Garraway Metals Pty Ltd v Comalco Aluminium Ltd
[1992] FCA 411
•12 JUNE 1992
Re: GARRAWAY METALS PTY LTD
And: COMALCO ALUMINIUM LIMITED
No. V G68 of 1991
FED No. 411
Contract - Trade Practices
(1992) 23 ATR 364
(1992) 92 ATC 4424
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Heerey J.(1)
CATCHWORDS
Contract - collection and recycling of used beverage cans - agreement for applicant to collect, process and transport UBC - construction - factual circumstances - pre-contractual negotiations - post-contractual conduct - whether permissible to use as an aid to construction.
Contract - agreement for applicant to collect, process and transport UBC - agent's fee - implied term - whether reviewed fee to be a reasonable fee - criteria - repudiation.
Contract - agreement for applicant to collect, process and transport UBC - rate of contamination - representations - whether promissory - contractual expectation loss - whether appropriate measure of damages - s.52 Trade Practices Act 1974 - whether damages for negligence recoverable - whether collateral agreement.
Trade Practices - collection and recycling of UBC - establishment of business in Tasmania by applicant - availability of UBC - representations - whether in fact made - reliance - representation as to a future matter - s.51A Trade Practices Act 1974 - whether misleading - whether negligently made - whether collateral agreement.
Trade Practices Act 1974 (Cth): ss.51A and 52
Administration of the Territory of Papua and New Guinea v Daera Guba (1973) 130 CLR 353
Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1978) 52 ALJR 20
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310
J.J. Savage and Sons Pty Ltd v Blakney (1970) 119 CLR 435
L. Schuler AG v Wickman Machine Tools Sales Ltd (1974) AC 235
White v Australian and New Zealand Theatres Ltd (1943) 67 CLR 266
Whitworth Street Estates Ltd v Miller (1970) AC 583
Garraway Metals Pty Ltd v Comalco Aluminium Limited
HEARING
MELBOURNE
#DATE 12:6:1992
Counsel for the applicants: Mr M.B. Phipps QC with
Mr J.D. Elliott
Solicitors for the applicants: Phillips Fox
Counsel for the respondents: Mr P.J. O'Callaghan QC with
Mr P.D. Santamaria
Solicitors for the respondents: Arthur Robinson and
Hedderwicks
ORDER
It is ordered that:-
1. The further hearing of this matter be adjourned to a date to be fixed.
2. Liberty be reserved for counsel to apply to bring in minutes of proposed orders.
3. Costs be reserved.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
The respondent Comalco Aluminium Ltd (Comalco) manufactures aluminium cans for beer and soft drinks. For some years Comalco has operated in different parts of Australia recycling systems for used beverage cans (UBC). The quantity of raw material so obtained is small compared with that obtained from mining. However there is an important public relations element for Comalco. In one State governmental action to overcome the problems of litter by UBC has resulted in legislation for compulsory deposits on drink cans. This has proved detrimental to the business of manufacturers like Comalco. A visible and successful recycling operation is seen by Comalco as a way of preventing such unwelcome intervention.
In Victoria Comalco appoints a number of firms and organisations to act as collection centres for the return of UBC. Some collection centres are commercial bottle merchants, others are service clubs and charitable organisations. Comalco makes arrangements with collection centres to buy back UBC at an agreed price per kilogram.
The applicant Garraway Metals Pty Ltd (Garraway Metals) is a scrap metal dealer. From 1981 it performed services for Comalco's recycling system in Victoria. Much of the present case is concerned with changes that were made to that system in May 1988. Prior to that time Comalco would collect UBC from collection centres and deliver it to Garraway Metals premises at Clayton for processing. Garraway Metals would remove contamination in the form of liquid, plastics, steel cans and other rubbish. For this work it used sorting tables and a magnetic separator. The UBC was then compacted, baled into pallets and transported to Comalco's factory at Yennora, a suburb of Sydney. Again Comalco arranged and paid for the transport.
Up until May 1988 Comalco paid Garraway Metals a fee for its services. This varied over the years but in the latter stages of the old system was 13 cents per kilogram. This fee was paid by Comalco to Garraway Metals on the weight of baled cans, free of contamination, delivered to Yennora.
Under the old system Comalco paid most collection centres direct by cheque against weighbridge tickets on UBC delivered to Garraway Metals. A small number of collection centres were paid in cash and Comalco provided Garraway Metals with a float of $5,000 which was used for this purpose. Garraway Metals itself operated as a collection centre and would buy in UBC which it sold to Comalco at an agreed price in the same way as other collection centres.
The new system, which was introduced following an agreement between the parties in May 1988, involved Garraway Metals taking over responsibility for transporting UBC from collection centres and delivering it to Yennora and also making payments to collection centres on Comalco's behalf. Garraway Metals' processing of the UBC by removing contamination and by compacting and baling was to continue as before.
The parties have reduced the issues in this case to a number of questions. The first of these is in the following terms:
1. Was it a term of each of the agreements referred to in paragraphs
3 and 7 of the reamended statement of claim and in paragraphs 3 and 7 of the defence:
(a) that Comalco would reimburse Garraway Metals for all sums paid by Garraway Metals on Comalco's behalf to Comalco's can collection centres? or
(b) that Comalco would make payments to Garraway Metals calculated on the basis of a fixed agent's fee and the average buy back price for clean baled cans received by Comalco from Garraway Metals?
Garraway Metals contends for an affirmative answer to question 1(a). It says that on the true construction of the agreement reached in May 1988 Comalco was obliged to reimburse Garraway Metals for all moneys paid by it to collection centres for UBC received in unbaled and contaminated form, together with an agreed fee for processing the UBC and delivering it in clean baled form to Yennora. Comalco argues that under the new system Garraway Metals was obliged to accept the risk of contamination and all its entitlements, both reimbursement for amounts paid to collection centres as well as payment for its own services, were fixed by reference to clean baled weight of UBC delivered to Yennora.
The issue in dispute may be illustrated by the following example. Assume Comalco has agreed a price for collection centres of 100 cents per kilogram and a payment to Garraway Metals for its services of 20 cents per kilogram. Let it further be assumed that Garraway Metals receives 200 kilograms of UBC from collection centres, pays those collection centres 200 x 100 cents and after removal of contamination delivers 190 kilograms in clean baled form to Yennora. On Garraway Metals' argument it is entitled to receive:
200 x 100 $200.00
190 x 20 $38.00
$238.00
On Comalco's argument Garraway Metals is only entitled to:
190 x 100 $190.00
190 x 20 $38.00
$228.00
The new arrangement was to be for a trial period of six months commencing on 2 May 1988. By November 1988 matters were proceeding satisfactorily and on 13 December 1988 the parties entered into a further agreement on essentially the same terms. The "agent's fee" was agreed to be 38 cents per kilogram (the same as that fixed in the May agreement) which was to be a fixed fee until 31 December 1989. The agreement provided that the fee "will then be reviewed to take effect from the period 1 January 1990 to 31 December 1990." By early 1990 world aluminium prices had dropped and Comalco insisted on a reduction of the fee to 32 cents per kilogram. Garraway Metals protested at this and some negotiations occurred. Finally the working relationship between the parties came to an end in September 1990. Garraway Metals says that the agreement of December 1988 included an implied term that the fee for the period from 1 January 1990 onwards would be a reasonable fee and that in the circumstances a reasonable fee was 38 cents. The second issue I am asked to decide is expressed as follows:
2. For the period 31 December 1989 to September 1990 was Comalco
obliged to pay Garraway Metals an agent's fee of:
(a) 38 cents per kilogram?
(b) 32 cents per kilogram?
(c) any and if so what other amount per kilogram?
Garraway Metals also claims that prior to the May 1988 agreement Comalco made representations as to the contamination rate being 4 per cent. Garraway Metals says that was a false representation. A number of questions are raised:
3. Did Comalco prior to the agreement referred to in paragraph 3 of
the reamended statement of claim and paragraph 3 of the defence represent to Garraway Metals that:
(a) the contamination rate (being the percentage of substances other than aluminium) of all cans which would be collected by the company from Comalco's authorised can collection centres in and after April 1988 would be approximately 4% by weight?
(b) the contamination rate of such cans collected from Comalco's can collection centres before April 1988 was approximately 4% by weight?
4. If yes to either part of question 3, did Garraway Metals rely on:
(a) the representation contained in 3(a);
(b) the representation contained in 3(b); in entering into:
(x) the agreement referred to in paragraph 3 of the reamended statement of claim and paragraph 3 of the defence;
(y) the agreement referred to in paragraph 7 of the reamended statement of claim and paragraph 7 of the defence?
5. Did the conduct described in question:
3(a);
3(b);
constitute;
(x) misleading and deceptive conduct within the meaning of section 52 of the Trade Practices Act 1974;
(y) negligence on the part of Comalco so as to entitle the applicant to recover damages;
(z) a collateral agreement as alleged in paragraph 23 of the reamended statement of claim?
Although negotiations between the parties as to the agent's fee continued up until September 1990, a figure satisfactory to Garraway Metals was not agreed upon. Garraway Metals says that Comalco's action in "unilaterally reducing the fee to 32 cents" amounted to a repudiation of the December 1988 agreement since Comalco was, on Garraway Metals' case, obliged to pay a reasonable fee which was at least 38 cents. I am asked:
6. Between June 1990 and September 1990 did Comalco, by its conduct,
evince an intention no longer to be bound by the terms of the agreement referred to in paragraph 7 of the reamended statement of claim and paragraph 7 of the defence and therefore constitute
(sic) a repudiation of the agreement?
7. If yes to question 6 did Garraway Metals accept the repudiation?
In early 1989 the parties discussed the possibility of Garraway Metals setting up operations in Tasmania. Those discussions included a reference to an expectation that the Cascade Brewery and Coca Cola bottlers in Tasmania would change from steel to aluminium cans. Garraway Metals says that in the course of these discussions Comalco made certain representations as to the potential supply of UBC in Tasmania. In reliance on those representations, Garraway says that it in fact established a business in Tasmania but the supply was far less than represented and the operation proved unviable. I am asked the following questions:
8. In or about January 1989 was an agreement entered into between
Garraway Metals and Comalco by which Comalco appointed Garraway Metals its agent to collect, bale, palletise and deliver to Comalco aluminium cans from sources within the State of Tasmania?
9. Prior to May 1989, did Comalco represent to Garraway Metals that
if Garraway Metals commenced business in Tasmania:
(a) Garraway Metals would receive in its first year of operation in Tasmania at least 200 tonnes of aluminium cans for baling, palletising and transporting to Comalco's premises;
(b) that thereafter Garraway Metals would receive up to 400 to 600 tonnes in aluminium cans for baling, palletising and transporting to Comalco's premises?
10. If yes to either part of question 9 did Garraway Metals rely on:
(a) the representation contained in 9(a);
(b) the representation contained in 9(b);
(x) in entering into the agreement referred to in Question 8?
(y) in commencing business in Tasmania?
11. If yes to either part of question 9:
(a) did either representation constitute misleading and deceptive conduct within the meaning of s.52 of the Trade Practices Act 1974;
(b) was either misrepresentation made negligently such that Garraway Metals is entitled to recover damages;
(c) did the representations or either of them constitute a collateral agreement that Garraway Metals would receive in its first year of operation after the commencement of its business in Tasmania at least 200 tonnes of aluminium cans for baling, palletising and transporting to Comalco's premises?
Finally there is a dispute as to whether work which Garraway Metals carried out on the repair of certain cages and trailers in 1990 was work and labour done at Comalco's request. The question is asked:
12. Is Garraway Metals entitled to recover from Comalco the cost of
carrying out work and labour and providing materials in respect of the repair and maintenance of certain cages and trailers the property of Comalco for the period 1 January 1990 to 13 September 1990?
Liability for Contamination - Question 1
Since this is a construction point, the first step is to ascertain what was the contract between the parties. It is common ground in relation to the first agreement that there are two contractual documents, a letter from Comalco to Garraway Metals dated 6 May 1988 and signed by both parties and a Comalco purchase order dated 20 June 1988. The letter was on the letterhead of Comalco and addressed to Mr Frank Garraway. It was in the following terms:
Dear Frank
In accordance with our recent discussions covering your company's proposed involvement within the Comalco Aluminium Can Recycling Network, we are pleased to confirm the following:
1. AGENCY APPOINTMENT
1.1 Comalco hereby appoints Garraway Metals Pty Ltd to act as its agent in the purchase, collection and shipment of aluminium cans from Comalco's Victorian centres for a trial period of 6 months commencing 2nd May 1988. 1.2 Comalco hereby authorises Garraway Metals Pty Ltd to pay Comalco collection centres on its behalf, bale the said cans, palletise and transport to our Yennora works, 100% of all cans purchased under this Agreement. The centres shall be as advised by Comalco from time to time.
1.3 Within seven (7) days of receipt of goods at Comalco's Yennora weighbridge Comalco agrees to reimburse Garraway Metals Pty Ltd for authorised payments made to Comalco collection centres.
1.4 The agent's fee will be reviewed for each twelve (12) months period commencing on 2nd May 1988.
2. PRICING AND TERMS OF DELIVERY
2.1 Comalco will pay $1.54 per kg for clean baled cans, delivered to Comalco's Yennora works of which $0.38/kg shall represent the agent's fee.
2.2 The said baled cans will have been magnetically sorted prior to baling and will be strapped to a T N T pallet as per Comalco's specification.
2.3 The price Comalco will pay for baled cans is made up from the average price Garraway Metals Pty Ltd pays Comalco collection centres on its behalf and an agent's fee for acting as its collection agent.
3. TERMINATION
Should irreconcilable differences occur between our two companies, termination of this agreement can be brought about by written notification advising that this agreement will terminate in Thirty (30) days from date of notification.
4. RENEWAL
The parties shall meet on or before 2nd October 1988 with a view to renewing this agreement on a long term basis. Yours sincerely,
(sgd)
W J Kennedy
SALES and RECYCLING MANAGER
SOUTHERN REGION
(sgd)
F GARRAWAY
GARRAWAY METALS PTY LTD
The purchase order was in the following terms (some formal parts omitted):
Comalco Aluminium Limited
Nelson Road, PURCHASE ORDER Yennora, NSW 2161
Garraway Metals Pty Ltd Requisition No.: 157110 494 Clayton Road Date: 20.6.88 CLAYTON VIC 3168 Per: Carrier F.I.S. Yennora Description Price This Order is to cover the period 2nd May 1988 to 1 November 1988 for the Agreement appointing Garraway Metals Pty Ltd, on a trial basis, as Agent for Comalco Aluminium Limited to purchase, collect, bale and ship used beverage aluminium cans (UBC) from Comalco's Victorian Centres. Price of Clean Baled Cans $1.54 per KG F.I.S. The above price understood to be current as of the date of Agreement (6th May 1988) and will be reviewed according to market conditions. Such price variations will be confirmed by a Supplement to this Order.
TERMS OF PAYMENT:
Within Seven (7) Days of receipt of Invoice following receipt of goods at Comalco Aluminium Limited Weighbridge, Yennora. All other Terms and Conditions are as per the Agreement dated 6 May 1988, a copy of which is attached.
Please sign and return the enclosed Acknowledge promptly. (Standard conditions appear on the reverse)
The parties agree that these documents are to be construed in the light of the surrounding circumstances. Those circumstances were variously defined, but included the previous relationship between the parties and the way in which Comalco dealt with collection centres. Although Garraway Metals' statement of claim particularises as part of the agreement a conversation between representatives of the parties in April 1988 and this appears to admitted by Comalco's defence, in the event Garraway Metals did not rely on that conversation as one at which an oral term was agreed upon.
Comalco in its defence admitted that the agreement was constituted as alleged by Garraway Metals, save that it did not admit the purchase order of 20 June was a contractual document. In its final submissions, counsel accepted that the purchase order formed part of the agreement but also sought to include a number of conversations. I do not accept this. On its face, the letter of 6 May is a formal and self-contained document, signed by both parties and designed to record the rights and obligations agreed on after negotiation. Since Comalco prepared the document, it cannot in my opinion rely on conversations, not even hinted at in the document, as part of the concluded agreement. I should also add that the purchase order of 20 June - again a Comalco document - expressly incorporates the document of 6 May and also states that the purchase order "supersedes all previous communications and negotiations."
Comalco relied strongly on evidence that prior to the May 1988 agreement Mr Garraway, a Director of Garraway Metals, had in various calculations which were revealed in discovered documents specifically made allowance for contamination. This needs some explanation. Negotiations for the May 1988 agreement were protracted. Since Garraway Metals was to take over functions previously performed by Comalco, the latter supplied Mr Garraway with costings to assist in determining a price for the expanded services his company was to provide. (As a matter of commercial negotiating practice this was no doubt unusual, but it illustrates the close and amicable relationship which then existed between the parties.) These costings included a figure for contamination. Under the old system of course, Comalco bore the risk of contamination because it paid its collection centres for unbaled and contaminated UBC.
When asked about his documents which included a reference to contamination, Mr Garraway's answer indicated that he regarded it as a cost he would have to make allowance for only in the sense that the contamination removal operations that he carried out, such as magnetic extraction etc, involved a cost to Garraway Metals. This may not have been completely logical since in terms of physical treatment of the UBC Garraway Metals was doing the same under the new system as under the old. But Mr Garraway impressed me as an honest witness. I think that he and the Comalco representatives may have had different aspects in mind when they considered contamination, the former considering the cost and the latter the value of contamination removal.
But in any event this evidence concerned pre-contractual negotiations and cannot be relied on as an aid to construction of the agreement reached for the reasons given by Mason J. in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352:
"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed. It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract."
Comalco also relied on what was said to be conduct by Garraway Metals after the May 1988 agreement which was said to be consistent with Comalco's construction of the contract. There is considerable room for doubt whether that is so as a matter of fact. Some of the conduct relied on, such as Garraway Metals collecting UBC from collection centres, paying them in accordance with Comalco's agreed prices, processing the UBC and exporting it to Yennora is equally consistent with Garraway Metals' construction of the agreement. Comalco also relied on Garraway Metals accepting payments calculated in a way said to be consistent with Comalco's construction. But the evidence of payment contained in exhibits K, L and M seems to suggest that in fact Comalco was reimbursing Garraway Metals for amounts paid to collection centres on the basis of weights received at Clayton, which would accord with Garraway Metals' view. Later payments may have been made on the basis for which Comalco now contends, but the evidence of Miss Fiona Garraway, which I accept, is that, as the officer of Garraway Metals responsible for the accounts, she had difficulty understanding the calculations and sought explanations from Comalco without success.
It is well-established in England that:
"... it is not legitimate to use as an aid in the construction of the contract anything which the parties said or did after it was made."
Whitworth Street Estates Ltd v Miller (1970) AC 583 at 603.
In L. Schuler AG v Wickman Machine Tool Sales Ltd (1974) AC 235 Lord Wilberforce said at 261:
"The general rule is that extrinsic evidence is not admissible for the construction of a written contract; the parties' intentions must be ascertained, on legal principles of construction, from the words they have used. It is one and the same principle which excludes evidence of statements, or actions, during negotiations, at the time of the contract, or subsequent to the contract, any of which to the lay mind might at first sight seem to be proper to receive."
This passage was cited with implicit approval by Mason J. in Codelfa (at 348). The view has been criticised by Greig and Davis Law of Contract, 1987, pp 430 et seq and in an article Interpretation of Ambiguous Contracts by Reference to Subsequent Conduct by Mr S.p Charles QC in 1991 Journal of Contract Law 16.
The principal Australian authority relied upon by critics of the Whitworth rule is White v Australian and New Zealand Theatres Ltd (1943) 67 CLR 266 where the High Court dealt with the expression "sole professional services" in a written contract. It was held that extrinsic evidence was admissible to identify such services and that upon the evidence the phrase referred to services, in the case of one of the plaintiffs, as a producer for a revue "Thumbs Up". It appears from the judgment of Williams J. (at 281) that amongst the extrinsic evidence relied on were some events which occurred after the date of the contract. However the High Court did not explicitly deal with the question of principle and it may be that evidence of conduct prior to and contemporaneous with the contract would have been sufficient to produce the same result.
The Privy Council in Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 at 392 on appeal from the Supreme Court of South Australia treated Whitworth as correct, although it left open the possibility of subsequent conduct of the parties giving rise to an amendment or variation of the contract - a possibility not raised in the present case.
The point has been recently discussed by the New South Wales Court of Appeal in Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310. Kirby P. said (at 315):
"the present authority of the High Court of Australia appears to be against the use of post-contract conduct in aid of the construction of a written contract."
His Honour however found that he could determine the case by reference to the terms of the contract itself. Priestley J.A., with whom Meagher J.A. agreed, discussed White and another High Court authority Administration of the Territory of Papua and New Guinea v Daera Guba (1973) 130 CLR 353 in which Gibbs J. (at 446), with the agreement of Menzies and Stephen JJ., accepted the House of Lords' decisions in Whitworth and Schuler as establishing the "general principle".
Gibbs J. referred to Watcham v Attorney General (East African Protectorate) (1919) AC 533 as a decision which "although critized, may possibly be supported as laying claim to a special rule for the interpretation of such instruments (scil. relating to land)". The same view of Watcham was taken in Schuler: (1947) AC at 252, 269 and 272. Lord Wilberforce (at 261) referred to it as "long ... recognised to be nothing but a refuge of the desperate". On the facts of Daera Guba, Gibbs J. was able to resolve the construction issue on other grounds.
In Hide and Skin Priestley J.A. concluded (at 328):
"It may be that, in strictness, what Gibbs J. said on this point was not essential to his reasoning on that part of the case to which it was relevant. Because this authority seems to be in conflict with White, it seems prudent for this Court to act on the possibility that White remains binding on this Court, and consider, in the present case, whether the acts of the parties after the date of the letter agreement give any assistance to ascertaining the meaning of that agreement."
Opinion in modern High Court and Privy Council authorities seems to be uniformly in favour of the Whitworth view.
I would make the comment that the exclusion of post contract conduct as an aid to interpretation seems more consistent with the objective theory of contract. A court will not permit a party to say "I thought the contract meant XYZ", because subjective intention and belief is not relevant. Evidence that the party had made this statement on an earlier occasion would also seem to be not receivable, because it would be an admission as to a fact which was not relevant. If it is sought to adduce evidence of conduct by the party which is said to be only consistent with him believing the contract meant XYZ, then that can only be receivable as an admission by conduct and for the same reason seems to be an admission of a fact which is not relevant. This is so in the case of one party; if both parties acted in a way which might demonstrate a particular belief as to the meaning of the contract the position would seem to be no different, unless it is possible to construe their conduct as a fresh agreement or a variation of the original contract.
If the issue is not a question of construction but the existence of something - for example words allegedly spoken or documents signed - said to constitute or form part of the contract, then evidence of admission by conduct would be receivable.
In the present case I think that the words of the contract are not ambiguous and it is not necessary to look at subsequent conduct, if that were permissible. Even if that course could be taken, the subsequent conduct is at best equivocal, for the reasons I have stated.
Turning to the letter of 6 May 1988, it is plain that Garraway Metals is being appointed as the agent of Comalco (cl.1.1) and is authorised as agent to pay Comalco's collection centres on its behalf (cl.1.2). Against the background of Comalco's recycling system, under which Comalco negotiated prices directly with collection centres and provided a copy of the price list to Garraway Metals, that must refer to the prices so fixed.
Since Garraway Metals is expressly authorised to make payments on its principal's behalf, in itself that would be sufficient to entitle it to reimbursement. However cl.1.3 puts the matter specifically and obliges Comalco to reimburse Garraway Metals within seven days of receipt of goods at Yennora, that being of course the completion of Garraway Metals' obligations. And what is to be reimbursed is "authorised payments made to Comalco collection centres", which can only mean payments which Garraway Metals has made to collection centres in accordance with the Comalco price list. The problem with Comalco's case on this issue is that it must wreak substantial violence to the plain words which, as I have said, are consistent with what ordinarily would be the obligations which arise when an agent makes a payment on his principal's behalf.
Comalco relied principally on the reference in cl.2.3 to "average price" as an ambiguity which enabled the court to look at what was said to be disclosed as a principal object of the agreement, viz the transfer to Garraway Metals of the risk of contamination. But it seems to me that the reference to average price paid by Garraway Metals is explicable as a means of relating the monies which Garraway Metals paid collection centres, which would be per load (and which might be at a different rate from one load to the next) to a per kilogram figure to match the agent's fee. Comalco's argument would involve reading down the plain words in cl.1.3 to accommodate cl.2.1, but the two clauses are dealing with UBC in different conditions at different points. Garraway Metals was to pay collection centres on delivery at prices which differed from one collection centre to another and might be varied by Comalco from time to time (unlike the agent's fee of 38 cents which was fixed for 12 months). Cl.2.3 necessarily recognises that the price Garraway Metals is going to pay collection agents is going to vary; were that not so there would seem to be no need for cl.2.3 at all. Therefore the component of the $1.54 relating to reimbursement ($1.16) must be treated as being a starting figure which is on account of Comalco's liability to reimburse. Even Comalco's case does not suggest that the agreement meant that for 12 months it simply had to pay $1.54 per kilogram at Yennora. On its case the agreement involves paying the 38 cents and "an average purchase price produced by dividing the gross weight of UBC acquired by Garraway Metals from all collection agencies by the dollars paid by Garraway Metals to such agencies." That such a complicated gloss on the plain words of Comalco's own document is necessary in itself is something which weighs against acceptance of Comalco's construction. And I note that when a further agreement was entered into, constituted by the letter of 13 December 1988, the parties did not find it necessary to include a figure corresponding to the $1.54. The only figure mentioned is the agent's fee of 38 cents.
I think Garraway Metals' construction, as well as being linguistically preferable, is also a practical commercial one, in the sense that it is understandable and workable. Comalco claimed that it intended that the new arrangement would pass the risk of contamination to Garraway Metals. That may have been its intention, but I am not persuaded that it was in fact communicated to Garraway Metals - even if it were permissible to have regard to matters arising in negotiations, which it is not. I accept that the risk of contamination was an important factor. The parties could negotiate an agreement which put that risk on one or other of them. On the construction I think is the correct one the risk remained with Comalco.
I therefore answer question 1(a) as follows:
1. (a) Yes.
(b) No.
Agent's Fee in 1990 - Question 2
The agreement of 13 December 1988 was in substantially the same terms as the May 1988 agreement except that cl.1.1 read
"Comalco hereby appoints Garraway Metals Pty Ltd to act as its agent in the purchase, collection and shipment of aluminium cans from Comalco's Victorian centres for a period of three years commencing 1 November 1988 with the option of a further two years."
Clauses 1.2 and 1.3 were the same. Clause 1.4 read:,
"The agent's fee will be fixed for a twelve months period."
Clause 2.1 and 2.2 read:
"2.1 The price Comalco will pay for clean baled cans delivered into its Yennora works is made up from the average price Garraway Metals Pty Ltd pays Comalco collection centres on its behalf plus the agent's fee for acting as its collection agent. 2.2 The current agent's fee is $0.38/kg which is a fixed fee until 31 December 1989. The agents fee will be reviewed to take effect for the period 1 January 1990 to 31 December 1990."
Clause 2.3 was in the same terms and cl.3 provided a termination in the same terms as cl.3 of the May agreement. To make out its case that the December agreement contained an implied term that the reviewed fee was to be a reasonable fee, Garraway Metals would have to show that such a term satisfied the five BP Westernport criteria:
1. It must be reasonable and equitable.
2. It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it.
3. It must be so obvious that it "goes without saying".
4. It must be capable of clear expression.
5. It must not contradict any express term of the contract;
See BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1978) 52 ALJR 20 at 26.
In my opinion the suggested implied term fails the second and third of those criteria and probably also the fifth. The contract works perfectly well without the suggested implied term. In its ordinary meaning an obligation to review the fee means just that, that the parties will look again at the fee and if agreement cannot be reached then the obligation to pay the fee fixed up to 31 December 1989, and the corresponding right to deliver UBC and earn that fee, will cease. I think, objectively considered, the parties have reserved themselves, at the time when the review came, the opportunity to reconsider the viability of the 38 cents figure - whether it might have been too high from the point of view of Comalco or too low from the point of view of Garraway Metals. I do not think the situation is truly comparable to that which arises when goods or services are provided with no consideration fixed and the law implies an obligation to pay a reasonable price. Rather the situation here was that the parties are to be taken as contemplating that if no agreement could be reached from the beginning of 1990 then the services would not be provided.
By letter dated 2 January 1990 Comalco's Senior Recycling Officer Mr David Angus wrote to Mr Garraway a letter which included the following:
"I would like to confirm the discussion Bruce (Larson) and I had with you on Wednesday 13 December regarding the new recycling agreement between our two companies effective 1 January 1990. Effective 1 January 1990 Garraway Metals will be paid a commission for processing UBC of $0.32/kg. It was agreed that this commission would be reviewed at the end of a three month period (i.e. 31 March 1990).
It was agreed that Garraway Metals will be responsible for the maintenance of all Comalco equipment. Comalco equipment must be maintained in a satisfactory condition. The cost of repairing any damage to equipment must be passed on to the offending agent(s). Locks for cages must be provided by your company."
Mr Garraway's account of the meeting referred to in that letter is that Mr Larson told him that Comalco could not pay 38 cents and could only pay 32 cents from 1 January. Mr Garraway says he protested that this was less than it was costing at the start of last year and he could not do it for that to which Larson responded:
"Well that's all we are going to pay but we will review it at the end of March."
Mr Garraway says that he did not say that his company would agree to this reduction. Reference was made at the meeting to Garraway Metals having to carry the cost of the repair and maintenance of Comalco cages and trailers. Mr Garraway said that he was prepared to carry the cost of doing this if after 12 months Comalco would give the equipment to his company. Mr Larson refused this and said words to the effect:
"It's 32 per cent kilogram fee and you do the repairs and maintenance on the equipment; take it or leave it."
I think that although Mr Garraway was understandably upset at the stand Comalco took (which may have been reasonable for Comalco in the light of its own commercial situation, a matter as to which I am not required to make any judgment) the fact remains that, however unwillingly, he continued to deal with Comalco until September of that year and I think he must be taken to have agreed to deal with them on the basis for which Comalco stipulated. I therefore answer question 2 as follows:
2. (a) No.
(b) Yes.
(c) No.
Representation as to Contamination Rate - Questions 3, 4 and 5
Mr Garraway says that in the course of a meeting in late 1987 with Messrs Bacon and Calligaro, respectively the Manager Sales and Recycling (Southern Region) and Senior Recyclying Officer of Comalco, there was discussion about various costs which would be entailed in Garraway Metals taking over responsibility for the whole of the collection operation. Mr Garraway says that Mr Bacon said:
"We have done figures on contamination for the year to December 1986 and it's 4 per cent."
To which Mr Garraway said:
"I think you are being a bit conservative on your estimates."
and Mr Bacon replied:
"No, 4 per cent is what we have worked it out at."
Mr Bacon does not really dispute mentioning contamination rates to Mr Garraway although on his evidence the discussion must have taken place earlier than Mr Garraway says because Mr Bacon ceased to work for Comalco in September 1987. Mr Calligaro does not appear to dispute substantially Mr Garraway's account other than that he says that the contamination rate referred to of 4 per cent was worked out on the average of year to date.
I accept Mr Garraway's evidence as to what he was told about the contamination rate, although it was only as to Comalco's past experience and not an estimate as to the future.
However I do not think that Garraway Metals can succeed on this issue. The company's primary case, which I have upheld, is that the agreements of May 1988 and December 1988 do not on their true construction require Garraway Metals to carry the risk of contamination. Mr Garraway does not say that had he been told what is said to be the true contamination rate in the period May 1988 to September 1990, viz 7.8 per cent, that he would not have entered into those agreements at all. Rather the case is, as appears from the statement of claim, a complaint that had the contamination rate been lower Garraway Metals would have delivered a greater weight of clean baled UBC to Yennora and thereby earned more by way of the 38 cents per kilogram agent's fee. This is the contractual expectation loss which generally speaking is not the appropriate measure of damages under s.52 of the Trade Practices Act 1974 (the Act): Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1. In any case Garraway Metals would need to show that if he had asked for a higher fee than 38 cents Comalco would have agreed. I am not persuaded as to this. For the same reason, there has been no loss demonstrated such as would entitle Garraway Metals to recover damages for negligence.
This complaint was also pleaded as a collateral agreement but on Mr Garraway's evidence the statements made were representational and not promissory and therefore did not give rise to a collateral agreement: J.J. Savage and Sons Pty Ltd v Blakney (1970) 119 CLR 435. I answer the questions therefore:
3. (a) No.
(b) Yes.
4. (a) Unnecessary to answer.
(b) (x) No.
(y) No.
5. (a) Unnecessary to answer.
(b) No.
(x) No.
(y) No.
(z) No.
Repudiation - Questions 6 and 7
It was accepted by counsel for Garraway Metals that this question depends on whether the implied term as to reasonableness is accepted. Since I find there was no such implied term it follows that Comalco did not repudiate the agreements. In any event, if there was a repudiation it occurred in early 1990 and Garraway Metals continued to deal with Comalco for a further nine months. In the circumstances this would, I think, amount to an affirmation of the contract. I answer the questions therefore:
6. No.
7. Unnecessary to answer.
Tasmanian Operation - Questions 8, 9 and 10
Garraway Metals pleads representations that Comalco required Garraway Metals' services in Tasmania to collect, bale, palletise and transport in the first year of operation after commencement of the business at least 200 tonnes of aluminium cans and thereafter in the second and third years of operation up to 400 to 500 tonnes and further that Garraway Metals would receive in its first year of operation at least 200 tonnes.
There is no substantial dispute that in early 1989 it was agreed that Garraway Metals would set up business in Tasmania and act as Comalco's agent for the collection, baling and palletising of UBC in the same way as it had in Victoria. Nor is there any doubt that Garraway Metals went ahead with this project which turned out to be financially disastrous. The real issue is whether Comalco made any representations as to the likely availability of UBC for Garraway Metals in the Tasmanian market.
Mr Garraway deposed that at various times over the years prior to 1988 he had given some thought to setting up a scrap metal business in Tasmania. Comalco operates a smelter at Bell Bay in the north of Tasmania. Mr Garraway had thought of opening a scrap metal operation there. However he did not take the matter any further because of what he regarded as prohibitive transport costs to the mainland.
At one of the regular meetings at Comalco's Mulgrave office in November 1988 Mr William Kennedy, who was then Manager of Sales and Recycling for the Southern Region of Australia, "quite out of the blue" raised the possibility of Garraway Metals opening a can recycling business in Tasmania. Mr Garraway told him that he had looked at it in the past but the cost of transport would be prohibitive. According to Mr Garraway, Mr Kennedy then said in substance:
"What if we were able to give you a good supply of cans? Would you be interested?"
Mr Garraway said he would be interested and mentioned his thoughts about Bell Bay where he said all the industry was. Kennedy said:
"We wouldn't want you there. We were thinking that we'd want you in Hobart."
Mr Garraway said that it was a long way from the industry there and shipping was very expensive. According, to him Mr Kennedy said:
"There are a lot of cans going over to aluminium. On our figures we would be looking at 200 tonnes per annum in the first twelve months. We have had meetings with the Department of the Environment and the Keep Australia Beautiful Council about setting up a program the same as Victoria. Cascade Brewery is going over to aluminium."
Mr Garraway says that within a month of that meeting Mr Kennedy telephoned him again and invited him to go to the Mulgrave office to discuss the issue. At the meeting Mr Kennedy said:
"It's not just going to be beer, it's going to be Coca Cola as well so we are looking at 400 to 600 tonnes per annum."
There was discussion about the pricing structure and Mr Kennedy proposed the same fee of 38 cents delivered to Bell Bay but that if Comalco's smelter there was not suitable for resmeltering an additional fee of 15 cents would be paid for transporting from Tasmania to Melbourne and thence to Yennora. Mr Garraway in the meantime had made some enquiries about transport costs and said that the fees suggested would be acceptable.
Following this meeting Mr Garraway made several trips to Tasmania looking for appropriate premises and found some at Moonah, a suburb of Hobart. He arranged for Mr Calligaro to visit the proposed site. Mr Calligaro was enthusiastic. Together they visited scrap metal dealers in Hobart to whom Mr Garraway introduced Mr Calligaro. Then the two men parted company with Mr Calligaro saying that he had a meeting with the Tasmanian Department of the Environment.
A few days later Mr Garraway met with Messrs Kennedy and Calligaro at Comalco's Mulgrave office. Mr Calligaro again said that he liked the proposed premises because they backed onto a new McDonald's restaurant site. Mr Kennedy proposed that collection centres in Tasmania appointed by the respondent be paid $1.65 per kilogram of UBC and he offered Mr Garraway an extra 15 cents per kilogram for bringing cans back to Victoria if they could not be handled at Bell Bay, to which Mr Garraway agreed.
Garraway Metals then proceeded with a planning application to the City of Glenorchy. This caused some delay and at Mr Garraway's request Mr David Angus, who had taken over Mr Calligaro's role at Comalco, wrote a letter dated 14 March 1989 to the Glenorchy Council. The letter is in the following terms:
"Comalco Recycling fully supports the establishment of a can recycling and non-ferrous scrap metal depot by Garraway Metals at 73-75 Charles Street, Moonah.
Comalco has been associated with Garraway Metals for over eight years and in this time they have played an integral part in helping Comalco to successfully establish an aluminium can recycling network in Victoria.
Comalco is Australia's largest aluminium can recycler, operating over 800 can collection centres nationwide. Comalco's commitment to recycling by way of manpower and capital investment has consolidated Australia's position in leading the world in voluntary aluminium can recycling.
Aluminium can recycling is instrumental in increasing community awareness of litter control and conservation of resources. Awareness is achieved through many forums including the School's Recycling Programme, special events such as football and agricultural shows and promotional campaigns such as 'CASH FOR CANS' competitions.
Certain activities are endorsed by a number of governmental bodies. The Environment Protection Authority (EPA) fully supports the Schools' programme while the Keep Australia Beautiful Council
(KABC) endorsed Comalco's recycling efforts through their 'Tidy Towns' programme.
Given Cascade Breweries recent decision to convert to aluminium cans, Comalco will in the future play a major role in the recycling of aluminium cans in Tasmania. For us to maximise our commitment in the Hobart region, Garraway's involvement is very important. Frank Garraway has advised me that the proposed site is ideally suited for its operations.
Frank Garraway has advised me that the proposed site is ideally suited for his operations.
I trust you will consider Garraway Metals' proposal favourably. Yours faithfully,
David J Angus
SENIOR MARKETING EXECUTIVE"
A planning permit was obtained and Garraway Metals entered into a lease, equipped the premises and arranged for two staff members, including Mr Garraway's son, to work there. The premises opened for business in May 1989. However between May and November 1989 (both inclusive) only 1623.5 kg of cans were received, or approximately 2.8 tonnes on an annual basis.
Mr Garraway was absent from Australia between the end of August and the beginning of November. On his return he realised that the Tasmanian operation was a drain on the business and would have to be closed. He says at his next meeting with Mr Kennedy he told him that the Tasmanian operation was to be shut down. Kennedy asked why and Mr Garraway said:
"Because we are not getting any cans."
He says that Mr Kennedy "simply shrugged."
By January 1990 the Tasmanian operation was shut down.
The principal Comalco evidence on this issue comes from Mr Kennedy. He says that he recalled having discussions with Mr Garraway about the possibility of his opening a business in Tasmania. He deposes:
"I believe that the possibility of Frank Garraway establishing a business in Tasmania had been mooted by him on previous occasions. My recollection is that Comalco established maximum total tonnes of UBC that could be generated in Tasmania around late 1989 to be approximately 200 tonnes. At no stage did I suggest to Mr Garraway that he would receive 200 tonnes of UBC in his first twelve months of operation. I believe that Comalco estimated the total UBC generation in Tasmania would be approximately 400 to 600 tonnes provided that all fillers used aluminium cans instead of steel and provided that all cans imported into Tasmania were aluminium. I did not give, nor purport to give, the assurances which Mr Garraway suggests that I gave him regarding the likely number of cans he would collect in Tasmania should he commence an operation there."
Mr Kennedy's evidence however discloses an important factor motivating Comalco's intentions towards Tasmania at this time. Mr Kennedy says that in early 1989 Comalco began considering whether it should increase its operations in that State. He deposes:
"The situation was such that with the increase in popularity of the Green Independents, growth of the conservation movement, together with the proposal by the Tasmanian Australian Labor party for deposit legislation which allowed for a refund when aluminium cans were brought back to the site of purchase meant that Comalco saw the need for an increased presence in recycling operations."
Comalco also relied on evidence from Mr Bruce Larson who was in 1989 National Recycling Manager for Comalco. He was present at the meeting at Mulgrave in February 1989 with Messrs Garraway, Kennedy and Calligaro. This took place a week before the visit by Mr Garraway and Mr Calligaro to Hobart. Mr Larson says that he recalls seeking Mr Garraway's confirmation that he was setting up business in Tasmania because Mr Garraway wanted to and not because Comalco saw the opportunity to do business with him there. He says Mr Garraway confirmed that he was going to set up business in Tasmania independently of Comalco's decision to upgrade its operation. Mr Garraway denies this. He says that during the course of the meeting there was discussion of the likely volume of tonnage of cans to be generated in the Tasmanian market and he said to the Comalco men:
"Your Victorian office have been talking about tonnages of 200 tonnes per annum going to 600 tonnes per annum."
To which Mr Larson replied:
"Oh I think 600 tonnes might have been an exaggeration."
I accept the evidence of Mr Garraway on this issue and generally in relation to the Tasmanian venture. It is plain from Comalco's own evidence and from the letter to the Glenorchy Council that it had a strong political and public relations motive for establishing recycling operations in Tasmania. It is also clear that at the very least Comalco in fact had internal estimates which corresponded with the figures that Mr Garraway says were mentioned to him. If Comalco had those figures and if it was in its interests to persuade Mr Garraway to set up in Tasmania which (as is again common ground) Comalco realised he had declined to do in the past, then the inherent probability is that it would have, as Mr Garraway says, passed the figures on to him.
The main thrust of Comalco's case on this issue was an argument that Mr Garraway's evidence differed from the representation pleaded and only amounted to evidence that there would be UBC of the specified amounts available in the market as distinct from amounts going to his company. It is true there are some parts of Mr Garraway's evidence which, if taken out of context, might support such an argument. But I think read as a whole the discussions were in the context of an assumption by both parties that Comalco would establish in Tasmania a network of collection centres like the Victorian system with which Mr Garraway had worked for some eight years. Indeed on Mr Garraway's account, which I accept, at the outset Mr Kennedy said:
"What if we were able to give you a good supply of cans? Would you be interested?"
This provided a basis for all that was said subsequently. As in Victoria, it was to be Comalco who would set up and market the recycling system and provide the UBC to Garraway Metals.
I do not accept the evidence of Mr Larson about the disclaimer. It is something not mentioned in the affidavits of Mr Kennedy or Mr Calligaro and has to my mind all the hallmarks of retrospective reconstruction. All the other evidence, from both sides, suggests that in 1989 Comalco was genuinely enthusiastic about the Tasmanian operation. At the very least Comalco was strongly motivated by the threat of deposit legislation which I gather is something of a bete noire for the aluminium container industry. At the time I do not think Comalco saw any reason to caution Mr Garraway and I do not think that they did.
I find the representations alleged by Mr Garraway were in fact made and I also find that, as he says, he would not have set up business in Tasmania had it not been for those representations. He had been dealing with this large and reputable company for eight years. Their relationship at the time was close and amicable. They were the manufacturer of aluminium cans and were far better able to estimate the likely supply of UBC than he was.
Since the representation was as to a "future matter", s.51A of the Act applies. There was no attempt by Comalco to show that it had reasonable grounds for making the representations alleged and accordingly I find that the representation was misleading. I think also the evidence as to what in fact happened allows one to conclude, in the absence of any evidence by Comalco as to how it came to make the estimates, that the statements were made negligently.
As to collateral agreement however I think again the statements were representational and not promissory.
I answer the relevant questions therefore as follows:
8. Yes.
9. (a) Yes.
(b) Yes.
10. (a) (x) Yes.
(y) Yes
(b) (x) Yes.
(y) Yes.
11. (a) Yes.
(b) Yes.
(c) No.
Repairs and Maintenance of Cages and Trailers - Question 12
This issue is bound up with the question whether there was an acceptance, albeit reluctant, by Garraway Metals of the terms on which Comalco insisted they would deal from the beginning of 1990. I find that Comalco's insistence on a reduced agent's fee of 32 cents together with responsibility for repairs and maintenance was accepted. The fact that Mr Angus, in a circular to collection centres at the time, said that the centres would be responsible for repairs etc is not inconsistent with an agreement that as between Comalco and Garraway Metals the latter would bear the final responsibility.
I therefore answer the question:
12. No.
I will adjourn the further hearing of this matter and reserve liberty to apply for counsel to bring in minutes of proposed orders. Costs will be reserved.
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