Driveforce Pty Ltd v Gunns Limited
[2008] TASSC 46
•29 August 2008
[2008] TASSC 46
CITATION: Driveforce Pty Ltd v Gunns Limited [2008] TASSC 46
PARTIES: DRIVEFORCE PTY LTD
v
GUNNS LIMITED
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 96/2007
DELIVERED ON: 29 August 2008
DELIVERED AT: Hobart
HEARING DATES: 2 July and 25 August 2008
JUDGMENT OF: Holt AsJ
CATCHWORDS:
Procedure – Supreme Court procedure – Tasmania – Practice under Rules of court – Amendments – Defence – Discretion
Aust Dig Procedure [276]
REPRESENTATION:
Counsel:
Plaintiff: R A Browne
Defendant: D J Gunson SC (2 July) and K J Stanton (25 August)
Solicitors:
Plaintiff: Fitzgerald & Browne
Defendant: S B McElwaine
Judgment Number: [2008] TASSC 46
Number of paragraphs: 14
Serial No 46/2008
File No 96/2007
DRIVEFORCE PTY LTD v GUNNS LIMITED
REASONS FOR JUDGMENT HOLT AsJ
29 August 2008
Gunns Limited, which is being sued for damages for breach of contract, has applied for leave to amend its defence.
I commence with some background. By a contract made 1 May 2001 the company, North Forest Products Pty Limited, engaged the plaintiff, Driveforce Pty Ltd, to harvest and deliver wood to it. Gunns took over the rights and obligations of North under the contract. Driveforce claims that under the contract it was required to harvest and deliver and Gunns was required to accept and pay for 65,000 tonnes of wood per year for the duration of the contract. The weekly delivery stream of harvested wood was to be in accordance with the quantities advised by Gunns from time-to-time. It is alleged that between 11 July 2004 and 1 September 2006 (being the date when Driveforce assigned its rights under the contract to another timber harvester) the weekly quantities of wood advised by Gunns as its delivery requirements did not and were not capable of achieving the base quota of 65,000 tonnes per year. Driveforce claims to have suffered a resultant loss of about $500,000.
The contract includes the following clauses:
“1.1 Definitions
In this agreement, including the recitals, unless the context otherwise requires:
‘Area’ means the area, locality, coupe or compartment from which the Company directs the wood is to be harvested.
‘Base quota’ means the quantity of wood specified in Part One of Schedule A which is to be harvested annually by the Contractor …
‘Destinations’ means the place to which the Company specifies the wood is to be delivered.
…
‘Weekly quota’ means the quantity of wood to be provided each week as advised by the Company from time to time.
‘Operating days’ means delivery days as advised by the Company.
…
4.1The Contractor shall:
….
c harvest from the area its quota of wood;
…
5.1The Company is to:
asubject to the other provisions of this agreement, make available to the Contractor for harvesting and delivery the weekly quota;
…
5.2
aThe Company is to accept all wood within specification which is delivered to the destination …
…
6.1The Contractor is to harvest and deliver the weekly quota as advised by the Company from time to time. The Contractor must delivery [sic] the weekly quota in a constant flow throughout the operating days of the week.
6.2The Company may authorise the Contractor to harvest all or some of its weekly quota in a subsequent week if the Contractor’s failure to harvest the weekly quota was caused by unforeseen and unavoidable circumstances.
6.3The Company may by notice in writing to the Contractor vary the Contractor’s weekly quota. Provided that the Company will not reduce the week’s quota in any week except in the event of a major downturn in business activity or reduction in the volumes required by the Company due to circumstances beyond the Company’s control. Any reduction in a weekly quota may be made up in subsequent months at the discretion of the Company.
6.4The Company shall not be liable for any loss or damage suffered by the Contractor, its employees, agents and subcontractors, as a result of a reduction in the weekly quota by the Company in accordance with sub-clause 6.3.
…
7.1The Company is to pay the Contractor for each tonne or cubic metre of wood delivered by the Contractor in accordance with this agreement at the rates specified …
…
SCHEDULE A
THE CONTRACTOR’S ANNUAL BASE QUOTA IS:-
65,000 tonnes total
Which may be composed of;
Supply from Western and Central Supply zones.”
Gunns in its defence says that upon a proper construction of the contract it had no obligation to make available for harvesting by Driveforce the annual base quota. That is to say it had no obligation in setting the weekly quotas to achieve the annual base quota. Against the event that Gunns is wrong on this contract construction point the defence calls in aid clause 6.3. Finally, the defence says that by virtue of Driveforce having assigned its interest under the contract to a new harvester in September 2006 it lost its right to recover damages.
The impugned amendments concern Gunns invocation of clause 6.3. There are some proposed additions to the plea that Driveforce lost its rights with the assignment, but Driveforce does not complain about these.
The proposed clause 6.3 plea is as follows:
“17 Further, in answer to the whole of the statement of claim the defendant says;
(a)clause 5.1(a) of the agreement provides that the defendant is to, subject to the other provisions of the agreement, make available to the plaintiff for harvesting and delivering the weekly quota;
(b)the weekly quota in accordance with clause 1.1 is defined to mean the quantity of wood to be provided each week as advised by the defendant from time to time;
(c)clause 6.1 of the agreement provides that the plaintiff is to harvest and deliver the weekly quota as advised by the defendant from time to time;
(d)clause 6.3 of the agreement provides that the defendant may by notice in writing to the plaintiff vary the weekly quota provided that the defendant will not reduce the weekly quota in any week except in the event of a major down turn in business activity or a reduction in the volumes required by the defendant due to circumstances beyond it’s control and any reduction in a weekly quota may be made up in subsequent months in the discretion of the defendant;
(e)clause 6.4 of the agreement provides that the defendant shall not be liable for any loss or damage suffered by the plaintiff, its employees, agents and subcontractors, as a result of a reduction in the weekly quota by the defendant in accordance with clause 6.3.
18If the agreement, properly construed as contended by the plaintiff, is that the defendant was obliged to advise the plaintiff of a weekly quota in amounts that were capable of achieving the base quota (which is denied) then the defendant says, correspondingly and upon a proper construction of the agreement, that;
(a)clauses 6.1 and 6.3 entitled the defendant to give a notice to the plaintiff of a reduced weekly quota from time to time such that the annual base quota would not or might not be achieved in any year subject to;
(b)the ability of the defendant to so vary the quota was limited to events which constituted a major downturn in business activity or a reduction in the volumes required by the defendant due to circumstances beyond its control.
19In December 2003 forest fires occurred in the western supply zone the subject of schedule A of the agreement, which fires were started by natural causes.
PARTICULARS
The fires were in forestry coupes within the Murchison District CF017A, EN004A, TG007D, BF009E, BO0786A, BY010A, CH010C, IR056A, MB007B, ME003C, OL035C and SR047C.
20By reason of such fires, Forestry Tasmania was not able to construct a sufficient number of roads within the western supply zone in order to gain access to identified logging coupes for the winter of 2004.
21Such inability by Forestry Tasmania resulted in a reduced number of logging coupes in State Forest which were allocated by Forestry Tasmania to the defendant for winter logging during 2004.
22Each of the matters pleaded at paragraphs 19, 20 and 21 were circumstances beyond the control of the defendant within the meaning of clause 6.3.
23That such circumstances lead to a reduction in the volumes of weekly quota which the defendant required to be delivered to it pursuant to the agreement.
24As a consequence the defendant was entitled pursuant to the agreement to vary the weekly quota in accordance with clause 6.3.
25By written notices given by the defendant to the plaintiff between January 2004 and September 2004 the defendant varied the weekly quota in accordance with clause 6.3 of the agreement.
26The defendant did not in its discretion permit the plaintiff to make up in subsequent months, such reductions in the weekly quota pursuant to clause 6.3.
27As a consequence the defendant is not liable to the plaintiff for such reductions in the weekly quota by reason of clause 6.4 of the agreement.
28Further the agreement expressly provided that the plaintiff would harvest and deliver timber from the western and central supply zones which comprised native forest.
29Wood harvested from such zones was for processing into woodchips at Burnie and then for sale and export from Burnie to international customers of the defendant.
30Between 1 July 2003 and September 2006 the defendant’s sales of export woodchips from Burnie to its international customers declined.
31Such decline was due to decreased and decreasing demand from three customers of the defendants namely, Nippon Paper, Mitsubishi Paper Mills and Oji Paper (the fall in demand)
32The fall in demand constituted a major downturn in business activity of the defendant within the meaning of clause 6.3 of the agreement.
33The agreement is to be construed as pleaded in paragraph 18.
34As a consequence the defendant was entitled to vary by reduction the weekly quota of the plaintiff pursuant to clauses 6.1 and 6.3 of the agreement.
35Between 1 July 2003 and September 2006 the defendant did reduce the weekly quota of the plaintiff by giving to it notice in writing of such reductions by the delivery of the weekly pulpwood quota advices.
36The defendant did not in its discretion permit the plaintiff to make up in subsequent months such reductions in accordance with clause 6.3.
37As a consequence the defendant is not liable to the plaintiff for such reductions in the weekly quota by reason of clause 6.4 of the agreement.”
Counsel for Driveforce submits that the facts alleged are insufficient to invoke the application of clause 6.3 and that accordingly the plea should be disallowed.
I set out some observations concerning requirements relating to pleadings which have relevance to the plaintiff’s submission:
h“The function of pleadings is to state with sufficient clarity the case that must be met” Banque Commerciale SA (In liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 per Mason CJ and Gaudron J.
h“It is fundamental to the proper conduct of civil litigation that a [party] be apprised of the case he, she or it has to meet with precision and with such degree of specificity and clarity as will enable a case to be prepared on that [party’s] behalf” Gunns Limited v Marr (No2) [2006] VSC 329 at par23 per Bongiorna J.
h“When a sufficient defence has been filed to a sufficient statement of claim, a further function will generally have been performed – that of defining the question or questions for decision. This definition is required, of course, from an early stage, or else discovery and other interlocutory procedures are likely to prove misdirected, wasteful and unproductive” Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd & Ors (1996) ATPR 41-552 at p42,679 per Burchett J.
h“The cardinal provision in r4 is that the statement of claim must state the material facts. The word ‘material’ means necessary for the purpose of formulating a complete cause of action; and if any one ‘material’ fact is omitted, the statement of claim is bad;” Bruce v Odhams Press Ld [1936] 1 KB 697 at 712 per Scott LJ.
h“… an amendment which is futile because it is obviously bad in law will not be allowed”. The Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 456 per Dawson J.
It is essential in a contract case that a party relying upon a particular term must, after identifying the term, plead all of the facts necessary to bring himself, herself or itself within the operation of the term. If any one of these facts is omitted the plea is bad.
The clause 6.3 plea by Gunns should identify the variations and the facts which link them to the claimed events. Take for example a week in the 2004 winter logging season, say the last week in July. The plea should identify for that week:
h The advice setting the original weekly quota.
h The quantity of wood specified in that advice.
h The notice in writing varying that quantity of wood.
h The quantity of wood by which the quota was reduced.
h The event occasioning the reduction; and
hThe facts linking the event to the reduction, eg: the fact (if it is the fact) that the coupes which were inaccessible were coupes which had been or were to be allocated to Driveforce for harvesting and the fact (if it is the fact) that in the relevant week an amount of wood equivalent to the quantity by which the weekly quota was reduced was not available for harvesting by Driveforce from coupes allocated to it which were accessible.
Without this information the plea lacks specificity, clarity and completeness and the basic function of pleadings will not have been met. It is no answer to say that the plaintiff already knows these things or should be able to find them out from an inspection of discovered documents, or by requesting particulars. Bruce v Odhams Press Ld (supra). See also Rubenstein v Truth & Sportsman Ltd (1960) VR 473 at 476; H 1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181 at 186-7 and Truth about Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (1998) ATPR 41-633 a 40,977-8.
If it is the case (in light of the plea that Gunns was not bound by the annual harvest quota in setting the weekly quotas and in light of the contents of pars19(a) and 20(c)[1] of the existing defence dated 7 August 2007) that Gunns, if it loses its contract construction argument, will ask the Court to regard the advices setting the weekly quotas as clause 6.3 variation notices, this should be made clear. Such a contention would carry with it obvious difficulties which may give rise to other grounds for claiming that the plea is unsustainable. For example for clause 6.3 to apply there has to be an identifiable weekly quota to start with. Otherwise there is nothing to which a variation might attach. If to meet this it is to be claimed that there was an implied term that if weekly quotas were not advised the weekly quota was to be an amount of wood calculated by dividing the annual base quota by the number of days in the year and multiplying that number by seven, the existence of such a term would need to be pleaded as would the facts giving rise to the implication.
[1] The existing defence pars19(a) and 20(c) are as follows:
19(a)upon a proper construction of the provisions of the agreement the defendant was only, relevantly, contracted to make available to the plaintiff for harvesting and delivery the weekly quota in accordance with clause 5.1(a) and as advised by the defendant to the plaintiff on a weekly basis in accordance with clause 6.1 of the agreement;
20(c)by each of the notices referred to at paragraph 19(a) the defendant did give notice in writing to the plaintiff of a variation in the weekly quota pursuant to clause 6.3;
The proposed amendments relating to clause 6.3 do not set out all of the material facts and accordingly will not be allowed. The non-controversial additions to the plea that Driveforce lost its rights with the assignment of its contractual entitlements to another harvester in September 2006 as set out in pars39, 40 and 41 of the proposed defence will be allowed. Pars17, 18, 19 and 20 of the existing defence contain a clause 6.3 plea which is defective for the same reasons as the proposed plea. Driveforce have applied for an order striking out par17 and Gunns have advised by letter to the Court from its solicitors dated 18 April 2008 that par18 is abandoned. Pars19 and 20 are without effect absent pars17 and 18 and consequentially need to be removed pending any further amendment to the defence.
The orders are as follows:
(1) Paragraphs 17, 18, 19 and 20 of the defence dated 7 August 2007 are struck out.
(2)The defendant has leave to amend the defence by adding new paragraphs in terms of pars39, 40 and 41 of the proposed defence attached to the interlocutory application filed 2 July 2008.
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