More particularly, Mr Senanayake, the Finance Director of Primary Flooring, accepted during cross-examination that this position was a "reasonable" one for Comfort Group to take.[84] Further, Mr Senanayake agreed that it was very difficult to agree on a date for termination of the Supply Agreement when the "whole picture", including commercial loss, was not looked at.[85] Consistent with the principle that a party is not required to subordinate its legitimate interests to those of the other party, in light of the above evidence, I accept that the Court must find that Comfort Group acted reasonably.
62 Additionally, Comfort Group submits that if there is an obligation to act in good faith and reasonably, it is mutual and that the evidence fails to demonstrate that it did not act in good faith and reasonably. It is also submitted by Comfort Group that when the conduct and reasons of Comfort Group are considered in light of all the circumstances at the time, including the nature of the request from Primary Flooring and the background against which it was sent, the Court should readily come to the conclusion that Comfort Group acted in good faith and reasonably. In my view, the evidence supports such a finding. Moreover, apart from Mr Senanayake's "estimate" as to possible cost savings, Primary Flooring has adduced no evidence by way of explanation of its commercial reasons for seeking to terminate the Supply Agreement or the process by which it determined to seek consent of Comfort Group to termination. Nevertheless, Primary Flooring's request for consent to terminate the Supply Agreement was sent in circumstances where: Primary Flooring, a large and sophisticated commercial entity, had knowingly assumed the obligations arising under the bargain, but was attempting to eschew them; and it was the latest in a series of attempts by Primary Flooring to avoid performance of those obligations.
63 In my view, it might be inferred from previous attempts by Primary Flooring to avoid the Supply Agreement[86] that there is some force in the position put by Comfort Group that Primary Flooring's request was contrived, in circumstances where the terms of the Supply Agreement specifically provide the means by which the Supply Agreement can be terminated. It is not, however, necessary to form a view on this for the purpose of these proceedings. Moreover, it is contended by Comfort Group that the request was also unreasonable, asking Comfort Group to identify an alternative termination date, when no provision was made for the commercial loss that would be suffered were the agreement terminated. As discussed previously, Primary Flooring could not, in my view, reasonably have expected any other response from Comfort Group to this termination request, contained, as it was, in the letter of 29 June 2017 from Primary Flooring's solicitors.[87] Indeed, Mr Senanayake agrees that the response by Comfort Group was reasonable in the circumstances. I accept that it follows that the Court could not possibly find that Comfort Group acted unreasonably in their response or in allegedly failing to respond to the request in the manner and detail sought by Primary Flooring.
64 In relation to what, in the circumstances and in the context of the provisions of the Supply Agreement, are critical matters, I accept the submissions by Comfort Group that:[88]
(a) the Supply Agreement is an indefinite contract that has only been in operation since 2010;
(b) the purchase price for the acquisition of the Dunlop Foams and Sleepmaker businesses was informed by the existence and terms of the Supply Agreement;
(c) the relevant "change in circumstances" (variance between the contracted price for scrap foam and the market price and, particularly, the world market price) was foreseeable; and
(d) there are, and were at all relevant times, for Comfort Group, significant financial loss and practical difficulties associated with making alternative arrangements for the disposal of scrap foam if the Supply Agreement were terminated.
65 In my view, it is clear that any suggestion by Primary Flooring that Comfort Group were not acting with fidelity to the bargain and they are undermining the bargain or the substance of the contractual benefit bargained for must be rejected.[89] The "bargain" is the bargain contained in the Supply Agreement. The "bargain" is not the pursuit of profit or commercial objectives by one party. Acting with fidelity to the bargain is about performing the contract and not hindering or preventing the other party from performing or enjoying the bargain.
66 Finally, there are some issues with respect to the nature of the declaratory relief sought. Although, having regard to my findings in the preceding reasons these issues do not arise, it may, nevertheless, be helpful to express some views on this issue. First, I am of the view that Primary Flooring is not entitled to declaratory relief in respect of the Third Contention, Fourth Contention or Sixth Contention, which pertain to factual matters, rather than a controversy as to legal rights. Secondly, the Seventh Contention envisages a role for the Court that does not arise. The stated condition or precursor to the Court resolving the "dispute" is described as a lack of agreement between the parties as to the date for termination of the Supply Agreement. There is no "lack of agreement" on this issue, only dissatisfaction of one party with the contractual terms to which it is bound. Moreover, there is no scope for the Court to consider or determine what termination date would be "reasonable in all of the circumstances". The "circumstances" are unspecified but are likely to be wholly or partly prospective, in respect of which no evidence has been adduced.[90]
67 Dissatisfied with the contractual bargain that it knowingly assumed as part of its acquisition of Dunlop Flooring, Primary Flooring has sought to bring the Supply Agreement to an end. The Supply Agreement provides that it may not be terminated, "whether by a party giving reasonable notice or by any other means or on any other grounds", except as provided by clause 6. Despite this, Primary Flooring contends that Comfort Group acted unreasonably in not assenting to the Proposed Termination, the terms of which provided Comfort Group with no more than a notice period and, accordingly, made no provision for the commercial loss that Comfort Group would inevitably suffer upon termination. For the preceding reasons, I find that this is not the position - Comfort Group has not acted unreasonably and was under no obligation to act other than it did.
68 Moreover, were the position that Comfort Group were obliged to act reasonably and in good faith in their response to the June 2017 Letter - despite no express obligation to that effect appearing in the Supply Agreement - I would find that they did so. The relevant circumstances, including those pertaining to entry into the Supply Agreement, cannot support a conclusion that non-consent by Comfort Group to the Proposed Termination was unreasonable or characterised by bad faith.
69 For the preceding reasons, the declarations sought by Primary Flooring are refused. The parties are to bring in orders to give effect to these reasons. I otherwise reserve the question of costs and will hear the parties further on this issue.
[1] Primary Flooring Outline of Opening Submissions (4 February 2019), [25].
[3] Email from Mr Phil Smith to Mr Michael Scott and Mr Geoff Wilding (3 November 2016).
[4] Email from Mr Phil Smith to Mr Michael Scott and Mr Geoff Wilding (2 November 2016).
[5] Email from Mr Michael Scott to Mr Phil Smith and Mr Geoff Wilding (3 November 2016).
[6] Email from Mr Michael Scott to Mr Phil Smith and Mr Geoff Wilding (4 November 2016).
[7] Clause 2(b) of the Supply Agreement is not presently relevant. However, some purported notices that Dunlop Flooring would have no requirement for any scrap foam under the Supply Agreement which were given in April 2017 and also again in May 2017 were issued pursuant to this clause; see further below [24] and [29].
[8] Affidavit of Lynn Craig Turner (20 December 2018), [8(b)]; see also Affidavit of Anton Gerard McKernan (15 June 2017), [14].
[9] Affidavit of Darron Curphey (6 August 2018), [9].
[10] Letter from Hanes Brands Inc to Comfort Group (12 April 2017).
[11] Letter from Hanes Brands Inc to Comfort Group (21 April 2017).
[12] Exhibit SG-5 to the Affidavit of Stefan Geertsema (31 July 2018).
[13] Letter from Primary Flooring to Australian Comfort Group Holdings Pty Ltd (29 May 2017).
[14] Letter from Holding Redlich to Allens (20 June 2017) attached to email from Holding Redlich to Allens (28 June 2017).
[15] Primary Flooring Outline of Submissions (4 February 2019), [19].
[16] Letter from Holding Redlich to Allens (29 June 2017).
[17] See above, [28]; Primary Flooring Outline of Submissions (4 February 2019), [22].
[18] Letter from Comfort Group to Primary Flooring (5 July 2017).
[19] Defendants' Outline of Opening Submissions (11 February 2019), [42].
[20] Affidavit of Stefan Geertsema (31 July 2018), [26].
[21] Affidavit of Anton Gerard McKernan (15 June 2017), [43].
[22] Affidavit of Stefan Geertsema (31 July 2018), [23].
[23] Affidavit of Stefan Geertsema (31 July 2018), [27]-[28].
[24] Letter from Comfort Group to Primary Flooring (5 July 2017).
[26] Primary Flooring: Short Closing Submissions (20 February 2019), [3]-[6].
[33] Primary Flooring Outline of Submissions (4 February 2019), [29]-[46].
[34] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at 656-7 [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 at 116-7 [46]-[52].
[35] Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 at 443.
[36] Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 at 444. See also Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd (2017) 123 ACSR 19 at 67 [271].
[37] Staffordshire Area Health Authority v South Staffordshire Waterworks Co [1978] 3 All ER 769 at 777. But see Gore District Council v Power Co Ltd [1996] 1 NZLR 58 for a contrary view.
[38] Masters Home Improvement Pty Ltd v North East Solution Pty Ltd [2017] VSCA 88, [99]; Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 at 272-3 [288]-[289].
[39] Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228 at [23]-[24].
[40] Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 263-4; Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558 at 570 [169].
[41] Virk Pty Ltd (in liq) v YUM! Restaurants Australia Pty Ltd [2017] FCAFC 190.
[42] Virk Pty Ltd (in liq) v YUM! Restaurants Australia Pty Ltd [2017] FCAFC 190, [164]-[165].
[43] Virk Pty Ltd (in liq) v YUM! Restaurants Australia Pty Ltd [2017] FCAFC 190, [164]-[165], [178].
[44] Virk Pty Ltd (in liq) v YUM! Restaurants Australia Pty Ltd [2017] FCAFC 190, [175].
[45] Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169 at 214 [107]; Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd [2015] FCAFC 127; (2015) 237 FCR 534 at 557 [122]; Central Exchange Ltd v Anaconda Nickel Ltd (2002) 26 WAR 33 at 48-50 [46]-[54]; Trans Petroleum (Australia) Pty Ltd v White Gum Petroleum Pty Ltd [2012] WASCA 165; (2012) 268 FLR 433 at 459 [150]-[151]; United Group Rail Services Ltd v Rail Corporation of New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618 634-5 [58]-[61]; Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 at 272-3 [287].
[46] Electronic Industries Ltd v David Jones Ltd (1954) 91 CLR 288 at 297; Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228, [3]-[4]; Australian Coarse Grain Pool v The Barley Marketing Board [1989] 1 Qd R 499 at 515.
[47] Trans Petroleum (Australia) Pty Ltd v White Gum Petroleum Pty Ltd [2012] WASCA 165; (2012) 268 FLR 433 at 459 [150]; United Group Rail Services Ltd v Rail Corporation of New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618 at 635 [61]; see also Central Exchange Ltd v Anaconda Nickel Ltd (2002) 26 WAR 33 at 49 [51].
[48] Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 260.
[49] Androvitsaneas v Members First Broker Network Pty Ltd [2013] VSCA 212, [108]; Specialist Diagnostic Services Pty Ltd v Healthscope Ltd [2012] VSCA 175; (2012) 41 VR 1 at 20 [86]-[90]; Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228, [25]. See also Tote Tasmania Pty Ltd v Garrott [2008] TASSC 86; (2008) 17 Tas R 320 at 326 [16].
[50] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 605-6; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347.
[51] Australian Blue Metal Ltd v Hughes [1963] AC 74 at 99; Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 2 All ER 216 at 229; Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 at 444.
[52] Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 at 444 - citing Winter Garden Theatre (London) Ltd v Millenium Productions Ltd [1948] AC 173 at 200-1; Australian Blue Metal Ltd v Hughes [1963] AC 74 at 99; W K Witt (WA) Pty Ltd v Metters Ltd and General Industries Ltd [1967] WAR 15 at 24-5.
[53] Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 at 447-8.
[54] Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 at 443-4.
[55] Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 at 443-4.
[56] Adventure World Travel Pty Ltd v Newsom [2014] NSWCA 174; (2014) 86 NSWLR 515 at 521-2 [26].
[57] See North East Solution Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1, [14](2.2(b)), where the relevant agreement embodied this approach in terms of obligations.
[59] Primary Flooring Outline of Submissions (4 February 2019), [42]; though the basis of these submissions with respect to this obligation was only made clear by Primary Flooring in its closing submissions.
[60] Primary Flooring Outline of Submissions (4 February 2019), [48].
[61] See Defendants' Outline of Closing Submissions (20 February 2019), [51].
[62] See Defendants' Outline of Closing Submissions (20 February 2019), [64]-[67]; and see below, [58]-[59].
[63] Primary Flooring Outline of Submissions (4 February 2019), [48].
[64] Primary Flooring Outline of Submissions (4 February 2019), [38].
[65] Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228, [3].
[66] Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 at 272 [287].
[68] Defendants' Outline of Closing Submissions (20 February 2019), [62].
[69] David A Harris Pty Ltd v AMP Financial Planning Pty Ltd [2019] VSC 24.
[70] David A Harris Pty Ltd v AMP Financial Planning Pty Ltd [2019] VSC 24, [51].
[71] David A Harris Pty Ltd v AMP Financial Planning Pty Ltd [2019] VSC 24, [52(b)]-[52(c)].
[73] Primary Flooring Outline of Submissions (4 February 2019), [34] and Defendants' Outline of Closing Submissions (20 February 2019), [64].
[74] Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228, [2]-[4] (cited in North East Solution Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1, [69]).
[75] Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 at 273 [290].
[76] Virk Pty Ltd (in liq) v YUM! Restaurants Australia Pty Ltd [2017] FCAFC 190, [178].
[77] Knights Quest Pty Ltd v Daiwa Can Company [2018] VSCA 349, [84].
[78] Virk Pty Ltd (in liq) v YUM! Restaurants Australia Pty Ltd [2017] FCAFC 190, [183].
[79] Defendants' Outline of Closing Submissions (20 February 2019), [68].
[80] Defendants' Outline of Closing Submissions (20 February 2019), [39]-[40].
[81] Defendants' Outline of Closing Submissions (20 February 2019), [41]-[42].
[82] Defendants' Outline of Closing Submissions (20 February 2019), [43].
[83] Defendants' Outline of Closing Submissions (20 February 2019), [43(a)-(b)].
[88] Defendants' Outline of Closing Submissions (20 February 2019), [72]; Primary Flooring Outline of Submissions (4 February 2019), [56].
[89] Cf Primary Flooring Outline of Submissions (4 February 2019), [58].
[90] Primary Flooring Outline of Submissions (4 February 2019), [28], and the Seventh Declaration which refers to a date on which the Supply Agreement "shall terminate".
Primary Flooring Pty Ltd
Australian Comfort Group Pty Ltd [2019] VSC 104
(1977) 180 CLR 266
(2014) 251 CLR 640
(2015) 256 CLR 104
(1992) 26 NSWLR 234
(1988) 14 NSWLR 438
(2015) 236 FCR 199
(2001) 69 NSWLR 558
(2014) 253 CLR 169
(2015) 237 FCR 534
(2002) 26 WAR 33
(2012) 268 FLR 433
(2009) 74 NSWLR 618
(1954) 91 CLR 288
(2012) 41 VR 1
(2008) 17 Tas R 320
(1979) 144 CLR 596
(1982) 149 CLR 337
(2014) 86 NSWLR 515