Azzi v Volvo Car Australia Pty Ltd - [2007] NSWSC 319

No judgment structure available for this case.

CITATION: Azzi & Ors v Volvo Car Australia Pty Ltd [2007] NSWSC 319

HEARING DATE(S): 6-10 March, 13-17 March, 20-24 March, 27-31 March, 11-13 April 2006

JUDGMENT DATE :
5 April 2007

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: Brereton J

DECISION: 1. In proceedings 50146/03, judgment for defendant, with costs. 2. In proceedings 50156/03, order that the proceedings be dismissed, with costs. 3. Grant liberty to the parties to apply, within 7 days, to set aside or vary the costs orders, and for other costs orders in their place.

CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – Offer and Acceptance – pre-contractual negotiations – contracts evidenced other than by offer and acceptance – where “letter of intent” and formal agreement executed simultaneously – where letter of intent covers additional matters – whether parties intended to be bound by letter of intent – significance of commercial context and conduct of parties – Construction and Interpretation – where letter of intent contemplated further agreement on specific matters – where no such agreement reached – whether letter of intent required that offer of further agreement contain terms covering such matters – Discharge and Breach – repudiation – repudiatory intent not lightly to be inferred – where defendant had resiled from any repudiatory stance before termination. - TRADE PRACTICES – Misleading and deceptive conduct – where representation made to recipient in circumstances that it was foreseeable it would be relied on by related party – where representation made to other party merely stated negotiating position of first party – whether statement of position if misconceived is misleading. - TORTS – NEGLIGENCE – Economic loss – whether duty of care owed to third party not to cause economic loss by repudiating contract with second party – where third party related to second party – where relationship between first and second parties regulated by contract. - INDUSTRIAL LAW – Unfair work contracts – whether contract one “whereby” person performed work in an industry – whether impugned provisions related to performance of work in industry – whether contract unfair by reason of imprecision. - DAMAGES – assessment – no question of principle.

LEGISLATION CITED: (NSW) Fair Trading Act 1987, s 42
(NSW) Industrial Arbitration Act 1940, s 88F
(NSW) Industrial Relations Act 1986, ss 105, 106
(CTH) Jurisdiction of Courts (Cross-Vesting) Act 1987, s 5(4)
(NSW) Jurisdiction of Courts (Cross-Vesting) Act 1987, s 8(1)
(CTH) Trade Practices Act 1974, ss 51A, 51AC, 52

CASES CITED: Accredited Aged Care Facilities Pty Ltd v Banyan Tree (Australia) Pty Ltd [2002] VSC 261
Auburn Council v Austin Australia Pty Ltd (in liq) [2007] NSWSC 130
Batterham v QSR Limited (2006) 227 ALR 212; [2006] HCA 23
Barton v Croner Trading Pty Ltd (1984) 3 FCR 95; 54 ALR 541
Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Brandster v Tryak Pty Ltd (1989) 28 IR 329
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529
D&G Motors Pty Ltd v Capitol Motors Ltd [1973] AR(NSW) 806
Emanuele v Chamber of Commerce & Industry SA Incorporated [1994] ANZ ConvR 417
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523
Fish v Solution 6 Holdings Ltd (2006) 227 ALR 241, [2006] HCA 22
Fortuna Seafoods Pty Ltd v The Ship “Eternal Wind” [2005] QCA 40
Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194
Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110
Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
McDonald’s Australia Ltd v Industrial Relations Commission of NSW [2005] NSWCA 286
Majik Markets Pty Ltd v Brake & Service Centre Drummoyne Pty Ltd (1991) NSWLR 443
Masters v Cameron (1954) 91 CLR 353
Mayne Nickless Limited v Industrial Relations Commission of New South Wales [2004] NSWCA 359; 141 IR 1
Milner v Delita Pty Ltd (1985) 61 ALR 557
Mitchforce Pty Ltd v Industrial Relations Commission (2003) 57 NSWLR 212
Old UGC Inc v Industrial Relations Commission of New South Wales in Court Session [2006] HCA 24; (2006) 227 ALR 190
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Perre v Apand Pty Ltd (1999) 198 CLR 180
Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) NSWLR 644
QSR Limited v Industrial Relations Commission [2004] NSWCA 199
Rosser v The Maritime Services Board of NSW (No 2) NSWSC (Young J, 30 August 1993, BC 9301829)
Ross T Smyth & Co Ltd v TD Bailey Son & Co [1940] 3 All ER 60
RT & YE Falls Investments Pty Ltd v State of New South Wales [2001] NSWSC 1027
Sinclair Scott & Co v Naughton (1929) 43 CLR 310
Solution 6 Holdings Pty Ltd v Industrial Relations Commission of NSW (2004) 60 NSWLR 558
Sydney Water Corporation Limited v Industrial Relations Commission of NSW (2004) 61 NSWLR 661
VG Haulage Services Pty Ltd, Ex parte; Re Industrial Commission of NSW [1972] 2 NSWLR 81
Vroon BV v Fosters Brewing Group Ltd [1994] 2 VR 32
Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387
Wesoky v Village Cinemas International Pty Ltd [2001] FCA 32

PARTIES:
50146/03:
Tony Azzi (Automobiles) Pty Limited (first plaintiff)
Harissa Pty Limited (second plaintiff)
Antonio Azzi (third plaintff)
Asialink Pty Limited (fourth plantiff)
Volvo Car Australia Pty Limited (defendant)
50156/03:
Tony Azzi (Automobiles) Pty Limited (first plaintiff)
Harissa Pty Limited (second plaintiff)
Antonio Azzi (third plaintff)
Volvo Car Australia Pty Limited (defendant)

FILE NUMBER(S): SC 50146/03; 50156/03

COUNSEL: J L Trew QC w J E O'Sullivan (plaintiffs)
J N West QC w A R Moses (defendant)

SOLICITORS: McClellands Lawyers (plaintiffs)
Letherbarrow Lawyers (defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BRERETON J

Thursday 5 April 2007

50146/03 Tony Azzi (Automobiles) Pty Ltd & 3 Ors v Volvo Car (Australia) Pty Ltd
50156/03 Tony Azzi (Automobiles) Pty Ltd & 2 Ors v Volvo Car (Australia) Pty Ltd

JUDGMENT

1 HIS HONOUR: In 2000, the first plaintiff Tony Azzi (Automobiles) Pty Ltd (“TAA”) carried on business under the trade name Larke Hoskins conducting a Honda motor vehicle dealership from premises at Rosebery, Rushcutters Bay and Homebush. The main facility, at Rosebery, was owned by the second plaintiff Harissa Pty Ltd (“Harissa”), which also held and holds 99 per cent of the shares in TAA – the other one per cent being held by the third plaintiff Tony Azzi, who is the controlling mind of both companies. In mid-2000, TAA was appointed by the defendant Volvo Car Australia Pty Ltd (“Volvo”) to be a Volvo dealer for its Sydney South Eastern region, pursuant to a letter captioned “Volvo Representation”, which had evolved through several iterations – the last of which was dated and apparently executed by Volvo on 16 August 2000 and accepted by TAA on 16 September 2000 – and which provided, inter alia, as follows:

2. Requirement – Dealer Agreement

The conditions for renewal, non-renewal and termination will be clearly established within both the one year and five year agreements.

2 Also on 16 September 2000, TAA executed a dealer agreement for a term of one year, which was expressed to commence with effect from 1 July 2000, a date that corresponds with the time at which TAA began to sell Volvo cars. By the time that a year had elapsed from 1 July 2000, and before any five-year dealer agreement had been executed, the relationship between TAA and Volvo had soured. Volvo raised complaints about TAA’s performance as a dealer, which TAA disputed. Volvo at first asserted that it was not bound to give TAA a replacement five-year agreement, though it was later to resile from that position. When Volvo eventually submitted a five-year dealer agreement to TAA, the draft included a provision for termination on 120 days’ notice. TAA contended that inclusion of such a provision was inconsistent with the “Volvo Representation” letter of 16 August 2000, and treated it as a repudiation, which it purported to accept; Volvo treated TAA’s purported termination as a repudiation, which it in turn purported to accept.

3 In these proceedings, which were initiated in the Federal Court and transferred to this Court under the (CTH) Jurisdiction of Courts (Cross-Vesting) Act 1987, s 5(4), TAA alleges that there was a contract made between it and Volvo on or about 1 July 2000, the terms of which were subsequently incorporated in the “Volvo Representation” letter ultimately executed by TAA on 16 September 2000, including the provision about one-year and five-year dealer agreements set out above. Alternatively, TAA contends that if there was no such contract at law, nonetheless there was an equitable estoppel of the type described in Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387, to the same effect. TAA alleges that by a course of conduct, culminating in but not limited to the inclusion in the draft five-year dealer agreement of the 120-day notice provision, Volvo repudiated that contract, and sues for damages for breach arising from that repudiation, those damages said to be the lost profits that it would have made under the five-year agreement, and the lost opportunity to renew the dealership at the end of the five year term.

4 Alternatively, Harissa alleges that if there were not such a contract, then by making representations, in the “Volvo Representation” letter and elsewhere, to the effect that TAA would be granted terms of one plus five years, Volvo engaged in misleading and deceptive conduct contrary to (CTH) Trade Practices Act 1974, s 52, and/or (NSW) Fair Trading Act 1987, s 42, and unconscionable conduct contrary to Trade Practices Act, s 51AC, by which Harissa incurred loss through its expenditure on improving the Rosebery premises in the belief that TAA would have a five-year dealership.

5 Further, TAA complains that by making representations after mid-2001 to the effect that TAA was not entitled to a further five-year term, when (on TAA’s case) it was so entitled, Volvo thereby engaged in other misleading and deceptive conduct contrary to Trade Practices Act s 52, by reason of which it is contended that third parties were influenced to the end that TAA lost the opportunity of participating in a float of its business in Hong Kong and the expenditure it had so far incurred in pursuing that opportunity was wasted.

6 In addition, Harissa (which was and is the proprietor of the land and buildings from which TAA conducts its business) claims that Volvo’s alleged repudiation of its contract with TAA was a breach of a duty of care owed by Volvo not to cause foreseeable financial damage to Harissa.

7 Finally, in proceedings which were initially instituted in the Industrial Relations Commission but transferred to this Court pursuant to (NSW) Jurisdiction of Courts (Cross-Vesting) Act 1987, s 8(1), TAA contends that if the arrangements between it and Volvo did not include an obligation on Volvo and a right in TAA to a replacement five-year term, then those arrangements were unfair within the meaning of (NSW) Industrial Relations Act 1996, s 106 – the unfairness primarily being the circumstance that, on that hypothesis, those arrangements, by not providing for a right to the replacement term, both did not reflect the underlying negotiations between the parties upon which TAA had acted, and did not provide a reasonable opportunity for TAA to derive a fair return from the investment which it was going to make.

Was there a Contract for a Replacement Five Year Term?

8 For Volvo, Mr West QC and Mr Moses submit that, though it was the intention of both TAA and Volvo that a new (five-year) agreement would replace the one year agreement, disagreements between the parties about the performance of TAA under the one-year dealer agreement, and failure to agree upon the terms of any replacement five-year Agreement, resulted in no such further agreement ever being made. Mr Trew QC and Mr O’Sullivan, for the plaintiffs, submit that a binding and enforceable agreement was made either between March and May 2000, or between June and September 2000, providing for a total term of six years, comprising two segments or dealerships of one and five years respectively.

9 On the negotiations culminating in the various versions of the Volvo Representation letter, there is, as well as the correspondence, the affidavit and oral evidence of Mr Azzi. Although Mr Eriksson and Mr O’Keefe swore affidavits, those affidavits were ultimately not read at the trial, and in those circumstances, I accept Mr Azzi’s uncontradicted evidence on these issues.

10 From about June 1999, Mr Azzi (on behalf of TAA) was engaged in discussions with Messrs Eriksson and O’Keefe (of Volvo) concerning a proposal that TAA establish a Volvo dealership in the Rosebery premises. In the course of those discussions, Messrs Eriksson and O’Keefe described the proposed dealership as part of the beginning of a new phase of restructuring that Volvo was proposing to implement, with the proposed dealership to cater for the City, Rushcutters Bay and Rosebery (as the hub dealership), and a satellite dealership based at Sylvania to cater for the Sydney Southern region, including the Sutherland Shire. They said that Volvo wished to reduce the number of its dealer outlets and intended to implement a three dealer strategy, and that TAA’s area of responsibility (with the satellite site) would extend from the City down to the southern suburbs, covering a third of the Sydney metropolitan area, including areas up to then serviced by Monaco Motors and Dominelli. The parties discussed a long-term relationship and a long-term investment. Mr Eriksson invoked Volvo’s slogan of “Volvo for life”. In cross-examination, Mr Azzi said:

I spoke to Mr Eriksson about a long term viability for the – for me becoming a Volvo dealer and I mentioned, due to the large investment and even the investment down south, a minimum period of ten years plus ten. Mr Eriksson said something to the effect, ‘Tony, we will give you a long term commitment, but it might have to come in various shapes. We are trying to sort it out between me and Paul [O’Keefe] because of the three dealer strategy. What we will commit to you is a long term commitment for your investment and Paul will come back to you as to how the term is to be set out in the agreement form.

11 In a letter to Larke Hoskins dated 1 July 1999, Volvo stated:

Volvo is currently working intensively to deliver a rejuvenated dealer network in Sydney. An essential element of this plan is the consolidation of the current areas of responsibility (AOR) into larger AORs serviced by fewer dealer groups. It is our clear intention that Sydney will be serviced by only three such groups.

Each of the newly expanded AORs will be serviced by a central ‘hub’ dealership. Satellite dealerships providing sales/service and parts or service and parts, as required, will be located so as to best service customers’ needs and maximise the Volvo business in each AOR.

In addition to a reduction in dealer groups in Sydney, we intend to deliver a more even distribution of sales potential between the dealers. To achieve this, we intend to realign certain postcodes with our current Haberfield AOR to become part of the eastern Sydney AOR. The Hurstville AOR will be incorporated in full.

These changes will deliver increased potential for the eastern AOR along with a more realistic alignment of the customers and their natural dealer locations.

12 In September 1999, Mr O’Keefe reported to Volvo’s board:

In May VCA tabled a ‘three dealer’ strategy for the Sydney metropolitan area. This strategy involved the termination of all current dealers, the amalgamation of the seven AORs into three and the appointment of three dealer groups, who would operate hub and satellite operations within each AOR.

Larke Hoskins are a prominent dealer who have, in the recent past, been a multi-site, stand alone Honda dealer. They are well established as an eastern suburbs and inner city dealer and achieve strong result into the key areas of this AOR.

Larke Hoskins have secured prominent facilities in Rushcutters Bay and in Zetland, the two primary automotive precincts for the city and Eastern suburbs. They propose to provide facilities in both areas for Volvo.

…

13 In a letter to Larke Hoskins dated 3 November 1999, Volvo stated:

Network proposals and requirements

In relation to the establishment of a new dealer network structure in Sydney, and in addition to the information contained in the attached Ambition 21 documents, Volvo Car Australia intend to implement the following structures across Sydney:

4. The Volvo Dealer Agreement shall be for a fixed term of five years, with established renewal, non-renewal and determination procedures.

Ambition 21: Volvo’s Formal Dealer Application:

Further to the above information and all correspondence to date, we have attached a copy of the Volvo’s Ambition 21 document for your perusal and response. Ambition 21 sets out Volvo’s strategic ambitions for the development of our dealer network and through it the Volvo brand.

14 Part III of the Ambition 21 document was a form which required completion by the applicant for a dealership, which Mr Azzi completed and sent to Volvo on about 2 December 1999. In it he described the name of the dealership as Larke Hoskins. One of the strengths of the dealership was said to be “main facility owned”. The company structure was stated to include Harissa, which was described as the “property company”.

15 On about 4 January 2000, Harissa, at Volvo’s request, engaged Gray Puksand, architects, to design and prepare plans for a redevelopment at Rosebery, including a temporary Volvo showroom, for which plans were prepared in September 1999 and April 2000. On about 24 March 2000 Mr Azzi completed and returned to Volvo a questionnaire and application for a Volvo dealer agreement, in which he stated among his requirements:

· a ten year minimum agreement plus an option for another ten years, and

· “confirmation of Sydney market and dealer numbers appointment for future not to be greater, three only Sydney metro”.

16 On 10 May 2000, Volvo issued to TAA the first (draft) version of the letter entitled “Volvo Representation”, appointing TAA as the Volvo dealer for southern Sydney. Paragraph 2, entitled “Requirement – Dealer Agreement”, was in the form already set out [see [1] above]. The letter defined TAA’s area of responsibility, outlined Volvo’s requirements, and included a requirement that TAA develop a southern suburb satellite dealership.

17 A schedule of works for the temporary Volvo showroom was prepared, and a development application was lodged with South Sydney Council on 27 May 2000. This work – to construct the first, temporary, Volvo showroom – was completed by 1 July 2000, to Volvo’s apparent considerable satisfaction.

18 Following a conversation between Mr Azzi and Mr O’Keefe on about 16 May 2000, and a letter from Mr Azzi dated 17 May 2000, some changes were made to the Volvo Representation letter, the second version of which issued on 26 June 2000, and involved amendments of a relatively minor nature to: the time for completion of the permanent Volvo facility at Rosebery; the date for submission by TAA of a proposal for the Rushcutters Bay satellite; the identity of the postcodes for the southern satellite area; a requirement for the provision of a schedule for site procurement of that satellite; terms relating to the use of the name of the dealership; and an increase in the amount of business development support to be provided by Volvo.

19 TAA received Volvo cars from about 24 May 2000, and commenced trading as a Volvo dealer at Rosebery from 1 July 2000. Mr Azzi sought further changes to the “Volvo Representation” letter, and by letter dated 3 July 2000, and Volvo issued a further version on 26 July 2000, which it described in a covering letter as a revision of “our letter of agreement”. The final version of the Volvo representation letter, dated 16 August 2000 and executed by TAA on 16 September 2000, is in substantially the same terms as that of 26 July 2000.

20 Also on 16 September 2000, TAA executed and returned the one-year dealer agreement, in respect a term of one year from 1 July 2000 to 30 June 2001. It included the following relevant provisions:

Franchising Code of Conduct

Trade Practices Act 1974

…

2(5) (a) Prior to executing this Agreement Dealer acknowledges that it has provided to Volvo a signed statement that the Dealer has been given advice about the Dealer Agreement or the Dealership business by any of the following:

(i) an independent legal advisor;

(ii) an independent business advisor;

(iii) an independent accountant;

(b) For each kind of statement not received under paragraph (a) above, a signed statement by the prospective Dealer that the prospective Dealer:

(i) has been given that kind of advice about the proposed Dealer Agreement or Dealer Business;

(ii) has been told the kind of advice that should be sought but has decided not to seek it.

…

(23) Term. This Agreement shall commence on 1 July 2000 and shall continue thereafter for a term of one (1) year (the “Term”) or until terminated by either party as set out hereunder.

…

(29) Business relations following termination. Any business relationship between the parties continuing after termination the notice of this Agreement has been given or continuing after termination of this Agreement shall not be construed as renewal of the Agreement or waiver of notice of termination or termination but otherwise shall be subject to terms identical with the provisions of this Agreement so far as are applicable

…

21 For Volvo, Mr West and Mr Moses submit that there was no binding contract for a replacement five-year term, and that at least insofar as it made provision in that respect, the Volvo Representation letter was in the third class referred to in the Masters v Cameron (1954) 91 CLR 353, the intention of the parties being not to make a concluded bargain at all unless and until they executed a formal contract, and that the only formal contract for that purpose was the one-year dealer agreement, which contained no provision for renewal. Mr Trew and Mr O’Sullivan, for the plaintiffs, submit that the Representation letter was within the first or fourth classes, namely one in which the parties had reached finality in arranging all the terms of their bargain and intended to be immediately bound to the performance of those terms, but at the same time proposed to have the terms restated in a fuller or more precise form not different in effect, or one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon while expecting to make a further contract in substitution for the first, containing by consent additional terms [cf Sinclair Scott & Co v Naughton (1929) 43 CLR 310, 317; Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622, 627-8].

22 With reference to RT & YE Falls Investments Pty Ltd v State of New South Wales [2001] NSWSC 1027, [53]–[58] (Palmer J), Mr West submitted that a cautious approach should be adopted in considering whether a binding contract had been made from negotiations between parties to a commercial transaction, prior to the execution of a formal document. In a case such as Falls – in which one of the parties was a government department and the issue was whether a binding contract had arisen from oral discussions – it is prima facie unlikely that the department will have committed itself to binding obligations without documentation, and one would be reluctant to infer that there was an intention to be legally bound in the absence of such documentation. But a less cautious approach is called for where there are commercial dealings between parties who act as if they are in legal relations and document their arrangements, albeit imperfectly: it is far more difficult to say that a contract which is apparently part-performed is no contract at all, since to do so must attribute to the parties an intention to perform work either at no cost, or alternatively on a basis yet to be determined, even though the work has been done in the context of an apparent agreement to perform it [cf Rosser v The Maritime Services Board of NSW (No 2) NSWSC (Young J, 30 August 1993, BC 9301829, p15]. Thus in Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32, Ormiston J held that in commercial transactions courts should strive to give effect to the expressed arrangements and expectations of those engaged in business, notwithstanding that there were areas of uncertainty and notwithstanding that particular terms had been omitted or not fully worked out – although there could be no binding and enforceable obligation unless the essential or critical terms had been agreed, and the courts would not enforce an agreement to agree at some time in the future. Further, where parties had deliberately written out the terms upon which they wished to bargain, but had omitted or inadequately expressed a term which might in other circumstances have been expressly or more precisely stated, courts will endeavour to give effect to the fact that the parties did not see the absence or deficiency of such a term as preventing them from reaching agreement. And where the court is satisfied that the parties have reached agreement judged by objective standards, then it will be more generous in giving effect to what is necessary to achieve business efficacy and their intentions, although their communications may have had an air of uncertainty and incompleteness about them.

23 As Ormiston J also observed, a court can enquire as to the existence of an agreement evidenced otherwise than by offer and acceptance, and agreement can be extracted from circumstances where no acceptance of an offer can be established or inferred, and where the most that can be said is that manifestation of mutual assent must be implied from the circumstances. In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110, McHugh JA said, at 11,117:

… It is an error ‘to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed’. … Nevertheless, a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words. … The question in this class of case is whether the conduct of the parties, viewed in the light of the surrounding circumstances shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract …

24 In many commercial situations, it can be seen that there is a contract, although it may be difficult to analyse at precisely what point in time there was an exact correspondence of offer and acceptance [Rosser v The Maritime Services Board of NSW (No 2), p 8]. In Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, Heydon JA (at 177 [74]) acknowledged that recognition had been given to the possibility of finding that contracts exist even though it is not easy to locate an offer or acceptance, referring with apparent approval to the judgment of Ormiston J in Vroon, and to that of the Court of Appeal in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 – in which McHugh JA, with whom Samuels JA concurred, said (at 535) that where an offeree with a reasonable opportunity to reject an offer of goods or services took the benefit of them under circumstances which indicated that they were to be paid for in accordance with the offer, it was open to hold that the offer was accepted according to its terms – concluding (at 179 [81]):

25 In this case, motor cars had been delivered by Volvo to TAA for sale since late May 2000, and it would be extraordinary if the parties did not intend in that setting that there be binding obligations between them, and at that stage the only documentation was the then iteration of the Representation letter. That the parties in fact commenced trading indicates that they were content for their relations to be governed by the Representation letter, at least unless and until some further documentation was brought into existence. Moreover, as Volvo knew, TAA would incur, or would cause its associates to incur, considerable expenditure in constructing the temporary showroom and service facilities on the faith of having been appointed on the terms of that letter.

26 The various versions of the Representation letter bear indicia of an intention that they be legally binding, although there are also indicia that a further, formal “dealer agreement” was contemplated. These include that the letter is expressed to set out “the key areas that will be part of the terms of [TAA’s] appointment as the Volvo dealer for the Sydney South Eastern Metropolitan Area of responsibility”. It speaks in terms of “TAA agree” or “has agreed”. It specifies extensive obligations that TAA (and Volvo) undertake. It speaks of “requirements” of Volvo upon TAA. It provides for eligibility for a business development grant payable “immediately upon signing this agreement, dealer agreements, all related security documentation”, to be covered by “a separate agreement”. Though described as a “letter of intent”, it provides for formal acceptance, including an “undertaking to adhere to [Volvo’s] stated requirements …”.

27 Accordingly, the conclusion that the parties intended the Representation letter to be a legally binding agreement is supported by: the terms and form of that agreement (which though in letter form are hardly informal); the circumstance that, to the knowledge of both parties, TAA was going to incur significant expenditure in the belief that it had an appointment as a Volvo representative in accordance with the Representation letter; and the fact that TAA commenced to trade as a Volvo dealer with only the Representation letter in place. In my view, by the time that TAA commenced trading as a Volvo dealer on 1 July 2000, there was consensus on the terms of the then current version of the representation letter, and an intention that the parties would trade on those terms and that legal rights and obligations would arise from them; but their commercial relationship was a dynamic one and new terms could be introduced from time to time by consent [cf Brambles Holdings Ltd v Bathurst City Council [71]-[82]].

28 I do not accept that any agreement contained in the Representation letter was superseded by the one-year dealer agreement, or that that agreement was the only legally binding agreement between the parties. First, the final version of the Representation letter was submitted and executed contemporaneously with the one-year dealer agreement; that is inconsistent with any intention that the latter supersede the former, and indicative that both were seen as necessary components of the relationship.

29 Secondly, the Representation letter deals with matters not covered by the one-year dealer agreement, and outside its one-year term: for example, both the second and third versions of the Representation letter contain a requirement to develop a southern suburb satellite to be operational within eighteen months, with Volvo being allowed thirteen months to wind down the existing dealer. Those terms extend beyond the term of the initial one-year dealer agreement. (Other indications that the Representation letter extended beyond the first year were, in the earlier versions, a requirement (subsequently omitted) that a dealer management system be implemented within 24 months of the commencement of the dealership; and a provision stipulating for updating of a market plan “on an annual basis”).

30 The circumstance that the parties commenced trading with only the Representation letter in place; that the final version of the Representation letter was executed contemporaneously with the one-year dealer agreement; and that it covered matters beyond the scope of a one-year dealer agreement; tell against Volvo’s contention that the only binding agreement between the parties was the one-year dealer agreement. To treat the one-year dealer agreement as the exclusive contractual arrangement between the parties would be quite inconsistent with their intent as documented in the Representation letter, and the manner in which they each dealt with the other up to that point.

31 Mr West pointed to the terms of the one-year dealer agreement, and that TAA had been legally advised in respect of it, in support of the contention that it was the “entire agreement” between the parties. However, the one-year dealer agreement – and in particular its provision that it is “the entire agreement” – must be construed in the context of the Representation letter, as being issued pursuant to and in accordance with the Representation letter. In that context, the one-year dealer agreement did not replace or subsume the Representation letter. To the contrary, it was the first of the dealer agreements contemplated by the Representation letter. In effect, the Representation letter was the “Head Agreement”, pursuant to which dealer agreements were to issue. This is consistent with what, according to Mr Azzi, Mr O’Keefe said:

The current situation of the dealers is just a mass of paperwork. Some of our country dealers do not even have a dealership agreement. The paper work is just a mess. We need time to put the three dealer strategy into effect. We need to look at the cancellation of a number of dealerships and bring the current dealer agreement all into line. We will guarantee the five year deal will be in place before the end of the first year. Don’t worry about the one or the five year terms.

32 The one-year dealer agreement was the “entire agreement” in respect of the initial one-year dealership, but it did not supersede the Representation letter as the head agreement between the parties. Thus there was a “Head Agreement”, ultimately encapsulated in the final version of the Representation letter, which provided for a series of subsidiary agreements, each of which would relate to a particular period of the total head agreement.

33 But Volvo contends that the Representation letter did not create any enforceable obligation to grant a replacement five-year term, on the basis that, at least in that respect, it was in the third class of Masters v Cameron. In my view, the context in which the Representation letter was issued – including imminent expenditure by TAA, prior discussions in which TAA had stipulated for a lengthy term in order to recoup its investment, and the content of the Representation letter as a whole – tell strongly against this vital aspect of it not having been intended to be binding. The stipulation to the effect that conditions for renewal, non-renewal and termination will be clearly established within the agreements is to be construed as “the conditions for renewal, non-renewal and termination if any will be clearly established …”. In other words, it was left open to the parties to negotiate conditions for renewal, non-renewal and termination, both in respect of the one-year and the five-year dealer agreements. But if they could not otherwise agree on such terms, then the Representation letter would continue to govern the relationship. It is illustrative of this that the one-year dealer agreement did not include any conditions for renewal, non-renewal or termination.

34 However, I do not accept Mr Trew’s submission that the effect of the second limb of requirement 2, that “the condition for renewal, non-renewal and termination will be clearly established within both the one year and five year agreements”, imposed on Volvo an obligation to include in such agreements, and any draft, a provision for renewal (and implicitly, although he did not expressly so submit, provisions for non-renewal and termination). Rather, the second limb of requirement 2 set out the intention or expectation of the parties that provisions for renewal, non-renewal and termination (if any) would be covered in the one-year and five-year agreements. It anticipated further negotiation on those topics, so that the subsidiary agreements might contain such provisions on those topics as the parties might later agree; to the extent that there was no further agreement, there would be no provision for renewal (or non-renewal), and as to termination the parties would be left to their rights at law, and the dealership would be terminable only for cause, or by effluxion of time.

35 Mr Trew invoked the judgment of Merkel J in Wesoky v Village Cinemas International Pty Ltd [2001] FCA 32 to support the proposition that the effect of the second limb of requirement 2 was to oblige Volvo to offer terms as to renewal (even if the terms offered be unacceptable to TAA). But in that case the real issue was one of construction – whether the words “subject to mutual agreement” related to the commercial terms and conditions of the non-recourse loan, or to the obligation to offer a non-recourse loan, and those circumstances are far removed from those of the present case.

36 Thus, to the extent that analysis in terms of Masters v Cameron is necessary or appropriate, the Representation letter was in this respect in the fourth class: the parties intended to be immediately bound, but contemplated that the dealer agreements might include, by consent, additional or different provisions. As Mr Trew accepted, if Volvo included in a draft dealer agreement renewal or termination provisions that were not acceptable to TAA, then the Representation letter would continue to cover the situation.

37 Further support for the conclusion that the parties intended to be bound in this respect by the Representation letter may be gained from admissions made on behalf of Volvo. On 12 September 2001, after disputation had arisen, Clayton Utz (then acting for Volvo) wrote to Bamford Hogg (then acting for TAA), relevantly as follows:

We note that, pursuant to the terms of the letter from Volvo to your client dated 16 August 2000 (accepted by your client on 16 September 2000), the initial dealer agreement was to run for a period one year which agreement was then to be replaced by a dealer agreement with a term of five years. We confirm, as we informed you during our telephone conversation call on Monday afternoon, that we believe that the term of the first agreement ran until 30 June 2001 and that accordingly the term of the five year dealer agreement commenced on 1 July 2001.

In light of the application of the franchising code of conduct to the arrangements between our clients, and as we indicated during our telephone call on Monday, Volvo will provide your client with a disclosure document prepared in accordance with the franchising code of conduct, before the parties execute an appropriate document reflecting the terms of the current agreement between the parties.

38 In a further letter dated 13 September 2001, Clayton Utz wrote:

11. Our client’s position with regard to the further five year term is clearly set out in our letter to you of earlier today. We confirm, as we informed you during our telephone conversation on Monday afternoon, that we believe that the term of the first agreement ran until 30 June 2001 and that, accordingly, the term of the five year of the agreement commenced on 1 July 2001.

39 And on 11 October 2001, Letherbarrow Lawyers (who by then were acting for Volvo) wrote to Blake Dawson Waldron (who were then acting for TAA), relevantly as follows:

You assert (in the alternative) that Volvo has, in fact, entered into a five year agreement with your client (the “Agreement”). We agree. Volvo’s preparedness to do so, notwithstanding breaches of the previous one year agreement (in respect of which Volvo reserved its rights) was confirmed in Volvo’s letter of 7 September 2001, which stated that the agreement would remain unchanged until terminated in accordance with its terms, and Clayton Utz’ letter of 12 September 2001 on Volvo’s behalf to Bamford Hogg Lawyers on behalf of your client. That letter drew attention to Volvo’s obligations to comply with the franchising code of conduct by providing a disclosure to your client before the parties could execute an appropriate document reflecting the terms of the current agreement between them.

40 Although not conclusive, this correspondence contains clear admissions on behalf of Volvo that it was bound, by the Representation letter, to grant a replacement five-year term.

41 Accordingly, I conclude that there was a binding contract between Volvo and TAA, ultimately encapsulated in the final version of the Representation letter, by which Volvo was obliged to grant TAA a dealership for a term of one year, to be replaced by a further dealership for a term of five years before or at the expiration of the initial one year period. The parties envisaged that in the case of both the one-year and the five-year dealerships, they might agree on additional terms, particularly in relation to renewal, non-renewal and termination; but were content to be bound in the meantime and in the absence of further agreement by the terms of the Representation letter. However, it was not a term of the Representation letter that any further agreement must provide for a renewal (or for that matter for termination), though it contemplated that it might, since such provisions were subject to the further agreement of the parties.

42 My conclusion that there was a binding contract to this effect renders it unnecessary to consider the alternative argument based on equitable estoppel.

Did Volvo Repudiate the Contract?

43 By mid-2000, TAA and/or Harissa, in performance of TAA’s obligations to Volvo, had spent considerable sums in upgrading the Rosebery premises to install the temporary showroom, and in the latter part of 2001 were expending further money in upgrading to a permanent showroom. TAA submits that in that context, from July 2001 onwards, Volvo repudiated the parties’ contract.

44 Requirement 5 of the Representation letter obliged TAA to develop a satellite facility in the southern suburbs at a location agreeable to both parties, to be operational within eighteen months (that is, by 1 January 2002). On or about 11 July 2001, Mr Azzi, together with Messrs Snijders, Clarke and Desselss of Volvo, inspected a property at Blakehurst that Mr Azzi considered a potential site for that purpose. After the inspection, Mr Snijders questioned why Mr Azzi was going ahead at that stage with the satellite dealership, when he had been experiencing trading losses, and suggested that he focus on getting Rosebery in order first. Mr Azzi says that he expressed a view that the southern suburbs were essential, and that he had a commitment to set up a southern satellite dealership within eighteen months. However, a suggestion on behalf of Volvo to focus on getting Rosebery in order first, rather than pressing ahead with the satellite dealership, hardly evinces an intention no longer to be bound by the contract. In the same conversation, Mr Azzi asked Mr Snijders when he was going to get his five-year written agreement, and Mr Snijders responded to the effect that it was underway and it was only a matter of the paperwork. Again, that does not begin to evince an intention on the part of Volvo not to be bound.

45 On 31 July 2001, Mr Snijders wrote to TAA, setting out Volvo’s view of TAA’s shortcomings in its performance, and expressing for the first time the view that the original agreement had expired on 1 July 2001 and that Volvo did not then see itself in a position to renew the agreement:

As you are aware, our original agreement expired on 1 of July 2001. In the brief period since that date we have had several discussions on the above matters, and I am aware that separate discussions have also been held between yourself and various departments within Volvo.

Tony, at this time, we seek your input on any actions that you intend to undertake that would immediately address the above concerns and encourage us to renew our agreement and proceed with this partnership. Based on the above, and without a substantial change in approach, we do not currently see ourselves in a position to do so.

We confirm that until we can resolve the above, we are not in a position to pursue a second location with Sydney City Volvo. Further, we reserve the right to retain the existing operator should we require, until such time as the above items are resolved and a clear forward direction is agreed.

I look forward to your response in due course.

46 The position adopted by Volvo in this letter was inconsistent with the agreement, both in indicating that Volvo would not cooperate in the creation of the southern suburbs satellite, and in asserting that the agreement had expired. At this time, Mr Snijders was unaware of the contents of the Representation letter and the first dealer agreement. Although Mr Trew submitted that the circumstance that Mr Snijders then had no knowledge of the Representation letter gave these matters even greater significance, by making clearer that his conduct was in complete disregard of the agreement, I do not agree; the question is what one party’s allegedly repudiatory conduct conveys to the other, not what the first party actually knows or intends in respect of the contract.

47 In any event, matters did not stand still with the letter of 31 July. Mr Azzi immediately sought a meeting with Mr Snijders, which occurred on 9 August 2001. The meeting was relatively informal, and conveyed to Mr Azzi that his dealership was secure. Mr Snijders told Mr Azzi that he would get his five-year agreement (even though Mr Snijders was unaware of the Representation letter). The conversation of 9 August 2001 conveyed nothing suggestive that Volvo would not perform its obligations, and the fact that Mr Snijders was unaware of the Representation letter does not add to it any repudiatory flavour that it does not otherwise bear.

48 TAA wrote to Volvo on 15 August 2001, relevantly as follows:

As you are aware, we have invested a substantial amount of money so far and remain committed to invest even more to bring our common vision to reality. Our investment in the Volvo brand is based on the understanding that the dealer agreement is for an initial term of one year and extended by a further five years upon its expiration. In this regard, I would be obliged if you would send the engrossment of the five year dealer agreement at your earliest convenience, for us to complete the documentation of our association.

49 Although characterising Volvo’s conduct up to this point as repudiatory, Mr Trew eschewed a submission that there had been sufficient “repudiatory conduct” before 9 August to justify termination for repudiation immediately before the meeting of that date. In any event, TAA’s letter of 15 August, requesting submission of the five-year dealer agreement, affirmed the contract.

50 A further meeting took place on 22 August. In the course of that meeting, Mr Snijders told Mr Azzi that he would get his five-year agreement soon. On the same day, Mr Azzi wrote to Mr Snijders, advising that TAA was in the process of preparing for the listing of its shares on the Growth Enterprise Market of the Stock Exchange of Hong Kong, and asking that Volvo acknowledge receipt and confirm that the dealer agreement would remain unchanged until terminated in accordance with its terms, and that Volvo agree to the inclusion of its name and the principal terms of the dealer agreement in the prospectus.

51 On 31 August 2001, however, Mr Snijders sent Mr Azzi a letter (responding to the request for consent to inclusion in the prospectus for the proposed Hong Kong float):

With regard to our inclusion within the prospectus documents, we confirm that at the current time our dealer agreement has expired and that the provision of the five year agreement is not yet guaranteed.

52 Mr Azzi replied on 3 September 2001, “with total disappointment”:

The statements contained in your letter relating to the dealer agreement are in stark contradiction with all of the verbal confirmation that you gave to me during our various meetings. I have on more than one occasion received your assurance that the dealer agreement between our respective companies is for a total of six years (one plus five) starting from [1 July 2000].

It has always been my principle to clarify misunderstandings and to avoid legal disputes where possible, in the interest of business efficiency and relationships. On the other hand, it is also my principle to strenuously defend and relentlessly enforce the legal rights of my company.

I have sought legal advice on the construction of the terms of the initial dealer agreement and the views of my lawyers concur with my understanding. I have also been advised that the third paragraph of your letter has amounted to a unilateral breach of the terms of the dealer agreement. In this regard, all of the legal rights of my company are expressly reserved.

Unless I receive from you, within two days from the date hereof, a written statement setting out your company’s position to confirm that the dealer agreement is and will remain for a full term of six years as agreed, legal action shall be commenced against your company for breach of contract without further notice and I shall present the matter on hand to your Head Office in Sweden.

53 Later on 3 September, there was a telephone conversation between Mr Snijders and Mr Azzi. In the course of a second telephone conversation that evening, Mr Azzi thought that Mr Snijders seemed agreeable, and his only question was the allegation of “unilateral breach of the terms of the dealer agreement”. Mr Azzi explained that that was due to his interpretation, again, of the term as being one year, rather than six as Mr Azzi understood it. Mr Snijders confirmed again that six years was agreed; “the only issue was that he felt pushed and on the other small concerns”.

54 On 5 September 2001, Mr Desselss and Mr O’Keefe of Volvo sent a letter to TAA, referring to their letter of 31 July and the meeting of 8 August and Mr Azzi’s response of 15 August (but not to what had happened since), relevantly as follows:

Whilst we note the commitments made in your letter of 15 August 2001, we advise that we do not yet agree that these issues have been sufficiently resolved to enable a renewal of our dealer agreement.

In order to give you the opportunity to demonstrate your commitment to resolving this situation, and to reinforce our absolute requirement that this occurs, we have decided to provide a three month period to allow you to undertake the necessary actions. This period shall commence on 5 September 2001 and end on 4 December 2001.

We will reassess the situation at Sydney City Volvo at the completion of this period. Should we be satisfied that the performance of the dealership has been rectified and that an operating structure has been implemented which will ensure the ongoing development of the business, we will commence a positive review of our longer term agreement.

Should, however, at the end of this period, the required actions and outcomes not have been achieved, we confirm that we will not be in a position to proceed with the renewal of our dealer agreements with Tony Azzi (Automobiles) Pty Ltd. …

55 Receipt of that letter was followed almost immediately by a telephone call from the person who had signed it on behalf of Mr Desselss, to the effect that the letter had been sent without Mr Snijders’ endorsement and should be disregarded. Although Volvo’s letter of 5 September was inconsistent with the contractual position, its immediate withdrawal as having been sent in error, before it was acted on, precludes it from being treated as repudiatory.

56 Mr Azzi responded on 6 September 2001, relevantly as follows:

I refer to your faxed letter dated 5 September 2001 that arrived on my desk early yesterday afternoon. The letter was almost immediately followed by a phone call from Gayle Pugh who had signed the letter on behalf of Mr Alan Desselss stating that it was sent to me without your endorsement and that I should disregard this letter.

There was no mention anywhere of any conditions for the renewal of the five year term or for a probation period under our agreement with Volvo. The imposition of any such condition at this point in time is without any legal or commercial justification.

I note for the record the following:

· I was repeatedly assured by you as the Managing Director of Volvo Car Australia Pty Ltd up to Monday night that you understood that our dealer agreement is for a term of six years in total. No probation or conditions were ever stated or implied in writing or verbally by you in our numerous meetings.

· It was on your invitation that I became the Chairman of the National Volvo Dealer Council for Australia and to think that a franchisee that holds a one year dealer agreement would be invited by the local Volvo Managing Director to that post is against common sense and be unheard of in any country that Volvo carries on business;

· I was involved, with your knowledge, in the assessment on numerous occasions with the possibilities for a second location in Sydney; as contemplated by our agreement with you.

· I have been induced to invest a considerable sum of money and time on the basis of the above.

For the purpose of the proposed application for the listing of the Larke Hoskins group of companies on the Stock Exchange of Hong Kong Limited, I have personally delivered to you a letter requesting your confirmation for permission to refer to the name ‘Volvo’ in the prospectus and to refer to the principal terms of the dealer agreement.

During our meeting on 22 August 2001, our plans were explained and intentions made clear to you relating to the purpose of the letter. Similar letters were delivered to the franchisors for both Honda (letter delivered 24 August 2001) and Mercedes Benz (letter delivered 16 August 2001) to which we have received favourable replies.

Your letter in response to my request dated 31 August 2001 does not address my request or the complete issues in a professional manner and you do not appreciate that you could at least make a statement of fact relating to the currency of the dealer agreement whilst you have always verbally assured me that it is of a six year duration. …

57 Mr Azzi forwarded a copy of that letter to Volvo’s head office (Volvo International) in Sweden.

58 In the absence of Mr Snijders from the office, apparently on vacation, Mr Azzi wrote again to Volvo on 7 September 2001, relevantly as follows:

I would appreciate if you could arrange for Richard to be in contact with me as soon as possible to resolve this matter given that I have received advice that the appointment is for six years.

Given Richard’s absence overseas I have not heard from anyone else from Volvo in response to my letter of yesterday to Richard. Things are now becoming very urgent in the context of potential loss that I and my company may suffer if the listing of my company does not now proceed as a result of the view that Volvo appears to be adopting as to the term of appointment of my company as a Volvo dealer.

I would therefore appreciate if you would make every endeavour to contact Richard so that communicating between the relevant decision makers in our respective organisations can be established to resolve this matter amicably if at all possible.

59 Mr O’Keefe on behalf of Volvo wrote to Mr Azzi on 7 September, apparently in response to Mr Azzi’s letter of 22 August. Relevantly, the letter was as follows:

Nevertheless, we can confirm that:

1. The agreement between Volvo and Tony Azzi (Automobiles) Pty Ltd ‘the agreement’ will remain unchanged until terminated in accordance with the terms of that agreement; and

2. Volvo will consent to the inclusion of its name and the disclosure of the principal terms of the dealer agreement in the prospectus provided that a complete copy of the draft prospectus is delivered to the company not less than 14 days before it is filed with any government agency or Stock Exchange or it is publicly released, whichever is the first to occur.

3. The original agreement, which had a one year term, will be replaced by an agreement for a further five year terms on similar terms and conditions (other than any right to have the agreement extended for a further period of five years) operating from the date of expiration of the first agreement.

60 Although TAA submits that the statement that the replacement five-year agreement would not contain provision for extension for a further period of five years was inconsistent with the extant agreement, it follows from my conclusion that the parties’ agreement did not oblige Volvo to grant a renewal, that this was not in fact inconsistent with the Representation letter. I do not accept, for reasons already explained, that the Representation letter conferred upon TAA a right to have a further renewal of the five-year agreement. I therefore do not accept that the 7 September 2001 letter evinces an intention by Volvo not to be bound by the Representation letter; to the contrary it accords with the Representation letter and evinces an intention to perform it.

61 On 10 September, Bamford Hogg, acting for TAA, sent a facsimile to Volvo, relevantly as follows:

I am instructed that Mr Azzi spoke with Mr O’Keefe earlier this morning prior to his departure to Hong Kong and informed him that in the absence of Mr Azzi that I was to undertake carriage of this matter with Volvo with a view to discussing the terms of the letter dated 07/09/01 from Mr Paul O’Keefe to Mr Azzi (which I understand was in fact faxed to Mr Azzi on 09/09/01).

I have made three telephone calls to Mr Paul O’Keefe requesting (by leaving messages on his voice mail) that Mr O’Keefe call me in relation to the letter.

I have not heard from Mr O’Keefe and therefore I called you to discuss the matter at 1.45 p.m. and left a message with one of your secretarial support staff that you call me on an urgent basis.

In the context of the progression of the float of our client’s company the position with Volvo is assuming a great deal of urgency. It is anticipated that it will become critical by the end of work hours today if the position between Volvo and our client is not clarified.

I would note that the letter dated 7 September 2001 placed in jeopardy the ability of our client to progress the proposed public listing. This will be causative of substantial loss to our client company and its shareholders.

62 On 11 September 2001, Mr Azzi wrote to Mr Desselss, to record his concern at the approach adopted by Volvo. While the letter was mainly concerned with issues pertaining to the Hong Kong float, it included relevantly:

4. In relation to the terms of the material contracts that are to be set out in the prospectus, please note that the five year agreement is long overdue and it is a matter which should have been attended to by Volvo before the expiry of the initial agreement as provided for in the letter dated 16 August 2000.

10. If the abovementioned could not be achieved, then my company will consider its position in light of the statement contained in the letter dated 5 September to the effect that my company is not entitled to the further five year term. The fact that Volvo has subsequently sought to confirm the five year term on a conditional basis as set out in the letter dated 7 September is noted but is not acceptable in the light of the position as we see it.

I look forward to advancing our discussions as soon as possible whilst all of my company legal rights are expressly reserved.

63 Mr Azzi’s 11 September letter to Mr Desselss proceeds not on the basis that Volvo did not intend to perform its obligation, but that Volvo was offering a replacement five-year term, albeit on a conditional basis. The only respect in which the confirmation of the five year term was on a conditional basis was that it would not contain any right to have the agreement extended for a further period of five years; as I have sought to explain, that involved no departure from or inconsistency with the Representation letter. The letter reads as a continuation of a negotiation process in the context of the commercial dispute.

64 On 12 September 2001, Clayton Utz for Volvo wrote to Mr Bamford, relevantly as follows:

We are instructed to confirm that the letter which your client Tony Azzi (Automobiles) Pty Limited received from Volvo dated 5 September 2001, was sent in error and should be ignored. We note that Mr Azzi was informed of this fact shortly after the letter was sent.

We note that, pursuant to the terms of the letter from Volvo to your client dated 16 August 2000 (accepted by your client on 16 September 2000), the initial Dealer Agreement was to run for a period one year which agreement was then to be replaced by a Dealer Agreement with a term of five years. We confirm, as we informed you during our telephone conversation call on Monday afternoon, that we believe that the term of the first Agreement ran until 30 June 2001 and that accordingly the term of the five year Dealer Agreement commenced on 1 July 2001.

In light of the application of the Franchising Code of Conduct to the arrangements between our clients, and as we indicated during our telephone call on Monday, Volvo will provide your client with a disclosure document prepared in accordance with the Franchising Code of Conduct, before the parties execute an appropriate document reflecting the terms of the current agreement between the parties.

…

in principle

65 This letter is an unequivocal statement of Volvo’s intention to abide by the contract and to grant a five-year term. Then, on 13 September 2001, Clayton Utz wrote to Mr Bamford in response to Mr Azzi’s 11 September letter to Mr Desselss, relevantly as follows:

7. We note that while Volvo was of the view that TAA has not met and is not meeting certain of its obligations under the agreement, the agreement remains on foot. Accordingly, we assume that TAA will continue to honour its obligations under the agreement. For its part, Volvo will continue to honour its obligations and act in accordance with the agreement.

10. We believe the matters raised in the correspondence are now clarified.

Please do not hesitate to contact the undersigned if you wish to discuss the matter further.

66 Again, this unequivocally acknowledged TAA’s entitlement to a replacement five-year term.

67 By facsimile dated 13 September 2001, Volvo International in Sweden acknowledged receipt of a copy of Mr Azzi’s letter of 6 September to Mr Snijders. On 20 September, Mr Azzi wrote direct to Volvo International, expressing his disappointment with the current management of Volvo Australia, and in particular “the ever-changing position of Volvo relating to the status of the dealer agreement”. Although referring to Mr O’Keefe’s letter of 7 September 2001, which confirmed that the original agreement would be replaced by a five-year agreement, it did not refer to the Clayton Utz letter. It did refer to the 5 September letter, without mentioning that it had been sent in error and withdrawn. It concluded:

I am prepared to travel to Sweden, if necessary to have a meeting with the relevant executives to resolve the issues in dispute. Unless I hear from Sweden within five business days of the date of this letter, I would have no further option but to initiate legal proceedings against VCA to recover losses and damages as a result of its acts and/or omissions.

68 On 21 September 2001, Volvo submitted to Mr Azzi a draft five-year dealer agreement and a disclosure document for franchisees, asking that he review the documents for at least fourteen days, seek any appropriate advice on them, and then return a copy of the letter of acknowledgment. The draft five-year dealer agreement that accompanied that letter contained a provision that permitted termination on 120 days notice without cause. The letter concluded “Should you have any queries please do not hesitate to contact me on the above phone number.”

69 On 26 September 2001, Volvo International sent a fax to Mr Azzi, acknowledging receipt of his letter of 20 September and advising that they were in contact with Volvo Australia and when in receipt of information would respond further. On 27 September Mr Snijders, having been informed of the letter of 20 September to Volvo International, wrote to Mr Azzi, proposing to meet urgently “to get the issues resolved”. Mr Azzi replied on 28 September:

I will inform you on Wednesday 3 October 2001 as to whether I am prepared to meet with you to discuss what you have described as “the issues”.

70 On 3 October 2001 Mr Azzi wrote to Mr Snijders that he was prepared to discuss all outstanding issues but not with Mr Snijders, and suggested that a meeting be arranged in his absence with Volvo to be represented by someone Mr Azzi considered neutral. He sought a response by 5 October. On 4 October, Volvo International responded that they had full confidence in Mr Snijders, and that Mr Azzi should discuss the issues with Mr Snijders.

71 On 8 October 2001, Blake Dawson Waldron on behalf of TAA wrote to Volvo, relevantly as follows:

… Your company has agreed to enter into a five year franchise agreement, commencing on 1 July 2001, with our client in the terms of the earlier one year agreement which concluded on 30 June 2001 other than a term entitling our client to extend the agreement for a further five years. Alternatively, your company has, in fact, entered into such an agreement with our client.

With your company’s letter of 21 September 2001, you submitted the formal document to give effect to the agreement. That document did not provide for a five year term but provided that the franchise could be terminated by your company on 120 days written notice (clause 24(5)). The requirement for such a change is clear evidence of your company’s intention to repudiate both, or either, of the agreements to which we have referred.

Our company has given your company the opportunity to reconsider its position, which you rejected.

We are instructed to inform you that our client accepts the repudiation and proposes to sue for damages. …

72 There is in fact no evidence that Volvo was given the opportunity to reconsider its position about the 120-day notice provision, and I accept that it was not afforded any such opportunity.

73 The thrust of TAA’s case on repudiation is that, at the time of the Representation letter in September 2000, the combination of the Representation letter and Mr O’Keefe’s representations to the effect that the one-year agreement was a stop-gap measure so that all three dealers could be brought into line, had the effect that the issue of a five-year agreement when all dealers were in line was a mere formality. Then, come 30 June 2001 by which time there ought to have been a five-year dealer agreement in place, no such agreement was issued, and when the matter was pursued, the answer was that no such agreement is guaranteed. Then after some dispute, when the attention of Volvo was ultimately drawn to the Representation letter, the response was that it would grant a five-year dealer agreement, but subject to a three month probation period. Then, in response to the suggestion that that was not what the Representation letter called for, a five-year agreement was provided, but one that was terminable on 120 days notice. There was thus a protracted course of conduct extending over a period of three months in which Volvo one way or another repeatedly avoided unequivocally putting a five-year dealer agreement on the table. Mr Trew submits that this sequence of events must be viewed as a whole, and in the context that Volvo knew that TAA was trying to float in Hong Kong and needed Volvo’s approval to a statement in the prospectus about the terms of the dealer agreement. He submits that, by September, Mr Azzi was receiving contradictory signals from Volvo about the agreement – in that when he was spoken to he was told he had an agreement (for a further five years), but in writing was told that there was no agreement or no guarantee of one and that he was in breach of the existing agreement. In those circumstances, so it is said, Mr Snijders could not be trusted and Volvo was not negotiating in good faith, and the inclusion in the draft five year agreement of the 120-day notice provision, coupled with the insistence of Volvo International that TAA would have to sort out its issues with the management in Sydney, was, so it was said, the last straw.

74 Repudiatory intent is not lightly to be inferred [Ross T Smyth & Co Ltd v TD Bailey Son & Co [1940] 3 All ER 60, 71; Rosser v Maritime Services Board (No 2), p32; Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194, 212; Auburn Council v Austin Australia Pty Ltd (in liq) [2007] NSWSC 130, [49]-[51]]. It is not in doubt that an accumulation of conduct by a party to a contract may amount to a repudiation, although no individual act can be identified on its own as doing so; and that repudiation may be established not only by conduct that evinces an intention not to perform the contract, but also by conduct that evinces an intention to perform it only in the manner in which it suits that party to perform [Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 647-9 (Brennan J)].

75 Particularly in the context of how the obligation in respect of the southern Sydney satellite was expressed in the Representation letter, what Mr Snijders said on 11 July 2001 does not permit a repudiatory intention to be attributed to Volvo. The pendency of TAA’s proposed float in Hong Kong does not add colour in the circumstances: faced with a request to consent to its name being included in a prospectus, Volvo was entitled to take some time to review and consider its position in that respect. A side-issue about advertising – as to who normally paid for what component – was apparently a misunderstanding between the parties, but evinced no intention not to be bound by the contract. Insistence on a right or position inconsistent with the contract is a different matter, and Volvo’s expressed positions, that Volvo would not cooperate in the creation of the southern suburbs satellite, that the agreement had expired and renewal was not guaranteed, and that there would be a three-month probationary period, were inconsistent with the contract and potentially repudiatory. Had matters stood still after those assertions, the case for repudiation would have been much stronger. But they were abandoned, and the proposed probationary period was almost immediately withdrawn as having been advanced in error.

76 In my view, even if, at some time prior to 7 September, Volvo’s conduct could properly have been regarded as repudiatory, at the time of the purported acceptance of the alleged repudiation there was not then any current repudiatory conduct. The “double speak” of which Mr Azzi complained had ended with the unequivocal written confirmations, in Volvo’s letter of 7 September and Clayton Utz’ letters of 12 and 13 September, that TAA was entitled to a replacement five year term [cf Auburn Council v Austin Australia, [30]]. The refusal of Volvo International to become involved cannot be repudiatory conduct: Volvo International was not a party to the contract. In any event, requiring Mr Azzi to negotiate with an officer of Volvo who he did not trust or like is not inconsistent with the contract.

77 TAA submitted that it was inconsistent with the Representation letter’s provision for a replacement term of five years that the dealer agreement could have a termination provision in it. But it is a characteristic of a Masters v Cameron class four contract that provisions different from or even inconsistent with the original agreement can be included, by consent, in the final agreement, and in this case the parties contemplated that provisions for termination might be included in the dealer agreements. The contention that submitting a draft five-year agreement that included a provision for termination on 120 days notice was repudiatory, is inconsistent with the basis upon which the agreement contained in the Representation letter was enforceable – namely, under the fourth class of Masters v Cameron, that the parties envisaged further negotiation as to provisions for renewal, non-renewal and termination. As Mr West points out, the parties had not yet negotiated the terms of the five-year dealer agreement. Given that the Representation letter left open for negotiation what provisions – particularly as to renewal, non-renewal and termination – would be included in the dealer agreement, there was no reason to assume that the five-year dealer agreement would be identical to the one-year dealer agreement save for its duration. Any provision that authorised termination in less than five years was, in a sense, inconsistent with an agreement to grant a five-year agreement, but it is plain from the Representation letter that the parties contemplated that the five-year dealer agreement might include provisions for termination. By proposing such a provision, Volvo was not acting inconsistently with the Representation letter, and cannot be said thereby to have evinced an intention not to be bound by the agreement contained in it. [Mr Azzi suggested that any termination clause would be limited to one that was standard by industry practice. Although I do not accept that proposition, even if correct it would not assist TAA’s case, as TAA’s dealership agreement with Honda included a provision for termination without cause on 120 days notice]. There is no reason to limit the reference to “termination” in the second limb of requirement 2 in the representation agreement to “termination for cause”; the parties reserved to themselves the ability to agree on any type of termination provision in the subsequent documentation. [While submitting that no provision for termination could be proposed by Volvo except those which were already in the one year agreement, TAA did not submit that no provision for renewal could be proposed other than what was in the one year agreement (there being none). Indeed, on Mr Trew’s submission – which I do not accept – although Volvo was bound to include in the draft a provision for renewal (and, it would seemingly follow, provisions for non-renewal and termination), TAA was not obliged to accept whatever Volvo proposed in that respect; if the parties could not agree on a provision, then the Representation letter continued to cover the situation]. The letter that accompanied the draft five-year agreement – Mr O’Keefe’s letter of 21 September – did not present the draft lease as a take it or leave it proposition; it invited further discussion. If the draft submitted were unacceptable, by reason of the inclusion of the 120 day notice provision or otherwise, then TAA’s proper course was to reject, or propose amendments to the draft, on the basis that it did not accurately reflect the parties’ agreement. If TAA did not accept the provisions of the draft five-year agreement, it continued to have its five-year rights under the Representation letter. I do not accept that by sending to TAA a draft five-year dealer agreement and other relevant documents albeit including the 120-day termination notice provision, inviting TAA to take at least fourteen days to consider them and take advice and contact it should it have any queries, that Volvo thereby engaged in repudiatory conduct.

Opportunity of renewed term

157 I would not allow damages in respect of any lost opportunity for a further term after the five-year term, as I have found that there was no contractual right to any such term, and damages are to be assessed on the basis that the contract would have been performed in the manner least unfavourable to the defendant.

TAA’s trading losses claim

158 In assessing damages under Trade Practices Act, ss 52 and 82, one is generally concerned to compare the position of the plaintiff as it has eventuated, with the position in which it would have been had the contravening conduct not taken place. On relevant assumptions, had the representations not been made, TAA would not have commenced the Volvo dealership.

159 Although TAA incurred trading losses from the Volvo franchise of $162,102 in the first twelve months of the dealership, which amount is the subject of its claim, these were offset by profits of $196,958 for the following five months [CX32: Joint Report of Watt and Ross, Appendix N, Sch 11A, 11B]. Overall, TAA did not make a loss as a result of the Volvo dealership. Accordingly, I would reject its claim for “start-up costs” or “trading losses”.

TAA’s Hong Kong float claim

160 In respect of the Hong Kong float, TAA claims damages in the sum of $315,123.10, being its expenditure on the float. This amount is said to be proved by the evidence of Mr Smith, who aggregated the invoices and ledger entries in respect of what was said to be expenditure on the float at $327,596.58, after deducting two invoices totalling $12,473.90 which were shown by his cross-examination to be legal fees relating to the current dispute and not to the float. However, cross-examination of Mr Smith also demonstrated that other expenses – including legal costs of Bamford Hogg totalling $12,306, and audit fees of Horwaths totalling $13,250 – had also been wrongly included. Accordingly, I would disallow a further $25,256, reducing the claim to $289,867.

161 Moreover, it became apparent that Mr Smith had no personal knowledge of the application of payments, apparently to Hong Kong, of $56,000 and $200,000, in respect of which he merely relied on what he was told by Mr Azzi; nonetheless, on balance I would be prepared to accept that these were probably costs of the float.

162 Accordingly, had TAA succeeded on this claim, I would have allowed damages in the sum of $289,867.

Harissa’s expenditure claim

163 Harissa’s damages claim (for misleading and deceptive conduct, or in tort, or for a monetary payment under s 106) is based on its expenditure on the development and improvement of the Rosebery property. Harissa claims the cost of the development work for upgrading the Rosebery property to meet the requirements of Volvo. The first stage of these works, carried out in mid 2000, comprised a temporary Volvo showroom, temporary Volvo service facilities, and showroom and service facilities for Mercedes Benz Light Commercial. The second stage of these works, underway in late 2001, comprised the second Volvo showroom, permanent Volvo service facilities, and areas for common use by the Volvo, Mercedes and Honda dealerships.

164 The total expenditure on Stage 1 attributable to the Volvo dealership, apportioned according to the evidence of the project manager Mr Bowman to exclude work attributable to the Mercedes dealership, amounted to $264,210.69 [Schedule 1 to Plaintiffs’ Submissions]. The total expenditure on Stage 2 included payments direct to contractors and suppliers of $297,401.36 [Schedule 2], and payments to the project manager Bowcon of $1,060,000 [Schedule 3]. I accept that it was reasonable for Harissa to complete the works once commenced, and not leave the property incomplete, and so I would not exclude expenditure incurred after the contract was terminated to complete the works. A few items could be allocated with certainty to the Volvo dealership. Otherwise, Mr Smith, Harissa’s accountant, allocated 50 percent of the building costs to the Volvo dealership, producing a total of $732,294.82 [Schedule 4]; Mr Bowman, the project manager, where he was unable to allocate an item precisely to one dealership or another, estimated that at least 33.3% of the balance was attributable to the Volvo dealership works, producing $556,993.74 [Schedule 5]. Mr West submitted that there was no sufficient analysis of the stage 2 expenditure on which the court could safely rely in determining how much was attributable to the Volvo dealership, but Mr Bowman, who was the project manager, was able to express the view that not less than 33.33% was attributable to it. That assessment is an imperfect one, but in assessing damages one has to do the best one can with the material available, and having regard to the scope of the Stage 2 works and their apparent relationship to each of the dealerships and “common areas”, and to the circumstance that Mr Smith’s assessment is that 50% was attributable to the Volvo dealership, I can be satisfied that Mr Bowman’s assessment is reasonable, if not conservative. As Mr Bowman was the project manager who supervised the works, I am inclined to prefer his somewhat more conservative assessment to that of Mr Smith; in other words Harissa has not established to the requisite standard that more than one-third of the works not precisely allocated were attributable to the Volvo dealership. Accordingly the cost of the relevant Stage 2 works was $556,993.74, and the total upgrade costs of both stages $821,203.

165 Mr West submits that the costs of Stage 1 are not recoverable, because they were expenditure incurred (1) before the commencement of the dealership, and (2) to support an income stream which was realised for the life of the temporary showroom, so that Harissa should not be entitled to the costs of establishing the temporary facility which enabled the economic activity to commence and income to be generated by that activity during the life of the temporary showroom: in other words, the expenditure on the first temporary showroom should not be recoverable because the benefit it was intended to generate was realised. As to Stage 2, Mr West accepted that they fell into a different category, as expenditure that might well have been wasted by reason of any relevant misrepresentation or repudiation. In respect of Stage 1, Mr Trew responds that the expenditure on the temporary showroom was incurred as part of the costs of establishing the whole (one-plus-five-year) dealership, not just the first year or so of it, and would not have been incurred but for the expectation that there would be a long-term dealership.

166 In my view, there are elements of accuracy in both submissions in this respect. On relevant assumptions, had the representations not been made, TAA would not have commenced the Volvo dealership, and Harissa would not have undertaken any of the Stage 1 or Stage 2 improvements; whereas because of the representations, TAA traded as a Volvo dealer for 16 months, and Harissa undertook the improvements. TAA ultimately traded at a profit of $24,912 for the 17-month period of the dealership, after appropriate adjustments [CX32: Joint Report of Watt and Ross, Appendix O]. Accordingly, the relevant comparison for the purpose of assessing damages is that prima facie TAA is better-off by $24,912, and Harissa worse off by about $821,203, than would have been the case but for their reliance on the relevant conduct. Given the relationship between TAA and Harissa, in my view it is appropriate to assess Harissa’s loss on the footing that a small part, namely $24,912, of the economic benefit which the improvements were intended to generate has been realised, which amount should be deducted from Harissa’s claim: although not a benefit gained directly by Harissa, Harissa’s purpose in upgrading the premises was to create income for TAA, and to the extent that that purpose was achieved, credit should be given.

167 I have considered whether there should be a further discount on account of the improvements having added value to Harissa’s property regardless of the loss of the Volvo dealership, or having produced some further economic benefit in their subsequent use. However, Mr Azzi’s evidence, which I accept on this issue because it is consistent with his documented insistence that he needed a long-term dealership, is that they would not have been undertaken but for the Volvo dealership. Since the loss of the dealership, the plaintiffs have been unsuccessful in obtaining another dealership to replace it; they used the temporary showroom area for storing pre-delivery Honda cars on an ad hoc basis (but it was easier to store them elsewhere), and from December 2001 to January 2003 the temporary Volvo showroom was used to display “prestige used cars”. Since September 2003, parts of the former Volvo service and parts facility have been leased. The possibility of redeveloping and subdividing the whole site has been explored, and may well be the highest and best use of the property. In short, the evidence does not enable me to conclude that the Stage 1 and Stage 2 improvements are now reflected in additional value in Harissa’s property. There was no need to have an upgrade to park pre-delivery Hondas, nor to have service bays and hoists areas to rent out space to Design Warehouse. The fact that the former Volvo facilities have to some extent been economically exploited subsequently does not require a conclusion that this is a return on the improvements; the previously existing, unimproved facilities might have generated an equivalent return. Ultimately, the evidence does not establish that any economic benefit subsequently generated from the premises was attributable to the improvements or could not otherwise have been derived, and on this issue the defendants bear at least an evidentiary onus; accordingly there is insufficient evidence to establish that any such discount is justified.

168 Accordingly, under this head, had Harissa succeeded, I would have allowed $796,291.

Conclusion

169 My conclusions may be summarised as follows.

170 There was a binding contract between Volvo and TAA, ultimately encapsulated in the final version of the Representation letter, by which Volvo was obliged to grant TAA a dealership for a term of one year, to be replaced by a further dealership for a term of five years before or at the expiration of the initial one-year period. The parties envisaged that in the case of both the one-year and the five-year dealerships, they might agree on additional terms, particularly in relation to renewal, non-renewal and termination, but were content to be bound in the meantime and in the absence of further agreement by the terms of the Representation letter. It was not a term of the Representation letter that any further agreement must provide for a renewal (or for that matter for termination), since such provisions would require the further agreement of the parties.

171 My conclusion that there was a binding contract to that effect renders it unnecessary to consider the alternative argument based on equitable estoppel.

172 As at 8 October 2001, Volvo was not evincing an intention that it would not perform its contractual obligation by granting TAA a five-year dealership from 1 July 2001. Even if it had previously engaged in conduct that might have conveyed such an intent, it had resiled from it by 7 September. Far from evincing an intention not to be bound, the Clayton Utz correspondence of 12 and 13 September manifested an acceptance that Volvo was bound, and an intention to perform, and effectively acknowledged that TAA already had their replacement five-year term, it remaining only appropriately to document it. In the absence of further agreement, Volvo was not bound to include a provision for renewal, but it was entitled to negotiate for provisions both for renewal and for termination. Inclusion of a 120-day termination on notice provision was consistent with the intention of the parties that there be further negotiation as to, inter alia, provisions for termination. Accordingly, I am unable to accept that there was any repudiation available to be accepted by TAA as at 8 October 2001. As the parties never agreed on what provisions should be included in the five-year agreement as to renewal, non-renewal or termination, their position remained governed in those respects by the Representation letter insofar as it made any provision, and, insofar as it did not, by the operation of law. It follows that as at 8 October 2001, there was no repudiation by Volvo available for acceptance by TAA, and TAA was not entitled to terminate for repudiation, as it purported to do.

173 Volvo made representations, to TAA and Mr Azzi on behalf of TAA, to the effect that Volvo would grant TAA a Volvo dealership for one year, to be replaced by a five-year dealership, in respect of the SSE AOR, including the Southern Suburbs territory. It was reasonably foreseeable to Volvo that those representations would be relied on by Harissa, which incurred expenditure on the works on its property, in particular in establishing the temporary showroom and subsequently the permanent showroom. However, there was no representation that the one-year and five-year agreements would contain a provision for renewal, nor that they could not contain a provision for termination other than for cause.

174 On the documentary evidence tendered by Volvo as well as by the plaintiffs, Volvo had reasonable grounds for making the representations when they were made. Accordingly it did not engage in misleading and deceptive conduct. Moreover, any absence of reasonable grounds was causally irrelevant to any loss suffered by TAA or Harissa, which was occasioned by TAA’s termination of the contract.

175 The only one of the four Volvo letters that Volvo might reasonably have thought would be passed on to Oriental Patron is that of 7 September 2001, which contained no relevant misstatement. As to the other three, there is no basis for finding an implied intent on the part of Volvo that they would be brought to the attention, nor that it was reasonably foreseeable that they would come to the notice, of others – in particular, Oriental Patron. Although the letters misconceived the true position, they were a statement by Volvo of its position to TAA, in the context of the commercial dispute, and not a reliable representation that Volvo’s position was the correct one. At the highest, they represented that Volvo believed the position to be as stated, not that the position was in fact and law as asserted. By sending the Volvo letters to TAA, asserting its position, Volvo did not engage in misleading conduct. Moreover, even if there had been misleading conduct on the part of Volvo in these respects, TAA did not suffer damage as a result, because the float would have been derailed, and the expenditure wasted in any event, as a result of the termination of the relationship by TAA in early October.

176 Volvo did not breach a duty of care owed to Harissa to perform its obligations under the contract with TAA, by repudiating its contract with TAA: first because Volvo did not repudiate its contract with TAA; and secondly because Volvo owed Harissa no such duty, having regard to the circumstances that Harissa was remunerated by TAA for TAA’s use of its premises by a rental calculated and valued at arm’s length, and thus had no direct interest in the results of TAA, remaining entitled to its rent regardless of the profitability of TAA (and, in particular, regardless of whether or not the Volvo dealership continued); and because any primary liability of Volvo (to TAA) was in contract not tort, and to impose on a contracting party liability arising from breach of that contract to a third party, in circumstances where none of the recognised exceptions to the doctrine of privity apply, would impinge considerably on the ability of the first party to pursue its autonomous commercial interests, and would have the practical effect of extending the scope of liability for breach of contract far beyond its established limits.

177 While the arrangements between Volvo and TAA required TAA to appoint a general manager and obtain approval of a management and staffing structure, they did not prescribe, and had no impact on, the conditions of employment of anyone who performed that work. They were not arrangements “whereby” any person performed work. Accordingly, the contract between Volvo and TAA was not one whereby any person performed work in an industry. Moreover, the relief sought by TAA is not in respect of any provisions of the contract that relate to the performance of work in an industry, and is therefore not within power under Industrial Relations Act, s 106.

178 The conclusion that the contract did provide for a replacement five-year term is a complete answer to the contention that the contract was unfair by reason of not providing for such a term. And a contract is not relevantly unfair just because its terms are imprecise; evaluation of its fairness depends on identification of its terms, however imprecise they may be.

179 Accordingly, all the plaintiffs’ claims fail on liability. Had it been necessary to assess damages, I would have reached the following conclusions.

180 On TAA’s claim for damages for breach of contract, being its lost profits for the Volvo dealership from October 2001 to June 2006:

· TAA’s new car market share would have been 5.1% to June 2002, and would have grown further as Dominelli closed down, to 5.6% for the year to June 2003, 6.1% to June 2004, and thereafter 6.6%.

· The new to used car sales ratio would have been 1:0.57.

· Used car margins would have been $2,300 for 2002 and 2003, reducing to $2,100 in 2004 to 2006.

· TAA would have maintained 3.5 months used car stock supply.

· No provision should be made for interest expense in the Parts Department.

· Bad debts, donations, and any other miscellaneous expenses, should be covered by a general allowance of 0.4% of gross profit.

· On Service Department revenue I prefer Mr Watt’s prediction. As to Parts Department revenue, I prefer Mr Ross’ prediction. As to New Car Department Advertising expenses, I prefer Mr Ross’ projection. And on Finance and Insurance Department performance, I also prefer Mr Ross’ assumption.

· I would not have allowed damages in respect of any lost opportunity for a further term after the five-year term, as I have found that there was no contractual right to any such term.

181 On TAA’s claims for damages under the Trade Practices Act, ss 52 and 82, and/or Industrial Relations Act, s 106, being its trading losses incurred by reason of having embarked on the Volvo dealership in reliance upon Volvo’s representation that it would have a one-plus-five-year term, I would hold that TAA suffered no relevant loss or damage, as although it incurred trading losses from the Volvo franchise of $162,102 in the first twelve months of the dealership, these were offset by profits of $196,958 in the following five months.

182 On TAA’s claim for damages under Trade Practices Act, ss 52 and 82, being the expenditure it incurred and claims to have wasted on the Hong Kong Float, I would have allowed damages in the amount of $289,867.

183 On Harissa’s claim for damages under Trade Practices Act, ss 52 and 82, and/or in tort for negligence, and/or under Industrial Relations Act, s 106, being the expenditure it incurred in effecting improvements to the Rosebery property in reliance upon Volvo’s representation that TAA would have a one-plus-five-year term, I would have allowed damages in the amount of $796,291.

184 My orders are:

(1) In proceedings 50146/03, I give judgment for the defendant, with costs.

(2) In proceedings 50156/03, I order that the proceedings be dismissed, with costs.

(3) I grant liberty to the parties to apply, by arrangement to be made with my associate within 7 days, to set aside or vary the costs orders, and for other costs orders in their place.

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Azzi v Volvo Car Australia Pty Ltd [2007] NSWSC 319

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CITATION:	Azzi & Ors v Volvo Car Australia Pty Ltd [2007] NSWSC 319
HEARING DATE(S):	6-10 March, 13-17 March, 20-24 March, 27-31 March, 11-13 April 2006
JUDGMENT DATE :	5 April 2007
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Brereton J
DECISION:	1. In proceedings 50146/03, judgment for defendant, with costs. 2. In proceedings 50156/03, order that the proceedings be dismissed, with costs. 3. Grant liberty to the parties to apply, within 7 days, to set aside or vary the costs orders, and for other costs orders in their place.
CATCHWORDS:	CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – Offer and Acceptance – pre-contractual negotiations – contracts evidenced other than by offer and acceptance – where “letter of intent” and formal agreement executed simultaneously – where letter of intent covers additional matters – whether parties intended to be bound by letter of intent – significance of commercial context and conduct of parties – Construction and Interpretation – where letter of intent contemplated further agreement on specific matters – where no such agreement reached – whether letter of intent required that offer of further agreement contain terms covering such matters – Discharge and Breach – repudiation – repudiatory intent not lightly to be inferred – where defendant had resiled from any repudiatory stance before termination. - TRADE PRACTICES – Misleading and deceptive conduct – where representation made to recipient in circumstances that it was foreseeable it would be relied on by related party – where representation made to other party merely stated negotiating position of first party – whether statement of position if misconceived is misleading. - TORTS – NEGLIGENCE – Economic loss – whether duty of care owed to third party not to cause economic loss by repudiating contract with second party – where third party related to second party – where relationship between first and second parties regulated by contract. - INDUSTRIAL LAW – Unfair work contracts – whether contract one “whereby” person performed work in an industry – whether impugned provisions related to performance of work in industry – whether contract unfair by reason of imprecision. - DAMAGES – assessment – no question of principle.
LEGISLATION CITED:	(NSW) Fair Trading Act 1987, s 42 (NSW) Industrial Arbitration Act 1940, s 88F (NSW) Industrial Relations Act 1986, ss 105, 106 (CTH) Jurisdiction of Courts (Cross-Vesting) Act 1987, s 5(4) (NSW) Jurisdiction of Courts (Cross-Vesting) Act 1987, s 8(1) (CTH) Trade Practices Act 1974, ss 51A, 51AC, 52
CASES CITED:	Accredited Aged Care Facilities Pty Ltd v Banyan Tree (Australia) Pty Ltd [2002] VSC 261 Auburn Council v Austin Australia Pty Ltd (in liq) [2007] NSWSC 130 Batterham v QSR Limited (2006) 227 ALR 212; [2006] HCA 23 Barton v Croner Trading Pty Ltd (1984) 3 FCR 95; 54 ALR 541 Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Brandster v Tryak Pty Ltd (1989) 28 IR 329 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529 D&G Motors Pty Ltd v Capitol Motors Ltd [1973] AR(NSW) 806 Emanuele v Chamber of Commerce & Industry SA Incorporated [1994] ANZ ConvR 417 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Fish v Solution 6 Holdings Ltd (2006) 227 ALR 241, [2006] HCA 22 Fortuna Seafoods Pty Ltd v The Ship “Eternal Wind” [2005] QCA 40 Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 McDonald’s Australia Ltd v Industrial Relations Commission of NSW [2005] NSWCA 286 Majik Markets Pty Ltd v Brake & Service Centre Drummoyne Pty Ltd (1991) NSWLR 443 Masters v Cameron (1954) 91 CLR 353 Mayne Nickless Limited v Industrial Relations Commission of New South Wales [2004] NSWCA 359; 141 IR 1 Milner v Delita Pty Ltd (1985) 61 ALR 557 Mitchforce Pty Ltd v Industrial Relations Commission (2003) 57 NSWLR 212 Old UGC Inc v Industrial Relations Commission of New South Wales in Court Session [2006] HCA 24; (2006) 227 ALR 190 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Perre v Apand Pty Ltd (1999) 198 CLR 180 Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) NSWLR 644 QSR Limited v Industrial Relations Commission [2004] NSWCA 199 Rosser v The Maritime Services Board of NSW (No 2) NSWSC (Young J, 30 August 1993, BC 9301829) Ross T Smyth & Co Ltd v TD Bailey Son & Co [1940] 3 All ER 60 RT & YE Falls Investments Pty Ltd v State of New South Wales [2001] NSWSC 1027 Sinclair Scott & Co v Naughton (1929) 43 CLR 310 Solution 6 Holdings Pty Ltd v Industrial Relations Commission of NSW (2004) 60 NSWLR 558 Sydney Water Corporation Limited v Industrial Relations Commission of NSW (2004) 61 NSWLR 661 VG Haulage Services Pty Ltd, Ex parte; Re Industrial Commission of NSW [1972] 2 NSWLR 81 Vroon BV v Fosters Brewing Group Ltd [1994] 2 VR 32 Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 Wesoky v Village Cinemas International Pty Ltd [2001] FCA 32
PARTIES:	50146/03: Tony Azzi (Automobiles) Pty Limited (first plaintiff) Harissa Pty Limited (second plaintiff) Antonio Azzi (third plaintff) Asialink Pty Limited (fourth plantiff) Volvo Car Australia Pty Limited (defendant) 50156/03: Tony Azzi (Automobiles) Pty Limited (first plaintiff) Harissa Pty Limited (second plaintiff) Antonio Azzi (third plaintff) Volvo Car Australia Pty Limited (defendant)
FILE NUMBER(S):	SC 50146/03; 50156/03
COUNSEL:	J L Trew QC w J E O'Sullivan (plaintiffs) J N West QC w A R Moses (defendant)
SOLICITORS:	McClellands Lawyers (plaintiffs) Letherbarrow Lawyers (defendant)