Cedar Meats Pty Ltd v Five Star Lamb Pty Ltd - [2013] VSC 164

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

No. S CI 2012 01888

BETWEEN

CEDAR MEATS PTY LTD (ACN 007 149 343)	Plaintiff
and
FIVE STAR LAMB PTY LTD (ACN 138 874 343)	Defendant

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JUDGE:	SIFRIS J
WHERE HELD:	Melbourne
DATE OF HEARING:	4-7 and 13 March 2013
DATE OF JUDGMENT:	12 April 2013
CASE MAY BE CITED AS:	Cedar Meats Pty Ltd v Five Star Lamb Pty Ltd
MEDIUM NEUTRAL CITATION:	[2013] VSC 164	First Revision: 16 April 2013

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CONTRACT – Abandonment – Conduct and factors relevant to mutual intention to abandon contract – Objective assessment.

CONTRACT – Termination – Whether discussions amounted to an agreement to terminate contract.

CONTRACT – Construction – Whether termination clause required notice to be given.

CONTRACT – Enforceability – Whether conduct gave rise to estoppel, waiver and misleading or deceptive conduct.

CONTRACT – Penalty – Whether liquidated damages clause was extravagant and unconscionable.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Korman	Kennedy Guy
For the Defendant	Dr O Bigos	Hunt & Hunt

HIS HONOUR:

A. Introduction

The Plaintiff (Cedar Meats) operates an abattoir at 690 Geelong Road, Brooklyn, Victoria.

The Defendant (Five Star) is a producer of lamb.

By agreement made on 24 December 2009 between Cedar Meats and Five Star (the Agreement), Cedar Meats agreed to provide Five Star with manufacturing, processing and packaging services for lamb products for export and domestic sale by Five Star.

The Agreement set out agreed daily volumes of lamb to be provided by Five Star (clause 7 and item 2 of Schedule 2), and the price per head (clause 9 and items 2 and 3 of schedule 2).

Clause 8(a) of the Agreement – which is at the heart of the dispute – provides that if the daily volume fell “more than 25% below the agreed daily volume … [Five Star] will pay to [Cedar Meats] a minimum of 75% of the agreed daily volume and price for those days”.

It is common ground that Five Star delivered far less than the agreed daily volume.

Cedar Meats seeks to enforce clause 8(a) of the Agreement. The claim is for an amount in excess of $15 million.

Five Star has raised a number of defences. It alleges that the Agreement was abandoned or terminated on or at some point after 4 November 2010. It alleges further that by its conduct Cedar Meats is not entitled to enforce the Agreement. Finally, Five Star alleges that if the Agreement is enforceable, clause 8(a) is a penalty and is unenforceable. It is also alleged that Cedar Meats, in any event, failed to mitigate its loss.

B. Summary of Issues and Conclusions

The first issue is whether the Agreement was abandoned or terminated. Five Star contends that on a detailed consideration of the external manifestations of the parties from September 2010 there is sufficient evidence of an intention on the part of each of Five Star and Cedar Meats,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] VSC 164
Decision Date: 12 April 2013

CaseChat Overview and Summary

Cedar Meats Pty Ltd and Five Star Lamb Pty Ltd were involved in a contractual dispute which was heard by the Federal Court of Australia. The case concerned the interpretation and enforcement of a meat supply agreement. The primary issue was whether the parties had mutually agreed to abandon the contract and whether the termination clause required notice to be given. Additionally, the court considered whether the conduct of the parties amounted to estoppel, waiver, misleading or deceptive conduct, and whether a liquidated damages clause was extravagant and unconscionable.

The court examined the conduct of both parties to determine if there was a mutual intention to abandon the contract. It was held that an objective assessment of the circumstances, including the parties' conduct and communications, was required to ascertain whether they had reached an agreement to terminate the contract. The court found that the conduct of the parties did not amount to an agreement to terminate the contract. Furthermore, the court held that the termination clause did not require notice to be given, and that the conduct of the parties did not give rise to estoppel, waiver, or misleading or deceptive conduct. Finally, the court rejected the argument that the liquidated damages clause was extravagant and unconscionable, finding it to be a reasonable pre-estimate of loss.

The court's decision was that the contract had not been abandoned, and therefore remained in effect. The court held that the termination clause did not require notice to be given, and that the parties were bound by the terms of the contract. The court also found that the conduct of the parties did not give rise to any estoppel, waiver, or misleading or deceptive conduct, and that the liquidated damages clause was valid and enforceable. The case serves as a reminder of the importance of clear and unambiguous contract terms, and the need for objective evidence to support claims of contract abandonment.

Orders