Finucane, P.E. v N.S.W. Egg Corporation

[1988] FCA 332

WDGMENT No. 3.32.'-

CATCHWORDS

CONTRACT - principles governing assessment of damages for hreach of contract -point atwhich contract of continuing nature could lawfully be terminated - interest payable on loan for purchase of buslness as expense of the business reduclng profits made from the buslness - notional assessment of tax payable had the contract been performed according to its terms.

PETER EDWARD FINUCANE	V NEW SOUTH WALES EGG CORPORATION
G24 of 1987
LOCKHART J. SYDNEY
8 JULY 1988

IN TEE FEDERAL COURT OF AUSTRALIA

NEW SOUTE WALES DISTRICT REGISTRY	No. G24 of 1987
GENERAL DIVISION

BETWEEN: PETER	EDWARD	FINUCANE
Applicant

-

AND :  NEW SOUTH WALES EGG CORPORATION

Respondent

JUDGE MAKING ORDER:	LOCKHART J.
DATE ORDER W E :	8 JULY 1988
WHERE ORDER W E :	SYDNEY

MINUTES OF ORDER

1.    The Court grant. leave to the applicant:

(a) To amend the amended atatement of claim by deleting

paragraph 20(k) and inserting in lieu thereof

paragraph 20(k2) which reads as follows:

'Failed to inform the applicant that:

(i)  the reapondent held the view that in the

event of the services of some egg carriers

being dispensed with then the most recently retained carriers would probably be the carriers not retained.

( i i ) that the respondent held the view that it

war more likely than not that in the event of changes to the transport system belng

introduced it would make compensation	to
carriers retained before 1 July 1983	but
not those engaged thereafter.'

L.

(b)	To amend the amended statement of claim by deleting
paragraph 23A(b) and inserting in lieu thereof

paragraph 23A(b2) which reads as follows:

"It was a term and condition of the said Agreement that the respondent would not terminate the

Agreement except upon the happening of any of the

events mentioned in clause 2 of the Contract

Carrier's Appointment or upon reasonable notice by one party to the other provided that such notice would not be given by the respondent to the applicant until the term of appointment had subsisted until at least the commencement of the long term."

2.     The Court declares that:

(a) The respondent engaged in conduct that was

misleading or deceptive in trade or commerce by

failing to inform the applicant prior to 17

September 1984 when interviewing the applicant as a person interested in buying an egg run that:

(i)  the respondent held the view that in the event

of the services of some egg carriers being

diopensed with then the most recently retained

carriers would most probably be the carriers

not retained;

(ii) the respondent held the view that it was more

likely than not that in the event of changes

to the transport system	being introduced it
would make compensation to carriers	retained

before 1 July 1983 but not those engaged

thereafter.

(b)	The applicant on or about 17 September 1984 entered into a contract with the respondent whereby the
respondent agreed to retain the applicant to cart

eggs on the respondent's behalf for a term of indefinite duration, terminable upon the happening of any of the events mentioned in clause 2 of the contract Carrier's Appointment or upon reasonable notice by one party to the other provided that such notice would not be given by the respondent to the

applicant until the term of appoiintment had

submisted until at least the commencement of the

long term.

(c) The respondent breached the agreement referred to

in declaration 2(b) above by terminating the said

agraement on 12 November 1984.

(d) The applicant suffered loss and damage as a result

of the conduct of the respondent	referred to	in
declaration 2(a).

3. The Court Orders:

The respondant to pay the applicant damages in the

sum of $112,771.27 together with interest at the

rate of $27.35 daily calculated from and including
23 April 1988.
The respondent to pay the applicant's costs of the
proceedings except for the costs of the hearing on
21 and 22 March 1988.

The applicant to pay the respondent's cost of the

hearing on 21 and 22 March 1988.

4. The Court by consent stays execution in respect of the

orders set out in paragraph 3 above pending the

determination of an appeal by the respondent and notes

the agreement of the parties that this tay is

conditional on the filing and service of a Notice of

Appeal by the respondent within 21 days and is also conditional on the respondent within 21 days depositing the sum of $112,771.27 with an institution to be

selected by Angel0 Hatsatouris and Geoffrey Pike,

solicitors respectively for the applicant and the

respondent, and in their joint names, such deposit	to
bear interest, to the intent that in the event that	the
appeal succeeds in whole or in part an	appropriate
portion of the said sum (with interest)	be repaid to the
respondent, and in the event that the appeal fails	in
whole or in part an appropriate portion afthe said	sum
be paid to the applicant.

5.    Liberty is reserved to any party to apply generally on

seven days notice.

- NOTE : Settlement and entry of orders is dealt with in Order 36 of
the Federal Court Rules.

IN TEE rEDEIUL COURT OF AUSTRALIA )

1

NEW SOUTH WALES DISTRICT REGISTRY ) No. G24 of 1987

)

GENERAL DIVISION 1

BETWEEN: PETER	EDWARD	FINUCANE
Applicant

AND:

- NEW SOUTH WALES EGG CORPORATION

Respondent

8 July 1988

REASONS FOR JUDGMENT

LOCKHART J.

On 22 April 1988 I delivered my reasons for judgment in this

matter. I found that the respondents had engaged in misleading or

deceptive conduct within the meaning of S. 52 of the Trade Practices

Act - 1974 ("the Act") and I arnessed damages for contravention of that

section purruant to a. 82 of the Act in the sum of $112,771.27.

Although I found that the allegation in sub-paragraph 20(k) of the

statemont of claim was not established in its precise language, I

found that the re6pondent held the view that in the event of the

services of some carriers being dispensed with, then the "last in

first out" principle would probably	apply, and that the respondent
also held the view that	it warn more likely than not that, in the event

of changer to the transport system being introduced, it would make

compensation to carriers retained before 1 July 1983 but not to those

L.

engaged theroafter. These matters were the subject of evidence and of argument, and I accordingly grant leave to the applicant to amend the statemont of claim with respect to paragraph 20(k) by deleting paragraph 20(k) and inserting in lieu thereof paragraph 20(k2) which

reads as follows:

"Failed to inform the applicant that:

(i)    the respondent held the view that in the

event of the aervices of some egg carriers
being disponmed with then the most
recently retained carriers would probably be the carriers not retained.
(ii)	that the respondent held the view that it
was more likely than ot that in the event

of changes to the transport system being introduced it would make compensation to

carriers retained before 1 July 1983 but

not those engaged thereafter."

I found also that on or about 17 September 1984 the applicant

had entored into a contract with the	respondent, the contract arising
from a combination of documents and conversations between officers	of

the respondent and the applicant. I found that the terms of the

contract were that the rospondent agreed to retain the applicant as a

carrier to conduct the egg run formerly conducted by Mr. Mayoh, the

term of the appointment being of indefinite duration terminable upon

Contract Carrier's Appointment or upon reasonable notice by one party	the happoning of any of the events mentioned in clause 2 of the
to the other provided that such notice would not be given by the
rempondont to the applicant until the term of appointment had
subsisted until at least the commencement of the long term. I found
that the respondent had breached the terms of the applicant's
engagement by terminating his appointment on 12 November 1984. At the
request of the parties, I did not proceed to assess damages for breach
of contract other than to observe that such damages would be
considerably lesa than the damages to which the applicant was entitled
for contravention of S. 52 of the Act. The parties were in agreement
with that observation. There was little argument advanced on the
question of damages for breach of contract, and I said in my reasons
for judgment that the parties should have an opportunity o reactivate
this question if they wished to do so.

I also found that the term and condition of the contract

pleaded in paragraph 23A of the statement of claim is a different term from the one which I had found to have been established. I said, however, that Iwas atisfied that he question whether the appointment of the applicant could be terminated by the respondent before it had subsisted until at least the commencement of the long term had been the subject of evidence and argument and had been

involved in certain of the allegations in paragraph 20 of the

applicant's statement of claim with respect to S. 52 of the Act. I

said I would give the applicant	an opportunity to seek leave to
further amend the statement of claim with respect to paragraph 23A	to
put this matter in	order.

I have now been asked to assess damages for breach of

contract notwithrtanding that it was common ground between the parties

that the figure which would result from that assessment would

necessarily be a smaller amount than the figure assessed as the applicant's damages for contravention of S. 52 of the Act. I acceded to this request because otherwise there would have been some doubt as

to whether my judgment was a final judgment:	Computer Edge Pty. Ltd.
v Apple Computer Inc. (1984) 54 A.L.R.	767 per Gibbs C.J. at 767-768.
In any case it is desirable and, indeed, essential	that all matters in
issue between the parties with	respect to the substratum of fact that

has given rise to the litigation in this Court be finally determined

in this proceeding.

The matter was restored to the list and I allowed additional

evidence to be given by the applicant by affidavit in support of his

claim for damages for breach of contract and heard argument with

respect to that matter. I alro indicated that the Court would grant

leave to the applicant to amend the statement of claim by allowing him to delete para. 23A(b) and to insert in lieu thereof para. 23A(b2) which read. as follows:

"It was a term and condition of the said Agreement

that he rerpondent would not terminate the

agreement except upon the happening of any of the

events mentioned in clause 2 of the Contract

Carrier*# Appointment or upon reasonable notice by

one party to the other provided that such notice

would not be given by the respondent to the

applicant until the term of appointment had

subristed until at	least the commencement of	the
long term."

The measure of damages for breach of contract is to award

damages which are such as to put the applicant in the position which

he would have been in	if the contract had been performed by the
respondent according to its terms:	Robinson v Harman (1848) 1 Ex 850,
154 E.R. 363; Koufos v. C.	Czarnikow Ltd. [l9691 1 A.C. 350 per Lord
Pearce at 414, and per Lord Upjohn at 420.	Expressed another way, the
measure of damages for breach of contract is to award	damages
equivalent to the loss or damage to the applicant attributable to	the
respondent's breach of contract.

Counsel for the applicant and the respondent each made

written submissions on the question of assessment of damages for

breach of contract and spoke briefly and succinctly to those Submissions. It is unnecessary for me to set out the text or substance of those submissions. I have considered them and propose to simply state my findings.

In my opinion, on the facts of this case, the respondent

could not lawfully have terminated the contract until after a period

of reasonable notice, which notice could not have been given until	the
term of the contract	had subsisted until at least the commencement of

the long term. I find that for this purpose the period in which the

contract had to be allowed to subsist before the respondent	could give
notice to the applicant terminating	his appointment is a period of 18

calendar months. That is to say, the earliest time at which the

respondent could have lawfully terminated the appointment, consistent with my finding#, was 18 calendar months after 17 September 1984, on

which date the applicant was appointed by the respondent to act as an

egg carrier. The termination of the contract on 12 November 1984

therefore occurred aome 16 calendar months	prior to the time at which
it could lawfully occur. I find that the period of 16 calendar months

(or 70 weeks in the particular period in issue) is therefore to be

taken as the initial point of reference for the purpose of calculating

damages. I find in accordance with evidence given at the hearing, and

accepted by the respondent in its submissions on this issue, that	the
egg run would have returned a gross income of some $45,000 per	annum.

The expenses of the applicant over a period of 12 months would have

been $8,463, so the applicant would have	had a taxable	income of
$702.63 per week.

There should be further deductions made from the sum

of $702.63 per week in calculating damages. First, I accept the subrisrion on behalf of the respondent that there rhould be deducted

interest on the loan which the applicant secured from the State Bank

in order to purchase the egg run and the truck used to conduct the

run. The need to take out a loan for the purchase of the run was a

natter peculiar to the applicant, which did not involve the

rerpondent. Interest payable on tho loan war an expense of carrying

on the business of the egg run and it reduced the profits which the

applicant would have earned from the	run had it not been necessary for
him to take out a loan to purchase the run and consequently to	incur

an interest liability in respect of the loan. The principal of the loan was $77,250 and interest was payable at the rate of 14.5% per annum. It follows that the applicant was liable to make interest paymentr at a weekly rate of $215.41. Deducting the interest

liability from the applicant's income from the run after payment of

expenres, the applicant's taxable income is reduced to $487.22 per

week.

The respondent correctly contends that the Court ought to

apply a tax rate of 305	to arrive at a net figure of the	applicant's
weekly income after	tax.	The decision of the House	of Lords in

British Transport Commission v Gourley [l9801	Ch 52 indicated that the
tax position of the plaintiff was relevant to the assessment	of

damages in an action for damages in tort. A majority of the High

Court held in Cullen v Trappell (1980) 146 C.L.R.	1 that the decision
in Gourley's Case should be followed in Australia.	On the present

facts, it is clear that the earnings of the applicant from the run

I .

would have beon taxable had the contract not been terminated by the

respondent. The Court has therefore to notionally assess the tax payable by the applicant had the contract been performed according to its terms, and to deduct that amount from the award of damages. Such

reasoning assumes, of course, that	the award of damages on the	claim
for contractual damages will not	be taxable to the applicant.	No
argusent to the contrary was advanced	by the applicant.	On this

basir, tho applicant would have had a net weekly income of $341.05

from tho run aftor his expenros, interest liability on the loan,	and
perronal tax liability had been met.

The respondent submitted that there should be a further

deduction in the respondent's favour in assessing the loss claimed by

the applicant, since the applicant	was employed from 4 March 1985	to
24 Docenber 1985.	The	applicant gave evidence by affidavit on these

proceedings that hir average gross wage for the whole of that period

of eqloyment was $293 per week. The respondent submitted that there

should therefore be	an allowance in favour	of the respondent of	the
amount earnt by	the applicant during this	period,	less a deduction

from the gross figure of tax at the rate of, say, 30%.	In my opinion
this rubmission is correct.

The applicant arsertr that one of the principal sources of

his losr resulting from the respondent's early termination of his

appointment as a carrier was his inability to	raise the money to repay
the capital of tho	loan taken out to purchase the run and to pay
interest upon the loan.	The applicant submits that further interest
was incurred by him as a result of his inability	to repay the loan and

interest, and that ruch further interest flowed as a natural

consequence of the respondent's breach. The applicant submits that

such interest should be included in the measure of damage. The

applicant argued that, as further interest accrued on each payment

that fell duo and was not made, interest should be calculated on an

accumulating basis for the period that would have remained if the notice of termination had not been given by the respondent prior to the point at which ruch notice could lawfully be given. It was said that such interest should be calculated on the net sum of damages

awarded to tho applicant pursuant to the breach of contract laim. It

was also said that the applicant should	be	allowed interest on the
whole of that sum from the	point at which his appointment	could

lawfully have boon terminated to the present time.

In my opinion the applicant's submission as to this issue is

erroneous. I accept the submission on behalf of the respondent that

to allow interest to be added to the applicant's claim in the manner

suggested would be to place the applicant in the position in which he

would have been had the appointment as contract carrier never been

made. That, of course, is a measure of damages	in tort. As I
obrerved above, tho purpose of contractual damages is rather to	place
the applicant in the position he would have been	in if his appointment
as contract carrier had been brought to an end in accordance with the

terms of tho contract of appointment. If the contract had been

properly porforred, then interert upon the loan would have been

payable by the applicant ar an expense of the run, and such interest

is properly taken into account in calculating the applicant's loss	of
earnings on the basis adopted	above.

I accept also the correctness of the respondent's submission

that the claim for interest to the present time should be rejected.

The applicant knew that he would be at risk from the period of the

commencement of the long term, which I have placed at 18 months	from
17 September 1984, in the sense that after that time the	applicant's

appointment could lawfully be terminated. It follows that the

respondent could not b . held rcrponsible for interest payments beyond

the cornoncement of the long term as	that concept is defined in these
reasonr for judgment.

I do not propose to calculate the arithmetical results which

follow from these findings. I could restore the matter to the list

and have the parties make the necessary calculations in the meantime.

Wowever, it ir common ground that there is no necesrity for me to make orders or declarations with respect to the quantification of damages for breach of contract because such damages would on any view be less

than the damages awarded for contravention of S. 52 of the Act. I

have raid sufficient to indicate the principles which have guided	me
in reaching my conclurion on the quertion	of the assessment of damages

for breach of contract. If it becomes necessary for the parties to

determine the precise figure which follows from those reasons	fo r
judgment, that should require only a simple arithmetical	calculation.

.	10.
.	8

As to costs relating to the assessment of damages for breach

of contract, the fair order in	my opinion will follow the order made
in the principal case, that the respondent should pay the	applicant's
costs of the assessment of	damages.

I certify that	this and the preceding
nine	(9) pages are a true copy of the
reasons for judgment	herein of the

Honourable M r . Justice Lockhart.

~ssociate fi.T.?l&,

Date:  8 July 1988

Counsel for the Applicant:  Mr. C. Birch

Solicitors for the Applicant:	Patrick Hargraves h Co.
Counsel for the Rorpondent:	Mr. J.D. Heydon Q.C. with Mr. D. DaVie6
Solicitors for the Respondent:	Westgarth Baldick
Date of Hearing:	15 June 1988
Date of Judgment:	8 July 1988