JJ Richard & Sons Pty Ltd v Precast Concrete Pty Ltd
[2010] QDC 272
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- Unreported Judgment
- JJ Richard & Sons Pty Ltd v Precast Concrete Pty Ltd[2010] QDC 272
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JJ Richard & Sons Pty Ltd v Precast Concrete Pty Ltd[2010] QDC 272
JJ Richard & Sons Pty Ltd v Precast Concrete Pty Ltd[2010] QDC 272
DISTRICT COURT OF QUEENSLAND
CITATION: | JJ Richard & Sons Pty Ltd v Precast Concrete Pty Ltd [2010] QDC 272 |
PARTIES: | JJ RICHARDS & SONS PTY LTD Appellant AND PRECAST CONCRETE PTY LTD Respondent |
FILE NO/S: | Appeal 3329/09; MAG 16444/06. |
DIVISION: |
|
PROCEEDING: | Appeal |
ORIGINATING COURT: | Magistrates Court, Brisbane |
DELIVERED ON: | 9 July 2010 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 23 June 2010 |
JUDGE: | McGill DCJ |
ORDER: | Appeal dismissed. |
CATCHWORDS: | CONTRACT – Interpretation – content of obligation to compete with a price. CONTRACT – Conditions and warranties – right in one party to have other party compete with a price offered by competitor – in context condition. APPEAL AND NEW TRIAL – Rehearing – drawing inferences on appeal – whether range of facts from which inferences can be drawn constrained by statute. WORDS AND PHRASES – “compete with”. Magistrates Courts Act 1921 s 47(a). Abel Point Marina (Whitsundays) Pty Ltd v Uher [2006] QSC 295 – cited. Allesch v Maunz (2000) 203 CLR 172 – cited. Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 – cited. Benmax v Austin Motor Co Ltd [1955] AC 370 – cited. Byrne v Australian Airlines Ltd (1995) 185 CLR 410 – cited. Carr v Brisbane City Council [1956] St R Qd 402 – considered. CGU Insurance Ltd v Porthouse (2008) 235 CLR 103 – cited. Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 – considered. Da Costa v Cockburn Salvage and Trading Pty Ltd (1970) 124 CLR 192 – considered. Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 – cited. Downey v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310 – cited. Fox v Percy (2003) 214 CLR 118 – cited. Graham v Queensland Nursing Council [2009] QCA 280 – cited. Hays Personnel Services (Australia) Pty Ltd v Motorline Pty Ltd [2008] QDC 130 - not followed. House v R (1936) 55 CLR 499 – cited. JJ Richards and Sons Pty Ltd v Dynamic Supplies Pty Ltd (Unreported, Magistrates Court Brisbane, 6 January 2006) – not followed. Kelantan Government v Duff Development Co [1923] AC 395 – cited. Kennedy v Kunde [1922] St R Qd 217 – cited. McMeekin v Maryborough City Council [1947] St R Qd 192 – cited. Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 – cited. Parsons v Raby [2007] QCA 98 – cited. Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 724 – cited. Portsmith Tally Services Pty Ltd v Chatfield [2008] QDC 220 – not followed. Queensland Nursing Council v Fletcher [2009] QCA 364 – cited. Savage v McCracken [1938] QWN 20 – cited. Scrivener v Director of Public Prosecutions (2001) 125 A Crim R 279 – cited. Seymour CBD Pty Ltd v Maroochydore Convenience Centre Pty Ltd [2000] QCA 327 – considered. Stevenson v Yasso [2006] 2 Qd R 150 – cited. Teelow v Commissioner of Police [2009] QCA 84 – cited. Thiess v TCN Channel Nine Pty Ltd (No 5) [1994] 1 Qd R 156 – cited. Todrell Pty Ltd v Finch (No 2) [2008] 2 Qd R 95 – cited. Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 – applied. Warren v Coombes (1979) 142 CLR 531 – cited. |
COUNSEL: | G.N. Kalimnios for the appellant I.W. Raine for the respondent |
SOLICITORS: | Hemming and Hart Lawyers for the appellant Stuart, Cook and Braham Solicitors for the respondent |
- [1]This is an appeal from a decision of the magistrate who on 23 September 2009 dismissed the appellant’s claim against the respondent for damages for breach of contract. There was no dispute that the respondent had purported to terminate three contracts between the parties; the magistrate rejected the appellant’s claim that it was entitled in these circumstances to damages for loss of bargain.
- [2]The trial was conducted in a somewhat unusual way: no witnesses were called, a bundle of agreed documents were put before the magistrate as all of the relevant documents, a number of facts were admitted, and an agreed chronology was put before the magistrate, who was told that quantum was agreed, so that if the appellant was successful the appropriate course was to give judgment for $13,875: p 11. There was essentially agreement on the matters in issue, although unfortunately this was not because those issues had been clearly defined by carefully drafted pleadings. The substantial issue between the parties before the magistrate was whether the appellant had breached Clause 2, which was a term of each of the three written contracts, an issue which involved the correct interpretation of that clause in the context of the contract. There was a subsidiary question of whether, if the appellant had breached that clause, the respondent was entitled as a result to terminate the contracts. The magistrate resolved both of these issues in favour of the respondent.
Terms of the contracts
- [3]The contracts were in the appellant’s standard form, described as a “service agreement form” with customer details and service requirements on the front, and a list of terms and conditions on the back; both sides were signed on behalf of the respondent. The contracts were for refuse removal services at the respondent’s premises. It is relevant to consider a number of terms of the contracts in order to provide a context for the interpretation of Clause 2. Relevantly the contract provided:
“1. The Term. Both Parties agree the prices overleaf reflect a long-term relationship and that is the spirit of the agreement.
The terms of this agreement shall be for an initial period of three years. The term shall be automatically renewed for further periods of three years thereafter unless terminated by either party giving written notice within 30 days of the end of the initial term or any renewed term
- Competitive Pricing. OUR GUARANTEE. During the term of this agreement, except during agreed fixed price periods or when a discount is already in effect JJ Richards & Sons Pty Ltd (JJR) undertakes to compete with any bona fide price offered by another party in writing to the customer to perform the services described overleaf by entering into a new 3 year agreement that includes an agreed price discount. Please note that this clause does not apply to compaction equipment or where the capital value of the equipment supplied exceeds $5,000.00.
* For the purpose of this agreement a ‘Bona Fide Offer’ is an offer from a competitor’s regular price list provided in writing on company letterhead and excludes any specials or discounted offers that are uncommercial, predatory or under-cost.
- Price variations. JJR may adjust its prices during the term of the agreement for reasons such as but not limited to increased operation costs, changes in disposal fees, site profitability, changes to disposal facility locations or increased government charges and levies by giving customers 30 days notice of such increase.
10 The customer agrees to:
- (i)Grant to JJR exclusive rights to the removal of waste from the premises specified and not engage a second party for waste removal during the term of this agreement.”
- [4]These three contracts were made in 2005; they replaced earlier service agreements made on 23 June 1999, which contained a different version of Clause 2. It was submitted on behalf of the respondent that the different clause in the earlier contract was a matter to which regard could be had for the purpose of interpreting the 2005 contract.[1] The magistrate cited the terms of Clauses 1 and 2 of the 1999 agreements, but it does not appear that they played any part in her analysis other than her noting that the 1999 version included an express provision for termination in certain circumstances, which was not included in the 2005 version: paragraph 22. I do not consider it is necessary to have regard to the 1999 contract in order to resolve the matter, and for that reason I will not quote the relevant terms.
Nature of appeal
- [5]Appeals from the Magistrates Court are governed by s 45 of the Magistrates Courts Act 1921, subsection (1) of which provides an appeal as of right “as prescribed by the rules”. Section 47 of the Act provides for the powers of the court on the hearing of the appeal:
“On the hearing of an appeal or a special case, the District Court may—
- (a)draw inferences of fact from facts found by the Magistrates Court, or from admitted facts or facts not disputed;
- (b)order a new trial on such terms as it thinks just;
- (c)order judgment to be entered for any party;
- (d)make any other order, on such terms as it thinks proper, to ensure the determination on the merits of the real questions in controversy between the parties;
…
- (f)make such order with respect to the costs of the appeal of special case it thinks proper.”
- [6]The relevant rule covering appeals to this court from the Magistrates Court is r 783 in Part 3 of Chapter 18 of the Uniform Civil Procedure Rules. Rule 785 in that part provides that Part 1 of that chapter, with certain exceptions, applies to appeals under Part 3 with necessary changes. One of the rules not excluded is r 765, which provides in sub‑rule (1):
“An appeal to the Court of Appeal under this chapter is an appeal by way of rehearing.”
- [7]In addition, r 766(1), which is also made applicable by r 785(1), provides:
“The Court of Appeal—
- (a)has all the powers and duties of the court that made the decision appealed from; and
- (b)may draw inferences of fact, not inconsistent with the findings of the jury (if any), and may make any order the nature of the case requires; and
- (c)may, on special grounds, receive further evidence as to questions of fact, either orally in court, by affidavit or in another way; and
- (d)may make the order as to the whole or part of the costs of an appeal it considers appropriate.”
- [8]The ordinary characteristics of an appeal by way of rehearing are well established. It is necessary for the appeal court to make up its own mind on the basis of the findings of primary fact made at the previous hearing, unless those findings are set aside in accordance with the established principles,[2] but it is necessary for the appellant to show that the decision under appeal was wrong.[3] Where the appeal is from the exercise of discretion, that involves showing that there was an error of principle in the exercise of the discretion, or that the discretion miscarried, in that the result was manifestly inappropriate.[4]
- [9]The respondent raised two issues in relation to the nature of the appeal: the first was that it was necessary for the appellant to show that the decision appealed from was wrong, and the second was that the effect of s 47(1)(a) was to limit the capacity of the court on appeal to draw inferences from facts.
- [10]As pointed out by Windeyer J in Da Costa v Cockburn Salvage and Trading Pty Ltd (1970) 124 CLR 192 at 209, the power to draw inferences of fact is more or less a standard form in relation to appeals and confers a wide power, though his Honour went on to note that “it does not I think curtail the recognition or respect that an appeal court should accord to the decision of the trial judge. … Whether the express authority to draw inferences of fact be necessary may be doubted, for it would seem to be necessarily implicit in a power to hear appeals on a question of fact.”
- [11]His Honour went on to cite a passage from the judgment of Lord Reid in Benmax v Austin Motor Co Ltd [1955] AC 370 at 376:
“In cases where there is no question of the credibility or reliability of any witness, and in cases where the point in dispute is the proper inference to be drawn from proved facts, an appeal court is generally in as good a position to evaluate the evidence as the trial judge, and ought not to shrink from that task, though it ought, of course, to give weight to his opinion.”
- [12]The same point was made in the judgment of the majority of the High Court in Warren v Coombes (1979) 142 CLR 531 at 551, where their Honours cited the following passage from the judgment of Gibbs J in Flannery v Cohuna Sewerage Authority (1976) 51 ALJR 135 at 136:
“Where the question depends on the proper inference to be drawn from undisputed facts, the appellate court, although bound to form its own conclusions, will still give proper regard to the findings of the trial judge at first instance.”
- [13]On p 553 they also said that “if the judges of an appellate court held the decision of the trial judge to be wrong, they should correct it.” The approach in Warren v Coombes has been frequently confirmed by the High Court.[5]
- [14]In the present case, where there was no dispute as to facts and no question of assessing witnesses, the situation is the same. I am bound to form my own conclusions, giving proper regard to the findings of the magistrate. It is for the appellant to show that the decision appealed from was wrong.
- [15]Counsel for the respondent submitted that the effect of s 47(a) was that the court was confined in the inferences it could draw by the terms of that provision in relation to the facts from which such inferences could be drawn, being limited to facts found by the Magistrates Court, admitted facts or facts not disputed. This was said to follow from the decision in Hays Personnel Services (Australia) Pty Ltd v Motorline Pty Ltd [2008] QDC 130 at [10] - [14], where it was said the provision did not empower the District Court judge to draw a different inference which would be inconsistent with the magistrate’s finding of fact on a particular issue. As the passages to which I have referred make clear, the process of drawing an inference, which by its very nature has to be based on facts of some kind, will ordinarily be based on facts which are either admitted or not disputed, or found by the magistrate, because there will be no other facts on which the inferences can be based.
- [16]There are, however, circumstances where the judge is entitled on an appeal by way of rehearing to interference with or overturn findings of primary facts made by a magistrate, sometimes even involving findings based on an assessment of credibility of witnesses, in respect of which various tests have been formulated over the years; for present purposes, what matters is that in some circumstances on an appeal by way of rehearing it can be done. In addition, the undoubted power to admit fresh evidence in certain special circumstances contemplates the possibility that there may be additional facts before the appeal court which were not before the magistrate. Further, it may be that the magistrate erred in failing to make a finding which ought to have been made on a particular factual matter, and it may be in a particular case that the court on appeal is in a position to make such a finding.
- [17]As a result, it is possible that the available range of facts from which an appellate court can draw inferences will be wider than the facts referred to expressly in s 47(a). Nevertheless, I do not read that provision as confining the inferences of fact which may be drawn on appeal to the facts identified in that paragraph. Section 47(a) is expressed as an empowering provision, not as a limitation. In addition, if one bears in mind the terms of paragraph (d) of the same section, in some circumstances it may be necessary in order to ensure the determination on the merits of the real questions in controversy between the parties, for the court hearing the appeal to draw inferences from facts which are determined other than in one of the ways identified in paragraph (a). There is also the consideration noted by Windeyer J that express authority to draw inferences of fact may not be necessary in circumstances where there is a power to hear appeals on a question of fact.
- [18]His Honour in Hays (supra) did not cite any authority for the view that he adopted as to the effect of s 47(a).[6] It is I think useful to bear in mind that s 47 is almost a literal re-enactment of what previously appeared in s 11(5) of the Magistrates Courts Act 1921. When that Act was introduced, the appeal which it provided was not by way of rehearing,[7] although subsequently appeals came to be by way of rehearing, initially pursuant to other rules[8] and subsequently under the UCPR. It has never been suggested that the effect of s 47(a) is that the appeal is not by way of rehearing, or that this section is in some way inconsistent with rules that so provide, and I consider that it does not operate in such a way. On a rehearing the appellate court has power to draw inferences from primary facts which is as complete as that of the primary judge.[9] I would therefore respectfully differ from the approach adopted in Hays (supra).[10]
- [19]All this, however, is really by the by, since the crucial question on the appeal is as to the correct interpretation of a term in the contract, which is not an inference of fact, but a question of law.[11] There is no doubt that on a rehearing the appeal court applies its own view of the law.
Interpretation of Clause 2
- [20]There was no dispute that Clause 2 was part of the contract. The finding that the necessary prerequisites for the application of Clause 2 had occurred in the circumstances of this case was not challenged on appeal. There had been bona fide prices offered by other parties to perform the services described in the agreements, and the appellant had offered to enter into a new three‑year agreement including a price discount, but the discount was not one with which the respondent agreed. It was also not one which matched the price offered in writing by at last one other party; indeed, it did not come close to matching it.
- [21]The appellant’s case is that, on its true interpretation, Clause 2 required the appellant only to compete by entering into a new agreement including an agreed price discount, so that, so long as the appellant had offered to take that course, a failure to compete by entering into the agreement was not a breach of contract on the part of the appellant, where entering into a new three-year agreement requires the cooperation of the respondent and the respondent has itself failed to cooperate in that way. Although the matter was not put in quite this way, in essence the appellant’s case was that the respondent was under an implied obligation to cooperate in order to enable the new three-year agreement to be entered into, the respondent’s refusal to enter into an agreement on the terms offered by the appellant was not reasonable, and the respondent was not entitled to take advantage of its own refusal to enter into the new agreement at the price discount offered by the appellant in order to terminate the contract on the basis of the appellant’s failure to enter into that agreement.
- [22]The respondent’s case, which was accepted by the magistrate, was that the fundamental obligation undertaken by the appellant in the clause was to compete with the price offered by another, that obligation on the true interpretation required the appellant to match the price offered by the other, and that because the appellant was not prepared to enter into a new three-year agreement including a price discounted to match the price offered by another, the appellant had failed to compete and was therefore in breach of Clause 2. As an alternative submission, the argument was advanced that the appellant was at least required to come close to the price offered by another party. That was the view expressed, it seems to me by the way of dicta, in a decision on the interpretation of a similar clause in a contract involving the appellant and another party: JJ Richards and Sons Pty Ltd v Dynamic Supplies Pty Ltd.[12] The magistrate accepted the former argument, that the obligation implicit in the words “undertake to compete” was that the price for the new agreement would be equal to or less than the price of a competitor: para 12.
- [23]When interpreting Clause 2, the appellant has the advantage of the consideration that, if the intention of the parties had been that the obligation on the appellant under the clause was to match the price offered by another, it would have been easy enough to express that by providing that the obligation was:
“To compete with any bona fide price offered by another party … by entering into a new three-year agreement at that price.”
- [24]Clause 2 does not say that, and refers to “an agreed price discount”. The use of the term “discount” may be relevant in relation to the exclusion earlier in Clause 2 that the clause does not operate “when a discount is already in effect”. That consideration produced a submission that Clause 2 could only operate once, so that, if a new contract at a discount price were entered into as a result of the activation of Clause 2, although presumably Clause 2 in terms would be included in the new contact,[13] it would be inoperative because one discount had already been allowed. Greater difficulty, however, is posed by the inclusion of the word “agreed”. If the effect of Clause 2 is simply that, if the parties enter into a new agreement at a new price, this existing agreement will be superseded, it is unnecessary. Further, if Clause 2 by its operation requires a further agreement between the parties, as to the quantum of the price discount, it becomes in substance an agreement to agree, which is unenforceable.[14]
- [25]An example of this is afforded by a decision of the Supreme Court: Carr v Brisbane City Council [1956] St R Qd 402, which also involved a contract for the removal of refuse. A term in the contract provided that if for any reason other than reasons covered by earlier clauses the cost of a contractor carrying out the contract was increased “the council will be prepared to negotiate with such contractor with a view to making good to him any such increased costs … as he has actually and necessarily incurred.” It was held that the provision for further negotiation between the parties deprived the clause of the certainty required by law for it to constitute the basis of an enforceable agreement: p 411. It was said that an agreement to enter into negotiations for the purpose of the parties agreeing to pay and accept a particular amount was an illusory promise which conferred no legal rights.
- [26]More recently, however, the court’s reluctance to render void commercial agreements between parties has recognised an express agreement to negotiate in good faith, which has been held to be binding. In Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 a majority of the Court of Appeal accepted the proposition that “in some circumstances a promise to negotiate in good faith will be enforceable, depending upon its precise terms.”[15] Some difficulties about this decision were discussed in Cheshire and Fifoot at p 268; one which strikes me as of some significance is that the majority of the Court of Appeal considered that only nominal damages would be available for breach of the obligation, which seems to produce a result of little practical difference from one where there is no enforceable obligation at all.
- [27]This decision was referred to in the judgment of the majority of the Court of Appeal in Seymour CBD Pty Ltd v Maroochydore Convenience Centre Pty Ltd [2000] QCA 327 at [26]: their Honours restated the fundamental principle: “the courts will not enforce an agreement to agree”, adding that “the status of contracts to negotiate is less certain under Australian law” by reference to Coal Cliff and a later decision of the NSW Court of Appeal.[16] In Seymour it was held that the matter had gone beyond agreeing to agree because the parties had reached agreement, but I am prepared to treat this as an endorsement of the traditional approach, at least in this state. Accordingly, if Clause 2 provides no more than an agreement to agree, it is not an agreement at all, which would lead to the conclusion that at least that clause, and possibly the whole contract if it were not severable, is void for uncertainty.
- [28]That is an approach courts seek to avoid when dealing with commercial contracts, and neither party contended for that position either before the magistrate or before me. The position of the appellant, however, was similar, in that it interpreted the clause giving rise merely to an obligation to negotiate, which would be satisfied so long as the appellant had in the negotiations offered any discount to the existing price. Whatever may be the status of an express agreement to negotiate in terms of strict law, it is apparent that, even on the view adopted by Kirby P that such an agreement is enforceable, because it gives rise to only nominal damages for breach, it is in practice illusory. The traditional view adopted by Mansfield SPJ was that such an agreement is in law illusory. In either case, the practical consequence of adopting this interpretation of the contract is that it gives very little practical effect to Clause 2, even if it does not run into the particular problems presented by an agreement to agree.
- [29]There are a number of indications that this clause was objectively a matter of some importance in the context of this contract. Clause 1 provides that “the prices overleaf reflect a long-term relationship and that is the spirit of the agreement.” It also provides that the contract will be automatically renewed after the initial term of three years in the absence of written notice by one of the parties “within 30 days of the end of the initial term or any renewed term.” Accordingly, there is a fairly narrow window of opportunity for a party to terminate the contract.
- [30]The next consideration is that Clause 2 is introduced with the heading “Competitive pricing. OUR GUARANTEE”. Plainly this did not import any guarantee in the technical legal sense, but as I have said elsewhere[17] the more common or popular meaning of the term “guarantee” is that it is something that is assured, something that will definitely be forthcoming or can be relied on.[18] Clause 2 contains a number of express exclusions which seem to be designed to prevent a clause, which was otherwise intended to have substantial operation, from operating in circumstances where substantial operation would be inappropriate.
- [31]Apart from this, the contract provided an exclusive right to the removal of waste from the premises referred to for a term of at least three years, where the appellant had power under the contract to vary the price. Clause 4 quoted above permits the appellant to adjust prices during the term of the agreement “for reasons such as but not limited to” various matters referred to, some of which relate to the cost to the appellant of performing the service, but including “site profitability”. It seems to me that there is some force in the respondent’s argument that, in this context, Clause 2 provides an important safeguard to a party contracting with the appellant, but only if the clause has some practical commercial effect.
- [32]There is the further consideration that the form is the appellant’s standard form. If a term of a contract is ambiguous, there is a principle that suggests that the interpretation against the interests of the party by whom it was formulated or included should be preferred.[19] Such an approach provides support for the interpretation adopted by the respondent.
- [33]Ultimately, in terms of analysing the words used, the ordinary meaning of the concept of undertaking “to compete with” a price in my opinion involves matching the price, because it is difficult to see how one can compete effectively with a price on any other basis. It is possible, of course, to compete with an alternative supplier on a variety of bases, including quality of service, terms of payment and so on, and a contract involving different terms may well be competitive overall. Clause 2, however, is not, it seems to me, directed to the issue of competition other than as to price.[20] It is concerned with the price at which another party will perform “the services described overleaf”, which seems to me to be talking about a situation where someone else is offering to do what the appellant is doing at a lower price. Price competition is one-dimensional, and the practical effect of that is that a price competes with another price only if it equals it or betters it.
- [34]In context, there would be no difficulty in interpreting this clause as requiring the appellant to meet the price offered by another except for the inclusion of the expression “by entering into a new three-year agreement that includes an agreed price discount.” Unless that expression is interpreted as not modifying the fundamental obligation on the appellant to compete as to price, it produces an interpretation which renders the clause of little practical significance, if not void. In all the circumstances, in my opinion such an interpretation should be avoided, and that expression should be seen as simply the mechanism by which effect is given to the obligation to compete as to price.
- [35]That has the consequence that the obligation on the appellant in these circumstances is to enter into a contract, or at least to offer to enter into a contract, at a price which meets the price offered by the other party. The appellant was not prepared to do so in this case, and it is not disputed that, if that were the obligation on the appellant, it was in breach of contract. In this respect, and for these reasons, in my opinion the decision of the magistrate on this point was correct.
- [36]It follows that I would reject the dicta of the other magistrate in the Dynamic Supplies Pty Ltd decision referred to earlier. In these circumstances, it is unnecessary for me to consider the question of whether the magistrate ought to have followed the decision in Dynamic Supplies Pty Ltd (supra) because of considerations of judicial comity, as submitted on behalf of the appellant. The difficulty with this argument, particularly on a point of this nature on appeal, is that no appellate court is going to say that the court of first instance ought in the interest of judicial comity to have arrived at a decision which the appellate court thinks was wrong.
Entitlement to terminate
- [37]The next question is whether that breach of the contract by the appellant entitled the respondent to terminate. This was approached by the magistrate by reference to the question of whether there was an implied term in the contract for termination by the respondent in such circumstances. Whether a contracting party is entitled to terminate a contract as a result of a breach by another party of a term of the contract, in circumstances where no such right is conferred expressly by the contract (as is the case here), depends on whether the breach constitutes repudiation, or breach of an essential term, or caused the loss of the substantial benefit of the contract.[21]
- [38]Repudiation occurs where a party evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with that party’s obligations. Commonly, however, in circumstances where the terms of a contract are ambiguous and there is a dispute over their meaning, insistence on a particular interpretation, even if it is ultimately found to be wrong, does not constitute repudiation.[22] The position is not clear cut, and sometimes insistence on an incorrect interpretation of a contract can amount to repudiation if the test for repudiation is satisfied. Because of the view that I take about the nature of this clause, it is unnecessary for me to determine this issue finally.
- [39]There are some terms of a contract breach of which will necessarily entitle the other party to terminate, which are termed essential terms or conditions. The question is whether the particular obligation “is a condition or essential term of the contract breach of which would immediately entitle the defendant at his option to rescind the contract and sue for damages, or is a warranty or nonessential and subsidiary term breach of which would entitle the defendant to damages.”[23] Whether a term falls into the former category depends on whether “it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor.”[24]
- [40]I have already referred to a number of features of this particular contract, features which suggest that this clause appears to have been intended to be an important feature of the contract and an important characteristic of its commercial operation. These features in my opinion lead to a conclusion, which is to be reached objectively, that the test posed in the Tramways Advertising case is met here. This was a significant term of the contract; it was the only term which had the distinguishing feature of block capitals in its heading. Interpreted in the way I have interpreted it, it was an important commercial safeguard to the contracting party. Because of that importance, it is reasonable to expect that such a contracting party would have expected it to have been properly performed. I do not consider that a reasonable contracting party would have been prepared to enter into a long-term relationship where the appellant had a capacity to increase the price on a variety of grounds unless its position was secured by a provision of this nature, which would actually be complied with. In my view, an objective assessment of this contract as a whole leads to the conclusion that this term was an essential term or condition of the contract, such that a breach by the appellant did give the respondent a right to terminate.
- [41]In these circumstances, there is no question of implying an entitlement to terminate into the contract. The common law provides adequate and appropriate rules dealing with the issue of termination for breach in circumstances where there is no express provision dealing with that subject matter in the contract. In those circumstances, it is difficult to see how the absence of an express provision dealing with the question of whether or not there is a right to terminate in relation to breach of a particular clause can ever satisfy the requirements for its implication of terms into a contract, particularly the requirement that it is necessary to give business efficacy to the agreement.[25] It also occurs to me that a conclusion that a term should be implied on the basis that it was reasonable and equitable to do so would involve a conclusion that, at least in the circumstance of that particular contract, the operation of the common law rules in relation to termination were not reasonable and equitable. Given that the common law rules are heavily based on the terms of the contract anyway, it is difficult to imagine that such a situation could arise.
- [42]Accordingly in my view the magistrate in this matter did err by dealing with the issue of whether there was a right to terminate by reference to whether a right to terminate was to be implied into the contract. To be fair to her, however, it appears that this approach was adopted because the respondent presented the issue to the magistrate in those terms.[26] That was the wrong approach in my opinion, but I agree with the conclusion reached by the magistrate that the respondent did have a right to terminate the contract because of the appellant’s breach. There was no dispute that that right had been exercised by the respondent’s letter. It follows that that termination was not wrongful and was not a breach of the contract, and the appellant had no right to recover damages for loss of the benefit of the contract. No other case was made out for damages for breach of contract, and the appellant’s claim was therefore rightly dismissed by the magistrate.
- [43]A number of other issues were raised in the notice of appeal, and in the parties’ submissions; in my view it is not necessary to resolve any of them in order to determine the substantial issue arising in relation to the appeal, which is whether the appellant’s claim was rightly dismissed by the magistrate.
Costs
- [44]One other issue arose on the appeal, in relation to the question of the costs of the proceeding before the magistrate. There was no argument in relation to costs before the magistrate, although the appellant did make the submission at one point that it wanted to make some submissions in relation to costs after the decision was known. When the magistrate handed down her decision, it appears that what happened was that the reasons were published and the formal order was then made, dismissing the plaintiff’s claim and ordering the plaintiff to pay the defendant’s costs, with liberty to relist the matter on three days’ notice if the costs were not agreed. I was told (although unfortunately there was no transcript or other evidence before me as to just what happened when the judgment was delivered) that the appellant sought the opportunity to make submissions in relation to costs arising out of the fact that there were various amendments made to the defendant’s defence, and, so it was said, the issues before the magistrate were not properly crystallised in the terms in which they were put at the trial until the day of the trial. In the event, those submissions were never made to the magistrate, who seems to have proceeded on the basis that any issue of that nature could be determined if the question of costs was not agreed and the matter was relisted.
- [45]It is not uncommon for judges when delivering reserved judgments to receive further submissions in relation to costs. Apart from anything else, it may be that one party or another has made relevant offers under the UCPR, which will influence the question. Sometimes it appears that the appropriate order is obvious and indeed sometimes such an order will be included in the written reasons, but, at least in circumstances where full argument in relation to the question of costs has not already been received, there is strictly speaking a breach of the rules of natural justice in dealing with the question of costs without giving the parties the opportunity to be heard specifically in relation to that question.
- [46]As long as a court is prepared to hear submissions if a party wishes to make them, it may not matter if the court has previously assumed that the question of costs was obvious, and has even purported to make an order in the particular way. Such a thing has happened to me on a number of occasions. The difficulty in this case is that it appears that the magistrate did not hear submissions in relation to costs with the rest of the argument, and did not give the parties the opportunity to make submissions in relation to costs when the decision was given. The order giving liberty to relist the matter if the costs are not agreed suggests that the purpose of that relisting is to resolve the quantum of the costs payable in accordance with the order which was made when the reasons were published, which was an order that the plaintiff pay the defendant’s costs. If the plaintiff wanted to argue, as it did, that the plaintiff should not have to pay the defendant’s costs incurred prior to the trial, because it was not until the trial that the correct issued was identified, that is a matter which really ought to have been reflected in the terms of the order made on 23 September 2009.
- [47]In addition, the argument was advanced that, if the matters raised on amendment at the trial had been raised in a more timely way, such as when the original defence was served, the appellant may not have persisted with the matter, so that the appellant should not be required to pay costs incurred by the defendant after that time. There are situations where such an approach may be appropriate, but in the present case the fact that the appellant did pursue the matter at trial, even after the appropriate issues had been identified between the parties (if not in terms by the pleadings), and indeed pursued the matter on appeal, indicates that that argument was not made out on the facts of this case.
- [48]I have looked at the original defence filed with the notice of intention to defend on 14 December 2006. This defence was based on the proposition that no contract had been entered into after the 1999 contract, and relied on the proposition that in any case the 1999 contract had been terminated by a letter from the respondent to the appellant dated 31 May 2006. However, it was alleged in the alternative that it was a term of the agreement that should the defendant receive a bona fide offer from an alternative service provider to undertake the work under the contract at a lesser price, then if the purchaser was unable or unwilling to compete with that offer the defendant had a right to terminate the agreement on 30 days’ written notice (para 11), that the plaintiff was unwilling or unable to compete with an offer communicated by the defendant to the plaintiff on 31 May 2006 (para 13), and that as a consequence the defendant was entitled to terminate the agreement and did so in writing by a letter dated 5 July 2006: para 14.
- [49]Although this pleading did rely in paragraph 11 on the formulation of Clause 2 of the 1999 agreement, is also relied in the alternative on Clause 2 of any agreement alleged to have been signed on any subsequent date. It does seem to me that the essence of the ground on which the respondent has ultimately succeeded was raised in that defence: there was a particular obligation under Clause 2 of the contract, the appellant had breached that obligation, the respondent was as a consequence entitled to terminate the agreement, and had done so. In these circumstances, the appellant’s real argument in relation to costs is that, although the issue on which the respondent succeeded was raised at an early stage, additional issues were raised and the respondent did not succeed on those other issues, and accordingly there should be some departure from the basic position that costs follow the event.
- [50]It is true that in some circumstances it may be appropriate to make an order for costs dealing with particular issues, particularly where a plaintiff who has been successful has raised substantial issues on which it was not successful.[27] It is, however, less common for an order for costs in favour of a successful defendant not to be made because the defendant raised a number of defences and did not succeed on all of them. Without going so far as to say that a defendant against whom a plaintiff fails completely should never be deprived of costs, it is at least unusual for that situation to arise.[28] There is the further consideration that here ultimately the issues at trial do appear to have been confined to the relevant issues, or at least by the time the matter got to trial the defendant had abandoned issues about whether or not there was a new contract and so on, which might otherwise have given rise to these difficulties. This is therefore not a case where the length of the trial has been artificially extended, or the plaintiff has been required to call additional witnesses, specifically because the defendant was running a particular defence which ultimately failed.
- [51]Accepting that it is appropriate to deal with the question of the costs of the trial again, having heard what counsel for the appellant wanted to say in relation to the matter, I am ultimately not persuaded that there exists in the circumstances of this case sufficient justification for a departure from the ordinary principle that costs follow the event. I do not think it is appropriate to modify that by reference to costs of an issue in the circumstances of this case. Accordingly, I would make the same order for costs of the trial as was made by the magistrate. If those costs are not agreed, the assessment of them can be resolved by the magistrate.
- [52]It follows that the order made by the magistrate should not be interfered with, and the appeal is dismissed. I expect that as a consequence the appellant will have to pay the respondent’s costs of the appeal, but that is a preliminary view and I am prepared to hear submissions on the question of costs when these reasons are delivered.
Footnotes
[1] Citing Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 422, Hays Personnel Services (Australia) Pty Ltd v Motorline Pty Ltd [2008] QDC 130 at 16. These cases appear however to be concerned with the question of imputing or implying terms when parties have not attempted to spell out the full terms of their contract.
[2]Warren v Coombes (1979) 142 CLR 531 at 551; Fox v Percy (2003) 214 CLR 118 at [22] – [29]; Stevenson v Yasso [2006] 2 Qd R 150 at [36]; Parsons v Raby [2007] QCA 98 at [23]. [24]; Graham v Queensland Nursing Council [2009] QCA 280 at [69], [70].
[3]Allesch v Maunz (2000) 203 CLR 172 at 180-1; Teelow v Commissioner of Police [2009] QCA 84 at [4].
[4]House v R (1936) 55 CLR 499 at 504-5; Queensland Nursing Council v Fletcher [2009] QCA 364 at [97].
[5] For example, in CGU Insurance Ltd v Porthouse (2008) 235 CLR 103 at [69], where the court drew what it regarded as an obvious inference from undisputed facts in that case, though it went on to identify the way in which the primary judge, and the intervening Court of Appeal, were in error: [74].
[6] It is arguably inconsistent with the decision of the Full Court in Savage v McCracken [1938] QWN 20.
[7]Kennedy v Kunde [1922] St R Qd 217.
[8] Provision for the appeal to be by way of rehearing was inserted in r 183 of the Magistrates Courts Rules 1922 in 1948: see Government Gazette 29 May 1948, Vol 170 No. 152 p 2168, presumably in response to the plea from Philp J in McMeekin v Maryborough City Council [1947] St R Qd 192 at 200. In 1960 the relevant rule became r 294(3). When the District Court was reinstated the appeals went to that court: District Courts Act 1958 s 156; District Courts Act 1967 s 95.
[9]Scrivener v Director of Public Prosecutions (2001) 125 A Crim R 279 at [10] per McPherson JA.
[10] And the similar approach, again without analysis or reference to authority, in Portsmith Tally Services Pty Ltd v Chatfield [2008] QDC 220 at [3].
[11]Kelantan Government v Duff Development Co [1923] AC 395 at 409; Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 at 581, 591; Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 724 at 736; Abel Point Marina (Whitsundays) Pty Ltd v Uher [2006] QSC 295 at [21].
[12] Unreported, Magistrates Court Brisbane, 6 January 2006.
[13] It is not difficult to imply the requirement that the new agreement referred to in Clause 2 be in the same terms as the existing agreement, particularly in circumstances where those terms represented, obviously, the appellant’s standard contractual terms.
[14]Seddon and Ellinghaus, Cheshire and Fifoot’s “Law of Contract” (9th Australian edition, 2008) p 259.
[15] Per Kirby P at p 26.
[16]Australis Media Holdings Pty Ltd v Telstra Corporation (1998) 43 NSWLR 104 at 127-8.
[17]Downey v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310 at [18]; appeal dismissed: [2005] QCA 199.
[18] Citing Sydney Harbour Casino Properties Pty Ltd v Coluzzi [2002] NSWCA 74 at [46].
[19]Seddon and Ellinghaus (supra) p 433, Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 at 510.
[20] The obligation is expressed as one “to compete with … the price”.
[21]Seddon and Ellinghaus (supra) p 1005.
[22] A classic example is DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 432-3.
[23]Associated Newspapers Ltd v Bancks (1951) 83 CLR 322.
[24]Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 at 641-2 per Jordan CJ.
[25]BP Refinery (Westernport) Pty Ltd v Hasting Shire Council (1978) 52 ALJR 20 at 26.
[26] See transcript pp 33-4.
[27]Thiess v TCN Channel Nine Pty Ltd (No 5) [1994] 1 Qd R 156 at 208.
[28]Todrell Pty Ltd v Finch (No 2) [2008] 2 Qd R 95 at 98-9.