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Franklins Pty Ltd v Metcash Trading Ltd

Franklins Pty Ltd v Metcash Trading Ltd

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Case Copied 16 December 2009 82 min read

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Reported Decision: 76 NSWLR 603

New South Wales

Court of Appeal

CITATION: Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 23/3/09-26/3/09

JUDGMENT DATE:
16 December 2009

JUDGMENT OF: Allsop P at 1; Giles JA at 42; Campbell JA at 66

DECISION: For formal orders see para [686]
In brief-
(1) Trial judge's construction of formal Supply Agreement, whereby Wholesale Price for a Product requires deduction from Metcash's Wholesale 5 price of all allowances and discounts whatsoever, confirmed.
(2) Trial judge's order for rectification of formal Supply Agreement replaced by an order (a) inserting into the definition of Wholesale Price for a Product an exception not requiring five specified types of allowance or discount to be deducted from Metcash's Wholesale 5 Price; and (b) for greater caution, deleting words in parenthesis from clause 4.4(a).
(3) Metcash's contentions of estoppel and misleading and deceptive conduct rejected.
(4) Declaration made concerning extent of Franklins' contractual right of access to Metcash documents.
(5) Minor or consequential amendments made to trial judge's answers to specific questions.
(6) Proceedings remitted to court below.
(7) Metcash's cross-appeal otherwise dismissed.
(8) Metcash to pay Franklins' costs of appeal and cross-appeal.

CATCHWORDS: CONTRACTS – construction and interpretation of contracts – use of surrounding circumstances – whether ambiguity in the words of the contract is required before surrounding circumstances can be examined – businesslike or commercially sensible construction – relationship with surrounding circumstances – scope of admissible surrounding circumstances – CONTRACTS – construction and interpretation of contracts – subsequent conduct – whether the subsequent conduct of the parties can be examined to construe a written contract – relationship with objective theory of contract – extent of permissible use of evidence arising after the execution of a written contract – CONTRACTS – construction and interpretation of contracts – recitals – use of recitals as an aid to construction – EQUITY – equitable remedies – rectification – common intention of the parties – role of commercial context in determining the common intention of the parties – rationale for rectification – nature of the common intention required – standard of proof for common intention of the parties – test for appellate intervention – ESTOPPEL – equitable estoppel – whether the parties could be taken to have assumed or expected the existence of a binding agreement which differed the written agreement as executed – whether parties would be assumed to be free to withdraw from negotiations – estoppel by convention – need for a common assumption to be adopted by both parties – whether estoppel by convention can arise from pre-contractual negotiations

LEGISLATION CITED: Conveyancing Act 1919
Evidence Act 1995
Land Ordinance of 1899 of British New Guinea
Sale of Goods (Vienna Convention) Act 1986
Trade Practices Act 1974 (Cth)
Uniform Civil Procedure Rules 2005

CATEGORY: Principal judgment

CASES CITED: ACN 074 971 109 v National Mutual Life Association of Australasia Ltd

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2009] NSWCA 407
Decision Date: 16 December 2009

CaseChat Overview and Summary

In the case of *Franklins Pty Ltd v Metcash Trading Ltd*, heard in the New South Wales Court of Appeal before Allsop P, Giles and Campbell JJA, the dispute concerned the interpretation of a formal Supply Agreement between the parties. Franklins sought to appeal the trial judge's construction of the agreement, particularly regarding the calculation of the "Wholesale Price" for a product, and the trial judge's refusal to grant rectification. Metcash cross-appealed, advancing contentions of estoppel and misleading and deceptive conduct.

The Court of Appeal was required to determine several key legal issues. These included whether the trial judge's construction of the Supply Agreement, which mandated the deduction of all allowances and discounts from Metcash's "Wholesale 5 Price" to arrive at the "Wholesale Price" for a product, was correct. The court also had to consider whether the formal Supply Agreement should be rectified to reflect a different common intention of the parties regarding the calculation of the Wholesale Price, and whether the doctrine of estoppel, including estoppel by convention, could be applied to establish a binding agreement that differed from the executed written contract. Furthermore, the court needed to assess Metcash's claims of misleading and deceptive conduct.

The Court of Appeal upheld the trial judge's construction of the Supply Agreement, confirming that the Wholesale Price required the deduction of all allowances and discounts. However, the court varied the trial judge's order for rectification. It ordered that the definition of Wholesale Price be amended to exclude five specified types of allowance or discount from being deducted from Metcash's Wholesale 5 Price, and for clarity, deleted certain words from a specific clause. Metcash's arguments based on estoppel and misleading and deceptive conduct were rejected. The court also made a declaration regarding Franklins' contractual right of access to Metcash documents and remitted the proceedings to the court below for further action. Metcash's cross-appeal was otherwise dismissed, and Metcash was ordered to pay Franklins' costs of the appeal and cross-appeal.

Orders

Orders of the court

For formal orders see para [686]

In brief-

(1) Trial judge's construction of formal Supply Agreement, whereby Wholesale Price for a Product requires deduction from Metcash's Wholesale 5 price of all allowances and discounts whatsoever, confirmed.

(2) Trial judge's order for rectification of formal Supply Agreement replaced by an order (a) inserting into the definition of Wholesale Price for a Product an exception not requiring five specified types of allowance or discount to be deducted from Metcash's Wholesale 5 Price; and (b) for greater caution, deleting words in parenthesis from clause 4.4(a).

(3) Metcash's contentions of estoppel and misleading and deceptive conduct rejected.

(4) Declaration made concerning extent of Franklins' contractual right of access to Metcash documents.

(5) Minor or consequential amendments made to trial judge's answers to specific questions.

(6) Proceedings remitted to court below.

(7) Metcash's cross-appeal otherwise dismissed.

(8) Metcash to pay Franklins' costs of appeal and cross-appeal.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

CITATION:	Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	23/3/09-26/3/09
JUDGMENT DATE:	16 December 2009
JUDGMENT OF:	Allsop P at 1; Giles JA at 42; Campbell JA at 66
DECISION:	For formal orders see para [686] In brief- (1) Trial judge's construction of formal Supply Agreement, whereby Wholesale Price for a Product requires deduction from Metcash's Wholesale 5 price of all allowances and discounts whatsoever, confirmed. (2) Trial judge's order for rectification of formal Supply Agreement replaced by an order (a) inserting into the definition of Wholesale Price for a Product an exception not requiring five specified types of allowance or discount to be deducted from Metcash's Wholesale 5 Price; and (b) for greater caution, deleting words in parenthesis from clause 4.4(a). (3) Metcash's contentions of estoppel and misleading and deceptive conduct rejected. (4) Declaration made concerning extent of Franklins' contractual right of access to Metcash documents. (5) Minor or consequential amendments made to trial judge's answers to specific questions. (6) Proceedings remitted to court below. (7) Metcash's cross-appeal otherwise dismissed. (8) Metcash to pay Franklins' costs of appeal and cross-appeal.
CATCHWORDS:	CONTRACTS – construction and interpretation of contracts – use of surrounding circumstances – whether ambiguity in the words of the contract is required before surrounding circumstances can be examined – businesslike or commercially sensible construction – relationship with surrounding circumstances – scope of admissible surrounding circumstances – CONTRACTS – construction and interpretation of contracts – subsequent conduct – whether the subsequent conduct of the parties can be examined to construe a written contract – relationship with objective theory of contract – extent of permissible use of evidence arising after the execution of a written contract – CONTRACTS – construction and interpretation of contracts – recitals – use of recitals as an aid to construction – EQUITY – equitable remedies – rectification – common intention of the parties – role of commercial context in determining the common intention of the parties – rationale for rectification – nature of the common intention required – standard of proof for common intention of the parties – test for appellate intervention – ESTOPPEL – equitable estoppel – whether the parties could be taken to have assumed or expected the existence of a binding agreement which differed the written agreement as executed – whether parties would be assumed to be free to withdraw from negotiations – estoppel by convention – need for a common assumption to be adopted by both parties – whether estoppel by convention can arise from pre-contractual negotiations
LEGISLATION CITED:	Conveyancing Act 1919 Evidence Act 1995 Land Ordinance of 1899 of British New Guinea Sale of Goods (Vienna Convention) Act 1986 Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005
CATEGORY:	Principal judgment
CASES CITED:	ACN 074 971 109 v National Mutual Life Association of Australasia Ltd