CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND
INTERPRETATION OF CONTRACTS – COMMERCIAL CONSTRUCTION
AND INTERPRETATION
– where the plaintiff and defendant entered into a carriage agreement
Source
Original judgment source is linked above.
Catchwords
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION ANDINTERPRETATION OF CONTRACTS – COMMERCIAL CONSTRUCTIONAND INTERPRETATION– where the plaintiff and defendant entered into a carriage agreementregarding the transportation of waste– where the carriage agreementrequired the plaintiff to move the containers in a prompt and efficient manner
– where
the contractual provisions dealing with timeliness of performance
were ambiguous – where the Court had regard to the circumstances
external
to the written contract to interpret those provisions
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH
AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND
NON‑PERFORMANCE
– REPUDIATION – WHAT AMOUNTS TO REPUDIATION – where defendant
gave notice to the plaintiff
that it terminated the carriage agreement –
where the plaintiff asserted that the termination was a repudiation of the
carriage
agreement – where the plaintiff accepted the repudiation and
purported to terminate the carriage agreement itself – where
breaches of
the carriage agreement by the plaintiff were so persistent and frequent that
defendant was entitled to terminate
TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER
Sellars v Adelaide Petroleum NL (1992-1994) 179 CLR 332,
considered
Shevill v Builders Licensing Board [1982] HCA 47
(1982) 149 CLR 620,
cited
Judgment (126 paragraphs)
[1]
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - COMMERCIAL CONSTRUCTION AND INTERPRETATION - where the plaintiff and defendant entered into a carriage agreement regarding the transportation of waste - where the carriage agreement required the plaintiff to move the containers in a prompt and efficient manner - where the contractual provisions dealing with timeliness of performance were ambiguous - where the Court had regard to the circumstances external to the written contract to interpret those provisions
[2]
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON‑PERFORMANCE - REPUDIATION - WHAT AMOUNTS TO REPUDIATION - where defendant gave notice to the plaintiff that it terminated the carriage agreement - where the plaintiff asserted that the termination was a repudiation of the carriage agreement - where the plaintiff accepted the repudiation and purported to terminate the carriage agreement itself - where breaches of the carriage agreement by the plaintiff were so persistent and frequent that defendant was entitled to terminate
[3]
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING AND DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS - Australian Consumer Law - where the plaintiff made a number of representations as to its ability to fulfil its obligations under the contract - where those representations were found to be false insofar as they related to future matters and there was no reasonable grounds upon which to make the statements - where the defendant relied on those representations in entering into the carriage agreement
[4]
DAMAGES - ASSESSMENT OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT - where the defendant's claim for damages for breach of contract was assessed by reference to the money it would have made had the plaintiff performed the carriage agreement according to its terms
[5]
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - loss and damage - where the defendant pleaded that the plaintiff's breach of contract resulted in a loss of opportunity - whether there was a contractual promise on the part of the plaintiff "to afford the [defendant] an opportunity to acquire a benefit or avoid a detriment" - whether the proceeding was properly characterised as a loss of opportunity case
[6]
DAMAGES - ASSESSMENT OF DAMAGES IN BREACH OF CONTRACT - PARTICULAR HEADS OF LOSS - LOSS OF CHANCE OR OPPORTUNITY - Australian Consumer Law - where defendant claimed that it would not have entered into the carriage agreement were it not for the misrepresentations of the plaintiff - where the defendant claimed it lost the opportunity to make other profitable arrangements - where the defendant was required to prove causation of loss on the balance of probabilities
G Coveney with S Philippou for the plaintiff and defendant by counterclaim
[20]
Enso Legal for the plaintiff and defendant by counterclaim
[21]
[1] Mr Kirk Grundy, director of the defendant, saw an opportunity to make money by transporting containers of waste from Sydney to a dump at Swanbank near Brisbane. It was prohibited to move waste more than 100 kilometres by road. Mr Grundy hit upon the idea of transporting the waste to Brisbane by rail. Fees to dump the waste in Queensland were so much cheaper than those in Sydney that, notwithstanding the required transport, he could still make a considerable profit. After running this scheme for a little while, Mr Grundy decided that he needed a more reliable carrier to take the waste by truck from the railway station to the Swanbank dump.
[2] The plaintiff was a company incorporated by Mr and Mrs Sargood to raise beef cattle on a property between Brisbane and Toowoomba. Mr Sargood had three trucks which he used to transport cattle and grain. In 2015 Mr Grundy and Mr Sargood negotiated a carriage agreement by which the plaintiff was to provide the trucking services necessary to collect waste at the Acacia Ridge railway station, take it to the Swanbank dump, and return the empty containers to the railway station for transport back to Sydney.
[3] In less than a year the contract had been terminated. The plaintiff claimed an amount of around $45,000 as damages for breach of contract in the District Court. That proceeding was transferred to this Court when the defendant made a counterclaim of over $1 million for breach of contract, or alternatively for a loss of opportunity because it entered into the contract after pre‑contractual representations made by Mr Sargood, rather than make some other arrangement with someone else.
[22]
[4] The parties entered into a written contract which they prepared themselves. As a legal document purporting to regulate the parties' rights and obligations, the document is awful.
[5] Plaintiff to move containers. The third paragraph on the first page imposes an obligation on the plaintiff to provide trucks and trailers to move the defendant's containers of waste from the railway station at 5 Kerry Road, Acacia Ridge to the Swanbank dump, and to return the empty containers to the railway station after the contents had been dumped.
[6] Number of containers to be moved. The contract is silent as to the number of containers to be moved. The defendant's submission was that the contract meant that the plaintiff was obliged to move and return as many containers as the defendant sent by rail citing, inter alia, Lord Hoffman in Attorney General of Belize v Belize Telecom Ltd[1] to say that the Court had no power to introduce terms to make the contract fairer or more reasonable.
[7] The law implies a term giving a reasonable time to repay a debt where no time is specified in the contract. It implies a term that reasonable notice is necessary to determine an agreement where the circumstances so demand. It implies terms to the effect that goods, and even premises, are reasonably fit for their purpose where the contract is silent. Cases to this effect are well entrenched and of great authority. However, there are nice legal points in analysing or extending such cases particularly as the touchstone for implication of terms "is necessity, not reasonableness".[2]
[8] Here the plaintiff did not plead that there was an implied term of the contract that it was only obliged to move a reasonable number of containers per day. Nor did the plaintiff plead that there was an oral term of the contract that it was obliged to shift only 50 containers a day, although this latter notion was discussed by Mr Sargood and Mr Grundy before the contract was made. There was no exploration of matters relevant to oral terms of the contract in the evidence at trial. The plaintiff did not submit that there was such an implied term, or an oral term. In these circumstances I will not imply a term, or find an oral term of the contract, although, I can imagine that, had the plaintiff's case been run differently, those things were possibilities.
[23]
(a) "The term of this agreement shall be for 12 months commencing the date of this agreement. Subject to the Carrier performing the terms and conditions of this Agreement in a prompt and efficient manner. The Consignor may grant an option to the Carrier for a further term of 12 months upon the expiration of the initial term." - first paragraph, first page.
[24]
(b) "In a case of unforeseen circumstances Tulloch Brae Pty Ltd will not be penalised for delay in delivering containers back to Archerfield Rail, 5 Kerry Road however an acceptable reason will have to be given to why this has occurred." - last paragraph, first page.
[25]
(c) "Tulloch Brae Pty Ltd must have all containers removed from 5 Kerry Road by required time so that no storage fees are charged. Any storage fees that are charged due to not having containers out by specified time (day of arrival +1 day) will be billed back to Tulloch Brae Pty Ltd." - first paragraph, second page.
[26]
[12] The group of words at [11](a), "Subject to the Carrier performing the terms and conditions of this Agreement in a prompt and efficient manner." is not a sentence. It could be read as words which belong at the end of the first sentence, qualifying the initial term of the agreement. Alternatively, it could be read as a group of words which belong at the beginning of the third sentence, qualifying the circumstances in which the defendant might grant an option. It could be read as an independent contractual obligation to perform with promptitude. That is, the provision at [11](a) is ambiguous.
[13] The words at [11](c) are also ambiguous in that the language might be read as imposing an obligation to pay storage fees for containers not moved within the specified or required time, but might also be read as obliging the plaintiff to remove all containers which arrive at the Acacia Ridge railway station from the railway station by the specified or required time. It might do both.
[14] The words at [11](b) are even more difficult. There is nothing in the contract to give meaning to "penalised" in the case of delay in returning containers to the railway station. It might be thought that having to pay storage fees imposed by the railway was a penalty, but delay "in delivering containers back to Archerfield rail" did not incur storage charges; they were imposed in respect of containers not collected promptly from the station. The penalty referred to must either be disregarded as meaningless, or regarded as a reference to the plaintiff becoming liable to penalty in the sense that the defendant would gain a contractual right in the absence of "acceptable reason" or "unforeseen circumstances". In short, the clause at [11](b) above is also ambiguous.
[15] In a case where there is ambiguity in the contractual provisions which deal with the timeliness of contractual performance, I have regard to circumstances external to the written contract within the limits set out in the cases to assist in interpreting those provisions. In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[3] French CJ, Nettle and Gordon JJ made this statement about principles of contractual construction so far as commercial contracts are concerned. The statement includes reference to, but is not limited to, the types of matters external to the contract, to which regard may be had:
[27]
"[47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
[28]
[48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
[29]
[49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. ...
[30]
[50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.
[31]
[51] Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption 'that the parties ... intended to produce a commercial result'. Put another way, a commercial contract should be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'."
[32]
[16] In Mount Bruce the judgment of Kiefel and Keane JJ contained the following passage:
[33]
"[108] That regard may be had to the mutual knowledge of the parties to an agreement in the process of construing it is evident from Codelfa Construction Pty Ltd v State Rail Authority (NSW). Mason J, with whom Stephen and Wilson JJ agreed, accepted that there may be a need to have regard to the circumstances surrounding a commercial contract in order to construe its terms or to imply a further term. In the passages preceding what his Honour described as the 'true rule' of construction, his Honour identified 'mutually known facts' which may assist in understanding the meaning of a descriptive term or the 'genesis' or 'aim' of the transaction. ..."
[34]
[17] In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales[4] Mason J dealt with negotiations towards a contract, saying:
[35]
"Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable."
[36]
[18] In this case Mr Grundy on behalf of the defendant had spoken to Mr Sargood on behalf of the plaintiff about his money-making idea for at least a year before the carriage agreement was made. Mr Sargood took a trip to Sydney to see the defendant's operations in Sydney. Through these two gentlemen both the plaintiff and defendant understood that the commercial aim of the defendant's business venture was to make money because of the difference between the high disposal fee which the defendant could charge in Sydney, and the relatively low disposal fee which it would have to pay in Brisbane. They knew that the more containers the defendant transported to Brisbane, the more money it would make - t 3-30. They knew that waste could only be carried on the train in specially modified containers, and that the empty containers had to be returned to Sydney in order for them to be re-filled with waste and sent to Brisbane again. The more quickly the containers were returned to Sydney, the more money the defendant would make.
[19] So far as this last commercial concept was concerned, Mr Sargood understood that the defendant's:
[37]
"... ability to grow that business was connected to how quickly you could collect, empty and return those containers to him. Correct?--- Correct.
[38]
Of course, the sooner you got it back to Sydney - the container back to Sydney, he could fill it and ship it back to Brisbane?--- That was the idea of it.
[39]
That's the business model he was - - -?--- That's exactly right. Exactly."
[40]
[20] I have regard to the background facts at [18] in interpreting the contract. All three of the clauses at [11](a), (b) and (c) above are concerned with the speed at which the plaintiff would perform services under the carriage agreement. All of them are aimed at having the services performed promptly, a concern which is to be understood against the commercial context in which the agreement was made.
[21] In these circumstances I think that the group of words at [11](c) above imposed two obligations: the first to remove containers within what it called the required or specified time, and the second to pay any storage fees charged as a result of breach of the first obligation. The parties were concerned not just that the defendant be indemnified against storage charges; the commercial basis to their bargain was that the defendant be put in possession of its containers promptly so it could fill them again.
[22] For much the same reason I do not interpret the group of words, "Subject to the Carrier performing the terms and conditions of this Agreement in a prompt and efficient manner" as qualifying the third sentence in the clause at [11](a). The contract called for promptitude and efficiency from the beginning, rather than it just being something which might become important at the end of the first 12 months of operation.
[23] It was argued by the defendant that this group of words ought to be read as qualifying neither the first nor the third sentence, but be read as a freestanding and independent obligation on the plaintiff to perform carriage services in a prompt and efficient manner. I accept this. Reading the group of words as qualifying the first sentence in the clause at [11](a) probably achieves the same result. Thus qualified, the first sentence provided that the agreement would continue for 12 months subject to the carrier performing its obligations promptly and efficiently. The necessary implication is that if the carrier did not perform promptly and efficiently the defendant could terminate the agreement before the expiry of the fixed term.
[24] If the clause at paragraph [11](a) is read this way, one can begin trying to give a commercial interpretation to the difficult group of words at [11](b). They can be seen to:
[41]
(a) provide that, in general, containers are to be returned to the railway without delay. This is consonant with the general obligation of promptness and efficiency at [11](a);
[42]
(b) provide ill-defined exceptions to the general obligation to perform promptly and efficiently when returning containers to the railway station. One can start speculating as to correlations between "unforeseen circumstances" and recognised legal concepts such as force majeure and making further implications into the words so that "acceptable reason" means "acceptable to the defendant", etc. However, in my view this strays into impermissibly re‑drafting the party's contract for them. In conclusion, I struggle to give any meaning to these exceptions. In the end it may not matter, for the plaintiff did not plead or submit that they were in play on the facts of this case.
[43]
[25] The written contract was signed at the end of July 2015. For a period of about a month the defendant was satisfied with the plaintiff's performance. After 22 August 2015 Mr Grundy experienced problems having containers returned to Sydney in a timely way. Mr Grundy complained to the plaintiff's operations manager, Mitchell Jeffreys, about this matter. Mitchell Jeffreys blamed Mr Sargood's failure to provide trucks and other necessary equipment, and failure to engage subcontract truck drivers when the plaintiff did not have enough trucks to handle the work itself. The situation did not improve from the defendant's view.
[26] Then in December 2015, the New South Wales Environmental Protection Agency (EPA) temporarily shut down the defendant's waste transport scheme. The transport business was allowed to begin again from mid-March 2016. From that point on, the defendant complains that the plaintiff was too slow collecting containers at the railway station, and too slow sending containers back to Sydney.
[27] Plaintiff's failure to promptly collect containers from the railway station. There is persuasive evidence that the plaintiff was in breach of its contractual obligation to remove containers from the railway station within the time limited by the contract (the day after the day of their arrival).
[28] There is evidence of the storage fees paid to the rail service. These were incurred right from the beginning of the plaintiff's performance of the carriage agreement - t 3-35. They were charged at $100 per day, per container. By the time the contract between the plaintiff and defendant was terminated in May 2016, over $71,000 had been charged in storage fees. That is evidence of over 710 "container-days" delay in moving containers from the railway station in about eight months of operation.
[29] There were various documents in evidence, such as exhibit 5 (tab 243), which are contemporary records of the railway station raising delays in collection. Exhibit 5 shows that as at 13 April 2016 there were 16 containers which had sat in the railway yard for five days; 18 which had sat in the yard for more than three days, and 17 which had sat in the yard for more than a day.
[30] There is the evidence of the plaintiff's then operations manager, Mitchell Jeffreys. Mr Jeffreys was in charge of allocating trucks to pick up containers from the railway station, travel to the dump, and return to the railway station. It was he who knew on a daily basis whether or not there were enough trucks available to do this - t 3-40. Mr Sargood made it clear several times in his evidence that he delegated the running of the business to Mr Jeffreys. Mr Jeffreys said that by September or October 2015 the plaintiff had a maximum of five employed truck drivers performing the work under its contract with the defendant. He explained that having regard to the time it took to access a container at the railway line, drive to the dump, wait for the container to be emptied, and return to the railway, "even when all our five trucks were operating, we could not cart all containers that arrived from Sydney and return an equivalent number on any given day".
[44]
(a) First, there are matters of demeanour and interest. Mr Jeffreys impressed as an intelligent and capable young man in the box. He was of course not without some interest in the matters he was giving evidence about. He had been employed first by the plaintiff, and then by the defendant. As well, his own competence was in question. Nonetheless, by the time of the trial Mr Jeffreys had moved on. In July 2016 he left the employ of the plaintiff. In August 2018 he left the defendant's business. He said that he had had little contact with anyone from either the plaintiff or the defendant since 2019.
[45]
Mr Sargood was hard to follow in terms of finding a logical, coherent or responsive thread to his evidence. He seemed overly emotional and obviously invested in the narrative he gave. At times he "acted out" conversations he was describing, including using different voices for different participants. This was odd in itself. As well, I simply cannot credit that he could remember the detail of the conversations he gave evidence of in this way. At other times he dealt with cross-examination by simply giving glib-sounding yes or no answers to questions posed. Obviously enough, he had a financial interest in the outcome of the proceedings.
[46]
(b) Secondly, in fact, the return to the plaintiff if a subcontractor was used was very small. Mr Sargood's evidence was that a contractor needed to be paid about $200 to collect a container, take it to the Swanbank dump, and return it. At first the price the plaintiff received for doing this job was $220, although it was increased to $250 in May 2016. Either way, the economics of using subcontractors are as Mr Jeffreys swore that Mr Sargood explained them at the time. On the other hand, Mr Jeffreys had no financial reason to refuse to use subcontractors, or to pay them too little.
[47]
(c) Thirdly, Mr Jeffreys' evidence was that in or around December 2015 Mr Sargood was away and that he gained permission from Mrs Sargood to use contractors and did so to quite effectively clear a backlog of around 100 containers sitting at the railway yard.[6] This was put to Mrs Sargood. The substance of her replies, and her manner of giving them, made it clear that she was refusing to engage genuinely with the process of cross-examination. I find her lack of engagement was to avoid giving evidence which would have favoured the defendant. Then, rather ironically, Mr Sargood agreed in his evidence that it "could be possible" that things had occurred as Mr Jeffreys said - t 3-43.
[48]
(d) Fourthly, at the end of April 2016 the plaintiff and the defendant agreed to increase the price the plaintiff was paid to $250 a container. Mr Jeffreys' evidence was that, following that agreement, Mr Sargood told him to increase the number of contractors and he did so - see Jeffreys' statement paragraph 54. This caused a significant rise in the number of containers moved at that time, see the summary at paragraph 69 of the defendant's written closing submissions.
[49]
[33] Mr Jeffreys' evidence was that although Mr Sargood allowed him to employ around three subcontractors once the $250 per container fee had been negotiated with the defendant in May 2016, "more containers arrived from Sydney than Tulloch Brae could empty on any given day. We kept plugging along as we were, and containers continued to bank up at [the railway station]."[7]
[34] Frank Andriano, from the Pacific National Railway gave evidence that is conformable with that given by Mr Jeffreys. He said that for a considerable time the plaintiff was not promptly collecting enough of the containers which were arriving from Sydney. The contractor, Qube, in charge of unloading the Pacific National trains, was "on the phone with us every day saying these containers need to go ... you know, we were running out of space here, et cetera. So, we were then applying pressure onto [the defendant]."[8] - t 2-18. Qube would "... always highlight to [Pacific National] that, well, they're not sending enough trucks to collect the containers." - t 2-18.
[35] In response to this information, Mr Andriano took note of the trucks coming to collect the defendant's containers at Brisbane for eight or nine days in a row. He said, "... there was always the same registration numbers that would come in and collect, and I put it to [the defendant] that, you know, they just didn't have enough trucks collecting the containers. And then it was causing a snowball effect where you would have containers that arrived on, you know, say, Tuesday, that were still in the back of the stacks because we had containers arrive Wednesday and Thursday, and they had limited space and they just kept on piling in front of the other." - t 2-19. Mr Andriano recalled that it was always the same handful of trucks - maybe four or five - t 2-23.
[36] Plaintiff's failure to return containers to the railway station. The evidence which was meant to be the centrepiece of the defendant's case in this respect is schedule A to the fifth further amended counterclaim. It was a summary of the information in the Pacific National invoices to the defendant. There were problems with this schedule.
[37] First**,** Mr Grundy said in his statement that he prepared it. In cross-examination he said he did not, but then said he did. It was not entirely clear, but in the end I accept his later version, because he explained in detail how he prepared the schedule.
[50]
[53] By a letter dated 2 June 2016 from its solicitors, the defendant gave notice that it terminated the carriage agreement. By a letter from its solicitors, the plaintiff asserted that there were no grounds to terminate the contract; characterised the defendant's solicitor's letter as a repudiation which it accepted, and purported to terminate the contract itself.
[54] In this proceeding the defendant relied on the following breaches of contract:
[51]
(a) failing to provide sufficient trucks and trailers to carry all the defendant's containers from the railway site to the dump, empty and return those containers on the same day or the day after they were delivered to the site;
[52]
(b) failing to perform the services under the carriage agreement with promptitude and efficiency.[13]
[53]
[55] Having regard to the evidence at [27]-[43] above, I find that the plaintiff was in breach of the carriage agreement. The plaintiff did not remove containers from the railway site within the time required by the contract, and did not provide sufficient trucks and trailers to remove the defendant's containers from the railway site within the time required by the contract. It did not return containers to the railway station for transit to Sydney promptly and efficiently; it did not provide sufficient trucks and trailers to promptly and efficiently return the defendant's containers to the railway station. In my view, these breaches involved such a number of containers and were so frequent and so persistent over the time the plaintiff performed the carriage agreement that they entitled the defendant to terminate the contract when it did.[14]
[56] It follows that I do not see the letter of termination sent by the defendant's solicitors as a repudiation of contract, nor do I see that the plaintiff's purported termination of contract as valid.
[57] The plaintiff had an independent claim for damages in an amount of $10,660 for breach of contract. This rested on the defendant's failure to pay some invoices. The defendant accepted that the invoices had not been paid as they ought to have been. However, the defendant relied upon its counterclaim for a defence of set-off in relation to this amount. My judgment on the defendant's counterclaim (below) overtops the amount said to be owing on these invoices. I find that there is a good defence by way of set-off. The result is that the plaintiff's claim must be dismissed in its entirety.
[54]
[58] From 6 June 2016 the defendant itself undertook the collection of waste from the train station and the return of empty containers to the train station. Mitchell Jeffreys' services were dispensed with by the plaintiff, and he was employed by the defendant. Mr Grundy gave him instructions to engage as many contractors as he needed to perform the work. Using this system the defendant was able to move many more containers than the plaintiff had. Mr Jeffreys used up to 12 subcontractors to do the work. He said that the increase in the number of trucks performing the work was responsible for the better performance.
[59] The other change Mr Jeffreys made when working for the defendant was to separate the function of bringing waste to the dump and the function of dumping it. Under the new system, trucks brought waste from the railway to the dump; the containers were unloaded, and the trucks returned to the railway station, taking empty containers if available. At the dump, the full containers were put onto a skel, or tipping, trailer, and the digger took the waste out of them. This was more efficient than the system under the plaintiff because under the plaintiff's system, if a truck was fitted with a skel trailer, it waited at the dump until the digger was free to remove waste from the container. Because there was often a queue to wait for the digger, it was more efficient to unload the containers than to wait for the digger.
[60] Mr Jeffreys' evidence was that after the defendant took over carriage services in Queensland, "We put more trucks on. That increased the volume and increased our [rail] bookings because the rail could see that we could manage it. ... We weren't getting storage charges. We were filling our bookings every day, and some. And then they [Pacific National] became more willing to work with us because we were - we were moving large volumes." - t 1-45.
[61] These last points (as to Pacific National) deserve some mention. Pacific National, the railway used by the defendant in its business, was concerned only to run full trains between Sydney and Brisbane, so that it made the maximum money it could on each trip. So far as the defendant was concerned, this meant that the railway would accept only a fixed number of bookings per day. Pacific National was amenable to increasing the number of bookings per day, but only gradually and incrementally, as it gained trust in its customers' ability to fill their bookings reliably.
[55]
[64] The counterclaim was for damages in contract, and was also put on the basis of false and misleading statements made under the Australian Consumer Law (ACL). The fifth further amended counterclaim added Mr Sargood as a defendant by counterclaim. The claim against him was based only on misrepresentations said to have been made in breach of the ACL. It was not argued that Mr Sargood was not knowingly concerned in the making of the representations, or that there was any other reason why he should not be liable in his individual capacity.
[65] So far as the counterclaim was based on breach of contract, the defendant relied upon the terms of the contract which I have found were breached.
[56]
[66] At the beginning of June 2015 Mr Sargood visited the defendant's operations in Sydney and discussed matters pertaining to the proposed carriage agreement with Mr Grundy. The defendant's pleading is that at these meetings Mr Sargood represented that:
[57]
(a) the plaintiff was a large operation with capacity and resources to perform the carriage services;
[58]
(b) the volume of containers arriving from Sydney would not be an issue;
[59]
(c) the plaintiff had a fleet of trucks and trailers available to it to perform the proposed carriage services;
[60]
(d) the plaintiff had the means to make further trucks and trailers available if needed to perform the carriage agreement.[15]
[61]
[67] It was pleaded that the representations were false and, insofar as they related to future matters, there were no reasonable grounds to make them.
[68] Mr Grundy's unchallenged evidence was that Mr Sargood told him the plaintiff was a large operation with capacity and resources to perform the carriage services. Mr Sargood denied it in examination-in-chief - t 2-81. In light of my subsequent findings I do not need to determine whether or not Mr Sargood said that the plaintiff was a large organisation. I think that on Mr Sargood's own evidence, in substance, he represented that the plaintiff was an organisation with capacity and resources to perform the carriage services the defendant needed. I discuss that evidence now.
[69] Before the carriage agreement was made Mr Grundy informed Mr Sargood that the contractor the defendant was currently using was too small and could not keep up with the rate of growth of the business - t 3-9. Mr Sargood accepted that in response he said words to the effect of, "No problem. We can do anything that is needed. I can have the skel trucks to do the job." - t 3-10. Mr Sargood accepted he said that the plaintiff could move a high volume of containers - tt 3-11.
[70] Mr Sargood said that he told Mr Grundy that the plaintiff could have a fleet of trucks available to carry out the contract - t 2-81 and t 3-22. Mr Grundy's evidence was that Mr Sargood represented that the plaintiff had a fleet of trucks and trailers available to perform the contract. That is, Mr Grundy's evidence was of a representation of presently existing fact, whereas on Mr Sargood's version he made a representation as to the future. I am content to accept Mr Sargood's version.
[71] Mr Sargood's evidence was that at the time of his pre-contractual discussions with Mr Grundy, he was keen to make money from the project - ex 10, paragraph 22 and t 3-28 - and that his involvement in the business would only produce a commercial return to him if the number of containers (boxes) a day increased:
[62]
"... Well, the simple fact is I was going into the job. Twenty boxes a day weren't going to cut it.
[63]
And so you wanted it to grow?--- We wanted it to grow.
[64]
So, the bigger the better as far as you were concerned?--- Well, I wasn't going and buying $300,000 trucks for it not to grow.
[65]
As far as you were concerned, the bigger the better?--- Bigger the better.
[66]
Right. So, the more ... containers that Mr Grundy could ship to you, that was a good thing?--- Yep. That was going to be a good thing.
[67]
Yes. And you in light of that said, 'No. Don't worry. Leave it to us. Us Queenslanders can handle it.'?--- We can handle it." - tt 3-29-30.
[68]
[72] Mr Grundy's evidence (unchallenged) was that in pre-contractual discussions about the likely growth of the business Mr Sargood assured him that volume [of containers arriving in Brisbane] would not be an issue. Mr Sargood admitted this at one stage in cross-examination - t 3-21. Earlier in evidence-in-chief Mr Sargood had denied saying that - t 2-81. Given Mr Grundy's evidence, and the differences in Mr Sargood's evidence, I find that Mr Sargood did say this. It was said in the context of a conversation (which he did admit occurred) during which Mr Grundy said that the business was moving 10 to 20 containers a day to Brisbane at that time, but wanted to get to 50 containers a day within about four to six weeks - t 2-80 and t 3-23. In that context, I find that the representation was that the sort of volumes being spoken about by Mr Grundy - around 50 a day - would not be a problem. And indeed, Mr Sargood practically said this himself in-chief at t 2-81.
[69]
[73] Insofar as Mr Sargood represented that the plaintiff had the capacity and resources to perform the carriage services the defendant was seeking, that representation was false: the plaintiff ran a grazing property. It had three trucks which it had used, on occasion, to carry animals and grain.
[74] I regard the other representations as being representations as to the future. Section 4(1) of the ACL provides that if a person makes a representation as to future matters and does not have reasonable grounds for making them, they are taken to have been misleading. Section 4(2) provides that the representor is taken not to have had reasonable grounds for making such a representation unless evidence is adduced to the contrary.
[75] Mr Sargood's evidence was particularly weak when he attempted to explain how, as at June or July 2015, the plaintiff might reasonably have expected to carry 50 containers a day six weeks after the carriage agreement came into force. The plaintiff had only three trucks at the time the contract was made - t 3-2 and t 3-30. Mr Sargood accepted that he was told before the contract was made that while the defendant was moving 10 to 20 containers to Brisbane a day, it wanted to increase that to 50 containers a day within four to six weeks - t 2-80 and his statement of evidence‑in‑chief, paragraph 25. He accepted that he would need more than three trucks if the deal went ahead and said that he had already lined up more trucks if the deal went ahead - tt 3‑30-31.
[76] I accept that the plaintiff spent some considerable money buying and hiring further trucks and other equipment in order to perform the carriage agreement. Mr Lee bought five skel trailers for the plaintiff in July 2015. He hired another three trucks - see p 6 of his statement. There were quite a number of invoices for equipment purchased, or hired, by the plaintiff in evidence.[16] I find that at the time the representations were made, Mr Sargood had reasonable grounds to think that the plaintiff had the resources to equip itself as it did. However, this equipment was not sufficient to perform the carriage services which the defendant sought. After purchasing and hiring extra equipment he had five trucks operating - his statement of evidence-in-chief, p 7.
[77] Before the contract Mr Sargood and Mr Grundy drove between the railway station and the Swanbank dump, a distance of around 35 kilometres. It took them two‑and‑a‑half hours (round trip) - t 3-16. They undertook this exercise two or three times to see if they could find a quicker route - t 3-17. They could not. Mr Sargood said, after some considerable argument and prevarication, that he formed the view, based on this timing, that one truck would be able to do five trips to the dump per day, although he allowed that it might be less - t 3-18. The dump was open 12 hours a day. There were considerable wait times to access the containers at the railway. There was time necessary to have the containers emptied before returning them to the railway. Five trips a day seems quite unrealistic thinking, if indeed it was Mr Sargood's thinking before the contract. Further, if he had reason to think he could have five trucks operating this is, on his unrealistic best case, still only 25 containers moved per day.
[70]
[81] There was no evidence-in-chief from Mr Grundy that he relied upon the statements made by Mr Sargood.[17] Counsel for the plaintiff asked Mr Grundy about the matter in cross-examination in the following passage:
[71]
"In terms of container movements, there was nothing recorded in the agreement about what the minimum or maximum number of container movements would be; that's right isn't it?--- No, there wasn't, no.
[72]
No. And because, obviously, you were looking for a single operator - - -?--- Sole contractor, yes.
[73]
Sole contractor. And you'd explained your requirements. If that was something that was important to you, you would've included it in the agreement; that's right isn't it?--- I would now - was - that was [indistinct] my - my first one at the time - my first contractor as a - under agreement for transporting.
[74]
Yes. So when it came to what Mr Sargood may or may not have said - oh, sorry, sorry - what Mr Sargood, in your view - you said about the size of his fleet and what he might be able to handle, those weren't the sort of things that induced you, actually, to sign the agreement, were they?--- Sorry - start again?
[75]
Sorry. Mr Sargood's comments to you in June about what the size of his fleet might look like was not something that in late July 2016 was a factor in your signing up to the agreement?--- No."
[76]
[82] Watching Mr Grundy give his evidence, it was not my view that the last exchange in this passage should be understood as meaning that he did not rely upon the things Mr Sargood had said to him about the plaintiff's ability to handle the size of the carrying job proposed. Mr Grundy hesitated in answering the question and I did not think he understood its import. In fact, the substance of the matter had been the subject of exchanges between him and the cross-examiner earlier in his evidence and it had been tolerably clear that, before signing the contract, he had been concerned to make enquiries of Mr Sargood as to whether or not Mr Sargood had enough trucks, or could put himself in a position where he had enough trucks to carry out the work - see generally, t 1-100 to t 1-102.
[83] Having been opened up in cross-examination, the matter was explored in re‑examination and the following evidence was given:
[77]
"Do you recall being asked questions by my learned friend about the conversations that you had with Mr Sargood about his capacity to - - - ?--- Yes.
[78]
- - - move the equipment and what impact that had on your decision to enter into the contract? Do you recall that?--- Yes, I do.
[79]
Why did you raise issues of capacity or discuss issues of capacity with Mr Sargood prior to entering into the contract?--- Because I wanted to make sure that he had - he knew what he was getting into and that he had the right equipment available to do the job.
[80]
I see. And what impact did that issue have with you?
[81]
MR FERNON: And what impact did those issues about Mr Sargood's capacity to do the job have on you?--- It had big issues.
[82]
What are they?--- Well, if he didn't have the capacity to do it, we were never going to get the boxes back.
[83]
Right? - And if we didn't get the boxes back, we could never load them and send them back up again. It would stay on their operation.
[84]
And what impact did those issues have on your decisions in relation to relationships with Mr Sargood?--- At the start, we thought we had all the right equipment coming, and that was the basis of - that's why I went into it a rela - I did an agreement with him, because I thought that he had all the - all the correct agree - all the correct equipment and he was going to get extra equipment and grow as we grew."
[85]
[84] This evidence is sufficient to convince me that Mr Grundy did rely on what Mr Sargood said. I find that had he not received the assurances he did from Mr Sargood, he would not have caused the defendant to enter into the carriage agreement. Mr Grundy's unchallenged evidence was that he had difficulties with the contractor he initially hired to move the containers and that he was looking for a new contractor so that he could improve this situation and allow his business to grow. He spent quite some time speaking to Mr Sargood about what would be required of the plaintiff under the carriage agreement. They discussed what equipment the plaintiff would need and what number of containers would arrive by rail. Mr Grundy took Mr Sargood to two waste stations in Sydney to show him how the operations worked and make sure Mr Sargood understood what would be required of the plaintiff. The whole point of all these discussions from the defendant's point of view was for Mr Grundy to assure himself that the plaintiff did have the capacity to perform the carriage agreement.
[86]
[85] The defendant's counterclaim pleads loss and damage on its claim in contract, and on its claim under the ACL, separately.
[86] So far as the claim in contract is concerned, it pleads that it, "lost the opportunity to increase its turnover by increasing the number of loaded containers it was shipping to [the railway station] ... to or approaching", the number it was able to move under the arrangements it effected after it terminated the carriage agreement - paragraph 28 fifth further amended counterclaim.[18] I regard it as a claim for damages for breach of contract assessed by reference to the money it would have made if the plaintiff had performed the contract according to its terms, see paragraph 38 of the document which is the prayer for relief for breach of contract.
[87] The defendant's case based on the ACL is a loss of opportunity case. The defendant pleaded that, but for the representations made, the defendant would not have entered into the carriage agreement. Because it entered into the carriage agreement it thereby lost the opportunity to effect other more profitable arrangements, such as those it made after it terminated the carriage agreement - paragraphs 18 and 35, fifth further amended counterclaim.
[88] The defendant puts forward one calculation which it says is the proper measure of its loss on both its contract claim and its ACL case.
[89] In any assessment of liability, questions as to proof of causation of loss are, of course, logically anterior to issues which arise in the assessment of damages for loss. However, particularly in discussing causation in the defendant's ACL case, it will help to have some understanding of the way in which the defendant says damages should be calculated. For that reason I will now give a short description of that, before returning to discuss the anterior question of causation in the ACL case.
[87]
[90] As explained above, after the carriage agreement was terminated, the defendant employed Mr Jeffreys and had him supervise about 12 subcontracted truck drivers to perform the work which the plaintiff was to provide under the carriage agreement. The defendant's case is that its loss is calculated by comparing the number of containers shifted during the period the carriage agreement was on foot, with the number shifted in the same period the next year (the comparison period). More containers were shifted in the comparison period.
[91] An accountant, Mr Matthew Gwynne, gave evidence of the extra money (net of costs) which the defendant would have made had the plaintiff performed during the period of the carriage agreement as the defendant did in the comparison period. Mr Gwynne's calculation (adjusted to reflect agreements during the trial) was as follows:
[88]
(a) Between 27 July 2015 and 30 April 2016 the plaintiff collected, emptied, and returned to the railway station an average of 137 containers per week. This was admitted on the pleadings.
[89]
(b) In the comparison period the defendant collected, emptied, and returned an average of 193.76 containers a week. This was agreed during the trial.
[90]
(c) That is, there was an average of 57 more containers dealt with per week during the comparison period than during the period of the carriage agreement. That is 1,889 more individual container movements achieved in the comparison period.
[91]
(d) Mr Gwynne calculated the net return to the defendant per container movement, and came to a figure representing the extra money the defendant would have made, had the plaintiff performed as well under the carriage agreement as the defendant did in the comparison period - $859,117.20.
[92]
[92] I will deal with one other matter now before turning to the issue of causation of loss in the defendant's ACL claim. In his address the plaintiff's counsel sought to make a submission that Mr Gwynne's analysis, based on container movements, was irrelevant because the defendant was paid on the amount of waste (by weight) tipped, rather than containers transported. It was said that there was evidence in the tipping records disclosed by the defendant that there was only an average of 170 containers tipped per week in the comparison period. Further, that the weight of the containers tipped during the comparison period was lower than in the period the carriage agreement was on foot. The submission was that a combination of these two things meant that no more waste was tipped in the comparison period, than in the period when the carriage agreement was on foot.
[93] None of this was put to Mr Gwynne. It should have been. Further, it should have been anticipated that, as Mr Gwynne was an expert, he may not have had instructions to enable a substantial response to the propositions. The propositions should therefore also have been put to Mr Grundy who had produced the tipping records and the container movement records on behalf of the defendant, and who was the person who, on behalf of the defendant, had provided the factual evidence upon which Mr Gwynne's calculation was made. None of these propositions were put to Mr Grundy. That the defendant calculated loss in accordance with the number of containers moved to and from Brisbane is obvious from the fifth further amended counterclaim. It is nowhere pleaded in the answer that this is an incorrect basis. Accordingly, I disregard this submission.
[93]
[94] I have found that the defendant relied upon the plaintiff's misrepresentations in entering into the carriage agreement; it would not have done so but for the misrepresentations. The defendant's case is that, having been induced to enter the carriage agreement, it lost the opportunity to make a more profitable arrangement for the carriage services it needed in Queensland. Its case is that it has suffered a type of loss similar to that suffered in Sellars v Adelaide Petroleum NL:
[94]
"... because the respondents (I shall call them the plaintiffs) relied upon Poseidon's false representations, they 'declined to proceed with the Pagini transaction' and [the trial judge] measured what he saw as their loss 'by reference to the benefits that were foregone when the [plaintiffs] decided not to continue their negotiations with Pagini Resources'. When the plaintiffs declined to proceed with the Pagini transaction, they lost whatever opportunity they had to enter into a contract with Pagini and to obtain the financial benefits which completion of the contract would have produced."[19]
[95]
[95] In order to prove such a case the defendant needed to prove causation of loss on the balance of probabilities.[20] This was so even though it involved the defendant asking for a finding, not about past historical facts, but about past hypothetical facts.
[96] The defendant led no direct evidence as to what it would have done had it not entered into the carriage agreement with the plaintiff. In a loss of chance case this issue needs to be pleaded and proved with particularity; cf Graham & Linda Huddy Nominees Pty Ltd v Byrne.[21]
[97] I think the evidence is sufficiently clear to act on inference to make the following findings. The scheme to rail waste to Swanbank was one which would likely make the defendant a lot of money, and one which the defendant, in the person of Mr Grundy, was enthusiastic about pursuing. Had the defendant not come to believe the plaintiff could carry out the carriage services satisfactorily to it, the defendant would not have abandoned the scheme altogether.
[98] Mr Grundy was dissatisfied with arrangements the defendant had in place at the time of the negotiations with the plaintiff. There is a little evidence as to the arrangements to move containers prior to the carriage agreement. The defendant relied upon a website called Loadshift to engage contractors ad hoc to move the containers which arrived at the railway station. It also engaged a Mr Northduft on a more regular basis to shift the containers. I accept that Mr Grundy's dissatisfaction was real and that, had he not been misled by the plaintiff, he would have caused the defendant to continue to look around for, and pursue, other arrangements for the carriage of waste in Queensland, rather than keep those he had in place before the carriage agreement.
[99] I do not regard those findings as sufficient to prove the defendant's case on causation. The difficulty is that, without evidence, I am merely speculating as to what arrangements might have been made; when they might have been made; the cost of them, and whether or not they would have been any more satisfactory than the carriage services in fact provided by the plaintiff. By way of contrast to the evidence proved in this case, the plaintiff in Sellars could prove that, prior to being misled by Poseidon, it was in very advanced negotiations with Pagini which were recorded in solicitors' draft heads of agreement. This provided substantial evidence of what it was likely to have done had it not been misled by Poseidon. Here, all the defendant proves is that it was dissatisfied with Loadshift and Mr Northduft and that Mr Grundy was convinced that it should find a single or sole haulage contractor to perform the work instead.
[96]
Loss and Assessment of Damages, Counterclaim based on Contract
[97]
[103] Loss is not an essential element of a cause of action for breach of contract. The defendant is entitled to nominal damages on its contract counterclaim because I have found a breach of contract. It says that it is entitled to more than nominal damages because it would have made more money had the plaintiff performed the contract according to its terms. As explained above, it pleads this loss as a loss of opportunity: it pleads that "it lost the opportunity to increase its turnover by increasing the number of loaded containers it was shipping to [the railway station]".
[104] In my view this is not a loss of opportunity case at all.[22] The defendant did not contract to buy a chance, such as a ticket in the lottery. In the language of Brennan J in Sellars, there was no contractual promise on the part of the plaintiff to "to afford the [defendant] an opportunity to acquire a benefit or to avoid a detriment" - p 359. The bargain was the exchange of a promise to work, for a promise to pay for that work. The contract was executory; the defendant's business was new and growing, but that does not make this a loss of opportunity case. The defendant is suing for the financial benefit it would have had, had the contract been performed according to its terms.
[105] The defendant relied upon Mr Gwynne's calculation to prove the amount of its loss.
[106] The plaintiff submitted that the defendant could not prove its loss simply by comparing the money it made in the comparison period with the money it made in the period the carriage agreement was being performed. It submitted that the defendant was required to outline every time the plaintiff failed to carry a container promptly and show what loss flowed from that failure, and thus to arrive at a total figure for its loss and damage. I think that the defendant has proven a loss by reason of the plaintiff's breach of contract. The Court will do its best to assess a loss, even when there are difficulties with the evidence proving it.[23] Equally well established is the principle that where a Court is presented only with incomplete or inexact evidence, it will assess loss on a conservative basis.
[107] Counsel for the plaintiff made a general written submission that, " ... it is ... not appropriate to compare the period when the defendant took over operations (at which point the business was mature and early issues had been addressed) with the situation faced by the plaintiff. Among other things, the number of permanent rail slots and containers had increased. ... The evidence demonstrates that different circumstances existed between the two periods."
[98]
[129] In accordance with my finding at paragraph [115], I do not find that there was any loss to the defendant until 14 September 2015. This means that Mr Gwynne's adjusted calculation of loss should be further adjusted so that the first line of the table at paragraph 69 of the defendant's written address relates to the period 14/09/2015 to 31/12/2015; the number of weeks at A is reduced to 15.43 and the number at E, "expected additional total" is 877 rather than 1,279. The total number for E, "expected additional total" will be 1,490 rather than 1,889. Moving to the table at paragraph 70 of the defendant's written address, this means that the contractual loss is reduced from $895,386 to $706,027.
[130] In accordance with paragraph [127] above, I further reduce that figure to $648,669.[27] Incorporating a further concession as to repair costs to the defendant's containers (paragraph 72 of the defendant's written address), reduces this to $622,394.[28] As mentioned in paragraph [57] above, this sum is to be reduced by $10,660 to set off the plaintiff's contractual claim for unpaid invoices. I assess damages at $611,734.
[99]
Hypothetical Assessment of Damages on the Defendant's ACL Counterclaim
[100]
[131] In case I should be incorrect in my reasoning at [102] above and the defendant has proved that it lost a compensable opportunity, I will make the following findings about valuing that opportunity.
[132] The starting point should be the amount of $622,394 which I have calculated as the amount the defendant lost by reason of the plaintiff's breach of contract.
[133] As I mentioned at [128] above, there were likely to have been other issues attributable to the newness of the business which meant that the number of containers which were likely to have been carried in the period from July 2015 to July 2016 (the hypothetical period) was less than the number in fact carried during the comparison period.
[134] First, a period of adjustment to the systems offered by Pacific National would have been inevitable in the hypothetical period. The railway was not flexible in allowing trucks access to the site "on demand", ie., if there were other customers or constraints, there could be long waiting times. Further, if containers where not picked up on the day they arrived, other customers' stock might be placed in front of them so that they were hard to access causing further delays.
[135] As the defendant's performance was more reliable in the comparison period, the relationship with Pacific National improved, so that during the comparison period the defendant was dealing with a much easier rail carrier, than the plaintiff was during its performance of the carriage agreement - cf Mr Jeffreys' evidence at [60] above. While the plaintiff might have had a better relationship earlier if it had been more efficient in performing the carriage agreement, I find that part of the relatively harmonious relationship during the comparison period was simply due to the defendant adjusting to the nature of rail carriage - t 1-35 and t 1-37. I find that for the first six months of the hypothetical period there would have been misunderstandings and inefficiencies due solely to the new relationship between Pacific National and the defendant and its haulage contractor or employed supervisor.
[136] Secondly, by the time of the comparison period, Mr Jeffreys had worked out more efficient ways of running the carriage services required by the defendant. Probably the only concrete example of that is his realisation that it was inefficient for a truck with a skel trailer to wait its turn at the dump - see [59] above. However, there are likely to have been other efficiencies created by Mr Jeffreys' familiarity with all aspects of the Queensland carriage operation which made it run more smoothly and efficiently in the comparison period than it would have done in the hypothetical period. For example, by the time of the comparison period, Mr Jeffreys had had nearly a year to learn what trucking subcontractors were available, which of them was reliable, which might possibly help out at short notice, etc. The hypothetical new operator in July 2015 would not have had access to someone with Mr Jeffreys' knowledge and experience to run the operation for it. By the end of the hypothetical period it may have acquired this knowledge and experience for itself.
[101]
[139] At paragraph 24B(b) of the answer to the counterclaim is a rather odd claim that, if (as the defendant pleaded) it had the capacity to rail 205 containers to Brisbane a week, it ought to have done so, did not, and thus the plaintiff had a claim for loss of profits for breach of contract amounting to over half a million dollars. This claim was not pressed at trial. Having regard to the terms of the carriage agreement, I cannot see a legal basis for the plaintiff's assertion that it was a breach of the carriage agreement for extra containers not to be sent. Factually, my finding is that the plaintiff could not promptly or efficiently move the containers it was sent. I regard the chances of it moving others as well as fanciful. So far as this claim is alive, I dismiss it.
[102]
[140] I give judgment for the defendant on the plaintiff's claim. I give judgment in an amount of $611,734 for the defendant on its counterclaim against the plaintiff. I give judgment for Mr Sargood against the defendant on its counterclaim against him. I will hear the parties on interest and costs.
[103]
[2] Lewison & Hughes, The Interpretation of Contracts in Australia, Thomson Reuters Australia Limited 2012 p 225.
[6] See paragraphs 33-35 of his statement and t 1-59.
[107]
[8] It was the defendant who was in a contractual relationship with the railway, not the plaintiff.
[108]
[9] Counsel for the plaintiff was warned that this would occur - tt 1-78-79; 1-112-113; 1‑117‑118.
[109]
[12] At paragraphs 21ff of the plaintiff's statement of claim there was an independent claim made on the basis of damage to the plaintiff's equipment due to overloaded containers. This was not pressed at trial.
[110]
[13] Paragraph 23 of the fifth further amended counterclaim.
[18] There was a separate part of the counterclaim which relied upon loss of use of containers in the period October to December 2015 - see paragraph 24 of the counterclaim. No separate evidence was led in relation to this, such as any use the defendant might have made of its containers other than to use them in the scheme to transport rubbish to Queensland. I think that the concession made at paragraph 30(b) of the defendant's written opening is correct, in fact there is no separate claim; that is certainly how the case was run at trial. The separate claim was abandoned in addresses.
[20]Sellars, per the majority at p 353, per Brennan J at pp 367-368, the latter dicta having been adopted by French CJ, Kiefel and Keane JJ in Badenach v Calvert[2016] HCA 18; (2016) 257 CLR 440, [40]-[41]; Sanpoint Pty Ltd v V8 Supercars Holding Pty Ltd[2019] NSWCA 5, [118].
[22] Unfortunately I did not raise this view with the parties at trial. They were given the opportunity to address it by written submissions after the trial.
[24] While the evidence is that the new containers arrived from China on 9 September 2015, I use the following Monday, 14 September 2015, as the date when they were in circulation in the defendant's business.
[122]
[25] Mr Jeffreys worked six days a week at the dump, see his statement.
[123]
[26] Based on 20 containers and a six day working week.
[124]
[27] 877 - (10% x 877) = 789. 610 - (5% x 610) = 579.5. 789 + 579.5 = 1,368.5. 1,368.5 x 474 = 648,669.
[9] While this result is somewhat unsatisfactory, it may not ultimately matter. Mr Sargood and Mr Grundy accept that pre-contractually they agreed that the defendant could send 50 containers a day starting from a time four to six weeks into the performance of the carriage agreement. While the plaintiff says that the number of containers sent each day did vary (once reaching 80), its defence of the counterclaim was not based on a factual assertion that the defendant sent an unreasonable number of containers per day to Brisbane.
[10] Time within which containers to be moved. The defendant pleaded that the contract contained a term that the plaintiff agreed to move the containers from the rail yard, and to return them to the rail yard, in a prompt and efficient manner, paragraph 19(3), fifth further amended counterclaim.
[11] There are three parts of the contract relevant to the times within which the plaintiff was to move containers.
[31] Mr Jeffreys said he attempted to have Mr Sargood employ subcontractors, but Mr Sargood refused to do that, or at least only employed a limited number of subcontractors. Mr Jeffreys says that Mr Sargood complained that, if subcontractors were used, the financial return to the plaintiff was too small.
[32] Mr Sargood accepted that Mr Jeffreys came to him during the period August to December 2015 because the defendant was complaining about delays in moving containers and wanted additional subcontractors retained to move them - t 3‑43. However, he disputed that he told Mr Jeffreys not to use subcontractors. Mr Sargood swore that it was Mr Jeffreys who was reluctant to use subcontractors, and who discouraged them by paying them too little. Even accepting Mr Sargood on this point, the difficulty is that Mr Jeffreys was the plaintiff's employee, so it is no answer to the defendant's claims. In any event, I prefer Mr Jeffreys' evidence for several reasons.
[38] Secondly, as a part of his explanation about the preparation of the schedule Mr Grundy explained that his solicitors began preparing it, but they were "costing me a fortune" to do so so, he took over. It might have been beneficial had his lawyers had some influence over the schedule, because it is somewhat idiosyncratic. The first two columns are called, "containers delivered to Sydney depot" and "containers delivered to Brisbane depot". Counsel for the defendants told me in submissions that the former referred to containers delivered to Brisbane and perhaps the latter refers to containers returned to Sydney. The schedule was said to have been prepared from invoices from Pacific National and I wonder if the attribution of container movements on a per day basis is strictly accurate, or if a more arbitrary allocation based on invoice date is shown. No one led any evidence about these things, or had Mr Grundy explain the schedule in any way in his evidence. These things limit the use I can make of the schedule.
[39] I am prepared to accept that overall, in particular having regard to the figures in the last column, "containers located in Brisbane depot", the schedule does show that the plaintiff was not returning containers to Brisbane promptly and efficiently throughout the course of the carriage agreement. This lack of efficiency caused more than 100 containers to be located in Queensland every day from about the beginning of April 2016 onward, until the carriage agreement was terminated.
[40] Lastly as to schedule A, I need to deal with the plaintiff's counsel attempting to make a submission that there were inaccuracies in the figures in schedule A. Counsel for the plaintiff refused to cross-examine Mr Grundy about these inaccuracies. It would be unfair in those circumstances to allow such a submission. I refuse to entertain this submission.[9]
[41] There is other evidence of the plaintiff's failure promptly to return containers to the railway station apart from schedule A. Mr Andriano said that he recalled "numerous Queensland to Sydney services returning with dozens of rail slots empty because [the defendant] did not return the same number of containers as it delivered to Brisbane days prior".[10]
[42] It was common ground that Mr Sargood wanted to re-negotiate the price the plaintiff was paid by the defendant to move each container. He succeeded in having the price raised from $220 to $250 per container in May 2016. Mr Jeffreys' evidence was that at one point Mr Sargood told him that he was to deliberately slow the return of containers to Sydney because that would give him bargaining power in his price negotiations with Mr Grundy. Mr Sargood denied this, but I prefer the evidence of Mr Jeffreys, for the reasons explained at [32] above.
[43] Mr Grundy's oral evidence was that, "Our fleet [of containers] ended up in Brisbane because we were sending up more than what was coming back ... it wasn't just Swanbank. They were sitting at the ... tip site, full, as well." - t 1-90. There is contemporary evidence to support significant delay in returning containers.[11] On 26 May 2016 Mr Grundy emailed the plaintiff recording that he had had to shut the waste collection operation in Sydney because he had no containers. He records that this is the second time this had occurred. He recorded that there were 124 containers unemptied at Swanbank on the day previous to the email with less than 100 emptied in the three days preceding the email - tab 307.
[44] Plaintiff's reasons for default. The plaintiff's case in response to evidence of delays on its part was not so much to deny that they occurred, but to explain them. The difficulty is that, having contracted to perform the carriage services promptly and efficiently, the type of explanations put forward by the plaintiff as to why it failed to do so are irrelevant to the question of breach of contract.
[45] Mr Sargood raised many issues as responsible for the plaintiff's poor performance under the contract. These included: difficulties with access to the railway station; problems with capacity to lift containers at the railway station; problems with subcontractors not being willing to wait at the railway station; problems with subcontractors not being accredited to enter the railway station; problems with access to the Swanbank dump; the fact that the Swanbank dump operated for 12, not 24, hours per day; ad hoc additions to permanent rail slots meant that extra containers would sometimes arrive at the railway station with information as to this available only from the time the train left Sydney; sometimes containers arrived in Queensland on a public holiday; sometimes traffic between the railway station and the dump was bad.
[46] Mr Sargood blamed Mitchell Jeffreys' interactions with subcontractors as a reason why the plaintiff was not able to perform its contractual obligations promptly. Mitchell Jeffreys was the plaintiff's operator, and any defaults on his part are the plaintiff's defaults. In any case, as discussed above, I prefer Mr Jeffreys' version of the plaintiff's difficulties with subcontractors to Mr Sargood's version.
[47] Equipment at the Swanbank dump. Mr Jeffreys' evidence was that there were some teething issues with the equipment necessary to unload the containers at the dump (a digger). This equipment belonged to the defendant and was operated by an employee of the defendant. It, and the system of using it, was relatively new when the plaintiff began performing the carriage agreement. If the equipment was not working, there were delays at Swanbank, and therefore delays in returning the affected containers to the railway station. There were also flow-on delays in the affected trucks collecting the next containers from the railway station.
[48] In terms of the breach of contract case, I cannot conclude that, without the difficulties experienced in using the digger to unload the waste from the containers at the Swanbank dump, the plaintiff would otherwise have substantially performed the carriage agreement according to its terms. There was no detailed evidence which would support such a finding and, on an impressionistic basis, problems with the digger were intermittent and mostly experienced at the beginning of the performance of the carriage agreement. Delays in collecting and returning containers were substantial, frequent, and experienced throughout the entire period of the plaintiff's performance of the carriage agreement.
[49] Weight issues and B-doubles. The plaintiff pleaded that it was an implied term of the contract that "the weight of the containers would not exceed the allowed weight limits for transportation prescribed by the relevant authorities and/or Federal or State governments in respect to transportation of waste product to or within Queensland".
[50] The implication of such a term would not avail the plaintiff in this dispute. There is no evidence that containers exceeding the weight limits described in the pleading were ever presented at the Acacia Ridge railway station. Indeed there is nothing before me as to what weight limits were prescribed by any government.
[51] The evidence raises a separate, but associated issue. Before the contract was made there were discussions between Mr Grundy and Mr Sargood during which Mr Sargood expressed the view that he would like to transport the containers using a B-double trailer so as to transport two containers at a time. He was told that there were difficulties with this because there could be no assumption that the containers would weigh 22.2 tonnes or less, so as to allow them to be legally transported two at a time. Mr Sargood accepted that this is what he was told prior to contract. He also accepted that pre-contractually he was told that some containers might weigh less than 22 tonnes net, but others would be over that weight - t 3-26. He saw no B‑double trucks at the Sydney waste operations on the pre-contractual Sydney trip - t 3-20.
[52] There is no basis on the evidence for any oral term of the contract, or any implied term of the contract, to the effect that containers were to be of a weight which would enable them to be taken from the railway station two at a time on a B-double trailer.[12]
[62] At the beginning of the plaintiff's involvement in the defendant's business, the defendant had permanent bookings for only 20 containers per day. Pacific National increased the number of containers it would carry for the defendant to around 35 per day in about March 2016 and to 50 in April 2016 - t 1-49 and t 1-105.
[63] Once there were 50 permanent bookings per day, the majority of the train was loaded with the defendant's containers so that there was less delay at the train station. Those coming to collect the containers were, in Mr Jeffreys' words, not battling with the other trucks to access the containers - t 1-50. The defendant was also less dependent on asking for ad hoc places on the train which created inefficiencies in container movements because the numbers arriving were not so predictable - t 1-50.
[78] At one point in his evidence Mr Sargood said he thought he would be able to move 50 containers a day because he would use B-double trailers - effectively moving two containers at a time - tt 3-31-32. As explained, he knew that this was not going to be possible - see [51]. Mr Sargood apparently had an idea that he would find, or build, a special lightweight trailer which would allow him to use a B-double truck to carry two containers at a time. Mr Grundy conceded that this was not fanciful - t 1-99. However, there is no evidence that these trailers existed or could be built. There is an air of unreality about the idea, particularly having regard to Mr Sargood's purchase of mainly heavy, old, secondhand trailers in July 2015. He had no reasonable grounds to think he could move two containers at a time.
[79] Mr Sargood claimed he was told by Mr Grundy that the dump would be open 24 hours a day. I prefer Mr Grundy's evidence to the contrary. I do not think there was any reasonable basis for Mr Sargood to assume that the dump would be open 24 hours a day, or that he could staff a manager at the dump, a digger operator at the dump and employees or subcontractors who would work through the night. There was not the slightest evidence that any of these things would be possible in performing the carriage agreement.
[80] I find that Mr Sargood and the plaintiff had no reasonable grounds to make the representations made as to the future.
[100] Of course, the defendant's calculation of loss is not on the basis that it would have engaged a sole haulage contractor, but that it would have set up the same type of arrangement it had after the carriage agreement terminated. That is, its damages calculation assumes that it would have employed someone like Mr Jeffreys as a supervisor, and run the operation itself using subcontractors. This is what it did in Sydney, although again, there is no detail in the evidence about that. The difficulty is that at the time the defendant was dissatisfied with Mr Northduft, and negotiating the carriage agreement with the plaintiff, it did not intend such an arrangement; it intended to contract out the entire haulage operation to a sole contractor. Between this state of affairs, and its damages calculation, there is an evidential gap in the defendant's case.
[101] There is no evidence that the defendant had identified anyone other than the plaintiff as available to undertake the carriage services it required. There is no evidence of anyone (unidentified by the defendant, but extant) who was capable of performing the carriage services the defendant required. There is no evidence to the opposite effect, say that, the defendant had made extensive searches for a haulage contractor and had come to the view that the plaintiff was its only option, so that I might conclude that if the plaintiff had not misled it, the defendant would have reverted to a 'plan B' and begun searches to employ someone like Mr Jeffreys to supervise a subcontracting operation. There is no evidence that anyone as capable as Mr Jeffreys was available to the defendant in July 2015. Mr Jeffreys was successful as a supervisor in 2016 because he had learned all about the operation in the time he was employed by the plaintiff.
[102] The defendant's business of railing waste to Queensland was new. It was still being equipped and established as at July 2015. The defendant's first plan to cart waste to Swanbank by using Loadshift had not been satisfactory, nor had the defendant's dealings with Mr Northduft. As it turned out the defendant's dealings with the plaintiff were also unsatisfactory. In regard to the latter point, Mr Grundy spent considerable time and effort satisfying himself that the plaintiff had the capacity to perform the services the defendant required. In these circumstances I cannot do more than speculate about whether the defendant would have found a satisfactory solution to its carriage needs in July 2015, or at some other time thereafter, if it had not contracted with the plaintiff. In my view this means that the defendant's case based on the ACL fails because it has not proved causation of loss.
[108] There are factual matters which might mean that, even without breaching its contract, the plaintiff would not have been able to shift the number of containers the defendant moved in the comparison period. I turn to examine these one by one.
[109] The dates for the start and finish of the comparison period, and the period of the carriage agreement, cover about the same period of time, at about the same times of year. The plaintiff did not cross-examine or make submissions about the way the period between 1 May 2016 and 3 June 2016 was treated in the calculation, even though the plaintiff moved an average of 221 containers a week in this period. Similarly, no point was raised as to the inclusion of the period at the beginning of the carriage agreement in the calculation, even though Mr Grundy's evidence was that there was satisfactory performance by the plaintiff during this time. In these circumstances, it is not my role to speculate as to what evidence might have been given had questions been asked.
[110] There was due allowance made in the calculation for the period when the defendant's business was shut by the EPA.
[111] Mr Gwynne's calculation assumes that sufficient containers were available to the defendant to allow the plaintiff to make as many container movements during the period of the carriage agreement as the defendant did in the comparison period. That assumption cannot be made.
[112] The oral evidence was that in July 2015 the defendant had around 50 containers - t 1‑57. Two hundred more arrived on 9 September 2015.
[113] The containers needed to be filled in Sydney; loaded on the train in Sydney, and transported to Brisbane. The train trip took 18 hours - t 1-33. There was no evidence about how long the filling and loading processes took. The plaintiff was obliged to remove the containers from the railway station in Brisbane by the day after their arrival. It was then to transport them to Swanbank, wait for them to be emptied, and return them to the railway station promptly. If a day and a half is allowed to fill a container and have it transported to Brisbane, and another day and a half is allowed to have it collected from the railway in Brisbane, there are three days taken. There is then the time taken to rail the container back to Sydney; collect it and take it back to the Sydney waste station. That must occupy another day. At the beginning of the performance of the carriage agreement there were only 20 permanent spots on the train to Brisbane each day, see below.
[114] Given the factual parameters, I find it hard to see how many more containers than 50 could arrive in Brisbane per week until after the arrival of 200 new containers on 9 September 2015. Unfortunately, when the evidence as to what containers were in fact railed to Brisbane per week is considered, it seems that significantly more than 50 containers were. For example, routinely from July 2015, schedule A to the fifth further amended counterclaim shows more than 50 containers located in Brisbane; sometimes 80 containers are shown as being located in Brisbane on a particular day. This would seem difficult to achieve if the defendant only owned 50 containers. One explanation for this may be that the evidence that only 50 containers were available until September 2015 is incorrect. There was no proper exploration of matters such as this during the trial, by either counsel.
[115] In circumstances where the evidence is unsatisfactory and contradictory, I am not prepared to find that the defendant would have had more containers to rail to Brisbane than it in fact did in the period between the commencement of the carriage agreement and 14 September 2015.[24] After that date, there were sufficient containers available to justify the assumptions Mr Gwynne has made.
[116] Mr Gwynne's calculation assumes that sufficient places on the train were available to the defendant to make as many container movements during the period of the carriage agreement as it did in the comparison period.
[117] I work on the assumption that travel by rail took place six days a week.[25] As at July 2015 Pacific National would not grant the defendant more than 20 permanent bookings a day because there were too many cancellations and too many empty spaces returning to Sydney. It appears from Mr Andriano's statement that this concern with reliability really prevented any increase in the number of permanent spots in the second half of 2015. Again, when regard is had to schedule A, or the summaries in Mr Gwynne's report at annexures 2 (first report) and 6 (second report) it does seem that more than 120 containers were in fact arriving in Brisbane per week.[26] Perhaps these extra container movements can be explained on the basis that ad hoc places were available to the defendant at times. But again, no exploration of these matters occurred at this trial.
[118] In March and April 2016 Pacific National increased the defendant's permanent bookings to 35, and then 50 spots per day. From what Mr Grundy said in his evidence, it seems that these increases were due more to his pushing to get a boost to his business after the EPA shutdown, than because the plaintiff's performance had improved.
[119] Had the plaintiff not breached the contract as it did, I find that Pacific National would have granted more permanent bookings earlier than it did. This was not explored in evidence with Mr Andriano. Taking a conservative approach to this matter, I find it likely that there would have been an increase to 35 container spots a day after about six weeks of reliable performance by a contract hauler, i.e. by about 14 September 2015, when the new containers became available. Further, that the increase to 50 would likely have occurred six weeks after that, i.e. at the beginning of November 2015.
[120] This means that for the period 14 September 2015 to 1 November 2015 Mr Gwynne has assumed that 15 more places on the train were available each day than would actually have been available. Because operations were on the basis of a six day week, there is no impact on Mr Gwynne's calculation for the period 9 September to 1 November 2015: the assumption adjusted by agreement between the parties is that 194 containers were moved per week through this time, whereas my hypothetical fact finding exercise allows for 210 permanent rail spots per week during this time. No adjustment is necessary to Mr Gwynne's calculation for these matters.
[121] Mr Gywnne's calculation assumes that sufficient waste was available to the defendant to fill as many containers during the period of the carriage agreement as it did in the comparison period.
[122] On the balance of probabilities I find that the defendant proved this. Mr Kacunic described the supply of waste available to the defendant as endless - t 1-68, although this might have been more useful evidence if it had been linked to a point in time. Generally this was Mr Grundy's evidence as to the situation from the beginning of 2015 - statement p 6. From April 2016 he had even more customers in Sydney wanting to use his services - t 1-96. A Mr Scott McPherson was operations manager of one of the defendant's large customers. His evidence was that there was a great deal more waste at the Sydney facility than was collected by the defendant until the end of December 2017. From the evidence at tabs 385 to 386 I am prepared to infer that this waste was available with regularity and constancy so as to enable the defendant to rail it to Brisbane as Mr Gwynne assumes. The defendant was the only contractor removing waste from this customer during that period - t 2-31.
[123] Mr Gywnne's calculation assumes that similar resources were available to empty containers at Swanbank dump during the period of the carriage agreement as there were in the comparison period.
[124] It was the defendant which owned and operated the digger at the Swanbank dump. To dump the waste from the containers, they had to be tilted, and the digger used to remove the contents. At some point the defendant bought a second digger to operate at Swanbank emptying containers. Mr Jeffreys' evidence was that the second digger was not in operation until about a year after the plaintiff ceased to perform the carriage agreement - t 1-47. This was also Mr Grundy's evidence - t 1-97. His evidence was also that the second digger did not double the capacity at the dump. Only one digger operated at a time, but having two meant that there were not down times - if one digger required repair, the other was used.
[125] If Mr Hurihanganui gave evidence contrary to this, I prefer that of Mr Jeffreys and Mr Grundy. I think that there was the possibility that Mr Hurihanganui was confused as to the periods of time he was giving evidence about; he had no particular reason to remember the date of the change, whereas for Mr Jeffreys and Mr Grundy, it was significant. Therefore my finding is that there was only one digger available at Swanbank for the time of the performance of the carriage agreement and for the comparison period.
[126] During the time of the performance of the carriage agreement there were "a lot of teething issues" with the digger - t 1-48, which caused delays from time to time, especially during the first months of the performance of the carriage agreement. If the defendant did not have a digger available to unload the waste from the containers promptly, there was delay in the truck returning to the railway station. This meant the container took longer to be returned, and also meant that the truck was delayed in collecting its next container from the railway station. These delays were attributable to the defendant's resourcing of the business, not to the plaintiff's breach of contract.
[127] I think that it is right to make a global reduction to the damages otherwise assessable on the contract claim to allow for the fact that problems with the digger and consequent delays would have been more prevalent in the period the carriage agreement was performed than they were in the comparison period. Again the evidence is scant. I think a reduction of 10% of the damages otherwise assessable for that period of the carriage agreement before the EPA temporarily shut the scheme down, and 5% thereafter is fair.
[128] There were other teething problems at the beginning of the performance of the carriage agreement. I deal with them at [135]-[137] below. I cannot see that they can be taken into account in assessing damages for breach of contract.
[137] I cannot make allowance for the matters dealt with at [135]-[136] except on a global discounting type basis. I think the monies earned during the first half of the comparison period should be reduced by 15%, and those earned in the second half reduced by 8% to account for these things. This reduces my starting figure of $622,394 to $547,274.[29]
[138] Lastly, and most significantly, this figure must be discounted to allow for the possibilities and probabilities that the defendant was not able to make an arrangement for carriage in the hypothetical period that was any more financially advantageous to it than the arrangement it in fact made with the plaintiff. As described above, because of the almost total lack of evidence led by the defendant as to this issue, I do not think I have a safe evidentiary basis to make such an estimate. For the sake of completing this hypothetical exercise I would assess the chances of the defendant's having made a better arrangement than the arrangement it in fact made with the plaintiff at about 30%. That is, my hypothetical assessment of damages on the ACL counterclaim is $164,182. From this figure $10,660 should be set off in respect of unpaid invoices.