Global Cement Australia Pty Ltd v Whitsunday Crushers Pty Ltd
[2008] QDC 88
•28 April 2008
DISTRICT COURT OF QUEENSLAND
CITATION:
Global Cement Australia Pty Ltd v Whitsunday Crushers Pty Ltd [2008] QDC 88
PARTIES:
GLOBAL CEMENT AUSTRALIA PTY LTD
Plaintiff
AND
WHITSUNDAY CRUSHERS PTY LTD
Defendant
FILE NO/S:
BD1537/02
DIVISION:
Civil
PROCEEDING:
Claim
ORIGINATING COURT:
District Court, Brisbane
DELIVERED ON:
28 April 2008
DELIVERED AT:
Brisbane
HEARING DATE:
JUDGE:
Nase DCJ
ORDER:
1. Judgment is given to the plaintiff against the defendant in the amount of $91,387.25 together with interest from 1 January 2003 at the rate of 9per cent per annum; and
2. The defendant’s counterclaim is dismissed
3. Defendant pay the plaintiff’s costs of the claim and counterclaim assessed on the standard basis
CATCHWORDS:
CONTRACT – ESSENTIAL TERMS –where contradictory oral evidence of the existence of an exclusive supply contract – assessment of the reliability of evidence
COUNSEL:
Mr W L Cochrane for the plaintiff
Mr C Wilson for the defendant
SOLICITORS:
Elliott and Harvey for the plaintiff
Deacons for the defendant
Introduction
Jerrold Wai Hing Wong[1] is the sole director of a company formed to import Chinese cement into the Australian market. The company (Global Cement Australia Pty Ltd) imported cement manufactured by the Nanjing Jin Aug Cement Company, a subsidiary of Shui On Construction and Materials Ltd. Shui On is a large Chinese corporation involved in the construction industry.
[1]For convenience and not out of disrespect I will usually refer to the main witnesses simply by their surnames
Global commenced selling cement into the Townsville‑Mackay region in April 2000, at a time when QCL was the sole supplier of cement products into Mackay. An important date in the action is 8 May 2000. On that date Wong (on behalf of Global) agreed to sell cement to Whitsunday Crushers Pty Ltd at a discounted price. The three men who attended the meeting on 8 May 2000 were Mr Wong, a Mr Pinni[2], and a Mr Whitelegg. Mr Whitelegg is the managing director of Whitsunday Crushers.
[2]Mr Pinni at the time was employed by Global. He did not give evidence at the trial
What agreements were reached on 8 May 2000 is now in dispute. No document or memorandum was ever signed by the parties setting out the terms of any agreement. Mr Whitelegg did keep notes during the meeting, and he relied on his note as a memorandum of the discussion in giving evidence. The note was not shown to Mr Wong, although he recalled Mr Whitelegg making notes during their discussion.
After the meeting in early May 2000, Whitsunday Crushers commenced drawing cement from Global, and continued to do so until August 2001. The date of the last drawing was 15 August 2001.[3] On 17 August 2001 Whitsunday Crushers signed a supply contract with QCL. Under the supply contract Whitsunday Crushers agreed to purchase cement exclusively from QCL for a period of one year.[4]
[3]T 235
[4]A copy of the supply contract was tendered and became Exhibit
At the close of trading on 15 August 2001 Whitsunday Crushers’ account with Global was in substantial arrears. While the precise state of the account was not quantified in the evidence, Whitelegg conceded Whitsunday Crushers’ account was probably $150,000 to $200,000 in arrears as at 17 August 2001.[5] Wong said he (Global) suspended dealings with Whitsunday Crushers because he was concerned at the level of arrears. Whitelegg claims that Global was unable to supply cement when required, and that Whitsunday Crushers, as a consequence, had no commercial option open to it other than to purchase cement from QCL. Wong denied Global was unable to supply cement, saying it had the capacity to transport cement to Mackay from Townsville or Brisbane if necessary.
[5]T 267
Global commenced proceedings to recover the balance owed to it by Whitsunday Crushers. The parties agreed that the unpaid balance of Whitsunday Crushers’ account is $91,387.25. Whitsunday Crushers admits the debt but asserts a counterclaim for a greater figure ($103,652.07).
Two separate claims are pleaded by Whitsunday Crushers in its counterclaim. Both are ultimately based on alleged breaches of the claimed supply contract between them. The first counterclaim is founded on an alleged term (or representation) that the Chinese cement is equivalent to comparable QCL cement. The claim advanced by Whitsunday Crushers is that, as it was necessary to use more Chinese cement to achieve the specified strength targets for the concrete, it suffered a loss measured by the cost of the additional cement used[6]. Wong admitted a statement to the effect that the Chinese manufactured cement was equivalent to comparable QCL cement but disputed his statement was a term of an exclusive supply contract between them or that he represented anything specific beyond the fact the Chinese cement satisfied the relevant Australian standard.
[6]The loss claimed was quantified as $15,451.98
The second claim is directly based on the alleged exclusive supply contract. Whitelegg says Global failed to supply cement in a timely fashion and that it (Global) had bound itself in the contract to reimburse Whitsunday Crushers for the additional costs of purchasing cement from another supplier. For convenience this claim will be referred to as the second counterclaim.
The issues
Global denies it had an exclusive supply contract with Whitsunday Crushers. The principal issue in the trial therefore is a factual one: did Global contract in the way claimed with Whitsunday Crushers to supply all its cement needs for two years? As no written contract exists this issue turns on an assessment of the evidence of Wong and Whitelegg.
The issue in relation to the first counterclaim is whether any statements by Wong amounted to a term in the alleged supply contract (or a representation) that the Chinese cement had the same (or equivalent) rate of strengthening as the comparable QCL cement.
The issue in relation to the second counterclaim is whether Whitsunday Crushers had an exclusive supply contract with Global, as it alleges and Global denies, and whether Whitsunday Crushers is entitled to claim the additional costs of purchasing cement from QCL under the contract for a period from 16 August 2001 to 31 December 2001 (or is otherwise entitled to damages for breach of the contract by Global).
Proof of the exclusive supply contract and of the terms that Global guaranteed supply of cement product to Whitsunday Crushers, and contracted to reimburse Whitsunday Crushers for any additional costs of purchasing cement from another supplier if it was unable to supply, is dependent on Whitelegg’s evidence of the meeting on 8 May 2000. If Whitelegg’s evidence is truthful and reliable his evidence establishes the supply contract, and the key terms on which the second counterclaim is based. Wong’s evidence contradicts Whitelegg’s evidence. If his evidence is truthful (and reliable) it negates the claim of an exclusive supply contract, and, in the circumstances of this case, the second counterclaim.
The conflict in their evidence extends not merely to the issue of a supply contract but also to the circumstances which led to the end of their commercial relationship. Wong said he suspended sales to Whitsunday Crushers because it was in substantial arrears of payment. Whitelegg said Global was unable to supply Whitsunday Crushers with cement and it was necessary for Whitsunday Crushers to sever its connection with Global and enter into a supply contract with QCL. The answer to the fundamental issues of credit in the trial entails an analysis of Whitelegg’s note, the other contemporaneous documentation, as well as the subsequent conduct of both Global (Wong) and Whitsunday Crushers (Whitelegg). Before discussing these issues, however, it is necessary to complete the basic narrative.
Completion of the narrative
As I have said, Whitsunday Crushers commenced drawing cement from Global after the meeting in May 2000. At that time Whitsunday Crushers had cement plants at Airlie Beach, Proserpine, and Cooktown. Whitsunday Crushers had conducted trials with the Chinese cement in April 2000,[7] before deciding to use it. It continued to draw cement from Global until the end of the year without problems. And, specifically, without any supply issues. Whitsunday Crushers did, late 2000 and early 2001, raise a question about the rate of strength gain.[8] In April 2001 Whitsunday Crushers won a contract to carry out works on a development of a port facility at Dalrymple Bay. Once work commenced on the Dalrymple Bay project, its demand for cement increased substantially.
[7]T 221: the results of the trials were satisfactory
[8]T 227: noted in an internal memorandum dated 7 December 2000, and in letters to Global dated 21 December 2000 (Exhibit 38), and 22 February 2001 (Exhibit 40)
The first written notification to Global of an increased demand was a letter dated 11 May 2001[9]. The information was apparently supplied in response to a request by Global for a program of anticipated usage “over the next few months”. In the letter Whitsunday Crushers says it estimates it will need “800-900 tonnes per month from now until the end of the calendar year.”[10] This letter substantially understated Whitsunday Crushers actual future requirements for cement.
[9]Exhibit 43
[10]The letter also requested documentation of tracking the cement from manufacture to sale. Although the request was repeated a number of times it seems to have been satisfied
Two months later on 12 July 2001[11] Whitsunday Crushers suddenly revised its estimated usage up to 40‑70 tonnes of cement a day - a figure equal to approximately 1,300 tonnes a month.[12] Global was asked to confirm it had GP (general purpose) cement available and the capacity “to meet Whitsunday Crushers’ delivery requirements”. This letter led to an exchange of facsimile letters on 23 July 2001.[13] Whitsunday Crushers challenged Global’s ability to meet its “requirements”, while Global continued to assert its capacity to supply cement to Whitsunday Crushers.
[11]By letter (Exhibit 44)
[12]See letter dated 23 July 2001 (Exhibit 22)
[13]These are collected in Exhibit 45 for convenience
By 10 August 2001 Global had exhausted its store of cement at Mackay. An internal memorandum[14] dated 10 August 2001 records that Global was transporting cement from Townsville to Mackay. Whitsunday Crushers continued to draw cement from Global until 15 August 2001.
[14]Exhibit 46
On 17 August 2001 Whitsunday Crushers wrote to Global.[15] In this letter Whitsunday Crushers asserted Global had no stocks of cement at Mackay, and asked Global to advise “where future deliveries will come from and when they might become available.” Whitsunday Crushers also said it intended to “pass on any cost differences in the product, cartage and extra administrative costs that we have incurred” in purchasing cement from QCL. At that time Whitsunday Crushers knew the next shipment from China was not expected until approximately 12 September 2001,[16] so that, until the arrival of the September shipment, Global could only supply Whitsunday Crushers with cement at Mackay by transporting it from Brisbane or Townsville.
[15]Exhibit 47
[16]See letter dated 23 July 2001 (Exhibit 25)
Whitsunday Crushers’ letter to Global was transmitted at 15.34 hours on 17 August 2001. On the same date Whitsunday Crushers signed an exclusive supply contract with QCL. I infer from this that the letter of 17 August 2001 to Global was not a genuine inquiry about its capacity to supply cement. Wong maintained in evidence, as he did in correspondence, that Global retained the ability to transfer cement from Brisbane or Townsville to Mackay to meet Whitsunday Crushers’ requirements for cement.
Whitsunday Crushers’ assertion it would pass on any cost differences to Global drew an immediate response. Wong wrote back by letter dated 20 August 2001[17] denying the existence of a supply contract. On that issue at least the battle lines were drawn.
[17]Exhibit 48
Wong said in evidence that the reason Global suspended sales to Whitsunday Crushers was because Whitsunday Crushers’ account was in substantial arrears. He went on to say he was concerned because Whitelegg had not signed a director’s guarantee, despite requests; and that he had learned Whitelegg had a criminal conviction for fraud.
One feature about the narrative is the relative absence of documentation. The fact Wong suspended deliveries to Whitsunday Crushers because its account was in arrears, if it is a fact, is not reflected in any contemporaneous document or letter. Nor, if there was an exclusive supply contract, is there a letter from either of them purporting to terminate the contract for the other party’s breach. Whitsunday Crushers’ letter of 17 August 2001 is in terms open ended, although the reality is otherwise, as its act of entering into an exclusive supply contract with QCL was a clear act of repudiation of any supply contract with Global. And there is, moreover, no letter that refers to an exclusive supply contract apart from Wong’s letter of 20 August 2001 which, of course, was a letter that denied the existence of a supply contract between them.[18]
[18]Even Whitsunday Crushers’ letter of 17 August 2001 did not expressly refer to a supply contract.
Demeanour
I could tell little from a comparison of the demeanour of the two men, although, one contrast between their evidence was striking. Wong did not have a precise recollection of the meeting on 8 May 2000, saying at one point that he did not “particularly recall the conversation with him on 8 May 2000”.[19] He said he had several conversations with Whitelegg and he did not really recall what was said at different meetings.[20] He also tended to answer questions by reference to what he “would have” said or not said. For example, he “may have” said his cement is equivalent to QCL cement,[21] but “would not” have said his cement had Main Roads approval,[22] and he “would have” said Global could meet Whitsunday Crushers’ needs.[23] While Whitelegg, by comparison, generally asserted a sharper recollection of the meeting on 8 May 2000 and of the conversations between them. For example, he said that between late July and early August 2001 he told Wong in a number of telephone conversations of the repercussions if Whitsunday Crushers could not supply John Holland at the rates they required in the contract.[24] He said that on virtually every occasion he spoke to Wong he discussed in specific terms the need for continuity of supply of cement.[25] In cross‑examination when it was suggested to him that the letter of 17 August 2001 was the first intimation by Whitsunday Crushers of a right to claim any cost increases from Global, he responded that “it was discussed with Wong on a number of occasions which weren’t documented”.[26]
[19]T 135
[20]T 135
[21]T 81
[22]T 81
[23]T 82
[24]T 234
[25]T 232
[26]T 269
The note
The original note was not produced as it has seemingly been misplaced, instead a photocopy of the note was produced. The note sets out a number of headings, the “agenda” of the meeting between the two men. The note is potentially an important piece of evidence. Although technically no more than an aid to memory, as an aid it naturally enhances the quality of Whitelegg’s evidence. The probability is that one of the two men lied when giving evidence.[27] If Whitelegg lied then the probability is that he also fabricated part of the first item in the note. The item is headed “supply”. The relevant part of the note reads: “… GW guarantee supply and will pay diff between QCL price should he not be able to supply”. Although the first part of the note is generally consistent with Wong’s evidence, the second is not as he denies absolutely any agreement or understanding to pay the difference between Global’s prices and QCL’s prices if unable to supply cement.
[27]It is probable one of them lied because the explanation of mistake on the part of one is improbable.
The note is not in the form of a draft contract, and it does not record any obligations or undertakings by Whitsunday Crushers. At the time, Global was attempting to sell cement into the north Queensland market. The various items set out in the note are presumably all matters Whitsunday Crushers wanted to consider before it decided to use Global Cement. The form of the note is neutral as to whether these words were inserted before or during the meeting.
The first counterclaim
Whitelegg in his evidence did not say that Wong expressly stated to him that the Chinese cement had the same chemical composition as the comparable QCL cement. The term alleged by Whitelegg was that the Chinese cement was equivalent to the comparable QCL cement. Wong effectively conceded he “would have” said the Chinese cement is equivalent to the comparable QCL cement during their discussion.[28] Whitelegg said he interpreted the statement as a warranty or representation the Chinese cement had a similar rate of strength gain as the comparable QCL cement.
[28]T 81
I am satisfied the first counterclaim has little to recommend it. While both cements met the appropriate Australian standard for GP cement, some samples of the Chinese cement contained a lower percentage of a constituent (C3S) responsible for early strength gain than did samples of the comparable QCL cement tested. As a result, Whitsunday Crushers claims it was necessary to use a greater quantity of the Chinese cement to obtain the specified strength gain targets.
The problem in treating Wong’s statement as a representation about the early strength gain properties of the Chinese cement is that both would know that GP cement manufactured by different producers (or even the same producer at different times) may contain different percentages of the constituent (C3S) responsible for early strength gain, and therefore may demonstrate different rates of strength gain.[29] In these circumstances, I do not believe that the general representation in this case is a specific representation about the comparable rate of strength gain of the Chinese cement when compared to QCL cement.
[29]Mr Beal, one of the experts who gave evidence, said in response to the question “In the concrete industry, notwithstanding the best efforts of Adelaide Steamships and Brighton, there are differences between cement aren’t there? ---- “Oh well, there’s – it’s regularly concrete plants get suddenly a run down in – as low strengths, so they whack the cement content up because the cement they’re getting supplied by our cement manufacturers is varying in quality”; T 118
The Second Counterclaim
Mr Cochrane, in his written submissions, attempted to identity a number of improbabilities in Whitelegg’s account of the alleged exclusive supply contract. He suggested it was improbable Wong would bind Global to supply unlimited quantities of cement (with a penalty clause for any failure to supply) without a written contract. He also pointed out that Global at relevant times only imported two types of cement into Australia: GP (general purpose) and fly ash blend. In those circumstances he suggested it is improbable that Global contracted to supply all of Whitsunday Crushers’ cement requirements. Both of these points are I think valid considerations.
There is little doubt that Global had the capacity to supply all of Whitsunday Crushers’ requirements for GP cement. Any problem in the availability of the Chinese cement was a logistical one arising from the delay between manufacture in China and arrival in Australia. Any cement had to be ordered, manufactured (a process which may take 16 days), then loaded and shipped to Australia (which may take a further 10 days).[30] Cement is not a product which can be stockpiled for long periods of time. These considerations are I think important when considering the arguments about the supply contract.
[30]See Exhibit 25 letter from Global to Whitsunday Crushers
One obstacle to accepting the existence of an exclusive supply contract is the conduct of both Global and Whitsunday Crushers. On the evidence placed before me there were quite limited written communications between the two about Whitsunday Crushers’ projected future usage,[31] a fact which is hardly consistent with the existence of a supply contract between them given the logistical issues in importing cement for Global. And especially if, as Whitelegg claims, he discussed the importance of continuity of supply on virtually every occasion he spoke to Wong[32] and told Wong on a number of occasions that Whitsunday Crushers looked to Global for reimbursement for any cost increases in purchasing cement from QCL.[33]
[31]The correspondence appears to be a letter dated 9 May 2001 from Global to Whitsunday Crushers, a letter dated 11 May 2001 from Whitsunday Crushers to Global, and a letter dated 12 July 2001 from Whitsunday Crushers to Global
[32]T 232
[33]T 269
The conduct of the parties at the end of the contract also seems to me to be less consistent with the existence of a supply contract between them. Neither party referred expressly to the existence of a supply contract in correspondence, or purported to terminate it. Circumstances which, given the magnitude of their business dealings and the possibility of litigation, tend to suggest they were not bound together by an exclusive supply contract.
And finally, Whitsunday Crushers continued to purchase bagged cement from QCL throughout the period. The purchases were either a breach of an exclusive supply contract or inconsistent with the existence of an exclusive supply contract between them.
Doing my best to weigh up the evidence I am not satisfied, on the balance of probabilities, that the parties entered into an exclusive supply contract on 8 May 2000. The principal reasons for my conclusion are:
A. The improbability that Global would contract to supply all of Whitsunday Crushers’ cement requirements when it only imported general purpose and fly ash blend cements into Australia;
B. The absence of any written contract or other documents setting out the terms of the exclusive supply contract; or, put in another way, the improbability that Global would commit itself to an exclusive supply contract that was not reduced to written form;
C. The very limited communications (written) between Global and Whitsunday Crushers about Whitsunday Crushers’ anticipated levels of demand for cement, a circumstance which is more consistent with Wong’s evidence than it is with Whitelegg’s evidence[34]; and
D. The conduct of the parties at the end of their commercial relationship was more consistent with Wong’s evidence.
[34]Another possible explanation arises from the circumstance that Whitsunday Crushers was asked by John Holland to submit an amended quote using QCL fly ash blend cement ( the amended quote was dated 19 June 2001), but at that time Whitelegg said the issue was not taken any further. From this it may be inferred Whitsunday Crushers was contemplating the possibility of using QCL cement around June 2001
A theoretical point
If in fact the parties had entered into an exclusive supply contract, Whitsunday Crushers undoubtedly repudiated it by entering into an exclusive supply contract with QCL on 17 August 2001. From that point onwards Whitsunday Crushers would not be entitled to claim under the reimbursement clause for failures by Global to supply cement.
By 10 August 2001 Global had exhausted its stock of cement at Mackay. A further shipment of cement was scheduled to reach Mackay at approximately 12 September 01. At that time, presumably, the cement on hand at Mackay would be sufficient to meet Whitsunday Crushers’ demand. Wong said Global had the ability to transport cement stored at Townsville and Brisbane to Mackay. Whether this was a financially viable option is difficult to know. Wong’s evidence is that he suspended sales to Whitsunday Crushers because it was in substantial arrears of payment. If sales were suspended by Wong, as he said, then it had the consequence that his claim to be able to supply Whitsunday Crushers from Townsville and Brisbane was never tested.
In this case Global did not plead (in the alternative) that Whitsunday Crushers had repudiated the contract and therefore was not entitled to claim under the reimbursement clause. In those circumstances it is unnecessary to consider this point.
Orders
1. Judgment is given to the plaintiff against the defendant in the amount of $91,387.25 together with interest from 1 January 2003 at the rate of 9per cent per annum; and
2. The defendant’s counterclaim is dismissed.
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