Glenroy Plains Pty Ltd v Pedra Branca Dairying Pty Ltd - [2011] SADC 26

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
GLENROY PLAINS PTY LTD & ORS v PEDRA BRANCA DAIRYING PTY LTD & ORS
[2011] SADC 26
Judgment of His Honour Judge Brebner
11 March 2011
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
Claimant asserted that an informal oral contract contained a specific term and that a breach of that term had occasioned damages. Conduct of a party gave rise to an inference that the asserted term did not form part of the contract.
Claim dismissed.
Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Bell Group v Westpac Banking Corporation (No 9) (2008) 225 FLR 1; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Browne v Dunn (1893) 6 R 73; R v Birks (1990) 19 NSWLR 677; MWJ v The Queen (2005) 80 ALJR 329, considered.

GLENROY PLAINS PTY LTD & ORS v PEDRA BRANCA DAIRYING PTY LTD & ORS
[2011] SADC 26

This is a claim for damages for breach of an oral agreement to supply grain.
The history of the proceedings and the nature of the claim
The first plaintiff, Glenroy Plains Pty Ltd (Glenroy Plains) is a wheat producer and supplier. The second plaintiff, Glenroy Plains Transport Pty Ltd is a road haulage contractor. The third plaintiff, Mr Gartner is the principal director of the first and second plaintiffs.
The first defendant, Pedra Branca Pty Ltd (Pedra Branca) operates a diary farm. The second, third and fourth defendants, Mr Hayes, Mr Jason Doman and Mr Peter Doman were directors of the first defendant at all relevant times. The Doman’s are father and son.
Pedra Branca requires substantial amounts of grain on a regular basis in order to feed its cows.
In late 2004 or early 2005 Glenroy Plains and Pedra Branca entered into an informal oral agreement for Glenroy Plains to supply grain to Pedra Branca for three years at an agreed price of $210 per tonne of grain supplied (the agreement and the agreed price). The years covered by the agreement were to be 2005, 2006 and 2007. Pedra Branca asserts that the agreement contained a specific term which obliged Glenroy Plains to supply it with a minimum of 2,000 tonnes of grain (the base amount) during each year of the agreement irrespective of whether Glenroy Plains was itself able to produce that amount of grain in any given year (the disputed term). To the contrary, Glenroy Plains asserts that the agreement did not contain the disputed term and that its obligation was limited to supplying Pedra Branca with whatever grain it was itself able to grow and harvest in any given year. Pedra Branca thus asserts that if Glenroy Plains was unable to itself harvest and supply the base amount then it was nonetheless obliged to obtain grain from other sources and on-sell it to Pedra Branca at the agreed price in order to make up any shortfall, irrespective of whether Glenroy Plains had to pay more than the agreed price in order to do so, and Glenroy Plains thus asserts that it was under no such obligation.
During 2005 and 2006 Glenroy Plains supplied Pedra Branca with in excess of 2,000 tonnes of grain which it had grown and harvested on its own land and it did so at the agreed price. Towards the end of 2006 Glenroy Plains grain crop failed due to adverse weather conditions. Glenroy Plains was thus unable to harvest grain of its own to supply to Pedra Branca during 2007. As a result of Glenroy Plains harvest failing Pedra Branca purchased its entire grain requirements for 2007 on the open market at prices significantly higher than the agreed price. By the beginning of 2007 Pedra Branca were in arrears of payment for grain previously supplied. Pedra Branca did not assert the existence of the disputed term until about August 2007 which was many months after it had entered the open market.
After a period of negotiation the plaintiffs commenced proceedings claiming the arrears. The defendant’s counterclaimed the difference between the price they paid on the open market for the first 2,000 of grain they purchased during 2007 and what they would have paid for the same amount of grain at the agreed price. The plaintiffs’ claim was ultimately resolved and on the day fixed for the commencement of the trial I made the following orders by consent:
1.The First, Second and Third Plaintiffs’ Claim, action and proceeding against the Second, Third and Fourth Defendants is discontinued.
2.That the costs of the Second, Third and Fourth Defendants in relation to the claim referred to in order one above be paid by the First, Second and Third Plaintiffs as taxed or otherwise agreed.
3.The Second and Third Plaintiffs’ Claim, action and proceeding against the First Defendant be discontinued.
4.That the costs of the First Defendant in relation to the Claim referred to in order 3 above be paid by the Second and Third Plaintiffs as taxed or otherwise agreed.
5.That judgment be entered for the First Plaintiff against the First Defendant in the sum of $111,400.50 plus GST and plus interest.
6.That the costs of the First Plaintiff in relation to the judgment referred to in order 5 above be paid by the First Defendant as taxed or otherwise agreed.
7.That interest on the judgment debt referred to in order 5 above be calculated as follows:-
a.     Between the period 13/04/2008 to 30/09/2008 at the rate of 6.5% per annum pursuant to District Court Rule 6R 261; and
b.    From 1/10/2008 to the date of judgment at the rate of 10% per annum pursuant to District Court Rule 6R 261; and
c.     As from the date of judgment at the rate of 10% per annum pursuant to District Court Rule 261.
8.That the enforcement of orders 2, 4 5 and 6 above be stayed until the sooner of further order or judgment in the action referred to in order 9 below.
9.That the trial of the Cross Action (Counterclaim) of the First Defendant be listed for trial on 23 and 24 September 2010 in substitution of the action of the First Plaintiff.
10.That for the hearing the First Defendant proceed first in evidence and as Dux Litis in the cause.
The trial thus became a trial of the counterclaim with the Pedra Branca as dux litis and bearing the onus of proof.
The principal issue
The fact in issue was whether or not the agreement included the disputed term obliging Glenroy Plains to supply the base amount irrespective of whether or not it harvested that amount of grain itself.
Evidence
The witnesses for Pedra Branca were Mr Hayes, Mr Peter Doman and Mr Jason Doman. Mr Gartner was the sole witness for Glenroy Plains. Most of the evidence focused on the history of the commercial relationship between Glenroy Plains and Pedra Branca and on the formation and terms of the agreement itself. There was little documentary evidence.
Mr Gartner’s family have cropped Glenroy Plains for at least two generations. Glenroy Plains produces grain and other cereal crops. Mr Gartner has cropped the property for some 25 years. He is a very experienced crop farmer. He is also experienced in the commercial practices and realities of the cropping industry. He is not a grain broker. Pedra Branca has been operated by the Doman family since the early 1960’s.
In about 2000 or 2001 Pedra Branca began purchasing some of its annual grain requirements from Glenroy Plains. Eventually the commercial relationship between the two entities evolved into a series of annual agreements for the supply of grain by Glenroy Plains to Pedra Branca which Mr Hayes aptly described as 12 month rolling contracts (the rolling contracts).
Glenroy Plains harvested its grain in about November of each year. After the harvests of 2001, 2002 and 2003 Mr Gartner, Mr Hayes, Mr Peter Doman and Mr Jason Doman met and discussed the commercial arrangements for the following year. These meetings usually took place in December or January and nothing turns on precisely where or when they took place.
Each of these meetings proceeded on the assumption that Glenroy Plains would supply grain from the harvest which had immediately preceded the meeting and that it would do so during the ensuing year and the principal purpose of each meeting was to agree the price per tonne for the term of the next rolling contract. It is common ground that Glenroy Plains supplied at least 2000 tonnes of grain to Pedra Branca during 2002, 2003 and 2004.
Glenroy Plains did not supply Pedra Branca with its entire grain requirements during each year of the rolling contracts and Pedra Branca sourced the balance of its requirements elsewhere however, Glenroy Plains nonetheless supplied a significant percentage of Pedra Branca’s needs during each year of the rolling contracts.
Glenroy Plains did not supply the grain in a single annual consignment but by a series of regular deliveries throughout each year. Whenever Pedra Branca required feed, an order would be placed with Mr Gartner by telephone. Mr Gartner would then deliver a truckload of grain and issue an invoice. Initially Mr Peter Doman placed the orders and then Mr Hayes ultimately assumed this responsibility after he joined Pedra Branca in about 2001.
The terms of the rolling contracts provide the background to the formation of the three-year agreement and it was submitted that their terms are relevant to the question of whether the disputed term formed part of the agreement or not.
Mr Peter Doman said that from 2002 onwards the terms of each of the rolling contracts stipulated that Glenroy Plains was to supply a minimum base amount of 2,000 tonnes of grain to Pedra Branca during the ensuing twelve months. Mr Jason Doman said that tonnages had been negotiated for each rolling contract. Mr Peter Doman said that negotiation of the terms of the rolling contracts would normally take place after each harvest however; Mr Jason Doman said that negotiations generally took place before harvest time.
Mr Gartner was not specifically asked whether or not the rolling contracts contained a term stipulating a base amount. He said that he was not sure if he supplied his entire yield to Pedra Branca during each year of the rolling contracts. Mr Hayes was also not specifically asked if the rolling contracts stipulated a base amount however, and significantly, he said that the annual rolling contracts were negotiated and entered into after Mr Gartner had harvested his grain and thus ascertained the approximate tonnage he had available to supply during the ensuing year.
It appears that the successive rolling contracts worked to the reasonable satisfaction of both parties although Mr Gartner said Pedra Branca fell into arrears of payment.
It is common ground that the parties eventually contemplated and discussed replacing the annual rolling contracts with a three year agreement.
Mr Hayes said that in the months leading up to the harvest of 2004 he came to believe that it could be to the benefit of all parties if the term of the next agreement was extended from 12 months to three years because it would provide security for both businesses. He said that he discussed this possibility with Mr Gartner on about three or four occasions and that he also discussed it with the Doman’s.
Mr Peter Doman said that from Pedra Branca’s point of view it was important to secure both the quantity and the price so Pedra Branca could budget effectively for the next three years. Mr Jason Doman agreed.
Mr Gartner agreed that he had discussed the possibility of a three year term with Mr Hayes in the lead up to the harvest of 2004. He said that they discussed Glenroy Plains supplying Pedra Branca with whatever amount of grain Glenroy Plains was able to produce. He said that potential variations in seasonal conditions made it impossible for him to guarantee a particular tonnage in advance however; his evidence is unclear about whether or not he mentioned this consideration to Mr Hayes during the course of their discussions prior to the harvest.
At a time which must have been shortly after the harvest of 2004, Mr Peter Doman, Mr Jason Doman, Mr Hayes and Mr Gartner met for lunch at a country hotel to discuss the future of the commercial relationship between Glenroy Plains and Pedra Branca. It is necessarily implicit in their evidence that each of them anticipated that the commercial relationship between Glenroy Plains and Pedra Branca would continue on terms which were to be discussed at the meeting and ultimately agreed upon. All of them say that a term of three years and a price per tonne for the entire period were discussed at the meeting. Unsurprisingly, there are some differences between their respective evidence about precisely when the meeting took place, but little, if anything turns on this.
Mr Peter Doman said that both price and quantity were discussed. He said that a minimum requirement of 2,000 tonnes per year was discussed. He said that Mr Hayes proposed a price of $210 per tonne per year. With regard to the quantity he said that “It was always 2,000 tonnes, that was part of the deal, then for the next three years, 6,000 tonnes in total and that Greg (Mr Gartner) was more than confident that he would be able to supply 2,000 tonnes, …” His reference to 2,000 “being part of the deal” was a reference to the rolling contracts.
Mr Jason Doman said that price was discussed at the meeting and that “I think from our point of view we put a price forward of $205 (per tonne) …”. Initially he said he could not remember if quantity was discussed but that it was his belief that Pedra Branca intended to continue to purchase between about 2,200 and 2,500 tonnes each year. He then altered his position and said that tonnage was in fact discussed. He said he was not a party to any further discussions with Mr Gartner about the agreement. He said that “I think we had settled on 2,000 tonnes so we could have a buffer on what was comfortable and what was achievable.”
Mr Hayes said that Pedra Branca proposed a term of three years, a price of $210 per tonne and an amount of 2,000 tonnes per year however; he could not initially remember who articulated this proposal on behalf of Pedra Branca and it is plain that his evidence on this topic was a summary of what he believed the proposal to be rather than a recital of the words which were in fact spoken by whoever it was that put the proposal to Mr Gartner on behalf of Pedra Branca. Later in his evidence he said that he had remembered that it was Mr Peter Doman who mentioned the price of $210 because he had thought that $200 per tonne would have been reasonable.
Mr Gartner’s evidence about what transpired at the meeting was as follows:
QCan you tell his Honour when that occurred.
AI believe we had a meeting late 2004, and I believe Mr Doman brought up a price of $205 a tonne which we did agree that we would just go away and have a think about that, and I believe I rang Mike Hayes up and said we need 210, and I believe he accepted that on behalf of the Domans and that’s how it started.
QJust taking you back to that meeting, was there a period of time during which this price would apply that was discussed at that meeting.
AFor three years.
QWas there any discussion at that time of the volume that was expected to be supplied.
AIt was around 2000 tonne, just whatever we could grow, whatever our crops yielded, which in turn could have been 1800, could have been 2,500, just whatever our crops yielded.
QWas it known by you at that time the approximate tonnage that you had supplied to Pedra Branca over the previous two years.
AIt would have been. I can’t quite remember exactly what it was, but yeah, it would have been. I would say probably in excess of 2000 tonne.
QWas the amount that you’d supplied to Pedra Branca in the previous two years discussed at that meeting.
AI can’t recall that.
QIs it a topic that might have come up.
AIt would have come up, I dare say.
QAnd was the topic of a fixed minimum tonnage raised at that meeting at that time.
ANo. No way.
He later expanded on this evidence by saying that he had no recollection of anyone from Pedra Branca saying how much grain they were hoping to obtain from him each year and, in this regard he said that it was just “…… what we could grow and I think some history was around 2,200 tonnes , somewhere around that……” and that “What we grew was what they would get.” He also said that any discussions about tonnages focused on what Glenroy Plains would be able to grow and that there may have been some talk about what he had supplied in previous years and he said that he believed that seasonal conditions and their potential impact on his yields were also discussed.
Mr Peter Doman said Pedra Branca had enjoyed a good relationship with Glenroy Plains for a significant period of time and that Glenroy Plains were always reliable. He said that these considerations were worth something from his point of view and that accordingly Pedra Branca was prepared to “…… pay above the market to make sure we protected our relationship (with Glenroy Plains).” However, he was not able to quantify the amount of the premium.
It is common ground that the agreement was not formally concluded at the meeting and that the matter was left on the basis that Mr Gartner would consider the proposal and then contact Pedra Branca with his answer.
Mr Hayes said that a week or so later Mr Gartner telephoned him and said to him “Got a deal, happy with the terms which were discussed, pub, $210, 2000 (tonnes), three years and agreed to what – no change from the proposal which had been put forward at the Bellum.” The Bellum Hotel is the hotel where the meeting took place.
Mr Gartner said that he telephoned Mr Hayes after the meeting and that he had done so in mid to late January 2005 and, in particular, he said:
QTo the best of your recollection, Mr Gartner, can you relate to his Honour the conversation that took place between you and Mr Hayes in terms of he said/I said.
AI said “We needed $210 a tonne”, because I believe it was 205. We achieved 210. Mike agreed and basically for all the wheat crop that we grew, they could have, whether it was 500, 2000, 2,500 whatever tonnage depending on the season as well.
QWhat did he say.
AYeah, he was happy with that and we went on and that was it.
QDid you then commence supplying grain at that agreed price.
AYes.
QAnd do you recall about when that happened.
AI reckon it would have been within five days.
Under cross-examination Mr Gartner expanded on this. He agreed that he told Mr Hayes that at $210 per tonne they had an agreement. He said that he added the qualification “As long as we’ve got the grain and weather permits” and he went on to say that Mr Hayes was aware of these considerations in any event.
It is common ground that this conversation gave rise to an informal contract between Glenroy Plains and Pedra Branca. As mentioned, it is also common ground that the term of the agreement was three years and the price was $210 per tonne per year.
Glenroy Plains delivered the first consignment of grain pursuant to the terms of the agreement to Pedra Branca on 27^th January 2005 and it continued to deliver grain from its own harvests throughout 2005 and 2006. In each of those years Glenroy Plains supplied in excess of 2,000 tonnes of grain to Pedra Branca and, according to Mr Gartner, the amounts supplied represented the entire yield from Glenroy Plains harvests of 2004 and 2005

In each of these years Pedra Branca’s overall grain requirements were significantly greater than the total amounts supplied by Glenroy Plains. As it had in earlier years, Pedra Branca purchased the balance of its requirements on the open market. In this regard Mr Peter Doman said that Pedra Branca would “pretty much” obtain its grain from Glenroy Plains until the yield from Glenroy Plains immediately preceding harvest was exhausted and that from then on it would go into the open market. He also said that Pedra Branca would nonetheless purchase grain from other suppliers on an ad hoc basis before the supply from Glenroy Plain was exhausted. In these circumstances it must have been plainly contemplated by Pedra Branca that it would need to purchase some if its requirements for 2007 on the open market.
As 2006 progressed Mr Gartner became concerned about whether he would be able to harvest any grain at all on Glenroy Plains that year. He said that the winter of 2006 was the driest for many years and that his crop was also adversely affected by frost. He said that he telephoned Mr Hayes and alerted him to the possibility that the crop was frost affected and suggested to him that he should inspect the crop. He said that Mr Hayes and Mr Jason Doman attended Glenroy Plains in about October of 2006 and that he showed them at least part of his crop.
The evidence which Mr Gartner, Mr Hayes and Mr Jason Doman gave about what was said during this inspection of the crop is at variance.
Mr Gartner said that during the course of the inspection he told Mr Hayes and Mr Doman that he would not be able to harvest any grain that year. He said that Mr Hayes accepted that this was the situation and he said that Mr Hayes also said that Pedra Branca would have to find more grain elsewhere. He said that Mr Doman had agreed with what he had been saying.
Mr Hayes said he did not say to Mr Gartner that he accepted that the crop had failed or that he accepted that Glenroy Plains would be unable to supply any grain after the balance of the 2005 harvest was exhausted. He said that by the time of the inspection the price of grain had increased to about $300 per tonne and that if Mr Gartner’s “……crop did come to some sort of fruition that we would still be able to receive some grain at $210 a tonne. If we had to go to the market I was going to have to pay $300 a tonne, so it was in our interest to say well let’s wait and see because if we get some grain or it all comes together or only a portion of the crop’s failed and the rest of it goes really good and we get our grain, then we should be able to receive grain as per the contract $210. So it didn’t make any sense to go rushing out there and buying a whole heap of grain at $300 per tonne……” (emphasis added).
Thus if Pedra Branca were forced into the open market it was Mr Hayes’ expectation that it would be forced to pay almost half as much again as the agreed price of $210.
Although he was a trifle vague about what was said, Mr Jason Doman did say that Mr Gartner was uncertain about the size and quality of the potential harvest and that there was some general discussion about the weather and the season however, he was adamant that he did not agree with any statements Mr Gartner might have made to the effect that Glenroy Plains would not be able to supply any grain from its 2006 crop.
Glenroy Plains 2006 grain crop ultimately failed because of frost and it was thus unable to supply Pedra Branca with any grain from that crop.
Glenroy Plains delivered its last consignment of grain in 2006 on 1^st November of that year. It is necessarily implicit in the evidence that this last consignment exhausted the yield from Glenroy Plains 2005 harvest. From then on Glenroy Plains did not supply Pedra Branca with any grain which it had itself cultivated and harvested.
Pedra Branca then went straight into the open market to source its grain requirements for the balance of 2006 and, with one exception to which I shall return, it purchased all of its requirements for 2007 on the open market. As Mr Hayes said, by this time the price of grain had in fact increased dramatically to about $300 per tonne and Pedra Branca were thus required to pay well over and above the previously agreed price of $210 per tonne in order to satisfy its requirements after the last delivery from Glenroy Plains. Obviously enough, this situation led to Pedra Branca incurring significantly increased production costs. In this regard Mr Hayes said that Pedra Branca was experiencing cash flow difficulties by the time Glenroy Plains made its last delivery and that these difficulties were exacerbated when Pedra Branca went into the open market because it was unable to obtain any grain from Glenroy Plains at the agreed price.
Neither Mr Peter Doman nor Mr Jason Doman have much first hand knowledge of the precise circumstances in which Pedra Branca entered the open market. Mr Peter Doman was not questioned on the topic and Mr Jason Doman said that he was not involved in sourcing grain from other suppliers after Glenroy Plains ceased supply. Mr Hayes said that about three weeks to a month after he had inspected the crop Mr Gartner told him that he did not have any more grain. He said that he did not recall if he asked Mr Gartner why this was so. He said that by this time Pedra Branca had begun making its own arrangements to source its grain from elsewhere at prices of about $300 per tonne and he said that Mr Gartner provided him with a list of the names and telephone numbers of producers from whom Pedra Branca might be able to source grain. He said that when Mr Gartner provided him with this information his response was to say words to the effect that Pedra Branca had made its own arrangements. When he was asked whether he had mentioned what is said to have been Glenroy Plains obligation under the disputed term he said that he did not recall whether there was any conversation about it and that he could not recall whether he raised the matter or not. Significantly, he did not suggest that he had reminded Mr Gartner of the disputed term when Mr Gartner notified him that he did not have any more grain or at the time when Mr Gartner provided him with the list of potential alternative suppliers.
By the time Glenroy Plains delivered the last consignment of its grain to Pedra Branca on 1^st November 2006 Pedra Branca was in significant arrears of payment for grain delivered. As 2007 unfolded, Mr Gartner telephoned Mr Hayes on a regular basis requesting payment and Mr Hayes told Mr Gartner, in effect, that he would look into the matter. Under cross-examination Mr Hayes said:
QYou were getting repeated calls from Mr Gartner complaining about his unpaid invoices and requesting payment.
AThat’s correct.
QAt the same time Pedra Branca had ongoing daily and weekly needs for wheat suppliers.
AThat’s correct.
QYou didn’t at any time during those regular contacts with Mr Gartner say to him words to the effect that ‘Where’s our supply from you?
ANo, because Greg had made it quite clear that there wasn’t going to be any grain forthcoming.
QAt no time did you order grain from Mr Gartner in 2007.
ANo, because there wasn’t any to order.
(emphasis added)
In April 2007 Mr Gartner supplied Pedra Branca with two loads of grain totalling about 55 tonnes which had been grown by his brother on a property adjoining Glenroy Plains. Mr Gartner said that when he learned that this grain was available he telephoned Mr Hayes and offered it to him. He said that a price of $290 per tonne was agreed and that Mr Hayes did not suggest that he was obliged to supply the grain at the previously agreed price of $210 per tonne. Mr Hayes agreed that Mr Gartner had offered him these two loads of grain and he said that he had agreed to take the grain in the hope that it might assist in resolving the differences between Glenroy Plains and Pedra Branca.
As 2007 progressed Mr Gartner continued to make enquires with Mr Hayes about the arrears and in August 2007 a meeting was convened to discuss the situation. The meeting took place at Pedra Branca’s premises. Again, the evidence about what transpired at the meeting is at variance.
Mr Gartner said that Mr Jason Doman and Mr Hayes were present at the meeting. He said that when he raised the subject of the arrears, Mr Jason Doman responded by saying words to the effect that Glenroy Plains had failed to supply any grain and that Pedra Branca had had to pay some $200,000 more for its grain as a result. Mr Gartner also said that this was the first time anyone had said anything to him about a guaranteed minimum base amount of 2,000 tonnes of grain per year and he said that he responded to this suggestion by saying that he had guaranteed to supply his entire yield, whatever the amount, but that he had not agreed to supply any base amount.
Mr Jason Doman said that he had no recollection of attending any such meeting however; he did say that he had spoken to Mr Gartner on the telephone in about mid September 2007 and told him that he had incurred additional expense because Glenroy Plains had failed to supply 2,000 tonnes of grain.
Mr Hayes said that Mr Jason Doman attended the meeting but he could not remember whether Mr Peter Doman was present or not. He said that he could not remember very much of the “specifics” of the meeting however, he was adamant that the meeting was not the first occasion on which a guaranteed base amount of 2,000 tonnes per annum had been raised. When it was suggested to him that Mr Gartner had said that he had not agreed to a minimum annual tonnage, he said he could not recall the specifics of the meeting clearly enough.
Neither counsel questioned Mr Peter Doman about whether he had attended this meeting.
For practical purpose this is how the situation stood when the relationship between Glenroy Plains and Pedra Branca came to an end.
According to Mr Gartner, nobody connected with Pedra Branca had ever suggested to him that Glenroy Plains was obliged by the terms of the agreement to supply 2,000 of grain for each of three years of the agreement, irrespective of whether it harvested that amount or not, until the meeting in August 2007.
Neither Mr Jason Doman nor Mr Peter Doman were asked whether they had mentioned the disputed term to Mr Gartner at any time after the meeting when the three year agreement was initially proposed. In particular, neither of them was asked whether they had reminded Mr Gartner of what was said to be his obligation under the disputed term after Glenroy Plains harvest had failed and it had become apparent that it had no more grain of its own to supply to Pedra Branca. It is necessarily implicit in Mr Hayes evidence at [49] that he accepted Mr Gartner’s intimation that he had no grain available and Mr Hayes says that he did not remind Mr Gartner of the disputed term because he knew Glenroy Plains had no grain of its own which it could supply.
There was also some general evidence about Mr Gartner’s commercial practices and about some of dealings with Mr Hayes.
Mr Gartner said that since the late 1980’s or early 1990’s it had been his practice to sell a small percentage of the anticipated yield from some of his crops in advance of the harvest itself. He said that he did this for grain and other crops. He said that the terms of these pre-harvest sales were such that if he was unable to harvest the amount that he had pre-sold then he would have been obliged to procure any shortfall from elsewhere and sell it to the purchaser at the previously agreed price. In other words, he said that it was his practice to sell a small proportion of his anticipated yields on terms which were the same as the disputed term. He said that he did this because it provided certainty of price and he said that he only (to use his own expression for the practice) “locked in” relatively modest percentages of his anticipated yields because his experience had shown him that his harvests would be reduced or destroyed by seasonal conditions in about three years in every ten. He said that as far as grain was concerned, the maximum amount he would ever lock in was some 20% of his anticipated harvest and that he would only ever do that when he was confident of obtaining an adequate yield. He said that over the years he had always managed to harvest enough to meet his pre-commitments.
Mr Hayes said that he would monitor the amount of grain which Glenroy Plains had supplied as each year progressed and that he would ask Mr Gartner how many tonnes had been supplied and that he would make reference to an amount of 2,000 tonnes. With regard to this, Mr Gartner said that Mr Hayes would make general enquires about how much grain Glenroy Plains still had available, but not in the context of an amount of 2,000 tonnes.
Pedra Branca ultimately calculated its damages as $203,148.34 on the basis that this amount represents the difference in the price it paid per tonne for 2,000 tonnes of its grain requirements in 2007 and the agreed price of $210 per tonne. While not admitting liability, Glenroy Plains does not dispute the accuracy of this calculation or the facts on which it is based and it does not assert that Pedra Branca failed to mitigate its loss.
Issues
As can be seen, the issue is whether or not Pedra Branca have proved on the balance of probabilities that the disputed term was in fact a term of the agreement which was accepted by Mr Gartner on behalf of Glenroy Plains during the course of his telephone conversation with Mr Hayes in January 2005.
Determination of the terms of the agreement
From time to time all of the witnesses expressed their respective subjective beliefs about the terms of the agreement. This was not surprising. However, the rights and liabilities of the parties to a contract are to be determined objectively and “It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words or conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also the surrounding circumstances known to the parties and the purpose and object of the transaction.”: Toll (FCGT) P/L v Alphapharm P/L (2004) 219 CLR 165 at [40] Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ approving Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22].
As can be seen from the summary of the evidence there was a considerable amount of evidence about the conduct of the parties both before and after the agreement came into effect and Ms Walker, counsel for Pedra Branca, submitted that regard could be had to the conduct of the parties both before and after the agreement was concluded in order to determine whether or not the disputed term was in fact a term of the agreement.
In submitting that the conduct of the parties before the agreement came into existence could be used as a basis on which to infer that the disputed term formed part of the agreement Ms Walker relied on Bell Group v Westpac Banking Corporation (No 9) (2008) 225 FLR 1 where Owen J reviewed some of the relevant authorities at [2653]-[2663]. I am not entirely certain that the authorities reviewed by his Honour do in fact stand for the proposition that the existence of a particular term of a contract can properly be inferred from the conduct of the parties before the contract is ultimately concluded, but there can be no doubt that their conduct beforehand can be relevant to the determination of their respective credibility and reliability and that it forms part of the circumstances in which the agreement was ultimately reached: See Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337. That said, and although evidence of prior conduct of the parties might give rise to inferences about the terms which they intended to include in the agreement, it cannot give rise to an inference that any particular term was ultimately included in the agreement or not.
The question of whether the conduct of the parties after the time an agreement was formed can be taken into account in determining the terms of an agreement was also considered by Owen J in Bell Group where his Honour said at [2668]-[2672]:
But what of the other exercise to which I have referred, namely, the task of deciding whether or not a contract with a particular term or terms came into existence at all? There is authority supporting the view that post-contractual conduct can be taken into account in such an exercise. In Mears v Safecare Security Ltd [1983] 1 QB 54 at 77, Stephenson LJ said:
I have already expressed my view that this agreement was oral, but even if it was partly in writing, we are concerned with the search for a term that was not written down, and there is nothing in those authorities which prevents the courts from looking at the way the parties acted for the purpose of ascertaining what that term was. Common sense suggests that their subsequent conduct is the best evidence of what they had agreed orally but not reduced to writing, though it is not evidence of what any written terms mean.
A similar question was dealt with by Young J in Peddie v Stein (unreported, SCNSW, BC8701481, 26 March 1987). Having said that evidence of subsequent acts or conversations is not admissible for the purpose of construing a contract, his Honour expressed the view that subsequent communications between the parties may legitimately be referred to and be taken into consideration to determine whether a contract has been made. Young J continued (at 20):
However not only is it legitimate to look at subsequent conduct for the purpose of determining whether a contract is made, it is also legitimate to refer to such evidence to work out what were the terms of the contract which was partly oral and partly written.
His Honour cited the dicta of Stephenson LJ in Mears in support of that proposition. He also referred to Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 where McLelland J collected the authorities on this question. In Film Bars, a case concerning an informal contract, McClelland J said (at 9255):
Where a question arises whether communications between the parties have given rise to a binding contract at a particular time, subsequent communications may be legitimately referred to and taken into consideration … However … the probative value of such communications must be found in the light they throw on the proper interpretation of the earlier communications alleged to constitute the contract.
I have found one authority that appears to take the opposite view. In Mildura Office Equipment & Supplies Pty Ltd v Canon Finance Australia Ltd [2006] VSC 42 at [185]. Dodds- Streeton J said: “Post-contractual conduct and communications are not admissible in order to establish the existence of a contract”. Her Honour did not cite or discuss authority for that proposition. Earlier in the reasons there was discussion of (and adoption of) the principles discussed in FAI Traders Insurance, which relate to construction of contractual terms rather than whether or not a contract has been formed. It was not a necessary part of the reasoning process because her Honour went on to say that in any event the evidence of post-contractual conduct lacked the precision, level of detail and certainty requisite for a contract. And later in the reasons, (at [91] in the course of discussing Vroon BV), her Honour said that “evidence of the parties’ [post-contractual] conduct and communications … does not establishes that they were acting on the basis that a contract existed”.
I think I should adopt the approach taken in Mears, Peddie and Film Bars. It seems to me, therefore, that the law does permit access to extrinsic evidence of the conduct of the parties for the limited purpose of ascertaining whether a contract, with the terms contended for, existed.
(citations omitted)

Owen J’s conclusion is consistent with the approach identified and then utilised by Nicholson DCJ in A.C.N. 098 081 004 Pty Ltd v Carribie Olive Harvesters Pty Ltd [2010] SADC 134.at [43]-[44] where his Honour said:
Ordinarily, the subsequent conduct of a party or parties to a contract is not admissible as an aid to construing a written contract. However, there is a relevant distinction between post-contractual communications and conduct by one party alone which might, at best, go to the issue of credibility and post-contractual communications and conduct of both parties capable of demonstrating a common intention which might go further and provide evidence as to the fact that a contract was entered into orally and as to its terms.
The distinction to be drawn, is well explained by Fisher J in McLaren v Waikato Regional Council (citations omitted):
It seems clear that a distinction must be drawn between establishing the contractual communications which passed between the parties and placing the correct construction upon those communications once they have been ascertained. If the contract is comprehensively recorded in a formal written document, there is no room for doubt over the contractual communications but the position may be different if the contract was wholly or partly oral or if all or some of the relevant documentation has disappeared. Whether something was stated during contractual negotiations is a pure question of fact. As with all questions of fact, there is the potential for an issue of credibility. If credibility is an issue, the subsequent conduct of the parties may be relevant. In that context, it will be helpful to know whether the post contract conduct of the party was consistent or inconsistent with an alleged recollection that a certain term had been communicated between the parties. But as I see it, the use of post contract conduct for that purpose has nothing to do with the construction of the contract. Cases such as Mears v Safecar Security Ltd … and Hill v National Bank of New Zealand Ltd do not involve resorting to evidence of post contract conduct as an aid to construction. They are concerned with the resolution of simple questions of fact. As Stevenson LJ said in Mears … “We are concerned with the search for a term that was not written down, and there is nothing in [the] authorities which prevents the court from looking at the way the parties acted for the purpose of ascertaining what that term was. Common sense suggests that their subsequent conduct is the best evidence of what they had agreed orally, but not reduced to writing, though it is not evidence of what any written terms mean …”
The construction of a contract is a different subject entirely. It requires a purely objective assessment of whatever had been communicated as the express terms of the contract. It is fundamental to the law of contract that what the parties privately thought about the matter then and subsequently is irrelevant. Further, the contract is to be construed as at the date upon which it was made. Short of a valid variation of the original contract, its proper construction would not be changed by subsequent conduct. Since the subjective intentions of the parties – whether before or after the date of the contract – are irrelevant, general principle would exclude the post contract conduct of either or both parties as a legitimate aid to construction.
(citations omitted)
It thus appears reasonably settled that the terms of an agreement or informal contract can be inferred from the conduct in which the parties engage after the agreement has been concluded but that the terms can only be so inferred if the inference clearly arises. However, it also appears settled that the construction of the terms themselves cannot be inferred from the subsequent conduct of the parties.
For these purposes I take an inference which clearly arises to be an inference which is more cogent, convincing and compelling than any other competing inferences.
It thus follows that in determining whether or not the proposal put forward by Pedra Branca at the hotel included the disputed term, and in determining whether the agreement which was subsequently entered into by Mr Hayes and Mr Gartner included the disputed term, it is open to me to consider not only the credibility and reliability of Mr Hayes, the Doman’s and Mr Gartner about what was said at the hotel but also whether or not the conduct of any of them after the agreement was concluded gives rise to a clear inference that the disputed term was in fact proposed at the hotel and accepted by Mr Gartner in the subsequent telephone conversation.
Even though the respective subjective beliefs of Mr Hayes, the Doman’s and Mr Gartner about the existence or otherwise of the disputed term cannot directly determine the oral text of the agreement for the reasons set out in [66]-[67], their subjective beliefs are nonetheless relevant to the consideration of their respective credibility and reliability as is their conduct both before and after the formation of the agreement.
Credibility
I do not think that either Mr Peter Doman or Mr Jason Doman were deliberately trying to deceive me. There was nothing intrinsic to their evidence which suggested that they might have been and there was nothing in their demeanour which caused me any concerns. Although I accept much of Mr Hayes’ evidence, there are same aspects of his account which cause me concern and I will return to these concerns later in these reasons. The reliability of the respective recollections of the Doman’s and Mr Hayes is, of course, an entirely separate matter.
Ms Walker submitted that there were a number of cogent reasons why I should entertain doubts about the evidence of Mr Gartner and she submitted that where there is a conflict between his evidence and that of the Doman’s and Mr Hayes, then I should prefer the evidence of the latter.
Ms Walker submitted that irrespective of whether the disputed term formed part of the agreement or not, it was nonetheless agreed on the pleadings that the price per tonne was to be reviewed after 2000 tonnes of grain had been supplied and she pointed to Mr Gartner’s evidence that there was no particular relevance to this amount. Even assuming I can take the pleadings into account in this way, I do not think that any such inconsistency detracts from Mr Gartner’s credibility to any significant extent. In all the circumstances, he could have simply forgotten that the price was to be reviewed if the amount of grain he supplied in any one year happened to exceed 2,000 tonnes (which it did) and, in any event, a term that the price was to be reviewed after 2,000 tonnes was supplied could have been part of an agreement obliging Glenroy Plains to supply its entire crop irrespective of whether or not the harvest yielded more than 2,000 tonnes of grain.
Ms Walker submitted that Mr Gartner was not prepared to concede that Pedra Branca made monthly payments of the amounts owing. Again I do not think that his reluctance to make any such concession detracts from his credibility as he was being asked to make this concession on the basis of Pedra Branca’s records.
Ms Walker submitted that Mr Gartner’s evidence that he did not calculate what his annual income from grain sold at $210 per tonne would be was contrary to the inherent probabilities of the situation however, if he was receiving regular payments, albeit late, his cash flow would be maintained to some extent and there would be no need for him to make a precise calculation until he commenced preparing his taxation return. In any event his failure to make such a calculation may have been nothing more than a reflection of lax business practices on his part. Accordingly, I do not think that this evidence has any real capacity to undermine his credit.
Ms Walker submitted that there were internal inconsistencies in Mr Gartner’s evidence, that his evidence was a reconstruction, that his answers often lacked detail and that he was intent on arguing his case throughout the course of his evidence.
None of these suggested blemishes on Mr Gartner’s evidence cause me any concerns. In all the circumstances, the fact that his evidence contained some internal inconsistencies and was to some extent the product of reconstruction is hardly surprising. True it is that while under cross-examination he provided additional details about what was said at the meeting and during the subsequent telephone call which was over and above what he had said in chief. But there is nonetheless a broad thread of consistency running through the entirety of his evidence and probing in cross-examination might well have prompted his memory as to details and I do not think that he was falsely embellishing or expanding his account as he went along. True it also is that while under cross-examination he often repeated his fundamental assertion that the disputed term was not a term of the agreement and that his obligation extended no further than whatever tonnage his harvests yielded and that he sometimes sought to argue his case by providing detail over and above that which was required by the question. However, these things seemed to me to be nothing more a reflection his personality and of his belief in the righteousness of his cause and some of the questions were phrased in such a way which would have naturally led him back to his basic position and he did not give me the impression that he was attempting to avoid the point of any of the questions.
In these circumstances, the principal issues cannot be resolved by findings on credibility and they thus fall to be determined by a consideration of the inherent probabilities of the situation, the reliability of the various witnesses and whether their respective conduct gives rise to any clear inference which has the capacity to prove that the disputed term was in fact a term of the agreement or not. Obviously these considerations are interwoven.
The inherent probabilities and the conduct of the parties
As far as the probabilities inherent in the whole situation are concerned, Miss Walker submitted that it is probable that Pedra Branca would have stipulated a base amount during the discussions at the hotel. She submitted that if Pedra Branca were seeking to secure their grain supply for the next three years then it made no sense not to stipulate an annual minimum base amount. In my view this may or may not be so. Even if the disputed term was not part of the agreement and Glenroy Plains obligation was limited to supplying whatever its annual harvests yielded, Pedra Branca would still have enjoyed the advantage of having the exclusive right to be supplied with Glenroy Plains grain at the agreed price which in turn meant that Glenroy Plains was locked in to supplying its grain to Pedra Branca at $210 per tonne and that it was prohibited from supplying its grain to others at a higher price and so, and to this extent, an agreement without a base amount had potential advantages to Pedra Branca in that it had first call on Glenroy Plains’ grain harvest at a known price. Miss Walker’s submission thus does not lead me to think that it is any the more likely that the disputed term was proposed at the hotel.
On the contrary, Mr Gartner’s practices of ordinarily only locking in small percentages of his anticipated harvests and only locking in to a maximum of 20% when he was confident of obtaining an adequate yield suggest that it is unlikely that he would have agreed to the disputed term at a time when he could not be certain about what his harvests of 2005, 2006 and 2007 might yield and in the knowledge, based on his experience of seasonal variations, that to do so might be commercially disadvantageous to him. His practices regarding locking in of anticipated yields also suggests that his evidence at [29]-[30] and [34]-[35] is likely to be reliable.
The inherent probabilities thus do not favour the existence of the disputed term.
Miss Walker then turned her attention to the conduct of the parties and she submitted that their respective conduct both before and after the agreement was ultimately concluded in the telephone conversation gives rise to the clear inference that the disputed term in fact formed part of the agreement.
Firstly she submitted that the evidence justified a finding that each of the annual rolling contracts contained a term obliging Glenroy Plains to supply a base amount of a minimum of 2,000 tonnes of grain during the ensuing year, and that as the disputed term was to the same effect, it could thus be inferred that the disputed term would have found its way into the three year agreement.
As I have mentioned, Mr Peter Doman says that a minimum of 2,000 tonnes was a term of each of the rolling contracts and Mr Jason Doman says that tonnages had been negotiated however, they differ as to whether tonnages were agreed between the parties before or after each harvest. As I have also mentioned, Mr Hayes’ said that the rolling contracts were negotiated after each harvest when Mr Gartner knew how much grain he had available. After Mr Hayes joined Pedra Branca in about 2001 it soon became his responsibility to order in the grain and he eventually dealt with Mr Gartner on a regular basis whereas the Doman’s did not. It is thus more likely that Mr Hayes would have an accurate recollection of when the annual rolling contracts were negotiated and both he and Mr Peter Doman agree that negotiations took place after harvest time. Negotiation of each rolling contract after harvest time also accords with the inherent probabilities of the situation in that it would have been logical for the parties to negotiate the terms for the following year at a time when Mr Gartner knew how much grain he had available. Accordingly, I find that the rolling contracts were negotiated after the relevant harvest had taken place. Even if each of the rolling contracts contained a term obliging Glenroy Plains to supply a base amount, there is a significant difference between the considerations which would be relevant to negotiating the terms of a one year agreement when the amount of grain available is known and negotiating the terms of a three year agreement when the most that can be known is the amount of grain which might be available for the first year of the contract and when the amount of grain which will be available for supply in the second and third years is unknown and unpredictable.
Assuming for the purposes of Ms Walker’s submission that the conduct of the parties before the agreement was entered in to can be taken into account for the purposes of considering whether a clear inference that the disputed term formed part the agreement and assuming that a base amount was a term of each of the rolling contracts, the situation is nonetheless equivocal and no clear inference that the disputed term must have been a term of the agreement can arise. This submission must be rejected.
Next, Ms Walker submitted that the fact that Pedra Branca built a premium into the price per tonne it agreed to pay during each year of the agreement gives rise to an inference that the disputed term was part of the agreement. She submitted that given that Pedra Branca was concerned to ensure security of supply it would not make sense for it to enter into a three year agreement and pay a price with a premium built in unless supply was guaranteed. However, and given the vagaries of the cropping industry, it would again make sense to enter into such an agreement in order to ensure security of supply in the sense of having priority over any grain which the intended supplier might produce.
Again the position is equivocal and this evidence lacks the capacity to give rise to a clear inference that the disputed term existed and again the submission must be rejected.
Next, Ms Walker submitted that the fact that Mr Gartner had supplied grain to Pedra Branca which he had not harvested himself was inconsistent which his assertion that his obligation was limited to supplying whatever grain he was able to harvest himself. She based this submission on some answers Mr Gartner gave under cross examination.
QThere has been other times when you’ve obtained grain from other sources and supplied it to Pedra Branca.
AHow’s that?
QIt’s a question I’m asking you.
AIt would be very rarely, very.
QBut it has happened.
AI’d have to look back and let you know on that but very rarely.
QFrom an entity or a family called Koch.
ANot at all, no.
QOr Poole.
AWho, sorry?
QPoole; Jason Poole or Josh Poole.
AI don’t know, no. Kochs are a transport company.
As can be seen, Mr Gartner did not distinctly admit that he had in fact obtained grain from any other sources and supplied it to Pedra Branca and, even assuming that he did, he was not asked any questions about the circumstance in which he did so and there was no other evidence which has the capacity to demonstrate that he had in fact done so or why, and nor is there any evidence that he ever purchased any grain from anybody else for the specific purpose of on-selling it to Pedra Branca. Even if Mr Gartner had obtained grain from other producers in order to on-sell it to Pedra Branca, there might well be reasons why he did so other than to satisfy a base amount. This evidence thus lacks the capacity to give rise to a clear inference that Mr Gartner was obliged by the rolling contracts or the agreement to supply a base amount.
Ms Walker then pointed to Mr Hayes’ evidence that he monitored the amount of grain Glenroy Plains had available by reference to an amount of 2,000 tonnes and submitted that this gives rise to the inference that the disputed term was part of the agreement because there would have been no reason for Mr Hayes to monitor the grain available by reference to this tonnage if it were not. As set out in [63] Mr Gartner agreed that Mr Hayes monitored the amount of grain by reference to how much grain Glenroy Plains had available for supply and not by reference to any particular tonnage.
Even if I assume for the purposes of Ms Walker’s submission that Mr Hayes did in fact monitor the amount of grain available by reference to a figure of 2,000 tonnes, that does not of itself give rise to a clear inference that the disputed term was part of the agreement because his actions could well be have been nothing more than a reflection of a belief on his part that Mr Gartner’s most recent harvest had yielded at least 2,000 tonnes or a reflection of a mistaken subjective belief on his part that Glenroy plains was obliged by the terms of the rolling contracts and the agreement to supply a base amount 2,000 tonnes. Also, and for reasons which I will give, there is significant potential for the Doman’s and Mr Hayes to be mistaken in this regard and thus Mr Hayes’ evidence on the topic must be approached with caution.
In short, neither alone nor in combination do the various circumstances pointed to by Miss Walker give rise to a clear inference that the disputed term was in fact a term of the three year agreement.
I return to Mr Hayes. As he was the person with whom Mr Gartner ultimately concluded the agreement, his evidence is critical to Pedra Branca’s claim.
Ms Walker pointed to the fact that Mr Hayes no longer has any financial interest in Pedra Branca or any other kind of connection with it and it is implicit in her submissions that these considerations reflect favourably on his credibility. However, these considerations are not determinative of either his credibility or his reliability and they cannot stand in the way of any evidence contrary to his which is either convincing or compelling. In this regard, Ms Walker also submitted that as Mr Hayes was responsible for ordering in the grain and as he was the person who dealt with Mr Gartner on a day to day basis, it is thus more likely that he would have an accurate recollection of the terms of the agreement. However, the same can be said for Mr Gartner. For reasons which I will give, Mr Hayes’ conduct gives rise to a clear inference that his evidence about the existence of the disputed term should not be accepted.

Mr Hayes had a financial interest in Pedra Branca at all relevant times. He was one of the directors of Pedra Branca and it was his responsibility to source Pedra Branca’s grain requirements either from Glenroy Plains or from other suppliers. It was thus his responsibility and in his interests to source grain as economically as possible. When he inspected Glenroy Plains in October 2006 he knew that the price of grain had increased dramatically to about $300 per tonne and he would have known that he faced the possibility of paying about half as much again for grain if he could not obtain any from Glenroy Plains at the agreed price. If the disputed term in fact formed part of the agreement, then the most economical way for Mr Hayes to obtain grain for Pedra Branca would be to enforce that term and, in all the circumstances, if it did form part of the agreement, then, and at the very least, one would have expected Mr Hayes to remind Mr Gartner of his obligation to supply grain at the agreed price irrespective of whether he obtained a yield from his harvest or not and one would also have expected him to do so either at the time he inspected the crop, at the time Glenroy Plains made the last delivery of grain it had itself produced on 1 November 2006, when Mr Gartner offered him his brother’s grain at $290 per tonne or whenever Mr Gartner telephoned about the arrears. At no stage of his evidence does Mr Hayes positively suggest that he reminded Mr Gartner of his obligation under the disputed term on any of these occasions, or at all, and it was his evidence that Pedra Branca went straight into the open market thus incurring significantly increased production costs which in turn exacerbated its cash flow difficulties.
There is one potential qualification to this. Mr Hayes says that he cannot recall whether he mentioned the disputed terms during his inspection of the crop. The significance of the disputed term, if it existed, would have been well known to Mr Hayes at that time and if it had been mentioned during the inspection, then one would have expected him to have remembered that it had been. Accordingly, I am unable to find that Mr Hayes mentioned the disputed term during his inspection of the crop.
As set out at [49], when Mr Gartner offered Mr Hayes his brother’s grain at $290 per tonne Mr Hayes said that he had agreed to take the grain at that price in the hope that it might assist in resolving the difference between the two entities. As set out at [51] Mr Hayes said that he did say “where’s our supply from you” on any occasion when Mr Gartner telephoned him about the arrears and he said that he did not do so because there was no grain to order. Given the financial advantages which would have accrued to Pedra Branca if the disputed term existed and was enforced, I find Mr Hayes’ explanation about why he purchased the grain produced by Mr Gartner’s brother at $290 a tonne to be lacking in cogency. Also given that the fact that Glenroy Plains did not have any grain of its own to supply was irrelevant to the enforcement of the disputed term, if it existed, I find Mr Hayes’ explanation about why he did not ask Mr Gartner “where’s our supply from you”, or why he did not order any grain from Glenroy Plains during 2007 to be equally lacking in cogency. I am thus not satisfied that either of these explanations he gave for his conduct more probably represent the truth than not. It follows that the only inference which arises from Mr Hayes purchasing Mr Gartner’s brother’s grain at a price well in excess of the agreed price and his failure to say “where’s our grain from you”, or to order any grain from Glenroy Plains during 2007, is a clear inference that the disputed term did not in fact form part of the agreement. This is not to say that any some later time Mr Hayes might have honestly but mistakenly come to believe that it did form part of the agreement and it is easy to see how he might have done so.
In making this finding that there is a clear inference arising from the conduct of Mr Hayes that the disputed term was not a term of the agreement, I have not taken into account any failure on his part to mention the disputed term at the time of the last delivery of grain on 1 November or any failure on his part to mention it during the inspection because he was not cross-examined as to why he did not mention it on either of these occasions. Similarly, I have not taken into account any failure on the part of the Doman’s to mention the disputed term or to attempt to enforce it at any time before the meeting in August 2007 because they were not cross-examined on either topic. See Browne v Dunn (1893) 6 R 73, R v Birks (1990) 19 NSWLR 677, MWJ v The Queen (2005) 80 ALJR 329.
Finally, Ms Walker pointed to the evidence that Mr Hayes was required to consult with Mr Peter Doman and on the basis of this evidence she submitted that if Mr Gartner had stipulated in the critical telephone call that he would only guarantee to supply that which he produced and not a minimum of 2,000 tonnes, then Mr Hayes would have been required to consult with Mr Doman before he entered into any agreement with Mr Gartner and she submitted that the fact that Mr Hayes did not consult Mr Doman gives rise to an inference that the terms which Pedra Branca proposed at the hotel must have been accepted by Mr Gartner without qualification. Plainly the submission assumes that Pedra Branca had in fact proposed a minimum of 2,000 tonnes at the hotel and thus assumes the existence of the fact the conduct is said to prove, and again Mr Hayes’ subsequent conduct strongly suggests otherwise.
Reliability and the possibility of mistake
Some six years have passed since the critical meeting at the hotel and the subsequent telephone conversation and some three and a half years have elapsed since the meeting and the conversations of August and September 2007 and there is nothing in writing signed by the parties setting out any of the terms of the agreement. In these circumstances it is not surprising that some of the evidence is somewhat inconsistent and the possibility that the witnesses might have been honestly mistaken about critical aspects of their evidence clearly exists. In this regard, the possibility that the witnesses have honestly but mistakenly reconstructed events in a way which is favourable to themselves or their interests at the time also clearly exists.
Glenroy Plains in fact supplied Pedra Branca with at least 2,000 tonnes of grain during the years 2002-2006. Mr Gartner says that there was some discussion about tonnages during the course of the meeting at the hotel and it seems necessarily implicit in his evidence that his expected annual yield would be of the order of about 2,000 tonnes. As set out, he qualified this by saying that this was always subject to seasonal variations.
There would have been no need for anybody connected with Pedra Branca to try to remember what was said at the hotel or for Mr Hayes to try and remember what was said during the course of the telephone conversation until after Glenroy Plains 2006 harvest had failed. In all the circumstances, it is easy to see how the regular supply of at least 2,000 tonnes of grain per annum over several years, when coupled with Mr Gartner’s statements about his anticipated harvests, could have led Mr Hayes and the Domans to reconstruct what had been said in such a way that by the time of the meeting of August 2007 they had come to the mistaken beliefs that not only had Mr Gartner guaranteed to supply Pedra Branca with at least 2,000 tonnes of grain each year, but also that they had stipulated a requirement to this effect as a term of any agreement.
Conclusion
It must be remembered that Pedra Branca bears the onus and thus even if I were to reject Mr Gartner, that does not necessarily mean that the Doman’s and Mr Hayes are reliable as to the existence of the disputed term.
What I have said and found at [102]-[104] compels the conclusions that the evidence which is said to suggest that the Doman’s and Mr Hayes are reliable and that disputed term was both proposed and accepted is equivocal at best and that the evidence about the conduct of the parties after the event does not give rise to a clear inference that the disputed term was part of the agreement and also compels the conclusion that Mr Hayes’ conduct gives rise to an inference that the disputed term was not in reality a term of the agreement.
Pedra Branca’s claim is dismissed accordingly.
If I am wrong in dismissing the claim there is no dispute that damages are to be assessed in the manner set out at [64] and by the use of this formula I assess damages at $203,148.34 plus GST plus interest.