Euphoric Pty Ltd v Ryledar Pty Ltd

[2006] NSWSC 2

CITATION:	Euphoric Pty Ltd v Ryledar Pty Ltd [2006] NSWSC 2
HEARING DATE(S):	3, 4, 5, 8, 9, 10, 12 & 15 November 2004 6 June 2005 (Adoption of Referee’s Report) 10, 11, 12, 13, and 14 October 2005
JUDGMENT DATE :	30 January 2006
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Palmer J
DECISION:	Judgment for Plaintiff; Cross Claim dismissed.
CATCHWORDS:	CONTRACT – CONSTRUCTION – RECTIFICATION – What was the true construction of a contract for the sale of petroleum products – whether contract should be rectified. - SALE OF GOODS – Sale of petroleum products – petroleum subject to volume contraction and expansion – whether volumes sold to be measured at point of loading or point of delivery. - OPTION – Whether defendant validly exercised option to renew Supply Agreement.
LEGISLATION CITED:	- Fair Trading Act 1987 (NSW) – s.72 - Prices Surveillance Act 1993 (Cth) – s.22 - Sale of Goods Act 1923 (NSW) – s.31, s.33, s.36 - Supreme Court Rules 1970 (NSW) – Pt 72 - Trade Practices Act 1974 (Cth) – s.87
CASES CITED:	- Caltex Petroleum Pty Ltd v Flomad Pty Ltd [2003] FCA 648 - Canberra Washed Sand Pty Ltd v Ro-Mix Concrete Pty Ltd (1976) 11 ACTR 1 - Crane v Hegeman-Harris Co Inc [1939] 1 All ER 662 - Esso Petroleum Co Ltd v Addison [2003] EWHC 1730 (Comm) - Ettridge v Vermin Board of the District of Murat Bay [1928] SASR 124 - Fercometal SARL v Mediterranean Shipping Co SA [1989] AC 788 - Foran v Wight (1989) 168 CLR 385 - GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No 4) (1990) 9 BPR 17,461 - Hamilton v Whitehead (1988) 166 CLR 121 - Hyundai Heavy Industries Co Ltd v Papadopoulos (1980) 1 WLR 1129 - Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 - McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 - Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 - Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 - Pukallus v Cameron (1982) 180 CLR 447 - Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 - Peter Turnbull & Co Pty Ltd v Mundus Trading Co (A’asia) Pty Ltd (1954) 90 CLR 235
PARTIES:	50070/01 Euphoric Pty Ltd t/as Clay & Michel – Plaintiff/Cross Defendant Ryledar Pty Ltd t/as Volume Plus – First Defendant/Cross Claimant Aziz Magar Sidhom – Second Defendant 50071/01 Euphoric Pty Ltd t/as Clay & Michel – Plaintiff Ryledar Pty Ltd t/as Volume Plus – Defendant
FILE NUMBER(S):	SC 50070/01; 50071/01
COUNSEL:	B.J. Coles QC, M. Ashhurst, S. Docker – Plaintiff P.M. Biscoe QC, M. Sahade – Defendants
SOLICITORS:	Cowley Hearne – Plaintiff Mallesons Stephen Jaques – Defendants

INTRODUCTION

1 The Plaintiff (“Euphoric”) distributed Mobil petroleum products in New South Wales. The First Defendant (“Ryledar”) carried on business as a reseller of petroleum products under the name “Volume Plus” at sites owned or occupied by it or by its licensees. 2 By an agreement dated 18 May 1998 (as varied) Euphoric agreed to supply petroleum products to Ryledar (“the Supply Agreement”). The Second Defendant gave guarantees and indemnities in respect of Ryledar’s obligations under the Supply Agreement. 3 In proceedings 50070/01 Euphoric sues Ryledar and the Second Defendant for the price of petroleum products sold and delivered under the Supply Agreement. Quantification of Euphoric’s claim was referred to a referee under Pt 72 of the Supreme Court Rules 1970 (NSW). The Referee’s Report, which has been adopted by the Court, concludes that Ryledar is indebted to Euphoric in the sum of $9,033,567.17, subject to the possibility of deductions for claims made by Ryledar against Euphoric in Ryledar’s Cross Claim in these proceedings. 4 The Defendants accept that Ryledar is indebted to Euphoric under the Supply Agreement in the amount found by the Referee but they say that the amount of Ryledar’s Cross Claims against Euphoric exceeds the amount owing under the Supply Agreement, so that in the end result Euphoric owes Ryledar a substantial sum of money. 5 Ryledar’s Cross Claims may be summarised, in the briefest outline, as follows:


– a claim for $3,627,008.78 for a six cents per litre rebate which Ryledar claims it was entitled to receive if the Supply Agreement were to be rectified or other relief were to be provided; the rebate is said to apply to all of the petroleum fuel delivered to all of Ryledar’s sites throughout New South Wales (“the Rebate Claim”);

– a claim totalling $1,775,769.85 for the amount which Ryledar claims it was overcharged by Euphoric under the Supply Agreement because Euphoric failed to reduce the volume of the fuel it sold to Ryledar to the volume that the fuel would have had at 15° Celsius (“the Volume Contraction Claim”)

– a claim that a loan account of Ryledar has been wrongfully debited by an amount which is not attributable to any particular sale of goods (“the Loan Account Claim”);

– a claim for damages for economic loss said to flow from the wrongful refusal of Euphoric to acknowledge that Ryledar had validly exercised an option to renew the Supply Agreement for a further term and from a wrongful refusal of Euphoric to supply further products after 24 May 2001 (“the Damages Claim”);

6    In proceedings 50071/01, Euphoric sues Ryledar to recover amounts totalling $1,872,024 which it says it allowed to Ryledar by way of rebate on the sale of fuel in the mistaken belief that Ryledar was entitled to such rebates under the Supply Agreement. Euphoric says that Ryledar has been unjustly enriched by the retention of the mistaken allowance of these rebates.
RESTITUTION CLAIM

7    Euphoric’s Amended Summons seeks:


– a declaration that under the Supply Agreement, as varied, Ryledar is entitled to a 6¢ rebate in respect of sales only to locations within the area defined in Item 4 of the Agreement;

– a declaration that Ryledar has been unjustly enriched by reason of receiving rebates for sales outside the defined area;

– an order for restitution in the amount of $1,872,024.

8    On the seventh day of the trial, Mr Coles QC, who appears for Euphoric with Messrs Ashhurst and Docker of Counsel, rightly conceded that Euphoric could not establish that any rebates had been allowed to Ryledar as a result of a mistake by Euphoric as to the terms of the Supply Agreement. Accordingly, he abandoned the claim for the second declaration and the consequential restitution order. 9    However, it is convenient to discuss briefly Euphoric’s restitution claim because the relevant facts are pertinent to other issues which must be resolved in the proceedings. 10    Rebates were allowed for sales to all of Ryledar’s New South Wales country locations by Mr Nigel Hobbs, who was Euphoric’s General Manager from February 1998 to February 2000. Mr Hobbs had negotiated the final terms of the Supply Agreement and had executed it on behalf of Euphoric 11    Mr Hobbs gave evidence that he decided to allow the contractual rebate to sales to all New South Wales country areas because “it was good business for us” , despite the fact that the Supply Agreement did not provide for that rebate. Indeed, Mr Hobbs said that, in allowing the rebate generally, he did not refer to the terms of the Supply Agreement and did not think about those terms: he was happy to provide the rebate because his “focus was on keeping, supplying a customer that was growing” . 12    He gave this evidence:

“Q. Was it your attitude at the time that whatever the contract said about rebate rates, your concern was to keep an expanding customer happy in a competitive market, and give them the rebated rates?
A. Yes, the majority of the business was in heavily discounted areas in Sydney and Wollongong, a few sites in the country. Whether it was five or ten, I can’t recall how many got picked up in my time. I didn’t turn my mind whether it was applicable or not, it seemed reasonable to extend it to those sites while it was expanding.

Q. So your decisions were governed by a business relationship rather than contractual terms?
A. That’s correct.”

See generally Mr Hobbs’ evidence at T80.50-T83.56.

13    Mr Hobbs was quite frank in conceding that, if the Supply Agreement did not entitle Ryledar to rebates for sales outside a certain area, nevertheless he allowed the rebates for sales to all of Ryledar’s New South Wales country areas, not because of any mistake on his part as to what the Supply Agreement provided, but because of a commercial decision: “I had a customer that we wanted to keep happy. We wanted to grow the business and that’s why I applied the rebate at the time” : T161.29-T162.18. 14    It is clear from Mr Hobbs’ evidence that Euphoric’s allowance of rebates on sales made to all of Ryledar’s New South Wales country locations was not the result of any mistaken understanding that Ryledar was contractually entitled to such rebates; it was a result of Mr Hobbs’ commercial decision, which was made regardless of the terms of the Supply Agreement. 15    Euphoric having allowed rebates voluntarily and not because of a mistaken belief that Ryledar was contractually entitled to them, it follows that its claim for $1,872,024 founded upon unjust enrichment must have failed.
THE REBATE CLAIM


Ryledar’s contentions

16    Ryledar contends that it was entitled to the rebate in respect of sales to all country sites in New South Wales. Ryledar says that its entitlement to such rebate is founded upon one of the following bases:


– the proper construction of the Supply Agreement read, if necessary, in the light of prior communications between the parties;

– the common intention of the parties that Ryledar was entitled to the rebates in respect of all sites, so that the Supply Agreement should be rectified accordingly;

– misleading or deceptive conduct on the part of Euphoric in representing to Ryledar that it was entitled to the rebate in respect of all country sites so that the Court should vary the Supply Agreement under s.87 Trade Practices Act 1974 (Cth) and s.72 of the Fair Trading Act 1987 (NSW) ab initio in order to reflect the representations made by Euphoric;

– estoppel by conduct and representation, so that Euphoric is prevented from alleging that Ryledar is in breach of the Supply Agreement in failing to pay the full sale price for sales to certain sites rather than the rebated price;

– estoppel by convention, the common assumption upon which the parties conducted their affairs being that Ryledar was entitled to a rebate in respect of sales to all country sites.

17    Consequently, Ryledar says that it is entitled to damages for Euphoric’s breach of contract in refusing to allow rebates for sales to all sites after 6 July 2000. 18    As I have noted above, if Ryledar establishes these contentions, the Referee’s Report has determined that $3,627,008.78 must be deducted from the amount otherwise due to Euphoric under the Supply Agreement.


The terms of the Contractual Rebate

19    Clause 2.1 of the Supply Agreement provides:

“ Sale and Purchase of Mobil Petroleum Products . Subject to this Agreement, Euphoric shall sell to Customer and Customer shall purchase from Euphoric during each month of the Term:

(a) Not less than the Minimum Quantity and not more than the Maximum Quantity of Customer’s requirements of petrol and automotive distillate for resale at or from the Sites; and

(b) Such quantity of Mobil Petroleum Products (other than petrol and automotive distillate) including lubricants as is sufficient to satisfy the expectation of Customer’s customers that such products will be available at the Sites.”
20    “Sites” are defined as meaning:
“… the petrol retailing facilities, the names and locations of which are set out in Item 8 of the Reference Schedule. If during the Term Customer acquires or licences any additional petrol retailing facilities, then such facilities shall be included in this definition at Euphoric’s discretion. If additional retailing facilities are not included in this definition Euphoric must provide just cause.”
21    Item 8 of the Reference Schedule defines “sites” as:
“All Sites in the State of New South Wales owned and/or leased by Customer or and/or [sic] operated as ‘Volume Plus’ branded Sites under licence from Customer.”
22    Clause 4.1 of the Supply Agreement provides:
“” Contractual Rebate . Subject to this Agreement for the Term, Euphoric shall allow the Contractual Rebate as a deduction in the price of Mobil Petroleum Products to which it refers on the face of the invoice, provided that Euphoric shall have no obligation to pay the Contractual Rebate to Customer during any period that an Event of Default specified in a Notice served by Euphoric on Customer pursuant to clause 3.6 remains unremedied.”
23    “Contractual Rebate” is defined in Clause 1.1 as “the rebate described as such in Item 4 of the Reference Schedule expressed in a cents per litre amount off Mobil’s List Price for Relevant Mobil Petroleum Products” . 24    Item 4 of the Reference Schedule to the Supply Agreement originally provided:

“Item 4 Contractual Rebate:
Gasoline: 6.2 cents per litre for Sydney Metro locations
6.0 cents per litre for Wollongong, Central Coast and Newcastle locations
Automotive Distillate: 6.2 cents per litre for Sydney Metro locations
6.0 cents per litre for Wollongong, Central Coast and Newcastle locations”

25    Item 5 in the Reference Schedule provides:

In the body of the Supply Agreement itself there is no provision dealing with freight charges or any reference to “Item 5”.

26    The Supply Agreement was varied in a number of respects by an agreement recorded in a letter from Euphoric to Ryledar dated 31 March 1999. Items 4 and 5 of the Reference Schedule were amended to read as follows:
“Reference Schedule Item 4 Contractual Rebate
Gasoline:

6.2 cents per litre for Sydney Metro locations

6.0 cents per litre for Wollongong, Central Coast, Newcastle, and any town on or east of a straight line connecting Newcastle Bilpin Katoomba Bowral Wollongong but excluding the Sydney Metro locations.

Automotive Distillate:
6.2 cents per litre for Sydney Metro locations

6.0 cents per litre for Wollongong, Central Coast, Newcastle, and any town on or east of a straight line connecting Newcastle Bilpin Katoomba Bowral Wollongong but excluding the Sydney Metro locations.


Reference Schedule Item 5 Freight
Deliveries outside areas defined under the Contractual Rebate will be charged freight as per Mobil’s Price Book less the freight applicable to the Zone in which the location resides.

Three Zones are defined as follows:

Zone 1 (North)
– All towns on the New England Highway and all towns between the New England Highway and the Coast up to the Queensland border.

Zone 2 (South)

Zone 3 (West)

– All other areas in NSW.

Reference location for each Zone

– North	Newcastle
– South	Wollongong
– West	Katoomba


Freight Applicable for each location

– Newcastle	1.2 CPL
– Wollongong	0.9 CPL
– Katoomba	1.0 CPL”

The construction of the rebate provisions

27    Ryledar contends that on the true construction of Clause 4.1 and Items 4 and 5 of the Reference Schedule, in the form as varied by the letter of 31 March 1999, Ryledar was entitled to the contractual rebate of six cents per litre in respect of sales to all of its country sites throughout New South Wales. Ryledar submits that this construction emerges from the words of Items 4 and 5, “if necessary construed with or in light of prior communications between the parties” : submissions 11 November 2004, para 3(a). 28    I am unable to accept this submission. The words of Item 4 are clear and admit of no ambiguity in their meaning. 29    Clause 2.1 and the definition of “Sites” make it clear that the parties stipulated that the Supply Agreement would apply to sales to all of Ryledar’s locations, present and future, throughout New South Wales. However, Clause 4.1 coupled with the definition of “Contractual Rebate” and Item 4 of the Reference Schedule, both in its original terms and as amended, make it clear that the rebate is not to apply to all “Sites” as defined in Item 8, i.e. all locations in New South Wales. In the original Item 4, the parties named express locations which would have the benefit of rebates. In the amended Item 4, they drew a line connecting particular points on the map and said that towns on or to the east of that line would have the benefit of the rebates. In doing so, they made clear their intention that sales of fuel to some sites in New South Wales would have the benefit of the Rebate and sales to other sites would not: otherwise, there was no point to their drawing the demarcation line. 30    It is now settled that the meaning of a commercial contract is to be construed objectively by reference to what it conveys to a reasonable person. This normally “requires consideration not only of the text of the documents, but also the surrounding circumstances known to [the parties] , and the purpose and object of the transaction” : Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, at [22]; see also Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, at [40] and the illuminating discussion of the authorities by Finn J in Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812, at [78]-[79]. The Court does not, therefore, need to find that the language of a contract is ambiguous before considering its meaning as it may be revealed in the commonly known context and purpose of the transaction. 31    However, that does not mean that when the Court begins the task of construction it puts the words of the document aside and endeavours first to ascertain the commonly known factual context and purpose of the transaction, often only by resolving a strenuous contest between the parties. The Court does not, once it has found the commonly known factual context and purpose, then look at the words of the contract and, if they do not readily accommodate the context and purpose so found, force them to do so by a process of interpretation. 32    When the Court is construing a commercial contract, it begins with the words of the document: there it often finds expressed the factual context known to both parties and the common purpose and object of the transaction. But the Court is alive to the possibility that what seems clear by reference only to the words on the printed page may not be so clear when one takes into account as well what was known to both parties but does not appear in the document. When that is taken into account, the words in the contract may legitimately have one or more of a number of possible meanings. It is then the Court’s task to identify which of the possible meanings represents the parties’ contractual intention. 33    However, when a party to a contract argues that the known context and common purpose of the transaction gives the words of the contract a meaning which, by no stretch of language or syntax they will bear then, in truth, one has a rectification suit, not a construction suit. 34    That is the case here. Ryledar says that the commonly known factual circumstances and the purpose of the transaction embodied in Item 4 of the Supply Agreement are revealed in the discussions and correspondence with led up to the execution of the Supply Agreement in its original form and the variation of Item 4 which was effected by the letter dated 31 March 1999. Ryledar has relied on that evidence in aid of its claim for rectification – as, indeed, it must, because the construction which it seeks to put on the words of Item 4 of the Supply Agreement is the opposite of their plain meaning. 35    I have analysed the evidence of discussions and correspondence preceding the execution of the Supply Agreement and the 31 March variation letter for the purposes of considering Ryledar’s rectification claim. For the reasons to which I will come shortly, that evidence does not support Ryledar’s claim to rectification. Even less does it support Ryledar’s claim as to the true construction of the contract. 36    As a matter of construction, I hold that under the Supply Agreement as varied by the letter of 31 March 1999 Ryledar was entitled to rebates on the sale of fuel to the sites within the areas defined in Item 4 but not otherwise.

Rectification

37    Ryledar contends that the words of Item 4 as varied by the 31 March 1999 letter do not actually reflect the common intention of the parties so that Item 4 should be rectified. The evidence upon which Ryledar relies in support of its submission must be taken in two stages. The first is evidence of discussions leading up to execution of the Supply Agreement on 18 May 1998; the second is evidence leading up to the expression by the parties of their agreed variations to the Supply Agreement contained in Euphoric’s letter of 31 March 1999. 38    I commence by observing that a party seeking rectification bears the civil onus in proving its case on the balance of probabilities. Nevertheless “within the civil onus there are various degrees of satisfaction and courts have held over a considerable period of time that, with rectification, a high degree of satisfaction is required” : per Young J (as he then was) in GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No 4) (1990) 9 BPR 17,461 at 463-464; and see e.g. Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336, at 351 per Mason J (as he then was); Pukallus v Cameron (1982) 180 CLR 447, at 456-457 per Brennan J; Crane v Hegeman-Harris Co Inc [1939] 1 All ER 662, at 664. 39 Mr A.A. Magar (“Eddie Magar”), on behalf of Euphoric, conducted negotiations with Mr Hobbs’ predecessor as General Manager of Euphoric, Mr Rosenberg, from May 1997 to January 1998. Mr Magar gave evidence but Mr Rosenberg did not. 40 Mr Rosenberg provided a number of drafts of the Supply Agreement for discussion. The drafts were prepared with the assistance of solicitors. Ryledar also had advice from its own solicitors. However, when Mr Hobbs took over from Mr Rosenberg as General Manager of Euphoric in February 1998, discussions between Mr Magar and Mr Hobbs did not involve their solicitors. 41 Mr Magar said that in his negotiations with Mr Rosenberg he had asked for a rebate of more than six cents on sales in the Sydney metropolitan area. Mr Rosenberg countered with a suggestion that there should be a rebate of 6.2 cents per litre on sales in the Sydney metropolitan area and a six cents per litre rebate on sales outside the Sydney metropolitan area. Mr Magar agreed. An early draft of the Supply Agreement contained in Item 4 a provision that the six cents per litre rebate would apply “for outside Sydney Metro locations” . This was the form of draft Item 4 in the Reference Schedule when Mr Hobbs took over negotiations from Mr Rosenberg in February 1998. 42    Mr Hobbs said that when he read the words “six cents per litre for outside Sydney Metro locations” in draft Item 4 he interpreted that as applying only to Ryledar’s then existing location outside Sydney, namely, Wollongong, and that if additional sites were acquired by Ryledar within the Sydney metropolitan area and Wollongong, the contract rebate would not apply to those sites. 43    Mr Hobbs said that later in negotiations with Mr Magar, Mr Magar requested that Newcastle and sites between Sydney and Newcastle be added as rebate locations, and that he agreed. Accordingly, he changed Item 4 as it had appeared in the draft Supply Agreement which he had inherited from Mr Rosenberg and inserted the wording which appears in the document as executed on 18 May 1998. 44    I accept Mr Hobbs’ evidence. He was not shaken in it and the variations to Item 4 of the draft agreement which were made after Mr Hobbs took over negotiations support that evidence. 45    Mr Hobbs produced two drafts of the Supply Agreement containing the amendments to Item 4 which he had made. Both drafts were provided to Mr Magar, who made comments and suggested amendments to them. Mr Magar is obviously a capable, experienced businessman who has no difficulty at all with spoken or written English. He must have paid close attention to the critical provisions of the pricing provisions of these drafts. Amendments were made to Item 8 of the Reference Schedule, which defined “Sites”, before the Agreement was executed. Yet Mr Magar did not suggest any amendment to the new Item 4, as proposed by Mr Hobbs, although its plain meaning was contrary to the intention which he said both parties had at the time. 46    Mr Magar gave evidence of his discussions with Mr Hobbs in paragraphs 195 to 247 of his witness statement of 7 April 2003. At paragraphs 227 to 233 he said that during negotiations for the Supply Agreement he and Mr Hobbs worked through a pricing example which made clear that the 6¢ rebate applied to all country locations in New South Wales. Mr Magar’s evidence is detailed and elaborate, considering that the discussions occurred some five years before he recorded them in a witness statement and he had no contemporaneous notes of the conversations to refresh his recollection. 47    Elsewhere I have referred to evidence given by Mr Eddie Magar which I regard as demonstrating a preparedness to give untruthful evidence where it assists his case: see paragraphs 50-52, 92-94, 165-167. The same indications were present when Mr Magar gave evidence about his discussions with Mr Hobbs and about his understanding of the terms of the Supply Agreement in its various drafts. He was often prevaricating and avoided conceding the obvious when it did not suit his case. 48    For example, Mr Magar was taken to a draft of the Supply Agreement in which the price of the products was clearly stated to be the Mobil List Price plus freight. Mr Magar insisted that the List Price nevertheless included freight and that the draft agreement provided for a free delivery zone (which it clearly did not). Then he conceded that Ryledar had to pay freight under the terms of the draft agreement; later, he said that it did not. His evidence was highly confusing, not because he did not understand the questions but because he chose to make it so: see T170.5-T174.9. 49    Again, Mr Magar was taken to Item 4 in draft 1 of the Supply Agreement which clearly provided a 6.2¢ rebate on the list price for sales “for Sydney metro locations” and a rebate of 6¢ “for outside Sydney metro locations” . There was no reference to freight in the schedule of this draft. He was then taken to draft 2 of the Supply Agreement which provided in Items 4 and 5:
“ Contractual Rebate

Gasoline	6.2 cents per litre for Sydney Metro locations 6.0 cents per litre for Wollongong, Central Coast and Newcastle locations
Automotive Distillate	6.2 cents per litre for Sydney Metro locations 6.0 cents per litre for Wollongong, Central Coast and Newcastle locations”


“ Freight
Deliveries outside areas defined under the Contractual Rebate will be charged freight as per Mobil’s Price Book less the freight applicable to Newcastle.”
50    Mr Magar was asked about his understanding of the changes between draft 2 and draft 1. He insisted that the express references to “Wollongong, Central Coast and Newcastle locations” in Item 4 in draft 2 meant the same as Item 4 in draft 1. he gave this evidence:
“Q. In any event, you read this document and as far as you could see, it precisely accorded with what you intended should be the case; is that right?
A. Yes, the agreement that we had at that time, yes.


Q. That is to say, you knew that you would get a contractual – apart from the Sydney Metro locations – you would get a rebate a contractual rebate of 6 cents per litre for your Wollongong, your Central Coast and your Newcastle outlets?
A. No, I would get a 6 cents rebate for everywhere across the State outside the Sydney Metro sites.

Q. But you didn’t understand it meant that, did you? You knew it meant Wollongong, Central Coast and Newcastle?
A. No, I did not.

Q. Because if you believed anything else you would have said, “Wollongong, Central Coast and Newcastle and everywhere in the State of New South Wales”, wouldn’t you?
A. No, the understanding at the time was the rebate is 6 cents anywhere in the State except the Metro locations but these locations included with the freight. There’s no delivering to them and I’m sure I put delivered price to make sure that was the concern.

Q. You can read English very well indeed, can’t you?
A. Yes, I can.

Q. It plainly says 6 cents per litre for Wollongong, Central Coast and Newcastle locations, doesn’t it?
A. Yes but –

Q. And –
A. It means 6 cents does not include any more freight.

Q. It plainly does not say 6 cents per litre for the whole of the State of New South Wales, does it?
A. No, the understanding was the 6 cents …

Q. No, would you tell me how you read the document? Do you read the document as saying 6 cents per litre for Wollongong, Central Coast and Newcastle locations?
A. No.

Q. Or do you read the document as a matter of English …
A. There’s a difference between – I can answer the question by – at that time because the understanding was so clear that the 6 cents is everywhere across the State other than metro locations, okay, and this clause was asked for, just to make sure that this location does not incur any more freight but if you ask me now the way I see it now, okay, I will tell you, yes, it says 6 cents to these locations.

Q. But that’s the only possible meaning it could have had to you when you looked at this draft in April 1998, isn’t that right?
A. No, that’s not true.

Q. You intended at that time, if you made an agreement with Euphoric, that the agreement would be a complete and precise record of what you and Euphoric agreed upon, didn’t you?
A. Up to the best we can do.

Q. You wanted an exact written record of the whole of the deal that Ryledar and Euphoric were doing, didn’t you?
A. To the best we can.

Q. And with that in mind, you went through these drafts, I am suggesting to you, very carefully indeed, didn’t you?
A. To the point of concern. That was never a point of concern which is the 6 cents rebate because it already applied. We knew it was 6.2 in Sydney and 6 cents all the rest of the State so it wasn’t even a point of concern for us. It is supplied.
51    This evidence, and Mr Magar’s manner in giving it, persuaded me that he had no genuine explanation as to how he could have misunderstood the plain meaning of the words in Item 4 of draft 2; he merely insisted on adhering to a position which advanced his case: see also T187.3 - T187.35. 52    To return to Mr Magar’s evidence of his discussions with Mr Hobbs during negotiations for the Supply Agreement: I formed the impression that much of this evidence was reconstruction and argumentative and that it appealed to business logic regarded exclusively from the viewpoint of Ryledar. I am unable to accept that evidence as reliable. 53    Mr Hobbs frankly conceded that he did not have a clear recollection of much of the discussions. However, he was firm in denying the critical statements attributed to him by Mr Magar. For these reasons, I prefer the evidence of Mr Hobbs to that of Mr Magar. 54    Mr Rosenberg may, indeed, have intended to allow the 6¢ rebate for sales to all country areas when he prepared the draft Supply Agreement containing in Item 4 the words “6 cents per litre for outside Sydney Metro locations” . I do not need to make a finding in this regard because Mr Rosenberg’s intention in February 1998 is not the decisive question when one comes to consider Euphoric’s intention at the time it executed the Supply Agreement on 18 May 1998. By that time, Mr Hobbs, not Mr Rosenberg, represented the mind of Euphoric so far as concerned this transaction: see e.g. Hamilton v Whitehead (1988) 166 CLR 121, at 127. Mr Hobbs intended that the Agreement should reflect what he himself understood to be the agreement reached by the parties. If Mr Hobbs mistakenly thought that his intention was the same as Mr Rosenberg’s intention, that is beside the point. If Mr Magar’s evidence of his own understanding of what was agreed and intended by Item 4 is accepted, then his understanding did not coincide with Mr Hobbs’ understanding at the time that the Supply Agreement was executed. 55 Ryledar appeals to Mr Hobbs’ conduct subsequent to 18 May 1998 in allowing the rebate to all country sites as evidencing an actual intention on his part as at 18 May 1998 that the Supply Agreement should provide such rebate. I do not accept this submission. As the evidence recounted above in relation to Euphoric’s claim founded upon mistake makes clear, in allowing the rebate Mr Hobbs was not intending either to implement or to vary the terms of the Supply Agreement: his decision was made without regard to the terms of the Agreement and was concerned solely with fostering the commercial relationship with his customer. 56 For these reasons, I am far from being persuaded to a high degree of satisfaction that when the Supply Agreement was executed on 18 May 1998, both parties had an actual common intention that the 6¢ rebate would apply to sales to all sites outside the Sydney metropolitan area. 57 The next issue is whether the parties had formed the common intention that the 6¢ rebate would apply to all country sites by the time that they came to sign and exchange copies of the letter dated 31 March 1999, which varied the Supply Agreement. As I have said, the terms of Item 4, as varied by that letter, are clear enough that the rebate was not to apply outside the defined area. However, Ryledar relies mainly on a series of facsimiles exchanged between the parties prior to signature of the variation letter as demonstrating that the parties had reached a common intention and that it miscarried in expression in the variation letter. 58 The correspondence begins with a letter dated 11 August 1998, sent to Mr Hobbs about a week after Euphoric had commenced supplying Ryledar at its new location in Wandandian, which was the first site opened by Ryledar outside the rebate area as defined in the original Item 4 of the Supply Agreement. 59 The letter contained the following:
“… we need your co-operation on a number of retail business opportunities in areas covered by Item 4 & 5 of the Reference Schedule in our Agreement. As you are aware, the Agreement states clearly the mechanism to adjust the Contractual Rebate for deliveries in areas outside Sydney, Wollongong, Central Coast and Newcastle. A typical example for Coffs Harbour is as follows:

Cents per litre
Contractual Rebate to Newcastle	6.0
Less Actual Freight to Newcastle	1.5
Plus Actual Freight to Coffs Harbour	(3.0)
Equals Contractual Rebate to Coffs Harbour	4.5


Please acknowledge as soon as possible as this matter has been outstanding for about two months.”
60    This letter is highly confusing. It says that the Supply Agreement “states clearly the mechanism to adjust the Contractual Rebate for deliveries in areas outside Sydney, Wollongong, Central Coast and Newcastle” , but there was no mechanism in the Supply agreement which “adjusted” the “Contractual Rebate”, as properly defined and as applied in accordance with the existing Item 4, in respect of any location outside the specified locations: under the Agreement as it stood, sales to sites outside the specified locations were not entitled to any Contractual Rebate. 61    The letter purports to give an example in respect of a sale to Coffs Harbour. It includes in the calculation a deduction from the List Price of a “Contractual Rebate of 6¢ per litre” to Newcastle, but the Supply Agreement made no provision for a sale to a site outside Newcastle to attract the rebate of 6¢ per litre which was allowable for a sale to Newcastle. 62    The explanation for the confusion is that the letter was drafted by Mr Peter Beckwith, then the General Manager of Ryledar, although it was signed by Mr E. Magar. Mr Beckwith conceded that he did not pay any particular attention to the words of the Supply Agreement or of Item 4 in particular when he drafted the letter but rather set out how he thought the pricing system should operate; he “assumed” that the Contractual Rebate would apply to sales to all sites in country New South Wales although, clearly, Item 4 did not say that and its words could not reasonably provide any foundation for such an assumption. 63    Mr Beckwith suggested that Item 5 in the Reference Schedule, which provided for freight charges, governed the interpretation of Item 4. But Item 4 dealt with a quite different topic, although the two pricing components in Item 4 and 5, rebate and freight charges, could come together to produce a delivered price for Ryledar where there was a sale to a location within the areas defined in Item 4. Mr Beckwith seemed to believe that the Supply Agreement provided – or, rather, ought to have provided – that the Contractual Rebate and the provisions relating to freight charges would always apply to a sale to country location, wherever it was New South Wales: see T273.30-T276.13. 64    I found Mr Beckwith’s evidence on this point very unsatisfactory. For example, at first he said that before drafting the letter of 11 August 1998 he read Item 4 of the Supply Agreement and understood the words as meaning that the 6¢ rebate would apply to all sales in New South Wales “with an adjustment for incremental freight” . Later he insisted that the words of Items 4 and 5, which dealt with different topics, had to be read together to produce an interpretation which was simply not available on any fair and reasonable reading of Items 4 and 5 and of the Supply Agreement: T274.27 - T276.13. I shall return to the character and reliability of Mr Beckwith’s evidence on this point below. 65    On 14 August 1998, Mr Hobbs responded to Mr Beckwith’s letter in the following terms:

“The pricing mechanism for areas outside the Metropolitan, Wollongong, Central Coast and Newcastle is also clear. Freight will be charged as per Mobil’s Price Book less the freight applicable to Newcastle. This calculation mechanism is based on Mobil’s Price Book, hence the reference. An example for Gasoline:

Contractual Rebate to Newcastle	6.0 CPL
Plus Coffs Harbour Book Freight	3.0 CPL
Less Newcastle Book Freight	0.6 CPL
Equals Coffs Harbour Rebate off Sydney List	3.6 CPL


Over the last few months we have been discussing the applicable rebate for your new site at Wandandian the applicable Freight at this location is 2.5 CPL. We agreed, as a gesture of good faith to use Nowra Freight as the benchmark, which is 1 CPL lower than Wandandian. We also agreed to use Wollongong as the reference point rather than Newcastle, saving .3 CPL for Gasoline and .5 CPL for Diesel. All up the saving to you versus the letter of the Supply Agreement is 1.3 CPL for gasoline.”
66    It will be seen that Mr Hobbs took the example which Mr Beckwith had given in the letter of 11 August but arrived a different ultimate deduction from the List Price. Further, it is clear that in this letter Mr Hobbs was concerned with the calculation of freight charges, which was the contentious issue between the parties, as is demonstrated by the correspondence which ensued. 67    On 26 August 1998, Mr Magar replied as follows:
“Contrary to your letter of the 14th August, no final agreement had been reached between ourselves on the contractual rebate for Wandandian. Your advice is not consistent with our supply agreement. The Agreement states clearly the freight applicable to Newcastle from Sydney is to be used as the reference freight for all areas outside the designated areas in New South Wales. We would not have included this matter in our letter of the 11th August if this matter had been resolved.”
68    It is notable that both in this letter and in the letter of 11 August, Ryledar used the words “Contractual Rebate” as including both the 6¢ rebate allowable under Item 4 and the rebates for freight charges allowable under Item 5. The words “Contractual Rebate” were certainly not used in the strict sense defined in the Supply Agreement. 69    The dispute between the parties as to whether the freight reduction should be book freight or actual freight continued in correspondence dated 22 September, 6 October, 12 November, 2 December and 14 December. At a meeting on 22 December between Messrs Hobbs and Braid, representing Euphoric, and Messrs Eddie Magar and Peter Beckwith representing Ryledar, Mr Hobbs suggested as a compromise to the freight dispute that New South Wales should be split into three zones, south, west and north. In the south the rates applicable to Wollongong freight would be used; in the west the freight charges applicable to Penrith would be used; and in the north the freight charges applicable to Newcastle would be used. Mr Beckwith responded that the idea was worth pursuing and that the zones would need to be defined. The parties agreed to think about the idea. 70    On 13 January 1999, Mr Eddie Magar sent to Mr Hobbs a facsimile which had been drafted by Mr Beckwith, in the following terms:

“Further to our meeting on 21/12/98, we have reviewed the three zone proposal to resolve the ‘freight issue’. The proposal (refer attachment) put is done on a without prejudice basis. We consider this counter proposal is a fair compromise. As discussed, the agreement signed on the 18th May 1998 remains unchanged until both parties are in full agreement on any proposed changes.”
71    The attached proposal described three freight zones (north, west and south) by reference to specified major highways. The proposal then defined three separate “6 CPL Contractual Rebate areas” . Again, they were divided into three zones, north, west and south. The north zone was described as: “All towns between Newcastle, Lithgow and Sydney Metro” . The west zone was described as: “All towns between Lithgow, Moss Vale and Sydney Metro” . The south zone was described as: “All towns between Moss Vale, Wollongong and Sydney Metro” . 72    It is unmistakeably clear from Ryledar’s proposed definition of three zones for the 6¢ Contractual Rebate that Ryledar did not believe, at that time, that it was entitled to a Contractual Rebate for sales to country sites throughout the whole of New South Wales. The proposal for three specified zones which would qualify for the 6¢ Contractual Rebate clearly acknowledged that sales to sites outside those specified zones would not be entitled to the rebate. 73    Mr Hobbs responded to this facsimile on the same day. He proposed certain changes to the specified zones for freight charges but said nothing about the proposed zones attracting the 6¢ Contractual Rebate. 74    On 9 February 1999, Mr Magar, in a facsimile drafted by Mr Beckwith, said:
“Further to your fax dated 13/1/99 and subsequent telephone calls, we confirm our agreement on the ‘freight issue’.”

The facsimile then described and defined the three proposed freight zones. The facsimile continued:
“The 6 CPL contractual rebate area on a delivered basis becomes Newcastle, Central Coast, Wollongong and any town east of a straight line connecting Newcastle to Bilpin to Katoomba to Bowral to Wollongong excluding the Sydney Metro area. The contractual rebate for the Sydney Metro area remains unchanged at 6.2 CPL.”
75    Pausing at this point, again, it is quite clear that in defining a certain area to which the 6¢ Contractual Rebate would apply, Ryledar was necessarily agreeing that the rebate would not apply to sales outside that area. Curiously, however, the facsimile goes on to give three examples for the calculation of sale prices for sites at Wagga, Queanbeyan and Coffs Harbour. In each of those examples the 6¢ rebate was applied although the site was outside the proposed zone attracting the 6¢ Contractual Rebate. 76    On 16 February 1999, Mr Hobbs replied to the 9 February 1999 facsimile in the following terms:
“As per clause 15.1 of the Supply Agreement between Euphoric Pty Ltd and Ryledar Pty Ltd I can confirm the following variations to the Supply Agreement.”

The letter then reproduced the changes sought by Ryledar in its facsimile of 9 February 1999, except that there was no reference to the variation to the Contractual Rebate area in Item 4 which was sought by Ryledar.

77    On 24 February 1999, Mr Hobbs sent a letter to Ryledar in which he responded to a request by Mr Beckwith to demonstrate “how the country pricing would apply” . He set out an example for sales at sites at Forster, Wandandian and Forbes. Although each of these sites was outside the proposed zone attracting the 6¢ Contractual Rebate, that rebate was applied in the examples. Mr Hobbs gave evidence as to what he intended when he worked out these examples:

“Q: Did you intend to communicate that Forster, Wandandian and Forbes would attract a rebate of 6 cents per litre?
A: My focus was on the freight calculation. I made an assumption that 6 cents was applying. I didn’t consider the agreement, I assumed it would apply, and didn’t give it a whole lot of thought at the time. I was focusing on the freight component.

His Honour: Q: When you said you didn’t think about the agreement, do I understand you to say that it wasn’t that you actually mistakenly believed that the rebate provisions of the contract actually included these towns, you believed that the rebate would be applied regardless of what the contract said, is that the effect of your evidence?
A: No. At the time I was applying the rebate to towns that came on board. So, as I said yesterday, I wasn’t – from a commercial point of view I was happy to provide the rebate to the small amount of sites that were added to the supply agreement. The questions and discussions I had were around the freight issue, and I was trying to resolve that. As an example, I left the 6 cents in because that was consistent with the price we were applying to Volume Plus at that time.

Q: I understand what you are saying, that the freight issue is always the major issue for discussion and negotiation?
A: Mmm.

Q: As far as the contract rebate rate is concerned, your view was that as a matter of commercial good business, as and when towns or sites were acquired by Volume, if it was good business, you would be happy to apply the contract rate to those towns, despite the fact that the agreement didn’t provide it?
A: That’s correct.

Q: Was that the attitude that you had at all times while you were general manager?
A: While I was general manager, yes.”
78    Euphoric commenced supplying Ryledar’s sites at Port Macquarie and Tuncurry on 19 and 26 February respectively. Euphoric allowed the 6¢ rebate for sales to those locations despite the fact that they were outside the rebate area defined in the exiting Item 4 of the Supply Agreement and in the proposed amendment to that area. However, this was consistent with Mr Hobbs’ declared attitude that if it was good business for Euphoric, he would have been happy to apply the Contractual Rebate to those towns despite the fact that the Supply Agreement did not provide for it. 79    On 15 March 1999, Mr Eddie Magar sent a letter to Mr Hobbs which had been drafted by Mr Beckwith. The letter stated:
“As per clause 15.1 of the Supply Agreement between Euphoric Pty Ltd and Ryledar Pty Ltd, I can confirm the following variations to the Supply Agreement.”

Under the heading “Reference Schedule Item 4 Contractual Rebate” appeared the words which were included under that heading in the 31 March 1999 variation letter which amended the Supply Agreement. Under the heading “Reference Schedule Item 5 Freight” appeared the words which were reproduced under that heading in the 31 March variation letter.

80    However, the 15 March letter went on to give “typical examples of Ryledar’s delivered prices for each Zone” . Those examples did not appear in the 31 March variation letter. The examples given are the same as had been included in Mr Magar’s facsimile of 9 February 1999, i.e., Wagga, Queanbeyan and Coffs Harbour. The examples included in each case a deduction from the List Price of the 6¢ rebate although, as I have noted, the three towns were outside the zone for the Contractual Rebate proposed in the amended Item 4. 81    On 31 March 1999, Mr Hobbs sent the proposed letter of variation of the Supply Agreement, including the changes sought by Ryledar to Item 4 of the Reference Schedule but not including in the letter any example of how delivered prices for each zone would be calculated. 82    On 13 April 1999, Mr Magar sent a further facsimile to Mr Hobbs, drafted by Mr Beckwith, requesting that Mr Hobbs confirm that the examples of Ryledar’s delivered prices for each zone “are correct as demonstrated in our letter dated 15/3/99” . Mr Hobbs responded by sending by facsimile his letter of 24 February 1999. Mr Magar says that he executed the 31 March 1999 letter of variation shortly after 13 April 1999. 83    Between 13 April 1999 and 6 July 2000, Euphoric applied the 6¢ Contractual Rebate to sales to all Ryledar’s country sites which opened during that time, whether those sites appeared within the area defined in Item 4 or not. In his witness statement, Mr Hobbs said that if he had been aware that Euphoric was allowing the 6¢ rebate contrary to the terms of the Supply Agreement he would have reviewed the practice. However, in cross examination, Mr Hobbs conceded that he probably would have continued the practice of allowing the rebate to all of Ryledar’s country locations, for commercial reasons. 84    On 6 July 2000, Mr Hobbs’ successor, Mr Rodgers, confirmed to Ryledar that from then on Euphoric would not allow the 6¢ rebate for sales outside the area defined in Item 4 of the Supply Agreement, as varied by the 31 March 1999 letter. 85    In support of its contention that by 31 March 1999 the parties had arrived at a common intention that the 6¢ rebate would apply to sales to all of Ryledar’s country locations throughout New South Wales, Ryledar relies heavily upon the worked examples of pricing which appeared in the correspondence between the parties leading up to the variation letter, some of those examples emanating from Mr Hobbs. 86    The great difficulty with this submission is that those examples are manifestly at odds with the clear wording of revised Item 4 of the Reference Schedule, which Ryledar itself had put forward. If it had really been the intention of Ryledar to propose that the 6¢ rebate be allowable for sales to all its country locations in New South Wales, nothing would have been simpler than to say so in those very words. Instead, a carefully demarcated rebate zone was proposed in amended Item 4, a quick reading of which would have left the reader in no doubt that the rebate would be applicable to sales within that zone and not otherwise. 87    One possible explanation for the discrepancy between the worked examples and the words of the amended Item 4 is that Ryledar suspected that, if it asked outright that the 6¢ rebate be applied to all of its country locations, Euphoric would refuse; Ryledar therefore disingenuously included in its correspondence pricing examples showing the rebate as allowed to sales outside the defined area, hoping thereby to gain Euphoric’s unwitting acceptance of the examples and, consequently, a basis for arguing later that Euphoric had agreed to allow the rebate throughout New South Wales, notwithstanding the wording of Item 4. 88    This suggestion was put directly to Mr Beckwith, who was the author of Ryledar’s relevant correspondence with Euphoric, commencing with the letter of 11 August 1998. Mr Beckwith denied the suggestion. However, as I shall explain, I did not find at all convincing his explanation as to why he had thought it necessary to seek Mr Hobbs’ confirmation of pricing examples pursuant to an agreement which, he said, was quite clear in its meaning. 89    Mr Beckwith said that the Supply Agreement, prior to the amendment by the March 1999 letter, was clear in its terms that the 6¢ rebate applied to sales at all Ryledar sites throughout country New South Wales. However, he said that in drafting the letter of 11 August setting out pricing examples showing the 6¢ rebate as applied to sales outside the areas defined in Item 4, he wanted to gain Mr Hobbs’ confirmation that the rebate applied throughout New South Wales as a matter of “professional wisdom … it is just one of those things as being part of the commercial world” . 90    Mr Beckwith was then taken to the words which he had drafted under the heading “6 CPL Contractual Rebate Areas” in the proposal sent to Mr Hobbs by Ryledar under cover of its facsimile of 13 January 1999. Mr Beckwith gave this evidence:
“Q: In paragraph 2 of the document on page 3.222 [should read 2.332] you specifically defined the areas in which the contractual rebate would apply, didn’t you?
A: If you read it as per the original agreement, that is true but that is not what the understanding was.”

The answer makes no sense. If Mr Beckwith meant to say that his own words in the proposal of 13 January 1999 did not reflect what he understood the parties to intend, the evidence is not credible.

91    In general, I found Mr Beckwith’s evidence on this question and the manner in which he gave it often evasive, often prevaricating and generally implausible: see T277.22-T283.49. 92    Mr Eddie Magar said that he read and approved Mr Beckwith’s letter of 11 August 1998 before it was sent. He was asked why, if the “mechanism to adjust the Contractual Rebate” in the Supply Agreement was so clear, it was necessary to send the letter. He gave this evidence:

“Q. What was the purpose of writing this letter so far as it sets out this typical example? Why did you need to write such a letter in your view?
A. To confirm the freight to Newcastle, the actual freight to Newcastle.

Q. There it is: 1.5 cents per litre?
A. Yes, because in the agreement it does not state how much it is. We just want to confirm the freight to Newcastle.

Q. Mr Magar, you don’t need to pick a typical example, being Coffs Harbour or any other town anywhere else in the State, if what you want to confirm is the freight to Newcastle, do you?
A. I want to confirm the mechanism and the freight to Newcastle.”

A little later he said:

“Q. … Do you say you wrote this letter in concert with Mr Beckwith to achieve firstly some confirmation of the actual freight to Newcastle? Is that what you are saying was your purpose in writing the letter?
A. No, I knew what the rebate to Newcastle was.

Q. I thought you told me a moment ago you wanted to confirm the freight to Newcastle? Wasn’t that your answer a minute ago?
A. No, I want to confirm the delivered price to this location, to Coffs Harbour.

Q. Was it or was it not your intention in writing this letter to confirm the freight to Newcastle?
A. The freight to Newcastle, yes.

Q. Was that your only purpose or did you have some other purpose?
A. I’d like to confirm the freight to Newcastle and the mechanism; mostly the freight to Newcastle.

Q. Mostly, well, what else?
A. The mechanism, we wanted to make sure the mechanism worked all right which is in the agreement which was number 4 and 5 altogether.”
93    Why Mr Magar would want to confirm the freight to Newcastle by taking as an example a sale to Coffs Harbour when Ryledar then had no site at Coffs Harbour is very curious. Almost in the same breath, Mr Magar said that he did not know why Coffs Harbour was selected as an example in the letter, that Coffs Harbour was selected because Ryledar was looking at acquiring a site there and, finally, that he did not know why Coffs Harbour was selected: T203.33 - T204.4. 94    It was put directly to Mr Magar that in sending the 11 August letter Ryledar was trying to get an inadvertent concession from Mr Hobbs about the application of the Contractual Rebate notwithstanding the terms of the Supply Agreement. Mr Magar denied the suggestion. In the light of the unsatisfactory nature of Mr Magar’s evidence on this topic, as well as the unsatisfactory character of his evidence generally, I cannot accept his denial with any assurance. 95    I can by no means dismiss as a real possibility that Ryledar deliberately set out to engineer, in its correspondence giving pricing examples, a state of confusion, at the least, in which it could argue later that Euphoric had agreed to allow the 6¢ rebate for sales to its sites in country New South Wales, wherever located, notwithstanding the clear words of Item 4 of the Supply Agreement. 96    On the other hand, I do not find any great difficulty in accepting Mr Hobbs’ evidence that he regarded freight charges, not applicability of the 6¢ rebate, as the significant issue in the discussions between the parties leading up to the March variation letter and that he focused on that issue and gave no particular attention to the mention in the pricing examples of the 6¢ rebate. I do not regard as inherently improbable Mr Hobbs’ evidence that in commenting upon Ryledar’s pricing examples and in working out his own examples he included the 6¢ rebate without paying any regard to whether the locations were within the area defined in Item 4 of the Supply Agreement. 97    Ryledar also places strong reliance on the fact that from 13 April 1999 onwards Euphoric allowed the 6¢ rebate for sales to country locations outside the zone defined in Item 4 of the Supply Agreement. However, as I have noted, this circumstance does not lead to the inevitable conclusion that the parties had a common intention as at 13 April 1999 as to what the Supply Agreement should provide: it is explicable as evidencing the attitude which Mr Hobbs took to keeping Ryledar, a growing customer, happy in terms of pricing inducements, regardless of what the Supply Agreement said about entitlement to the Contractual Rebate. 98    In order to succeed in its defence of the rectification claim, Euphoric does not have to prove that Ryledar set out to trick it by seeking its confirmation of pricing examples which included rebates not allowable under the Supply Agreement. Euphoric will succeed in its defence if Ryledar cannot provide convincing proof, i.e. proof to a high degree of satisfaction, that notwithstanding the clear and unambiguous language of Item 4 of the Supply Agreement, as amended by the March variation letter, and as drafted by sophisticated commercial parties highly experienced in the industry, both parties actually intended the opposite of what they had said. 99    I am far from convinced that Ryledar has proved its rectification claim. I regard as improbable the suggestion that Ryledar itself put forward wording for the amended Item 4 which was directly contrary to what it believed to be the actual agreement of the parties. I regard the pricing examples used in the correspondence between the parties prior to March 1999 as confused and confusing in so far as they bear upon the parties’ intention as to Ryledar’s entitlement to the 6¢ rebate. I regard that confusion as introduced principally by the terms of Ryledar’s letter of 11 August 1998. I do not find Euphoric’s allowance of the 6¢ rebate to all locations after 13 April 1999 to be unequivocal evidence of a common intention as at that date that that entitlement be a term of the Supply Agreement rather than a commercial inducement or bonus which Euphoric, through Mr Hobbs, was prepared to proffer to keep Ryledar, as a substantial customer, happy. 100    For these reasons, I am not satisfied that as at the time of the parties’ execution of the March 1999 variation letter, the parties had the common intention for which Ryledar contends. Accordingly, Ryledar’s claim for rectification of the Supply Agreement fails.


Misrepresentation and estoppel by conduct

101 In the alternative to its claim for rectification, Ryledar seeks orders under s.87 Trade Practices Act 1974 (Cth) and s.72 Fair Trading Act 1987 (NSW) that the Supply Agreement be varied ab initio so as to entitle Ryledar to the 6¢ rebate for sales to all country locations in New South Wales. 102 Ryledar’s Amended Cross Claim alleges that from mid-August 1998 until about 29 June 2000 Euphoric represented to Ryledar in correspondence and by conduct “that the rebate applied to petroleum products delivered to all country locations” . The reference to “the rebate” can only mean the Contractual Rebate as defined in the Supply Agreement. The allegation must, therefore, be read as saying that from mid-August 1998 to 29 June 2000 Euphoric represented that the Supply Agreement contained a term that the 6¢ rebate referred to in Item 4 applied to sales to all Ryledar country locations in New South Wales. That this is, indeed, Ryledar’s case is confirmed by its written submissions, to which I will come shortly. 103    The evidence upon which Ryledar relies in support of the alleged misrepresentation is the evidence in support of its claim for rectification: namely, the pricing examples contained in the correspondence between the parties from 11 August 1998 onwards and the fact that after 13 April 1999 Euphoric allowed the 6¢ rebate on sales outside the zone defined in Item 4. 104    Ryledar’s submissions on misrepresentation are sparse and, with no disrespect to Counsel, superficial. They are set out in its written submissions dated 11 November 2004 as follows (omitting references to evidence):

252    In proceedings 50070 of 2001:


– Ryledar fails in its contention, by way of Defence and Cross Claim, that on the true construction of the Supply Agreement it was entitled to a 6¢ per litre rebate on all petroleum products sold by Euphoric and delivered to locations outside the area defined in Item 4 of the Reference Schedule to the Supply Agreement;

– Ryledar fails in its contention, by way of Defence and Cross Claim, that the Supply Agreement should be rectified to entitle it to the 6¢ rebate;

– Ryledar fails in its contention that the Supply Agreement should be amended pursuant to s.87 Trade Practices Act to include its claimed entitlement to the 6¢ rebate;

– Ryledar fails in its contention that Euphoric is estopped from denying that the Supply Agreement contained the alleged term as to the 6¢ rebate;

– Ryledar is not entitled to damages by reason of Euphoric’s refusal to allow the 6¢ rebate for sales outside the area defined in Item 4 of the Supply Agreement after 6 July 2000;

– Ryledar fails in its contentions that:

the Supply Agreement required the volume of petroleum products sold to be adjusted by reference to temperature of 15ºC;

the Supply Agreement required volumes to be measured at the point of delivery;

there should be any reduction in the amount found by the Referee to be due under the Supply Agreement by Ryledar to Euphoric as at 17 November 2000 to allow for volume contraction in petroleum products sold and delivered;

– Ryledar fails in its contention that the amount found by the Referee to be due by Ryledar to Euphoric as 17 November 2000 should be reduced by an amount of $100,000, being an unjustified charge to Ryledar’s loan account;

– Ryledar fails in its contention that Euphoric breached the Supply Agreement by failing to acknowledge the validity of the purported exercise of Ryledar’s option to renew;

– Ryledar is not entitled to any reduction from the amount of $9,033,567.17 found by the Referee as owing to Euphoric as at 17 November 2000.

ORDERS

253    The orders of the Court are as follows. 254    In proceedings 50071 of 2001:


i) declaration in terms of paragraph 1 of the Amended Summons;

ii) otherwise, the Amended Summons is dismissed.

255    In proceedings 50070 of 2001:


i) judgment on the Second Further Statement of Claim against the Defendants in the amount of $9,033,567.17, plus interest and costs;

ii) the Cross Claim will be dismissed, with costs.

COSTS

256    My tentative views as to costs are as follows. 257    In proceedings 50071 of 2001, as Euphoric succeeded in obtaining the declaration which it sought but failed in its claim founded on unjust enrichment, Euphoric should recover only half of its costs. In proceedings 50070 of 2001, as Euphoric succeeded on all determinative issues, costs should follow the event and Ryledar should pay Euphoric’s costs on the party/party basis. However, I will hear the parties further on costs if they so desire.
– oOo –