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[2011] NSWCA 41
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BGL Operations Pty Ltd v Allied Express Transport Pty Ltd [2011] NSWCA 41 (9 March 2011)
Last Updated: 25 May 2011
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Case Title:
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BGL Operations Pty Ltd v Allied Express Transport
Pty Ltd |
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Medium Neutral Citation:
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Hearing Date(s):
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Decision Date:
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Jurisdiction:
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Before:
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Giles JA at [1]; Campbell JA at [2]; Macfarlan JA at
[4] |
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Decision:
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(1) Appeal allowed; (2) Set aside orders (1) and
(2) made at first instance on 19 March 2010; (3) Judgment for the appellant;
(4) Order that the respondent pay the appellant's costs of the proceedings
at first instance and on appeal; and (5) Direct that the respondent have a
certificate under the Suitors' Fund Act 1951, if qualified. [Note:
The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the
Court otherwise orders, a judgment or order is taken to be entered when it is
recorded in the Court's computerised
court record system. Setting aside and
variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and
36.18. Parties should in particular note the time limit of fourteen days in Rule
36.16.] |
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Catchwords:
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CONTRACT - sale of goods - whether vendor waived
right to claim that purchaser breached purchase obligation - whether vendor had
choice
between two inconsistent courses of action - whether election by
vendor
CONTRACT - sale of goods - concurrent and mutually dependent obligations -
whether vendor's failure to communicate readiness and willingness
to perform
precluded claim for breach - whether vendor required to tender performance
DAMAGES - Sale of Goods Act 1923, s 52 - contract price and market price
the same - whether vendor suffered loss - whether trial judge erroneously
assessed damages
DAMAGES - failure to mitigate loss - onus on defendant - issue only arises
if plaintiff proves loss at least on a prima facie basis
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Legislation Cited:
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Cases Cited:
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Texts Cited:
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Benjamin's Sale of Goods, 7th ed (2007) Sweet and
Maxwell N C Seddon & M P Ellinghaus, Cheshire & Fifoot's Law of
Contract 9th Aust ed (2008) LexisNexis Butterworths K C T Sutton, Sales and
Consumer Law 4th ed (1995) LBC Information Services |
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Category:
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Parties:
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BGL Operations Pty Ltd (Appellant) Allied Express
Transport Pty Ltd (Respondent) |
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Representation
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Counsel: J Stoljar SC/R H Weinstein
(Appellant) T J Davie (Respondent) |
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- Solicitors:
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Solicitors: Sachs Gerace Lawyers
(Appellant) Hassett Dixon Solicitors & Attorneys (Respondent) |
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File number(s):
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Decision Under Appeal
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- Court / Tribunal:
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- Date of Decision:
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- Citation:
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Allied Express Transport Pty Limited v BGL
Operations Pty Limited [2010] NSWDC 47 |
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- Court File Number(s)
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Publication Restriction:
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Judgment
- GILES
JA : I agree with Macfarlan JA.
- CAMPBELL
JA : I agree with Macfarlan JA. My reason for agreeing with the statement in
[31], that the court would imply that Bells had an obligation
to purchase within
a reasonable time, is that the particular contract in question is one concerning
which the familiar tests for
implication of a term in a contract for reasons of
business efficacy, set out by Mason J in Codelfa Constructions Pty Ltd v
State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 347, result
in there being such a term. ( cf Handley v Gunner [2008] NSWCA 113;
(2008) 13 BPR 25,139 at [80][98], [119][124]).
- I
agree with the orders proposed by Macfarlan JA.
- MACFARLAN
JA:
Nature of Case and Conclusions
- In
early September 2006 the appellant ("Bells") entered into a written Interim
Agreement with the respondent ("Allied") for the provision
by Allied to Bells in
Sydney and Newcastle of ice delivery services. Bells was at that time the
largest supplier of packaged ice
in New South Wales, supplying ice through some
1,300 outlets. Allied was a freight transport operator utilising some 1,000
vehicles
in Australia, by itself or through related entities.
- Clause
8.2 of the Interim Agreement provided as follows:
"8.2 If said contract [a contemplated long term contract between
the parties] cannot be agreed and executed for any reason by 30 th
November
2006, or Bells Pure Ice decide not to proceed to execute said contract with
Allied Express, then all retro fitted vehicles,
and materials handling equipment
configured [to] perform work for Bells Pure Ice will be purchased by Bells Pure
Ice from Allied
Express at the vehicle/equipment market price".
- The
long term contract was not executed by 30 November 2006 and the primary judge
found that Bells had in fact decided by at least
early November 2006 not to
execute it.
- The
parties continued to perform the Interim Agreement after 30 November 2006. They
did so until June 2007. At a meeting on 5 June
2007 a representative of Bells
told representatives of Allied that Allied "can keep the equipment [referring to
items that were the
subject of Clause 8.2]", "that none of it works anyway" and
that Allied "bought the wrong brands and old stuff that did not work".
Allied's
response was that it "would check and come back to" Bells. It did not do so.
- On
19 October 2007 Allied commenced the present proceedings making various claims
against Bells that were subsequently withdrawn,
settled or otherwise disposed
of. None of these are in issue on the present appeal. On 30 October 2009 Allied
amended its Statement
of Claim to make for the first time a claim against Bells
for damages for breach of Clause 8.2 of the Interim Agreement. This claim
is the
matter in issue on the present appeal by Bells.
- The
primary judge, Rolfe DCJ, found in favour of Allied on this claim and awarded it
damages of $148,650 (see [2010] NSWDC 47).
- In
my view Bells' appeal should be allowed for the following reasons:
(a) Allied did not, as Bells contended, waive its right to claim
that Bells breached Clause 8.2 (see [33] - [36] below). However Bells
did not in
fact breach that Clause because the Clause gave rise to concurrent and mutually
dependent obligations binding the parties
and Allied did not at any relevant
time communicate to Bells that it was ready, willing and able to perform its own
obligations (see
[37] - [44] below).
(b) Even if Bells did breach Clause 8.2, Allied failed to prove that it
suffered any loss as a consequence of such breach because
first, the contract
price (specified to be the "market price") and the market price were the same
(see [46] - [54] below) and, secondly,
because Allied otherwise failed to prove
that it suffered any loss (see [55] - [64] below).
The vehicles and equipment adapted or purchased by Allied
- In
accordance with discussions between the parties and as contemplated by the
Interim Agreement, Allied proceeded after the Interim
Agreement was entered into
to have adapted or to acquire vehicles and equipment to enable it to provide the
requisite delivery services
to Bells. It was common ground between the parties
there were five items of this description, all of which fell within the ambit
of
the purchase obligation contained in Clause 8.2. These items were described by
the primary judge as follows (the references to
the "the plaintiff" being to
Allied):
"(a) 10 Pallet jacks, ordered on 15 September 2006 and which were
delivered on 30 October 2006. These cost the plaintiff $52,250.
(b) One 1996 international ACCO 2350 tautliner truck registered as YEB 247,
which was a retrofit of the plaintiff's own vehicle, and
which arrived at the
premises of the plaintiff on 23 November 2006, having been ordered on 15
September 2006 at a cost of $58,496.
(c) One 1994 Barker Chiller tautliner trailer which arrived at the
plaintiff's premises on 23 November 2006, having been ordered on
23 October
2006. It was purchased for $57,050.
(d) One 1984 Maxicube insulated trailer which arrived at the plaintiff's
premises on 15 December 2006, having been ordered on 21 November
2006. Its cost
was $36,417.
(e) One tautliner truck, registered at WIG 858, which was a retrofit of the
plaintiff's own vehicle, and which arrived at the plaintiff's
premises on 15
December 2006" (Judgment [11]).
- The
evidence of what became of the items was as follows.
- The
evidence given on 8 February 2010 at the hearing at first instance was that two
or three of the pallet jacks were still then at
Allied's warehouse. The evidence
did not make clear where the remainder had gone but it was apparent that they
had not been sold,
at least not for any significant amount of money. Allied had
been able to put some of the pallet jacks to use for a limited period.
It made
no attempt to sell them other than to make an enquiry of the company that had
supplied them to Allied. That company offered
what was described in the evidence
as a "rock bottom price". The primary judge estimated this price to be $5,000
(Judgment [85]).
- The
tautliner truck YEB 247 was sold by Allied at a profit. The primary judge
credited this profit against losses that he found that
Allied incurred in
relation to other items.
- At
the date of the hearing Allied still owned the third item, the tautliner
trailer. The primary judge found that it had a value of
$30,000 at that time.
There was no evidence of Allied having attempted to sell the vehicle other than
evidence of Mr Richardson of
Allied who said that it had been "on the market for
the last eight months" (affidavit [85]). As his affidavit was sworn on 29 August
2008, it appears that Allied's first attempts to sell occurred at about the end
of December 2007.
- Mr
Richardson's evidence was that the fourth item, the Maxicube insulated trailer,
was still owned by Allied, although it was not
being put to any use because
Allied did not have "a spare prime mover to actually pull it" (transcript p 82).
He said that Allied
had not been able to sell the trailer (affidavit [86]) but
gave no details of the timing or nature of any efforts to sell.
- The
final item, the tautliner truck WIG 858, was sold by Allied on 3 October 2007
for less than the total of its original value and
the cost of the "retrofit"
that it had been given to adapt it for use in Allied performing services for
Bells. There was no evidence
of the timing or nature of any efforts to sell made
prior to 3 October 2007.
The judgment at first instance
- After
dealing with various matters that are not in issue on this appeal, the primary
judge noted Bell's submission that Allied never
requested it to purchase the
vehicles and equipment. In response to this submission, the judge said that "the
onus was on [Bells]
to purchase the equipment as at 1 December 2006. It made no
attempt to do so" (Judgment [65]). Implicitly treating this failure as
a breach
of Clause 8.2, his Honour turned to the assessment of Allied's damages and
expressed the following conclusions (referring
to Allied as the plaintiff and
Bells as the defendant):
"78 In my opinion, looking at the contract as a whole in this case,
the Court has to bear in mind that the specific purpose of the
equipment was its
availability and suitability for carrying the defendant's ice. There can be no
doubt that the plaintiff, in retrofitting
some of the vehicles, did so in order
to make them adaptable for this specific purpose. In effect, the result was a
'hybrid' in the
case of the vehicles which were retrofitted. In this respect, in
my opinion, the defendant cannot take advantage of its own breaches
by asserting
that, on the facts peculiar to the case, the Court should ignore the price paid
by the plaintiff for the equipment and
should determine the price with reference
to what might be available in a general market place (where it would be
difficult to achieve
a sale). I accept the plaintiff's submission that if the
Court were to do this it would allow the defendant to take advantage of
its own
wrong: Alghussein v Eton College (1998) 1 WLR 587; Ruthol Pty Limited
v Mills & Ors (2003) NSWCA 56 (at 94).
79 The best evidence before the Court about the market price as at 1 December
2006 is the evidence of what the plaintiff paid for
the equipment. Further, on
the facts that existed at that date, it is abundantly clear from Mr Port's
evidence, in terms of 'the
market', that the market was either solely the
defendant or it was largely dominated by the defendant.
80 [His Honour here referred to Bells' position in the market].
81 [His Honour here referred to case authorities requiring consideration in
construing a contract of surrounding circumstances, including
the market in
which the parties were operating.]
82 I therefore propose to assess the plaintiff's damages on the basis of the
price paid by the plaintiff for the equipment. In doing
so, it is necessary to
determine what, if any, deductions should be made from the purchase price of the
equipment to arrive at the
final figure for damages. In doing so, I have kept in
mind the remarks of Lord MacMillan in Banco de Portugal v Waterlow & Sons
Limited (1932) AG 452 at 506 that it is sufficient if a plaintiff has acted
reasonably. His Lordship's remarks have been accepted in Australian
cases:
Segenhoe Ltd v Atkins (1990) 29 NSWLR 569. In all the circumstances, I am
satisfied that the plaintiff has acted reasonably. I now consider each piece of
equipment in turn".
- The
primary judge then calculated damages by reference to the cost to Allied of
acquiring or adapting the vehicles and equipment,
making allowance for the
residual value of certain of the items as at the date of hearing, the sale price
of the tautliner truck
WIG 858 and the value that Allied had obtained from
limited use of some of the items.
The issues on appeal
- Bells'
first basis of challenge to the primary judgment was that Allied waived
compliance with the purchase obligation that Clause
8.2 of the Interim Agreement
imposed upon Bells and that Bells did not therefore breach that obligation.
- Secondly
Bells contended that it did not in any event breach Clause 8.2 because, first,
the obligations imposed by that Clause upon
Allied to deliver the relevant items
and upon Bells to accept delivery and pay the purchase price were concurrent and
mutually dependent
obligations and, secondly, at no time did Allied either offer
to perform its own obligations or request or demand that Bells perform
its
obligations.
- Thirdly
Bells contended that Allied had not established that it had suffered any, or
alternatively more than nominal, loss as a result
of Bells' alleged breach of
Clause 8.2.
- Fourthly
Bells contended that the primary judge had erred in failing to find that Allied
had not taken reasonable steps to mitigate
its loss in respect of some of the
items.
- During
the hearing of the appeal Bells withdrew a submission that it had earlier made
that because Allied did not have title to all
the items on 1 December 2006, it
was not able, and therefore not ready, willing and able, to complete the sale at
that time, with
the result that Allied was precluded from claiming damages in
respect of the breach of contract alleged to have been committed by
Bells on
that date.
- This
submission had largely been founded upon the fact that Allied was on that date
only the hirer, under hire purchase agreements,
of a number of the items and not
the owner of them. The submission was withdrawn when Bells accepted that the
relevant time for assessment
of Allied's ability to perform its obligations
under the contract was not 1 December 2006 but the subsequent point of time at
which
a reasonable time for the performance by the parties of their obligations
expired (see McNally v Waitzer [1981] 1 NSWLR 294 at 296-7, 303-4; N C
Seddon & M P Ellinghaus , Cheshire and Fifoot's Law of Contract, 9 th
Aust ed (2008) LexisNexis Butterworths at [21.26]).
- There
was no issue on the appeal as to the ambit of Bells' contractual obligation but
it is nevertheless appropriate that I make some
comments below about that
obligation.
Bells' contractual obligation
- I
should note first that notwithstanding that the Interim Agreement stated that it
was a "non binding agreement" neither party contended
in the proceedings that it
was not in fact binding.
- Secondly
the parties accepted on appeal that each of the five items referred to above
(see [12]) constituted "retro fitted vehicles"
or "materials handling equipment"
covered by the purchase obligation imposed by Clause 8.2.
- Thirdly
it was common ground that both of the alternative conditions precedent to the
operation of Clause 8.2 (see the first two lines
of that Clause) had been
satisfied by 30 November 2006.
- Fourthly
by Clause 8.2 Bells agreed to purchase what were in effect future goods, that
is, goods to be identified at a later point
in time (see Sale of Goods Act
1923, s 10). The Clause did not purport to effect an immediate sale and
purchase. Whilst it was plain from the terms of the Clause that the purchase
was
not to occur before 30 November 2006 (or before such earlier time as Bells
decided not to execute the long-term contract), the
Clause did not specify a
date for performance by Bells of the obligation to purchase. In these
circumstances the Court would imply
that the obligation was to be performed
within a reasonable time ( Canning v Temby [1905] HCA 45; (1905) 3 CLR
419 at 424, 430 and 432).
- Fifthly
as Bells submitted at the hearing of the appeal, Clause 8.2 imposed concurrent
and mutually dependent obligations on Allied
and Bells. Allied's obligation as
seller of the items in question was to deliver the items and Bells' obligation
as buyer was to
accept and pay for them. Section 31 Sale of Goods Act
confirms as follows the position that is in any event applicable under the
general law.
"31 Unless otherwise agreed, delivery of the goods and payment of
the price are concurrent conditions, that is to say, the seller
must be ready
and willing to give possession of the goods to the buyer in exchange for the
price, and the buyer must be ready and
willing to pay the price in exchange for
possession of the goods".
Whether waiver by Allied of Bells' obligation to purchase
- Bells'
submission on waiver, as it finally came to be put at the hearing of the appeal,
was confined to one that Allied waived its
right to claim that Bells breached
Clause 8.2 because Allied elected to adopt a course of action with which that
claim was inconsistent,
namely, continuing to perform the Interim Agreement
after 30 November 2006. Bells submitted that Allied "was confronted with a
choice
between two mutual[ly] exclusive [courses] of action: on the one hand it
could have requested or demanded that [Bells] purchase the
[relevant items] and
thereby brought the Interim Agreement to an end or, alternatively, on the other
hand could have continued to
affirm and perform the Interim Agreement (Written
Submissions [42] relying upon the decision of the High Court in Agricultural
and Rural Finance Pty Ltd v Gardiner (2008) HCA 57; (2008) 238 CLR 570).
- In
my view Bells' submission should be rejected because the two courses of action
identified by Bells were not in fact inconsistent.
It was arguably implicit in
the Interim Agreement that the parties would cease to perform it once Bells had
completed the purchase
of the items falling within the ambit of Clause 8.2 that
Allied had acquired or adapted for the purpose of providing services to
Bells.
However this never occurred and there was in my view no reason why Allied should
not have continued to provide services under
the Interim Agreement unless and
until Bells performed its purchase obligation. Contrary to Bell's submission,
there was no inconsistency
between a request or demand by Allied for Bells to
purchase the items and Allied continuing to provide services under the Interim
Agreement until Bells complied with the request or demand. As in Immer (No
145) Pty Ltd v Uniting Church of Australia Property Trust (NSW) [1993] HCA
27; (1993) 182 CLR 26, "the stage had not been reached where [Allied] was
required to make an election ..." (at 43).
- Indeed,
in the absence of Allied taking steps to terminate the Interim Agreement by
reason of Bells breaching its purchase obligation,
Allied would itself have been
in breach of the Interim Agreement if it had ceased to supply the services
provided for by the Agreement.
Thus, without any inconsistency of approach on
its part, Allied could have requested or demanded that Bells purchase the items
and,
until Bells did so, have continued to supply delivery services under the
Interim Agreement. Put simply, Allied's continued supply
of services would not
have indicated to a reasonable person in the position of Bells that Bells need
not perform its purchase obligation.
- The
outcome might have been different if Bells had contended that Allied's continued
supply of services over a significant period
of time gave rise to an estoppel in
favour of Bells, or to an inference that Allied intended to abandon the Interim
Agreement so
far as it contained an obligation of purchase on the part of Bells
(see Agricultural and Rural v Gardiner at [51]-[52]). However, this was
not the basis upon which Bells put its waiver submission. The Court does not
know whether there would
have been a factual basis for such contentions. In any
event they would have raised factual issues that were not explored at first
instance and could not have been made for the first time on appeal.
Whether Bells breached its purchase obligation
- As
the obligations of Allied and Bells were concurrent and mutually dependent,
Bells would only have been in breach of its obligations
if Allied had
communicated to Bells its readiness and willingness to perform its own
obligations. The requirement that a person in
the position of Allied do this
arises as a matter of general contract law applicable both to the sale of goods
and the conveyance
of real estate. The existence of this principle underlaid the
judgments of each member of the Court in Foran v Wight [1989] HCA 51;
(1989) 168 CLR 385. Mason CJ who dissented in the result but not on this point
said in that case:
"In the context of concurrent and mutually dependent obligations it
was recognized as early as the eighteenth century that a party
who was ready and
offered to perform his part of the contract could maintain an action against the
party who refused or neglected
to perform his part" (at 396-7).
- To
similar effect was the statement of Deane J as follows:
"Neither vendor nor purchaser will be guilty of breach of contract
if he fails to complete within the time or upon the day fixed by
the contract
unless the other party tenders performance of his concurrent obligations" (at
433; see also Brennan J at 420-1; Dawson
J at 450-1).
- Gaudron
J put it as follows, citing Dainford Ltd v Smith [1985] HCA 23; (1985)
155 CLR 342 at 365 and Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11;
(1988) 166 CLR 245 at 275-6: "there is no actual breach by one party of an
obligation to settle [a contract for the sale of land] unless the other party
tenders performance of his or her obligation to settle" (at 455; see also
Cheshire & Fifoot's Law of Contract at [21.26]; K C T Sutton,
Sales and Consumer Law 4 th ed (1995) at [21.52]; Macquarie
International Health Clinic Pty Ltd v Sydney South West Area Health Service
[2010] NSWCA 268 at [161]).
- A
consequence of this principle is that where a seller of goods neither offers to
perform nor tenders performance of its own obligations,
it may not maintain an
action against the buyer for damages for non acceptance (see Sale of Goods
Act, ss 52 and 40).
- In
the present case it is unnecessary to decide whether it is sufficient for the
party complaining of a breach by the other party
to have offered to settle, or
whether the first party must have gone further and tendered performance of its
obligations, as Allied
did not here do either. I note however that older case
authority and commonsense strongly favour the view that an offer is sufficient
(
Rawson v Johnson [1800] EngR 41; (1801) 1 East 203 [102 ER 79]; Jackson v Allaway
[1844] EngR 120; (1844) 6 Man & G 942 [134 ER 1174]; Bankart v Bowers (1866) LR 1
CP 484; see also: Levey & Co v Goldberg [1922] 1 KB 688; and
Benjamin's Sale of Goods , 7 th ed (2006) Sweet and Maxwell at [8-004]).
- In
the present case Allied contended both at first instance and, at least
initially, on appeal that Bells had breached its purchase
obligation as soon as
30 November 2006 (being the date mentioned in one of the pre-conditions to
Clause 8.2) passed without the purchase
having occurred. However there was no
breach at that time because Allied did not then offer to perform its own
obligations, nor did
it in fact do so at any time. If Allied had contended that
Bells breached its purchase obligation on or after the meeting of 5 June
2007,
Allied would have had the basis for an argument that it had been excused from
its obligation to tender performance by an intimation
by Bells, implicit in what
was said on Bells' behalf at the meeting on that day, that Allied need not do so
( Foran v Wight ). However such an argument would have been likely to
give rise to issues as to whether, six months having passed since 30 November
2006, Allied's conduct in continuing to perform the agreement had raised an
estoppel in favour of Bells or had impliedly indicated
an intention to abandon
that part of the contract concerned with the purchase by Bells of the relevant
items. As pointed out above
(see [36]), these issues were not explored at the
hearing.
- As
Allied did not offer to perform its own obligations at any time at or before the
date upon which it alleged that Bells breached
Clause 8.2, Allied's claim for
damages for breach must fail.
- As
this point was not taken by Bells at first instance, it was not dealt with by
the primary judge. Allied did not oppose it being
raised for the first time on
appeal as Allied was not prejudiced by that occurring because the facts relevant
to it had been litigated
at first instance.
Quantification of damages
- If
(contrary to the view that I have just expressed above) Bells did at the time
alleged by Allied breach the obligation that Clause
8.2 imposed upon it, Allied
would in my view nevertheless not be entitled to recover other than nominal
damages.
The Contract Price and the Market Price were the same
- The
first and most obvious reason for this conclusion arises out of the fact that
Clause 8.2 specified that the purchase price payable
by Bells was the "market
price" of the items to be purchased.
- For
there to have been a "market price", there would have to have been a market.
However if there is a market at the relevant time
the measure of damages for a
buyer's breach of its obligation to purchase goods is the difference between the
market price and the
contract price ( Sale of Goods Act, s 52(3)). As the
contract price was here the "market price", the two prices were the same.
Accordingly, the difference, and therefore the quantum
of damages, is zero.
- Section
52(3) is conditional upon the existence of "an available market" and not simply
a "market". The subsection is in the following terms:
"Where there is an available market for the goods in question, the
measure of damages is prima facie to be ascertained by the difference
between
the contract price and the market or current price at the time or times when the
goods ought to have been accepted, or if
no time was fixed for acceptance, then
the time of the refusal to accept".
- I
do not consider that the adjective "available" indicates that the "market or
current price" later referred to in that subsection
is different from the
"market price" to which Clause 8.2 of the Interim Agreement referred. Neither
party submitted that it was.
- Whilst
the words "prima facie" in s 52(3) indicate that the rule there stated is not an
inflexible one, a reason for it to be departed from would need to be shown. None
is
apparent to me or was suggested by the parties. Furthermore, if the rule were
departed from, damages would be assessed by estimating
the seller's "loss
directly and naturally resulting in the ordinary course of events from the
buyer's breach of contract" (s 52(2)). For reasons that I give below (see [55] -
[64]) assessing damages in this way would not assist Allied.
- Contrary
to Allied's contention, the conclusion that the damages to which Allied is
entitled are zero is not one that flouts common
sense and fails to give
operation to Clause 8.2. Why, Allied submitted, would Allied agree to Bells
assuming an obligation in the
terms of Clause 8.2 (indeed the evidence indicated
that Allied suggested the terms of Clause 8.2 to Bells) if the price to be paid
by Bells was simply that which Allied could obtain elsewhere? A possible answer
to this question is that Allied may well have sought
by the Clause to ensure
that it had an assured buyer at an assured price for the items especially
acquired or adapted by it for use
in performing its contract with Bells. Having
an assured buyer and price would have been an advantage to Allied even if Allied
could,
perhaps with some inconvenience and delay, have obtained the same price
elsewhere in the market. Particularly might this have been
so because, on the
evidence, the relevant items were not ones that Allied ordinarily used. It would
probably therefore have been
unfamiliar with the market for disposal of such
items.
- These
considerations preclude any conclusion that the Court should depart from the
ordinary meaning of the words used in Clause 8.2.
Indeed Allied did not contend
for any such conclusion. It did not for example submit that the words "market
price" in Clause 8.2
should be construed as meaning the cost to Allied of the
items in question. Rather, its submission, reflecting the approach of the
primary judge, was that in the circumstances of this case Allied's acquisition
cost was the best evidence of market value.
- This
being the nature of Allied's submission, it is apparent that the submission does
not provide an answer to the fundamental barrier
to Allied recovering
substantial damages that the contract price was expressed to be "market price".
- It
would not have been possible for Allied to support the damages claim by
asserting that there was no relevant market and therefore
no relevant "market
price" for the purposes of Clause 8.2. If this had been the case Clause 8.2
could not have operated to confer
upon Allied an entitlement to substantial
damages because there would not have been any contract price specified in Clause
8.2 that
was referrable to the circumstances. Accordingly, a fundamental
ingredient of the contractual obligation for breach of which damages
were sought
would have been absent The contractual promise would in these circumstances have
been incomplete and unenforceable (see
Cheshire & Fifoot at
[6.8]-[6.11]).
Ascertainment of market price
- A
further and alternative reason why Allied's claim for damages must fail is as
follows.
- It
was not in my view correct in the circumstances of the present case to treat
Allied's acquisition costs (whether or not adjusted
in the manner provided for
by the primary judge) as indicative of the market price of the relevant items.
- The
first point to make in this regard is that the primary judge effectively took
the dates of the hearing before him, that is, 8
to 10 February 2010 as the dates
for assessment of damages, rather than the date or dates of the alleged breach
in late 2006. The
date of breach is the usual date as at which damages are
assessed ( Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351). On
occasions a later point of time may be taken but there need to be reasons for
doing so. For example in Rentokil Pty Ltd v Channon [1990] 19 NSWLR 417
damages were assessed as at the date of the hearing because of the plaintiff's
impecuniosity at an earlier time (at 432).
- No
comparable or other relevant circumstances were shown to exist in the present
case. The evidence did not for example show that
from the time of breach Allied
took reasonable steps to sell the relevant items (see [14] - [18] above). In
these circumstances there
was in my view every reason in the present case to
adhere to the general rule that damages should be assessed as at the date of
breach.
- Assessment
of damages as at the date of breach would have highlighted the fact that Allied
neither proved that there was a market
for the items and what the relevant
market prices were, nor proved that there was no relevant market and that Allied
took reasonable
steps to attempt to sell the items. In the absence of proof of
one or other of these, there was no warrant for adopting Allied's
acquisition
costs, albeit adjusted in a limited fashion, as representing the market prices.
The fact was that Allied simply failed
to prove its loss and should have failed
on that basis, as well as on the basis to which I have referred in [46] - [54]
above.
- The
primary judge appears to have concluded that there was no significant market for
the relevant items if the possibility of sale
to Bells were excluded. I agree
with his Honour that, as it is a party that at this point in the analysis is to
be assumed to have
refused to purchase the items, Bells should not be considered
as a potential purchaser.
- However
the evidence did not in my view justify the judge's conclusions that there was
no other significant market and that Allied
had proved that it suffered a
substantial loss. Allied did not establish that the items were not fit for any
purpose other than use
in Bells' ice supply business. Indeed to some extent the
evidence suggested otherwise. For example Mr Noel Ryles gave evidence on
behalf
of Allied that he was satisfied that the retrofitted vehicles "were able to do
normal taxi-truck work when they weren't being
used to deliver ice" (black
appeal book p 51). Furthermore, Allied did not establish that it had made
consistent and reasonable efforts
to sell the items after the date of Bells'
alleged breach (see [14] - [18] above). In those circumstances it was not
appropriate
for the primary judge to conclude that there was no relevant market,
that Allied's acquisition prices constituted the best evidence
of market price
and that Allied had proved that it had suffered quantifiable loss.
- The
primary judge justified his adoption of Allied's acquisition prices in
preference to "what might be available in a general market
place", upon the
basis that the court would otherwise be allowing Bells to "take advantage of its
own wrong" (see Judgment [78] quoted
in [19] above).
- The
precise ambit of this principle (if indeed it can properly be described as a
principle at all: see Young JA in Nicholls v Michael Wilson & Partners
Ltd [2010] NSWCA 222; 243 FLR 177 at [181]) is not clear. It can at least be
used in some circumstances to prevent a person relying upon the occurrence of an
event where the
event has been brought about by the person's own conduct (see
generally Ruthol Pty Ltd v Mills [2003] NSWCA 56; (2003) 11 BPR 20,793 at
[88]-[100]) and to justify a construction of a contract that precludes a
wrongdoer taking advantage of his
or her own wrong (see Suttor v Gundowda Pty
Ltd [1950] HCA 35; (1950) 81 CLR 418 at 440-1; TCN Channel 9 v Hayden
Enterprises Pty Ltd (1989) 16 NSWLR 130 at 147). However Allied was not able
to refer the Court to any case in which the approach has been applied in any
situation arguably
analogous to the present.
- Nor
do I see any reason why as a matter of principle or commonsense it should be
applied in the present case. The "wrong" referred
to by the primary judge was
Bells' breach of Clause 8.2. The "advantage" of it that the judge considered
that Bells should not be
entitled to take was the advantage of requiring
Allied's damages to be assessed in accordance with the ordinary principles of
the
law, applied in the context of the contract entered into between the
parties. These principles are designed to enable assessment
of fair compensation
to the plaintiff for its loss resulting from the wrong of the defendant. A
defendant is not in ordinary circumstances
taking advantage of his own wrong by
requiring adherence to them. There were no special circumstances present that
rendered this
general principle inapplicable.
Mitigation of damages
- Bells
submitted that Allied failed to prove that it mitigated its loss by taking
reasonable steps to sell the relevant items after
the alleged breach occurred.
Allied responded by submitting, correctly, that the onus of establishing a
failure by a plaintiff to
mitigate its loss was on the defendant.
- However,
this is not in my view a case where mitigation of loss properly arises as an
issue. For reasons I have given above (see [46]
- [64]) the plaintiff here,
Allied, failed to prove that it suffered any loss as a result of the alleged
breach of contract by Bells.
Allied bore the onus of proving any such loss.
Mitigation of loss would only have arisen as an issue if Allied had proved, at
least
on a prima facie basis, that it had suffered loss. The onus would then
have shifted to Bells to prove that Allied did not take reasonable
steps to
mitigate its loss.
- As
Powell JA pointed out in Wenkart v Pitman (1998) 46 NSWLR 502, the
accepted view that the defendant bears the onus of proof on the issue of
mitigation appears to stem from the decision of the
Court of Common Pleas in
Roper v Johnson (1873) LR 8 CP 167. That proof by the plaintiff of its
loss, at least on a prima facie basis, is necessary before the issue of
mitigation arises is apparent
from the following passage from the judgment of
Brett J (as Lord Esher MR then was) in that case, quoted with approval by Powell
JA in Wenkart (at 523):
"It seems to me to follow ... that the plaintiffs here did all they
were bound to do when they proved what was the difference between
the contract
price and the market-price at the several days specified for the performance of
the contract, and that prima facie that
is the proper measure of damages;
leaving it to the defendant to shew circumstances which would entitle him to a
mitigation. No such
circumstances appeared here: there was nothing to shew that
the plaintiffs ought to have or could have gone into the market - a rising
market - and obtained a similar contract" (at 181-2).
Orders
- In
light of the views that I have expressed above the appeal should be allowed. I
propose the following orders:
(1) Appeal allowed;
(2) Set aside orders (1) and (2) made at first instance on 19 March 2010;
(3) Judgment for the appellant;
(4) Order that the respondent pay the appellant's costs of the proceedings at
first instance and on appeal; and
(5) Direct that the respondent have a certificate under the Suitors' Fund
Act 1951, if qualified.
**********
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