Cultivaust Pty Ltd v Grain Pool Pty Ltd
[2004] FCA 638
•21 MAY 2004
FEDERAL COURT OF AUSTRALIA
Cultivaust Pty Ltd v Grain Pool Pty Ltd [2004] FCA 638
INTELLECTUAL PROPERTY – Plant variety rights and plant breeder’s rights – whether the Grain Pool of Western Australia’s conduct contravened the applicants’ rights under the Plant Variety Rights Act 1987 (Cth) (PVR Act) and the Plant Breeder’s Rights Act 1994 (Cth) (PBR Act) – the interaction of the PVR Act and the PBR Act – the protection afforded under the PVR Act and the PBR Act – consideration of ss 11, 14, 15, 17, 18, 19 of the PBR Act
CONTRACT – whether Cultivaust and the Grain Pool of Western Australia entered into a contract or reached an agreement concerning the payment of production levies and/or end point royalties
ESTOPPEL – estoppel by conduct – whether the Grain Pool of Western Australia is estopped by its conduct from denying the applicants’ claims
EQUITY – fiduciary relationship – whether there existed a fiduciary relationship between Cultivaust and the Grain Pool of Western Australia
TRADE PRACTICES – whether the Grain Pool of Western Australia unlawfully attempted to reach an understanding with other statutory grain marketing boards about the level of any production levy or end point royalty to be paid in respect of Franklin barley
Acts Interpretation Act 1901 (Cth) ss 7, 8, 9
Judiciary Act 1903 (Cth) ss 39B(1A)(c), 79
Plant Variety Rights Act 1987 (Cth) ss 5(b), 6, 9, 12, 22, 26, 27, 38, 40, 41
Plant Breeder’s Rights Amendment Act 2002 (Cth)
Plant Breeder’s Rights Act 1994 (Cth) ss 3, 10(a), 11, 14, 15, 16, 17, 18, 19, 23, 53, 54, 56(3), 78, 81, 82, 83, 84
Primary Industries and Energy Legislation Amendment Act (No 2) 1989 (Cth)
Trade Practices Act 1974 (Cth) ss 45, 45A(1), 76(1)
Grain Marketing Act 1975 (WA) ss 6(1), 7, 22, 22A, 24, 29, 31
Grain Marketing Act 2002 (WA) ss 45, 46, Sch 1
Limitation Act 1935 (WA) ss 38, 47A
Limitations of Actions Act 1936 (SA) ss 35, 48The Grain Pool of Western Australia v The Commonwealth of Australia (2000) 202 CLR 479 cited
Fisher v Hepburn Ltd (1960) 105 CLR 188 applied
Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 applied
K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 60 ALR 509 applied
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 applied
National Phonograph Company of Australia Limited v Menck [1911] AC 336 cited
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 cited
The Commonwealth of Australia v Verwayen (1990) 170 CLR 394 cited
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 applied
Pilmer v The Duke Group Ltd (in Liq) (2001) 180 ALR 249 applied
Tate v Williamson (1866) LR 2 Ch App 55 considered
Breen v Williams (1996) 186 CLR 71 considered
News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 appliedFelton v Mulligan (1971) 124 CLR 367 cited
LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575 applied
Sanders v Snell (1998) 196 CLR 329 cited
Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots [1991] 2 VR 636 cited
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 cited
John Pfeiffer Pty Ltd v Rogerson (2000) 172 ALR 625 applied
British American Tobacco Ltd v The State of Western Australia [2003] HCA 47 applied
The Commonwealth of Australia v Mewett (1997) 191 CLR 471 applied
Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 75 ALJR 363 cited
Board of Fire Commissioners of New South Wales v Ardouin 1961) 109 CLR 105 cited
Australian National Airlines Commission v Newman (1987) 162 CLR 466 cited
Puntoriero v Water Administration Ministerial Corporation (1999) 199 CLR 575 citedCULTIVAUST PTY LTD & THE STATE OF TASMANIA v GRAIN POOL PTY LTD & THE STATE OF WESTERN AUSTRALIA
S 104 of 1999
(Consolidated with No S 66 of 2001)MANSFIELD J
21 MAY 2004
ADELAIDE
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
S 104 OF 1999
BETWEEN:
CULTIVAUST PTY LTD
FIRST APPLICANTTHE STATE OF TASMANIA
SECOND APPLICANTAND:
GRAIN POOL PTY LTD
FIRST RESPONDENTTHE STATE OF WESTERN AUSTRALIA
SECOND RESPONDENTJUDGE:
MANSFIELD J
DATE OF ORDER:
21 MAY 2004
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1. The application is dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
S 104 OF 1999
BETWEEN:
CULTIVAUST PTY LTD
FIRST APPLICANTTHE STATE OF TASMANIA
SECOND APPLICANTAND:
GRAIN POOL PTY LTD
FIRST RESPONDENTTHE STATE OF WESTERN AUSTRALIA
SECOND RESPONDENT
JUDGE:
MANSFIELD J
DATE:
21 MAY 2004
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
INTRODUCTION
This application concerns the commercial exploitation in Western Australia of a variety of barley known as Franklin barley. Franklin barley is a two-row Sprig type barley with strongly pigmented flag leaf oracles and is relatively thick stemmed and has a shorter maturity. In common language, the barley is described as both ‘seed’ and ‘grain’. It is from such seed or grain that other plants can be grown or reproduced and from which malt can be made.
The State of Tasmania (Tasmania) was granted plant variety rights in Franklin barley pursuant to the Plant Variety Rights Act 1987 (Cth) (the PVR Act). The PVR Act was repealed by s 78 of the Plant Breeder’s Rights Act 1994 (Cth) (the PBR Act), but by s 82 of the PBR Act the plant variety rights held by Tasmania under the PVR Act continue to have effect, despite the repeal of that Act, as if they had been granted at that time as plant breeder’s rights (PBR) in Franklin barley.
On about 31 January 1992, Tasmania in the exercise of its plant variety rights in Franklin barley granted to Cultivaust Pty Ltd (Cultivaust) an exclusive licence (the licence) in respect of Franklin barley, the terms of which will be referred to below.
The Grain Pool of Western Australia (GPWA) was established by s 6(1) of the Grain Marketing Act 1975 (WA) (the GM Act). The GPWA is not a servant or agent of the Crown: s 7, GM Act. The GM Act was repealed by s 45 of the Grain Marketing Act 2002 (WA). The Grain Marketing Act 2002 (WA) created Grain Pool Pty Ltd. Pursuant to s 46 and item 4 of Sch 1 to the Grain Marketing Act 2002 (WA), the assets and liabilities of the GPWA were transferred to Grain Pool Pty Ltd, proceedings against the GPWA were able to be continued against Grain Pool Pty Ltd in the same right, and the acts of the GPWA are regarded as acts of Grain Pool Pty Ltd. Accordingly, although the title of the proceedings has changed, it is convenient to continue to refer in the judgment to the GPWA.
From May 1992 Franklin barley was grown and harvested by farmers in Western Australia and was then delivered to the GPWA under a compulsory barley marketing pool in respect of Franklin barley established under s 24 of the GM Act. It was then sold by the GPWA for use by maltsters and was used for malt in Western Australia, and was also sold by the GPWA for export. In addition, from 17 October 1994 the GPWA issued permits under s 22A of the GM Act to Joe White Maltings Ltd (Joe White) and to Kirin Australia Pty Ltd (Kirin) to purchase Franklin barley direct from farmers. Under s 22 of the GM Act, the GPWA is the ‘sole marketing authority’ of prescribed grain (which includes barley) in Western Australia. A person is not entitled to sell or deliver a prescribed grain other than to the GPWA, or to take delivery of or receive a prescribed grain other than from the GPWA. Each year the GPWA receives the prescribed grain produced in the season. According to s 29 of the GM Act, the GPWA receives (through its agent), but does not buy the grain. Instead the grain becomes vested in the GPWA.
The GPWA is required to establish a pool or separate pools for the marketing of prescribed grain produced in a season, to fix the terms upon which the pool is established, and a date on or before which grain for the compulsory pool may be delivered to the GPWA or a licensed receiver. For its part, the GPWA is then obliged to receive all of the prescribed grain produced in the season which is so delivered, upon the terms and conditions of the pool. Upon delivery, the grain is vested in the GPWA and the previous rights and interests of the grower are converted into a claim for compensation from the GPWA. The GPWA then proceeds to sell grain vested in it at such prices and on such terms as it thinks fit, and in the light of what it receives, or anticipates receiving, it makes compensation payments to the growers. Hence, it controls the sale and distribution of barley produced in Western Australia at material times.
That conduct by GPWA is alleged to infringe the rights of Tasmania and of Cultivaust with respect to Franklin barley under the PVR Act and then under the PBR Act, and to have caused them loss. According to s 11(g) of the PBR Act, the holder of the PBR has the exclusive right to stock the material for the purposes described in (a) to (f) of that section. The GPWA in storing the grain for the purpose of offering it for sale (s 11(c)), or for the purpose of selling it (s 11(d)), or for the purpose of exporting it (s 11(f)) would appear to breach the PBR. It is at the storage stage, and not on its receipt of the grain from the growers, that the breach may occur. As is considered below, the proper construction of the PBR Act and the PVR Act does not lead to such a straightforward conclusion.
Tasmania and Cultivaust seek declaratory orders that the GPWA by its actions infringed (within the meaning of s 40 of the PVR Act and s 53 of the PBR Act) their rights under s 12 of the PVR Act and s11 (as extended by ss 14 and 15) of the PBR Act. As a consequential claim, because the GPWA was acting apparently in accordance with powers it had under provisions of the GM Act, Tasmania and Cultivaust further seek orders by declaration that ss 22A, 22B, 24, 25, 29 and 31 of the GM Act (until it was amended on 6 December 1997) were inconsistent with the PVR Act and the PBR Act to the extent of the rights conferred on Tasmania and Cultivaust (pursuant to licence) in respect of Franklin barley and to that extent were invalid by reason of s 109 of the Constitution. The amendment of the GM Act effective on 6 December 1997 led to declarations being sought that ss 18BA, 22, 22A, 22B, 24, 25, 29 and 31 of the GM Act thereafter are inconsistent with the PVR Act and the PBR Act to the extent of the rights conferred on Tasmania and Cultivaust (pursuant to the licence) in respect of Franklin barley and to that extent invalid by reason of s 109 of the Constitution.
The validity of the PVR Act and the PBR Act was unsuccessfully challenged by the GPWA in separate proceedings in the High Court: The Grain Pool of Western Australia v The Commonwealth of Australia (2000) 202 CLR 479 (GPWA v Commonwealth).
The State of Western Australia is directly concerned in this consolidated proceeding only to the extent of seeking to support the validity of the challenged provisions of the GM Act as in force from time to time. The State of South Australia intervened in the proceeding, and took the same substantive position as that of Western Australia.
The second cause of action against the GPWA is based upon an alleged fiduciary relationship between the GPWA on the one hand and Tasmania and Cultivaust on the other arising out of their dealings in 1992 and 1993 with respect to the supply of Franklin barley seed to farmers in Western Australia. The same conduct which is said to have contravened rights under the PVR Act and the PBR Act is also said to have contravened the fiduciary duty which the GPWA is alleged to have owed to Tasmania and to Cultivaust, and to have caused them loss and damage.
The third cause of action against the GPWA is based upon an alleged agreement made on or about 5 May 1992 by which Cultivaust and Tasmania agreed to supply and to allow Franklin barley seed to be shipped into Western Australia for growing trials and malting evaluations. It is alleged that the GPWA breached that agreement by the same conduct referred to, so as to cause loss and damage to Tasmania and to Cultivaust.
The fourth cause of action against the GPWA is based upon conduct of the GPWA in December 1992 allegedly interfering by unlawful means in the trade and business of Cultivaust in its endeavours to secure an arrangement with the Australian Barley Board (ABB) relating to the sale and supply of Franklin barley in Victoria and South Australia, so that Cultivaust had to enter into a contract for the sale and supply of Franklin barley to those states which was at a much lower price or was on less favourable terms than would otherwise have been the case. A similar allegation was made against the GPWA with respect to Cultivaust’s dealings with the NSW Grains Board (NSWGB) at about the same time, but ultimately that claim was not seriously pursued in the light of the evidence.
There is a further alternative claim made by Cultivaust. If the claim for infringement of Tasmania’s PBR fails, Cultivaust and Tasmania alternatively contend that the GPWA is estopped by its conduct in 1992 and 1993 from denying that Cultivaust agreed to supply Franklin barley seed in 1992 only for a growing trial and from denying that the GPWA agreed not to accept that harvest, or subsequent harvests, or Franklin barley in its role as the statutory grain marketing authority for Western Australia except with the authorisation of Cultivaust (so as to put Cultivaust in a position where it could insist upon an agreement for the GPWA to pay a production levy or end point royalty on Franklin barley seed grown in Western Australia after 1992). The GPWA denies any conduct which could or did give rise to such an estoppel.
FRANKLIN BARLEY
Barley is a cereal crop. It is grown world wide, and is used for various purposes including malting for brewing beverages (beer and whisky), as an ingredient for food production, and for stock feed. In Australia, barley is usually sown in autumn and winter, and is harvested in late spring or early summer, although the sowing and harvesting period varies with the local climate. In broad terms, barley in Western Australia is sown from about early May in each season and is harvested from November to January or early February in each season.
Characteristics of barley include its dormancy period, that is the period of time between harvesting and the ability of the barley to be made into malt; its maturation period, that is the period of time between sowing and harvesting (affected by such matters as climate, geographical area, and soil conditions); its disease resistance; and its shape. In the 1960s, typical Australian bred barleys tended to be shorter and broader grains than typical European bred barleys.
Malt extraction refers to the percentage of sugars that can be extracted from barley that can be used as a substrate for yeast to ferment and produce alcohol in the production of beer and whisky.
The yield of barley is the amount (metric tonnage) of grain harvested per unit area.
Diastatic power is a term used in the malting industry that relates to differences between varieties of barley in enzyme activity or the amount of enzymes that are available to break down starch to produce sugars. Higher diastatic power means a better barley for malting purposes.
In the 1980s, the then available varieties of Australian barley produced lower malt extracts and lower diastatic power than varieties available internationally. As a result, Australia’s share of the significant Japanese market for malting barley was reducing, particularly in the face of competition from certain varieties of Canadian malting barley.
The evidence about the development of Franklin barley is not in dispute. Wayne Vertigan (Mr Vertigan) was the agricultural scientist principally involved in the development of Franklin barley. He started work with the Tasmanian Department of Agriculture (now the Department of Primary Industries, Water and Environment) (the DPI, Tasmania) in 1963 after completing tertiary studies, and remained there until 1996. He then worked for four years with the Tasmanian Institute of Agricultural Research (TIAR), a joint venture between the DPI, Tasmania and the University of Tasmania.
Mr Vertigan began a barley breeding program in 1986. He was seeking to develop a barley breed resistant to a particular virus, and with characteristics more typical of European varieties of barley. That work led first to the development of a virus-resistant variety called Sharmon barley. Sharmon barley produced larger seed in high rainfall areas and smaller seed in lower rainfall areas. It was grown principally in Tasmania, and was used mainly for feed barley for animals or as an ingredient in food products. The barley variety principally used in Tasmania for malting and brewing until 1989 was a variety called Proctor, a variety used widely in the United Kingdom.
Stuart Smith (Mr Smith), the Team Leader of the Pastures and Grains Section of the Extensive Agriculture Branch of the Primary Industries, Water and Environment Department of Tasmania (the successor in title to the DPI, Tasmania) was employed from 1972 as a seed agronomist, of course with increasing seniority and responsibility. He confirmed that the DPI, Tasmania has since 1972 conducted plant breeding and development programs, and has released and ‘commercialised’ a number of cultivars, including Franklin barley.
In 1980, Mr Vertigan commenced tests on the German variety of barley called Triumph. That variety was then released in Tasmania in 1984. It had certain characteristics which were better than Sharmon barley or Proctor barley, but had a longer dormancy period. Mr Vertigan then conceived the idea of combining the best characteristics of Sharmon barley and Triumph barley, particularly directed to developing a barley suitable for brewing. He prepared a report and recommendation for the commencement of a barley breeding program, and was authorised to proceed.
The selective breeding program extended over several years, monitored in each generation in relation to growth characteristics, disease resistance, straw strength and yield potential and grain quality. Field trials were conducted during the 1986 to 1989 seasons. The field trials enabled testing for grain size and protein level. In addition malting tests were conducted to assess the potential for commercial malting of the newly developed variety.
In early 1989, Mr Vertigan started to prepare an application on behalf of the DPI, Tasmania for plant variety rights under the PVR Act in respect of one particular breeding line of barley from the Sharmon/Triumph breeding line. He ascribed to it the name Franklin barley. On 6 April 1989 the Registrar of the Plant Variety Rights Office notified the DPI, Tasmania that provisional protection under s 22 of the PVR Act thereby existed until the application was finally dealt with, as described in the genus Hordeum, species vulgare, variety Franklin. On 19 January 1990 plant variety rights were granted under s 26 of the PVR Act to Tasmania in respect of Franklin barley, until 6 April 2009.
Mr Vertigan described the major attributes of Franklin barley as being: high grain yield under suitable growing conditions; flexibility of sowing time; very good disease resistance; strong straw and resistant to head loss; high malt extract; high diastatic power (i.e. starch degrading enzyme activity); and short period of grain dormancy. Its high malt extract and its high diastatic power made it an attractive barley to maltsters.
Franklin barley was formally ‘released’ for the use of farmers and to the maltsters in Tasmania in 1989. It was well suited to Tasmania’s climate. It proved to be very popular, and within a period of a few seasons replaced other species of barley then grown in Tasmania and became the dominant barley in Tasmania.
It was also assessed as being suitable to regions of Western Australia, South Australia, Victoria and New South Wales which were cooler and had a higher rainfall. To generate interest in those States, small supplies of seed were sent out to their departments of agriculture for testing.
Two malting companies, Joe White and Barrett Burston (Aust.) Ltd (Barrett Burston) conducted farm growing trials in Victoria in 1989 and 1990 and in South Australia in 1990 and 1991 leading to full scale malting trials. Those trials led the DPI, Tasmania to claim that Franklin barley was likely to produce higher yields than current malting varieties of barley in the cooler and higher rainfall areas across southern Australia, especially with careful attention to crop locations and sowing time, and that Franklin barley had performed well in commercial malting and brewing trials.
The conditions imposed upon Joe White and upon Barrett Burston by Tasmania through John Thorp, Chief Officer, Pastures and Field Crops Branch DPI, Tasmania (Mr Thorp), in respect of the growing trials conducted in 1990 and 1991 demonstrate the concern on the part of the DPI, Tasmania to lay down a regime for the use of Franklin barley in those trials to preserve its commercial value. They were anxious to avoid ‘leakage’ by the use of second generation seed, that is by the use of seed retained from a previous year’s harvest by a grower. They were conscious that such control over the use of a cereal variety seed, to exploit the benefits available under the PVR Act, was a novelty or a ‘first’ within Australia.
As appears below, trials of Franklin barley were also conducted in Western Australia in the 1991 growing season. The GPWA was not involved in those trials.
The success of the trials of Franklin barley in 1991 led Joe White and Barrett Burston to pursue the growing of Franklin barley by growers in Victoria and South Australia in the 1992 and subsequent seasons. Growers were obliged to sell barley through the ABB. The ABB was the statutory marketing authority to which all growers of barley (and other crops) in those states were obliged to deliver the barley they wished to dispose of, and the ABB then marketed that barley on their behalf. There were discussions between the interested parties, including the ABB. The correspondence indicates that Barrett Burston (International) Pty Ltd (BBI) rather than Barrett Burston was involved in those discussions. Nothing in this matter turns upon whether the relevant entity was BBI or Barrett Burston, so I shall refer to the two entities hereafter indiscriminately as Barrett Burston.
The discussions included Cultivaust’s claim to impose a production levy or end point royalty upon all Franklin barley delivered to maltsters through the ABB at some point in the handling process.
ARRANGEMENT WITH CULTIVAUST
Cultivaust was registered on 20 June 1989 under the name Cambridge Farms (Australia) Pty Ltd. It changed to its current name on 11 June 1991. Its director is now Timothy John Teague (Mr Teague) who was appointed on 7 June 1991. Peter Clifford Semmler (Mr Semmler) was a founding director. He resigned as a director on 14 November 1995. The third director at material times was William Farnell Cormack (Mr Cormack), also a founding director. Mr Cormack died on 8 January 2002. Cultivaust did not operate from dedicated premises, or have its own staff. Its affairs were conducted through its directors, and they used the resources of their respective companies, which were its shareholders, for administrative support.
Cultivaust’s equal shareholders are Jill Cormack Holdings Pty Ltd, previously called Demeter Cormack Pty Ltd (Demeter Cormack) and Teague Australia Pty Ltd previously called T J Teague (S.A.) Pty Ltd (Teague SA), a company under the control of Mr Teague and his wife. The financial position of Teague SA at material times is not disclosed on the evidence, although since 24 October 1990 its assets and undertaking have been the subject of a fixed and floating charge to the National Australia Bank Ltd and since 15 November 1993 a further charge to that bank.
Demeter Cormack had as its principal business the export of agricultural produce from Fremantle in Western Australia. Both Mr Cormack and Mr Semmler spent time promoting the interests of Cultivaust. Demeter Cormack went into voluntary administration on 16 December 1994. The purpose of the voluntary administration was to determine whether the company should be placed into liquidation or should enter into a Deed of Company Arrangement. On 7 April 1995, the creditors resolved to enter into a Deed of Company Arrangement which was duly signed on 27 April 1995, under which each of Mr Cormack and Mr Semmler agreed to contribute funds to the company, and its business and assets were to be sold to the intent that the creditors should receive a dividend of not less than 36 cents in the dollar. Subsequently, the Deed was varied on 31 May 1996 to provide for a lesser minimum distribution, the funds for which largely came from a payment by an outside entity (now a shareholder of Demeter Cormack) for an assignment of its debts. Ultimately the administration came to an end on 25 July 1996. The directors of Demeter Cormack included Mr Cormack, until his death, and Mr Semmler, who resigned as a director on 31 October 1996.
Subsequent to 25 July 1996, Demeter Cormack and Mr Cormack played no active role in the promotion of the business of Cultivaust. Demeter Cormack granted a charge over its assets to the National Australia Bank Ltd on 2 October 1997. It is common ground that Demeter Cormack has not been in a position to directly provide shareholder finance to Cultivaust at any material time.
The DPI, Tasmania sought to secure a commercial return from its plant variety rights in Franklin barley. It decided to retain and deal with those rights within Tasmania. It invited tenders from potential licensees with a view to licensing an entity to exploit the rights to Franklin barley outside Tasmania. In the course of considering the responses, the concept emerged of royalty collection for the exploitation of plant variety rights in Franklin barley not just from the sale of barley seeds. Although barley growers may purchase fresh barley seeds for sowing in each year, it was also common for barley growers to retain from a previous year’s harvest sufficient seeds for the next year’s harvest. The use of farm saved seeds for subsequent years’ crops had, in the past, meant the supplier of seeds had a once-only opportunity for exploiting its plant variety rights, namely at the point of sale of the seed. The idea of some form of ‘end product royalty’ thus emerged, payable either by maltsters on usage, or in some way at the point of sale by growers, or at the point of sale to maltsters (or to exporters).
On 4 April 1989, the DPI, Tasmania notified Teague SA that ‘subject to satisfactory commercial arrangements’ being resolved, Teague SA would be appointed as the agent for the disposition and control of Franklin barley within Australia, outside Tasmania. That appointment was confirmed by letter dated 6 May 1991 from the DPI, Tasmania. It was subject to a formal document being agreed upon, and to Ministerial approval.
The DPI, Tasmania had also provided Franklin barley seed for growing trials, through a United Kingdom based seed and grain merchant, in the United Kingdom and some European countries. It is not necessary to remark upon the outcome of those trials.
It seems clear enough, as Mr Vertigan said, that the development of Franklin barley was a major development in barley breeding in Australia, particularly resulting in a significant improvement in available malting quality barley in Australia.
I accept the evidence of Dr Walker and Mr Thorp that in 1991 to 1992 they were the officers within the DPI, Tasmania directly responsible for seeking benefits from the commercial exploitation of Franklin barley, including of course quite extensive consultations with Cultivaust. Dr Walker left the DPI, Tasmania in March 1994 about the time of a departmental restructure. By early 1991, they had each adopted the objective of securing an end product royalty as well as a royalty on seed sold, as a means of increasing the commercial benefits from the development of Franklin barley, and in that context to regulate the capacity of growers to retain barley grown in one harvest to be used as seed for succeeding seasons. That approach, and the means of securing those perceived commercial benefits (including by the means implemented by the conditions imposed on the growing trials of Joe White and Barrett Burston in 1990 and 1991) were discussed at length with both Mr Teague and Mr Semmler of Cultivaust during their negotiations, leading to the appointment of Cultivaust as the agent for Australia (excluding Tasmania) for the sale and release of Franklin barley.
The negotiations with Mr Teague and Mr Semmler extended then over the succeeding months of 1991. In the course of those negotiations, the entity to be granted the proposed licence was identified as Cultivaust, being in effect a joint venture company of each of Mr Teague through Teague SA and of Mr Semmler through Demeter Cormack. A draft licence agreement was submitted to Teague SA and Demeter Cormack jointly on 6 May 1991. Although those negotiations did not result in a formal licence agreement until 31 January 1992, Mr Teague and Mr Semmler were introduced to officers of the ABB and to representatives of Joe White and Barrett Burston in April 1991 as the proposed licensees and they participated in discussions about the basis of payment for Franklin barley grain for those maltsters from 1991, including the concept of an end product royalty to be collected by the ABB on Franklin barley received by it from growers. For the 1991/92 trial growing season, the ABB was to co-ordinate production of Franklin barley for those maltsters on the basis that growers would not keep grain for seed for succeeding seasons’ crops. Any direct seed sales, other than under the aegis of the DPI, Tasmania would contravene the PVR Act.
The culmination was the licence agreement dated 31 January 1992 between Tasmania and Cultivaust. The licence granted was throughout the whole of Australia, excluding Tasmania, and outside Australia, for a period of 10 years. It included the power to grant to others rights to sell seed (that is the reproductive material of Franklin barley), but subject to the written consent of Tasmania in the case of the right to purchase seed outside Australia. The licence obliged Cultivaust to produce seed to meet the demand for it, and to promote the sale of Franklin barley. It expressly provided that the intellectual property rights in Franklin barley (the plant variety rights and subsequently the PBR) remained with Tasmania, and for Tasmania to enforce its rights under the PVR Act (and subsequently the PBR Act) in relation to the use of Franklin barley. Royalties were payable by Cultivaust in respect of the sales within Australia of Franklin barley at 50% of the total royalties agreed to be paid in writing for ‘seed sales’ in the following calendar year. In addition, Cultivaust was to pay for seed ordered from Tasmania at its ruling price.
The agreement between the DPI, Tasmania and Cultivaust does not refer to any end product royalty, or to the sharing of any end product royalty. However, all officers of the DPI, Tasmania and Mr Teague and Mr Semmler understood that any end product royalties, when and if received, were also to be shared equally. That is in fact what happened. Nothing in this case turns upon the absence of such a provision in that agreement.
Following the execution of that agreement the DPI, Tasmania expected Cultivaust to negotiate with the State marketing authorities of each State, and the maltsters, with a view to obtaining a royalty on the production of Franklin barley or upon that which they handled or acquired. It was largely left to Cultivaust to fulfil the role of exploiting the commercial benefits of Franklin barley.
In fact, Mr Teague was in part responsible, together with Mr Semmler and Mr Cormack from Cultivaust, in developing the notion of imposing a production levy or end point royalty on harvested Franklin barley as well as a seed royalty on the purchase of seed. Their consideration on that topic developed in consultation with Mr Thorp of DPI, Tasmania. Mr Teague was aware, from his past experience, that once certified seed was sold to a farmer, the farmer was likely to continue to produce crops of the same product from farm saved seed from a previous year’s crop, and to be able to do so for several years. Consequently, he was aware that the next royalty recoverable for the sale of certified seed could be several years later. The production levy was conceived as a means of securing a longer term income stream. It was also conceived as enabling a lower ‘up front’ or sales royalty as the income stream would be able to be spread over the useful life of the crop which, he expected, would be at least 10 years.
THE LEGISLATION
Franklin barley variety of the genus Hordeum species vulgare, pursuant to s 27 of the PVR Act, was entered in the register of plant variety rights established under s 6 of the PVR Act and maintained under s 9 of the PVR Act. Section 12 of the PVR Act defines the nature of plant variety rights. It provides in part:
’12.(1) Plant variety rights, in respect of a new plant variety, are –
(a)the exclusive right to sell, including the right to license other persons to sell, plants of that variety;
(b)the exclusive right to sell, including the right to license other persons to sell, reproductive material of plants of that variety;
(c)the exclusive right to produce, including the right to license other persons to produce, plants of that variety for sale; and
(d)the exclusive right to produce, including the right to license other persons to produce, reproductive material of plants of that variety for sale.’
Section 12 was amended by the Primary Industries and Energy Legislation Amendment Act (No 2) 1989 (Cth), s 3 and Sch 1. It is not necessary to refer to the amendments. The parties did not treat them as relevant.
The GPWA claims that it did not infringe the exclusive rights of either Tasmania or of Cultivaust. Section 40 provides the circumstances in which the exclusive plant variety lights under the PVR Act may be infringed. Section 40 provides:
‘40.Subject to sections 38 and 39, the plant variety rights of a grantee in respect of a plant variety are infringed by –
(a)a person who, not being licensed by the grantee to sell plants of that variety, sells, or holds himself, herself or itself out as being willing to sell, plants of that variety;
(b)a person who, not being licensed by the grantee to sell reproductive material of plants of that variety, sells, or holds himself, herself or itself out as being willing to sell, reproductive material of plants of that variety;
(c)a person who, not being licensed by the grantee to produce plants of that variety for sale, produces plants of that variety for sale;
(d)a person who, not being licensed by the grantee to produce reproductive material of plants of that variety for sale, produces reproductive material of plants of that variety for sale;
(e)a person who, being a person to whom a licence has been granted in respect of that plant variety, does not comply with a term or condition of the licence; or
(f)a person who uses the name of that plant variety, being the name entered in the Register, in relation to any other plant variety or in relation to any plant other than a plant of the first-mentioned variety.’
The GPWA contends that s 38 of the PVR Act enabled a farmer to obtain seed for the purpose of planting and harvesting a crop to sell the produced crop for food or consumer purposes without infringing the grantee’s plant variety rights. It also contends that the same farmer could retain seed from the crop for replanting the next crop. In doing so the farmer would not be producing plants or reproductive material for the purposes of an infringing sale, contrary to s 40(c) and (d), as the next season’s plants would be harvested so that the further crop would be sold for food or consumer purposes. Hence, it is contended, the PVR Act effectively allowed a farmer to keep seed from one crop for further cropping purposes. It is called farm saved seed. Not all plant varieties have the characteristic of the harvested crop also being propagating material. That is a characteristic of barley. It tends to be called ‘seed’ when sown, and ‘grain’ when harvested. The harvested grain can be retained as farm saved seed.
Section 38(1) provides:
‘Notwithstanding that plant variety rights subsist in respect of a plant variety, any person may –
(a)propagate, grow and use plants of that variety for purposes other than commercial purposes;
(b)sell plants of that variety for use as food or for another use that does not involve the growing of the plants or the production of plants of that variety;
(c)sell reproductive material of plants of that variety for use as food or for another use that does not involve the production of plants of that variety;
(d)sell with a farm or other place at which plants of that variety are grown any plants or reproductive material of plants of that variety at that place; or
(e)use, and do anything necessary or desirable for the purpose of using, plants or reproductive material of plants of the variety as an initial source of variation for the purpose of originating another new plant variety except where the person makes repeated use of plants or reproductive material of plants of the first-mentioned variety for the commercial production of the other variety.’
Section 38(1)(c) is further explained by s 38(3) in the following terms:
‘The right of a person under paragraph (1)(c) to sell reproductive material of plants, of a plant variety in respect of which plant variety rights subsist includes -
(a)the right of the person to use plants, or reproductive material of plants, of that variety purchased or otherwise acquired by the person without any infringement of those plant variety rights to –
(i)produce reproductive material of plants for the sale; or
(ii)produce plants, or reproductive material of plants, from which reproductive material of plants for the sale may be derived; and
(b)the right of the person to use plants, or reproductive material of plants derived by the person from plants, or reproductive material of plants, of that variety, purchased or otherwise acquired by the person without any infringement of those plant variety rights to –
(i)produce reproductive material of plants for the sale; or
(ii)produce plants, or reproductive material of plants, from which reproductive material of plants for the sale may be derived.’
As noted, the PBR Act came into force on 10 November 1994. It repealed the PVR Act but preserved existing plant variety rights under the PBR Act as if they had been granted under the PBR Act as PBR. Section 11 defined PBR in the following terms:
‘Subject to sections 16, 17, 18, 19 and 23, PBR in a plant variety is the exclusive right, subject to this Act, to do, or to license another person to do, the following acts in relation to propagating material of the variety:
(a)produce or reproduce the material;
(b)condition the material for the purpose of propagation;
(c)offer the material for sale;
(d)sell the material;
(e)import the material;
(f)export the material;
(g)stock the material for the purposes described in paragraph (a), (b), (c), (d), (e) or (f).’
There are definitions of ‘conditioning’ and of ‘propagating material’ in s 3(1) of the PBR Act.
It is not disputed that the seed or grain of Franklin barley is both ‘reproductive material’ within the meaning of s 12 of the PVR Act and is also ‘propagating material’ within the meaning of s 11 of the PBR Act, except insofar as it is harvested material within s 14 of the PBR Act or insofar as it is a product made from harvested material within s 15 of the PBR Act, in which case it is to be treated as if it is propagating material for the operation of s 11.
Section 14 of the PBR Act extends PBR to harvested material in certain circumstances. It provides:
‘(1) If:
(a)propagating material of a plant variety covered by PBR is produced or reproduced without the authorisation of the grantee; and
(b)the grantee does not have a reasonable opportunity to exercise the grantee’s right in relation to the propagating material; and
(c)material is harvested from the propagating material;
section 11 operates as if the harvested material were propagating material.
(2)Subsection (1) applies to so much of the material harvested by a farmer from propagating material conditioned and reproduced in the circumstances set out in subsection 17(1) as is not itself required by the farmer, for the farmer’s own use, for reproductive purposes.’
Section 15 further extends PBR to products obtained from harvested material in certain circumstances. It provides:
‘If:
(a)propagating material of a plant variety covered by PBR is produced or reproduced without authorisation of the grantee; and
(b)the grantee does not have a reasonable opportunity to exercise the grantee’s rights in relation to the propagating material; and
(c)material is harvested from plants grown from the propagating material but the grantee does not have, in the circumstances set out in section 14, a reasonable opportunity of exercising the grantee’s rights in the harvested material; and
(d)products are made from the harvested material;
section 11 operates as if those products were propagating material.’
Tasmania and Cultivaust contend that ss 14 and 15 of the PBR Act, by reason of conferring ‘opportunities’ on the holder of PBR at three stages (namely, in respect of propagating material, in respect of ‘harvested material’ from propagating material, and thirdly in respect of ‘products made from harvested material’, in the circumstances to which they respectively apply), provide the holder of PBR with the opportunity to impose an ‘end point’ royalty as opposed to, or as well as, a royalty on the farmer/producer of Franklin barley at acquisition or usage of seed or farm seed.
Section 11 is expressly subject (inter alia) to ss 17 and 18, which were also the subject of detailed submissions. Section 17(1) of the PBR Act provides as follows:
‘If:
(a)a person engaged in farming activities legitimately obtains propagating material of a plant variety covered by PBR either by purchase or by previous operation of this section, for use in such activities; and
(b)the plant variety is not included within a taxon declared under subsection (2) to be a taxon to which this subsection does not apply; and
(c)the person subsequently harvests further propagating material from plants grown from that first-mentioned propagating material;
the PBR is not infringed by:
(d)the conditioning of so much of that further propagating material as is required for the person’s use for reproductive purposes; or
(e)the reproduction of that further propagating material.’
Section 18(1) of the PBR Act at material times provided:
‘Despite the fact that a plant variety is covered by PBR, any act referred to in section 11:
(a)that is done in relation to the propagating material of plants of that variety; and
(b)that enables the use of that propagating material:
(i)as a food, food ingredient or fuel; or
(ii)for any other purpose that does not involve the production or reproduction of the propagating material;
does not infringe the PBR.’
Section 18 was repealed and replaced by the Plant Breeder’s Rights Amendment Act 2002 (Cth), s 3 and Sch 1 Pt 1 Item 4.
The GPWA contends that the philosophy underpinning ss 17 and 18 of the PBR Act is to permit acts which are not done to produce plants or propagating material to be sold for a commercial profit to a person, who then intends to grow further plants or propagating material of the same type from the material sold. Section 17 creates an express exception for farm saved seed, so that a farmer who legitimately obtains propagating material of a plant variety covered by PBR is entitled to use propagating material harvested from a crop grown from the initial propagating material to produce further crop. It is said that s 17 thereby simply makes express the limitation which was already manifest under the PVR Act. Section 18 is said to permit an act to be done in relation to propagating material without infringing PBR where it enables the use of propagating material ‘as a food, food ingredient or fuel’ or ‘for any other purpose that does not involve the production or reproduction of the propagating material’. Section 23 is said to limit the extension or ‘cascading’ of PBR in relation to propagating material legitimately sold by the grantee or with the grantee’s consent, so that s 23 complements ss 14 and 15. They deal with the opposite scenario, namely the extension of PBR to harvested material and products derived from propagating material produced or reproduced without authorisation of the grantee.
In its opening submission, the GPWA then summarised the circumstances as follows:
‘Accordingly, if a farmer purchases seed covered by PBR, and then plants that seed and obtains a crop, the farmer may sell, and third parties may acquire, grain from the crop for a purpose of final consumption (ss 18 and 23(1)); and that farmer may also lawfully retain seed out of that crop for the purposes of replanting a further crop (s 17(1)).’
FRANKLIN BARLEY IN WESTERN AUSTRALIA AND CHRONOLOGY OF EVENTS
It is convenient before recording my findings about the way in which Franklin barley came to be grown, and handled, in Western Australia, to say something generally about the evidence and the witnesses. Much of the evidence comprised contemporary documentation. There was no suggestion that it was not an accurate perception or record of the events to which it referred, at least from its author’s understanding at the time. I have accepted and acted upon the contemporary documentary material. There are a few instances where contemporary document material does not present a straightforward picture. Where that has occurred, I have endeavoured to explain in a little more detail what findings I have made about those events.
Evidence was given by a range of persons. The principal witnesses were Mr Teague and Mr Semmler from Cultivaust and Kevin Swan (Mr Swan) and Peter Wells (Mr Wells), who were at material times the General Manager/Chief Executive Officer of the GPWA and the Assistant General Manager, Finance and Legal, of the GPWA respectively. Mr Wells described his position as akin to what was once called the company secretary. Their evidence was complemented by a range of witnesses, to whom I have referred in the course of recording my findings.
I am satisfied that each witness who gave evidence endeavoured to be frank and truthful. Indeed, the areas of disagreement between them are limited. There is some disagreement about the detail of conversations Mr Teague and Mr Semmler had with officers of the GPWA (not Mr Swan or Mr Wells) on around 4 and 5 May 1992. There is also some disagreement about the detail of a meeting between Mr Teague, Mr Semmler, Mr Swan and Mr Wells on 13 November 1992. I have recorded in more detail my findings about those matters, and my reasons for them. Those findings do not reflect adversely on any witness. They are the result of my consideration of the respective understanding and expectations of the witnesses, the inherent probabilities, and the context established by the contemporary documentation.
Subject to those remarks, it is convenient to record my findings about all matters touching upon the several causes of action relied upon in a more or less chronological sequence before formally addressing whether the causes of action, or any of them, are made out.
As much of the evidence is not contentious, I have not in all respects explained why a particular finding has been made or the foundation for the finding. I have done so where I have considered it necessary.
In early 1991, Mr Vertigan and subsequently Mr Thorp from the DPI, Tasmania had some contact with Peter Portmann (Mr Portmann), Principal Officer, Crop Improvement Branch, Western Australian Department of Agriculture (WADA), about the possible conduct of growing trials of Franklin barley in Western Australia. That contact included a facsimile from Mr Vertigan dated 21 February 1991, which included the following:
“We would also need an assurance that the seed sent and that harvested from the W.A. crops would not be used for further seed multiplication without permission from the D.P.I. Tasmania or its Australian licensee.”
On March 1991, Mr Portmann for the WADA notified the DPI, Tasmania that it wished to proceed with commercial evaluation of Franklin barley, involving evaluative trials within the WADA, selected growers, the GPWA, maltsters and the Swan Brewery. In the letter from the WADA dated 12 March 1991, Mr Portmann recognised that Tasmania ‘stands to gain commercially’ from efforts to do commercial work in Western Australia involving Franklin barley. It was agreed that two tonnes of Franklin barley seed would be supplied at the standard price for commercial malting evaluation. By letter dated 26 March 1991, the WADA indicated that the freighting of the seed would be arranged through the GPWA.
By letter dated 11 April 1991 from Mr Thorp, the DPI, Tasmania stipulated that the two tonnes of Franklin barley was sent:
‘… on the understanding that all grain produced from the WA crops will be used for malting and none will be retained for further seed multiplication.
Your Department will need to take appropriate steps to ensure that growers who receive the seed comply with this requirement …’
Mr Portmann for the WADA acknowledged that letter and agreed to abide by its terms. He did so on a copy of the letter which he returned to Mr Thorp. Mr Portmann clearly understood the terms of the then arrangement. In a letter which he sent to growers who were to conduct trial evaluation growths of Franklin barley, he included the following:
‘I remind you that under the terms of the agreement with the owners of Franklin, all grain of Franklin must be delivered to the grain pool. If there is a small amount remaining after filling the truck that is not economic for the grain pool to collect it must be disposed of as feed barley to the bin or fed to stock. It cannot be retained for seed purposes without the written permission of the owner or agents responsible for marketing the variety.’
Despite that arrangement, one of the growers who participated in the 1991 growing trials did retain about 10 tonnes of the 50-55 tonnes of Franklin barley grown. The balance, as with the other Franklin barley grown in those trials, was delivered to the GPWA in accordance with its statutory monopoly.
Apart from those trials in Western Australia, Kirin also approached the DPI, Tasmania in the first half of 1992 for supplies of Franklin barley for malting in Western Australia. Those negotiations were conducted through Michael Tempone (Mr Tempone), the Operations Manager of Kirin in Western Australia until 1995, and Mike Walter (Dr Walter), then Chief Officer, Pastures and Field Crops Branch and Michael Hart (Mr Hart), Deputy Chief Officer, Pastures and Field Crops Branch, DPI, Tasmania as well as with Mr Vertigan.
In fact during 1992 and in the next succeeding few years, Kirin acquired supplies of Franklin barley direct from Tasmania, through the Tasmanian statutory marketing authority the Tasmanian Grain Elevators Board (TGEB) from growers of Franklin barley in Tasmania. Kirin bore the transport costs of that barley, in excess of 16,000 tonnes over some three or so years. The then chairman/manager (now managing director) of the TGEB Anthony Wright (Mr Wright) has confirmed that the TGEB agreed with Kirin by agreement dated 18 November 1992 to sell and supply 20,000 tonnes of Franklin barley to Kirin in Western Australia during 1993 and 1994 at about $206 per tonne. Due to a lack of suitable grain, the tonnage ultimately supplied under that contract was somewhat less than 20,000 tonnes. Kirin paid the freight on that grain from the TGEB storage facility including its shipment from Tasmania to Western Australia.
The maltsters in Western Australia (Joe White and Kirin) were, following the trials of Franklin barley in 1991, anxious for it to be introduced to growers for commercial growing in the 1992 growing season. The principal barley then grown in Western Australia was the Stirling variety. The evidence indicates that the barley grown in Western Australia in the preceding few years had become less attractive for exporting to overseas brewers compared to barley available from other countries. There was an understandable desire to maintain the availability of a competitive quality of barley for export to maintain and develop those markets. As at December 1991, Kirin was contemplating a substantial expansion of its malting plant at Welshpool in Western Australia, but announced that ‘the production of a barley with special malting properties’ was an obstacle standing in the way of the proposed development. The GPWA was aware of its attitude. Joe White had also, at least by January 1992, conveyed to the GPWA its concern that a higher quality malting barley be produced in Western Australia than the Stirling variety most commonly then grown for malting purposes. The issue was discussed at a substantial industry forum on 14 February 1992.
It is at this point that the respective positions of the parties diverge. Franklin barley came to be supplied to growers in Western Australia for the 1992 crop (and the 1992/93 harvest) and for subsequent years. The Franklin barley seed supplied into Western Australia for the 1992 crop was largely through dealings between Cultivaust and Joe White (as the ultimate acquirer of the crop, albeit through a Franklin barley marketing pool established by the GPWA). However, there were also dealings between the GPWA and Cultivaust leading up to the supply of Franklin barley seed into Western Australia for the 1992 season.
The GPWA says that Cultivaust simply sold Franklin barley to farmers in Western Australia who then grew a crop. The farmers retained part of their Franklin barley crop as farm saved seed, in accordance with their statutory right to do so. The farmers then replanted their Franklin barley seed in ensuing seasons to produce the next year’s crop. The farmers disposed of the non-retained part of the Franklin barley crops to the GPWA for malting or feed purposes, that is for final consumption purposes. As noted earlier, the GPWA contends that both the PVR Act and the PBR Act permitted this course of conduct to occur lawfully without any infringement of plant variety rights or PBR. Hence, it contends, there was nothing which could properly be described as ‘unlicensed barley’, in the sense that it was produced or sold in contravention of the PVR Act or the PBR Act.
The GPWA identifies the contract claim, based upon an alleged agreement formed on 5 May 1992 between Cultivaust and the GPWA, as being based upon two alleged terms, namely:
(a)that Franklin barley seed supplied by Cultivaust in 1992 was solely for the limited purpose of conducting growing trials of Franklin barley in Western Australia, and after harvesting, all the grain grown from the seed was to be delivered to two maltsters, Joe White and Kirin; and
(b)that the GPWA would consider what assistance it could offer to Cultivaust in the promotion and development of Franklin barley seed sales and grain production in Western Australia.
The GPWA denies the existence of any agreement on such terms as a matter of fact. It claims that it did agree with Joe White that it would facilitate a 1992 growing trial in Western Australia conducted by Joe White with Cultivaust’s concurrence. It did not do anything to contravene that agreement. It further contends that, if any agreement was concluded of the nature alleged by Cultivaust, neither John Orr (Mr Orr) nor Chris Maughan (Mr Maughan) (officers of the GPWA with whom the alleged arrangement was entered into) had any authority to enter into any such agreement in terms which bound the GPWA. Further, it denies that any estoppel arose to prevent or hinder it in the exercise of its statutory powers, or to prevent the performance of its statutory functions, or that any such estoppel could have any binding effect.
I have referred above to the other responses of GPWA to the applicants’ claims.
After the 1991 trial of Franklin barley in Western Australia, Mr Teague of Cultivaust was anxious to get Franklin barley available for farmers for the 1992 sowing season. The latest supply date for that purpose was about the end of April 1992. In the period March-April 1992, he dealt at some length with Joe White to arrange the supplies of seed to it for provision to growers. Joe White, for its part, was keen to participate because it perceived Franklin barley as providing a superior barley for malting purposes and so as a means of retaining its existing export markets.
Joe White in March 1992 proposed to arrange the growing of some 100-150 tonnes of Franklin barley in high rainfall areas in 1992 to secure a more extensive trial for it. It proposed to the GPWA that it would enter into direct buyer-grower contracts, avoiding the need for any Franklin barley grain pool to be established by the GPWA. Kirin also, on 2 April 1992, wrote to the GPWA seeking the opportunity to arrange even more extensive testing of Franklin barley in the southern areas during 1992. At a meeting held on 8 and 9 April 1992, the GPWA decided it would ‘become involved’ in a large scale trial of Franklin barley in 1992. It was conscious that, if the maltsters Joe White and Kirin dealt directly with growers, its function as a grain marketing authority would be diminished. Mr Swan acknowledged that there was pressure from Joe White and Kirin to deal with barley ‘outside the system’. It therefore determined also to establish a Franklin barley grain pool for the 1992/1993 season.
On 10 April 1992, a meeting took place between officers of the GPWA, and of Joe White and Kirin. It was agreed that Joe White would procure about 200 tonnes of Franklin barley seed for a further growing trial in 1992, and that the GPWA would be responsible for the allocation and distribution of that seed. The notes of that meeting record that growers were to deliver all but ‘seed stocks for personal use in the following season’ to the GPWA.
In the succeeding few weeks, Cultivaust dealt with both Joe White and officers of the GPWA. The particularly significant conversations with officers of the GPWA took place on or about 4 and 5 May 1992. The allegation by Cultivaust and Tasmania is that on about 5 May 1992 Cultivaust and the GPWA agreed that Cultivaust would supply Franklin barley seed to Western Australia for further evaluation trials for the 1992 season, upon the basis that:
(a)the seed supplied would only be used for the growing trials, and after harvesting would all be delivered to Joe White and Kirin; and
(b)the GPWA –
‘would consider what assistance it could offer to [Cultivaust] in the promotion and development’
of Franklin barley in Western Australia.
The critical discussions took place between Mr Teague and Mr Orr who was a market research officer of the GPWA between March 1992 and May 1995, and Mr Teague and Mr Semmler and Mr Maughan, who was the marketing officer of the GPWA until 13 August 1993. Each of those persons reported to the marketing manager Rory Coffey (Mr Coffey), who in turn reported to Mr Wells.
The discussions did not reflect precisely the arrangement which previously existed between Cultivaust and the WADA (Mr Portmann) as set out above in respect of the 1991 growing trial. There was no agreement between the GPWA on the one part and Cultivaust on the other part about any end point royalty payments in respect of Franklin barley. Indeed, the suggestion of end point royalty payments as discussed between Cultivaust and Joe White was in slightly different terms, and somewhat less restrictive. The background to those discussions is reflected in a facsimile dated 27 April 1992 from Cultivaust to Joe White concerning the supply of Franklin barley for a growing trial in the immediate future. The memorandum to Joe White included the following:
‘Considering the very good relationship that was developing between our Companies we are rather dismayed at what has now transpired in West Australia. The model that has now been operating in South Australia and Victoria for the last three years should also be the basis for the situation in West Australia. We, therefore seek your co-operation to negotiate an agreement between our Companies in regard to the procedures for Franklin barley in West Australia, as this must be resolved before the Seed currently in transit arrives.’
On 30 April 1992, Cultivaust, by facsimile, again wrote to Joe White regarding the development of Franklin barley in Western Australia. That facsimile repeated Cultivaust’s desire to establish a viable long term royalty stream, which should include an end product royalty. Mr Teague (who sent that memorandum) suggested that the end product royalty should begin on all Franklin barley produced from the 1993/94 season (i.e. the December 1993 harvest) rather than on the 1992 harvest. The memorandum then continued:
‘Seed is made available for sowing in Western Australia on the proviso that an end product levy system as explained can be established. We would appreciate your explaining this point to both Kirin and the W.A. Grain Pool.’
The memorandum further suggested, in respect of the 1992 proposed trial, that the GPWA should purchase grain grown under the trial from Joe White on the basis that it is ‘aware that an end product levy will be due on all grain beginning with next years harvest’ and that ‘none of the resultant crop from this seed is sold/given away as seed’. It did not purport to put an embargo on the use of barley grown during the trial as farm saved seed for the following year’s crop.
Consistent with that memorandum, Joe White provided the growers with a document for signing which included an acknowledgment that the barley supplied was covered by plant variety rights which prohibited it from being sold, bartered or given away without the written consent of Cultivaust or Tasmania. It did not restrict the grower from retaining seed for the following year’s harvest.
At the same time, Cultivaust was communicating directly with the GPWA. Mr Maughan had been asked to do some operational work in relation to the proposed Franklin barley trial. He had apparently spoken to Mr Teague, in circumstances which are unclear, in relation to seed availability. Following that conversation, on 4 May 1992 Cultivaust through Mr Teague by facsimile communicated to Mr Maughan at the GPWA. That facsimile message asserted that Franklin barley is protected under the PVR Act and continued:
‘It is our responsibility to act for the best interests of the breeder, the Tasmanian Department of Primary Industry; to do this we cannot allow seed sales into Western Australia until we have established a long term royalty system for the breeder. To do this we feel that an end product levy collected on grain received is the long term solution and we would wish to discuss this with you prior to authorising any seed sales. This system has been established in other States of Australia.’
Despite that communication, or more specifically any written acceptance of its terms, Cultivaust then released and supplied seed to Joe White for the proposed trial. The facsimile of 27 April 1992 suggests that seed had been despatched by that date. When releasing the seed to Joe White, apparently on 4 May 1992, Cultivaust sent Joe White a further facsimile asserting that the release was under the conditions set out in the earlier facsimile to Joe White of 30 April 1992.
‘That a system of end product levy be established on Franklin barley received in Western Australia …’
It sought written confirmation.
I accept that following the facsimile to the GPWA of 4 May 1992, Mr Maughan had a conversation with Mr Teague. Mr Maughan has no clear record or recollection of the content of that conversation. However, I accept his evidence that he was conscious that his dealings with Cultivaust were out of his usual role, and that he was also conscious that he should not himself make any commitment, and did not have any authority to make any commitment, on behalf of the GPWA. In my view he did not do so. I accept his evidence that he asked Mr Teague to put any proposal in writing for consideration by his superiors. To the extent to which Mr Teague has placed more emphasis upon that conversation than Mr Maughan has acknowledged, in my view he is in error. In particular, I do not find that Mr Maughan gave any assurances to Mr Teague as to the terms on which the GPWA would receive and handle any Franklin barley supplied by Cultivaust, whether to Joe White or to the GPWA. He may have discussed with Mr Teague that the GPWA would sell the Franklin barley grown during 1992 and then acquired by the GPWA to either Joe White or Kirin. They were the maltsters who had been encouraging the GPWA to support the 1992 growing trial. Mr Maughan may also have discussed that the GPWA was co-operating in the proposed growing trial, as it was. But any such general discussion was not in any sense one from which, in my view, Mr Teague was entitled to draw any contractual commitment on the part of the GPWA. I do not think the conversation had that character.
Mr Orr in April 1992 had been directed by his superiors to assist Joe White in relation to the proposed growing trial and malting evaluation of Franklin barley. His role was mainly to identify a spread of suitable growers in various geographical locations, particularly in higher rainfall areas, for the trials to be conducted. He was also to assist in the distribution of Franklin barley seed, and generally to liaise with the growers. He did not have a role in GPWA in policy making or entering into agreements with suppliers in respect of the provision of Franklin barley. Over the succeeding short period, he did manage the supply of, and arrange for distribution to growers of, about 137 tonnes of Franklin barley seed.
Apart from the telephone contact with Mr Maughan, Mr Teague had more extensive telephone contact with Mr Orr in early May 1992. It is common ground that those discussions were generally concerned with logistical issues relating to the delivery of Franklin barley seed into Western Australia. I accept Mr Orr’s evidence that he, too, did not occupy a position within the GPWA which gave him any authority to negotiate terms of any agreement between Cultivaust and the GPWA, and that he was conscious of not doing so. The subsequent facsimile message from Cultivaust to Mr Orr at the GPWA of 21 May 1992 deals with logistical matters, and is consistent with that view of the conversation which took place at that time. It does, however, repeat the expectation or desire of Cultivaust for a long term agreement between Cultivaust and the GPWA, including a production levy on Franklin barley seed grown in Western Australia. The letter asked for Mr Orr’s views ‘so that we can try and get an Agreement worked out for the future’. Mr Orr did not take that matter further. As I have found, he was sufficiently aware of his role to back off from any prospect of involvement in such negotiations. He did, however, on the instructions of Mr Wells, at about this time secure from the ABB a copy of the then current draft proposed agreement between Cultivaust and the ABB whereby Cultivaust proposed to appoint the ABB as its licensee for Victoria and South Australia to produce and deal in Franklin barley, including for the payment of a production levy. Mr Orr’s subsequent role was restricted to following up with growers the results of the Franklin barley growing trial in Western Australia in 1992.
On instructions from the general manager of GPWA, on 5 May 1992 Mr Orr wrote to the growers conducting the trial of Franklin barley including the following:
‘The Grain Pool, following a request by Joe White Maltings, has identified a number of growers such as yourself throughout the suitable growing areas in WA to grow an area of Franklin barley for quality testing purposes. An allowance has been made to retain seed for future plantings, however this variety is covered by plant variety rights and as such, on sale is not permitted.’
It would appear that Joe White had conveyed to the GPWA the terms of the supply of Franklin barley seed for the 1992 growing season in accordance with the request of Cultivaust.
At the same time, Joe White responded to Cultivaust’s facsimile of 4 May 1992 to the effect that the question of an end product levy on Franklin barley for the 1993/94 season (harvest December 1993) be deferred for further discussion at a later date and that, by taking the seed which it had acquired for the trial in 1992, it did not accept that condition.
It is plain that up to that point no commitment to Cultivaust to pay any form of production levy had been agreed either by Joe White or by the GPWA. By facsimile from Joe White to Cultivaust of 5 May 1992, Joe White indicated that the issue of an end product levy had been raised, in particular in respect of the 1993/1994 growing season. Joe White referred to earlier conversations, and indicated expressly that, by acquiring Franklin barley seed for the 1992 growing trial, it did not accept that any such end product levy should or would be agreed.
On 5 May 1992, the GPWA also wrote to Cultivaust. The letter explained the limited role of the GPWA in relation to the 1992 growing trial. It then said:
‘If this 1992/93 season project is successful, we agree that it will be important to ensure there is registered seed production in WA. However, your inference to eventually applying an end product levy is definitely not an acceptable arrangement and would in itself present Franklin barley as a less attractive option to growers.’
That letter was sent under the hand of Mr Swan. I do not think it left any room for misunderstanding.
There may have been some optimism at that time, which turned out to be misplaced, on the part of Cultivaust about reaching an arrangement with the GPWA about an end point royalty. Mr Teague said that, at that time, Cultivaust was not too concerned by the non-acceptance of the proposed conditions of sale involving an end product royalty, as a seed royalty had already been paid on the seed provided for the 1992 growing trial, and Cultivaust had waived any claim to a production royalty as against maltsters for that season in order to promote Franklin barley and its use by maltsters.
It is consistent generally with that picture that the Producers’ Council of the GPWA meeting held on 7 May 1992, when discussing the Franklin barley trial, noted that growers buying Franklin seed under the trial arrangement could retain seed grown on their property for personal seeding stocks or for farm feeding, and with the balance to be delivered to the GPWA for domestic maltsters. Such seed was not to be sold without a further royalty arrangement in place with the plant variety rights holders.
There was then a lull in communications for a few months. Those which occurred related to operational features of the growing trial and its progress. The picture which emerges over that period is that there was an expectation by Cultivaust that Franklin barley would be grown in Western Australia during the 1993 growing season because maltsters and growers (as they got a higher price for good quality malting barley) would be likely to pursue that outcome.
In August 1992, the GPWA invited Cultivaust to indicate its proposed arrangements for the supply of Franklin barley seed in the forthcoming season. Cultivaust responded on 28 October 1992. It repeated its desire to establish a production levy payment for Franklin barley grown in Western Australia. It was by then apparent that the 1992 trial was likely to be successful, so that Franklin barley either alone or blended with another variety of barley would be a preferred barley variety for maltsters in Western Australia. In the result, about 5,400 metric tonnes of Franklin barley was received by the GPWA and was sold to Joe White, from the 1992 growing trial.
On 13 November 1992, the three directors of Cultivaust attended a meeting in Western Australia with Mr Swan and Mr Wells of the GPWA to discuss the proposed further supply of Franklin barley for the 1993 growing season. The Cultivaust representatives at that meeting again raised their desire to secure a production levy or an end point royalty on production of Franklin barley for the 1993 and subsequent growing seasons. Before dealing with those discussions and their outcome, it is convenient to note certain negotiations between Cultivaust and the ABB.
In mid 1992, negotiations between Cultivaust and the ABB for securing an income stream from Franklin barley in Victoria and South Australia were progressing apparently smoothly. Drafts of a proposed agreement concerning Franklin barley grown on the Eyre Peninsula of South Australia were considered, including a condition that the Franklin barley grown be provided to the ABB (thus not permitting any farm saved seed) and for a royalty on the sale of certified Franklin barley seed as well as a levy on each tonne of Franklin barley seed sold by the ABB. A draft provided to the ABB by Cultivaust on 2 June 2002 provided for a production levy of $2.50 per metric tonne on tonnage sold up to 7,500 tonnes per season, then reducing to $2 per metric tonne for further tonnage sold. A copy of that draft agreement was provided by the ABB to the GPWA, in response to the request made through Mr Orr referred to above.
The GPWA in the latter part of 1992 had, at least at a management level, firmed in its opposition to a production based levy on Franklin barley. It did so, however, with the support of Joe White and of the Producer’s Council of the GPWA (the growers representative body of the GPWA). Despite that general view, the meeting of 13 November 1992 did not involve any outright rejection of a production royalty payment. There is some disagreement, albeit of emphasis, as to whether the officers of the GPWA present at that meeting expressed a neutral position with respect to a production levy, subject to the views of the Western Australian Farmers’ Federation Inc (WAFF), or expressed mild support for it, again subject to the views of the WAFF. It is not suggested that any commitment was made at that meeting. Mr Swan described the GPWA as the servant of the growers. The GPWA at that time had a liaison committee called the Growers’ Consultative Committee. It comprised representatives of the WAFF, and of the Pastoralists’ and Graziers’ Association. The WAFF had made known to the GPWA that, at least to that point, it was opposed to any production levy or end point royalty. There is no reason to think Mr Swan would have made any commitment to Cultivaust about a production levy inconsistent with the views of the WAFF. Nor is there any reason to think he would have expressed the views of the WAFF as being generally supportive of a production levy. The greater Cultivaust perceived the obstacle to a production levy, the lower any production levy ultimately agreed (if one came to be agreed). On the other hand, the pressure from maltsters and growers for access to Franklin barley would have dictated to Mr Swan that he should not shut the door entirely to Cultivaust. I accept his evidence that he indicated to Cultivaust at that meeting that he would raise with the Board of the GPWA the proposal for a production levy or end point royalty. I also accept that Mr Swan said at that meeting that the Board of the GPWA would further consult with the WAFF, and that such consultations might be delayed until February 1993 due to growers being caught up until then by harvesting. Mr Swan’s evidence is confirmed by Mr Wells. It also reflected Mr Wells’ own views.
Despite the clear indication that no commitment would be made by the GPWA at that meeting, I also find that some discussions took place about the rate of any production levy which might come to be agreed. Mr Wells sought to ‘talk down’ the suggested figure. In that context, Mr Swan pointed out that Franklin barley had not by then been shown to be as suitable for growing in Western Australia as it was in Tasmania.
I find that the meeting concluded on the basis that Mr Swan would raise again with the Board of the GPWA a production levy for Franklin barley, but that it was likely that no decision would be made without further consultation with the WAFF, and that the harvest period meant no final decision was likely until some time in February 1993. Mr Wells described the outcome of the meeting as being that the GPWA would further consider the proposed production levy. That I find to be an accurate description of the outcome. I accept the evidence of Mr Teague and Mr Semmler that, following that meeting, they were not discouraged from pursuing the provision of Franklin barley to Western Australia for the 1993 growing season by any firm indication that a production levy or end point royalty would simply never be agreed. They did not assert that any agreement for a production levy was made at that meeting.
In my view, the meeting of 13 November 1992 did not include any indication on the part of the GPWA through Mr Swan that it agreed in principle with the concept of a production levy or an end point royalty levy, or that the consent of the WAFF was a formality. I think Mr Semmler and Mr Teague read into the meeting and the comments of Mr Swan more than was conveyed. In the result, I do not think it matters too much because the position was clarified by an exchange of correspondence soon thereafter. Apart from the conflicting evidence, the pressure on the GPWA to secure supplies of Franklin barley during 1993 was, in substance, similar to that which existed during 1992. Despite that pressure, the GPWA in the past had been careful not to make any such commitment, and indeed had conveyed to Cultivaust that it was opposed to an end product royalty. Whilst commercial reality or pressure may ultimately have led to it accepting such an end product royalty, there is no reason to think that it would have acceded readily to doing so. I accept the evidence of Mr Teague and Mr Semmler that the attitude of the WAFF was discussed at that meeting, and that it was clear that any outcome of the meeting would be subject to the views of the WAFF. I also accept that Cultivaust had reason to hope that, if the WAFF expressed no opposition to, or expressed support for, an end product royalty as the price of its members having available Franklin barley seed for the 1993 growing season, the GPWA would not have itself impeded such an arrangement somehow being implemented. It was in essence the body through which the growers of barley in Western Australia were to secure their best price for their harvests.
It is consistent with that meeting, in particular that Mr Teague and Mr Semmler were not positively discouraged from pursuing an end point royalty, that on 27 November 1992 Cultivaust sent to the GPWA a draft proposed licence agreement. Under the proposed agreement the GPWA was to be licensed to deal in and sell Franklin barley seed, and to license others to sell and produce the seed on the conditions in the agreement. The conditions included an end point royalty of $1 per metric tonne together with a premium depending upon the price achieved for Franklin barley by the GPWA in sales of Franklin barley compared to other malting varieties of barley with which it dealt. A revised draft was sent on 30 November 1992.
I do not consider the dealings between Cultivaust and the GPWA over the period of about May 1992 to May 1994 demonstrate other than the relationship of arms length commercial negotiators. They do not show an evolving relationship of mutual trust and confidence, so that the GPWA was obliged to act in any other manner than as it did. The GPWA did not assume any obligation to act other than in its own interests, or the interests of Western Australian barley growers. It did not assume over that period any obligation to act in the interests of Cultivaust.
In the chronological findings, I have addressed the various matters to which Cultivaust has referred in submissions in support of its contentions. I shall not repeat them in detail.
The GPWA facilitated the 1992 growing trial of Franklin barley. It established a Franklin barley grain pool for the harvest from that trial. It sold the grain harvested (except for farm saved seed) to Joe White. In doing so, it acted in accordance with its statutory functions. Its communications with Cultivaust at the time do not provide any foundation for a finding that it then intended to, or would, promote the interests of Cultivaust. Indeed, the contrary is the case. Mr Swan was then unpersuaded that Franklin barley in Western Australia would have the qualities claimed for it. It made clear its limited role. It made clear that growers could retain farm saved seed (without demur from Cultivaust). It made clear its then reluctance to accept the concept of any production levy or end point royalty.
Nor does the subsequent conduct of the GPWA advance Cultivaust’s claim. It was aware of Tasmania’s plant variety rights and subsequently PBR. It undertook negotiations, which recognised those rights, in November and December 1992 with a view to reaching an agreement with Cultivaust. It expressly indicated those negotiations were subject to the views of the WAFF. Those negotiations were arms length negotiations. It withdrew from them on 5 February 1993. It then expressly left to Cultivaust the decision as to whether, and how, it released Franklin barley seed into Western Australia for the 1993 and subsequent growing seasons.
Overarching those communications, as Cultivaust points out, is the GPWA’s general willingness to support the use of Franklin barley in Western Australia. Its attitude reflected the wishes of Western Australian maltsters, and consequently growers. I do not consider that attitude carries with it any element of obligation on the part of the GPWA to act for the benefit of Cultivaust. It is no more than the recognition that the GPWA’s ‘clients’ perceived potential benefits in the availability of Franklin barley in Western Australia.
Nor do I consider the provision of agronomic information to the GPWA by Cultivaust in about August 1992, upon its request, as advancing the claimed fiduciary relationship. It was information the GPWA sought to assist in its performance of its statutory functions, to determine whether to establish a Franklin barley grain pool and where deliveries to that grain pool would occur.
In 1993 and subsequent years, because Cultivaust provided Franklin barley seed to growers in Western Australia in the manner referred to earlier in those reasons, Cultivaust recognised that it had possibly acted unwisely in a commercial sense. It recognised that, because so much Franklin barley seed was available, the growers would be resistant to any production levy. They had then the capacity to grow Franklin barley without such a levy. They could retain farm saved seed for future crops. However, to recognise that Cultivaust’s commercial decisions may have made its negotiating position to secure a production levy or end point royalty more difficult, does not add any colour to Cultivaust’s claim that its relationship with the GPWA was, or was evolving into, a fiduciary one. The GPWA’s subsequent negotiations with Cultivaust during 1993 also do not have that effect.
As recorded above, on 30 May 1994 the GPWA formally notified Cultivaust that it no longer wished to be directly involved in the commercialisation of Franklin barley in Western Australia. It withdrew from any further discussions regarding the imposition of a production levy or end point royalty on Franklin barley in Western Australia.
Consequently, I reject the contention that the GPWA had a fiduciary relationship with Cultivaust as alleged.
There are additional matters leading to rejection of this claim. Cultivaust contends the fiduciary duty which arose was that the GPWA should not prefer its own interests to those of Cultivaust by taking advantage of Cultivaust’s decision to release Franklin barley seed. The specific conduct alleged to breach that duty is the establishment of grain pools for Franklin barley in each season, and the acceptance of delivery of grain and its sale without Cultivaust’s express authority, where certain of that grain was harvested by growers without Cultivaust’s express authority (presumably second generation crops from farm sowed seed). However, the GPWA was simply fulfilling its statutory function. As the monopoly statutory marketing authority it was obliged to receive deliveries of grain, and to sell them, and to account to the growers in the particular pool by way of compensation. The GPWA had no capacity to refuse to accept deliveries of Franklin barley, or to sell that grain and to account for it. In my judgment, the statutory structure within which it operated explains its conduct, and it illustrates further why the relationship between Cultivaust and the GPWA was not a fiduciary one. Cultivaust had a sufficient understanding of the way statutory marketing authorities operated to appreciate that the conduct of the GPWA was not conduct giving rise to the fiduciary relationship it now alleges.
The GPWA was empowered to enter into an agreement with Cultivaust which included an end point royalty payable by it per tonne of Franklin barley delivered to it; the payment so made would then reduce the compensation to growers from that pool. It did not do so. The progress to such an agreement in late 1992 ceased. At that point, no figure for any end point royalty was agreed. There was then a significant difference between what Cultivaust wanted and what the GPWA thought might be acceptable to growers in Western Australia. The difference may have been irreconcilable. The fiduciary duty alleged, however, purports to impose on the GPWA the obligation to have acted towards Cultivaust in a way different from that which their respective commercial interests dictated at that time. That fact also tends to indicate that, in reality, the relationship between them was simply that of commercial negotiators.
THE UNLAWFUL INTERFERENCE CLAIM
Cultivaust contends that the GPWA attempted to reach an understanding with the ABB and with the NSWGB as to the level of the production levy or end point royalty that each, as statutory marketing authorities, would pay in respect of Franklin barley harvested in the States of New South Wales, Victoria, South Australia and Western Australia.
There are obstacles confronting the claim. The GPWA contends the Court does not have jurisdiction to hear and determine it. It also contends that Australian law does not recognise a cause of action for intentional infliction of economic harm caused by an unlawful act. The alleged unlawful act is the attempt referred to in the preceding paragraph. It is said to be unlawful, as being in contravention of ss 45(2)(a)(ii) and 76(1)(b) of the TP Act. Section 45A(1) of the TP Act deems certain conduct to have had the purpose or effect of substantially lessening competition in the relevant market or markets. That issue itself throws up complex issues as to the nature of the relevant market or markets. The GPWA further contends that, whatever its conduct, it did not interfere in the course of negotiations between Cultivaust and the ABB, and did not cause Cultivaust any loss. Finally, as the claim was first made by amendment on 18 July 2001, Cultivaust to the extent necessary seeks an extension of time to have instituted the claim to that date under s 48 of the Limitations of Actions Act 1936 (SA) (the SA LA Act). The GPWA disputes that it is entitled to such an extension of time, or that the SA LA Act is applicable.
As I have reached the conclusion that this claim must fail on the facts, it is not necessary to address all the issues raised by the pleadings. It is appropriate that I should briefly refer to three of them.
In my view, the Court has jurisdiction to hear and determine this claim. I think it is within the primary jurisdiction of the Court by reason of s 39B(1A)(c) of the Judiciary Act 1903 (Cth) (Judiciary Act) because it arises under a law made by the Commonwealth Parliament. I accept the contention of Tasmania and Cultivaust that the claim involves more than the interpretation of the TP Act, and in the relevant sense arises under it: see e.g. Felton v Mulligan (1971) 124 CLR 367. The cause of action, if it is to succeed, involves the establishment of conduct by the GPWA which would amount to a contravention of s 76(1) and s 45 of the TP Act. That the cause of action as pleaded requires also the proof of other facts does not lead to the view that the claim does not arise out of the TP Act: see LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575 at 581.
The circumstances in which there may arise a cause of action for unlawful interference with contractual relations may be uncertain: see e.g. Sanders v Snell (1998) 196 CLR 326; Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots [1991] 2 VR 636. However, whether such a cause of action may be maintained by reason of a contravention of the TP Act where no remedy is sought under the TP Act is far from certain: see e.g. Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 504, 515. I do not need to determine that question.
The third matter to which I propose to refer briefly before turning to my findings of fact is whether the cause of action is statute-barred in any event.
Cultivaust contends that the relevant law is the law of South Australia. Section 35 of the SA LA Act imposes a six year limitation period on a tort action. That time would run from when the damage first occurred. In the light of my factual findings, I place that date as early April 1993. Section 48(3) then permits an extension of time to a period of 12 months after the ascertainment of facts material to the cause of action. Mr Teague for Cultivaust did not learn of the letter from the GPWA (Mr Wells) to the ABB (Mr Banbury) of 14 December 1992 until July 2001. Hence it presents a straightforward foundation upon which the exercise of the discretion to extend the time may arise. Then Cultivaust contends the justice of the case should lead to the favourable exercise of the discretion. If necessary, I would exercise the discretion in its favour.
The critical communication, namely the letter of 14 December 1992, was despatched from Western Australia and received in South Australia. The communication was effected in South Australia, and the loss was suffered in South Australia. I consider that to be the lex loci delicti. The SA LA Act should therefore apply: John Pfeiffer Pty Ltd v Rogerson (2000) 172 ALR 625, in respect of the relevant limitation period. I would therefore have extended the time for this claim to be pursued by Cultivaust if it otherwise would have succeeded in the claim.
As I noted in the introduction to these reasons for judgment, the claim for damages was not really pursued by Cultivaust in relation to the dealings between the GPWA and the NSWGB. In opening, senior counsel for Cultivaust recognised the claim was unlikely to be pursued. In the course of the hearing, little evidence was led concerning it. No witness was called from the NSWGB.
In fact, the evidence shows that on 30 November 1992 Cultivaust proposed to the NSWGB an agreement for the supply of Franklin barley to New South Wales which included a production levy of $1.00 per tonne plus 20 per cent of the ‘premium achieved by Franklin over other Malting varieties’ marketed by the proposed licensee, namely the Grains Board, to a maximum of $3.00 per tonne. That level of production levy came to be agreed between Cultivaust and the NSWGB: cl 4.1 of the agreement dated 24 February 1993. Whatever effect Mr Wells’ facsimile of 11 December 1992 may have had upon the ABB, it clearly did not operate to the detriment of Cultivaust in its dealings with the NSWGB. There was no actual interference with the negotiations between them, even if there was an attempt to do so. Nor was there any actual detriment to Cultivaust.
That claim must fail. It is unnecessary to refer to the other issues raised by way of defence. They do, however, arise in relation to the claim as it concerns Cultivaust’s dealings with the ABB.
The factual background is straightforward. It is referred to in more detail in the chronological findings. From early 1992, Cultivaust was engaged in negotiations with a view to agreeing upon a means of securing a production levy or end point royalty for Franklin barley grown in Victoria and South Australia. By June 1992, those negotiations had progressed to the point where the proposed levy appears to have been accepted in principle, and Cultivaust and the ABB were discussing particular clauses of a proposed agreement. As noted, in response to the GPWA request through Mr Orr, the ABB in June 1992 sent to the GPWA a copy of the then draft agreement (at that time, dealing specifically with the Eyre Peninsula in South Australia). That draft agreement proposed a production levy of $2.50 up to the first 7,500 tonnes of Franklin barley, and $2.00 per tonne for further Franklin barley produced in a season.
By November 1992, the horizon of the proposed agreement between Cultivaust and the ABB had expanded. The draft agreement submitted to the ABB on 5 November 1992 encompassed production of Franklin barley in both Victoria and South Australia, and was proposed to run over nine years. It proposed a production levy on each tonne of Franklin barley ‘marketed, managed, handled by, delivered to and/or contracted by’ the ABB of $3.00 per metric tonne up to 50,000 metric tonnes and of $2.50 per metric tonne for further production of Franklin barley in each growing season, as well as a royalty on sale of seed of $30.00 per metric tonne.
The next significant event is the facsimile letter from Mr Wells of the GPWA to the ABB of 14 December 1992. A similar facsimile was sent to the NSWGB on 11 December 1992. Its relevant contents are set out in the chronological findings.
As I have indicated elsewhere in these reasons, I find that Mr Wells was thereby endeavouring to have the ABB (and the NSWGB) reject the Cultivaust claim for a production levy of about or up to $3.00 per tonne, and to direct the negotiations of each of the statutory marketing boards to a production levy of not more than $1.00 per tonne. The final paragraph seeks the assistance of the ABB to ‘contain the aspirations of Cultivaust’, and exhorts the ABB to action ‘to ensure that the interests of barley growers are protected’. It is how he sought to achieve that purpose which is the critical issue. The earlier content of that facsimile makes it clear that the GPWA regarded protection of the interests of barley growers as best served by statutory marketing authorities not acceding to a production levy of up to $3.00 per tonne. Mr Wells acknowledged that his letter was an attempt to set a benchmark for the production levy.
The ABB through Mr Banbury on 21 December 1992 acknowledged the facsimile without commenting upon it. However, Mr Banbury (who had the carriage of negotiations with Cultivaust on behalf of the ABB) also telephoned Mr Wells in relation to the letter. Mr Banbury perceived the risk that dealing with the GPWA over the level of any production levy may contravene the TP Act. He conveyed that to Mr Wells. On behalf of the ABB, he declined to participate in any form of collective bargaining by the statutory marketing authorities with Cultivaust or to deal with the GPWA in relation to the negotiations between the ABB and Cultivaust.
Mr Wells did not seek to take his proposal any further.
Cultivaust nevertheless contends that the outcome of its negotiations with the ABB was affected, adversely to Cultivaust’s interests, by the communication from the GPWA to the ABB of 14 December 1992.
After further discussion between Mr Semmler and Mr Banbury, Mr Banbury on 9 and 26 February 1993 sent memoranda to the General Manager of the ABB, Michael Iwaniw (Mr Iwaniw), reporting on his consideration of the claim by Cultivaust for a production levy for Franklin barley, and his views as to what the plant variety rights of Tasmania extended to. Those memoranda reveal that he believed that the GPWA would support a production levy of no more than $1.00 per tonne, and that its growers through their grower organisations would press for a levy of $0.50 per tonne. Mr Banbury expressed the view that the ABB should ascertain the views of the relevant grower organisations, because the concept of a production levy would have significance longer term in relation to any subsequent grain varieties the subject of plant variety rights. He noted that the Course Grains Committee of the Grains Council of Australia proposed to address such issues at a meeting in April 1993. His memoranda reveal he had access to the draft agreement between Cultivaust and the GPWA (which had no figures as to the amount of any production levy).
In April 1993, Mr Iwaniw instructed Mr Banbury to agree to a production royalty of no more than $1.00 per tonne. Mr Banbury conveyed that to Mr Semmler. It was, from Mr Banbury’s position, a point from which he could not move, at least upwards. Mr Banbury also in April 1993 secured the application of the proposed production levy to malting grade Franklin barley only. Those features were included in a draft agreement provided to Cultivaust on 2 April 1993. Subsequent drafts of the agreement between the ABB and Cultivaust incorporated that figure as the production levy, as well as a royalty for each tonne of Franklin barley seed sold by the ABB. The figure was included in all subsequent drafts. There was extensive negotiation about other terms of the proposed agreement. As noted, it was finally executed on 13 January 1995.
The agreement was extended on 28 January 1999, relevantly in the same terms. It was substituted by a new agreement on 7 December 2000, between Cultivaust and ABB Grain Ltd (the successor of the ABB), again relevantly in the same terms.
By April 1993, I find that the ABB had available to it a copy of the agreement struck between the Grains Board of New South Wales and Cultivaust of 24 February 1993. It provided for a production levy of $1.00 per metric tonne on all Franklin barley delivered to that statutory marketing authority plus a potential premium as described earlier in these reasons. That information was included in a paper prepared for the Grains Council of Australia for its April 1993 conference, but was available to the ABB and others earlier. It also had a knowledge of the attitude of the GPWA to Cultivaust’s claim for a production royalty on Franklin barley.
The decision about pricing, that is what the ABB would be prepared to pay Cultivaust as a production levy for Franklin barley, was made by Mr Iwaniw. He did not give evidence. The reason he did not do so was explained, and I do not draw any inference that his evidence may not have been helpful to Cultivaust’s claim by reason of the fact that he did not give evidence.
However, I do not find on the balance of probabilities that Mr Iwaniw’s decision was influenced by Mr Wells’ communication to the ABB (Mr Banbury) of 14 December 1992 either directly or indirectly.
The evidence does not suggest Mr Iwaniw was ever aware of the existence of that letter or was informed of its detailed contents. He was informed by Mr Banbury’s memorandum of 9 February 1993 of the attitudes of the Grain Council of Australia and of the GPWA to a production levy. As to the GPWA’s attitude, that memorandum reported that its chief executive, Mr Swan, had informed Mr Banbury that he supported some form of production levy. The memorandum then says that the GPWA’s view is that any production end levy should be less than $1.00 per tonne and that Western Australian growers were likely to press for a levy of less than $0.50 per tonne. The source of that information is not explicitly identified. A reader of the document would, I think, infer that it was Mr Swan. Mr Banbury’s memorandum also observed that the GPWA ‘have sought our support for that proposal’ of a levy of less than $1.00 per tonne. It made the point to Mr Iwaniw that the ABB was in a strong bargaining position in relation to Cultivaust, which would otherwise have to deal with individual growers.
Mr Banbury’s memorandum of 26 February 1993 contained an analysis of the matters of significance from the differences in the draft licences to the ABB and to the GPWA. It did not remark at all upon the level of any production levy.
The next step in Mr Iwaniw’s knowledge is, as I have found, the terms of the agreement between Cultivaust and the NSWGB, some time during March 1993.
On the evidence, I find that Mr Iwaniw’s judgment was formed on the basis of the information about the agreement between Cultivaust and the NSWGB, and upon such commercial considerations as he considered relevant, and upon such unidentified further background material as he himself possessed. His commercial judgment would be directed to securing for barley growers in Victoria and South Australia supplies of Franklin barley on the best possible terms. Given the timing of his decision in relation to his knowledge of the agreement between Cultivaust and the NSWGB, and what I think must have been his perception of the relative bargaining positions of the ABB and of Cultivaust, in my view he would have assessed the agreement with the NSWGB as the upper limit of what he should negotiate. That agreement was in place. Any ‘better deal’ would involve a cutback from the production levy fixed in that agreement. The severing of the premium component of that production levy formula is an obvious step to endeavour to secure the most favourable agreement possible for growers in Victoria and South Australia. I infer that his line of thinking proceeded in that way. More accurately, in legal terms, I do not find on the balance of probabilities that Mr Iwaniw’s decision was influenced by the letter from Mr Wells of the GPWA of 14 December 1992 or its contents.
It is also consistent with the view I have reached on that matter that the agreement between the ABB and Cultivaust proceeded through a series of negotiations and drafts extending then over a further two years. The production levy of $1.00 per tonne did not alter. Cultivaust was free at any time to revisit the issue of the amount of the production levy. No attempt to do so emerges from the evidence (except at the time of the 1999 renewal of the agreement). When executed, the agreement was expressed to have operated from April 1993. It is inherently unlikely that the communication from Mr Wells of 14 December 1992, which was immediately and forcefully responded to by Mr Banbury in the manner I have described, should have played any part in Mr Iwaniw’s direction in early April 1993 when it is seen in context, or should have played any part in the agreement eventually struck between Cultivaust and the ABB.
As I have found that Mr Wells’ conduct on behalf of the GPWA did not, on the balance of probabilities, contribute to the decision of the ABB as to the level at which it was prepared to agree any production levy, it is not necessary to address the other elements of the putative cause of action. That finding means that Mr Wells’ conduct did not deprive Cultivaust of the opportunity to negotiate a higher level of production levy for Franklin barley grown in Victoria and South Australia over the period from April 1993.
CONCLUSION
I have not found it necessary to determine the further contentions of the GPWA that all causes of action against it should fail because Cultivaust and Tasmania failed to comply with s 47A of the Limitation Act 1935 (WA). If s 47A does not apply, it is accepted that all causes of action other than that of unlawful interference with contractual relations are within time, as prescribed either by s 35 of the SA LA Act or s 38 of the Limitation Act 1935 (WA).
However, as I have reached a firm view that s 47A of the Limitation Act 1935 (WA) does not apply, it is appropriate to refer briefly to my reasons for that conclusion. It relevantly provides that an action shall not be brought against any person (excluding the Crown) for any act done in pursuance or execution or intended execution of any Act or of any public duty or authority except in certain circumstances. The prescribed circumstances do not exist.
Section 47A can only apply to the present proceedings if it is picked up and applied by ss 79 and/or 80 of the Judiciary Act: British American Tobacco Ltd v The State of Western Australia [2003] HCA 47 (BAT case) at [3], [44] – [46] and [63]. This action involves the exercise of federal jurisdiction, being based primarily upon alleged infringements of the PVR Act and the PBR Act. The BAT case did not directly decide whether, in such circumstances, s 47A would apply to the principal and other causes of action. However, as Gleeson CJ commented at [4] and [25], the application of s 47A would result in the GPWA being treated as being in a special position different from, and more favourable than, that of an ordinary citizen. The GPWA is not an instrumentality of the State: s 7, GM Act. Section 64 of the Judiciary Act (because Western Australia is a party) would then apply so as to exclude the application of s 47A to the present proceedings. Section 79 also would not pick up s 47A because s 47A prohibits the commencement of proceedings except in certain circumstances, but s 79 applies only when the proceedings involving the exercise of federal jurisdiction have been commenced: see the BAT case at [66]; The Commonwealth of Australia v Mewett (1997) 191 CLR 471 at 492, 556. Furthermore, s 47A in substance imposes preconditions upon the institution of proceedings under s 54 of the PBR Act which the PBR Act does not impose. It is in my view an imposition upon the exercise of federal jurisdiction uncountenanced by the source of that jurisdiction, and so in terms of s 79 of the Judiciary Act would not be applicable: cf Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 75 ALJR 363 at [59].
I also consider, as counsel for Cultivaust contended, that s 47A does not apply in its terms to the particular conduct of the GPWA which (at least in part) is said to give rise to the causes of action. That is self-evident in respect of the alleged unlawful interference with contractual relations. An attempt to contravene s 45 of the TP Act is not conduct which the GPWA was entitled to undertake. More generally, the conduct alleged to contravene Tasmania’s PBR does not involve the GPWA acting precisely in accordance with the GM Act. Its commercial role as a statutory marketing authority gave it power to act as it did, but did not in accordance with its duty oblige it to act as it did: see Board of Fire Commissioners of New South Wales v Ardouin (1961) 109 CLR 105 at 119; Australian National Airlines Commission v Newman (1987) 162 CLR 466 at 471; Puntoriero v Water Administration Ministerial Corporation (1999) 199 CLR 575.
For the reasons given, I do not consider that Cultivaust or Tasmania has succeeded in any of the causes of action pleaded.
Accordingly, the application should be dismissed. I will give the parties the opportunity to make such submissions as to costs as they may be advised.
I certify that the preceding three hundred and one (301) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. Associate:
Dated: 21 May 2004
Counsel for the Applicants: DF Jackson QC, CJ Kourakis QC with AL Tokley,
MA Perry & AA JonesSolicitor for the Applicants: Corsers Counsel for the First Respondent: KJ Martin QC with JA Thomson Solicitor for the First Respondent: Mallesons Stephen Jacques Counsel for the Second Respondent: RM Mitchell with JS O’Sullivan Solicitor for the Second Respondent: Crown Solicitor for the State of Western Australia Counsel for the intervener for the Attorney-General for the State of South Australia: MD Walter with C Bleby Solicitor for the intervener for the Attorney-General for the State of South Australia Crown Solicitor for the State of South Australia Dates of Hearing: 8, 9, 10, 11, 12, 15, 16, 17, 18, 19, 29, 30 April
1, 2, 3, 8, 27, 28, 29, 30 May 2002Date of Last Written Submissions: 28 October 2003 Date of Judgment: 21 May 2004
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