Backwell IXL Pty Ltd v Hogg
[1998] VSC 155
•27 November 1998
SUPREME COURT OF VICTORIA
COMMERCIAL LIST
Not Restricted
No. 2090 of 1997
F4844
| BACKWELL IXL PTY. LTD. | Plaintiff |
| v | |
| ROBERT GRANT HOGG & ORS. | Defendants |
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| JUDGE: | CHERNOV, J. |
| WHERE HELD: | Melbourne |
| DATES OF HEARING: | 3, 7-9 September 1998 |
| DATE OF JUDGMENT: | 27 November 1998 |
| CASE MAY BE CITED AS: | Backwell IXL Pty. Ltd. v. Hogg |
| MEDIA NEUTRAL CITATION: | [1998] VSC 155 |
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AGENCY - Transport contract - Whether transport consultant agent or principal -
Forwarding agent - Capacity to create a legal relationship between principal and third
party.
CONTRACT - Implied term - Agent’s remuneration - Commission - Whether
reasonable or excessive remuneration.
EQUITY - Fiduciary duty - Agent - Breach - Conflict of interest - Improper profits.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr. C.R. Northrop | Harwood Andrews |
| For the Defendants | Mr. A.K. Panna | Oakley Thompson & Co. |
HIS HONOUR:
The parties
The plaintiff, Backwell IXL Pty. Ltd. (Backwell), is a company involved in the manufacture and distribution of electrical goods throughout Australia. The first and second defendants, Robert Grant Hogg (Hogg) and Angela Mary North respectively, carried on business between about September 1995 and 18 February 1997 under the name, "Range Transport Consultancy" (RTC). They provided a range of services in the transportation industry, including arranging for the transportation of their client's goods by other carriers. On 18 February 1997, the third defendant, National Freight Management Services Pty. Ltd. (which is beneficially owned by the first defendant), acquired the business from the first and second defendants and continued to operate it under the name, “Range Transport Consultancy”. In essence, the plaintiff claims from the defendants recoupment of money, being the amounts paid by the plaintiff to RTC in excess of reasonable remuneration to which, it says, RTC was entitled. It was the plaintiff’s case that RTC was its agent. The third defendant counterclaimed for wrongful termination of its alleged contract with the plaintiff. I will examine the way in which the parties put their respective cases after dealing with the facts.
In mid-1996, the plaintiff was informed by its then principal cartage contractor, Ansett Freight, that it was about to terminate operations and, therefore, would no longer be able to provide it with transport services. As a result, Backwell was required to seek out a new carrier. The person who undertook that task on its behalf was Hendrick Eric Wilkens (Wilkens), who was at all relevant times until about July 1997 (when he left its employ), the Customer Service Manager of the plaintiff. Wilkens acknowledged in evidence, that he was inexperienced in the field of transport contracting and consequently, he sought the assistance of the plaintiff's consultant, Michael Duskovic (Duskovic). Together, they interviewed a number of carriers, including IPEC, Mayne Nickless and Discount Freight Service, with the view of locating the most cost-effective carrier. After processing and analysing the material provided by the interviewees, Wilkens and Duskovic concluded that the charges which they submitted were too high. For instance, they found that IPEC's rate was approximately three times higher than that which had been charged by Ansett Freight. The rates of the other two carriers were also substantially higher.
The unchallenged evidence of the first defendant was that the services offered by RTC fell into three broad, but not mutually exclusive, areas:
(a) The first was the provision of advice to a business on transportation practices and requirements. This involved the analysis of the transport and distribution arrangements of the business and the provision of advice about how to produce efficiency gains and cost savings in that area. Normally, RTC would charge an all-inclusive fee for such advice and the implementation of RTC's recommendations would be left to the customer.
(b) The second broad area of service provided by RTC, involved it providing analysis and advice (as referred to in (a) above), and included the implementation of any recommendations. This often required RTC to obtain transportation rates from various operators and analyse them in the context of the customer's trading patterns, to see which transport operators would be most cost effective for the customer to engage. The fee for such consultancy was normally based upon 50% of the savings that could be achieved for the customer by the introduction of new transport arrangements.
(c) The third category of service offered by RTC, was the provision by it of transport services for a customer, in the sense of it taking full responsibility for transporting the customer's goods through the use of sub-contracted carriers. Such service involved RTC procuring the collection of the customer's goods and the delivery of them to the required destination. It took on all the risks associated with the transportation of the goods, including any liability for damage. Hogg said in his evidence, that before being engaged by a customer to provide this type of service, he would normally provide RTC's transport rates for the carriage of the goods. If those rates were accepted, his charges for all transportation thereafter, would be based on the quoted rates until they were varied by agreement. In those circumstances, RTC invoiced the customer for the goods carried, at the pre-agreed rate. The obligation to pay the carrier was with RTC.
Engagement of RTC - August 1996
Because Hogg had heard on the industry grapevine that Ansett Freight, which he knew carried goods for Backwell, was about to close down its freight transport division, he telephoned the company in August 1996 to offer it his services. He was referred to Wilkens to whom he outlined the type of services that he could provide. Wilkens referred Hogg to Duskovic. As a result, Hogg telephoned Duskovic and then met with him shortly thereafter to discuss the transportation services that RTC could provide to Backwell. In the course of those discussions, Duskovic told Hogg that any decision to engage a transport operator was "rate-driven", that is to say, the primary concern of Backwell was to achieve low transportation costs. Following this meeting, Duskovic provided Hogg with information concerning Backwell's transport requirements so as to enable him to prepare a quotation of RTC's transport rates. The discussion between them proceeded on the basis that RTC would be responsible for the transportation of Backwell's goods, albeit through sub-contractors. There was no discussion of RTC acting as mere agent of Backwell. After analysing the material so provided to him, Hogg faxed those rates to Duskovic on or about 14 August 1996. (Although the evidence is not clear on this point, it seems that a schedule of rates was also faxed to Wilkens.) Duskovic, in turn, processed them through his computer and found that they produced a transport cost structure which was similar to that which operated with Ansett Freight as carrier. Duskovic then showed Wilkens, RTC's schedule of rates and informed him of the result of his analysis. In the light of that material, they interviewed Hogg, probably on 14 August 1996. During that meeting, Hogg explained that there were two ways in which his firm could provide transportation services. First, it could undertake responsibility for organising all aspects of the pick-up and delivery of Backwell's goods; it would then be his firm's responsibility to ensure safe delivery of them. This arrangement was to operate in the same way as Backwell's arrangement with Ansett Freight. In respect of that service, RTC would charge Backwell in accordance with its transportation rates (as set out in the schedule which Hogg had forwarded to Duskovic and probably Wilkens). The second type of service that could be provided by RTC, Hogg told Wilkens, was the overseeing by RTC of the transportation of Backwell's goods. This arrangement would operate akin to RTC being a transport manager for which it would charge a monthly fee.
In response, Wilkens said that he preferred the first arrangement; he was familiar with it, having regard to his dealings with Ansett Freight. Hogg explained that if he were so engaged, he would send an invoice to Backwell for the cost of transportation of its goods at the agreed rate. The carrier would be paid by Hogg. He would be the contact with Wilkens and would deal with and be responsible for all aspects of the transportation of the company's goods. Wilkens said in his evidence, that it was clear to him from those discussions, that Hogg's firm would not, itself, transport the goods. He understood that RTC did not own trucking or warehouse facilities. Hogg actually told him the names of the carriers he proposed to use for the transportation of the plaintiff's goods. The parties also discussed terms of payment and eventually agreed that RTC's invoices would be paid within 14 days.
Wilkens agreed in cross-examination, that at the meeting there was no discussion about RTC's profit margins in relation to its schedule of rates; he acknowledged that such margins were of no real concern to him. He was concerned only with the rates that would be charged to Backwell, so that he would know the cost to his company of transporting its goods. Similarly, there was no discussion at that meeting, about Wilkens seeing invoices from the carriers which were to transport his company's goods.
At the conclusion of the meeting, Wilkens told Hogg that after all quotations were analysed (later that day), a decision would be made as to which transport operator would be engaged. After Hogg departed the meeting, Wilkens and Duskovic discussed the RTC rates and compared them with those of other carriers. They concluded that, given the company's rate-driven criteria, RTC should be engaged to transport the plaintiff's goods. Late on 14 August 1996, Hogg telephoned Wilkens to ascertain the decision which had been made by Backwell in respect of the engagement of a transport operator. Wilkens informed him that it was decided to give the job to RTC. Hogg advised that he would drop by on the following day and obtain a signature from Wilkens in relation to documents that he had drawn up. On 15 August 1996, Hogg saw Wilkens and they signed a document headed "Terms and Conditions" (the Terms), which Backwell claims to be the repository of the agreement between the parties pursuant to which, it says, RTC was appointed its agent. In light of that, I shall set out below the relevant parts of the Terms:
"The appointment of Range Transport Consultancy is to follow the
identification of savings being available.1. The first weeks of the program will be principally devoted to negotiations with nominated carriers and establishing the invoice processing requirements of Blackwell IXL (sic).
2. Any new arrangements will commence at the earliest opportunity, convenient to Blackwell IXL (sic) and the carrier/s concerned.
3. Range Transport Consultancy shall negotiate terms and conditions of domestic agreements on behalf of Blackwell IXL (sic). Blackwell IXL (sic) always retains the right not to enter into arrangements considered unsatisfactory.
4. Range Transport Consultancy shall check and make ready for payment rendered transport invoices from the nominated carrier/s. This will assist your accounts section to process invoices expediently and relieve you of the often tedious and time consuming interaction with carriers to resolve incorrect charging.
5. Range Transport Consultancy shall monitor the performance of transport companies by liaising with carrier/s and Blackwell IXL (sic) personnel. Service level requirements will be maintained at all times.
6. Normal sales representations to Blackwell IXL (sic) by members of the transport industry may be directed to Range Transport Consultancy, thereby eliminating this time-consuming interaction with carriers.
7. Day to day operational matters are expediently handled directly by Blackwell IXL (sic) personnel with the carrier/s concerned. If you are not satisfied with the carriers response then refer the matter to Range Transport Consultancy for assistance.
8. In order that the benefits derived from our negotiations are not prejudiced, we ask you to refrain from direct negotiations with forwarders without prior consultation with Range Transport Consultancy.
9. Range Transport Consultancy shall provide Blackwell IXL (sic) with Transport and Distribution Management Consulting services for a two year term. Our association beyond that term would continue annually, subject to notice being received no later than 90 days prior to the anniversary of the agreement.
10. Consulting services outside of this project's scope are available at a daily rate of $900 or a rate fixed by mutual arrangement.
11. Range Transport Consultancy will directly invoice Blackwell IXL (sic), every 14 days.
12. Payment will be made to Range Transport Consultancy by 14 days from invoice date.
13. The skills and resources of Range Transport Consultancy are employed to monitor the services of carriers who always retain responsibility for the physical delivery of consignments. We are not common carriers.
14. Range Transport Consultancy act on as facilitators of arrangements between clients and carriers.
15. Range Transport Consultancy has completed this document and stress that the information contained herein is private and confidential and must be treated as such."
Wilkens could not recall the precise sequence of events relating to the signing of the Terms, but I am satisfied on the evidence, that on the balance of probabilities, before he signed the document, Wilkens had agreed verbally to engage RTC to transport its goods at rates shown in RTC's schedule which Wilkens had before him during his discussions with Hogg and Duskovic on 14 August 1996.
In summary, I am satisfied on the evidence, that as a matter of probability, the sequence of events relating to the making of the agreement between the plaintiff and RTC was as follows:
(1)
Hogg contacted Wilkens with a proposal that RTC be considered as a provider of transport facilities to Backwell. Wilkens referred Hogg to Duskovic.
(2)
Duskovic then held a meeting with Hogg and obtained a schedule of rates and thereafter, Duskovic met with Wilkens to discuss the RTC rates. There was then a meeting between Wilkens, Duskovic and Hogg.
(3)
Duskovic and Wilkens concluded that the rates provided by RTC were the best rates they were likely to obtain for the plaintiff. As a consequence, Wilkens informed Hogg that Backwell would engage his firm to carry the goods in accordance with the RTC schedule of rates.
(4) Subsequent to that, there was a meeting between Hogg and Wilkens, at
which the Terms were signed.
It is relevant to note that the circumstances in which Backwell engaged RTC on 14 August 1996, included the following:
(a) Wilkens was using Duskovic as Backwell's adviser in the selection of a new transport operator for the plaintiff. No such advice was sought by Wilkens from Hogg.
(b) The rates provided by Hogg to Wilkens and Duskovic were all-inclusive rates, that is to say, they obviously included the cost of transport and RTC's charges or mark-up. There was never any suggestion that the rates were merely the cost charged by the carrier.
(c) Both Wilkens and Duskovic compared RTC's rates with those provided to them by other cartage contractors. They were thus comparing the charges offered to Backwell by the cartage contractors and RTC on the basis that all the rates were all-inclusive rates, which combined the costs of cartage and mark-up.
(d) It was known to Wilkens and Duskovic that Hogg would be providing the cartage services in relation to Backwell's goods, through sub-contractors.
Capacity of RTC - August 1996
The plaintiff's principal case is that RTC or Hogg was its agent in respect of the transportation of its goods and that it overcharged it for its services, thereby making an unlawful profit which it must now disgorge. The plaintiff founded its case almost wholly on the wording of the Terms which, it says, shows that RTC was to act as the agent of Backwell. I am satisfied on the evidence, however, that the parties did not agree that the Terms would be the sole repository of the agreement between them. Even if the sequence of events relating to the execution of the Terms which I have mentioned earlier is not accepted, the document was executed at or about the time when Wilkens and Hogg reached an agreement whereby RTC would be engaged by Backwell to transport its goods at the rates set out in its schedule. In my view, the agreement between the parties was not constituted wholly by the Terms; it is to be gathered from the events of 14 August 1996 or of 14 and 15 August 1996.
The Terms document must be put into its true perspective and cannot be looked at in isolation from the events to which I have referred. In interpreting the Terms, it should be borne in mind that the document was drawn by Hogg and was intended to apply to one or more of the three categories of service that RTC offered and to which I have referred earlier. It was not tailor made for the arrangement which was in fact entered into between Hogg and Wilkens. Consequently, it is not surprising that some clauses of the Terms could be construed as applying to the services that RTC in fact performed for Backwell, while other clauses had no operation at all in that contract. For instance, the first part of cl.1 was not put into effect, in the sense that after signing the Terms, RTC did not negotiate with nominated carriers. Any discussions with the carriers by RTC took place before the execution of the Terms. By mid-August 1996, Hogg had already obtained rates from the carriers who might carry Backwell's goods. On the other hand, the second part of that clause, namely, the establishment of invoice processing requirements occurred, to a large extent, after the execution of the Terms. Similarly, RTC was not required to carry out and did not carry out, the services contemplated by the first part of cl.3. As to the second part of that clause, Wilkens said that he understood that this would enable Backwell to reject any increase in rates by carriers.
In my view, looking at the events of 14 and 15 August 1996, including the execution of the Terms, RTC was not engaged by Backwell as its agent to arrange for the carriage of its goods. On the contrary, I am satisfied on the evidence, that in August 1996, Backwell engaged RTC to transport its goods, albeit through the medium of sub-contractor carriers, at the rates accepted by Wilkens.
Hogg's evidence was that once he was hired by Backwell, he arranged for cartage contractors such as All Country Express to act as his sub-contractors in the carriage of the goods and as the occasion required from time-to-time, he sent to Backwell, invoices for the provision of such services calculated at the agreed rate. He said in his evidence, and I accept, that from time-to-time he attended the premises of the plaintiff to see that the goods had been collected by the carrier and to ensure that the transport of them was carried out effectively. Hogg also attended the premises of the carrier to make sure that the goods were properly dealt with. Furthermore, on occasions, he discussed with Wilkens ways of packaging and arranging for the cartage of the goods so as to minimise the costs to the company. But at no stage did Wilkens ask Hogg to provide him with invoices that were charged to RTC by carriers and there was no discussion between them about RTC's profit margin.
October 1996 variation
In October 1996, All Country Express informed RTC that its rates would be revised upwards and Hogg told Wilkens that it would be necessary for him to change the rates charged by RTC, so as to absorb that increase. Hogg's evidence, which was confirmed by Wilkens, was that he spoke to Wilkens about the matter and provided him with RTC’s revised transport rates on or about 7 October 1996 and that Wilkens agreed to such an adjustment in the rates.
Consideration McPhee Transport
In late 1996 or early 1997, Wilkens became aware that a number of Backwell’s customers in New South Wales were dissatisfied with the quality of the company's transport service and that this was affecting, or had the potential to affect, its business in that region. Consequently, Wilkens' priority in relation to the transport service required by his company, shifted from rate-driven to quality-driven. Wilkens conducted an informal survey amongst the company's New South Wales customers, as to their preferred carrier. The majority of them nominated McPhee Transport. Wilkens told Hogg that the company's primary concern in relation to its New South Wales customers, was to ensure that the transport service was of appropriate quality and that he was considering having McPhee Transport carry its goods to those customers.
The plaintiff sought to present a case that McPhee Transport was chosen by it as the preferred carrier in New South Wales and that this was presented to RTC as a fait accompli, so that Hogg played no relevant role in securing McPhee Transport to carry Backwell's products first into New South Wales and later, to other locations. I am satisfied on the evidence, however, that although Wilkens informed Hogg that McPhee Transport was his preferred carrier in the sense that the majority of Backwell customers in New South Wales preferred it, Hogg nevertheless investigated (at the request of Wilkens) which transport carriers would provide to Backwell the quality of transport service which it required. He examined two other carriers as well as McPhee Transport to determine the most appropriate carrier having regard to Backwell's requirement for quality of carrier service. Wilkens agreed that (as a result of the material provided to him by Hogg) they considered at least one further carrier, Discount Freight Express, but ultimately, Hogg advised Wilkens that McPhee Transport would be the best carrier for Backwell's purposes. It will be apparent, however, that in relation to McPhee Transport, Backwell was involved much more directly in the selection process than was the case in August 1996. In late January or early February 1997, Hogg was requested to arrange for an inspection of the facilities at McPhee Transport.
February 1997 dealings with McPhee Transport
It is common ground that on 3 February 1997, Wilkens, another person from Backwell and Hogg, inspected McPhee Transport's facilities and spoke to its General Manager, Craig Steven Holland (Holland). The plaintiff sought to rely on what was said at that meeting as an admission by Hogg, that RTC was acting as the plaintiff's agent:
(a) For example, the plaintiff pointed to the fact that Wilkens told Holland that Hogg was Backwell's transport consultant and Hogg did not dispute this. In my view, however, that was no more than Wilkens' characterisation of the role performed by RTC for Backwell and, in general terms, may have been a correct lay description of it.
(b) The plaintiff also referred to Holland's evidence, that Hogg had called him in January 1997 and during their conversation, said that he was acting as freight adviser for a Geelong electrical manufacturer and sought a proposal from McPhee Transport for the distribution of that company's goods. Holland said he informed Hogg that he would not deal with him under any circumstances if he was acting as an intermediary or a freight broker. He told him that McPhee Transport would not allow a loading on its rates. Holland claimed that Hogg assured him that he had been appointed by the plaintiff to review its distribution arrangements and that he was making enquiries at the request of Wilkens, thereby inferring that he was effectively part of the Backwell team. Shortly after that conversation, Hogg again told Holland that he was the plaintiff's freight adviser and was retained by it for an annual fee of $25,000. He claimed that Hogg assured him that any proposal by McPhee Transport would be forwarded to Backwell.
In a sense, Hogg was the plaintiff's freight adviser and he had been appointed by it to review its distribution arrangements, particularly those that related to New South Wales. On that basis, Hogg's representation to Holland was not inconsistent with the actual role which he performed for Backwell. Moreover, he was no doubt trying to secure the services of McPhee Transport for the carriage of the plaintiff's goods and would not want to contradict the policies of McPhee Transport in respect of dealing directly with the customer. Moreover, Holland's threat that under no circumstances would his company deal with Hogg if he were acting as an intermediary or freight broker, was not put into effect in the sense that McPhee Transport continued to deal with RTC and to transport Backwell's goods. Furthermore, as I will mention later, McPhee Transport did not insist that the documentation which was sent to it for execution, such as that containing its rates and terms and conditions of cartage, be executed by Backwell. The documents which contained the McPhee Transport schedule of rates pursuant to which it was engaged, was never executed and those documents and all invoices in relation to such transport were sent to RTC, albeit addressed to Backwell. It seems strange that if McPhee Transport was intent on dealing only with Backwell and did not want to contract with or through Hogg, it would not insist that the documentation be executed by Backwell. In any event, it continued to deal with Hogg. Moreover, Wilkens referred to Hogg, on every occasion, the approaches of McPhee Transport which sought to establish a closer relationship between it and Backwell. This clearly indicates that the plaintiff regarded itself as dealing with Hogg and not with McPhee Transport and is consistent with Wilkens' other evidence, namely, that the goods carried by McPhee Transport were carried through the "set up" with RTC and that the charges that Backwell paid were "Ranger" charges and not McPhee Transport charges.
Engagement McPhee Transport
The first written communication from McPhee Transport in relation to Backwell, was a memorandum from Holland as general manager of McPhee Transport, to RTC dated 3 February 1997, which is marked to the attention of Hogg. It outlined the proposal by McPhee Transport to carry Backwell's goods, together with the transport rates. It also contains a paragraph which states that Backwell's pallets will be returned to Geelong where practicable (at no cost to Backwell). Holland's memorandum concluded, "Please be assured that we are very keen to be of service to IXL and we look forward to the opportunity to work with you and they." The tenor of this memorandum is inconsistent with Holland's claim that McPhee Transport would not work with RTC.
On 5 February 1997, Hogg sent to Backwell his proposal for the transportation of its goods by McPhee Transport. That proposal, in effect, mirrored the proposal from McPhee Transport of 3 February 1997, which had been sent to Hogg, except that:
(a) it provided that Backwell would be charged $5 per pallet that was returned to it;
(b) it contained a schedule of rates (which obviously had a mark-up component to them over-and-above the McPhee Transport rates).
There was further correspondence in February 1997 between McPhee Transport and RTC, in which the transport company set out its rates. Such communication, although addressed to Backwell, was always sent to RTC. So far as is relevant, no such communication was actually sent by McPhee Transport to Backwell. As I have already mentioned, on the occasions when Wilkens was approached by McPhee Transport in relation to various transportation matters, he referred it to Hogg. RTC used the McPhee Transport rates provided to it in February, to calculate its own rates which Hogg then sent to Wilkens for approval. I am satisfied on the evidence, that the RTC rates in respect of the carriage of Backwell's goods by McPhee Transport was accepted and approved by Wilkens. I am also satisfied on the evidence, that Wilkens knew that the RTC rates included a mark-up of the McPhee Transport rates, although he did not know (nor did he ask Hogg) what was the extent of that mark-up. Wilkens said in evidence, that he appreciated that the cost of obtaining the transport services of McPhee would increase the cost of transportation to Backwell, but at that time he was concerned with obtaining a standard of service based on quality rather than cost (as was his concern in late-1996).
Initially, McPhee Transport was used only to carry Backwell's goods to New South Wales. In respect of that transport service, Backwell paid RTC in accordance with its new schedule of rates. In respect of other destinations, however, during this early period, the existing arrangement continued and the plaintiff was billed by RTC in accordance with its October 1996 rates. Progressively from February to May 1997, the use of McPhee Transport was increased, so that by about May 1997, it carried Backwell's goods generally throughout mainland Australia.
On about 18 February 1997, the third defendant bought the business that was conducted by the first and second defendants. I am satisfied on the evidence, that little discussion took place between the defendants’ representatives and those of the plaintiff in relation to this changeover. There does not seem to have been any reason for the parties to have discussed the matter. As far as the plaintiff was concerned, the services that were provided by Hogg and RTC, continued to be provided by RTC (albeit through the third defendant). No doubt, the plaintiff did not know or care that after mid-February 1997, RTC was being conducted by a company as distinct from it being operated by the first and second defendants.
The invoices issued by carriers which moved the plaintiff's goods other than McPhee Transport, were addressed and sent to RTC. The McPhee Transport invoices, on the other hand, although sent to RTC, were addressed to Backwell. RTC checked the invoices from the carriers against other documents to ensure that delivery was effected and that their charges accorded with the agreed rates. RTC then sent its own invoices to Backwell, calculated in accordance with the schedule of rates that Hogg had sent to Wilkens and which was approved by him. Those invoices, in turn, were checked before payment by Wilkens to ensure that they accorded with RTC's schedule of rates. At least in the case of charges made by McPhee Transport, RTC usually paid those invoices after it had been paid by Backwell.
Querying RTC fees
In April or May 1997, the question of Hogg's method of charging Backwell was raised by Holland who questioned Hogg whether a mark-up was included in the rates which RTC charged to Backwell. Hogg said that he did, but refused to tell Holland the amount of the mark-up. Holland informed him that he did not like dealing with brokers. Although the evidence is not clear as to the timing of this discussion, the probability is that shortly after Hogg's discussion with Holland, Hogg spoke with Wilkens about changing the basis on which RTC was to be paid by Backwell. Hogg offered to provide his services on a flat consultancy fee instead of an all-inclusive fee, but Wilkens said that he preferred to continue with their current arrangement. Hogg then went back to Holland and informed him of his conversation with Wilkens, but Holland merely repeated, in effect, that he did not like dealing with brokers. Notwithstanding Holland's attitude, McPhee Transport continued to deal only with RTC in relation to the carriage of the plaintiff's goods.
In the main, there was relatively little conflict between the evidence of the opposing parties on any issue. But one of the areas where there was a conflict, related to Hogg's evidence that after Wilkens left, he raised with Neville John Coots (Coots), who was Backwell's National Sales Manager, the matter of the RTC charges and whether Backwell was happy with them. According to Hogg, Coots' response was that he was not concerned about the margin earned by RTC, so long as his telephone was not ringing with complaints from customers. Coots denied that such a conversation ever took place and also the comments attributed to him by Hogg. When Coots gave evidence, it became clear during his cross-examination that he had little recollection of events that occurred during that period. Hogg, on the other hand, was precise in his evidence and in his recollection of events. Although the existence or otherwise of this discussion as outlined by Hogg is not critical to the resolution of the case, I accept his evidence, more particularly, that he had the conversation with Coots to the effect summarised by me above.
Not long after Wilkens left Backwell in June 1997, David Isaac (Isaac), the Financial Controller of the plaintiff and others from the plaintiff from time-to-time raised with Hogg first, the concern that their transportation costs were increasing and later, the question of the mark-up that RTC was charging in respect of its services. The concern over the increase in costs of transportation to Backwell, was also pursued by the person who replaced Wilkens, namely, Stewart Lloyd Williams (Williams). Isaac also contacted Duskovic in relation to this increase in transportation costs. Duskovic came to the conclusion, after carrying out some investigations, that the increase in the costs was probably due to the increase in the plaintiff's sales and that its proportion of single consignments, relative to the volume of goods dispatched, had also risen, which meant that the transportation of such goods became more expensive. He said that during his discussions with Isaac, however, no complaint was made by any representative of the plaintiff about the performance of RTC or about its rates. The plaintiff's representatives were concerned to know how costs could be reduced. It is not necessary for the purpose of this case to come to any final views as to whether changes in the plaintiff's operating patterns contributed materially to such change in the costs of transportation. What is relevant is that this matter was investigated by the plaintiff and by its independent consultant, Duskovic, yet the cause of the increase was not attributed to RTC. It will be recalled that McPhee Transport had carried the plaintiff's goods since early 1997, at the rate nominated by Hogg in February of that year.
Isaac and Wilkens, however, had a growing belief that RTC was charging out to Backwell, an excessive mark-up on the McPhee Transport charges. Towards the end of July 1997, according to Hogg, Isaac asked him over drinks, what an account like Backwell's would be worth. Hogg told him, effectively in order to ‘fob him off’, that on some accounts he could make $2,000 per month and as to others, it depended on the rates charged. Hogg said that he did not say to Isaac, as Isaac contends, that RTC was making only $2,000 per month from the Backwell account. Isaac's version of this conversation was a little different. He said that he asked Hogg how much he was making from the plaintiff and although at first, Hogg was reluctant to answer the question, he said it was approximately $2,000 per month, which equalled 2 - 3% of the total value of the freight. I am satisfied that Hogg was not as precise as Isaac claims, although he probably did lead Isaac to believe that his profit from the Backwell contract was in the order of $2,000 per month and that Isaac then equated that to the percentages referred to earlier. In fact, however, RTC's gross margin was closer to $55,000 per month and to that extent, Hogg misled Isaac. Whether Hogg was obliged to disclose it to him, is a different matter and in my view, for reasons I give later, Hogg was probably not under a legal obligation to tell Isaac what his gross margin was.
There was a previous conversation which took place between Hogg and Isaac earlier in July 1997, after Holland had repeated to Hogg his concerns about dealing with brokers and Hogg told him that he would raise the matter with Backwell. Hogg said that he then mentioned this situation to Isaac and suggested to him that he could write out a cheque for 75% of the transport costs directly to McPhee Transport and 25% to RTC. According to Hogg's unchallenged evidence, Isaac told him that this would create an administrative nightmare for the plaintiff and that he would prefer to continue with the existing arrangement. Hogg said that Isaac did, however, ask him what his profit margin was. Hogg's view was that this was none of the plaintiff's business, but because Backwell was his customer, he did not want to be, nor could he be offensive about it, so he told Isaac, as was the fact, that the profit margin varied according to the route and destination and that he could not tell him the amount off the top of his head. Why, in view of that conversation, Isaac later asked Hogg over drinks, about his profitability, is difficult to understand. Hogg's response should have told him that his gross mark-up was 25% - and from that, Isaac could have estimated RTC's profitability.
In August 1997, Backwell officers were seeking to reconcile some of the charges made by RTC with material contained in other documentation. This resulted in discussions being held between them and McPhee Transport which, in turn, resulted in calculations being made by the plaintiff as to the extent of the mark-up that Hogg was charging. At the same time, Holland was taking every opportunity to inform Hogg that he did not want to deal with brokers and would prefer to transact business directly with the plaintiff. Despite Holland's comments to Hogg, there is no evidence that his company really sought to pursue that preferred course until about September 1997. In late August 1997, however, when Holland told Hogg that he wanted to inform Backwell that McPhee Transport did not wish to deal with brokers, Hogg told him that in those circumstances, he would recommend a new transport operator to Backwell, but he did ask Holland to continue the service to Backwell to allow him to make the change to another carrier. It was agreed that Hogg sought to persuade Backwell to change carriers and that meetings were arranged with at least one transport company for the purpose of considering whether McPhee Transport would be replaced.
At the same time, there were further discussions between Hogg and Williams and others from Backwell, about the RTC charges. It is not necessary to go into the details of those discussions. Suffice it to say, that Backwell was not satisfied with Hogg's responses to the queries that were raised with him and in early September 1997, Wilkens progressively obtained from Bob Watkins, Manager of McPhee Transport’s Geelong depot, a copy of the rates that McPhee Transport was charging for carrying the plaintiff's goods (and to which Hogg added his mark-up). Williams brought the matter to a head at a meeting with Hogg on 15 September 1997, during which he claimed that Hogg had engaged in excessive billing. The details of Wilkens' conversation with Hogg on 15 September 1997 are not relevant, but at the end of their meeting, Wilkens handed Hogg a letter terminating his services. Backwell then negotiated with and engaged, McPhee Transport directly. Isaac said, and I accept, that had he been aware of the extent of Hogg's mark-up on the McPhee Transport invoices, he would not have authorised Backwell's payment of the RTC charges. I am also satisfied on the evidence, that McPhee Transport would have preferred to treat RTC as Backwell's broker. But I am also satisfied on the evidence, that McPhee Transport and Backwell were well aware that RTC was charging a mark-up on McPhee Transport rates and that this was known by them from the moment McPhee Transport was engaged to carry the plaintiff's goods.
Plaintiff's final submissions
The way that the plaintiff ultimately put its case was that RTC was its agent. It submitted that the evidence established that RTC was engaged (as the agent of Backwell) to find and negotiate with carriers for the transportation of its goods and that a contract of carriage was then created between the carrier and Backwell. The plaintiff put its claim for the return of what it says were over-charges by RTC, in two ways:
(a) Having regard to the legal incidence of the agency relationship between Backwell and RTC, it was an implied term of the agreement that RTC would be entitled only to a reasonable remuneration for its services in the order of 2 - 3% of the amounts charged by the carriers. Any amount obtained by it in excess of that, must be disgorged.
(b) RTC, as an agent of Backwell, owed Backwell certain fiduciary duties, including not to profit from its office, or, to put it another way, not to make undisclosed profits (namely, the mark-up in excess of reasonable charges) at the expense of Backwell. So much of its charges as were over and above reasonable remuneration, constituted a profit at the expense of Backwell which it must now disgorge in accordance with the principles stated by Deane, J in Chan v. Zacharia (1984) 154 C.L.R. 178, at pp.198-9.
Agency
The plaintiff's principal submission on this point was that the Terms, which it says constituted the agreement between the parties, made RTC an agent of Backwell. The plaintiff says that in particular, cll.3, 5, 6 and 14 of the Terms show that such an agency relationship was created. It is true that if the Terms, and in particular, these clauses are looked at in a vacuum, the inference may be raised that RTC was to act "on behalf of" or as agent of, Backwell. But for the reasons that I have given earlier, I have concluded that the agreement made between Backwell and RTC in August 1996 concerning the carriage of the plaintiff's goods, was not confined to the written Terms. Although in a sense, the Terms became part of the agreement between the parties, as I have already mentioned, not all of its clauses were intended to operate, nor did they operate to govern the respective obligations of the parties to one another. Thus, cl.14 on which the plaintiff relied and which describes RTC as being "only ... facilitators of arrangements between client and caveat", cannot be determinative of the capacity in which RTC performed the work for Backwell. In the circumstances, in order to determine this issue, one has to look also at, inter alia, the actual work performed by RTC.
August 1996 - February 1997
In my view, when RTC was engaged by Backwell in August 1996 to arrange for the transportation of its goods, it was not engaged to act as Backwell's agent to find the best or cheapest carrier on the basis that it would be remunerated by commission. This is clear from the evidence of Duskovic, Wilkens and Hogg to which I have already referred. The function of RTC was summed up by Wilkens, who said that Hogg was paid to pick-up goods and deliver them to the end purchaser. It undertook the responsibility of having the plaintiff's goods delivered in return for payments calculated in accordance with its schedule of rates which was accepted by Wilkens. There is no evidence which suggests a change in that relationship before February 1997, notwithstanding that RTC's schedule of rates was varied (by agreement) in October 1996.
An agent is a person who is given authority or has the capacity to create legal relations between the principal and third parties (International Harvester Co. of Australia Pty Ltd v. Carrigan's Hazeldene Pastoral Co. (1958) 100 C.L.R. 644, at p.652; Lee Cooper Ltd v. CH Jeakins & Sons Ltd [1964] 1 Ll. Rep. 300, at p.308; Hill, Freight Forwarders, paragraphs 64-70, at pp.38-40). RTC could be described as an agent of Backwell, but the true arrangement between the parties was that it would act as a "go between" between Backwell on the one hand and a carrier on the other and create or procure the creation of, a legal nexus between them. It is trite that the label or a title attached to a person by the parties, by itself, cannot be determinative of that person's legal position or capacity. The High Court in the International Harvester Case, supra, at p.652, has pointed out that there are numerous examples where parties have been appointed as "sole selling agents" or as "manufacturers' agents" or as "distributors", whereas the true relationship between them was such that each was a principal vis-à-vis the other. For example, in the case of a "distributor", more often than not, such an entity is not a true agent, but acquires the goods in question in its own right notwithstanding that often, it has an exclusive right of distribution. In popular language, the distributor may be conveniently described as an agent of the manufacturer, but in reality and as a matter of law, that person is a principal who acquires the goods in its own right. The reason is that such a distributor has not been authorised and does not have the capacity to bring about a contractual relationship between the manufacturer and the consumer.
In this case, I am satisfied on the evidence, that the agreement between the parties reached in about mid-August 1996, did not result in RTC being given the authority to bring about a contractual relationship between the plaintiff and the carrier. In business parlance, RTC may have been appropriately described as an "agent" of Backwell, but at law it contracted with it as principal.
An important factor in the examination of this issue is that RTC was to be paid according to the schedule of rates provided by Hogg and not on commission. There is no evidence to justify the conclusion that Hogg was to be paid in any other way. Backwell's independent consultant, Duskovic, and Wilkens agreed that the rates which Hogg provided in tender of the contract, were to be accepted. It was a matter for RTC to sub-contract for the transportation of the goods at whatever rate it could negotiate. In fact, as the evidence shows, Hogg had negotiated rates, albeit probably on a conditional basis, with his then prospective sub-contractors even before he submitted his schedule of rates to Duskovic and Wilkens. In my view, the position of RTC here is similar to that of Messrs Lewis, Lattimer & Co. in Colley v. Brewers' Wharf and Transport Ltd (1921) 9 Ll. Rep. 5. In that case, Messrs Lewis, Lattimer & Co. (the firm) engaged the defendant to carry the plaintiff's goods, some of which were stolen when a van of the defendant was stolen. The plaintiff sued the defendant for the value of the goods. The defendant said, however, that there was no contract between it and the plaintiff. The plaintiff's case was that the firm was a mere forwarding agent and was, therefore, acting as the defendant’s agent. The Court rejected this characterisation of the firm, principally because it charged the plaintiff its own price for the transportation of the plaintiff's goods and not mere agency commission. It then sub-contracted the work to carriers to whom the firm paid a different and lower price. The firm was, said the Lord Chief Justice, entitled to sub-contract and make a bargain for itself; it was not profiting as an agent from its bargain. The firm was doing what it had a right to do, namely, get the work done at any price it could and charge the plaintiff at its own rates. His Lordship concluded that in the circumstances, there was no contract between the plaintiff and defendant carrier.
If one takes the period before February 1997, there is no evidence that RTC did more than sub-contract the carriage of Backwell's goods in its own right. There is no evidence that Backwell intended RTC to act as its agent in the sense of it establishing a contract between Backwell and the actual carrier. The same applies to RTC; it had no intention of procuring a contractual nexus between Backwell and the carrier. On the contrary, Wilkens treated RTC as a principal, responsible for the transportation of his company's products, albeit by carriers which were sub-contracted to RTC.
But even if RTC was the plaintiff's agent during this period, I am satisfied on the evidence, that Wilkens agreed to pay Hogg in accordance with RTC's schedule of rates. Those rates obviously carried a profit margin which, as the evidence shows, was of no concern to Wilkens. He was only interested in knowing the "all up" cost of transport to the plaintiff. Thus, notwithstanding any agency relationship that may have been created between the parties, RTC was entitled to be paid the agreed rates and was not limited to claiming what the plaintiff terms, "reasonable" commission. Like any contractual relationship, the agency relationship can include, if the parties have so agreed, a term that the agent be remunerated in the agreed manner. There is no magic, in my view, to the label attached to the remuneration that is paid to an agent. Usually it is called commission which is often a percentage of the sale price or some other amount chosen by the parties. But equally, the principal and agent may agree that the agent be paid a flat fee or a mark-up within an all-inclusive price that the principal agrees to pay. That mark-up may be called a commission, but there is no legal requirement that the exact amount of it be known to the principal as a condition of it being liable to pay it. Putting aside the situation where the agent practises non-disclosure in relation to its principal, if the principal knows that the agreed all-inclusive price charged to it includes the agent's mark-up, the principal is obliged to pay that price, notwithstanding that it made no enquiries of the agent and thus did not know what was the precise amount of the mark-up. At the end of the day, it is a question of what the parties have agreed upon.
In Kelly v. Cooper [1993] A.C. 205, the plaintiff instructed the defendants, a firm of real estate agents, to sell his house and agreed to pay them a percentage of the selling price as commission. The owner of an adjacent house also instructed the defendants to sell that house. Both houses were shown by the defendants to a prospective purchaser, whose offer to purchase the adjacent house was accepted. He then offered to buy the plaintiff's house. This offer was conveyed to the plaintiff by the defendants, but the plaintiff was not informed that the prospective purchaser had agreed to buy the adjacent house. After the sales were completed, the plaintiff claimed damages from the defendants for their breach of duty in failing to disclose material information and placing themselves in a position where their duties and interests conflicted. The Privy Council held that it was the business of an estate agent to act for numerous principals who may be competing with one another. Consequently, a term was to be implied in the contract pursuant to which such an agent was engaged, that the agent was entitled to act for other principals and keep confidential information obtained from each. Their Lordships made it plain that the agents’ fiduciary duty was determined by the contract of agency and since the plaintiff knew that the defendants would be acting for other vendors of comparable properties and would receive confidential information from them, the agency contract could not have included terms requiring them to disclose that confidential information to the plaintiff. It also did not preclude the agents from acting for a rival vendor. At pp.214-215, the Privy Council said that the existence and scope of fiduciary duties of agents depend upon the terms on which they are acting. They referred to what Lord Wilberforce said in New Zealand Netherlands Society "Oranje" Inc v. Kuys [1973] 1 W.L.R. 1126, at pp.1129-1130, namely, that the precise scope of the fiduciary duty of an agent must be moulded according to the nature of the relationship. Lord Wilberforce cited Lord Upjohn in Phipps v. Boardman [1967] 2 A.C. 46, who said, at p.123: “Rules of equity have to be applied to such a great diversity of circumstances that they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case." The Privy Council also referred to what Mason, J said in Hospital Products Ltd v. United States Surgical Corporation (1984) 156 C.L.R. 41, at p.97, namely, that contractual and fiduciary relationships may co-exist between the same parties. The existence of a contractual relationship often provides a foundation for the erection of a fiduciary relationship. In these situations it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship to the extent that it exists, "must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction."
Similarly, here, on an objective view, Backwell knew very well that the RTC mark-up was included within the prices quoted on the rates schedule. It made no effort to find out what it was; it did not care. Thus, even if there was an agency relationship between the parties, it was governed relevantly by the contract between them which included an obligation by Backwell to pay RTC in accordance with the relevant schedule of rates. It cannot come along now and claim that it should have been lower and recoup what it says to be the excess, on the basis of a breach of a contractual or fiduciary duty. It should be recalled what Lord Browne-Wilkinson said in Henderson v. Merrett Syndicates Ltd [1995] 2 A.C. 145, at p.206, about the ambit of fiduciary duties:
"The phrase 'fiduciary duties' is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances. That is not the case. Although, so far as I am aware, every fiduciary is under a duty not to make a profit from his position (unless such profit is authorised), the fiduciary duties owed, for example, by an express trustee are not the same as those owed by an agent. Moreover, and more relevantly, the extent and nature of the fiduciary duties owed in any particular case fall to be determined by reference to any underlying contractual relationship between the parties. Thus, in the case of an agent employed under a contract, the scope of his fiduciary duties is determined by the terms of the underlying contract. Although an agent is, in the absence of contractual provision, in breach of his fiduciary duties if he acts for another who is in competition with his principal, if the contract under which he is acting authorises him so to do, the normal fiduciary duties are modified accordingly: see Kelly v. Cooper [1993] A.C. 205, and the cases there cited. The existence of a contract does not exclude the co-existence of concurrent fiduciary duties (indeed, the contract may well be their source); but the contract can and does modify the extent and nature of the general duty that would otherwise arise."
Similarly, in Re Coomber [1911] 1 Ch. 723, at pp.728-9, Fletcher Moulton, LJ said:
"Fiduciary relations are of many different types; they extend from the relation of myself to an errand boy who is bound to bring me back my change up to the most intimate and confidential relations which can possibly exist between one party and another where the one is wholly in the hands of the other because of his infinite trust in him. All these are cases of fiduciary relations, and the Courts have again and again, in cases where there has been a fiduciary relation, interfered and set aside acts which, between persons in a wholly independent position, would have been perfectly valid. Thereupon in some minds there arises the idea that if there is any fiduciary relation whatever any of these types of interference is warranted by it. They conclude that every kind of fiduciary relation justifies every kind of interference. Of course that is absurd. The nature of the fiduciary relation must be such that it justifies the interference. There is no class of case in which one ought more carefully to bear in mind the facts of the case, when one reads the judgment of the Court on those facts, than cases which relate to fiduciary and confidential relations and the action of the Court with regard to them."
In my view, on the evidence, the plaintiff has no legal basis for contending that during the period in question, RTC made an unlawful profit by charging its mark-up as it did, even if it was Backwell's agent. There was no breach of fiduciary duty on its part in claiming payment as it did. Similarly, there was no implied term of the agreement between them that RTC's charges or mark-up will be limited to what the plaintiff calls "reasonable commission" (whatever that may mean).
Post February 1997
In one sense, the legal relationship between the three parties, namely, Backwell, RTC and the carrier, McPhee Transport, is less clear than was the position that prevailed between the relevant parties during the earlier period. It was Wilkens who effectively nominated McPhee Transport as the preferred carrier for his company's goods into New South Wales, although Hogg made his own analysis of that carrier and at least one other and recommended or agreed that McPhee Transport be used. McPhee Transport made it known that it did not wish to deal through RTC. It wanted to deal with Backwell and its offer documents appear to be directed to it. On the other hand, such expressions of view were probably no more than its preferred option. The reality was that Hogg appeared to have a stranglehold on the transportation of the plaintiff's products and that is probably why McPhee Transport did not insist on the documentation being executed by Backwell, notwithstanding that Holland kept up the pressure to deal directly with Backwell. This was resisted by Backwell, at least during the period of Wilkens' employment there. All approaches to him by McPhee Transport were diverted to Hogg because he regarded himself as dealing only with Hogg in relation to the transportation of his company's goods and not because, as the plaintiff contends, Wilkens regarded Hogg virtually as an employee of Backwell and directed the transport company to him in that capacity.
In my view, the evidence as to the events during February 1997 and thereafter, does not establish that the legal relationship between Backwell and RTC which had existed since August 1996, changed so that the firm became Backwell's agent after February 1997. But even if I am wrong in that conclusion, and RTC became Backwell's agent after February 1997, there was, on the evidence, no change in the basis on which it was to be remunerated. The evidence shows that nothing had changed in that regard. Wilkens accepted Hogg's rates in respect of the McPhee Transport cartage. He said in his evidence, that he had agreed to pay the "Ranger" rates and not the McPhee Transport rates and he rejected in about April or May 1997, Hogg's offer that the method of his remuneration be changed to a flat fee. Wilkens wanted to retain the existing arrangements. He was quite clear in his evidence, that he did not change the arrangement between himself and Hogg before he left Backwell.
Conclusion as to agency claim
In my view, therefore, the evidence does not establish that RTC was Backwell's agent in relation to the transportation of its goods. Moreover, even if the defendant were to be properly characterised as the agent of the plaintiff, a term of that agency was that Backwell would pay it in accordance with its schedule of rates. There was no implied term of the agency agreement that it would be entitled only to reasonable remuneration for its services and, on the evidence, its mark-up did not constitute an improper profit or breach of fiduciary duty.
Plaintiff's other claims
The plaintiff also claimed in its pleading that it was entitled to the recoupment of any amount paid to RTC over and above a "reasonable remuneration" on the basis that such excess was paid under a mistake of fact. It also claimed damages for misleading and deceptive conduct and breach of warranty. None of this was pressed in the plaintiff's final submissions and, in my view, rightly so. There is absolutely no basis on the evidence, for the claim that Hogg engaged in misleading and deceptive conduct or that a warranty was given which was breached, entitling the plaintiff to damages for such breach. Those claims as initially formulated were based on Hogg's response to Isaac in about August 1997, that his remuneration from the contract was in the order of $2,000 per month. This was said to be a misrepresentation sufficient to found an action in misleading and deceptive conduct and/or to constitute a warranty. In my view, the statement by Hogg did not constitute a representation as to his earning under the contract. He was, in effect, ‘fobbing off’ Isaac's questions as to his earnings. It was not a representation by him or if it was, it was not made in trade or commerce. In any event, there was no evidence that the plaintiff was induced by it to do anything of relevance to this case. Similarly, the statement was not intended to impose a contractual obligation and was, therefore, not a warranty (see Blakney v. J.J. Savage & Sons Pty. Ltd. [1973] V.R. 385, at p.387).
Similarly, in respect of the claim based on the alleged payment under a mistake of fact, the evidence makes it clear that the payment was made in accordance with the agreement between the parties and no mistake was established on the part of the plaintiff. Wilkens said that before payment, he satisfied himself that the invoice accorded with the schedule of rates pursuant to which he had agreed that Hogg would be paid. The plaintiff says that the mistake was constituted by its belief that the remuneration to Hogg was reasonable. The only evidence on this point from the plaintiff was that of Isaac, who said that if he had known what Hogg's mark-up was, he would not have authorised payment. That is not the same as paying under a mistaken belief that the mark-up was reasonable. In any event, such a mistake was brought about by the plaintiff. In my view, the plaintiff has no basis for claiming the money on the basis that it was paid under a mistake of fact and, no doubt for that reason, the plaintiff properly did not press the point in its final submissions.
Counterclaim
Although the third defendant has counterclaimed for damages for breach of contract constituted by the termination of its employment on 15 September 1997, it did not press for it in its final submissions. In my view, there would be no basis on which the third defendant could counterclaim, because the contract between the parties did not prevent the plaintiff from terminating the third defendant’s services on reasonable notice. No evidence was led by the third defendant as to what that period would be and, in my view, it would not be very great. Further, there was never a term of the contract which compelled Backwell to pay the third defendant's rates, notwithstanding that it could find cheaper alternative transport for itself. In my view, the third defendant would not succeed in a counterclaim, even if it had pressed it. As I have said, however, the third defendant did not press for it in its final submissions.
Orders
In view of my above conclusions, there will be judgment for the defendants on the plaintiff’s claim. The counterclaim of the third defendant will be dismissed. I will hear the parties as to the form of orders and on the question of costs.
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