Data Transfer Services Pty Ltd v The Local Project Pty Ltd

[2024] NSWDC 531

District Court

New South Wales

Medium Neutral Citation:

Data Transfer Services Pty Ltd v The Local Project Pty Ltd [2024] NSWDC 531

Hearing dates:

22 July 2024

Date of orders:

8 November 2024

Decision date:

08 November 2024

Jurisdiction:

Civil

Before:

Andronos SC DCJ

Decision:

(1)   Judgment for the defendant.

(2)   The plaintiff to pay the defendant’s costs, on the ordinary basis as agreed or assessed.

Catchwords:

CONTRACTS — Implied terms — Terms implied in fact — Necessary to give business efficacy

CONTRACTS — Breach of contract — Consequences of breach — Right to damages

CONTRACTS — Remedies — Liquidated damages — Debt

ESTOPPEL — Estoppel by representation — Detrimental reliance

Legislation Cited:

Evidence Act 1995, s 69, s 135

Cases Cited:

Australian Broadcasting Corporation v Australasian Performing Rights Association Ltd (1973) 129 CLR 99

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266

Legione v Hateley (1983) 152 CLR 406

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37

Stowe & Devereaux Holdings Pty Ltd v Stowe (1995) 127 FLR 25

Category:

Principal judgment

Parties:

Data Transfer Services Pty Ltd (plaintiff)
The Local Project Pty Ltd (defendant)

Representation:

Counsel:
Mr M McGirr (plaintiff)
Mr S H Hartford Davis (defendant)

Solicitors:
R Legal (plaintiff)
HWL Ebsworth Lawyers (defendant)

File Number(s):

2023/00156446

Publication restriction:

Nil

JUDGMENT

1. On 30 January 2020, the plaintiff, Data Transfer Services Pty Ltd, and the defendant, The Local Project Pty Ltd, entered into a Service Agreement (the Agreement). Pursuant to the Agreement, the plaintiff was to provide IT, print and mail processing services in relation to the distribution of certain publications, including glossy magazines and a book. The plaintiff provided these services from a warehouse in North Parramatta, through which the defendant’s publications were processed and distributed.

2. In about late January 2023, the plaintiff conducted an internal audit, as a result of which it formed the view that it had significantly undercharged the defendant for services it had provided. Essentially, the plaintiff considered that it was entitled, under the Agreement, to charge for storage of the publications and that it had neglected to do so. It sent an invoice to the defendant on 27 February 2023, which the defendant refused to pay. The defendant considered that the plaintiff had no such right and that it was up to date with all properly rendered invoices from the plaintiff.

3. The plaintiff threatened to exercise a warehouseman’s lien over the defendant’s stock then stored at the plaintiff’s warehouse. In response, the defendant brought proceedings in the Equity Division of the Supreme Court and obtained an order entitling it to enter the warehouse to recover its stock, on payment of the sum of $115,830 into the plaintiff’s solicitors’ trust account, to be held as security for the plaintiff’s claim. The Supreme Court proceedings were transferred to this Court and the plaintiff also commenced the current proceedings seeking the revised sum of $102,795 in debt or, alternatively, in damages, together with interest and costs.

4. The issue before the Court is primarily whether, on its true construction, the Agreement entitles the plaintiff to charge for storage of the defendant’s stock in addition to the other charges to which it is entitled. By way of alternative, should its construction argument fail, the plaintiff also relies on a common law estoppel. If successful, the estoppel would preclude the defendant from denying the Agreement has the meaning contended for by the plaintiff, as a matter of construction, or from denying that it is liable to pay a fee for the storage of stock in the particular circumstances.

5. For the reasons which follow, I have found that the plaintiff has not made good its claim in contract and is not entitled to a common law estoppel.

6. The defendant is entitled to judgment in its favour with costs.

Evidence

7. The plaintiff relied on two affidavits of Mark Mina, a director of the plaintiff, and one affidavit of Tarek Iksander, a strategy manager for the plaintiff. It also tendered an affidavit of Palinda Gail Nanavichit, which had been prepared on behalf of the defendant. Ms Nanavichit was formerly an employee of the plaintiff, but she now works for the defendant. No witnesses were called for cross-examination.

8. The parties jointly tendered a bundle of correspondence and the plaintiff relied on a 5-page schedule by which the defendant conceded that, if the plaintiff were to succeed on the question of liability in its damages claim, damages ought be assessed at $33,132.00.

9. The plaintiff also sought to rely on parts of Mr Mina’s first affidavit, by which he sought to calculate the number of pallets required for storage of the defendant’s stock on a weekly basis for each year of the term of the Agreement. I allowed the evidence insofar as it purports to state the number of pallets that were, in fact, used to store the defendant’s stock. I did not allow the evidence insofar as it purported to express an opinion as to how many pallets were required for storage of the defendant’s stock without setting out the basis for the calculation. I, nevertheless, allowed it as a submission.

10. Similarly, I excluded three tables exhibited to Mr Mina’s first affidavit because they purported to give evidence of the calculation of how many pallets were used, that the number of pallets used was required to store the defendant’s stock, and the calculation of how much the defendant was liable to pay. To the extent that the tables simply comprised arithmetic calculation, they were unobjectionable. However, the defendant sought to rely on them as admissible business records pursuant to s 69 of the Evidence Act1995 (NSW). I was not satisfied that they were admissible as they were prepared after the commencement of these proceedings, and I inferred, for the purpose of the proceedings, and neither the author nor method of calculation were identified. Even if otherwise admissible, I consider that they would have been prejudicial, and liable to be excluded under s 135 of the Evidence Act 1995.

11. Accordingly, I received them as a submission only.

The Agreement

12. The Agreement, dated 30 January 2020, was comprised in a document described as a “Service Agreement” executed by the parties. The plaintiff also contends, and the defendant denies, that certain express terms could be inferred by conduct or were implied in fact to give business efficacy to the Agreement.

13. The relevant express written terms are:

1. The Agreement was a Service Agreement “for the provisioning of IT, print and mail processing services required for supporting and sustaining the distribution of” the defendant’s publications. It was intended to outline the parameters of all IT, print and mail processing services to be provided by the plaintiff to the defendant [cl 1].

2. The purpose of the Agreement was to ensure that the proper elements and commitments were in place to provide consistent service support and delivery to the defendant by the plaintiff, and its goal was to obtain mutual agreement between the parties [cl 2].

3. The Service Scope was described as “Data Processing”, “Printing” and “Mail Processing” [cl 5.1].

4. The Customer Requirements, being the “Customer” responsibilities and/or requirements “in support of” the Agreement, relevantly included payment for all support costs at the agreed interval [cl 5.2].

5. Assumptions related to in-scope services and components included that changes to services would be communicated and documented to all stakeholders (who were identified in cl 3 as the plaintiff and defendant) [cl 5.4].

6. Agreed Service Levels required all orders to be processed and lodged with Australia Post within 48 hours (excluding weekends and public holidays) of receipt of data [cl 5.5].

7. Pricing and payment terms were set out in some detail in cl 7. Specifically, those terms included:

1. That the average processing unit price per pack based on 1000 per weekly volume was $3.24 per pack excluding postage and GST [cl 7.1]. A pricing matrix (Appendix 1.1) outlined processing and management charges. It provided a flat rate per week for automated picking and packing, according to the number of units moved, and a per unit rate for hand picking and packing.

2. A further appendix (Appendix 1.2) comprising a quote, which outlined stock supply in respect of packaging. It set out unit prices for box and pack supply and laser imaging.

3. Parcel rates and international rates, which comprised per unit rates for postage according to destination and package weight, set out in cl 7.2. It was common ground that the rates specified included a mark-up over the rates charged to the plaintiff by Australia Post of between 10% and 13%.

4. Clause 7.3 which addressed charges associated with return management. Returns were charged according to a per record fee for scanning and creating a file, plus a management fee of $250 per month. It was by no means clear how the management fee would operate, however, this clause was not in issue in the proceedings.

8. Terms and conditions, which appear to mirror those appended to invoices, were also appended to the Agreement. They included:

1. A 10% surcharge on postage lodged on the plaintiff’s credit account with Australia Post;

2. Clauses with respect to Stock Quality Assurance and changes to Specifications, which provided that additional fees could be charged in certain circumstances;

3. That courier charges incurred were to be recharged at market rates; and

4. The relevant term (the Storage of Overs clause), the construction of which is the key matter of dispute on the contract claim, which was as follows:

“STORAGE OF OVERS

Any Materials remaining on our premises at the completion of the job (overs) will be packaged and marked for collection by, or couriered to, the customer. Stock requiring ongoing storage will be charged at a rate of $15.00 per pallet (or part thereof) per week.”

14. The parties agreed that nothing ought be made of the inconsistent use of “stock” and “materials” in the clause.

Construction of commercial agreements: relevant principles

15. The Agreement is a commercial document and, as such, is to be construed in a businesslike manner. Construction is determined objectively, and the parties’ subjective understanding is irrelevant to the court’s objective determination of the meaning of the language used in the contract.

16. In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, French CJ, Nettle and Gordon JJ stated at [46] to [51] (footnotes omitted):

“The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.

In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.

Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.

…

Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption ‘that the parties ... intended to produce a commercial result’. Put another way, a commercial contract should be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.”

17. Further, a clause must not be considered in isolation but in the context of the whole document: Australian Broadcasting Corporation v Australasian Performing Rights Association Ltd (1973) 129 CLR 99 at 109.

Consideration

18. The plaintiff contended that, properly construed, the Storage of Overs clause had the effect that it was entitled to invoice for storage of the defendant’s stock at the warehouse according to the number of pallets actually deployed in the storage of the stock during the term of the Agreement. Accordingly, the Invoices were properly raised and the defendant is liable to the plaintiff either in debt, on the Invoices, or for damages, for its breach in failing to pay them.

19. In summary, the plaintiff advanced the following contentions in support of its construction argument:

1. The two sentences comprised in the Storage of Overs clause ought be read as separate promises – a promise by the plaintiff to pack and mark for collection any goods which remain on the plaintiff’s premises (promise 1) and a promise by the defendant to pay the plaintiff for any goods which require ongoing storage at the plaintiff’s premises (promise 2).

2. It would be an uncommercial construction of the Storage of Overs clause to read the two sentences together to make promise 2 contingent on promise 1. The outcome would be absurd and would result in the plaintiff being precluded from levying storage charges even where such services were provided because steps irrelevant to the performance of the service were interposed as a condition of them being chargeable.

3. The Agreement gives no guidance on what constitutes “completion” of a job. It would be commercially nonsensical to make payment for storage contingent on an event as ill-defined as “completion”, the parameters of which were not defined. To the plaintiff’s contention, it might be added, that, it would be entirely possible that “completion” would never be achieved, leaving the plaintiff in a position where it was compelled to allocate warehouse space to the storage of the defendant’s stock, for which it at least suffered an opportunity cost, and which it could not recover.

4. Accordingly, the plaintiff had an unqualified right to charge for storage of stock. The exercise of that right was not contingent on any communication by the plaintiff to the defendant. It was exercisable in the absolute discretion of the plaintiff at any time after storage was effected.

20. The defendant’s contentions may be summarised as follows:

1. The two sentences comprised in the Storage of Overs clause ought be read together and given a congruent operation. Such a construction accords with commercial common sense and with the textual context of the clause. The textual context includes the heading of the clause, the combination of both parts of the Storage of Overs clause in a single clause and the aggregation of sub-clauses setting out the respective charging entitlements and payment obligations of the parties in cl 7. It would make little textual sense for a significant charging entitlement to be isolated from cl 7 and found in the “fine print” of an attachment.

2. Clause 7 provides multiple mechanisms for the remuneration of the plaintiff. The plaintiff’s entitlement to each requires satisfaction of preconditions relevant to that particular mechanism and such charges will not all necessarily accrue in any particular case. Each is specific to the service provided.

3. The purpose of the Agreement was the provision by the plaintiff to the defendant of logistics services. Some warehousing was incidental to the performance of those services, however, it was not referred to in either cl 1 or cl 2 of the Agreement, nor was it identified in the Service Scope. There were no Service Levels identified in the Agreement relevant to storage or warehousing. Accordingly, the provision of storage or warehousing services only becomes chargeable if the conditions in the Storage of Overs clause are satisfied, in the same way that Stock Quality Assurance services and Changes to Specifications become chargeable if circumstances required the provision of such services.

4. In any event, the only sensible construction of the clause requires that for it to be engaged, there must, first, have been some form of communication between the parties that storage was “required” within the meaning of the clause. This does not arise automatically but, rather, on the completion of a job. In its context, the relevant requirement must mean that the defendant determines, in its absolute discretion (subject to its implied duty of good faith), that the job is complete, communicating that determination to the plaintiff and thereby raising an obligation on the plaintiff to package the stock and mark it for collection by the defendant or arrange for it to be couriered to the defendant. Only after this process has been undertaken does the remaining stock incur the charge of $15.00 per pallet per week.

21. Having considered the arguments of counsel and carefully reviewed the Agreement itself in the context of such evidence as is available of the circumstances of its execution as were known to both parties, I do not accept the arguments of the plaintiff. In my view, the Storage of Overs clause does not confer on the plaintiff a right to invoice for storage other than in the circumstances specified in the first sentence of the clause.

22. I have reached this conclusion for three principal reasons.

23. First, I do not accept that the only, or even the most, commercially sensible construction of the clause would have the effect for which the plaintiff contends.

24. The purpose of the Agreement was for the provision of logistics services in connection with the distribution of printed materials. Those materials were stored in the plaintiff’s warehouse pending distribution. Charges were agreed in cl 7 for the core Services. Those Services did not include warehousing, which was incidental to “the provisioning of IT, print and mail processing services required for supporting and sustaining the distribution of” the defendant’s publications. A commercially sensible construction requires the plaintiff’s substantive entitlement to payment to conform to its substantive obligation to provide services. I do not consider it to be the most commercially sensible outcome, or a sensible outcome at all, for a substantial entitlement to payment, which would arise in every, or nearly every circumstance, to arise in respect of an incidental or collateral service obligation.

25. This conclusion also disposes of the plaintiff’s contention that such a term could be implied in fact as I consider that it would not meet the test in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266.

26. Secondly, as a matter of text and the immediate documentary context of the Storage of Overs clause, the overall structure of the Agreement sets out the Services to be provided for which a payment regime was also set out. The “Terms and Conditions” attachment sets out further, largely incidental, services, which may be required and which import their own additional payment regime.

27. In my view, this is conformable with the entitlement to payment under any of the clauses in the Terms and Conditions attachment being contingent on a right accruing to the plaintiff in respect of services provided under the relevant clause.

28. The clause itself is headed, “Storage of Overs”, which is a tolerably clear indication of what the clause is about and when it is enlivened. In other words, I consider the second sentence of the Storage of Overs clause confers a right of payment only in circumstances where the first sentence applies. That is, there must be “overs”, defined within the clause as material remaining on site on the completion of the job. I reject the contention that the right to charge for ongoing storage is a freestanding right, unconstrained by the first sentence in the clause.

21. An example of how the clause would practically operate would be that Stock would require ongoing storage where it has been marked for collection, notified as such, but has not been collected.

22. Finally, I do not accept that the practical operation of the clause, as propounded by the plaintiff, conforms with a businesslike construction of the Agreement. I certainly do not accept that all stock stored on site incurs a storage charge irrespective of whether any relevant job has been completed. Nor do I accept that a charge can be levied in the discretion of the plaintiff without prior notice. These are not part of any commercially sensible construction. In my view, the entitlement to charge for storage under the Storage of Overs clause requires that a relevant job has been completed and stock remains on site at such completion.

Conclusion on contract claim

31. On the above construction of the Agreement, the evidence of the circumstances does not establish a right to invoice for storage. The evidence as to the conduct by the parties of their relationship does not establish that any job was relevantly complete, nor does it establish that any such completion was the subject of communication between the parties. There was no evidence that any of the defendant’s stock was packaged and marked for collection.

32. Accordingly, the plaintiff’s claim in debt and its alternative claim for damages for breach of contract must fail.

Estoppel: relevant principles

33. The plaintiff’s alternative case is that of common law estoppel. It says the defendant is estopped from denying that it required the storage of “overs” and that it would pay for this service in the amount of $15 per week per pallet (or part thereof), being a fee equivalent to that set out in the Agreement.

34. The parties conducted the hearing on the agreed basis that the elements of a claim for common law estoppel are:

1. the representor makes a representation or engages in other conduct which is capable of occasioning the formation, by the representee, of the assumption the subject of the second element;

2. the representee forms an assumption as to the legal relationship between the representee and the representor;

3. the conduct of the representor is a material cause of the formation of the assumption by the representee;

4. the representee takes or omits to take action in change of its position in reliance on the assumption;

5. the representee would suffer detriment if the representor were permitted to depart from the assumption; and

6. it would be unjust or unconscionable for the representor to depart from the assumption.

35. The first element of the action is that there be a representation. The representation must be clear and unequivocal or unambiguous, whether in relation to a present fact or future intention or conduct: Legione v Hateley (1983) 152 CLR 406 at 436-7 per Mason and Deane JJ. Care must be taken to ensure that consequences are not read into a representation not merited by its terms: see, for example, Stowe & Devereaux Holdings Pty Ltd v Stowe (1995) 127 FLR 25 at 41, 44-45.

36. On the other hand, the Court should not search for ambiguity or uncertainty, but should assess the question of clarity and certainty practically and sensibly, as well as contextually. The Court is concerned with what the terms of the representation objectively convey to the representee in the circumstances. What amounts to sufficient clarity depends to a large extent on the relevant factual context.

37. In addition to establishing a clear and unequivocal representation, the plaintiff must show its reliance on that representation. This requires proof of a sufficient link between the representation relied on in the conduct which constitutes the detriment. The representation need not have been the plaintiff’s sole inducement for acting as it did, however, it must have played a part.

Estoppel: consideration

38. The evidence on which the plaintiff relied to establish its estoppel is comprised in communications between the parties from time to time during the term of the Agreement concerning stock levels on site.

39. In its Amended Reply, where the estoppel claim is pleaded, the plaintiff particularises emails exchanged between Gail Nanvichit (then of the plaintiff) and Aidan Anderson (of the defendant) on 19 October 2020, 10 November 2020, 17 November 2020, 18 January 2021, 1 March 2021, 25 October 2021, 8 November 2021, 15 November 2021, 13 January 2022, 16 March 2022, 17 March 2022, 10 August 2022, 15 August 2022 and 30 November 2022. Those emails are relied on to demonstrate both that the condition referred to in paragraph 20(4) above had been satisfied, and that the defendant represented to the plaintiff that it required the storage of “Overs” and that it would pay a fee of $15.00 per week per pallet to the plaintiff for such storage.

40. The above communications relied on by the plaintiff do not establish any representation by the defendant to the plaintiff sufficient to estop it from denying liability to pay for storage of the Overs. They are communications in which Ms Nanavichit identifies stock count for the defendant’s publications and either Mr Anderson or Mr Tom Coen, from the defendant, thank her for the email by which notice was given. They were, on occasion (such as 10 November 2020), expressly described as being for the defendant’s “reference”. They did not expressly identify the stock as “Overs”, but as current stock counts.

41. On 16 March 2022, Mr Anderson asked Ms Nanavichit to retain emergency stock. This, it is clear enough, was a reference to stock that was still available to be sold and could not be described as “overs” at the completion of a job. In an email sent by Ms Nanavichit on 15 August 2022, the stock is expressly described as not having been “sold out yet”. The fact that it was described as not sold out yet, clearly indicates that the parties understood that the stock was still for sale.

42. Further, there was nothing in any of the communications which referred to, much less promised, payment for storage at the rate of $15.00 per pallet per week or at all.

43. The affidavits relied on by the plaintiff did not identify any communication, nor any circumstance, that established the representation pleaded. On my view, therefore, the plaintiff’s estoppel claim falls at the first hurdle in that there was no representation to the effect pleaded by the plaintiff.

44. The defendant addressed on the question of whether entry into the Agreement itself assists the plaintiff in establishing an estoppel. It is not clear that the plaintiff intended to advance such a claim, however, to the extent that it did, I do not consider that the plaintiff’s claim could be made good on that basis.

45. If the Agreement objectively has the meaning contended for by the defendant, a representation to be bound by its terms does not assist the plaintiff as, without more, there is no representation to be bound by any different terms. If, however, the Agreement objectively has the meaning propounded by the plaintiff, the estoppel is unnecessary as the Agreement itself will be the source of right.

46. However, if the plaintiff subjectively believed the contract had the meaning contended for by it but objectively this has proved not to be the case, the plaintiff must establish both that it had this belief and that the defendant, by representation or other conduct, played a part in inducing such a belief.

47. In my view, the evidence did not establish any relevant representation or any other conduct. There was no express representation to the effect pleaded by the plaintiff. There was no conduct which, in my view, was capable of conveying any representation at the time the Agreement was entered or subsequently.

Damages

48. The plaintiff quantified its claim in the sum of $102,795.00. The defendant conceded that, if the plaintiff were to succeed on liability for damages, such damages ought be quantified at $33,132.00.

49. The plaintiff calculated its damages as being $23,521 in 2020, $27,499 in 2021, $38,627 in 2022 and $13,170 in 2023, giving a total of $102,817.

50. The above figure also included a sum of $24,450 by way of weekly management fees calculated at $150 per week. This claim is without foundation and I reject it.

51. The defendant disputed Mr Mina’s calculations as largely guesswork. Although I admitted Mr Mina’s evidence of the number of pallets actually used, the reliability of his evidence in this regard was questioned by the defendant because there was no system in place, during the term of the Agreement, to monitor, record or calculate the number of pallets used to store the defendant’s stock. The plaintiff did not take a Brown v Dunn point in this regard, likely because it made similar evidentiary and methodological criticisms of Ms Nanavichit’s calculations, and neither witness was required for cross-examination.

52. Levels constantly fluctuated as stock was outgoing and incoming on an irregular basis and there was no satisfactory explanation in the affidavit evidence as to how such precise calculations could have been made. It was not established that Mr Mina kept track of weekly pallet levels throughout the warehouse over the life of the Agreement, which would have been impossible without a recordkeeping system. A notice to produce issued by the defendant to the plaintiff established that there were no records to evidence any such system.

53. I am not satisfied that the number of pallets actually used were as described by Mr Mina in his evidence.

54. However, a more fundamental difficulty with the plaintiff’s damages evidence is that it assumes an entitlement to claim a storage fee from the day that stock was received into the warehouse. I do not accept that the Agreement can be so read and the parties did not conduct their relationship that way, in any event.

55. For the reasons set out above, in my view, the plaintiff has failed on the questions of breach and cannot establish any liability on the part of the defendant. I do not accept that the plaintiff has quantified any loss.

56. If I am wrong on the question of liability, however, I consider the defendant’s admission of quantum in the sum of $33,132.00 ought be treated as the proper measure of any entitlement of the plaintiff.

Conclusion

57. The plaintiff has not succeeded in persuading me that it is entitled to any relief by way of debt or in damages, and I do not accept that the defendant is estopped from denying the application of the Storage of Overs clause according to the construction propounded by the plaintiff.

58. The defendant is entitled to judgment in its favour.

59. As the defendant has been wholly successful, it is also entitled to its costs as sought in its written submissions. The plaintiff should release the sum paid into the trust account.

60. The orders of the Court, therefore, are:

1. Judgment for the defendant.

2. The plaintiff to pay the defendant’s costs, on the ordinary basis as agreed or assessed.

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Decision last updated: 08 November 2024