Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd - [1999] FCA 1299 - FCA 1999 case summary — Zoe

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Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd

[1999] FCA 1299

Federal Court of Australia|1999-09-15|Before: Mansfield J

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Court

Federal Court of Australia

Decision date

1999-09-15

Before

Mansfield J

Source

Original judgment source is linked above.

Judgment (65 paragraphs)

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REASONS FOR JUDGMENT 1 This claim arises from the circumstances in which Tirango Nominees Pty Ltd ("Tirango") became an exclusive distributor for, and vendor of milk and other dairy products supplied by, Dairy Vale Co-Operative Ltd ("Dairy Vale Co-Op") by an agreement made on 23 June 1994. There is no issue that such an agreement was struck, but there is a significant issue as to its terms. In this judgment, I shall refer to the agreement as "the agreement" in a general way, and where necessary identify its specific terms or issues concerning its specific terms. By a guarantee also dated 23 June 1994, Allen James Williams ("Mr Williams") and Pauline Anne Stockman ("Ms Stockman") guaranteed the payment by Tirango to Dairy Vale of amounts payable from time to time under the agreement, and the due performance and observance of the agreement by Tirango ("the guarantee"). 2 Dairy Vale Foods Ltd ("Dairy Vale"), from March 1995, became the owner and operator of the assets and business and undertaking of Dairy Vale Co-Op by order under s 60(2) and (3) of the Co-Operatives Act 1983 (SA). By virtue of that order, Dairy Vale assumed the rights and liabilities of Dairy Vale Co-Op. It is clear that Dairy Vale is liable for the actions of Dairy Vale Co-Op about which the applicants complain in this action. 3 I shall call Tirango, Mr Williams and Ms Stockman together "the applicants". 4 It is unnecessary to distinguish between Dairy Vale Co-Op and Dairy Vale for the purposes of the claim. I shall simply refer to Dairy Vale hereafter to encompass each of those entities as appropriate from time to time. 5 Up until 30 June 1994, there were two principal suppliers of milk and dairy products to the Adelaide milk market. They were Dairy Vale and National Dairies (SA) Ltd ("National Dairies"). Each held about half of the white milk market, although Dairy Vale had a greater share of the white milk market in the southern suburbs of Adelaide and National Dairies had a greater share of the white milk market in the northern suburbs. There was a separate product market called in evidence the "flavoured milk market", of which Dairy Vale held only about 20 per cent and National Dairies held about 80 per cent. The evidence indicates that National Dairies' large share of the flavoured milk market was largely as a result of the success of its Farmers Union Iced Coffee product. 6 On 3 July 1987, Tirango purchased the business of J C and K M Worrell, trading as Elizabeth Milk Supply, and commenced trading as a distributor of milk and dairy products in the northern suburbs of Adelaide. It was a substantial investment, as Tirango paid $445,000 for that business. Later, in 1988, it purchased a further milk round also servicing part of the northern suburbs of Adelaide from Gregory Little ("Mr Little") for $140,000. In addition, the interests associated with Tirango had also separately developed the business of Milk Plus Service Pty Ltd ("Milk Plus") on a 50/50 basis with Mr Little to deliver milk to twenty four hour outlets in Adelaide, such as petrol stations. 7 In addition, Mr Williams and Mr Stockman together with Mr Little operated a milk distribution business in the Gippsland area of Victoria through Tronnan Nominees Pty Ltd ("Tronnan") trading as Vic Milk. 8 At material times up to May 1994, Tirango had four directors and equal shareholders: Geoffrey David Stockman ("Mr Stockman"), Ms Stockman, Mr Williams and Pamela Williams ("Ms Williams"). Mr Stockman until May 1994 was the director of Tirango principally involved in the day to day running of its business, although Mr Williams maintained an active interest and took over its running from time to time when Mr Stockman was on holidays. Mr Stockman died suddenly on 28 May 1994. 9 Leading up to mid 1994, Tirango's business was a substantial one. It distributed and sold about 70,000 litres of milk each week. It had four trucks with four permanent drivers. An additional two trucks serviced the Milk Plus business. Up to 1994, it sold up to 85 per cent product of National Dairies, although in the early months of 1994 it increased a little the percentage of Dairy Vale products which it sold. As a distributor, it was obviously highly regarded by National Dairies. 10 In November 1993, the South Australian Government announced that it intended to deregulate the white milk supply industry. It intended to terminate price control over white milk sales from 1 January 1995. Up to that time, white milk prices were fixed by regulation. The coloured milk market was not regulated and was somewhat more profitable. There were at the time about 300 milk vendors in the Adelaide area, of which about eighty were wholesale vendors distributing to shops, supermarkets and other commercial outlets and the balance made domestic deliveries. 11 Apparently in anticipation of that deregulation, both National Dairies and Dairy Vale contemplated that the milk and dairy product distribution system could be restructured and made more efficient. Each contemplated that, instead of the existing system, there would be exclusive distributors of their respective products, rather than distributors being able to distribute either National Dairies or Dairy Vale products. As events turned out, 1 July 1994 became the date at which exclusive distribution arrangements became effective both for National Dairies and for Dairy Vale. Part of that process involved, at least in anticipation, a significant reduction in the number of milk vendors throughout the suburbs of Adelaide. The Issues

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14 It is then alleged that those representations were made orally by statements made by Mr Thomas Alexander Thwaites ("Mr Thwaites") of Dairy Vale to Mr Stockman and to Mr Williams in May and June 1994. I shall call those representations "the oral representations". The amendment introduced at the start of the hearing maintained that allegation, but also asserted that the representations were partly contained in, or evidenced by, financial projections allegedly produced by Dairy Vale in or about May and June 1994. It emerged in the course of evidence that reliance was being placed principally upon a facsimile from Mr Thwaites to Mr Williams of 14 June 1994 containing a spreadsheet with projections encompassing four options ("the June spreadsheet"). It will be necessary to refer to the June spreadsheet later in these reasons. As discussed below, I consider it significant that the statements of evidence filed on behalf of the applicants up to the trial, and the statement of claim up to the commencement of the trial (which had already been amended), did not identify the June spreadsheet as conveying any significant representation to them. 15 As the evidence emerged, the essence of the representation about profitability was a "guarantee" (to use a word used by Mr Williams) given by Dairy Vale to Tirango that, if Tirango entered into the agreement, it would earn not less than $11,000 gross profit per week. I shall call that alleged representation "the gross profit promise". Hereafter I shall include the gross profit promise as one of the oral representations. 16 It is common ground that the agreement comprises at least a written document entitled "Dairy Vale Wholesale Vendor Agreement" dated 23 June 1994 ("the written agreement"). The applicants allege that the oral representations, including the gross profit promise, constituted oral terms of the agreement. They allege alternatively that the oral representations constituted terms of a collateral oral agreement between Dairy Vale and the applicants, or warranties by Dairy Vale to the applicants. The oral representations are claimed to have induced Tirango to enter into the agreement and to have induced Mr Williams and Ms Stockman to have entered into the guarantee. 17 The applicants then allege that the oral representations were untrue, to the knowledge of Dairy Vale, so that the applicants are entitled to relief under s52 of the Trade Practices Act 1974 (Cth) ("the Act") or under s 56 of the Fair Trading Act 1987 (SA), as well as for damages for breach of contract. 18 The applicants' claim is that Dairy Vale was prompted into making the oral representations to secure Tirango as an exclusive distributor of Dairy Vale products, and to prevent Tirango from entering into an exclusive distribution agreement with National Dairies. They say that, but for the oral representations, Tirango would have entered into a distribution agreement on similar terms with National Dairies, and without any guarantee being required from Mr Williams and Ms Stockman, and that any such agreement would have been for a term of between five to seven years and with a net weekly profit assured of not less than $4,000 per week. Consequently, they contend that the Tirango business at the end of that term would have been worth not less than $1.5 million, and that Tirango has lost that net income for five to seven years and the loss of the opportunity to sell its business at that value at the end of that term. 19 That loss flows, the applicants contend, because from 1 July 1994, Tirango became an exclusive distributor of Dairy Vale products under the agreement, but it was unable to gross a weekly profit of more than $8,500 per week and often much less. In fact, it made substantial trading losses rather than the anticipated net profit of some $4,000 per week. On 6 November 1995, Tirango sold part of its business for $155,000 to generate some working capital and to meet accumulated losses so as to be able to keep trading. On 9 September 1996, it ceased to operate as a distributor for Dairy Vale under the agreement and ceased to trade. 20 The circumstances in which Tirango ceased to trade give rise to a separate claim. 21 Tirango alleges that, under the agreement, Dairy Vale agreed to provide it with four weeks credit for payment of invoices for products supplied under the agreement. On 6 August 1996, in breach of that term, Dairy Vale demanded payment of sums which were in respect of supplies provided by Dairy Vale only of seven days or more duration. Tirango claims that that demand was made wrongly in breach of the agreement, and further that it led to Dairy Vale wrongfully claiming to be entitled to terminate the agreement on 9 September 1996 and to Dairy Vale refusing to supply Tirango further with milk and dairy products for distribution. As a result, Dairy Vale took over Tirango's business from 10 September 1996. It is said that that was done wrongfully by Dairy Vale, and that Tirango thereby lost the opportunity in any event to dispose of its business for some $550,000. It claims that sum from Dairy Vale, together with an account of profits for operating the business since that time. 22 The oral representations are denied by Dairy Vale. It claims that the agreement consisted only of the written agreement. In conjunction with the written agreement there was a further agreement in writing undated but made on 23 June 1994 between Dairy Vale and Tirango entitled "Milk Vendor's Agreement" ("the trading terms agreement") dealing with trading terms and conditions. Dairy Vale contends that the written agreement and the trading terms agreement contain all the terms and conditions of the agreement between Dairy Vale and Tirango. It disputes that there are any oral or implied terms. 23 Dairy Vale contests that the gross profit promise was given. It acknowledges that there were a number of discussions between officers of Dairy Vale, and a director or directors of Tirango between 29 April 1994 and 23 June 1994, and subsequently, but it disputes that in those discussions it represented to Tirango, or agreed with Tirango, that by entering into the agreement Tirango would derive and continue to derive either a gross weekly profit of the order alleged or at all. The document to which attention was drawn by the amendment, that is the June spreadsheet, was prepared (it contends) upon information provided to Dairy Vale by Mr Stockman for Tirango, and that Dairy Vale believed it to be true, based essentially upon Tirango's report of its current and prospective trading options and the trading details of Mr Little's business. It also contends that the June spreadsheet was provided upon the express basis that it was based upon information supplied by Tirango, and that Dairy Vale accepted no responsibility for any errors or omissions in it. 24 Dairy Vale also relies upon a clause in the written agreement that it constitutes the entire agreement and understanding between the parties, to the exclusion of all or any prior arrangements and undertakings. 25 Dairy Vale further acknowledges that in discussions extending over the period 29 April to 23 June 1994, the prospect of Dairy Vale and Tirango entering into a joint venture arrangement to distribute Dairy Vale products was discussed. It says that no agreement to do so was ever reached. It says that it genuinely contemplated that prospect. It agrees that those discussions included that it might invest up to $150,000 in any such joint venture, and that it might take up to 49 per cent of the interest in that joint venture. 26 Dairy Vale also acknowledges that, prior to the agreement, it informed Tirango that it intended to promote new products and would provide point of sale advertising material and merchandising and marketing support (hereafter described collectively as "promoting and marketing assistance"). It says that it did provide promoting and marketing assistance. However, it denies that it made the representation in the terms of (c) of the oral representations, or that that was a term of the agreement or a collateral contract or a warranty on its part. In any event, it says that it did not breach that representation. 27 Dairy Vale also denies that Tirango relied upon any of the oral representations (if any were made) on entering into the agreement. In part it says that in mid 1994, Tirango had to become a Dairy Vale distributor or a National Dairies distributor, and further says that Tirango would have been forced to have become a Dairy Vale distributor in any event because National Dairies declined to appoint it as a distributor. It denies therefore that Tirango would have been a National Dairies distributor but for the making of the alleged misrepresentations in any event. 28 Dairy Vale also specifically denies that Tirango would, and could, have made the level of profit which it claims it would have or that it suffered the losses which it alleges. 29 In relation to the claim that it wrongfully made a demand under the agreement, and wrongfully terminated the agreement, Dairy Vale says that it was an express term of the agreement that Tirango would comply with the Dairy Vale "trading terms" for payment of goods supplied by Dairy Vale as set out in the trading terms agreement. It did give notice of a demand on 6 August 1996 to Tirango demanding payment of all monies owing by Tirango to Dairy Vale then outstanding for seven days or longer. It says that it was entitled to do so. Alternatively, Dairy Vale says that, even if the demand then made had included monies not then due or owing, Tirango was in any event indebted to Dairy Vale as at 31 July 1996 for some $249,011.09 of which some $229,404.22 was payable as being due and outstanding for four weeks or more. It claims that it was entitled to terminate the agreement on 9 September 1996. 30 Dairy Vale has made a cross claim based upon the agreement. 31 It alleges that it supplied milk and dairy products to Tirango pursuant to the agreement on a running account basis, which has an unpaid balance of $252,496.74. It also claims that, pursuant to the trading terms agreement, Tirango agreed to pay interest on any outstanding amounts at a rate equal to the aggregate of 1.5 per cent plus the overdraft rate charged by Dairy Vale's bankers to Dairy Vale from time to time. At 30 May 1997, the accrued interest entitlement is said to $19,558.00. Accordingly, Dairy Vale claims against Tirango, and against Mr Williams and Ms Stockman under the guarantee, for that total sum of $272,054.74 plus interest accumulated thereafter. 32 There is an additional aspect of the cross-claim. The guarantee contains a covenant to guarantee Dairy Vale the performance by Tirango of the agreement "… on the same terms and conditions as are contained in Clause 3.15 …" of the agreement. Dairy Vale says that there was a mutual mistake in the guarantee, and that the reference should be to cl 4.15 of the agreement. There is no cl 3.15 of the agreement. It seeks to rectify the guarantee. The applicants simply deny those matters. The sequence of events

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34 At the time Christopher Linden Wood ("Mr Wood") was the managing director of Dairy Vale. He remained in that capacity until March 1995. I found him an entirely satisfactory witness. He was cautious and careful in what he said. He did not seek to go beyond matters of his direct knowledge. He did not apparently overstate or seek to argue the claim on behalf of Dairy Vale. I have no hesitation in accepting his evidence. As appears below, he was directly involved in critical discussions only on 5 January 1994. 35 Mr Wood accepted that each of Dairy Vale and National Dairies would move to a situation where milk vendors operated on an exclusive basis for one or other of those two dairy companies. He planned to develop an exclusive milk vendor distribution system to cover the Adelaide metropolitan region. As part of that plan, he started forming the idea in late 1993 of entering into joint venture arrangements with some of the larger milk vendors. The possibility of such joint venture arrangements was a flexible one. He had in mind that Dairy Vale might advance monies by way of loan or a convertible note to a particular milk distributor in circumstances where Dairy Vale might later convert that loan, or convert that note, into equity in the distributor's business. The precise mechanics for doing that were not fully worked out. It was to be a means of providing financial support to a business enterprise which might become a Dairy Vale distributor, or which was a Dairy Vale distributor. He was aware that any such proposed arrangement would have to be approved by the Dairy Vale Board. At all times, he accepted that he did not have the authority on his own behalf to enter into such an arrangement with a distributor. 36 Mr Wood recognised that, to explore such a prospect, it would be necessary to exchange financial and operational details. He accordingly arranged for a confidentiality agreement to be prepared, to be used by Dairy Vale in respect of those distributors (if any) with whom discussions of a possible joint venture took place. 37 A pro forma for that agreement was duly prepared. 38 In late 1993 or very early 1994 Tirango entered into discussions with Dairy Vale in relation to a possible joint venture. The confidentiality agreement was executed on 5 January 1994. On 5 January 1994, a confidentiality undertaking was also entered into by Milk Plus. Mr Wood met with Mr Williams, Mr Stockman and Ms Stockman on that date. 39 There are respects in which Mr Wood's evidence about that meeting differs from the evidence of Mr Williams. I accept his evidence in preference to that of Mr Williams. I accept that, contrary to Mr Williams' evidence, he did not then suggest that Dairy Vale would enter into a joint venture agreement, with Dairy Vale taking a 15 per cent interest only in the joint enterprise business. That level of participation was not within his contemplation. I also accept that he did not on that first occasion provide any warranty or promise or intimation to Mr Williams, or to those present, that Dairy Vale would ensure that Tirango could earn as a joint venturer, or as a gross weekly profit of $11,000 from "day 1". It is inherently unlikely that he would have done so. The point of the discussions at that time were very preliminary on any view. He would not have "promised" an $11,000 weekly profit. I think that that part of the evidence is an example of the fixation in Mr Williams' mind, which I accept he now has, of the gross profit promise having been made. In my judgment, Mr Williams was wrong in attributing the gross profit promise to Mr Wood. That conclusion, together with a number of other matters to which I refer, has caused me to reject Mr Williams' evidence that the gross profit promise was made by Dairy Vale. 40 I also accept Mr Woods' evidence on the only occasion subsequent to the agreement that he met with Mr Williams, that Mr Williams did not then raise with him the gross profit promise or complain that Tirango had not earned a gross weekly profit of $11,000 despite the alleged oral representations. Mr Williams said that he raised that matter after the agreement on a number of occasions, including on one occasion with Mr Woods. That occasion was a lunch at Jolleys Boat House Restaurant. It was a belated celebration for having entered into the agreement. It took place in September 1994. On that occasion, the topic of a possible joint venture was discussed. Mr Williams' response (as I find it to have been, on the basis of Mr Woods' evidence) was that the further discussion should be deferred for a time to see how the exclusive distributorship progressed. On that occasion, apart from Ms Stockman and Mr Williams, Mr Thwaites, Mr Harris and Mr Whewell also attended. 41 I return to the sequence of events. 42 On 16 March 1994, Mr Thwaites was appointed as distribution development manager of Dairy Vale at the initiative of Mr Woods. He was engaged for the specific purpose of assisting in developing a distribution structure for Dairy Vale in the light of the State Government announcement. He worked under the supervision of the distribution manager Peter Thiele ("Mr Thiele"). Mr Thiele is a qualified chartered accountant, and was employed by an accountancy firm before taking that position. 43 By letter dated 29 March 1994, to all retail vendors, National Dairies indicated that it proposed to move from a dual vendor system. It gave notice to its distributors that, as from 17 May 1994 (subsequently extended to 1 July 1994) it would cease its then current supply operations and would move to a distribution network through exclusive National Dairies distributors. It indicated that the process of selecting retail vendors to become National Dairies distributors would shortly commence, and invited application from milk vendors by 15 April 1994. That letter went under the signature of Peter Alex McKinnon ("Mr McKinnon"), the distribution project manager for National Dairies. The evidence indicates that National Dairies stole a march on Dairy Vale in that announcement, as Dairy Vale was somewhat less advanced in its plans to implement exclusive distributorships. 44 Mr McKinnon also gave evidence. He was called by the applicants. I found him also to be an entirely reliable and truthful witness. I have no hesitation in accepting his evidence. 45 Mr McKinnon indicated that, as a general rule, it was understood in early 1994 that the profit margin for wholesale sellers of milk was 10 per cent on white milk and, because it was not regulated, 22 per cent on flavoured milk products. Having invited application from milk distributors, National Diaries planned in the succeeding period of time to enter into exclusive distribution agreements with a selected and limited number of distributors. It proposed to have regard to the financial standing of distributors who had applied for that appointment, their past history with and relationship with National Dairies, their reputation amongst their customers, and such matters. It proposed to appoint sufficient distributors to cover existing serviced areas. One of the distributors which it had in mind, and expected, would become a National Dairies distributor was Tirango, but it did have a concern about the level of Tirango debt. 46 National Dairies' letter of 29 March 1994 requested applicant milk vendors to supply business information, and to supply credit information to National Dairies. On 27 April 1994, Tirango applied to National Dairies to be appointed a wholesale distributor. Following that application from Tirango, National Dairies did have some discussions with Tirango, and also with Mr Little, who was another large milk vendor in the northern suburbs of Adelaide. It wished to explore the possible appointment of both Mr Little and Tirango as dedicated National Dairy vendors. 47 Mr McKinnon said, and I accept, that he believed that Tirango trading as Elizabeth Milk Supply was insolvent. He said that although National Dairies was prepared to endeavour to appoint both Tirango (through Mr Stockman) and Mr Little as dedicated National Dairies vendors for the northern suburbs of Adelaide, in the case of Tirango that desire was subject to National Dairies being satisfied as to Tirango's financial stability. Mr McKinnon did not at any time, prior to Mr Stockman's death, have any dealings with Mr Williams. 48 I find on the basis of Mr McKinnon's evidence that in the discussions which then ensured between Mr Stockman and Mr McKinnon (or those working under his direction including a Mr Gallucchio) no offer of financial support was made to Tirango. National Dairies gave no guarantees to Tirango (or to Mr Little) of any percentage gross or net profit or of any turnover figures. It made it known to them that it hoped that they would have 80 per cent of their previous level of business as a result of exclusive distributorship appointments. Mr Gallucchio, who was National Dairies financial controller, also expressed concern in those meetings that Tirango was insolvent and that there was a question as to whether it could continue trading. National Dairies required some evidence of solvency, by reduction of Tirango's indebtedness to it. 49 On 2 June 1994, Mr Williams, Mr McKinnon, Mr Gallucchio, and Mr Little met, following Mr Stockman's death. The discussion included the financial position of Tirango. Mr McKinnon asked Mr Williams for a response to their view that Tirango was insolvent. At the same time, I accept that National Dairies was also anxious to ensure that the Tirango business did not go to Dairy Vale, and did not otherwise go into receivership so as to be sold on the open market. The firm desires of National Dairies in that regard were not expressly made known to Mr Williams. 50 At a further meeting on 9 June 1994, at which both Mr Williams and Ms Stockman were present, the issue as to Tirango's financial position was again raised. Mr McKinnon said that the concerns of National Dairies had not been allayed, as there had been no attempt to reduce the indebtedness and that he regarded Tirango as procrastinating in responding to their concerns. Mr Williams at that time indicated that some land and businesses held by him in Victoria would somehow be used to generate funds to effect debt reduction. Mr McKinnon does not recall any reference to an insurance payout on the life of Mr Stockman being available to reduce that indebtedness. On that occasion, Mr Williams agreed that a payment of $44,000 would be made by 14 June 1994 in reduction of the indebtedness. That was not made. 51 On 15 June 1994, National Dairies through Mr Gallucchio complained of that non payment to Mr Williams by facsimile. The total then owing by Tirango to National Dairies was $277,960.25, of which $190,247.55 was overdue beyond normal trading terms. That facsimile required payment of that overdue amount before signing any new contract with Tirango. It concluded with the comment:

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52 On 17 June 1994, Mr McKinnon telephoned Mr Williams as no further payment had been made. He told Mr Williams that Tirango would not be offered a distribution contract by National Dairies because Tirango had not demonstrated its good faith in relation to the reduction of its indebtedness. Mr Williams was somewhat upset with Mr McKinnon on that occasion. He told Mr McKinnon that he did not think it was within Mr McKinnon's authority to decide not to offer Tirango a contract, because he was "middle management" and he would take the matter up with Mr McKinnon's superiors. It appears from Mr Williams' evidence that Mr Williams then telephoned certain executives of National Dairies in Melbourne. They were in the Victorian administrative structure of National Dairies, rather than the South Australian administrative structure, and had no direct role in superintending Mr McKinnon's work. 53 Mr McKinnon had no further discussions with Mr Williams or Ms Stockman regarding National Dairies appointing Tirango a distributor. Effectively, from 17 June 1994, the prospect of National Dairies appointing Tirango as one of its exclusive distributors was at an end. 54 On 23 June 1994, National Dairies through Mr McKinnon formally informed Tirango that its application for appointment as a wholesale distributor had been unsuccessful and that supply arrangements were to cease on 2 July 1994. That letter also complained of the failure to bring the Tirango account in line with trading terms or to provide security, and required payment of the then current outstanding amounts. That payment was progressively made, on the evidence, up to 4 August 1994. The total paid to that date was $224,361.60, perhaps providing an explanation for a cash shortfall in Tirango over that period of time. 55 I accept Mr McKinnon's evidence that the termination of negotiations with Tirango was not because Tirango had also been negotiating with Dairy Vale. His reason was because there had been no progress in meeting the financial requirements of National Dairies despite discussions over some time, and there was a need for National Dairies to make a final decision. 56 Those matters were, I find, well known to Mr Williams. Tirango's failure to reduce its indebtedness to National Dairies in the time required by National Dairies had nothing to do with the ongoing discussions between Tirango and Dairy Vale. I do not accept the applicants' claim that, but for the oral representations, Tirango would have become a National Dairies distributor. Whilst it is clear that Mr Williams in early June 1994, and Mr Stockman before that, was trying to keep the option open of a distributorship with either National Dairies and Dairy Vale, the loss of the option with National Dairies had nothing to do with the oral representations. There was a significant overdue indebtedness to National Dairies which Tirango failed to meet. Mr Williams' evidence, to which I refer in more detail below, also indicates that there were significant occasions on or after 17 June 1994 when he says the oral representations were made. Ms Stockman's evidence was that the only occasion when she was told about the oral representations was on 23 June 1994 when the written agreement was signed. Those events were after the National Dairies distributorship option had been lost. Thereafter, Tirango's only option was to become an exclusive distributor of Dairy Vale. 57 In my view, Mr McKinnon's evidence which I have accepted provides a further reason to doubt the reliability of Mr Williams' evidence about the oral representations. I do not think it is consistent with Mr McKinnon's evidence that, as Mr Williams maintained, the decision to sign the written agreement was induced by the oral representations and that otherwise Tirango would have become a National Dairies distributor. That is a further factor to which I have had regard in assessing the weight which I should give to Mr Williams' evidence. 58 Returning to the sequence of events, on 8 April 1994, Dairy Vale also followed National Dairies by informing milk vendors, including Tirango, that from 1 July 1994 it proposed to distribute its milk and other dairy products through dedicated Dairy Vale vendors. It too invited vendors, including Tirango, to apply to become a Dairy Vale vendor. That letter nominated Mr Thwaites or Mr Gregory White ("Mr White") as contacts. 59 Tirango, not surprisingly, also sought to explore that opportunity. Mr Stockman had a number of meetings with Mr Thwaites, including a meeting on 27 May 1994 attended also by Mr Little. Following Mr Stockman's death on 28 May 1994, Mr Williams continued those discussions with Dairy Vale on behalf of Tirango, including discussions on 11 and 19 June 1994 and when the written document was signed on 23 June 1994. It was in the course of those discussions that the June spreadsheet was provided on 14 June 1994. Mr Williams then had a significant telephone conversation on 17 or 19 June 1994 and a further significant conversation when the written agreement was signed. 60 Mr Williams also said that he attended meetings with Dairy Vale officers on about 13 May 1994, about 20 May 1994, and on 27 May 1994, as well as those discussions in June 1994, at which the oral representations were made. 61 Before addressing the evidence about those several occasions, I shall make certain observations about the witnesses. Observations about the witnesses

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63 Other than that occasion, the principal participants in discussions at which it is alleged that the oral representations were made, included Mr Williams and Ms Stockman from Tirango, Christopher Grant Harris ("Mr Harris"), Mr Thwaites, and Mr Little. Mr Harris was employed by Dairy Vale between 23 May 1994 and January 1995 as its national sales manager. 64 In addition, the applicants led evidence from Peter Whewell ("Mr Whewell"), who started working for Tirango on 2 June 1994, after Mr Stockman's death, as its day to day manager, from Roger Prime ("Mr Prime") the secretary and manager of the Milk Vendors Association of South Australia ("the MVA"), and Roland Seton Wettenhall ("Mr Wettenhall") and Peter Haslock ("Mr Haslock") each of whom is an independent chartered accountant who gave evidence on matters relating to the issues of damages. 65 Apart from Mr Wood and Mr Thwaites, Dairy Vale called evidence from Graham Letton Smith ("Mr Smith"), who was at material times the marketing manager of Dairy Vale, from Michael Whaley ("Mr Whaley") who was Dairy Vale's credit controller from 19 June 1995, and from Robert Michael Kennedy ("Mr Kennedy"), also an independent chartered accountant whose evidence was directed only to the question of damages, and who dealt with matters which Mr Haslock and Mr Wettenhall had addressed. 66 I accept that each of those witnesses was endeavouring to give the Court a truthful version of events. However, as is often the case, the version of witnesses to critical events differed in significant respects. That is sometimes because persons participate in such events with a particular perspective or expectation, or have a desire subconsciously to read into conversations something more than was really said. It is also sometimes the case that the passage of time, and events which occur after critical conversations, lead to an interpretation or construction of critical conversations which is somewhat coloured and which comes to represent a truthful but nevertheless inaccurate version of the actual events. In circumstances where there is such conflict, contemporaneous documents or conduct, or uncontested related circumstances, often assist the Court in deciding where the truth lies. Sometimes, too, the impression that a particular witness gives in the course of evidence, by demeanour or by the way questions are answered, or by the limited recollection of matters other than one or two matters central to that person's particular case, may throw some light on the fact finding process. It is also part of my consideration of the evidence to weigh up the inherent probabilities or improbabilities of each of the oral representations having been made as alleged, by reference to the accompanying conduct of the parties to the conversations. In the present matter my conclusions are also assisted in relation to the oral representations by my unqualified acceptance of the evidence of Mr Wood and Mr McKinnon. As I have explained, on certain significant topics, their evidence does not accord with the evidence in particular of Mr Williams. 67 Mr Williams and Ms Stockman were also both at somewhat of a disadvantage in the particular discussions at which the oral representations are said to have been made. In Mr Williams' case, he had had a limited role in Tirango's business operations and in Tirango's dealings with Dairy Vale prior to Mr Stockman's death. His knowledge of the day to day operations of Tirango, of the significance of particular pieces of information concerning its day to day operations, and of the background to the discussions which had taken place was obviously considerably less than that of Mr Stockman. He was thrust into the critical decision making role for Tirango when time was of the essence. Up to the time of Mr Stockman's death, he had not been greatly involved in the dealings between Tirango and Dairy Vale or National Dairies. Both National Dairies and Dairy Vale wished to decide upon their respective distributors by about mid June 1994, so that exclusive distribution agreements could be executed and implemented from 1 July 1994. In Ms Stockman's case, she had no direct dealings with Dairy Vale or with National Dairies concerning the prospect of Tirango becoming an exclusive distributor of one or the other of them, until 23 June 1994. On that occasion she attended with Mr Williams to execute the written agreement. She gave evidence of a conversation at that time. In each of the case of Mr Williams, and more so in the case of Ms Stockman, obviously at the time they became significantly involved in such discussions, they had a background knowledge which in part would have represented Mr Stockman's assessment of the prospects for Tirango, no doubt reflecting in part his discussions with officers of Dairy Vale but also reflecting his personal views and the results of discussions and calculations and business assessments he had made for Tirango in conjunction with Mr Little. 68 I have carefully considered the evidence of Mr Williams and Ms Stockman concerning the occasions when the oral representations are said to have been made. In the light of that consideration, I have reached the view that I should not place much weight upon the evidence of Mr Williams or of Ms Stockman except where it is confirmed by other evidence. In the case of Mr Williams, I have noted a number of matters already which give rise to that view and, in the course of considering the particular occasions when the oral representations are said to have been made, I will deal with further matters supporting that conclusion. In the case of Ms Stockman, I formed the impression that she had clearly in her mind that the gross profit promise had been made on 23 June 1994, and asserted the existence of that promise persistently but without giving me the impression that it had entered into any meaningful context of discussions which took place on that occasion. I think she probably formed the belief as to the gross profit promise having been made from a series of discussions with Mr Williams and from circumstances other than those which occurred on 23 June 1994. 69 In my view, Mr Little was a reliable witness except in two respects. He is obviously a successful milk vendor. In 1994, he operated several businesses under his own name, under the names Northern Milk Supply and Barossa and Mid North Milk Supply, as well as the Milk Plus business. On 28 June 1994, he became a distributor of National Dairies products. He was able to supply to former customers of Tirango much of the National Dairies product which Tirango had previously distributed as a dual distributor. 70 His evidence was general in nature. He impressed me as an experienced and able business man within his area of expertise. He had several discussions with Dairy Vale and National Dairies representatives, including discussions at which Mr Stockman was present, during 1994. He did not have any detailed recollection of those discussions, and gave the impression that he was concerned only with getting the best deal for him and his businesses when deciding to which of the two companies he would seek to be appointed as a distributor. Principally, in his mind, that involved ascertaining the areas he could service and supply. He was, I find, prepared to form his own judgment about the potential sales and profitability of doing so, although the topics of volumes, gross profit and net profit were no doubt discussed at those meetings. 71 The two respects in which I do not accept Mr Little's evidence are firstly that, on 27 May 1994, Mr Thwaites said to Mr Stockman in Mr Little's presence that Dairy Vale would guarantee Tirango $11,000 per week gross profit if he became a Dairy Vale distributor, and secondly that on the same day Mr McKinnon of National Dairies, in Mr Stockman's presence, said that National Dairies would ensure that Mr Little's business, if it became a National Dairies distributor, would be assured that it would maintain 80 per cent of the existing total turnover of the then existing business (not just the National Dairies product). I refer to those two aspects further when discussing the oral representations. 72 The principal witness called by Dairy Vale concerning the oral representations was Mr Thwaites. Upon his employment on 16 March 1994, his responsibility was the negotiations and discussions with the larger wholesale milk vendors, including Tirango. 73 He impressed me as a careful and sensible witness, and I am generally prepared to accept his evidence. In particular, I accept his evidence where it differs from the evidence of Mr Williams, Ms Stockman and Mr Little. His evidence accorded in a number of minor and incidental respects with the evidence of Mr Wood on matters where one would expect that accord only if it represented actual circumstances. He also was frank in responses to questions where the answer may have been unhelpful to Dairy Vale's case, and cautious in not overstating the position where his answers were consistent with Dairy Vale's case. 74 In view of my findings about the oral representations, it is not necessary to deal in detail with the evidence of Mr Whewell, Mr Smith or Mr Whaley. They were not involved in the relevant discussions. I note however that I have no reason to doubt the accuracy of their evidence on matters of which they have direct knowledge. 75 For the same reason, it is not necessary to address in any detail the evidence of Mr Wettenhall, Mr Haslock or Mr Kennedy. Mr Wettenhall's evidence was directed to valuing the Tirango business had the gross profit promise been made and been fulfilled, and the loss of net weekly profit from 23 June 1994 to 9 September 1996 on the same basis. As appears in these reasons, I am not prepared to find that the gross profit promise was made. 76 Mr Haslock addressed the same questions. In addition, in forming his view he assumed that, but for the gross profit promise having been made, Tirango would have entered into a similar arrangement with National Dairies. I have found that it would not have done so. Mr Haslock also addressed the loss of profits of Tirango in the period 23 June 1994 to 9 September 1996 on the assumption that the Tirango business would have continued to operate in the same way after 23 June 1994 as it had before that date. He evaluated the value of Tirango's business at 9 September 1996 also on that assumption. I do not consider that that assumption is an appropriate one. It is clear that from 1 July 1994, Tirango would have become an exclusive distributor of either Dairy Vale or National Dairies. I have found that, from 17 June 1994 and for reasons unrelated to any discussions with Dairy Vale, National Dairies declined to consider Tirango as a potential exclusive distributor of its products. Tirango then had no real option but to become a Dairy Vale distributor. Its business from that date would inevitably have changed, whether or not the oral representations were made. In addition, in Mr Haslock's case, I formed the view that his approach was rather too hypothetical and that his hypothesis was unduly favourable to Tirango. That is because he set out, upon the assumption outlined, to value the business of Tirango but eschewed a consideration of the way in which Tirango actually operated. In fact, Tirango was operating the business of Elizabeth Milk Supply as its sole activity, and I consider that his approach to some degree eliminated from consideration the way in which Tirango operated that enterprise in favour of some theoretical ideal operator. 77 Mr Kennedy's evidence was directed to two principal questions: the solvency of Tirango at June 1994, and the reliability of the financial records of Tirango. His conclusion, following upon his views on those two questions, was that Tirango suffered no loss in any event. In light of the view I have taken that the oral representations were not made, it is not necessary to form any conclusions on those questions. Nor is it necessary to express any concluded views on the relative merits of the evidence of those three expert witnesses. 78 I note that there was no expert evidence directed to quantifying Tirango's loss in the event that I did not accept that the gross profit promise was not made, but I found that one or more of the other oral representations had been made. Findings about the oral representations

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96 I do not accept Mr Little's evidence about the express guarantee said to have been given by Mr Thwaites on that occasion. I thought that, in that respect, he was reading into the discussion something which did not occur in those terms. Like Mr Little, Mr Stockman was obviously a very able milk distribution operator. I find that, like Mr Stockman, he was largely prepared to form his own judgment upon what could be achieved as a Dairy Vale distributor given a particular distribution area. No doubt such matters as profit were generally discussed between Mr Little and Mr Stockman, as they each considered whether to become distributors of Dairy Vale or National Dairies. I think it is inherently unlikely that, at meetings at which the two potential rivals were present, Dairy Vale through Mr Thwaites would provide to one a guarantee in such terms, or that National Dairies through Mr McKinnon would provide to the other a guarantee as Mr Little asserts. Mr Little's evidence in that latter respect is specifically countered by the evidence of Mr McKinnon, which I have accepted. Mr Little was unable to flesh out any discussion with Mr Stockman and Mr Thwaites on the topic in his evidence. He said that really nothing more was said on that topic of the gross profit promise. If it were a representation of the nature asserted, it is very unlikely that Mr Stockman would not have followed it up by exploring the basis upon which it was made or might be achieved. There was however no such discussion according to Mr Little. I do not think, on the evidence, that Mr Stockman was the type of person who would have simply accepted such an assurance without investigating its foundations. His other enquiries, including his role in the preparation of the spreadsheets, indicate that he was doing his own work leading up to the making of the decision whether to become a Dairy Vale distributor. In addition, Mr Little in his cross-examination resiled from his description of the conditional nature of the asserted representation, that is that it concerned Tirango somehow giving up its interests in the Milk Plus business.

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103 As I indicated earlier, in my judgment it is significant that the applicants' statement of claim did not refer to that document or its contents, and that Mr Williams' statement did not refer to that document or its contents, until amended at the start of the trial. It is very hard to comprehend that a document having the significance allegedly attributed to it by Mr Williams was not previously adverted to in those materials, even though it was included in the proposed book of documents for use at the trial. 104 The applicants relied to a significant degree upon the evidence of Mr Harris about the June spreadsheet. The June spreadsheet was one of several spreadsheets in evidence, apparently prepared by Mr Thwaites using information supplied by Tirango as well as Dairy Vale's own information as to litreage of milk sold to Mr Little's businesses. I accept that the spreadsheets generally were referred to in discussions with milk vendors for the purposes of showing those vendors that acceptance of appointment as a Dairy Vale distributor would be profitable. 105 Mr Harris recalled only two meetings he attended with representatives of Tirango. The first was one at which Mr Stockman was present, just before his death. There were no spreadsheets discussed on that occasion. The second he identified as having occurred on 1 July 1994. He referred to his diary to fix that date. He said Mr Williams was present on that occasion, and probably Ms Stockman also. That was the only meeting with Tirango at which he was present when a spreadsheet was discussed, although there were other meetings with Tirango representatives which he attended. His recollection is that the gross profit figure then presented was just over $10,000 although his written statement referred to the range $10,500 - $11,000. 106 He confirmed that there was no agreement by Dairy Vale to enter into a joint venture agreement with Tirango, but that that topic was a matter of ongoing discussion into the second half of 1994. He also confirmed that, at the celebratory function at Jolleys Boat House on 3 September 1994, no claim was made by those present from Tirango that Dairy Vale had not delivered on the gross profit promise, and that the figure of $10,000 was not then mentioned. 107 I have given careful consideration to the use to which I should properly put Mr Harris' evidence. The applicants submit that I should find that he is mistaken as to the date 1 July 1994, and should find that the occasion was 23 June 1994 when the written agreement was signed. But neither Mr Williams nor Ms Stockman said that the June spreadsheet or any spreadsheets were then discussed. Nor was there any other occasion in June 1994 when Ms Stockman was present at which the oral representations were discussed with officers of Dairy Vale. On the occasions of Mr Williams' asserted meetings with Dairy Vale representatives on 13 and 20 May 1994 when Mr Stockman was present, he did not say that Mr Harris was present. In addition, neither Mr Williams nor Ms Stockman gave evidence of an occasion when the figure of $10,000 or thereabouts for a weekly gross profit figure was discussed. I have therefore concluded that the occasion to which Mr Harris refers was not one which took place prior to the occasion on 23 June 1994 when the agreement was entered into. It may be that there was a subsequent discussion along the lines that Mr Harris described, and which took place on 1 July 1994. That may have been an occasion which helped to cement into the beliefs of Mr Williams and Ms Stockman that the gross profit promise was made, but they do not now place its occurrence after 23 June 1994. In my view, however, the occasion to which Mr Harris refers must have taken place after 23 June 1994 and so, whatever was then said, it did not play a part in Tirango entering into the agreement and it was not an oral representation made up to the time of the agreement. 108 In my judgment, Mr Williams understood the process by which the June spreadsheet and the earlier spreadsheets came to be prepared. I do not think he attributed to them at the time the character and significance which he now believes they have. In particular, I do not find that he read the spreadsheets carefully or that he understood them to be representations by Dairy Vale about what Tirango would achieve as a Dairy Vale distributor. I accept Mr Thwaites' evidence that he did not present them in that way, and that he did not say that they represented Dairy Vale's assessment of what Tirango would or was likely to achieve as a Dairy Vale distributor. It is my firm conclusion that Mr Williams did not at the time focus upon those documents in the way he now claims. I find that he had in his mind mainly the general discussions with Mr Thwaites, and his private discussions with Mr Stockman and perhaps Mr Little. I find that in those general discussions, the gross profit promise was not made. I also find that the June spreadsheet, or the earlier spreadsheets, were not taken by Mr Williams on behalf of Tirango as conveying the oral representations about profitability as alleged by the applicants. 109 The spreadsheets, including the June spreadsheet, appear to have been based upon a litreage of some 98,000 litres. That figure appears first to have been calculated by Mr Stockman. Whatever its source, it was clearly known to Tirango, through Mr Stockman, that it represented the Dairy Vale product sold by Tirango and by Mr Little's businesses. It was also apparent to Tirango, from the knowledge of Mr Little's rounds and from Mr Thwaites' discussions with Mr Williams, that part of Mr Little's area could be given to another potential Dairy Vale distributor. That is what in fact occurred. Those matters, together with the applicants' emphasis in evidence and before the trial upon the gross profit promise, in my view also tend to support the conclusion that the spreadsheets did not then have the significance which the applicants now ascribe to them. The handwritten note of Mr Thwaites to Mr Wood apparently in late June 1994 reporting on the proposed arrangement with Tirango by a series of dot points does not refer to the gross profit promise or to the spreadsheets. If that sort of information had been promised to Tirango, in my view there is no especial reason why it would not then have been recorded in that document. Its absence from that note is consistent with my conclusion. 110 I have considered the significance of Mr Thwaites' evidence that the income from litreage provided for in the spreadsheets was to some extent overstated by the failure to take into account certain customer discounts, and that the margin on flavoured milk sales which was too high. However, because I have reached the conclusion that the spreadsheets were not presented by Dairy Vale as having the significance now asserted, and were not considered or relied upon by Mr Stockman or by Mr Williams as Dairy Vale providing the foundation for the oral representations, it is not necessary to address those aspects further. Ms Stockman did not see the spreadsheets at any material time. 111 Mr Williams also gave evidence of a telephone conversation with Mr Thwaites on 17 June 1994, in which, he says, he received the assurance that Tirango would achieve a gross profit of $11,000 per week, and would achieve sales volumes necessary to do so. He described having made a note in his diary immediately following that conversation. As presented, that diary note reads:

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"That it is Dairy Vales wish & intention that Eliz Milk Supply Remains Viable & Profitable By maintaining A Gross Profit in Excess of $11000 weekly. At present $9600 for the term of this contract. This [illegible] means that Periodical Adjustments to Pricing & Customer List may be necessary as the effects of Deregulation are felt. Approx $3500 N/Profit/Weekly. Interviewing Top/Distribution man." 112 The words "at present" and the figure "$9600" are circled together. It is apparent that the figure $9600 was written over some other figure. 113 Mr Williams was strenuously cross-examined about that diary entry. It is inconsistent with a diary entry of 11 June 1996 of a telephone conversation with Mr Thwaites in which appears "guarantee 9700 gross margin". He was unable to explain how that entry came about. It does not appear to reconcile with the gross profit promise which he alleges he had already received. It is also not consistent with the terms of the gross profit promise allegedly given on 17 June and 23 June 1994. I thought his explanation of that diary note was unsatisfactory. I am unable to make a finding as to how it came about. I do not accept that it is a reliable contemporaneous record of that conversation. In particular, I do not accept his evidence that Mr Thwaites then provided the gross profit promise. 114 On 23 June 1994, both Mr Williams and Ms Stockman attended Dairy Vale to sign the written agreement, the trading terms agreement, and the guarantee. They did so in the presence of Mr Thwaites and Mr Greg White of Dairy Vale. That is the first occasion upon which Ms Stockman had any relevant direct dealings with officers of Dairy Vale for the purposes of this claim. 115 Mr Williams says that, before signing the documents, he went carefully over the matters discussed earlier to ensure Dairy Vale would do as it had promised and that he secured confirmation from Mr Thwaites and Mr White that Dairy Vale "guaranteed" Tirango a gross minimum profit of $11,000 per week. 116 I do not accept their evidence of that discussion. Mr Williams and Ms Stockman had considered the documents. They asked for alterations to be made to clause 11(ii) of the Trading Terms Agreement concerning the credit terms to be provided by Dairy Vale. Clause 18 of the written agreement also expressly provided:

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119 Its terms are inconsistent with the alleged joint venture agreement, said to have been represented as part of the oral representations. It makes it clear that there would be further discussions regarding a possible joint venture, involving Dairy Vale possibly providing loan funds and possibly equity capital to Tirango. It also makes it clear that such action by Dairy Vale was dependent upon the existing shareholders of Tirango injecting a further $150,000 capital into Tirango. It expressly says that, at that time, there is no obligation on the part of Dairy Vale to enter into any such arrangement. 120 Mr Williams said that he had asked his solicitors to check the document during June 1994, but did not inform the solicitor about the gross profit guarantee. He also said that, at the meeting on 23 June 1994, he did not see any need to seek to have that guarantee confirmed in writing. In view of the significance to Mr Williams and to Ms Stockman according to their evidence of the gross profit guarantee, and of the oral representations, it is difficult to understand why they did not insist upon the gross profit promise being recorded, or at the least that it be confirmed in writing. The fact that they did request Dairy Vale to confirm in writing its intention with respect to the possible future joint venture, which had been discussed, and that Dairy Vale did so tends further to raise questions as to why they did not seek the additional oral representations to be reflected in writing to the extent to which they were not already in the written agreement. Those matters add to the concerns which I have in accepting the evidence of Mr Williams and Ms Stockman on that matter. 121 There is a further piece of evidence which also tends to support the conclusion that the gross profit promise was not made. The accountants for Tirango, Bishop & Bishop, were consulted by Mr Williams, Ms Williams, and Ms Stockman on 15 September 1994. Mr Bishop's notes of that meeting include the following:

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"At this point in time they are breaking even, however, the initial conversation with Dairy Vale and going into business is that they would have about a $9,500.00 gross profit and expenses to be about the same. Left them with, say, $4000.00 on the bottom line." 122 Mr Bishop was not called to give evidence. It is difficult to understand how that memorandum could have been noted except for information provided by one of the directors of Tirango. I conclude that it was provided by one of them, probably Mr Williams. The instruction is then inconsistent with the claimed gross profit promise, which Mr Williams and Ms Stockman both say was made. It is not significantly different from the diary note of Mr Williams of 11 June 1994 referred to earlier in these reasons. 123 In the years 1991/1992 and 1992/1993, Tirango's gross sales had been of the order of $2.46 million and $2.87 million respectively. Its gross trading profit in the first of those years was almost exactly $280,929, representing a weekly gross profit of almost $5,400. Its gross trading profit in 1992/1993 was $311,338, representing a weekly gross profit of nearly $6,000. Those figures were of course known to Tirango, and had been provided to Dairy Vale on or shortly after 5 January 1994. That information also adds to my conclusion that the evidence of Mr Williams and Ms Stockman is unreliable. It is, in my view, inherently unlikely that Dairy Vale - however anxious it may have been to secure Tirango as the distributor of its products - would have made the gross profit promise which involved Tirango's gross weekly profit almost doubling from 1 July 1994 by distributing Dairy Vale products in an area where National Dairies products were the preferred product for the majority of consumers and where there was the likelihood of Mr Little with his existing distribution facilities becoming an exclusive distributor of National Dairies products. It is the more unlikely in circumstances where both Dairy Vale and National Dairies were about to embark upon a new distribution system, without any sound basis for assessing the impact of that change. 124 For those reasons, I am not satisfied that the gross profit promise or the oral representations alleged in (a) of the statement of claim set out above were made. 125 Mr Thwaites confirmed that the prospect of a joint venture with Tirango was part of the discussions, as well as its possible appointment as a "super vendor". His evidence on those matters was not significantly different from the other evidence. They were a matter of real and genuine interest on both sides, but had not progressed to the point of agreement on either side. As the evidence of Mr Williams and Ms Stockman makes clear, when the written agreement was signed on 23 June 1994, they were aware that no joint venture agreement was then in place. They did not immediately expect one. They requested a letter of intent from Dairy Vale on the topic, and received the letter of 23 June 1994 referred to above. I accept Mr Thwaites' evidence that one obstacle to progressing the joint venture proposal was the level of indebtedness of Tirango. He told Mr Stockman, and later Mr Williams, of the need for that level of indebtedness to be reduced. That is confirmed by the letter of 23 June 1994. I find that Dairy Vale would not have made the oral representation alleged unless and until that had occurred. 126 Accordingly, I find that there was no oral representation in terms of that alleged. In particular, the evidence does not satisfy me that Dairy Vale had made a commitment to a joint venture with Tirango, involving a contribution of not less than $150,000 to Tirango for 30 per cent of the issued share capital of Tirango. I find that the genuine expressions of interest made by Dairy Vale had not reached that point. I also find that there was no representation by Dairy Vale by 23 June 1994 that Dairy Vale would appoint Tirango as one of two or three super vendors of its products in Adelaide. In my judgment, again, the genuine expressions of interest made by Dairy Vale on that topic had not reached that point. 127 In their final submissions, the applicant maintained the claim that the promotion and marketing representations were made, and had not been fulfilled (cl (c) and (d) of the oral representations as set out above). They did not contend that it was necessary to address separately cl (e) of the oral representations, as it was subsumed in the issues as to the gross profit promise and the conduct concerning the termination of the agreement. 128 It was contended that Dairy Vale had failed to meet the promotion and marketing representations by failing to promote adequately its Dairy Vale Iced Coffee and Max Iced Coffee products, and in losing market share following 1 July 1994. There are clearly difficulties in Tirango succeeding on those matters. The relevant oral representations alleged were expressed in general terms, and related to Dairy Vale's future plans. There is no cogent evidence to indicate that it did not, at the time, intend to fight to secure and enhance its market share after 1 July 1994. Its interests in doing so corresponded with the interests of its distributors, including Tirango. The fact that, as events turned out, it might have done more or that its available resources limited its promotion and marketing efforts in a way of which the applicants are critical does not lead to the conclusion that those oral representations were not accurate or that Dairy Vale did not have reasonable grounds for expressing those views at the time. 129 However, as the applicants acknowledge, no separate damage apart from the damage flowing from the failure to achieve a gross weekly profit of $11,000 has been shown. I have reviewed the evidence carefully. Even if the promotion and marketing representations were made, I do not think that it has been shown that Dairy Vale failed to meet their general terms. It has also not been shown that, in the respects identified by the applicants in submissions, any damage flowed to Tirango. 130 I also reject the applicants' submission that there was implied into the agreement a term that Tirango would derive, and continue to derive, a gross weekly profit in the order of $11,000 per week. In my judgment, the implication of such a term does not meet the conditions necessary to do so: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 349. I consider that, having regard to Tirango's previous financial performance, it is not reasonable and equitable to imply such a term. I have found that the express making of the gross profit promise was inherently unlikely. I also consider that the implication of such a term was not necessary to give business efficacy to the agreement and that it is not so obvious that 'it goes without saying': per Mason J at 347. 131 As I have concluded that the gross profit promise was not made, and that the oral representations were not made, it is not necessary to address whether they may, if made, have been terms of the agreement, or terms of a collateral contract, or warranties, or actionable misrepresentations. 132 In my judgment, the claim of the applicants based upon the oral representations fails. Termination of the Contract

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"This is to re-advise you that your account with the company is considerably overdue and outside our current trading terms, which are seven (7) days nett. The total owing to Dairy Vale up to 31/7/96 is $242,011.09 of which is $229,404.22 is due payable forthwith. [sic] Consequently I must inform you that that you are in breach of your wholesale vendors agreement, specifically clauses 9.1 (a), and 4.15. In accordance with the terms and conditions of this agreement we hereby give you seven (7) days notice to remedy such breach. Payment to Dairy Vale of the overdue amount, being $229,404.22, will bring your account within trading terms and remedy the breach. Should such payment not be made, the company reserves the right to take such action as it sees appropriate in accordance with the wholesale vendors agreement. Such action may include termination of your agreement." 137 At that time, Dairy Vale had not determined the amounts outstanding on accounts received by Tirango on or before 3 July 1996, that is outstanding for more than four weeks from the Wednesday following receipt of Dairy Vale accounts. I accept the evidence of Mr Whaley that there was then due by Tirango to Dairy Vale at least $209,130.72 for in excess of that four week period. The notice given was in respect of a sum which it is clear was greater than the amount in fact owing and payable for invoices received on or before 3 July 1996. 138 Clearly, Dairy Vale was in error in making a demand for amounts overdue for more than seven days. 139 The applicants contend that, in the circumstances, there was no entitlement to terminate the agreement. No valid notice of a breach was given under cl 9.1(a) of the agreement, so they submit cl 9.1 did not become available to terminate the agreement. The purported termination on 9 September 1996 was a nullity. They rely upon Rawson v Hobbs (1961) 107 CLR 466 and Amann Aviation Pty Ltd v The Commonwealth (1990) 22 FCR 527 at 554 for the proposition that cl 9.1 of the agreement had to be strictly complied with. Later in these reasons I refer to the High Court decision The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 ("Amann") dismissing an appeal from that decision. On 9 September 1996, Dairy Vale took control of certain milk belonging to Tirango then in storage at Dairy Vale to the value of $5,000. Tirango claims it also usurped the business of Tirango so it could re-lease its milk rounds. 140 Dairy Vale submits that the fact, substance and nature of the breach of contract by Tirango were conveyed in the notice given on 7 August 1996, and that Tirango made no attempt to discharge or reduce its indebtedness. Accordingly, it submits it validly terminated the agreement by the notice given on 9 September 1996. 141 In my judgment, the notice given on 7 August 1996 was not a notice given in accordance with cl 9.1 of the written agreement. 142 On 9 September 1996, Dairy Vale gave notice of termination of the written agreement "pursuant to Clause 9.1(a)" of the said Agreement. It is my conclusion that that termination was invalid. That is simply because cl 9.1(a) contemplates a breach of the written agreement and a valid notice of breach allowing seven days to remedy the breach. I have found that no such valid notice was given. 143 Tirango's claim for damages in respect only of the wrongful termination of the contract is for the value of the milk rounds taken by Dairy Vale, and an account of the profits derived by Dairy Vale in re-leasing those rounds since 9 September 1996, and the milk to the value of $5,000 wrongly seized. 144 I do not accept that contention. It assumes that Dairy Vale was not entitled to, and would not have, given a proper notice of breach under cl 9.1(a) of the written agreement. It was clearly entitled to have done so, and intended to do so. Its error was to specify the breach as a failure to pay invoices within seven days of them being provided to Tirango, rather than the four week period. There was a sum in excess of $200,000 owing in respect of invoices provided prior to the commencement of that four week period. 145 As Mason CJ and Dawson J said in Amann at 80, after referring to the general rule about the measure of damages for breach of contract:

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146 In the present circumstances, the onus is upon the applicants to prove that their expectation of the outcome for which they contend, ie. the continuance of the distributorship for the term of the written agreement and the opportunity at the expiration of that term to sell the entitlement of being a Dairy Vale distributor to a third party "had a likelihood of attainment rather than being more expectation" (Amann, at 80). 147 In Amann, the Commonwealth had unsuccessfully asserted that, notwithstanding its wrongful termination of that agreement, it would lawfully have terminated it in any event. It failed to make out that fact; see eg. per Burchett J in 22 FCR at 566 and per Mason CJ and Dawson J in 174 CLR at 95-96. 148 I find that Dairy Vale could, and would have, lawfully terminated the written agreement by 9 September 1996 in any event. I have found that Tirango by early August 1996 owed Dairy Vale in excess of $200,000 which had been outstanding for more than four weeks. It clearly intended to activate cl 9.1(a) of the written agreement. It was entitled to. Had it done so with a valid notice, either then or during the balance of August 1996, the result would have been the same. On 15 August 1996, Dairy Vale wrote to Tirango again and specifically informed Tirango that it may terminate the agreement if payment of the overdue amount was not paid. At that time, Mr Williams and Ms Stockman were unable to agree as to how to respond to the demand. On 26 August 1996, Dairy Vale wrote to Tirango's solicitors giving Tirango a short period to put a proposal to reduce the outstanding debt, so that Tirango could continue to operate the distribution business. Those solicitors requested more time to respond, and Dairy Vale through its solicitors granted an extension of time to do so. There appears to have been some consideration given to putting a proposal as invited by Dairy Vale but none was forthcoming by the expiration of the period specified. 149 Had Dairy Vale not adopted that course of conduct, I may have been disposed to have allowed Tirango damages for loss of the opportunity, once a valid notice of demand was made under cl 9.1(a), to present some proposal to Dairy Vale to reduce its debt or otherwise to deal with its business. As that opportunity was in fact given, I do not think there is any further consequence of the wrongly expressed notice given on 7 August 1996 or the termination on 9 September 1996 which the applicants have proved. In my judgment, the applicants have failed to prove in the particular circumstances that, if not for the wrongful termination of the agreement, they had any real prospect of the agreement persisting beyond 9 September 1996 in any event. 150 The claim for the $5,000 worth of milk held by Dairy Vale but owned by Tirango is not disputed. Other than that, in my judgment the applicants are not entitled to damages on the basis claimed.

[57]

"The Vendor shall make due and punctual payment for the Products to Dairy Vale in accordance with the trading terms." 158 "Trading terms" is defined to mean such trading terms as are from time to time prescribed by Dairy Vale in relation to trading with Tirango. 159 Mr Williams and Ms Stockman contend that the guarantee, on its terms, does not fix them with liability in respect of Tirango's indebtedness to Dairy Vale as it is too vague and uncertain to do so. They refer to the wording of par 1, in particular that the payment referred to is not really capable of identification. They submit further that the expression "trading terms" in par 3 does not incorporate by reference the terms in the trading terms agreement, as the trading terms agreement is alleged by Dairy Vale to constitute a separate, further agreement in writing. 160 The written agreement comprises seventeen pages of text, encompassing twenty-two paragraphs, and six pages of schedules and the execution page. A number of the paragraphs are broken up into sub-paragraphs. Clause 4 is the only paragraph which is fourteen or more sub-paragraphs. 161 In the absence of any evidence from any witness, I am not prepared to conclude from the documents alone that there was, up to the time of the execution of the written agreement and the guarantee, a continuing common intention that par 3 of the guarantee should have referred to cl 4.15 of the written agreement: see Slee v Warke (1949) 86 CLR 271 at 281; Pukallus v Cameron (1982) 56 ALJR 907 at 909. Paragraph 1 of the guarantee, albeit perhaps somewhat loosely, guarantees a certain "payment" by Tirango, and par 2 indemnifies Dairy Vale against loss by default by Tirango in the performance of the written agreement. As there are a number of other substantive promises by Tirango in the written agreement, I am not convinced that par 3 of the guarantee was not intended to relate to one of them. Once it is acknowledged that the reference to cl 3.15 is erroneous, it does not necessarily follow that the ".15" is correct and the "3." is the error. If par 1 was intended to guarantee payment by Tirango, although par 3 may have been intended to reinforce that promise, the fact that there is elsewhere in the guarantee a guarantee of "payment" contributes to my lack of persuasion to the necessary degree, in the absence of oral evidence on the topic, that the guarantee should be rectified in the manner contended for by Dairy Vale. 162 As the cross-claim by Dairy Vale against Mr Williams and Ms Stockman was specifically founded upon par 3 of the guarantee, after its rectification, in my judgment that cross-claim must fail. Orders