Sunset Vineyard Management Pty Ltd v Southcorp Wines Pty Ltd [2008] VSCA 96

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337; Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1; University of Wollongong v Metwally [No 2] (1985) 59 ALJR 481; Whisprun v Dixon [2003] HCA 48; (2003) 200 ALR 447.

**1 The appellant and the respondent were parties to a grape purchase agreement dated 21 February 1998 ('the Agreement'). The appellant agreed to provide grapes to the respondent.

2 The Agreement had an initial term of seven years[1] ('the Initial Term') and an option term of five years ('the Option Term').[2]

3 The appeal is concerned with the construction of the Agreement, specifically, whether a premium payable under the Initial Term was payable under the Option Term.**

**4 In the reasons for judgment[3] the learned trial judge set out in careful and concise terms the background facts of the dispute. These reasons draw extensively on the reasons for judgment.

5 The appellant is a grape grower (called 'the Grower' in the Agreement) and operates as a management company representing the interests of the owners of the vineyard. The respondent, Southcorp, is a wine producer and purchases grapes from various growers.

6 The Agreement between the appellant and the respondent provides that the price payable by the respondent for grapes supplied by the appellant differs according to the type and quality of grapes.

7 The Agreement provides a base price called a 'Variety Price' or 'Base Grape Value'. At least during the Initial Term the price payable under the Agreement included a quality bonus, called a 'Grade Premium', for grapes of higher quality than the quality upon which the base price is set. There was also provision for a price reduction for quality defects determined by way of a points system under the Agreement. A price reduction was attracted when appropriate under both the Initial Term and the Option Term.

8 Attraction of the Grade Premium depended upon the application and calculation of a formula under the Agreement. There was no issue that the Agreement did not contain an express specification of one of the elements of the formula for calculating the Grade Premium during the Option Term. At trial, the appellant contended that a specification of the element could be discerned on a proper construction of the Agreement as a whole. In the alternative, the appellant contended that if the Agreement was incomplete as to the relevant element of the formula for the calculation of the Grade Premium during the Option Term then it should be implied to fill the void.[4]

9 Furthermore, at trial the parties agreed that if the respondent was obliged to pay a Grade Premium during the Option Term then the grapes supplied in the first year of that term were of a quality attracting a Grade Premium in an agreed amount.**

**10 The Agreement is made up of a number of documents. First, there is a document called 'MEMO OF AGREEMENT - VARIETY PRICE' ('Memo of Agreement'). Secondly, there are attached schedules of Block Details, Production Details, Pricing Details and Quality Control Standards ('the Schedules'). Thirdly, there is a document called 'TERMS AND CONDITIONS' (the 'Terms and Conditions').

This is the MEMO OF AGREEMENT between the Grower and Southcorp for the supply of the Grapes described herein. The terms and conditions and Schedules attached to this Memo of Agreement are incorporated into this document to constitute the 'Agreement' as defined in clause 26.1 of those terms and conditions.

**12 Clause 5.1 of the Terms and Conditions provides, '[t]he price payable by Southcorp ... is the Variety Price plus a Grade Premium, and subject to any adjustments under clause 15.'

13 'Grade Premium' is defined in clause 26.1 of the Terms and Conditions to mean, 'the premium payable in respect of a variety of Grapes, as determined in accordance with Southcorp's Grape Value Grade scale, with the fruit quality determined by Southcorp's winemakers for deliveries in each Vintage Year.'

14 Clause 5.4 of the Terms and Conditions provides that clause 5.1 is 'subject to the Grapes complying with the Quality Control Standards set out in clause 15.' Clause 15 refers to the quality standards specified in the Schedules. The relevant Schedule contains details of a 'Defect Points' system which allows reduction of the base Variety Price according to the number of defect points assigned to a parcel of grapes.

15 Clause 6.1 of the Terms and Conditions provides:**

In each Vintage Year Southcorp will pay to the Grower a Grade Premium in respect of any Parcel of Fruit which is of a higher grade rating than the Base Grape Value Grade for the relevant variety specified in Item 5 in the Memo of Agreement.

16 Clause 6.3 of the Terms and Conditions provides:

The amount of any Grade Premium will be calculated by subtracting the relevant Base Grape Value Grade from the Vintage Grape Value Grade and then multiplying the difference by the Grape Value Grade scale set out in Item 5 in the Memo of Agreement.

I will refer to this calculation as the 'Grade Premium Formula'.

**17 Item 5 of the Memo of Agreement states, 'Production & Pricing Details. Refer attached Schedule.' I will refer to this Schedule as the 'Pricing Details Schedule'.

18 A copy of the Pricing Details Schedule was annexed to the reasons for judgment.[5] The parties expressly agreed the following matters relevant to the calculation of the Grade Premium Formula for each variety of grapes in the Initial Term:**

1. The Base Grape Value Grade (upon which the Base Grape Value or Variety Price is based).
2. The Grape Value Grade Scales for each Vintage Year.

The other element in the Grade Premium Formula is the 'Vintage Grape Value Grade'. This is the actual grade rating of a parcel of grapes, as determined by Southcorp.

19 Clause 2.7 of the Terms and Conditions provides:

During the Option Term or any Holdover, the Agreement continues to be governed by these terms and conditions, except that there is no equivalent to clause 2.3, and:

2.7.1 in the case of an Option Term, the parties must agree on each Variety Price not less than three (3) months prior to the expiry of the Initial Term. The Variety Price applicable during the Option Term must not be less than the Minimum Price for each variety specified in Item 5 of the Memo of Agreement, or

2.7.2 in the case of a Holdover, if the parties can't agree on a Variety Price, then that Variety Price is the same as in the previous Vintage Year.

**20 Insofar as is relevant, clause 2.7 of the Terms and Conditions unambiguously states that the Terms and Conditions apply to the Option Term, with the exception that the Variety Price is to be the subject of Agreement between the parties and, in default of agreement, is to be the minimum price for each variety specified in the Pricing Details Schedule. Importantly, there is no reference in clause 2.7 to any element of the Grade Premium Formula. In that regard, clauses 5 and 6 of the Terms and Conditions are to govern the issue of whether any Grade Premium is payable during the Option Term.

21 In respect of the Initial Term, the Agreement operates in the following way.

22 The starting point is the concept of a Base Grape Value, or Variety Price, for each Vintage Year in the Initial Term. This is the base price per tonne which is payable for grapes, before the addition of any Grade Premium.

23 If a parcel of grapes is classified by Southcorp as achieving a Vintage Grape Value Grade which is higher than the Base Grape Value Grade, a Grade Premium calculated in accordance with Southcorp's Grape Value Grade Scale is payable. For example, using the figures specified in the Pricing Details Schedule for the 1998 Vintage Year:**

1. Chardonnay grapes with a quality grade of between 1 and 10 attract a premium of $63 per tonne for each grade above the Base Grape Value Grade of 7.
2. Chardonnay grapes with a quality grade of between 10.1 and 20 attract a premium of $115 per tonne for each grade above 10.
3. Cabernet sauvignon and shiraz grapes with a quality grade of between 1 and 10 attract a premium of $80 per tonne for each grade above the Base Grape Value Grade of 6.
4. Cabernet sauvignon and shiraz grapes with a quality grade of between 10.1 and 20 attract a premium of $130 per tonne for each grade above 10.

**24 Both the Base Grape Values, or Variety Prices, and the Grape Value Grade Scales increased in every year of the Initial Period. The Grape Value Grade Scales increased by a rounded amount of 3% in each year of the Initial Term.

25 A Grade Premium is to be calculated by reference to the three elements of the Grade Premium Formula set out in clause 6.3. The first element is the Base Grape Value Grade. The definition of this term in clause 26.1 of the Terms and Conditions indicates that the same Base Grape Value Grade is to apply in both the Initial Term and the Option Term. This follows from the definition of 'Term' in clause 26.1 of the Terms and Conditions.

26 The second element of the Grade Premium Formula is the Vintage Grape Value Grade of the relevant parcel of grapes, as determined by Southcorp.

27 The third element of the Grade Premium Formula is the Grape Value Grade Scale. Clause 6.3 of the Terms and Conditions provides that this element is that 'set out in' the Pricing Details Schedule.

28 For example, the calculation of a Grade Premium for a parcel of chardonnay grapes supplied in 1998 with a grade of 9 would be as follows:**

This calculation is possible during the Initial Term, because the Pricing Details Schedule sets out the Grape Value Grade Scales for each variety of grapes in each Vintage Year of the Initial Term.

29 However, the Pricing Details Schedule does not set out a Base Grape Value Grade or a Grape Value Grade Scale in respect of any variety of grapes for any Vintage Year in the Option Term. All that appears in the Pricing Details Schedule for the Option Term is a reference to an 'Option Term Minimum Price' per tonne of grapes. Reference to clause 2.7.1 of the Terms and Conditions indicates that this is intended to be the Variety Price, or Base Grape Value, for the whole of the Option Period in the absence of contrary agreement.

30 The grounds of appeal relied upon the letter dated 23 December 1997, called the 'Southcorp Letter', from the respondent to some promoters of the appellant. It provided:

In response to your letter of 18 December 1997 we confirm our preparedness, conditional upon your obtaining clear title to the Murray Bend property from the Administrator and the Court, to execute a grape Supply Agreement with Sunset Vineyard Management Pty Ltd on the same terms and conditions as contained in the existing Agreement for this property executed by Murray Bend Vineyard Management Pty Ltd and Southcorp Wines Pty Limited on 30 May 1997 with the only exception being the planting of the final 200 acres to 100 acres each of Shiraz and Cabernet Sauvignon.

We have to hand a copy of your draft (?) Information Memorandum and, while we are comfortable with the Southcorp references in the document which are confirmed by this letter, we would have preferred to sight the draft for approval of the Southcorp reference prior to its distribution to prospective investors.

We look forward to receiving confirmation of the title resolution and the completion of the documentation with the substitute manager.

(1) the Agreement on its proper construction required payment of a Grade Premium in the Option Term, where grapes were of the appropriate quality;

(2) there were implied terms that required payment of a Grade Premium in the Option Term, where grapes were of the appropriate quality; and

(3) the disclosure to the respondent of the contents of the Information Memorandum before 23 December 1997 together with the Southcorp letter evidenced a mutual intention that no premium was to be paid during the Option Term.

**32 The learned trial judge found that on a proper construction of the Agreement the parties did not intend that a Grade Premium would be paid during the Option Term.

(1) the Pricing Details Schedule contained the specific matters agreed between the parties, while the Term and Conditions were generic;

(2) the specific contents of the Pricing Details Schedule should prevail; and

(3) the absence from the Pricing Details Schedule of a Grape Value Grade Scale for the Option Term showed an intention that there be no Grade Premium payable for the Option Term.

**34 The learned trial judge rejected the submission on behalf of the appellant that a construction of the Agreement which involved no Grade Premium being payable in the Option Term would be capricious, unreasonable, inconvenient or unjust. His Honour also rejected the appellant's argument at trial that a term should be implied to the effect that the Grape Value Grade Scale for each Vintage Year in the Option Term is to be determined by extrapolation from the figures in the Price Details Schedule for the Initial Term.

35 The learned trial judge's finding was based on the following three principal grounds:**

(1) the Information Memorandum unambiguously recorded an understanding by the appellant that no Grade Premium was payable in the Option Term;

(2) the statement in the Southcorp letter that it was 'comfortable' with the Southcorp references should be understood as the respondent's concurrence with that understanding of the appellant; and

(3) the Information Memorandum and the respondent's concurrence with its terms was admissible in determining the intention of the parties as to whether a Grade Premium was payable during the Option Term or as to whether the court should imply a term to the effect contended for.

36 The issues to be determined on appeal are first, whether on a proper construction of the Agreement, the Agreement provides for the payment of a Grade Premium during the Option Term; secondly, whether on a proper construction of the Agreement, it provides a Grape Value Grade Scale for the Option Term; thirdly, whether a construction of the Agreement to the effect that no Grade Premium would be payable during the Option Term would be capricious, unreasonable, inconvenient or unjust; fourthly, whether a term should be implied into the Agreement that the Grape Value Grade for each Vintage Year in the Option Term is to be determined from the Grape Value Grade Scale in the Pricing Details Schedule; fifthly, whether the Information Memorandum recorded an understanding by the appellant that no Grade Premium would be payable during the Option Term; and sixthly, if so, whether the Southcorp letter should be understood as concurring with the understanding of the appellant set out in the Information Memorandum.

**37 At the outset of the appeal the appellant applied to amend the Notice of Appeal to advance a construction of the Agreement not put to the learned trial judge. There was a concomitant application to amend the Statement of Claim that was the subject of the proceedings at trial. In essence the amendment was in support of a submission that a Grape Value Grade was discernible in the Agreement because of the consistent arithmetical relationship in the Pricing Details Schedule between the Variety Price and the Grade Premia within each year.

38 For the appellant it was submitted that the amendment application arose by virtue of different counsel being retained by the appellant than at trial, leading to the identification of the arithmetically based argument and construction. A party is generally bound by the case it ran at trial. To raise a new issue on appeal there must be exceptional circumstances.[6] In this matter, the circumstances arising from the briefing of new counsel do not constitute an exceptional circumstance such as to invoke the jurisdiction to allow the amendment.[7]

39 The respondent did not submit that the amendment might have resulted in different evidence being led or that any substantial difference may have occurred as to the way in which it conducted the trial. Furthermore, the amendment was consistent with the way in which the trial was conducted. During the trial the learned trial judge clarified with the appellant's counsel that only a narrow question needed to be resolved by his Honour:**

... the argument centres not on incompleteness leading to uncertainty, but whether incompleteness simply means that there was no Agreement about any important matter such as Grade Premium, or whether that incompleteness can be met by construction so as to make the Agreement work, or in implied terms so as to make the Agreement work.[8]

40 Further, in his reasons his Honour seemed to observe, consistently with that which the appellant's counsel had confirmed, that there was no allegation or argument as to incompleteness for want of an essential term or voidness for uncertainty.[9] Nevertheless, on the appeal, it was submitted for the appellant that the amendment should be allowed in the interests of justice.

**41 Thus, the primary construction argument for the appellant was based on a discernible consistent relationship (and therefore a similar, if not the same, argument as is sought to be added by the amendment). In my view the argument is unpersuasive for two reasons. First, the argument involved rewriting the Agreement. Secondly, the argument contradicts the plain meaning of the Agreement, more so when the Agreement is construed in the context of the surrounding circumstances.

42 The plain construction of the Agreement reveals, as his Honour held, that the appellant and the respondent failed to reach agreement on a Variety Price for the Option Term before the Initial Term expired. Further, the appellant and the respondent did not agree on a Grape Value Grade Scale for the period. Notably, the Grape Value Grade Scale (vis-à-vis the Initial Term only) was expressed in specific monetary terms rather than as a percentage of the Base Grape Value. Indeed, the Grape Value Grade Scale refers to monetary amounts, as reflected in the Grade Premium Formula in clause 6.3 of the Agreement.

43 Further, in each of the Initial Term years, a Grape Value Grade Scale is clearly set out in the Schedule. Thereafter, in place of the Base Grape Values the amount of $600 is inserted under the heading 'Option Term Minimum Price'.

44 A construction argument mounted on clause 2.7[10] to the effect that the words 'these terms and conditions' apply to the Option Term is unhelpful. There is no term or condition in the Agreement creating or applying a Grape Value Grade Scale in the Option Term. Further, as his Honour observed, clause 2.7 is a generic provision and does not prevail over the specific provision of the Schedule. In addition, insofar as the appellant and the respondent agreed upon specific pricing matters, they are contained in the Schedule to the Agreement.

45 In any event, clause 2.7 uses the expression 'these terms and conditions' along with other parts of the Agreement[11] in a manner referring to the terms and conditions as set out in the Terms and Conditions document attached to the Memo of Agreement, as distinct from the Schedule to the Agreement. The expression 'terms and conditions' is no more than a term of contractual art or drafting.

46 The appellant did not press an argument for an implied term. However, it could be said that the appellant's construction argument was, properly construed, an implication argument. It remains that there was no Grape Value Grade Scale in the Agreement. Hence, there is no text of the Agreement to which the construction argument might assign an appropriate meaning. To do so involves writing new text, contrary to the principles of BP Refinery (Westernport) Pty Ltd v Hastings Shire Council.[12]

47 So far as the three percent horizontal extrapolation submission of the appellant arises, again it runs up against the plain meaning of the Agreement as already considered. As was pointed out for the respondent in submissions, the bonus for each grade above the Base Grape Value Grade ranged up to 16.3 percent of the Base Grape Value prices in the Initial Term; the appellant's terms would have it receiving an additional 30 percent of the agreed base price in some instances and when the appellant was already paid significantly above district average prices.[13]

48 The appellant placed particular emphasis on the circumstances surrounding the Agreement and its making. His Honour dealt with the submission at trial (citations omitted):**

In Royal Botanic Gardens and Domain Trust v South Sydney City Council Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ considered the admissibility of evidence of surrounding circumstances to assist in the interpretation of a written contract if the language be ambiguous or susceptible of more than one meaning and, in that regard, stated:

'In Codelfa, Mason J (with whose Stephen J and Wilson J agreed) referred to authorities which indicated that, even in respect of Agreements under seal, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view.'

In Pacific Carriers Ltd v BNP Paribas Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ stated:

'The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction.'

In BP Australia Pty Ltd v Nyran Pty Ltd RD Nicholson J considered whether evidence of surrounding circumstances known to the parties included the circumstance that, prior to the execution of the contract in question, one party communicated its subjective understanding of the meaning of a provision in a contract to the other party and, in response, the other party communicated its agreement with that understanding. In this regard, RD Nicholson J stated:

'Objective background facts can include statements and actions of the parties which reflect their mutual actual intentions. That is, evidence of the mutual subjective intention of the parties to a contract may be part of the objective framework of the facts within which the contract came into existence. It is the mutuality which makes the evidence admissible.'

RD Nicholson J emphasised the obvious point that communication by one party to the other of its subjective intention is not enough to make the evidence admissible:

'I accept the submission for the respondent that communication of a subjective intention by one party to another in the course of contractual negotiations does not of itself result in the subjective intention becoming a mutually known objective background fact of the type qualifying for admission. What is needed in addition to the fact of communication is the element of concurrence. It is the concurrence which creates the mutuality.'

In my view, these statements by RD Nicholson J are correct and applicable to this proceeding. They are consistent with the following statement by Mason J in Codelfa, concerning the admissibility of evidence of mutual intention of the contracting parties that a particular provision in a proposed contract should not be included:

'There may perhaps be one situation in which evidence of the actual intention of the parties should be allowed to prevail over their presumed intention. If it transpires that the parties have refused to include in the contract a provision that would give effect to the presumed intention of persons in their position it may be proper to receive evidence of that refusal. After all, the court is interpreting the contract which the parties have made and in that exercise the court takes into account what reasonable men in that situation would have intended to convey by the words chosen. But is it right to carry that exercise to the point of placing on the words of the contract a meaning which the parties have been united in rejecting? It is possible that evidence of mutual intention, if amounting to concurrence, is receivable so as to negative an inference sought to be drawn from surrounding circumstances.'

**49 His Honour correctly states the applicable principles. They are not challenged. Essentially, the appellant submitted that, assuming ambiguity in the Agreement, the Information Memorandum and its exchange beforehand comprised part of the surrounding circumstances to which regard may be had in continuing the Agreement. The Information Memorandum forms part of the background circumstances and, consistently with the principles in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales,[14] may be considered. However, this does not advance matters for the appellant. The Information Memorandum was communicated to the respondent by the appellant. It was prepared on the basis of an earlier agreement with the entity, Murray Bend. The appellant and the respondent agreed to enter into a contract on the same terms and conditions as that earlier contract.

50 The appellant also challenged the analysis by the trial judge of the Information Memorandum and the Southcorp letter. It was argued that his Honour applied an 'unambiguous understanding' to the Information Memorandum. To suggest as much misconstrues what the judge actually said:**

It follows that evidence of the Information Memorandum and of Southcorp's concurrence in it is admissible in determining the intention of the parties as to whether a Grade Premium is payable during the Option Term, or as to whether the Court should imply a term to the effect suggested. The Information Memorandum, when read as a whole, makes a number of references to the proposed contractual arrangements with Southcorp. I have set these out above. In my view, these references unambiguously record an understanding by the plaintiff that no Grade Premium was payable during the Option Term. The statement by McDougall in his letter of 23 December 1997, that Southcorp was "comfortable with the Southcorp references" in the Information Memorandum, should be understood as Southcorp's concurrence with the plaintiff's understanding, as recorded in the Information Memorandum, that no Grade Premium was payable during the Option Term.

**51 Clearly the trial judge used the word 'unambiguous' in the sense that the Information Memorandum was not capable of another interpretation. It was not capable of being read as revealing no matters as to an understanding of whether the quality bonus would be paid in the Option Term. Furthermore, the modelling did not factor in any bonuses for the Option Term. Rather, the evidence pointed to a minimum price, excluding bonuses.[15]

52 In the Information Memorandum there is a statement that 'it would not be unreasonable to assume bonuses throughout the term of the Contract'. The appellant attempted to make something of this, however, it did not advance the appellant's position. The relevant section of the Information Memorandum explicitly referred to the Contract expiring on 30 June 2004 making it clear that the reference to bonuses was confined to the Initial Term.

53 The appellant challenged his Honour's analysis of the Southcorp letter. As the respondent submitted, pricing and contract terms were central in the context of representations to investors with respect to expected risks and returns. These matters went to the central purpose of the Information Memorandum. The centrality of interest and concern lay mutually with the investors and the respondent, Southcorp. An ordinary meaning of the Southcorp letter indicates a concurrence, as the respondent submitted, in whatever understanding the Information Memorandum reflected as to the terms of the Agreement. One way to test the analysis of the trial judge is to observe that if the respondent had sued the appellant for breaching disclosure restrictions in the Information Memorandum it would be difficult for the respondent to argue that it only consented to the Southcorp references in the letter.

54 Ultimately, as his Honour concluded, the Information Memorandum and the Southcorp letter reflected the Agreement of the parties to the pre-existing contractual scheme, the structure for returns and the bonuses intended to be replicated in the proposed contract.

55 The final submission of the appellant was to the effect that the Agreement omitted an intended term. The drafting and format of the Agreement makes it plain that there was a specific intention not to include a bonus premium provision with respect to the Option Term.

56 As the respondent submitted, the double line terminating any continuation of either the Base Grape Value or Grape Value Grade Scale beyond 2004, followed by the specific monetary reference of $600, is clear intention of non-application of the premium provision. It was apparent from the face of the Agreement (as reflected by the Information Memorandum) that there was consciously no provision for Grade Premiums in the Option Term on the part of the contracting parties. Furthermore, no question of capriciousness, unreasonableness, inconvenience or injustice arose as a question of fact when the contextual circumstances are analysed.

57 None of the submissions of the appellant is persuasive. No error has been made out and none of the grounds succeed. The proposed amendment of the grounds by the appellant does not advance its position. I would refuse the application to amend and dismiss the appeal.**

**58 I have read the draft judgment of the Chief Justice and adopt her summary of the facts and of the relevant terms of the agreement made between the parties.

59 The grape purchase agreement entered into by the parties on 21 February 1998 had an initial term of seven years ending on 30 June 2004 and an option term of five years thereafter. The option term was exercisable by either party. Some months after entering into the agreement the appellant exercised its option to extend the agreement for the period of the option term from 30 June 2004 to 30 June 2009.

60 The agreement provided that the price payable by Southcorp for grapes purchased from the appellant was to vary according to the variety and the quality of grapes. The agreement also provided for price reduction if the grapes supplied suffered from specified quality defects.

61 In particular, the agreement provided for a bonus to be paid for grapes of quality higher than the base quality. This bonus was called a 'Grade Premium' in the agreement. The agreement contained a formula to enable the calculation of the Grade Premium. One of the elements of the formula was stated to be the 'Grape Value Grade Scale'. This scale was set out for each of the seven years of the agreement in a pricing schedule annexed to the agreement. However, no such scale was set out in the agreement in relation to any year of the option term. The first year of the option term ended on 30 June 2005. Southcorp did not pay a Grade Premium bonus in the first year of the option term.

62 The first question before his Honour was whether on a proper construction of the agreement, the parties intended that the bonus would be payable during the option term. His Honour concluded that no such construction was tenable. In my view his Honour was correct in reaching such a conclusion. The pricing schedule annexed to the agreement set out in unambiguous terms the manner in which the Grade Premium bonus was to be calculated during each year of the agreement. It set out that the minimum price payable during the option term for any variety of grape was $600 per tonne.

63 His Honour held that the pricing schedule contained the specific details agreed upon between the parties as to the price to be paid for various quantities and grades of grape during each year of the agreement. Those specific details did not include any reference to the Grape Value Grade Scale during the option period. Furthermore, his Honour concluded that there was no alternative interpretation open, 'merely the suggestion that the Court should guess what the parties would likely have agreed if they had chosen to express' Grape Value Grade Scale for the option term. In my view that conclusion is unchallengeable. The express terms of the agreement, namely that for the initial term of the agreement specific prices were agreed for specific types of grape of a specific grade are clear. Those prices were not agreed for the option period.

64 True it is, as argued by the appellant, that clauses 2.7, 5.1 and 6.1 of the agreement contemplate that Southcorp pay a Grade Premium to the appellant during each vintage year of the operation of the agreement, including during the option term. As was conceded by counsel for Southcorp before us the wording of clause 6.1 is 'unhappy'. However, his Honour clearly recognized the tension between the contemplation of a premium expressed in those clauses and the specific prices set out in the pricing details schedule. He said ' an interpretation which involved no Grade Premium being payable during the Option Term would have the effect that any reward for good quality fruit would vanish'. However, as his Honour pointed out, to accept the argument of the appellant would involve the court in rewriting the Pricing Details schedule so as to attribute to the parties an intention for which they had made no provision. In my view, his Honour held correctly that the specific was preferable to the general. The task before his Honour was to determine the intention of the parties from the words used by them. His Honour referred to the following statement of Lord Mustill in Charter Reinsurance Co Ltd v Fagan[16]**

.... to force upon the words a meaning which they cannot fairly bear is to substitute for the bargain actually made one which the court believes could better have been made. This is an illegitimate role for a court.

**65 His Honour was not in error in concluding that the Pricing Details which had been agreed specifically between the parties should prevail over the general expression of intention disclosed in clauses 2.7, 5.1 and 6.1 of the agreement.

66 His Honour next considered whether or not the Court should imply a term in the agreement to the effect that the Grape Value Grade Scale for each of the five years of the option term was to be determined by extrapolation, at the rate of three per cent per annum, of the Grape Value Grade Scale set out in the pricing schedule for the initial term of five years. His Honour concluded that the suggested implied term was not established. His Honour referred to Codelfa Construction Pty Ltd v State Rail Authority of NSW[17] where Mason J adopted the summary of the necessary conditions for the implication of a term as expressed in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council[18]. His Honour concluded that it was not reasonable and equitable to attribute to the parties an intention in accordance with the implied term, nor was it necessary to imply the term suggested in order to give the agreement business efficacy. Furthermore, his Honour concluded that the implied term was not so obvious that 'it goes without saying'. Upon appeal the appellant does not seek to argue that his Honour was in error in so finding and in my view it could not do so sensibly.

67 Finally, His Honour concluded that the extrinsic evidence which was led at the trial as to the circumstances in which the agreement was entered into confirmed his view as to the proper interpretation of the agreement. In particular, in November 1997 an 'Information Memorandum' was supplied by the appellant to potential investors. The memorandum was intended to seek investment by investors in the vineyard operated by the appellant. A copy of the memorandum was provided by the appellant to the respondent in late 1997. By letter dated 23 December 1997 the respondent informed the appellant that it was prepared to enter into the proposed agreement for the supply of grapes. In the same letter it acknowledged that it was 'comfortable' with the references made to it and referred to in the information memorandum which had been prepared by the appellant and supplied by it to potential investors. His Honour concluded that the memorandum was admissible in determining the intention of the parties as to whether a Grade Premium was payable during the option term or as to whether such a term should be implied. The memorandum informed potential investors of the financial projections for the proposed agreement. It stated that grape prices allowed for 'modest and achievable quality bonuses in Term 1 of the contract'. It stated that the minimum price for 'Term 2' was to be $600 per tonne. The financial projections included two scenarios; one assuming that no quality bonuses became payable, and the other assuming the payment of such bonuses. In each scenario, the financial projections included forecasts crop income for the first three years of the option term, based upon a return of $600 per tonne, with no reference whatsoever to quality bonuses or to Grade Premium. His Honour concluded that the information memorandum recorded an understanding by the appellant that no Grade Premium was payable during the option term. In my view, his Honour was not in error in so concluding.

68 I respectfully agree with the Chief Justice that there are no exceptional circumstances in this case which can be called in aid of us allowing amendments of the statement of claim and of the notice of appeal so as to permit the appellant to advance an argument as to the construction of the agreement which was not pleaded or argued before the trial judge. Furthermore and to the extent that other factors may be argued to be relevant to a grant of leave in such circumstances it is unnecessary to consider them further as the proposed amendment is, in my view on any analysis, doomed to failure.

69 By its application to amend, the appellant now seeks to argue that the Grape Value Grade Scale provides the method of calculation of a grade premium during the option term by reason of what is said to be a 'discernible consistent, arithmetical relationship' between the base price of grapes and the Grape Value Grade Scale in each year of the agreement, as shown in the Pricing Details schedule. Thus, so the argument goes, the 'discernible consistent arithmetical relationship' can be extrapolated so as to provide for the payment of a grade premium during the option term. It is submitted that by analysis of the pricing schedule, the Grape Value Grade Scale can be seen throughout the term of the agreement to have been a fixed percentage of the base grape value fixed for each year. Thus, for chardonnay grapes it is argued that for grades 1 to 10 the Grape Value Grade Scale is 8% of the base value, and for grades 10.1 to 20 it is 16%. For cabernet sauvignon, and shiraz grapes it is argued to be 10% of the base price for grades 1 to 10 and 16% for grades 10.1 to 20.

70 However, as pointed out by counsel for the respondent there are several difficulties with this late conceived argument as to the construction of the contract. First, nowhere in the agreement is there any suggestion that the price of grapes was to be calculated by reference to a formula based upon percentages. The parties chose to be specific in setting numeric dollar values per tonne. Secondly, the retrospective attribution of the above percentages necessarily involves a rounding off of percentage figures. A rounded off percentage is less specific than the actual prices per tonne which were agreed by the parties in the pricing schedule. Thirdly, the application of such rounded off percentage figures during the seven years of the agreement would have resulted in prices being paid that were different from those actually paid pursuant to the agreement. By way of example, the Grape Value Grade Scale between 10.1 and 20, which was fixed by the pricing schedule to apply to chardonnay grapes in 2004 was fixed at $138 per tonne by the pricing schedule. If the so called 'consistent arithmetical relationship' of 15% was to be applied to the base value of $930 that year the scale would have allowed for $140 per tonne. Other similar discrepancies can be seen to apply to the agreed prices of each variety of grapes throughout the seven years of the agreement. A slight discrepancy in the amount per tonne could produce a significant difference in the amount paid for the total tonnage supplied. Taking into account the fact that the agreement was intended**

**to set specific prices per tonne for a product which was to be sold in a substantial tonnage, there is every reason to conclude that the parties intended to be specific, rather than general in their agreement as to pricing structure. In my opinion the fact that some approximate percentage can be calculated retrospectively to apply to fixed specific prices agreed to by the parties does not provide a cogent reason to say that the contract could be interpreted in any way other than by reference to its express provisions. Indeed, the arithmetical relationship, now said to be discernible, was so far from obvious that those advising the appellant did not detect it until shortly before the hearing of this appeal. In my view, the proposed amendment to the statement of claim, and the proposed amended ground of appeal raise no issue of substance. The leave sought by the appellant to so amend should not be granted.

71 It follows that I agree with the Chief Justice that the appeal should be dismissed.**

**72 I have had the advantage of reading the draft reasons prepared by Warren CJ and Kellam JA. I agree that the appeal should be dismissed for the reasons given by their Honours.

[2] The option was exercised in April 1998 to run from 1/7/94 to 30/6/09.

[3] Sunset Vineyard Management Pty Ltd v Southcorp Wines Pty Ltd [2006] VSC 234.

[4] No party submitted at trial that the Agreement was incomplete as to an essential term and thus was void for uncertainty.

Management Pty Ltd v Southcorp Wines Pty Ltd [2006] VSC 234.

[6] University of Wollongong v Metwally [No.2] (1985) 59 ALJR 481 at 483 cited with approval in Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1, 7.

[7] Whisprun v Dixon [2003] HCA 48; (2003) 200 ALR 447, [51] - [52].

[8] Transcript p. 59/1. Also, later in submissions at the trial the appellant's counsel clarified that there was no evidence as to the way in which the Base Grape Value Grade was calculated, see Transcript p. 61/5.

[11] Clause 25.1 and 26.1 and the various headings.

[13] Outline of Appeal Submissions of the Respondent, [29].

[14] [1982] HCA 24; (1982) 149 CLR 337.

[15] In documents entitled 'Summary of Returns' (AB/C53) and 'Expected Case Scenario' (AB/C 75).

[16] [1997] AC 313, 388.

[17] [1982] HCA 24; (1982) 149 CLR 337.