Bickfords (Aust) P/L v ACI Operations P/L - [2010] SADC 89

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
BICKFORDS (AUST) P/L v ACI OPERATIONS P/L
[2010] SADC 89
Judgment of His Honour Judge Nicholson
15 July 2010
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - OFFER AND ACCEPTANCE - ACCEPTANCE - GENERALLY
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - IMPLIED TERMS - IMPLICATION OF MUTUAL OBLIGATION
ESTOPPEL - ESTOPPEL IN PAIS - EQUITABLE ESTOPPEL
Plaintiff as purchaser of bottles and defendant as seller of bottles parties to ongoing trading relationship over many years - plaintiff placed a large order within days of the end of the 2006 price volume adjustment reconciliation period - defendant refused to accept the order and invoice the sale thereby depriving the plaintiff of a price adjustment in its favour covering all acquisitions during the relevant reconciliation period - Whether defendant entitled to refuse to accept the offer or was contractually obliged to accept it or estopped from refusing to accept it.
HELD: Plaintiff's claim dismissed.
Contract Law in Australia Carter Peden and Tolhurst 5th Ed. Lexis Nexis Butterworths at [13-16] - [13-19], referred to.
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; Industrial Rollformers Pty Ltd v Ingersoll-Rand (Australia) Ltd [2001] NSWCA 111; United Group Rail Services Ltd v Rail Corporation NSW (2009) 74 NSWLR 618; Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL (Receivers and Managers Appointed)(Administrators Appointed) and Ors [2005] VSCA 228; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Hughes Brothers v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91; Burger King Corporation v Hungry Jacks Pty Ltd (2001) 69 NSWLR 558; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349, considered.

BICKFORDS (AUST) P/L v ACI OPERATIONS P/L
[2010] SADC 89
Introduction

This case concerns a claim by the plaintiff (Bickfords)[1] that it is entitled to have credited to its running account with the defendant (ACI)[2] the sum of $152,736.21, on a proper construction of the contractual arrangements between the parties and their application to events which occurred in December 2006. In the event that it were to succeed with this primary claim for relief, the plaintiff also seeks declaratory relief as to the terms of the parties’ contract.
[1] The plaintiff Bickfords (Australia) Pty Ltd was previously known as Lloyd Products Pty Ltd and it was under that name that it commenced its contractual relationship with the defendant some time prior to 1993.
[2] At some time during the parties’ relationship, the defendant, ACI Operations Pty Ltd, became part of the Owens-Illinois Inc. Group. Owens-Illinois Inc. is a corporation registered in Delaware, USA. Much of the correspondence from the defendant to the plaintiff, particularly in the latter years, has been on “O-I Australia” letterhead or something similar. However, it is common ground that at all material times, the relevant contractual relationship or relationships has, or have, been between the plaintiff company and the defendant company.
In addition, the plaintiff supports its claim on various alternative bases namely: a contract variation allegedly arrived at in December 2006, estoppel and an implied term that the defendant would act reasonably and in good faith so as to enable the plaintiff to obtain the full benefit of the contract between the parties.
In the event that the plaintiff were to succeed in demonstrating an entitlement to a credit to its running account with the defendant, the parties agree that the amount to be credited is $152,736.21. The plaintiff also makes a claim for interest.
Bickfords is a beverage manufacturer based in Salisbury South, South Australia. ACI is a glass packaging supplier and operates a glass packaging manufacturing plant at West Croydon, South Australia. From some time in or about 1992 until the present, ACI has supplied Bickfords with the glass bottles it requires to conduct its beverage supply business. Bickfords has been a substantial customer of ACI, particularly after some time in 2005 when ACI recommenced as Bickford’s favoured supplier. As a general practice, representatives of Bickfords, on its purchasing side, regularly liaise with representatives of ACI, on its sales side, so as to generate a forecast by Bickfords of the approximate volumes of each particular bottle type that it would anticipate ordering over an ensuing 12 month period. At or about the same time, ACI provides a price list for that ensuing 12 months. Both the forecast and the price list are subject to variation from time to time.
The ACI price list refers to each identified bottle type and nominates a price per thousand bottles which varies for that bottle according to the quantity ordered. For example, page 20 of Exhibit P1 is a memorandum dated 24 June 1998 from the defendant to the plaintiff which sets out the then applicable price list with respect to various bottles. To take the “esprit/lemon ruski 505345” bottle type as illustrative, it can be seen that if the plaintiff’s orders for the relevant period fell within zero to 4,999 units, the price charged per thousand bottles on an FOB[3] basis was $203. Pricing for larger quantities operates on a sliding scale. For example, once total purchases exceed 20,000 units for that bottle type, the price became $136.56 per thousand bottles on an FOB basis. It is not in dispute that, once the volume of acquisitions[4] of a particular bottle type enters a new price band, the price for that band will apply across all purchases of that bottle type during the relevant 12 month accounting period.
[3] Free on Board.
[4] I use the term “acquisitions” loosely bearing in mind that lying at the heart of this dispute is the question of whether in order to enjoy the reduced price, the plaintiff is obliged to enter a binding contract for, or only to order the appropriate quantity of bottles.
The parties’ practice was and is to undertake a consultation process, towards the end of each relevant 12 month accounting period, with a view to identifying any opportunities available to the plaintiff to acquire further quantities of bottles of particular types before the end of the 12 month accounting period so as to move a bottle type into a higher quantity/lower price bracket. This would generate a reduced price across all purchases of that bottle type during the 12 month accounting period in question. The resulting “credit” would then be applied to future purchases. At the end of each 12 month accounting period, or shortly thereafter, a final reconciliation is prepared by the defendant and any credit due to the plaintiff identified. This process can work the other way. Sometimes the plaintiff might be charged a price for a particular bottle type based on a forecast purchase quantity that is not met. If so, a higher price might became payable, having regard to the total amount actually taken by the plaintiff during the relevant accounting period and a credit in favour of the defendant generated.
By way of example, Exhibit P1/71 contains the price volume reconciliation statement for the period 1 January 2003 to 31 December 2003. It can be seen that, apart from some adjustments of a de minimis nature, there were two bottle types for which the predicted volume was not maintained during the year in question. For the bottle type with mould number 3507 (second entry) the predicted volume (“applied PV scale”) was between 250 and 499 thousand units. This attracted an applied price of $303.50 per thousand. However, 544,680 units of this bottle type were in fact acquired during the year in question. That meant that the final price to be charged was to be drawn from the “correct PV scale” of between 500 and 999 thousand units, that is, a price of $300.49 per thousand across the whole of the 544,680 units in fact acquired. This led to a credit adjustment in favour of the plaintiff of $1,672.13. By way of contrast, the bottle type represented by mould number 13568 (the ninth entry) was originally priced with respect to an “applied PV scale” of between 500 and 999 thousand units whereas the total, in fact, acquired during the year in question was only 463,240 units. On reconciliation this attracted a higher price in accordance with the “correct PV scale” and resulted in a credit in favour of the defendant in the amount of $1,894.69. At the end of the completed reconciliation, there was a total price volume adjustment of $222.41 in favour of the defendant.
This process has been undertaken periodically for the duration of the parties’ relationship. Initially, it was conducted on a financial year basis so that the reconciliation was done shortly after 30 June in each year and with respect to acquisitions for the preceding 12 months. However, it is common ground that in or about 2003, the practice changed such that the price volume reconciliations were thereafter conducted on a calendar year basis and a final reconciliation arrived at shortly after 31 December in any given year with respect to total acquisitions for the preceding 12 months. The dispute between the parties, the subject of these proceedings, concerns the calendar year ending 31 December 2006. The amount in dispute consequent upon the reconciliation for the calendar year 2006, is $152,736.21. Prior to that, the price volume reconciliation adjustments would appear to have been as low as $222.41 (the 2003 calendar year) and as high as $89,856.76 (the 2005 calendar year).[5]
[5] This may not be completely accurate. Item 40 in the amended chronology of key events (Exhibit P3) records that Bickfords received a credit of $188,594 for price volumes achieved during the financial year ending 30 June 2002. This entry in the amended chronology is noted in the final column as having been “agreed”. However, the tender bundle reference given is page 52 of Exhibit P1 which is correspondence dealing with the price volume reconciliation for the 2006 calendar year. I have not located documentation in Exhibit P1 which supports entry number 40 in Exhibit P3. I am not saying it is not there, just that I have not located it and that the reference provided by the parties (p 52 of P1) appears to be in error. Further, the evidence of Angelo Kotses, the Managing Director of the plaintiff, was to the effect that the claim for price adjustment made by the plaintiff for the 2006 calendar year was the largest ever claimed.
The Events of November-December 2006
I turn to a summary of the events of November and December 2006 which have given rise to the present dispute. I will need to return to these events later in these reasons.
On 17 November 2006, Carmen McMorrow, the Senior Account Manager for the defendant and who was responsible for the plaintiff’s account, met with David Watkins, the then Purchasing Manager of the plaintiff. A draft price volume reconciliation document had been, or was, made available. It dealt with actual acquisitions[6] for the January-October 2006 period and forecast acquisitions for the November-December 2006 period (P2/408). The minutes of that meeting can be found at P1/409. The purpose of the meeting was to discuss the draft price volume reconciliation document and to identify those bottle types with respect to which the plaintiff’s acquisitions for the calendar year might fall short of the next nearest price volume break that, if reached, would generate a lower price for that bottle type. For example, the minutes record that for the bottle type 15445 (mineral water) “achieving break would be dependant on [the plaintiff] taking their full forecast”. However, for bottle type 30293 (old style), the minutes record that the plaintiff would “need to take a further 950K between now and year end to achieve PV break”. For bottle type 13568 (fruit juice) the minutes record to the effect that the plaintiff was taking these bottles at a rate which would put it in a price volume category lower than that which had originally been forecast and which, if maintained, ultimately would generate a higher price to be paid for the total of these bottles taken. The minutes record “D Watkins indicated that Bickfords will remain in the lower break and pay the variance”.
[6] The terms used in the document were “actual off take” and “forecast off take”.
The plaintiff, assisted by this information, was to consider whether or not it wanted to increase the number of bottles of particular types to be acquired during the six weeks or so remaining to the end of the year, 31 December 2006. A number of commercial considerations would bear on any such decision. Naturally, the plaintiff would like, where at all possible, to attract the lowest unit price for its bottle purchases. However, it would not necessarily do this at the cost of other commercial considerations such as, its forecast use of the bottles once acquired, its capacity to store, the fact that it would incur a liability to pay the price of the bottles in advance of any projected on-sale and so on.
Carmen McMorrow and David Watkins had another meeting on 7 December 2006 (P2/415) which Carmen McMorrow described as a regular (by which I inferred that she meant routine) meeting with David Watkins to go through the issues between the parties relevant at that time.
By email directed to David Watkins of 11 December 2006, Carmen McMorrow provided a revised draft price volume reconciliation document for 2006 “covering the period of January – November 2006 actuals plus December 2006 forecast”. The document speaks for itself but the type of information provided is illustrated by the seventh dot point in the email: “5345 … Esprit-achieving PV break is dependant on Bickfords taking Dec forecast”. The terms of the email correspondence that then ensued form the basis of the dispute and, leaving aside formal parts, I set them out in full.
Email David Watkins to Carmen McMorrow 21/12/2006 05:11pm (P2/419)
Hi Carmen,
Can you please confirm if O-I are able to hold the following stock over for delivery in Jan but invoice in December.
30293 275ml Soda 459k

30140 750ml Cordial 267k

05345 300ml Esprit 382k
Please advise in the morning.
Email Carmen McMorrow to David Watkins 22/12/2006 10:12am (P2/422)
Hi David,
Standard policy is that O-I generally do not facilitate such an arrangement due to the level of manual involvement and monitoring required, particularly when we are referring to 595 pallets.
However I am pleased to advise that head office have approved this arrangement as an exception to assist Bickford’s (sic) in achieving their price volume breaks. Generally once stock is invoiced and held by O-I, a storage charge of $5.00/pallet is applicable, however this will be waivered (sic) on the basis that the agreed amount is taken in full for all containers specified below by the 31^st of January 2007.
30293 275ml Soda 459k (204 pallets)

30140 750ml Cordial 267k (239 pallets)

05345 300ml Esprit 382k (152 pallets)
David we will require Bickford’s (sic) to ensure payment of their November account in full by no later than the last day of December to ensure these transactions can take place as otherwise Bickford’s (sic) will exceed their credit limit and the invoicing for this stock will not be able to proceed.
Please advise if Bickford’s (sic) wish to proceed on the above basis.
Later that day (Friday 22 December 2006) Carmen McMorrow emailed to David Watkins further drafts or updated versions of the price volume reconciliation schedule (P2/431). The terms of this email are not directly relevant.
Email David Watkins to Carmen McMorrow 22/12/2006 03:31pm (P2/428)
Thanks Carmen. Bickford’s would love to take up the oppourtunity (sic) to store stock until 31^st Jan 07. I am working on the payment side and will confirm on Wednesday.
According to the defendant’s internal records[7], Carmen McMorrow followed up with Bickfords on Wednesday 27 December because she did not immediately receive a response to this last email. She was advised that Bickfords would confirm something on the Thursday but nothing came through.
[7] Exhibit P2/504 and see T168-169.
Email Carmen McMorrow to David Watkins Friday 29/12/2006 08:54am (P2/434)
Morning David,
The total outstanding on Bickford’s November 2006 account is $883,810.30.
Please ensure a receipt of the remittance advice is sent to our Accounts Dept today. Please address to Joanne Chafer and this can be forwarded either by email … or fax on ….
Accounts can then proceed to process any invoices and sign off on stock-holding as detailed in my email below.
With thanks,
The reference in this email to Carmen McMorrow’s “email below” is a reference to her email of 22/12/06 at 10:12am the terms of which have already been set out above and a copy of which accompanied the email of 29/12/2006 at 08:54am.
Email David Watkins to Carmen McMorrow (copied to Angelo Kotses, George Kotses and Dean Crichton, all of Bickfords) Friday 29/12/2006 10:19am (P2/436)
Hi Carmen,
I have raised purchase order[8] number PO16166 for the following:
[8] The purchase order in question, with an “order date” and a “print date” recorded as 29 Dec 06 can be seen at P2/433.
459000 275ml Old style soda

267680 750ml Bickfords cordial

382000 300ml Esprit
These numbers will get us to our volumes required to meet price points for 2006. As discussed please invoice and store on our behalf at Port Adelaide free of charge for the month of January. We will call all material in during January as confirmed.
As for account payment, I have discussed internally and we will do the following, November will be cleared 1^st Friday in Jan and Dec will be 1^st Friday in Feb. This has been our standard terms for some time and we will continue to commit to this. As our sole glass supplier we believe this arrange (sic) works well and will continue with this process. If our credit limit is an issue then this needs to be addressed as a separate issue in our next review.
Please confirm all is in place for this to happen.
Regards
Email Carmen McMorrow to David Watkins (copied to Joseph Haddad and Joanne both of the defendant) Friday 29/12/2006 11:53am (P2/437)
David
Confirming our telephone discussion.
As Bickford’s are well over their credit limit (set at $1,000,000) of which Bickford’s currently owe $1,782,418.85 we are unable to process any further invoices for December until payment is received.
I have escalated this further internally and unfortunately have not received the authority to enable Bickford’s to exceed their limit any further unless payment for November is received today.
David, please note that O-I’s Terms and Conditions of Sale in relation to payment, is that payment is to be made by the buyer within 30 days of the end of the month in which invoice was issued. A copy of these terms issued with every invoice. Whilst you indicated that Bickford’s pay on the 1^st Friday of each month, our history shows different with payment receipted any time from 12-15 days in the month.
As mentioned, it is our Year End and we are unable to process the invoices which will exceed your limit to over $2,000,000 unless payment is received today.
With thanks,
Email David Watkins to Carmen McMorrow (copied to Joseph Haddad and Joanne) Friday 29/12/2006 12:15pm (P2/439)
Carmen,
Just a few things that need to be cleared up.
Firstly, Angelo and John Loriente set up the account as it stands today and that is payment at the end of the 1^st week following month due. This has always been acceptable before and will continue.
Secondly, when we were approached to shift all our business across to ACI, no credit limit was ever tabled, if it was we have been trading outside our limit for some time and allowed to do so.
To expect payment today is unrealistic when the account is due next week. If your financial year end is causing issue, that needs to be addressed internally and not pushed onto us.
We have placed our order to take into account pricing for yearend (sic) as has been the case in years past with no request for payment. Please review this decision as a matter of urgency, should a satisfactory result not be achieved, I will have to escalate this matter with our organizations.
Please confirm the course of action O-I wish to follow.
Regards,

Email Carmen McMorrow to David Watkins (copied to Joseph Haddad and Joanne) Friday 29/12/2006 02:37pm (P2/442)
David,
Unfortunately we are able (sic) to process the pre-purchase and I will call you shortly to discuss further.
With thanks,
The word “able” in this email was a typographical error for the word “unable”. Shortly after sending this email, Carmen McMorrow did speak to David Watkins on the telephone to advise him verbally that the defendant was unable to process the plaintiff’s purchase order (Exhibit P2/433).[9]
[9] See the evidence of Carmen McMorrow at T173 and the reference to this phone call in the next email.
Email David Watkins to Carmen McMorrow (copied to Joseph Haddad and Joanne) Friday 29/12/2006 02:52pm (P2/446)
Carmen,
Thanks for the call. Unfortunately we do not accept the fact that you are unable to process the prepurchase of stock. Can you please advise who in O-I has made the decision not to authorise this and who we need to contact to clear this matter. We would like to resolve this matter today as a matter of urgency.
Regards,
This is the final written communication between the parties for the calendar year ending 31 December 2006, relevant to this issue, that is in evidence before the Court. Further correspondence on this issue occurred in the new year but, on the view I take of the matter, that correspondence is of no direct relevance. As at 31 December 2006, the parties had not reached an agreement in the sense that the defendant had purported to refuse to accept the plaintiff’s purchase order (P2/433) for various bottle types and quantities. Early in January, the defendant raised invoices with reference to and delivered relatively small quantities of some of the bottle types referred to in this purchase order and on and after 5 January, following payment in full by the plaintiff of the November outstanding balance, the remainder of the purchase order was processed by the defendant. Thereafter, the parties, essentially, have conducted their business with one another as usual.
The Plaintiff’s Case
The plaintiff’s primary contention is that, as a matter of contractual entitlement, it was sufficient for the plaintiff to raise the purchase order (P2/433) prior to the end of the price volume reconciliation accounting period in question, that is 31 December 2006, in order for it to be entitled to the price adjustment credit that this purchase order would generate. In other words, the entitlement to a price volume adjustment operated on mere orders made or raised within a calendar year and there was no need for any order to have been accepted or for any invoicing of an order or any delivery of goods to take place within that calendar year. In the alternative, and not withstanding their usual contractual terms, the parties’ conduct towards each other during November and December of 2006, in particular the email traffic set out above, gave the plaintiff a contractual entitlement to this effect for the 2006 calendar year. In the further alternative, if the express terms of the parties’ contractual arrangements were such that before any credit adjustment could arise, the defendant had to have accepted the plaintiff’s purchase order and invoiced and delivered the goods in question prior to the end of 31 December 2006, the contract contained an implied term which precluded the defendant from relying on this express contractual position. This implied term was variously expressed by the plaintiff during the trial as being either an implied term of good faith, that is, the defendant had a duty to act towards the plaintiff in good faith when working out the day to day application of the parties contractual arrangements, or the implied term referred to in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd[10] to the effect that each party agrees, by implication, to do all such things as are necessary on its part to enable the other party to secure the full benefit of the contract. Finally, the plaintiff asserted as a further alternative that the defendant was estopped from adopting the position it did with respect to the 2006 year, that is, from refusing to grant the price volume adjustment credit. Such an estoppel was said to arise because it would be unconscionable to allow the defendant to refuse the order in circumstances where it had never indicated to the plaintiff that it was subject to a credit limit and where the defendant was in breach of the parties’ contractual obligations, as to payment terms, by insisting upon the November 2006 balance being paid by 31 December 2006 rather than by the end of the first week in January.
[10] (1979) 144 CLR 596 at 607.
Two Subsidiary Issues in Contention
The correspondence during the November-December 2006 period and the oral evidence adduced on behalf of the defendant discloses that the defendant had two inter-related concerns in December 2006 which led to its refusal to accept the plaintiff’s purchase order and to commit itself to a sale of the goods referred to in that purchase order. Ordinarily, according to the defendant, orders are accepted or “offtakes” of various quantities of bottles within a particular purchase order are accepted by the defendant delivering the goods in question together with a delivery note and either at or shortly after delivery, invoicing the plaintiff for the goods as delivered. According to the defendant, it is only then that a sale has taken place and it is only then that the defendant will “book” such a sale to revenue for the purpose of its company accounts. Nevertheless, there would have been nothing to prevent the defendant from accepting the plaintiff’s purchase order and rendering an invoice or invoices for the full quantity referred to therein prior to 31 December 2006 whilst deferring delivery and storing the sold product at the defendant’s premises until the end of January 2007 so as to enable the plaintiff to take an orderly delivery of the bottles throughout January rather than all at once in the last two or three days of December 2006. It was this type of arrangement that the parties appear to have negotiated in the email correspondence but subject to the defendant’s requirement that the amount of the November 2006 account be paid in full on or prior to 31 December 2006.
The consideration which motivated the defendant to adopt the position it ultimately took was that the plaintiff’s account was in excess of the credit limit (internal to the defendant) that the defendant had assigned to the plaintiff. The defendant also maintained that there was a contractual obligation on the plaintiff to discharge the November 2006 account by the end of December 2006. In effect, before the defendant was willing to “process” or, to use contract law terminology, accept the plaintiff’s order and thereby contractually oblige itself to sell to and deliver to the plaintiff further bottles to the value of $248,616.81,[11] it required the plaintiff, in effect, to bring its account into order. If the plaintiff were to discharge the November account by 31 December 2006, the defendant would be prepared to accept the purchase order and extend the further credit required. In this respect, the plaintiff insisted that the parties’ contract provided that the plaintiff was to pay within 37 days of the end of the month in which an invoice was rendered whereas the defendant contended that payment was due within 30 days that is, by the end of the next month.
[11] This was the total payable if the purchase order at P2/433 had been accepted in full.
Ultimately, it is my view that on a proper analysis of the parties’ contractual arrangements, the defendant was at liberty to refuse the plaintiff’s order in December 2006 at will. The fact that, on the defendant’s case, the plaintiff had exceeded its credit limit, internal to the defendant, or was in anticipatory breach of the defendant’s 30 day from month of invoice payment term in so far as the November account was concerned, neither adds to nor detracts from the defendant’s entitlement or right in this respect. Nevertheless, these two issues, in particular the assertions that the defendant had no right to apply or insist on a credit limit, and had no right to insist on payment of the November 2006 account, were relied on strongly by the plaintiff in arguing that the defendant acted in bad faith and was, itself, in breach of contract. I therefore need to spend a little time in resolving these two subsidiary issues. I will deal with these matters during my discussion of the contractual terms which govern the parties’ relationship. However, before doing this, I need to say something about the witnesses that were called by each party.
The Oral Evidence
On the view I have taken of this matter, the resolution of the dispute between the plaintiff and the defendant essentially depends on the documentary evidence. I did not find the evidence given by any of the witnesses particularly helpful, other than by way of providing an understanding of the day-to-day trading arrangements between the parties and the background to the dispute in December 2006. The oral evidence trespassed at times into the territory of telling the court what a particular witness thought that a document meant or what it was intended to achieve or what that particular witness understood the terms of the contract between the parties to be and how they ought to be construed or applied. There were few factual contests, the resolution of which requires the acceptance of the evidence of one witness and the rejection of that of another. However, I did find the plaintiff’s witnesses Angelo Kotses and George Kotses (particularly the former) to be less impressive and less persuasive than each of the defendant’s witnesses Carmen McMorrow, John Loriente and Jo-Anne Chafer-Leach. Angelo Kotses, in particular, was less than helpful on many occasions throughout his evidence and deliberately so. He was evasive at times. He had a mindset that the defendant had behaved badly and had refused to accept the relevant purchase order prior to 31 December 2006 simply because it would generate a very large credit in his company’s favour. He was upset that the defendant raised the credit limit issue and insisted on payment of the November account by 31 December 2006 only within days of the relevant price volume reconciliation period coming to a close. This was seen to be opportunistic behaviour given that in previous years the plaintiff had been repeatedly meeting its payment obligations early in the second month after the month of invoice.
Angelo Kotses gave his evidence from a position of being completely persuaded in his own mind that the defendant had acted badly and that his company was entitled to the price volume adjustment credit simply upon presentation, prior to 31 December 2006, of the purchase order. His evidence was coloured by that belief and involved reconstruction and conclusions by which he asserted the plaintiff’s position. He did have a direct involvement with some of the early contractual documents but virtually no direct involvement in the negotiations that occurred in November-December 2006. Ultimately, I found his evidence to be of limited assistance. George Kotses also had no direct involvement in the negotiations that occurred during November-December 2006 but he did have a greater day-to-day familiarity with the ordering and supply activities of the plaintiff and the defendant than did Angelo Kotses.
The person, on the plaintiff’s side most involved in the November-December 2006 negotiations was a man called David Watkins. He was only with the plaintiff for a short period of time over 2006-2007. He was not called to give evidence. Carmen McMorrow was the person on the defendant’s side involved in the November-December 2006 negotiations. I found her to be an impressive witness. She generally only told the Court what she could remember about her involvement in her dealings with David Watkins. Her evidence is also helpful in explaining the background to the dispute from the defendant’s perspective and the nature of the defendant’s sales and delivery operations. However, like Angelo and George Kotses, her evidence was not particularly helpful on the issue of the terms of the parties’ contract. John Loriente also gave evidence on behalf of the defendant. I was impressed with his evidence. He had nothing to gain or lose from the outcome of this dispute. His evidence included his recollection of a conversation that he and Angelo Kotses had concerning the defendant’s standard 30 day from end of month of invoice payment term. His version of this conversation is inconsistent with the version given by Angelo Kotses and, insofar as it is necessary to resolve this factual dispute, I have a clear preference for the evidence of John Loriente. I will deal with other aspects of the evidence given by the various witnesses insofar as may be relevant during my discussion of the contractual obligations which govern the parties’ relationship.
Contractual Documentation
Exhibits P1 and P2 are two lever arch folders which contain a substantial quantity of business records which document the parties’ dealings with each other during the period 1993 to 2006 including the various price adjustments allowed based on volumes of purchases over this period. Included are various notes of meetings, emails, purchase orders, tax invoices, draft and final price volume reconciliation spreadsheets, delivery orders, statements of account and the like. Only a very small number of the documents in Exhibits P1 and P2 are of a contractual nature in the sense of identifying and recording the terms of the parties’ contractual arrangements. Rather, the vast bulk of the documentation comprises a running record of their month to month trading and the practical working out of their contractual relationship. I have considered these records. Taken as a whole, they are consistent with the defendant’s case. No documentary record has been drawn to my attention that is consistent with any price volume reconciliation prior to December 2006 having been based on product orders rather than product sales occurring within the relevant price volume reconciliation accounting period. Of course, the fact that this has been the practice is not, of itself, inconsistent with the plaintiff’s primary case that the mere ordering of product prior to the end of a price volume reconciliation (calendar year) period was sufficient to trigger the price volume adjustment process.
I turn now to consider, in chronological order, those documents within Exhibits P1 and P2 which are of a contractual nature.
Exhibit P1/1 is an application for a 30 day commercial credit account signed by Angelo Kotses on behalf of the plaintiff on 22 July 1993, when the plaintiff was trading under the name Lloyd Products Pty Ltd. An identical copy of this document but with larger print and easier to read is Exhibit D4. In addition to being an application for credit, the document also purports to set out the defendant’s “Standard Terms and Conditions of Sale”. The signature of Angelo Kotses appears immediately below a declaration that is in the following terms:
1....
2.I/We agree to be bound solely by your Terms and Conditions as detailed above and I/We further agree that any Terms and Conditions of purchase that maybe incorporated in any order, acceptance of quotation or any other document delivered by me/us, shall unless those Terms and Conditions are agreed to in writing by your duly authorised representative, have no legal effect.
3.…
4.I hereby certify that I am authorised to sign this application on behalf of the applicant.
The “standard terms and conditions of sale” set out in the document include the following:
1.     GENERAL
Any order for any product manufactured by ACI (“Product” or “Products”) placed by a buyer is deemed to be an order incorporating these terms and conditions notwithstanding any inconsistencies which may be introduced in the buyer’s order or acceptance unless such inconsistency is expressly agreed to by ACI in writing.
2.     QUOTATIONS AND ORDERS
2.1    All quotations given by ACI are subject to withdrawal or variation at any time prior to acceptance of an order from the buyer.
2.2    No order will be accepted by ACI unless an official order is received by ACI from the buyer.
2.3    No orders made by a buyer on the basis of ACI’s quotation shall be binding on ACI until acknowledged by ACI.
2.4    …
3.     PRICES
3.1    Where:
(a)an order is placed for forward delivery; or
(b)ACI is unable to effect immediate delivery in respect of any order, the order is accepted subject to price adjustment such that the order will be charged and paid for at the relevant price for the Products ordered set forth in ACI’s price list current at the time at which delivery is made.
3.2    …
4.TERMS
Payment for Products shall be made by the buyer within 30 days of the statement date.
5.     DELIVERY
5.1    …
5.2    …
5.3    ACI reserves the right to deliver in instalments, and each instalment shall be deemed to be sold under a separate contract. Failure to delivery any instalment shall not entitle the buyer to repudiate, rescind or terminate the contract.
5.4    …
5.5    …
5.6    …
6.RISK AND OWNERSHIP
6.1    The risk in the Products supplied passes to the buyer upon delivery of Products to the buyers carrier or to the buyer direct.
6.2    The ownership in the Products supplied does not pass to the buyer until the buyer has discharged all outstanding indebtedness (whether in respect of the Products supplied or otherwise) to ACI whatsoever or until such time as the buyer sells the Products to its customers in the ordinary course of business.
6.3    Until payment in full of such indebtedness has been made, the buyer acknowledges and agrees that:
(i)the Products supplied are held by the buyer in a fiduciary capacity as bailee to be sold by it as agent for and on behalf of ACI;
(ii)the buyer shall if directed by ACI store the Products supplied marked in such a way that it is clear that they are the property of ACI but all costs of storage (whether or not storage is at the direction of ACI) shall be for the account of the buyer.
(iii)if the Products supplied or part thereof have been sold by the buyer to its customers prior to payment in full of all outstanding indebtedness of the buyer, then the debts of the buyer arising from such on-sales shall be the property of ACI and shall be held on a fiduciary basis separately for its account, not mixed with the buyer’s other moneys, debts or property and payable immediately without demand. ACI has the right to trace the proceeds of any such sales in accordance with equitable principles.
6.4    …
6.5    …
7. to 11. …
12.WAIVER
The failure of ACI to exercise or the delay in exercising any right power or privilege available to it shall not operate as a waiver thereof nor preclude any other or further exercise thereof nor the exercise by ACI of any other right power or privilege.
13. to 20. …
21.IMPLIED CONDITIONS
21.1 Except in respect of conditions or warranties implied by law, which cannot be excluded or modified, all implied conditions and warranties by ACI are hereby excluded.
21.2 Except in respect of conditions or warranties implied by law for breach of which liability cannot by law be limited, liability for breach of any implied conditions or warranty by ACI other than a condition or warranty as to title, encumbrances or quiet possession shall be limited to any one of the following as determined by ACI:
(i)the replacement of the Products or the supply of equivalent goods; or
(ii)the repair of the Products; or
(iii)the payment of the cost of replacing the Products or of acquiring equivalent goods; or
(iv)the payment of the cost of having the Products repaired.
21.3 Subject to clauses 21.1 and 21.2, ACI shall not be liable for:
(i)any negligence, wrongful act or omission of ACI its servants or agents; or
(ii)any breach of these terms and conditions, whether the breach is fundamental or otherwise, by ACI, its servants or agents.

Angelo Kotses acknowledged that he signed this document on behalf of the plaintiff but told the Court that he did not read Clause 4 setting out the defendant’s payment terms of 30 days of the statement date. He was evasive and unhelpful when cross-examined on this document; it took some time for him to concede that it was an application for a credit limit of $100,000 per month. He said that he did not read the document at the time but acknowledged that he knew that the standard terms attached to the application for credit were intended to have legal effect. Whilst ultimately a question for the court, Angelo Kotses agreed in cross-examination that, according to his understanding, the defendant was not obliged to accept any order placed by the plaintiff – “their prerogative, they’re the supplier” (T35). He also said that “[the defendant has] many times not supplied us. It’s almost put us out of business” (T36).[12]
[12] An example of a refusal to supply because the plaintiff’s credit limit had been exceeded to an extent unacceptable to the defendant occurred in 2005, see Exhibit P1/332.
Before discussing the next document of a contractual nature, I need to say something about the conversation between Angelo Kotses and John Loriente, the then National Credit Manager for the defendant, that took place in 1995. This conversation occurred in Angelo Kotses’ office. It is the plaintiff’s case that it has always paid its suppliers, including the defendant, by the end of the first week of the second month after the month of invoice, that is, 37 days from the last day of the month of invoice. By way of example, if an invoice were to be issued to the plaintiff by one of its suppliers during the month of August, the plaintiff would pay that invoice by the end of the first week of October. This is a matter of convenience and importance to the plaintiff because its major customers, including the supermarkets, pay the plaintiff’s invoices within that same time frame – “when we receive payment from our customers … then we pay our suppliers” (T20). Angelo Kotses told the Court that the purpose of the meeting with John Loriente in 1995 was “to talk to us about credit”. John Loriente put to Angelo Kotses that the defendant’s standard terms required payment by the thirtieth of the month after the month of statement. Angelo Kotses said that he told John Loriente of the plaintiff’s practice and requirement and that John Loriente said words to the effect that whilst it was an unusual practice, provided the plaintiff paid by the end of the first week of that next month, it would be fine. Angelo Kotses said that he agreed to this and said to John Loriente words to the effect “I’ll pay you at the end of the first week like I pay every other supplier”.
John Loriente disagreed with this account of the conversation. He was employed by the defendant for 39 years but had been retired for five years or so as at the time of trial. For the last 15 years of his employment, and as at 1995, he was the defendant’s credit manager responsible at a group level for collections and for credit policy. He said that he had various conversations with Angelo Kotses. He denied that they reached any agreement in 1995 to vary the defendant’s usual payment terms as alleged by the plaintiff. He said this topic was discussed because payment from the plaintiff was always late. He said that even the assurance given by Angelo Kotses was not always observed and the plaintiff would have to be telephoned in order to chase up outstanding payments. On occasions, the defendant would have to send somebody around to the plaintiff to collect a cheque. He denied that he ever authorised payment being made beyond 30 days.
[T]hat is totally untrue; one, I didn’t have the authority to do it and our company policy never gave me authority. It was only the MD, I think, at the time that could give that sort of extension and non-one got it, because the minute you let one person have it word gets around. We were not flexible as far as payment terms were concerned (T195).
For the reasons earlier set out, I have a clear preference for John Loriente’s evidence over that of Angelo Kotses. I am satisfied that no binding agreement was entered into by John Loriente on behalf of the defendant with Angelo Kotses on behalf of the plaintiff for a variation of the defendant’s standard payment term of 30 days. However, it is plain from the evidence of Angelo and George Kotses on behalf of the plaintiff, and John Loriente, Carmen McMorrow and Jo-Anne Chafer-Leach on behalf of the defendant, that the defendant’s payment term of 30 days was rarely, if ever, observed by the plaintiff. It is possible to get a general understanding of the plaintiff’s payment history from the primary records in Exhibits P1 and P2. The parties made various submissions in this respect with reference to a written submission provided to the court in a document headed “Payments Schedule” (MFI P14). Precise findings in this respect are not possible, in part because for substantial periods of the parties’ relationship, payment was made by cheque and there is insufficient evidence before the court as to when the defendant received cleared funds. In later years payment has been made by way of electronic funds transfer and it is easier to ascertain the date or dates upon which the defendant received cleared funds. It is not important to make precise findings as to when, on each occasion a payment was made by the plaintiff, the funds were actually received by the defendant. However, what is clear is that the plaintiff repeatedly and almost without exception paid outside the 30 day payment term insisted upon by the defendant; sometimes within, but sometimes later than, the 37 day period relied upon by the plaintiff.
John Loriente was asked in his evidence in chief, why the defendant tolerated late payment by the plaintiff. He said this (T197):
Well if its only a few days late, I mean one – I mean you wouldn’t stop delivering to a customer if he was – they were only one or two days late. No-one issues – its no good issuing a writ because you have to give 30 days notice before you can take action. It was all futile. All we had to do was try and convince him to pay on time and he said it wasn’t possible. So, you know, we were in a bit of a bind. What do you do? Do you say to him you don’t want to trade with him anymore, just for the sake of a few days? But it was perhaps tolerated but was never accepted and that was, you know, repeated to him over and over again.
I am satisfied that no oral or written variation to the defendant’s payment term was ever agreed to. However, the defendant’s term was rarely, if ever, observed by the plaintiff and not enforced by the defendant, other than by extra curial methods. John Loriente indicated that if a delay in payment was sufficiently late, the defendant might refuse further supply until a payment was made and this appears to be consistent with Angelo Kotses’ evidence to the effect that the defendant had many times not supplied the plaintiff.
In July of 1997, the parties entered into another agreement with the heading “Agreement between [defendant] and [plaintiff] for three years, from 1 July 1996 to 30 June 1999”. The document is to be found at Exhibit P1/6-15. It is undated (other than adjacent to one of the signatures) but the parties are in agreement that it was entered into in July of 1997 (see amended chronology of key events, Exhibit P3). The agreement was signed by Angelo Kotses on behalf of the plaintiff. The document sets out the basic terms upon which the plaintiff and defendant agreed to deal with each other during the period 1 July 1996 to 30 June 1999. The agreement makes provision for the plaintiff to purchase its requirements of glass containers from the defendant during the period in accordance with invoice prices quoted by the defendant and listed in schedule 1 to the agreement but subject to amendment in accordance with the terms of the agreement. It also contains the following provision:
3.3Debit/credit adjustments by Container, based on applicable volume scales (set out in schedule 1 (as amended from time to time)) for actual quantities supplied in each Agreement Year will be made by 30 July immediately following that Agreement Year.
The agreement also provides for a “Growth Incentive Rebate” scheme which enabled a rebate of price to be made to the plaintiff based on total purchases. It is unnecessary to explore in any detail the terms or basis of this scheme. It ran concurrently with the price volume adjustment scheme for only a few years. The growth incentive rebate scheme did not continue after 1999.
This agreement also includes provisions dealing with “stock and forecast management” which, together with clause 3.3 (above), would appear to have been the genesis of the price volume adjustment practices observed by the parties during the period of their relationship which already has been described.
This agreement of July 1997 contains the following clauses:
10. Terms and Conditions of Sale
10.1 [the defendant] shall supply according to, and [the plaintiff] agrees to be bound by, [the defendant’s] Standard Terms and Conditions (a copy of [the defendant’s] Standard Terms and Conditions current as at the date of this Agreement which is (sic) set out in schedule 3). In the event of any inconsistency, the provisions of this Agreement shall prevail.
10.2 Subject to sub-clause 10.3, [the plaintiff] acknowledges that [the defendant’s] Standard Terms and Conditions may be amended from time to time by [the defendant] in its sole discretion and upon [the defendant] providing to [the plaintiff] a copy of any amended Standard Terms and Conditions, those amended Standard Terms and Conditions shall be deemed to constitute schedule 3.
10.3 [the plaintiff] shall not be bound by any change to [the defendant’s] Standard Terms and Conditions, to the extent that the change would in the opinion of [the defendant] and [the plaintiff] result in a material change to a material term of this Agreement.
There is also a term (clause 13) to the effect that the terms of the agreement were not to be varied except by an instrument in writing signed by both parties and a term (clause 14) to the effect that the failure of either party to exercise or any delay in exercising any right under the agreement was not to operate as a waiver of that right and that any waiver by a party must be in writing and signed by that party.
The copy of this agreement as set out in Exhibit P1/6-15 does not have attached to it a schedule 3 containing the defendant’s then Standard Terms and Conditions.
I again interrupt this consideration of the contractual documents to refer to a meeting between Angelo Kotses and James Tan, another employee of the defendant, which meeting took place on 6 October 1997. This also occurred in Angelo Kotses’ office and was again an occasion when the defendant, this time through James Tan, raised with the plaintiff that it was operating outside of the defendant’s payment terms. According to Angelo Kotses, he told James Tan of the “agreement” that had been reached with John Loriente. James Tan did not raise this issue again with Angelo Kotses. There is a documentary record of this meeting; a file note prepared, it would appear, by James Tan and set out in Exhibit P1/16-18. James Tan was not called to give evidence but the file note, apparently signed by Mr Tan, records the following with reference to this issue:
6. Finance
Angelo was disappointed with ACI’s request for early payment. He believes Lloyd Products only need to settle payment on the Friday of the first week following month end. James will speak to J Loriente/B Foley.
The evidence with respect to this meeting is not sufficient to enable an inference to be drawn that the defendant, in 1997, agreed with Angelo Kotses’ assertion that an agreement had been reached with John Loriente. It is simply another illustration of the long running “battle” between the parties concerning timely payment of the defendant’s accounts.
The next document of potential significance in Exhibit P1 is that at pages 20-21. It is a memorandum addressed to Angelo Kotses from Bernard Heaphy, an employee of the defendant, dated 24 June 1998. The memorandum records the proposal of an agreement to supersede “the current agreement between Lloyd Products Pty Ltd and ACI Operations Pty Ltd which was intended to run from 1 July 1996 to 30 June 1999”. The new agreement was intended to be for the period 1 July 1998 to 30 June 2001. The memorandum deals with a revised price volume scale designed to encourage growth. A copy of Angelo Kotses’ response to this memorandum is to be found at Exhibit P1/22 and is dated 28 June 1998. Neither of these documents purport to vary the terms and conditions of sale then existing between the parties nor the basis upon which the price volume reconciliation scheme then in place was operating.
The next document of significance is a facsimile transmission from Bernard Heaphy on behalf of the defendant to George Kotses and copied to Angelo Kotses, dated 15 July 1999. The document encloses “a copy of our standard terms and conditions of sale” (Exhibit D9). The standard terms and conditions of sale included in Exhibit D9, at least insofar as they concern the offer/acceptance (formation of contract) process, terms of payment, risk and ownership, questions of waiver and implied terms, are in materially the same form as those attached to the 30 day commercial credit account and set out above. Both George Kotses and Angelo Kotses recall having received this document at the time (T45, T109 respectively). George Kotses could not recall if he read through the standard terms and conditions at the time.
On 21 September 2000, the defendant again wrote to George Kotses enclosing a document setting out the defendant’s revised terms and conditions of sale (Exhibit P1/49-50). Again, the revised terms and conditions of sale are materially in the same form as those attached to the 30 day commercial credit application and set out above. The letter from the defendant enclosing a copy of the revised terms and conditions also asked for a signed written acknowledgement to be returned to the defendant in the terms “we have read the attached terms and conditions of sale and agree to comply with them in respect of all transactions entered into between our company and ACI Operations Pty Ltd”. George Kotses does not recall receiving this letter (T111). However, Angelo Kotses does recall his attention being drawn to this letter and the enclosed terms. He said this during examination in chief:
That was the time that GST was brought in and again I had no need to change the agreement that we had [with John Loriente] (T27).
In cross-examination, Angelo Kotses agreed that he deliberately decided not to sign this document (T43-44, 62-63).
There are no other documents, in evidence, that purport to constitute a written contractual agreement between the parties. However, I am satisfied that each time the defendant issued an invoice to the plaintiff, the defendant’s “standard terms and conditions” appeared on the reverse side of the invoice. The standard terms and conditions on the reverse of the invoices in evidence also are not materially different from those in the 30 day credit application and set out above. Exhibit D7 provides a number of example invoices with standard terms and conditions attached. The front page of each invoice records “terms of payment net one month – from month end” which is consistent with clause 4 of the standard terms and conditions. By way of contrast, every one of the plaintiff’s purchase orders, of which there are numerous examples throughout Exhibit P1, stated at the top right hand side, “Terms 37 days end of month”.
Conclusions as to the Contractual Terms upon which the Parties dealt with one another
As far as individual transactions are concerned, the following documentary process routinely was engaged in prior to December 2006. With reference to the annual forecast of purchases by the plaintiff and the defendant’s price list each as applicable from time to time, the plaintiff would issue a purchase order setting out the type and quantity of bottles ordered, the applicable unit price and the total value of the purchase order inclusive of GST. The purchase order contained on its face, consistent with the plaintiff’s position throughout, the words “terms 37 days end of month”. The plaintiff also engaged in a “call up” process. It did not necessarily want all of the product in a particular purchase order to be delivered at the same time. Exhibit D5 is an example of a call up document provided by the plaintiff to the defendant containing requested delivery times. (See generally George Kotses at T111-112).
Ordinarily, the defendant responded with a document called “order receipt”. An example of this document is Exhibit D12. The order receipt refers to the purchase order date and states “we are pleased to confirm receipt of your order for the following products:”. The words “receipt of your order” are printed in bold. The order receipt includes a description of the relevant product and quantity, shipping or carrier details and proposed delivery dates and times. The order receipt concludes with the following:
For each delivery please check the audit quantity against the confirmed quantity to identify those items which are not yet fully confirmed.
We will contact you again once product availability can be FULLY CONFIRMED.
If there are any queries contact us on …
(emphasis in the original).
At the bottom of the order receipt document and in bold are the following words:
These goods are sold subject to the terms and conditions of sale.
When it came time for delivery, the goods as delivered would be accompanied by a delivery advice. An example of a delivery advice is at Exhibit P1/153. The delivery advice refers to the customer order number and date and the defendant’s order number. It records the particular items as delivered and has provision on it for a customer to sign acknowledging receipt of the goods. The delivery advice also contains at the foot of the document the words (in capitals):
These goods are sold subject to the terms and conditions of sale.
Shortly after delivery of a particular batch of goods as ordered, the defendant forwards to the plaintiff a “tax invoice” setting out the items delivered with reference to the plaintiff’s purchase order and the defendant’s delivery documentation together with the price payable. The tax invoice also has at its foot the words (in capitals):
These goods are sold subject to the terms and conditions of sale
As already noted above, each invoice has the defendant’s “standard terms and conditions” printed on its rear. It was George Kotses’ experience that the tax invoice was posted by the defendant to the plaintiff after delivery (T112-113).
It was the defendant’s practice to issue an “account statement” to the plaintiff each month setting out the state of the running account between the parties. By way of example, the account statement at Exhibit P2/392 sets out the state of the running account between the parties as at 28 February 2006. It records that during the period of 1 February 2006 to 28 February 2006, an amount of $794,875.37 was received from the plaintiff. It then lists a large number of “open items” as at 28 February 2006 being various sales and deliveries made but still not paid for. On this example account statement, the balance owing as at 28 February 2006 is $839,512.55. Recorded near the top of the front page are the words “terms of payment: net one month – from month end”. On the defendant’s case, the plaintiff was obliged to clear that amount of $839,512.55 on or before 30 March 2006.
I leave undecided for the present the question of whether or not the plaintiff was subject to a credit limit and whether or not it was contractually entitled to pay the defendant’s monthly accounts within 37 days of the end of the month of statement.

In situations such as this, traditional offer and acceptance theory is an analytical tool of limited utility.[13] Often,
it is relevant to ask: In all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would [reasonable persons in the position of the parties] think as to whether there was a concluded bargain?[14]
[13] See the discussion by Heydon JA as he then was in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 at [71]-[81].
[14] Brambles at [81].
In my view, the parties, early in their relationship, negotiated a relatively straight forward arrangement; an “umbrella” agreement - to use the term referred to in submissions by counsel for the defendant - pursuant to which they agreed, in advance, the terms upon which any sale and purchase transactions would be entered into. They adopted a set of terms which, subject to variation from time to time thereafter, would govern their dealings with one another. Initially, those terms were set out in the credit application agreed to by Angelo Kotses (P1/1). Essentially those same terms and conditions applied, as varied from time to time, throughout the parties’ relationship. The defendant repeatedly presented its standard terms and conditions to the plaintiff and at no time did the plaintiff indicate by its words or actions, or in any written document that those terms of trade (save for the term as to payment) were not acceptable to it. I accept that, when the defendant sent revised standard terms and conditions of sale to the plaintiff in September 2000 (Exhibit P1/49) and requested a signed acknowledgement by the plaintiff, no such signed acknowledgement was forthcoming. Strictly, it may be that any “offer” to change the terms pursuant to which the parties dealt with one another would not be binding unless and until an acceptance of that offer was communicated by the plaintiff to the defendant. However, the parties continued to enter into transactions and the defendant repeatedly thereafter provided a copy of its standard terms and conditions attached to invoices. Still leaving aside for the moment, the term as to payment, I am satisfied that by its course of conduct the plaintiff accepted the revised terms and conditions as governing each purchase transaction undertaken. In any event, even if these revised terms and conditions did not come into effect, this would simply have left the previous form of the terms and conditions in place which, as I have earlier indicated, at least in so far as the issues between the parties in this trial are concerned, show no material variation.
In short, the parties by their conduct adopted the defendant’s written terms and conditions in force from time to time as the basis of the numerous sale transactions entered into during the long period of their relationship. The written terms and conditions, as varied from time to time, have the following effect:
(i) Notwithstanding that the plaintiff routinely forecasts the bottle types and quantities of bottle types it expects to order on a rolling 12 month basis, it is not obliged to place any orders nor is the defendant obliged to accept any orders.
(ii) Any orders placed by the plaintiff are simply orders in the sense of an offer to purchase and the plaintiff has no contractual entitlement to acquire any particular bottle type or quantities thereof unless and until an order is accepted by the defendant.
(iii) In the event that an order is accepted by the defendant, a contractual obligation by the plaintiff to purchase and a contractual obligation by the defendant to sell the items so ordered arises, for a price determinable in accordance with the defendant’s then existing price list.
It follows that when ascertaining whether or not the defendant was contractually entitled to behave as it did in November-December 2006, the starting point is that, under the “standard terms and conditions” of contract governing the parties’ relationship, the defendant was always at liberty to refuse to accept a purchase order presented by the plaintiff.
Apart from Exhibit P1/6, there is no document which might be read as setting out the written terms of the price volume reconciliation process conducted by the parties throughout their relationship. However, it is not in dispute that each party enjoyed from time to time a contractual entitlement to a price volume reconciliation adjustment in its favour on the basis and in the circumstances as summarised earlier in these reasons. However, the plaintiff maintains that it was entitled to such a price volume reconciliation adjustment for the period ending 31 December 2006 merely on the basis that it had issued a purchase order (P2/433) on 29 December 2006 pursuant to which it ordered bottles to the value of $248,616.81 inclusive of GST.
On my analysis of the “umbrella” contractual terms governing the parties’ relationship, the mere issue or delivery of the purchase order on 29 December 2006 was not sufficient to give rise to a contractual entitlement in the plaintiff to the purchase of the bottles referred to therein. That purchase order, or offer to purchase, still needed to be accepted by the defendant before any sale of goods contract would arise. At a minimum, the defendant had to have communicated to the plaintiff either an oral or a written acceptance of that offer to purchase.[15] No oral acceptance was forthcoming and nor did any document issue from the defendant that might be construed as an unconditional acceptance of that offer prior to 31 December 2006. In my view, the plaintiff did not have a contractual entitlement to purchase the bottles identified in the purchase order at Exhibit P2/433 prior to the closure of the accounting period relevant to the 2006 price volume reconciliation arrangements, that is, 31 December 2006.
[15] I do not need to decide at which point in the typical process undertaken, as summarised above, binding contractual obligations ordinarily would arise. However, and recognising that I have not heard full argument on this issue, it is arguable that the defendant’s “order receipt” document, by its terms, was insufficient to constitute an unconditional acceptance of the plaintiff’s purchase order offer and that acceptance would not occur, ordinarily, until delivery.
That does not necessarily mean that the plaintiff was not entitled to enjoy the benefits of a price volume reconciliation based on the mere issue of the purchase order. The defendant’s “umbrella” standard terms and conditions do not set out the terms and conditions governing the price volume reconciliation process. This process whilst early on based, to some degree, on the terms of Exhibit P1/6-15, developed essentially as a matter of practice between the parties. Nevertheless, the plaintiff has not identified for the court any document which supports its assertion that the mere issue of a purchase order is sufficient to trigger a price volume reconciliation process nor has the plaintiff given evidence of any oral agreement to this effect. The practice of the parties would appear to have been to the contrary. Prior to December 2006, all price volume reconciliations had been based on completed sales for the relevant 12 month accounting period.
George Kotses gave this evidence during his examination in chief (T108):
Q:In previous years, what did you do, what did Bickfords do to achieve the price break volume discounts in previous years?
A:We needed to order the additional glass if we were short and we would place a purchase order to achieve that objective.
Q:Prior to December 2006, where you ever advised by Bickfords that in order to get the discount or the price volume rebate discount that you had to receive an invoice before the end of the year?
A:From O-I? No.
Q:Did anyone from ACI or O-I before December 2006 ever advise you that the goods had to be delivered to Bickfords before the end of the year, before you could get a discount?
A:It was normal practice; in this particular case it was a separate incident.
Q:So you’re saying it was normal practice for it to be delivered.
A:It would be cleaner in normal circumstances, but it wasn’t official that you had to call in the glass.
(emphasis supplied)
Angelo Kotses, after an introductory observation by me, gave this evidence in chief (T26):
HH:… [S]o far I have heard that his expectation was “if we put an order in before 31 December, then we expect to get the price discount.” I haven’t heard that, in fact, he put in an order … and got a price discount.
Q:In previous years, besides 2006 when you put the purchase order in in December, did ACI invoice you before the end of the year?
A:Yes, they did.
Counsel for the plaintiff then left this topic. Indeed, David Watkins, as part of his request in December 2006 that the defendant defer delivery until January 2007, asked the defendant to “invoice [the plaintiff’s order] in December”.
To construe the parties’ contractual arrangements in such a way as to lead to the result that the plaintiff could attract a price adjustment in its favour across all purchases made during a given 12 month period by simply ordering product within days of the end of the relevant accounting period makes little commercial sense. The very understanding behind the parties agreeing to the “umbrella” terms to apply if and when sale of goods contracts were to be entered into is a mutual recognition that the parties’ own respective commercial considerations will govern, from time to time, the decision of the plaintiff what to order and the decision of the defendant whether or not to accept an order. The construction advocated by the plaintiff would lead to the surprising position whereby the plaintiff could lodge a huge order towards the end of the accounting period in question concerning all bottle types and thereby attract to itself the cheapest price band available for all of the product it had previously purchased during that accounting period whilst at the same time admitting of the possibility that the defendant might refuse to accept the order. There is nothing in the documentation or the oral evidence before the court that gives any support to a conclusion that the parties entered into such a non-commercial arrangement.
I am satisfied that, subject to any variation that may have been agreed to in the email correspondence, the price volume reconciliation for the 2006 calendar year depended on, at a minimum, the plaintiff’s purchase order (offer to buy) having been accepted by the defendant and that acceptance communicated to the plaintiff prior to the close of the relevant accounting period.
On my findings concerning the parties’ dealings with one another in December 2006 (below) this is sufficient for me to reject the plaintiff’s primary contention in this matter. It is unnecessary for me to decide whether or not, acceptance of the plaintiff’s offer, whilst essential, was also sufficient to trigger the price volume reconciliation adjustment. However, my analysis to this point is consistent with the initial formation of the scheme in clause 3.3 of Exhibit P1/6. Clause 3.3 would appear to have required more than mere acceptance:
Debit/credit adjustments … based on applicable volume scales … for actual quantities supplied in each Agreement Year will be made …
(emphasis supplied)
Furthermore, the experience of the parties as indicated in the evidence of George and Angelo Kotses was that delivery (George) and invoice (Angelo) typically occurred before the close of the relevant accounting period. Whilst the agreement entered into in July 1997 (P1/6-15) appears to have expired on 30 June 1999 by effluxion of time, the available inference to be drawn from the parties’ conduct thereafter is that they continued to observe the process established by clause 3.3 when conducting the price volume reconciliation process. In my view, clause 3.3 and the parties’ ensuing conduct remains the best evidence of the parties’ agreement with respect to this issue such that delivery within the relevant accounting period is required.
The November-December 2006 negotiations revisited
The plain reading of the email traffic between the parties, set out earlier in these reasons, is that the defendant at no time unconditionally accepted the plaintiff’s offer to buy as constituted by the purchase order at Exhibit P1/433. Prior to the issue of the purchase order, the plaintiff asked the defendant if it would be prepared to invoice in December a substantial quantity of stock sought to be acquired but to store the stock at the defendant’s premises for delivery in January 2007. The defendant indicated that an arrangement along those lines could be reached, as an exception to its usual practice, but imposed the condition that it would require payment of the November 2006 account in full by no later than the 31^stday of December. The defendant advised the plaintiff that the total amount outstanding for the November 2006 account was $883,810.30 (P2/434). Thereafter the negotiations broke down. By the afternoon of 29 December 2006, the defendant was in receipt of the purchase order at Exhibit P1/433 but had made it clear that this offer to purchase would not be accepted by the defendant unless and until its condition that the November 2006 outstanding balance be discharged was met.
The question might arise as to whether or not the parties entered into an enforceable contract of sale, the performance of which by the defendant, was subject to compliance by the plaintiff with the condition that it discharge the November account before 31 December 2006. Ordinarily, a court is more inclined to construe conditions of this nature as precedent to the performance rather than the formation of a contract.[16] However, in this case the natural and commercially sensible reading of the correspondence suggests a condition precedent to formation. The plaintiff at no time agreed to abide by the defendant’s requirement and the defendant’s intention was made clear that only once payment was received, would it “ensure this transaction can take place” and proceed with “processing of invoices”. The email correspondence discloses a clear failure to accept and ultimately a rejection of the plaintiff’s offer to purchase.
Was the Defendant Entitled to Refuse to Accept the Plaintiff’s Offer?
[16] See generally the discussion in Contract Law in Australia Carter Peden and Tolhurst 5th Ed. LexisNexis Butterworths at [13-16] – [13-19].
On the identification of and construction of the contractual terms existing between the parties that I have adopted, the defendant at all times, was entitled to refuse the plaintiff’s offer to purchase. Ordinarily, it could do so for any reason whatsoever. Notwithstanding that the parties had a long history of regular and routine trading, the plaintiff was not obliged to purchase bottles and neither was the defendant obliged to sell them. The fact that the parties habitually traded with one another does not of itself lead to a variation in the overarching contractual terms that regulated their relationship. The defendant had a reason for refusing the plaintiff’s offer on this occasion; the plaintiff had been trading at a level well beyond the defendant’s internal credit limit assigned to the plaintiff. It was for this reason that the defendant insisted upon compliance with what it understood to be the contractual payment term, namely that the November 2006 account be cleared by 31 December 2006. If the plaintiff were to do this, its account with the defendant would then be within the (internal) credit limit acceptable to the defendant even once further credit in the amount of $248,616.81, as sought in the purchase order at Exhibit P1/433, were to be extended.
According to the evidence of Carmen McMorrow, which I accept, the internal credit limit set for the plaintiff which guided the defendant’s decision making as to whether or not to accept purchase orders, was $1 million at any given time. However, the plaintiff had been allowed to exceed that credit limit and to do so routinely. As at late in December 2006, the plaintiff owed the defendant approximately $1.78 million. Acceptance of the purchase order at Exhibit P1/433 would have meant that, as at the end of December 2006, the plaintiff would have been indebted to the defendant for an amount in excess of $2 million. However, if the November account were to be discharged, the plaintiff’s indebtedness after acceptance of the purchase order, whilst still in excess of $1 million, would then be well under $2 million and within a trading range that had been permitted to the plaintiff for quite some time.
The evidence of Jo-Anne Chafer-Leach, which I accept, was to the following effect. The plaintiff’s credit limit in 2006 was $1 million. The defendant’s computer system was programmed to require her to “manually release” that is, give permission for, any order that would place a customer beyond their credit limit. This self imposed requirement to flag and manually authorise any such transaction was part of the defendant’s reporting requirements imposed on it by its USA parent. Jo-Anne Chafer-Leach said that, in December 2006, she told Carmen McMorrow that if the plaintiff’s purchase order at Exhibit P1/433 were to be accepted, it would take the plaintiff well beyond its credit entitlement unless “our payment” was received before the end of the month. Whilst the plaintiff’s trading range remained between $1 million and $2 million, approval had routinely been forthcoming from higher management and notwithstanding the plaintiff’s credit limit of $1 million. However, where acceptance of an order would extend the plaintiff’s credit beyond $2 million approval had to be obtained from the defendant’s Chief Financial Officer, Mr Neil Cooper. This approval was not forthcoming in December 2006.
The plaintiff maintains that it was not on notice that its credit limit was $1 million. Angelo Kotses said that prior to December 2006, he had not been advised of any credit limit. None of the defendant’s witnesses said in evidence that they had told the plaintiff about or explained the nature of the defendant’s credit policy. Even if the plaintiff was not on notice of its applicable credit limit, this would not, of itself, mean that the defendant was obliged to accept any purchase order. However, I am satisfied that the plaintiff was on notice that the defendant operated its business with reference to a credit policy, and whether or not it was aware, at any given time, what its credit limit was.
(i) the proposition is so self evidently likely that a person in the position of Angelo Kotses with his commercial experience must have assumed as much.
(ii) Angelo Kotses signed an Application for a 30 Day Commercial Credit Account in July 1993, Exhibit P1/1.
(iii) George Kotses received an email from Carmen McMorrow as recently as 12 December 2005 (P1/332) with reference to “Payment of the October Account” which stated, inter alia, “… all orders have been blocked … due to credit limit being reached.”
Related to the credit limit issue is the question of what was the parties’ agreement concerning the time of payment. Insofar as it is necessary to decide this issue, in my view, for each sale transaction entered into the defendant’s payment term and not the plaintiff’s (“37 days”) term applied. Clause 1 of the defendant’s Standard Terms and Conditions provides:
Any order … placed by a buyer is deemed to be an order incorporating these terms and conditions [that is, including clause 4 – “payment for products shall be … within 30 days of the statement date”] notwithstanding any inconsistencies which may be introduced in the buyer’s order … unless such inconsistency is expressly agreed to by [the defendant] in writing.
I accept that as a matter of logic and contract principle, this clause cannot, of itself, operate to prevent the parties from reaching agreement in the future as to a variation of the standard terms and conditions, whether in writing or orally or by conduct. Any contract can subsequently be varied provided that the requirements for a valid and enforceable contract are met. However, the oral evidence on both sides and the documentary evidence supports a finding that at no time during the parties’ relationship did either party expressly concede the other’s position. The plaintiff continually paid outside the defendant’s 30 day time frame and the defendant routinely agitated for prompter payment. In the absence of any such express agreement by the defendant, its payment term remained in force unless an implied agreement to the contrary could be inferred from its conduct.

Consistent making and receipt of late payment, on its own, does not suffice.[17] The plaintiff could hardly arrogate to itself a more favourable term by continually refusing to observe the less favourable term previously agreed to by it. As John Loriente pointed out, what choice did the defendant have? In any event, the plaintiff’s late payment was plainly a source of ongoing tension and can be regarded as having been accepted under protest. I accept that each purchase order, once accepted, generated a separate contract and once payment for a particular order was received, whether or not late, the parties’ respective contractual obligations (apart from any enduring warranties as to quality and the like) were discharged.
[17] See for example, Industrial Rollformers Pty Ltd v Ingersoll-Rand (Australia) Ltd [2001] NSWCA 111 at [142].
Nevertheless and notwithstanding the inclusion on the plaintiff’s purchase orders of “Terms 37 days end of month” the defendant responded on each occasion with an “order receipt” and a “delivery advice” both of which drew attention to the defendant’s “terms and conditions of sale” and with an invoice containing its standard terms and conditions. That the defendant intended to transact on this basis only was clearly indicated to the plaintiff prior to each time it proffered a new purchase order and on every occasion that the defendant accepted a purchase order. The defendant’s term as to payment had been agreed upon initially. Thereafter, the plaintiff repeatedly “offered” to deal on a different basis. This was never agreed to by the defendant; no acceptance of the proposed variation to the “umbrella” terms was ever communicated to the plaintiff by the defendant by its conduct or otherwise.
Notwithstanding the above finding, I will assume for present purposes that the plaintiff was contractually entitled to pay the November 2006 outstanding amount by the end of the first week in January. Even so, this would not affect the contractual analysis, set out above, concerning the November-December dealings. The defendant was at liberty to refuse the order for any reason. It did so because it was not prepared to extend further credit. In a sense, it offered the plaintiff a life line – pay off the November statement and further credit will be extended. It cannot be said that in making it a condition that the plaintiff had to discharge the November statement early (on the plaintiff’s case) the defendant was acting in breach of contract. The plaintiff had a commercial choice about when to pay and it exercised that choice. It never had and was never deprived of an unconditional entitlement to have its purchase order at Exhibit P1/331 accepted.
Implied Term that the Defendant would act in Good Faith
The manner by which the plaintiff articulated its case under this heading is not entirely clear. This aspect of the plaintiff’s alternative case is pleaded in its Reply to the defendant’s Further Amended Defence.[18]
[18] No issue has been taken that this pleading should have been included in an amended statement of claim rather than the reply.
By paragraph 5 of the Reply, the plaintiff pleads:
5.     In the alternative … the plaintiff says:
5.1    It was an implied term of the Supply Contract that the defendant would act reasonably and in good faith so as to enable the plaintiff to obtain (or, in the alternative, so as not to deprive the plaintiff of) the benefit of the supply contract, including the ability to order additional stock following the annual reconciliation discussion thereby bringing the plaintiff within a particular price volume bracket.
5.2    The said term was to be implied as a matter of law.
5.3    The defendant’s conduct in refusing to accept the plaintiff’s 29 December 2006 order was a breach of this implied term.
5.4    By reason of this breach of implied term, the plaintiff suffered loss and damage in the amount of the credit amount pleaded in the Amended Statement of Claim.
The term as pleaded is not of a form conventionally implied into a commercial contract “as a matter of law” as pleaded in paragraph 5.2 of the Reply. The term as pleaded seems to be a variation of or amalgam of the Secured Income term (see above) and/or the term sometimes said to be implied in a commercial contract to the effect that each party owes a duty to act in good faith both in performing obligations imposed and in exercising rights granted by the contract.[19]
[19] See the reference to this notion and the various authorities cited relevant thereto by Allsop P with whom Ipp JA and Macfarlan JA agreed in United Group Rail Services Ltd v Rail Corporation NSW (2009) 74 NSWLR 618 at [58].
The other difficulty arising from the plaintiff’s pleading at clause 5 is that the plaintiff maintains that the implied term (whatever its form) is part of the “Supply Contract” as previously defined in the Amended Statement of Claim. The “Supply Contract” is defined in clause 5 of the Amended Statement of Claim in the following terms:
In or about 1996 or 1997, [the plaintiff] and [the defendant] entered into a contract for [the defendant] to supply [the plaintiff] with glass bottles. [The defendant] continues to supply glass bottles to [the plaintiff] in accordance with the terms set out in paragraph 7 below.
Paragraph 7 of the Amended Statement of Claim sets out a number of asserted terms of the “Supply Contract” dealing with the following concepts: an obligation on the defendant to supply the plaintiff with a schedule of prices for each year, an obligation on the plaintiff to nominate volumes of anticipated purchases for the calendar year, terms summarising the price volume reconciliation process and the obligation on the plaintiff to pay its monthly account on or about the first Friday in the second month following the month of invoice. By its pleading, the plaintiff has purported to identify one contract which on the plaintiff’s case has governed the whole of the parties’ relationship since in or about 1995. In its pleading, the plaintiff has not referred to any of the contractual documentation discussed above in these reasons apart from selected emails and minutes of meeting. In particular, no reference is made in the pleading, insofar as it identifies the alleged terms of the “Supply Contract”, to the documents at Exhibit P1/1-5, P1/6-15, P1/49, Exhibit D9, and the defendant’s invoices such as those at Exhibit D7. The analysis of the parties’ contractual arrangements adopted by me, as set out above, is contrary to the plaintiff’s allegation of a ‘Supply Contract’. I have found that the parties entered into an “umbrella” agreement or arrangement, the terms of which varied from time to time, although not in any way material to the issues in this case, pursuant to which the parties agreed upon the contractual terms that would govern individual contracts for the purchase and sale of bottles thereafter entered into.
It is conceivable, that either the umbrella contract or each of the individual purchase and sale contracts might contain an implied term along the lines propounded by the plaintiff. However, any such implied term would have to pass through the eye of clause 21 of the Standard Terms and Conditions. Clause 21 in its original form has been set out above. However, as at 21 September 2000 or thereabouts (P1/49-50), clause 21 had been redrafted and took an expanded and arguably more onerous, vis a vis the plaintiff, form. Clause 21 remained in the form set out at Exhibit P1/49-50 until at least January 2007 (see D7). There is no room for any implied term to form part of either the umbrella agreement or any of the individual transaction agreements save for one of a type expressly contemplated by clause 21.
However, clause 21, certainly in its form as set out in Exhibit P1/49-50, does not by its terms expressly purport to exclude an implied term in the nature of that relied upon by the plaintiff. Ordinarily, exclusion clauses will be read strictly against the party responsible for the drafting of the clause although the modern practice, at least where commercial contracts between parties of apparently equal bargaining power are concerned, is to allow such clauses to operate in accordance with their natural and ordinary meaning. In Darlington Futures Ltd v Delco Australia Pty Ltd[20] the High Court observed:
The interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentum in case of ambiguity.
[20] (1986) 161 CLR 500 at 510.
Clause 21 in its form applicable as at December 2006 purports to exclude implied terms conditions or warranties “in relation to the sale or supply of goods or services …” [clause 21.1] and “relating in any way to any goods or services supplied …” [clause 21.2]. In my view, the natural and ordinary meaning of these words is not such as to embrace an implied term of the nature propounded by the plaintiff. I am satisfied that under its proper construction, clause 21 in the form it was in in December 2006, does not stand in the way of either the Secured Income term which term ordinarily would be implied into all contracts as a matter of law or the implication of a term that the parties are to exercise good faith when performing obligations or exercising rights under their contractual arrangements, to the extent that such a term might otherwise be implied as a matter of law into the parties’ arrangements.
There is no scope for any implied term to be included in any purchase and sale contract based on the purchase order at Exhibit P1/433 for the simple reason that no such contract came into existence prior to 31 December 2006. Any implied term as relied on by the plaintiff, could only be part of the “umbrella” agreement entered into by the parties and designed to regulate each sale and purchase contract ultimately entered into.
The Secured Income implied term is to the effect that each party agrees to do all things as are necessary on its part to enable the other party to have the benefit of the contract. An understanding of how this term is intended to operate can be obtained from the observations of Mason J (as he then was)[21]:
But it is common ground that the contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract. As Lord Blackburn said in Mackay v. Dick:
“as a general rule … where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agree to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.”
It is not to be thought that this rule of construction is confined to the imposition of an obligation on one contracting party to co-operate in doing all that is necessary to be done for the performance by the other party of his obligations under the contract. As Griffith C.J. said in Butt v. M’Donald:
“It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.”
It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party’s obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequences of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.
(citations omitted)
[21] Secured Income at 607-608.
The question arises as to what is the benefit, or are the benefits, of the “umbrella” agreement contemplated by the parties to which they are entitled? It is possible that there is an obligation on the parties to co-operate insofar as is necessary with respect to the provision by the defendant of a price list for an ensuing 12 month period or the provision by the plaintiff of its forecast expected volumes for an ensuing 12 month period. There may be other examples. However, it is difficult to see how an implied term of this nature could be relied upon to compel the plaintiff, on the one hand, to place orders or the defendant, on the other, to accept orders when the intentions of the parties as demonstrated by the express terms of the umbrella agreement are clear to the effect that there are no such respective obligations. There can be no room for an implied term to be construed in such a way as to require either party to do something which, in accordance with the express terms of the umbrella agreement, they are not obliged to do.
The Secured Income implied term typically operates in circumstances where the parties’ contractual expectations involve an element of active co-operation to enable, for example, a particular condition to be satisfied. The question of whether or not an offer to purchase will be accepted by the other party and a contract thereby brought into existence, does not readily lend itself to any requirement that there be mutual co-operation, in good faith or otherwise.
The law as to whether or not a duty to perform obligations and exercise rights under the “umbrella” agreement in good faith should be implied is in a state of uncertainty.[22] In Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL (Receivers and Managers Appointed)(Administrators Appointed) and Ors[23] the Victorian Court of Appeal[24] expressed reluctance
to conclude that commercial contracts are a class of contracts carrying an implied term of good faith as a legal incident so that an obligation of good faith applies indiscriminately to all the rights and power conferred by a commercial contract. It may, however, be appropriate in a particular case to import such an obligation to protect a vulnerable party from exploitative conduct which subverts the original purpose for which the contract was made. Implication in this fashion is perhaps ad hoc implication meeting the tests laid down in BP Refinery (Westernport) Pty Ltd v Shire of Hastings, rather than implication as a matter of law creating a legal incident of contracts of a certain type.
(citations omitted)
[22] See for example Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 263-270, Hughes Brothers v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91, Burger King Corporation v Hungry Jacks Pty Ltd (2001) 69 NSWLR 558 at 565 and Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 at 363-369, Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL (Receivers and Managers Appointed) (Administrators Appointed) and Ors [2005] VSCA 228.
[23] [2005] VSCA 228.
[24] At [25] per Buchanan JA with whom Warren CJ at [1]-[5] and Osborn AJA agreed.
I will assume in the plaintiffs favour that such an implied term is included in the “umbrella” agreement. However, I am not satisfied that the defendant can be said, on the facts of this case, to have acted in bad faith or at least not to have acted in good faith, in any event. It may be, although I have formed no final conclusion on this point, that, if the only reason the defendant had for refusing to accept the plaintiff’s offer set out in Exhibit P1/433 prior to 31 December 2006 was that the defendant wished to avoid any liability for price adjustment in favour of the plaintiff, an element of bad faith might be indicated. However, I am satisfied that this was not the case. I am satisfied that the defendant was quite content to accept the order and thereby to generate the price credit in favour of the plaintiff, prior to 31 December 2006, if to do so would not lead to a level of debt then unacceptable to the defendant. The defendant did not act capriciously in pursuit of an ulterior purpose but acted reasonably, in its own legitimate commercial interests and in good faith in refusing to accept the plaintiff’s offer for the reasons that the defendant gave.[25]
The Claim of Estoppel
[25] Cf; Renard at 263 and Esso at [28].
In the plaintiff’s Reply, it has also pleaded that the defendant was or should be estopped from asserting or relying upon any requirement that payment of the November 2006 statement had to be made by 31 December 2006. The plaintiff has pleaded its estoppel claim in two ways.
First, it is alleged that, because of the defendant’s conduct, the plaintiff believed or assumed that payment was not required to be made until the end of the first week in January 2007; that the plaintiff relied upon this belief or assumption in not making payment of the defendant’s November 2006 account by 31 December 2006 and that the defendant is thereby estopped from asserting or relying upon any requirement that payment be made by 31 December 2006.
Second, and in the alternative, the plaintiff has pleaded that, by reason of the defendant’s conduct, the plaintiff believed or assumed that its account was not the subject of any internal credit limit or that any such credit limit was not being enforced; that, in reliance upon this belief or assumption, it allowed its account balance to reach the levels that were reached in late 2006 and that the defendant is thereby estopped from asserting or relying upon any internal credit limit in refusing to accept the defendant’s December 2006 order.
Initially, the plaintiff pleaded that it relied upon the first belief or assumption “in not ensuring it was in a position to make [the] payment” (paragraph 3.6.2) and on the second belief or assumption “in not placing itself in a position to reduce the balance of its account below $1 million prior to 31 December 2006” (paragraph 4.2.4). However, during the trial, the plaintiff sought leave, which was granted, to delete both these aspects of its estoppel pleading. Each of these aspects of the pleading was unsustainable given the evidence of Angelo Kotses to the effect that, at all times, the plaintiff had available to it facilities in the order of $10 million and, at all times, was in a position to have met the defendant’s demand for the November 2006 account to be discharged if the plaintiff wished so to do.
The pleas of estoppel, even in their truncated form, cannot assist the plaintiff. Each, on its face, even if established on the facts, would not lead to a conclusion that the defendant was obliged to accept the plaintiff’s purchase order offer.
Furthermore, given my findings as to the terms of the “umbrella” agreement between the parties, I am not satisfied that the defendant’s conduct in any way caused the plaintiff to believe or assume that payment of the November 2006 account was not required to be made until the end of the first week in January on the one hand, or that the plaintiff’s account was not the subject of any internal credit limit that might be enforced on the other. In any event, and if these matters were to be assumed in favour of the plaintiff for present purposes, it was disabused of any such assumptions by the defendant in the December 2006 email correspondence. It was made plain to the plaintiff well prior to 31 December 2006 that its purchase order at Exhibit P1/433 would not be accepted other than on the condition imposed by the defendant. The plaintiff knew that, on this occasion, the defendant was applying its internal credit limit applicable to the plaintiff’s account and the plaintiff knew that the defendant was insisting upon payment of the November statement on or prior to 31 December 2006. Furthermore, the plaintiff was at all times in a position to meet the defendant’s express condition, but for its own commercial reasons chose not to do so. In these circumstances, the plaintiff has not been mislead by the defendant, it has not suffered detriment as a result of any failure by the defendant to adhere to a represented position and it would not be unconscionable, in all the circumstances, to permit the defendant to rely upon its lawful entitlement to refuse to accept the plaintiff’s order. The plea of estoppel fails.
Conclusion

According to the parties’ contractual arrangements but subject to any specific variations agreed to from time to time, each annual price volume reconciliation is based on bottles sold and delivered by the defendant during the calendar year in question. If I am in error with respect to the need for delivery, at a minimum, the reconciliation is to be based on orders that are accepted by the defendant during the calendar year in question in such a way as to generate a contractual obligation by the plaintiff to purchase and a contractual obligation by the defendant to sell the bottles in question. The mere placement of an order by the plaintiff during the calendar year in question is insufficient. The events in November-December 2006 did not have the effect of changing this basic contractual position in any of the ways propounded by the plaintiff. The plaintiff’s claim as set out in each of its prayers for relief, 1 to 5, in the Amended Statement of Claim, fails and is dismissed.
I will hear the parties on the question of costs.