Hannaford (trading as Torrens Valley Orchards) v Australian Farmlink Pty Ltd

[2008] FCA 1591

FEDERAL COURT OF AUSTRALIA

Hannaford (trading as Torrens Valley Orchards) v Australian Farmlink Pty Ltd ACN 087 011 541 [2008] FCA 1591

CONTRACT – international sale of perishable goods – whether exporter was an agent for sale for a grower or a buyer for resale from the grower – criteria for distinguishing the two relationships.

CONTRACT – grower and exporter – ongoing business relationship – oral contract – terms – exporter “passing on” price reductions for alleged defects in quality – whether contractually justified in so doing.

SALE OF GOODS – whether sale contracts were subject to the Sale of Goods Act 1895 (SA) or the Sale of Goods (Vienna Convention) Act 1986 (SA) – goods sold into Singapore and Hong Kong – Singapore a party to the Convention, but not Hong Kong.

SALE OF GOODS – implied conditions as to quality and fitness – sale for resale to overseas buyer – defects alleged by overseas buyer – liability of original seller to buyer for resale – onus of proof. 

PLEADING – leave to amend defence sought at conclusion of final oral addresses after 16 day hearing – a new implied contractual term proposed based on prior dealings – leave refused.

Sale of Goods Act 1895 (SA) ss 14, 18, 52
Sale of Goods (Vienna Convention) Act 1986 (SA)
United Nations Convention on Contracts for the International Sale of Goods, Arts 1, 9, 35, 39, 44, 50
Trade Practices Act 1974 (Cth) ss 51A, 52, 75B, 82, 84(2), 87
Fair Trading Act 1987 (SA) ss 54, 56
Uniform Commercial Code, §1-303
Unidroit Principles of International Commercial Contracts 2004, Arts 1.9, 5.1.2
Sale of Goods Act (1979) (UK) s 48C(1)(a)
Evidence Act 1995 (Cth) ss 69, 87
Misrepresentation Act 1971 (SA) s 7

Telecommunications Products Case, Cour de Cassation (France), 2 April 2008 cited
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 cited
Hawkins v Clayton (1988) 164 CLR 539 cited
Fraser-Ramsay (New Zealand) Ltd v De Renzy (1912) 32 NZLR 553 cited
Mercantile International Group plc v Chuan Soon Huat Industrial Group Ltd [2002] EWCA Civ 288 considered
South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 cited
International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644 considered
Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552 cited

Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1968] AC 1130 cited
Nichols v Arthur Murray Inc 56 Cal Rptr 728 (1967) cited
Colonial Mutual Life Assurance Society Ltd v The Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41 cited
Bailey & Co Ltd v Balholm Securities Ltd [1973] 2 Lloyd’s Rep 404 cited
Jackson Securities Ltd v Cheesman (1986) 4 NSWLR 484 cited
Weiner v Harris [1910] 1 KB 285 cited
Gannow Engineering Co Ltd v Richardson [1930] NZLR 361 cited
Jackson v Royal Bank of Scotland [2000] EWCA Civ 203 cited
Ex parte White;  In re Nevill (1870) LR 6 Ch App 397 considered
Ex parte Bright;  In re Smith (1879) 10 Ch D 566 cited
Bailey & Co Ltd v Balholm Securities Ltd cited
Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676 distinguished
Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236 cited
Carlos Federspiel & Co SA v Charles Twigg & Co Ltd [1957] 1 Lloyd’s Rep 240 cited
WK Witt (WA) Pty Ltd v Metters Ltd [1967] WAR 15 considered
Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569 cited
Carminco Gold & Resources Ltd v Findlay & Co Stockbrokers (Underwriters) Pty Ltd (2007) 243 ALR 472 cited
Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1 cited
The “Tiiskeri” [1983] 2 Lloyd’s Rep 658 cited
Kemp Ltd v Tolland (trading as James Tolland & Co) [1956] 2 Lloyd’s Rep 681 considered
BICC plc v Burndy Corporation [1985] 1 Ch 232 cited
Flowers Case, Saarbrücken Provincial Court of Appeal, 3 June 1998, CISG-online 354, cited
Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 cited
Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 cited
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 cited
Elders Trustee and Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193 cited
RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164 cited
Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 cited
CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd (2005) ATPR 40-042 cited
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 cited
Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 cited
Watson v Foxman (1995) 49 NSWLR 315 cited

Cheshire and Fifoot, Law of Contract (9^th Aust ed, 2008)
Schlechtriem and Schwenzer (eds), Commentary on the UN Convention on International Sale of Goods at 411 ff and 460 ff (2^nd English ed, 2005)
Farnsworth on Contracts (3^rd ed, 2004)
Furmston (ed), The Law of Contract (2^nd ed, 2003)
Bowstead & Reynolds on Agency (18^th ed, 2006)
Atiyah, The Sale of Goods (10^th ed, 2001)
Dal Pont, Law of Agency (2^nd ed, 2008)
Benjamin’s Sale of Goods (7^th ed, 2006)
Restatement of Agency, Third
3 Am Jur 2d, “Agency”
Restatement of Agency, Second
Fisher, Agency Law (2000)
Sutton, Sales and Consumer Law (4^th ed, 1995)

Schroeter UG, “The Status of Hong Kong and Macao under the United Nations Convention on Contracts for the International Sale of Goods” (2004) 16 Pace International Law Review 307

ANTHONY GOULD HANNAFORD TRADING AS TORRENS VALLEY ORCHARDS v AUSTRALIAN FARMLINK PTY LTD (ACN 087 011 541), CHOON KIAT KOH, BRUCE ARTHUR PLUMMER and HEATHER CHURCHILL; AUSTRALIAN FARMLINK PTY LTD (ACN 087 011 541), CHOON KIAT KOH, BRUCE ARTHUR PLUMMER and HEATHER CHURCHILL v ANTHONY GOULD HANNAFORD TRADING AS TORRENS VALLEY ORCHARDS

No SAD 251 of 2005

FINN J
24 OCTOBER 2008
ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 251 of 2005

BETWEEN: ANTHONY GOULD HANNAFORD TRADING AS TORRENS VALLEY ORCHARDS
Applicant/Cross-Respondent

AND:

AUSTRALIAN FARMLINK PTY LTD (ACN 087 011 541)
First Respondent/First Cross-Claimant

CHOON KIAT KOH
Second Respondent/Second Cross-Claimant

BRUCE ARTHUR PLUMMER
Third Respondent/Third Cross-Claimant

HEATHER CHURCHILL
Fourth Respondent/Fourth Cross-Claimant

JUDGE:	FINN J
DATE OF ORDER:	24 OCTOBER 2008
WHERE MADE:	ADELAIDE

THE COURT ORDERS THAT:

1.The applicant file and serve on or before Friday, 21 November 2008:

(a)       draft minutes of order to give effect to these reasons;  and

(b)proposed orders in relation to the claims for loss of use of monies and for interest with expert calculations upon which the former is based. 

2.The matter be adjourned for the making of orders including as to costs until Thursday, 18 December 2008 at 9.00 am. 

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

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 251 of 2005

BETWEEN:

ANTHONY GOULD HANNAFORD TRADING AS TORRENS VALLEY ORCHARDS
Applicant/Cross-Respondent

AND:

AUSTRALIAN FARMLINK PTY LTD (ACN 087 011 541)
First Respondent/First Cross-Claimant

CHOON KIAT KOH
Second Respondent/Second Cross-Claimant

BRUCE ARTHUR PLUMMER
Third Respondent/Third Cross-Claimant

HEATHER CHURCHILL
Fourth Respondent/Fourth Cross-Claimant

JUDGE:	FINN J
DATE:	24 OCTOBER 2008
PLACE:	ADELAIDE

TABLE OF CONTENTS

THE PRINCIPAL ACTORS........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[9]
A note about cherries........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[16]
The “cool chain”........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[19]
THE PARTIES’ CASES........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[25]
(i)    The pleaded case........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[25]
(ii)   The course of dealing sidewind........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[35]
SALE AND RESALE OR AGENCY:  THE APPLICABLE PRINCIPLES........ ........ .	[46]
MATTERS OF CREDIT........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[57]
BACKGROUND PRIOR TO THE 2003/2004 SEASON........ ........ ........ ........ ........ ........ .	[60]
THE CONSIGNMENT DOCUMENTATION........ ........ ........ ........ ........ ........ ........ ........ .	[67]
THE 2003/2004 SEASON........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....	[75]
1.     General matters........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[75]
2.     Price........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[75]
3.     Farmlink’s forms........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[86]
4.     The weather........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[94]
THE TWENTY-ONE CONSIGNMENTS........ ........ ........ ........ ........ ........ ........ ........ ........	[96]
Order 4017:  sea freight to Hong Kong........ ........ ........ ........ ........ ........ ........ ........ .......	[108]
The other consignments (cont)........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[120]
THE SEASON’S SETTLEMENT........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ......	[159]
Miscellaneous Evidence........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[172]
CONCLUSION:  SALE OR AGENCY........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[176]
The terms of the contract........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[187]
Purchase discounts........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[193]
ISSUES OF QUALITY AND QUALITY CONTROL........ ........ ........ ........ ........ ........ .....	[208]
Singapore........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[210]
Hong Kong........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........	[213]
Hong Kong:  Factual setting and evidence........ ........ ........ ........ ........ ........ ........ ........ ....	[216]
The alleged admission........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[223]
The evidence (cont)........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[226]
Hong Kong:  Conclusion on quality issues........ ........ ........ ........ ........ ........ ........ ........ ....	[237]
CONCLUSION ON THE CONTRACT CLAIM........ ........ ........ ........ ........ ........ ........ .....	[245]
THE TRADE PRACTICES ACT CLAIMS........ ........ ........ ........ ........ ........ ........ ........ .....	[247]
1.     The claim against Ms Churchill........ ........ ........ ........ ........ ........ ........ ........ ........ .....	[249]
(i)       The negotiation representations........ ........ ........ ........ ........ ........ ........ ........ ........	[257]
(ii)      The market representations........ ........ ........ ........ ........ ........ ........ ........ ........ .......	[260]
(iii)     The “silence” claim........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...	[265]
2.     The claims against Mr Plummer and Mr Koh ........ ........ ........ ........ ........ ........ .....	[267]
CONCLUSION ON THE TP ACT CLAIMS........ ........ ........ ........ ........ ........ ........ ........ ...	[268]
THE APPLICANT’S AGENCY CLAIM........ ........ ........ ........ ........ ........ ........ ........ ........ ..	[269]
THE CROSS-CLAIM........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[271]
CONCLUSION AND ORDERS........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .	[276]

REASONS FOR JUDGMENT

1. Anthony Hannaford, who trades under the name Torrens Valley Orchards, is a cherry grower in the Adelaide Hills.  His produce is sold into both the domestic and overseas markets.  In the 2003/2004 season, Australian Farmlink Pty Ltd, an exporter of South Australian produce, sold TVO cherries to a business in Hong Kong (eleven shipments) and to a company in Singapore (ten shipments).  The return TVO received from Farmlink on the sale of its cherries was, in aggregate, about one third of what Mr Hannaford claims were the agreed sale prices.  The primary reasons allegedly assigned for the greatly diminished returns were price reductions because of quality defects apparent in most of the consignments of the cherries on arrival in Singapore and Hong Kong.  These reductions were called “purchase discounts” in Farmlink’s documentation and “credits” in TVO’s.

2. Neither the Singaporean buyer, Freshmart Singapore Pte Ltd, nor the Hong Kong business, Wing Cheong Laan (whose principal was named Mak), is a party to this proceeding.  The second and third respondents, Choon Kiat Koh and Bruce Plummer, are directors of Farmlink.  The fourth respondent, Heather Churchill, was at all relevant times Farmlink’s export manager.

3. The fundamental issues arising in this proceeding relate to the nature and the terms of the relationship between TVO and Farmlink in the sale of TVO’s cherries:  was it that of seller and purchaser, or was it one of principal and agent?  And whichever was the case, what were the terms of the sale or of the agency?  Surprisingly perhaps, the parties’ agreement, such as it was, was an oral one.

4. It is fair to say that the respondents’ defence drifted far from that upon which the case was originally pleaded and conducted.  After the close of oral submissions I was asked to entertain a further amendment to the defence to accommodate issues that had been brought into focus in final submissions.  As I will later indicate, I refuse to allow the amendment sought. 

5. The oral character of the contract(s) apart, two further factors have complicated the resolution of this matter.  The first is the real uncertainty as to the legal context in which the question of characterisation of the parties’ relationship is to be addressed.  If the matter is properly to be regarded as one of sale and resale, the vendor-purchaser relationship between TVO and Farmlink would be subject to the Sale of Goods Act 1895 (SA) and the resale relationship between Farmlink and Freshmart, but not Mak, probably to the Sale of Goods (Vienna Convention) Act 1986 (SA). This latter matter, though, has not been addressed by the parties and has not been the subject of evidence to the extent that it might raise questions as to the law of Singapore and Hong Kong respectively: see United Nations Convention on Contracts for the International Sale of Goods, Art 1 (“CISG”).  Singapore has ratified the CISG and it is in force in that country.  Though the CISG was in force in China, but not in Hong Kong, at the time of the “hand over” to China, China has apparently not taken the necessary steps to have the CISG apply to Hong Kong.  The Cour de Cassation in France has, in consequence, recently concluded that the CISG was not applicable to Hong Kong:  see Telecommunications Products Case, Cour de Cassation, 2 April 2008;  and see generally Schroeter UG, “The Status of Hong Kong and Macao under the United Nations Convention on Contracts for the International Sale of Goods” (2004) 16 Pace International Law Review 307.  If, on the other hand, the relationship of TVO and Farmlink is that of principal and agent, TVO’s relationship with Freshmart, but not with Mak, was subject probably to the provisions of the Sale of Goods (Vienna Convention) Act. I mention this for the following reason. The CISG, but not the domestic Sale of Goods Act, has a developed regime for a buyer (i) to notify a seller of lack of conformity with the quality required by the contract: see CISG Arts 35, 39 and 44 and see Schlechtriem and Schwenzer (eds), Commentary on the UN Convention on International Sale of Goods at 411 ff and 460 ff (2^nd English ed, 2005);  and (ii) to effect a price reduction for non-conformity:  CISG Art 50 and Schlechtriem and Schwenger at 596 ff.  I note this because both Farmlink and Mak effected price reductions.  The evidence on whether they were negotiated or not is controversial. 

6. The second complicating factor relates to those price reductions.  It is clear from the evidence that, at presently relevant times, quality problems of varying severity were prevalent in both the domestic and overseas sales of cherries generally and that, in respect of overseas sales, exporters routinely passed on price reductions to Australian suppliers in response to this phenomenon.  The evidence both of TVO’s dealings with other exporters, and of its dealings with Farmlink since the 2000/2001 cherry season, illustrate this practice.  The significance, if any, of it in the characterisation of the parties’ relationship and in the terms of it has been vigorously debated before me.

7. I have in the event concluded that Farmlink was not TVO’s agent. It was a purchaser for resale. The individual purchases in respect of each consignment to Singapore and Hong Kong were for agreed prices. Because quality defects were a recurrent concern and because Freshmart and Mak effected price reductions (whether or not, at least in Freshmart’s case, in reliance upon Art 50 of the CISG), the individual sales by TVO took place in a context in which reductions in the “purchase price” payable by Freshmart and Mak were to be anticipated in some degree for quality defects. I am not satisfied, though, that in passing on price reductions Farmlink had any contractual right so to do. Formally it may have had rights against TVO under the Sale of Goods Act (eg s 14 and s 52) for which it may have been entitled to claim damages for breach of warranty in respect of particular individual contracts or to set off such a breach in diminution or extinction of the price.

8. Mr Hannaford’s routine acceptance of reductions (at least those said to be made for quality reasons) in the purchase price owing to him was, in my view, a reasonable and sensible business response to a recurrent phenomenon in an ongoing business relationship in a market for perishables.  As I observed in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 at [230]:

   … notwithstanding their contract, parties in an ongoing business relationship … commonly “regulate their relationships in accordance with what they consider is fair and reasonable or commercially necessary at particular points in time rather than by reference to a priori rights and duties arising under a contract”:  Integrated Computer Services Pty Ltd [v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11, 110] at 11,117.

   Such “mutual accommodation” may, or may not, over time evidence a contract variation.  In the present case as pleaded it did not.  Mr Hannaford was not obliged to accept whatever price reduction Farmlink had accepted from, or perhaps even agreed with, Freshmart and Mak.  He retained his right to renegotiate his contract with Farmlink and was entitled to insist that price reductions ascribed to quality defects were reasonable and legitimate, ie were in fact made for reasons of quality and were ones for which he bore the responsibility. 

   THE PRINCIPAL ACTORS

1. (i)  Anthony Hannaford.  Mr Hannaford is, apparently, the biggest cherry grower in South Australia.  He commenced his own business in 1985 and registered the business name Torrens Valley Orchards several years later.  During the 2003/2004 cherry season he owned – and he still owns – three orchards in the Adelaide Hills.  After an early dealing with Mr Plummer in the late 1980s, he recommenced dealings with Mr Plummer and Ms Churchill in the mid-nineties about which time, or perhaps a little later, he commenced supplying them with cherries.

2. (ii)  Heather Churchill.  Ms Churchill has been involved in the export industry since the mid to late 1980s.  She moved to South Australia in 1993 and took up a position as export coordinator with an apple exporter, South Australian Horticultural Export Co.  While working in that position she met Mr Plummer who, in 1999, offered her a position with Australian Farmlink Pty Ltd, a new business which he was involved in starting up.  As export manager, her responsibilities were to find market sales for produce, to arrange for its export and delivery and to discharge all the associated accounting and administrative functions.  She was responsible to the directors of Farmlink.  The overseas markets with which she had dealings included Singapore, Malaysia, Thailand, Taiwan, Hong Kong, the UK and some Pacific islands.  Her evidence was that although Farmlink dealt with a variety of products for export, during the cherry season she concentrated 100 per cent on cherries.  Ms Churchill remained the export manager of Farmlink until 2006. 

3. (iii)  Australian Farmlink Pty Ltd and its directors.  The company’s business was the supply of export services both to Mr Plummer’s organisation and to other local growers of fruit and vegetables.  Its two directors were Mr Plummer and Mr Choon Kiat (Peter) Koh. 

4. Mr Plummer was also a director of Plummer’s Border Valley Orchards Pty Ltd, a grower, packer and marketer of apples, some cherries and some stone fruit.  PBVO was one of Farmlink’s suppliers.  Many of the export shipments from TVO were initially delivered to the PBVO packing shed.  Ms Churchill’s office was in the PBVO administrative building.  It was her evidence that it was normally Mr Plummer’s brother who dealt with the cherry side of PBVO’s business.

5. Mr Koh, the other of Farmlink’s two directors, is also a co-director and shareholder of Freshmart.  Ms Churchill variously described him as “controller”, “manager” and “principal” of Freshmart.  Freshmart was one of Farmlink’s buyers, and is based in Singapore.  Mr Koh personally dealt with Ms Churchill on its behalf in relation to its purchase of cherries.  It is Ms Churchill’s evidence that, in his capacity as a director of Farmlink, Mr Koh never supplied instructions to her as an employee of Farmlink.

6. (iv)  Mak.  Mr Pin Jam Mak, known as Mak, was another of Farmlink’s buyers who traded under the business name Wing Cheong Laan and was based in Hong Kong.  Ms Churchill’s evidence was that she had known him for ten years, and that he had a track record with her that was impeccable.  Specifically, she indicated that she had been dealing with Mak at least since 1999 and probably since 1995.

7. There was contrary evidence as to Mak’s character given by a TVO witness, Jonathan Freeman, who was the sole director of a company conducting an aquaculture and agriculture export business and who said he had a long standing involvement in the export of food products (including cherries) to the Chinese market.  Such question as there is about Mak’s character, I need not resolve.  This said, his actual conduct and/or his likely conduct in the circumstances bear directly both on some of my findings and on issues of proof. 

   A note about cherries

8. The South Australian cherry season is of short duration.  Picking normally commences in early December and usually runs for about five weeks.  Cherries need to be picked quickly once they mature.  Once picked, they immediately start to die, hence the industry emphasis on trying to preserve their quality and life for as long as possible through a process of refrigeration called the “cool chain” (see below) which aims to keep cherries at a constant temperature (between 0° and 1°C) from when they reach the packing shed at an orchard until they are delivered to market.  Any break in the cool chain can have a significant adverse affect on the quality of the cherries.  Properly handled and stored, the commercial life of a picked cherry can be extended up to eight weeks.

9. Like all perishables, the quality of cherries is affected by a variety of factors.  Extended periods of rainfall can cause cherries to crack.  Rain equally causes them to swell and if this occurs just prior to picking they become more susceptible to bruising during the picking and packing process.  A range of other environmental factors can affect quality:  birds, winds, temperatures, soils, fungi, etc.  Equally, cherries require careful handling.  As Mr Hannaford put it:  “they are extremely delicate … to handling conditions … They have to be … picked carefully, handled carefully, transported carefully all the way through the process.”

10. There are different varieties of cherries having different characteristics, for example, the times at which they mature.  And they can differ in size.  The evidence in this matter is that, at the relevant times, the markets generally preferred big, firm, sweet cherries with green stalks.

    The “cool chain”

11. The following is an amalgam of the evidence of several of the witnesses and Mr Hannaford’s description of his own practices.  As noted above, the purpose of the cool chain is to reduce and maintain the temperature of cherries to as close to zero as possible until they are consumed.  This prolongs the life of the fruit by retarding the natural senescing process.  Any significant break in the cool chain will have some effect on the life and/or quality of the cherry. 

12. The “chain” begins soon after the cherries are picked. They are transported unrefrigerated to the packing shed where they are quickly placed into a ‘hydro-cooler’ – a machine which pumps cooled water through the bins of cherries for up to 10 minutes. This process removes much of the initial field heat. From there, the cherries are moved either temporarily into a receiving cool room, or directly into the packing chain. In the packing chain, the cherries are cleaned, “singulated” (a process in which clumps of cherries are broken up), sanitised, protected by fungicide, sorted and packed. Cooled water is used during most steps of this process, and the cherries are put through a hydro-cooler for a second time. The packing shed itself is both insulated and air-conditioned. The cherries are subsequently returned to a different cool room for storage before delivery.

13. In the export context, the cool chain differs depending on whether the cherries are being sea-freighted or air-freighted to their destination.

14. Where the cherries are air-freighted, they are loaded into refrigerated trucks for transport to the airport. The truck refrigeration units operate on engine power while in motion, but otherwise on mains power – they are re-connected to mains power on arrival. At the airport, the cherries are unloaded into cool rooms for temporary storage.  These are removed from the cool rooms about 45 minutes prior to departure and left un-refrigerated on the tarmac. Dr Brown, an expert witness called by Farmlink, noted that it was the bane of trying to transport perishables by air to get air companies to ensure that containers are kept in cool rooms, particularly during brief transit stops. The evidence was that the cherries are not refrigerated whilst in the air, although air pressure and temperature is controlled.

15. Where the cherries are to be sea-freighted, they are loaded into refrigerated trucks for transport to PBVO. At PBVO, the pallets are again cooled using an enforced blower system, and then loaded into sea shipping containers. The containers are cooled prior to loading, although to prevent condensation are generally off power during the actual loading. The refrigeration units on the containers also are not capable of being powered by the trucks during transport, although power is re-established immediately upon arrival at the port. Dr Brown gave evidence that a short disconnection from a cooling system, such as would occur transporting cherries from the Adelaide Hills to Port Adelaide, was not normally significant, appropriate insulation and the large thermal mass involved preventing any significant increase in temperature.

16. The evidence on how the cool chain is maintained subsequent to delivery to the overseas buyer is dependent on the processes of the buyer in question. Nonetheless, it was not contested that its maintenance after delivery was significant to the ultimate quality of the cherries when sold.

    THE PARTIES’ CASES

    (i)        The pleaded case

17. Put in short form the applicant’s primary case is that in or about early December 2003 Farmlink orally agreed with TVO to sell cherries grown by TVO into the Hong Kong and Singapore markets at agreed prices for each of four different cherry sizes and, further, that a premium of at least one dollar above those prices was payable for cherries packed into punnets.  That agreement, when enlivened by Farmlink’s individual packing orders to TVO, constituted Farmlink a purchaser of TVO’s cherries at the agreed price.  Eleven such orders were filled for shipment to Hong Kong;  and ten for Singapore.  There was a large shortfall in the amounts Farmlink actually remitted to TVO relative to the agreed prices for these shipments.  TVO’s primary claim is for the amount of the shortfall, plus damages for loss of the use of the money and interest.

18. The contract’s term as to price is also pleaded in alternative ways (ie approximately the agreed price or at reasonable prices) which it is unnecessary to set out here in detail. 

19. Alternatively, TVO has contended that Farmlink was a del credere agent for the purposes of the marketing and sale of cherries in Hong Kong and Singapore, with Farmlink warranting that TVO would receive the agreed prices.  Indemnification is sought in respect of this warranty which is alleged to be an implied term of the agency.

20. Distinctly, TVO alleges that Farmlink, if an agent, breached its contractual duties as agent.  The Further Amended Statement of Claim instances (i) non-disclosure of material information relating to the operation of the agency and in particular the state of the Hong Kong and Singapore markets at the time of its orders for cherries from TVO;  (ii) failure to exercise reasonable care and skill in performing the agency particularly in relating to securing the agreed prices or approximately those prices;  and (iii) failing to provide material advice to TVO or misleading TVO in a number of specified matters relating to the sales into the Hong Kong and Singapore markets.

21. The alleged failures to advise and instances of misleading are in turn pleaded to misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) and of s 56 of the Fair Trading Act 1987 (SA).

22. In the Amended Defence and Cross-Claim which was operative during the conduct of the hearing, Farmlink denied there was an agreement for the sale of cherries to it such as propounded by TVO.  Nonetheless, it accepts that an oral agreement was entered into with TVO in or about December 2003 for it to sell cherries grown by TVO into the Asian market on terms that:

    (i)The cherries to comply with the specifications set out in Farmlink’s Pre-Shipment Inspection Form or alternatively there was an implied term of the agreement that the cherries were of a quality as contained in the specifications pursuant to s 14 of the Sale of Goods Act;

    (ii)Farmlink could only give an estimate as to the price that would be paid or received for TVO’s cherries as the prices were subject to change because they were dependent on the prices which Farmlink could obtain for the cherries in specific markets as affected by: 

    (a)demand in the market at the time of supply;

    (b)the price of other cherries of equal quality in the Hong Kong and Singapore markets at the time; 

    (c)the quality of the cherries being sold;

    (d)the stability or instability of the market/s.

    (iii)The cherry packaging requirements as detailed by Farmlink had to be adhered to by TVO when packaging the cherries to send direct to Hong Kong or Singapore.

    (iv)Farmlink (through Churchill) would contact TVO and advise what type and quality of cherry it required and TVO would advise what price they were willing to sell the cherries for.  Once TVO advised of the supply price of the different quality cherries, Farmlink would then add onto that supply price the export costs, plus Farmlink’s margin (which was approximately 65 cents per kilo) (‘Selling Price’).  Farmlink would then offer this Selling Price to the Hong Kong and Singapore markets and the buyers of those markets would either reject or accept that Selling Price.  If that Selling Price was accepted, it remained static unless it was altered by the factors as set out at (ii) above. 

23. It should be noted in passing that the respondents’ defence expressly acknowledged that TVO was not made aware of the selling price of the cherries in Hong Kong or Singapore, nor was it aware of the margin received by Farmlink.  This information was said to be “commercially sensitive”.

24. The respondents denied the terms of the oral contract pleaded by TVO.  Notably, para 6 of the FAD denied that Farmlink was, in law, a purchaser of TVO’s cherries to it at the prices pleaded by TVO.

25. Further the respondents denied Farmlink was a del credere agent as pleaded by TVO or an agent on the terms pleaded by TVO.  Nonetheless, its case has been conducted on the basis that it nonetheless was an agent for sale.

26. Farmlink in turn cross-claimed against TVO for damages for its failure to supply cherries that met Farmlink’s specifications in breach of its agreement with Farmlink and/or of s 14 of the Sale of Goods Act. As I will later indicate, this claim was not pursued before me. Distinctly, Farmlink claimed indemnification as an agent for its export and transport costs in effecting overseas sales.

    (ii)       The course of dealing sidewind

27. The matter I would stress about the above pleadings is that each side’s case was founded upon an oral contract alleged to have been entered into in or about December 2003.  Farmlink’s case later took a new turn outside the pleadings.  This needs some explanation as it is the subject of a ruling below.  In its Summary of Facts, Issues and Contentions filed before the hearing, Farmlink referred at length to a course of dealing between itself and TVO from 1999/2000 to 2003/2004 and, in particular, to what was said to be TVO’s acceptance of purchase discounts for quality.  It asserted its relationship with TVO was an agency for sale at a negotiated conditional price.  And it asserted that:

    27.Even if there was an agreement for sale of goods by TVO to Farmlink sufficiently certain to be enforceable, then the decisive point is that it was a condition and had been agreed and/or established by the course of dealing between the parties that the price paid to TVO would be the conditional price less any “purchase discounts” applied by the overseas buyers and passed back to TVO by Farmlink. 

28. Though an amount of time at the hearing was devoted to TVO’s dealings with Farmlink for the seasons from 1999/2000 to that presently in issue, the applicant clearly prosecuted its case on the basis of the contrasting oral contracts pleaded.  The respondents’ counsel provided the applicant’s counsel with written final submissions almost at the end of the applicant’s final address.  It was then that the issue of “course of dealing” came fully to the fore.  The contention was now squarely put that, as terms of a contract may be implied from a past course of dealings, the dealings of the parties prior to 2003/2004 required close consideration.  In particular Farmlink applied purchase discounts in every season from 1999/2000.  These, it is said, were acquiesced in by TVO.  The course of dealing generally was then relied upon to indicate both the relationship of the parties and the terms of their agreement.

29. In oral submissions counsel for the respondents, while accepting that they may not have pleaded the matter “in as many words”, contended that, even if Farmlink was a purchaser from TVO, the price payable was as determined by the course of dealings over the previous four seasons.  He then referred to para 27 of the Summary of Facts, Issues and Contentions to which I referred above.  The applicant’s response to this is contained in his counsel’s reaction:

    HIS HONOUR:         Are you making any point about this, Mr Brohier, because you did refer to that fact … this morning.

    MR BROHIER:        Yes, your Honour.  We say that we have run the case on the pleaded defence, and the pleaded defence is that there was a term in the contract that – an oral term, that Farmlink could only give an estimate of price because it was dependent on prices;  could obtain a specific market is affected by demand in the market, etcetera;  and then, in paragraph 8.2 and 10.2, that the reason there was non-payment was because a lack of quality.  That’s the case we have always met, and if there is an attempt to say that regardless of quality the issue is what price they got so that in effect it was a carte blanche agreement, we say that’s not open, and we have made it clear in our whole submissions that we have based it on the pleadings.

30. It is fair to say that the term said to emerge from the course of dealing relating to purchase discounts evolved during the respondents’ final oral submissions:  see eg Transcript 890, line 23 – 892, line 11;  as did its relationship to the oral contract that had been pleaded:  see Transcript 895, lines 4-9.

31. In reply submissions, counsel for the applicant dealt with the alleged course of dealing term as follows:

    MR BROHIER:        Your Honour, the attitude we take about that is this:  firstly, we say that the case should proceed on the pleaded case of an oral agreement.  If your Honour is minded to give some leeway to deal with a course of conduct case, it can only be on the basis of the evidence which, as we have submitted, the only course of conduct can be that, where there were proper quality claims, properly justified, then a price discount is factored in.  By that, we mean that it can’t be the case that any alleged quality claim has to result in a discount.  It can only be that the course of dealing shows that – I withdraw that.  We will only – we say the only amendment that could be allowed is to allow a plea that the course of dealing shows that where there are quality claims, which then are justified, the reduction flows.

    The proposition that is put to your Honour is that, if you like, the amendment that is sought is that price is dependent on whatever the overseas buyer wants to pay according to his whim and fancy at the time.  If that is the proposition, we say your Honour should reject any attempt to amend the pleadings to plead that, not on the basis of prejudice, but on the basis that it doesn’t sit with the evidence, and your Honour can consider the evidence and, in our submission, you’ll come to this position, that it’s simply not supported.

    Counsel did point to the prejudice TVO would suffer if a more qualified version of the implied term was advanced allowing for Farmlink to act unilaterally in accepting price discounts.  I accept that such would be the case.

32. At the close of oral submissions, counsel for the respondents asked that Mr Hannaford be permitted to re-open his case to give such evidence as he might wish to avert any prejudice arising from the course of dealing case that he was seeking to put.  It was clear that the term he now wished to propose involved some retreat from what appeared to have been advanced previously:  see Transcript 912, lines 25-45.  I refused to countenance re-opening of the case – it had already been adjourned part heard for a lengthy period – but I did ask counsel for the respondents to provide a draft of the term proposed for the purpose of determining whether any amendment to their defence might be permitted in the circumstances.

1. As subsequently proposed, the term was adapted to the contingencies both of a sale and purchase and of an agency for sale.  In each case the term was in substance the same.  Paragraph 5.7 of the proposed Further Amended Defence is as follows:

   Further and in the alternative, if (which is denied) there was a contract for sale and purchase of the goods as alleged, based on past dealings between the parties, it was an implied term during the 2003/2004 season that Farmlink was entitled to and could unilaterally accept from the overseas buyers and pass back to TVO without TVO’s prior consent any and all discounts or reductions sought by the overseas buyers even if such discounts or reductions resulted in no or a negative return to TVO, except for discounts sought by the overseas buyers on the ground of price changes in their market described by Farmlink in its credit notes or purchase orders for the 2003/2004 season as “price discounts”, as to which Farmlink would seek TVO’s prior consent before accepting and passing back price reductions to TVO.

2. The applicant has opposed my allowing this amendment (and its agency for sale counterpart:  para 13.9) to be made.  That opposition is based essentially on (i) the inconsistency between the proposed term and the evidence in relation to the purpose of the parties’ transactions;  (ii) both the lack of support from Ms Churchill for it and the fact that the term was not put to Mr Hannaford;  and (iii) the focus that had been placed on quality as the alleged actual reason for discounts.

3. I am quite conscious of the foundation that both a prior course of dealing between parties and practices and usages thereby established between them can provide (a) for the drawing of inferences as to the actual terms on which the parties have contracted and (b) for the imputation of implied terms in their contract:  for the difference between inference and imputation, see Hawkins v Clayton (1988) 164 CLR 539 at 570-571 and 573. This is evidenced both in the provisions of international instruments such as the CISG Art 9: see Schlechtriem and Schwenzer at 141 ff; see also Unidroit Principles of International Commercial Contracts 2004, Arts 1.9 and 5.1.2;  and in the domestic laws of common law countries:  see eg Uniform Commercial Code, §1-303;  Restatement of Contracts, Second, §223;  Farnsworth on Contracts, §7.13 (3^rd ed, 2004);  Furmston (ed), The Law of Contract at [3.18] (2^nd ed, 2003);  Cheshire and Fifoot, Law of Contract at [10.18] and [10.29] (9^th Aust ed, 2008).  I equally accept that it may well have been the case, as I will later suggest, that some at least of the terms upon which TVO and Farmlink actually intended to contract in the 2003/2004 season were to be inferred from their prior course of dealings.  But that is not the question on which I must rule.

4. The amendment sought to be made at such a late stage is not one which I consider should be permitted.  It is yet another variant on the term initially proposed – the variation seemingly being a response to accommodate questioning during final submissions.  It is of such a character that it ought to have been the subject of evidence both of Ms Churchill and of Mr Hannaford.  It raises quite a spectrum of different issues to those raised by what had been pleaded by the respondents.  And it embodies an exception the provenance of which relates only to evidence in the 2003/2004 season and not to “past dealings”.  It is simply far too late in the day to permit this amendment to be made, the more so because I consider the proposal itself to be uncertain in scope and ambiguous in content. 

5. I will in any event later suggest both that the term itself attributes a character and a consequence to past dealings which I do not consider is reasonably suggested by them and that important aspects of Ms Churchill’s decisions in 2003/2004 in relation to purchase discounts had no reflection at all in the prior course of dealing. 

   SALE AND RESALE OR AGENCY:  THE APPLICABLE PRINCIPLES

6. Notwithstanding that the relationships of principal and agent and seller and buyer are mutually exclusive, the one being a fiduciary relationship, the other a “commercially adverse relationship”:  Bowstead & Reynolds on Agency at [1-032] (18^th ed, 2006);  the distinction between them in cases where sales or purchases have been effectuated by an intermediary can be a fine one not easy to draw:  see Atiyah, The Sale of Goods at 28 (10^th ed, 2001).  Unsurprisingly, courts have emphasised that decided cases are for the most part of limited assistance given the quite fact (and agreement) specific nature of the inquiry to be made:  see eg Fraser-Ramsay (New Zealand) Ltd v De Renzy (1912) 32 NZLR 553 at 575; see generally, Dal Pont, Law of Agency at [2.3] (2^nd ed, 2008);  the more so when, as in the present matter, the contract in question (whether of agency or sale) is an oral one:  cf Mercantile International Group plc v Chuan Soon Huat Industrial Group Ltd [2002] EWCA Civ 288 at [30]-[31].

7. Before identifying those factors which have been found to be of varying significance as indicators of, variously, agency or sale, it is appropriate, first, to refer generally to a number of relatively uncontroversial propositions of agency law.  In so doing, I repeat for convenience in part what I said in South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at [131] ff.

   (1)Those definitions of agency that take the principal and agent relationship itself as their particular focus:  contrast International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644 at 652; emphasise that that relationship “can only be established by the consent of the principal and the agent”: Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1968] AC 1130 at 1137; see, for example, Bowstead & Reynolds at [1-001];  Restatement of Agency, Third, §1.01;  3 Am Jur 2d, “Agency”, §15.

   (2)The consents so given need not necessarily be to a relationship that the parties understand, or even accept, to be that of principal and agent:  Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552 at 587. It is sufficient if “they have agreed to what amounts in law to such a relationship”: Garnac Grain Co Inc at 1137; Nichols v Arthur Murray Inc 56 Cal Rptr 728 (1967) at 730-731;  Restatement of Agency, Second, §1 comment.

   (3)Though there is no uniformly agreed definition of agency:  see the discussion in Fisher, Agency Law at 8-11 (2000);  the two whose authoritative character has resulted in their wide citation are those of the Restatement of Agency, Third, §1.01 and of Bowstead & Reynolds at [1-001] (the latter being based upon the Restatement provision).  The Restatement’s definition is that:

   §1.01Agency is the fiduciary relationship that arises when one person (a “principal”) manifests assent to another person (an “agent”) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.

   Bowstead & Reynolds’ definition is that:

   [1-001]Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation. 

   The necessary consents apart, the required characteristic of the relationship is that one party acts on behalf of, and is authorised to act on behalf of, the other.  This “representative” characteristic must be able to be discerned in the factual relation of the parties:  Colonial Mutual Life Assurance Society Ltd v The Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41 at 48-50.

   (4)Though the characteristic of “control” is accentuated in the Restatement’s definition:  see comment f to §1.01;  its significance is far more muted in Anglo-Australian law:  see South Sydney District Rugby League Football Club at [136]. Thus, it is commented in Bowstead & Reynolds (at [1-017]) that:

   It might seem therefore that control is not a significant feature of the internal relationship, except in so far as the relationship by definition posits a person, the principal, giving authority, and the agent’s duty to obey instructions if he wishes to continue as agent.  Nevertheless, if the principal gives up all control of his supposed agent the relationship is only doubtfully one of agency.

   I will return to the significance of the presence or absence of control later in these reasons. 

8. Before turning to the factors which have been said to be possibly indicative of agency or of sale, it is instructive to refer first to §14J of the Restatement of Agency, Second, which accentuates the fiduciary and the adversarial characters of agents and buyers respectively: 

   One who receives goods from another for resale to a third person is not thereby the other’s agent in the transaction:  whether he is an agent for this purpose or is himself a buyer depends upon whether the parties agree that his duty is to act primarily for the benefit of the one delivering the goods to him or is to act primarily for his own benefit.

9. Judges have, on occasion, used a test stated at the level of generality of §14J to determine whether a particular relationship (ordinarily manifest in a written agreement) is one of agency or of sale.  So, in Fraser-Ramsey (New Zealand) Ltd it was commented (at 566):

   There is no trace in the agreement of the creation of or of the intention to create a fiduciary relation between the parties.

   Characteristically, though, a more finely tuned and contextual focus on particular “indications” is employed especially where, as in the present matter, the parties’ relationship is not recorded in a written agreement.  I use the description “contextual” for this reason.  The indications for the most part are not necessarily determinative and acquire their actual significance from the particular context in which they appear.

10. For present purposes I would note the following.

11. (i)  As an agent for sale ordinarily acts on behalf of its principal:  but cf in relation to a broker selling in its own name:  Bailey & Co Ltd v Balholm Securities Ltd [1973] 2 Lloyd’s Rep 404 at 408; Jackson Securities Ltd v Cheesman (1986) 4 NSWLR 484 at 489-490; is it apparent from the facts that the seller has actually conferred on the intermediary an authority to negotiate and/or to sell on the seller’s behalf thus bringing into existence direct contracts between the seller and the third party buyer: Mercantile International Group plc at [30]-[34]?

12. (ii)  Often interlocking factors of some significance are (a) by whom is the sale price to the third party set? and (b) how is the intermediary remunerated/rewarded for the sale to the third party?  If the intermediary is remunerated by commission pre-arranged with the seller this will ordinarily indicate an agency relationship:  eg Weiner v Harris [1910] 1 KB 285; although in exceptional circumstances a buyer for resale may be paid what is described, or is misdescribed, as a commission: eg Gannow Engineering Co Ltd v Richardson [1930] NZLR 361; Jackson v Royal Bank of Scotland [2000] EWCA Civ 203 at [17]-[18]. In the absence of fully informed consent, it would be a breach of fiduciary duty for an agent to profit on the sale of its principal’s property by, for example, marking up the principal’s stipulated sale price and retaining the difference. That an intermediary so acts may itself be indicative that the parties relationship was that of seller and buyer for resale and not agency for sale: Ex parte White;  In re Nevill (1870) LR 6 Ch App 397. Nonetheless, a principal may agree to an agent deriving its remuneration from a mark-up on the price the principal stipulates it is to receive from the sale: eg Ex parte Bright;  In re Smith (1879) 10 Ch D 566. In Mercantile International Group plc in circumstances in which the agreements between the parties pointed unambiguously to an agency relationship, it was held that that conclusion was unaffected by the circumstances that the principal knew that the intermediary charged more to purchasers than it confirmed to the principal;  the principal did not mind nor care to know the detail of the matter, but was satisfied to get the price it stipulated;  and the principal was content that the intermediary should keep for itself an undefined margin, it obtaining no remuneration by way of commission or otherwise from the principal:  at [5] and [36].

13. (iii)  It may be apparent from the circumstances and context of the supplier’s and intermediary’s dealing, that, on sales to a third party buyer it was reasonably to be expected that the intermediary was to answer to that buyer for the quality of the goods sold:  cf International Harvester Co;  Bowstead & Reynolds at [1-032]. 

14. (iv)  Two duties stemming from a finding of agency are that the agent (a) must keep its principal’s property separate from its own;  and (b) must keep an accurate account of all transactions entered into on its principal’s behalf:  see generally Bowstead & Reynolds at [6-088] ff;  Dal Pont, Ch 13.  It has been suggested on occasion that these consequences may be indicative of an agency (at least if they have been expressly or impliedly agreed by the parties):  cf Benjamin’s Sale of Goods at [1-049] (7^th ed, 2006).  For present purposes I merely note those agency obligations.  I will make further reference to them after having outlined how Farmlink actually dealt with TVO in relation to the proceeds of sale received from the Singaporean and Hong Kong buyers and in relation to keeping accounts of the sales made by Farmlink. 

15. There are two final matters to which I should refer.  First, while the relationships of agency and sale are mutually exclusive, it is not uncommon for an intermediary to be the agent of its seller-principal but to be a principal vis-à-vis a third party on the sale to it:  see eg Bailey & Co Ltd v Balholm Securities Ltd at 408; Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676. As was said by Roskill LJ in Romalpa (at 690):

    I see no difficulty in the contractual concept that, as between the defendants and their sub-purchasers, the defendants sold as principals, but that, as between themselves and the plaintiffs, those goods which they were selling as principals within their implied authority from the plaintiffs were the plaintiffs’ goods which they were selling as agents for the plaintiffs to whom they remained fully accountable.

    As will be seen, the respondents seek to draw some comfort from this.

16. Secondly, neither TVO nor the respondents have sought to advance and rely upon known practices and usages in the cherry sale and/or exporting market which might illuminate in any way the complexion properly to be given to their relationship or its incidents:  see CISG, Art 9(2);  Unidroit Principles of International Commercial Contracts 2004, Art 1.9(2);  Uniform Commercial Code, §1-303 (“usage of trade”).

    MATTERS OF CREDIT

17. The matters that are in issue in this proceeding occurred some years ago and for the most part during a very confined period when both Mr Hannaford and Ms Churchill were working under considerable pressure.  It was only to be expected that their respective recalls might be inaccurate and be likely to be affected by reconstruction from contemporary documentation to which they each later had access.  I am satisfied that the evidence of both of these witnesses was affected in these ways and to some degree self-servingly.

18. If Mr Hannaford’s recall of some matters was indistinct or erroneous, especially as to matters of timing, Ms Churchill’s was on occasion wholly questionable.  I am satisfied that she convinced herself on some number of occasions that what she would have done/said etc was what she did/said etc.  She was warned about this.  I am satisfied her use of “I would have” was not simply a speech habit.

19. I have concluded that on some matters of importance Ms Churchill’s evidence ought not be accepted unless corroborated by documentary evidence.  She was often evasive and combative in answering questions.  Some passages of her evidence were transparently self-serving or underwent adaptation as the case evolved.  I have little confidence in much of her evidence on contested matters. 

    BACKGROUND PRIOR TO THE 2003/2004 SEASON

20. For the reasons given earlier, the prior dealings of TVO and Farmlink are not directly relevant in determining the nature and the terms of the parties’ relationship.  Nonetheless, they provide relevant contextual material and for that reason I refer to them, albeit sketchily, and primarily in relation to the “application” of purchase discounts by Farmlink and to the manner in which accounts were settled.

21. The 1999/2000 season was the first in which TVO dealt with Farmlink in relation to cherries.  Mr Hannaford said in evidence that he could not remember specifically taking up the topic of purchase discounts with Ms Churchill at the beginning of their business relationship but that at some stage they certainly did discuss discounts and how they work and how they apply and why.  He reiterated that at pre-season and post-season meetings with Farmlink and its growers discounts were discussed from time to time “and we talk about why and how and what the problems were and what we can do to avoid them … if it is related to the growing of the cherries and packing”. 

22. When discussing a $3,822.50 discount said to be for “poor quality” on an order in excess of $80,000.00, Mr Hannaford said he was not “shocked and awed” [counsel’s terms]:

    I mean, there is always some things that happen during the season.  There are quite often some issues, some problems.  Maybe it is our fault.  Maybe some cherries snuck through the system and so there are, from time to time there are some issues, either fair or unfair, that can result in some discounts, yes.

    He understood that overseas buyers demand quality and they will reject cherries or seek a discount if the quality is not there.

23. In the 1999/2000 season, discounts were applied to four of twenty-four orders amounting $14,670.10 leaving a payment by Farmlink to TVO of $362,935.62 on an expected return of $377,605.72.  The accounts for this season were settled on about 9 February and it was only then that Farmlink delivered the completed “purchase orders” (see below) showing the purchase discounts applied.

24. In the 2000/2001 season the purchase discounts applied to TVO sales ($251,131.78) amounted to about half the expected return and related to nine of twenty-one orders.  Two container shipments, one to Singapore, the other to Hong Kong, accounted for about $185,000.00 of the total discount.  TVO’s benefit from the insurance recovery on the container losses was $119,864.74, payment being made after August 2001.  The evidence on the policies effected by Farmlink has been left in a less than satisfactory state.  While TVO benefited ultimately from the insurance payout, I am satisfied it was neither the insured nor a beneficiary under the contract.  The evidence, such as it is, suggests the insurance was effected in Farmlink’s name with the interests of the Singaporean and Hong Kong buyers noted on the policies.  The further significance of the insurance claims for present purposes is that Farmlink indicated to Mr Hannaford that thereafter insurance was not available for cherry consignments it made abroad.

25. In the 2001/2002 season on Farmlink’s figures, TVO’s expected return was $177,790.00 and purchase discounts of $15,795.90 were applied to six of eleven consignments.  In this season TVO dealt with a number of exporters all of whom passed back purchase discounts to it.  So, for example, Jayfresh (Mr Freeman’s company) provided TVO a return of $310,135.20 after purchase discounts of $21,909.80.  I note in passing that both Mr Hannaford and Mr Freeman indicated that Jayfresh approached discounts “a little bit differently”.  The final accounting for Farmlink was done in March 2002.  Mr Hannaford indicated he received some progressive part payments through this season but generally he received the outstanding purchase orders in a bunch after the end of the season on the final accounting.

1. The 2002/2003 season, for present purposes, was relatively similar to the preceding year:  TVO’s return was, on Farmlink’s figures, $138,381.50 after purchase discounts amounting to $19,543.00 were applied to nine of seventeen consignments.  Jayfresh, in its dealings with TVO, applied discounts which in aggregate were in similar proportions to returns as were Farmlink’s.  As in previous years, the purchase discounts were probably communicated to Mr Hannaford at the end of season settlement.  Mr Hannaford accepted in cross-examination that, by this season, whenever the question of purchase discounts came up, Ms Churchill’s standard reply was that they had been applied because the cherries had been partially rejected on quality grounds. 

   THE CONSIGNMENT DOCUMENTATION

2. Each of the individual consignments in issue in this matter both had its own particular setting and was located in a larger general context of dealings between TVO and Farmlink.  Nonetheless, it is convenient to refer, first, to the relatively standard documentation generated in respect of the consignments not only for such illumination as it provides as to the TVO-Farmlink-overseas buyer relationships, but also because the documentation provides terms of reference in the factual narrative which follows.

3. The document that initiated an export consignment was Farmlink’s “Export Packing Order” which was sent to TVO.  This was in a standard form of which the following is an example:

1. Periodically, not invariably, instructions were given under the heading “VARIETY” – for example:  “good, firm, sweet”;  “the best”;  “good, firm, red” (reflecting a direction from Mak in Hong Kong);  etc.  Such rare notations as were made under “Comments” towards the bottom of the form were ordinarily of a more prosaic character:  “must be at [PBVO] by 11 am Tues”;  etc.

2. Such orders were effected usually by TVO delivering the packaged cherries to PBVO or, on occasion, to freight forwarders retained and paid for by Farmlink.  It is agreed between the parties that, if the relationship between TVO and Farmlink was that of sale and purchase, such delivery was an unconditional appropriation such that property passed to Farmlink:  see Sale of Goods Act, s 18 rule 5(1); Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236; Carlos Federspiel & Co SA v Charles Twigg & Co Ltd [1957] 1 Lloyd’s Rep 240. When making a delivery TVO usually faxed what it called a “dispatch docket” to Farmlink. This handwritten document, which made no reference to price, was for present purposes the only document of significance generated by TVO for delivery to Farmlink in any season. Mr Hannaford’s explanation for the absence of a price on the dispatch docket was that:

   We didn’t put a price on because sometimes the price can vary a little bit and this was one reason for creating these documents was for our own internal records as well to keep track of our sales for our own viewpoint but there was very often a price variation to do with cost of freight [or] the fact if they were in punnets or gift boxes, there may be some variation to the agreed price.

3. The airway bill for a consignment, or the bills of lading for sea shipments, were all in the name of Farmlink which was invoiced for, and paid, freight.  Farmlink invoiced its overseas buyer for the fruit at prices fixed by it.  TVO was not copied that invoice.  I will later make reference to Farmlink’s Cherry Shipping Strategy Plan for its projected prices to overseas buyers for that season.  The prices so fixed differed from those agreed between TVO and Farmlink as TVO’s “agreed” or “firm” sale price and they were not communicated to TVO.  The only reference to TVO in the invoice was as part of the “Description of Goods”, for example, “TVO STELLA CHERRIES x 18 – 500 gm”.  Payment by the buyer was required to be made to a general bank account of Farmlink which, on the evidence, was used for its general trading activities.

4. When Farmlink paid TVO for a purchase it did so by reference to a document entitled “Purchase” and referred to in evidence as a “purchase order”.  That document, directed to TVO, referred to a specific order;  it described Farmlink (at its address) as the party TVO was to “Ship To”;  it identified under headings the quantity, description and price of the cherries particularised in the order and the percentage “discount”;  and it specified what, in the event, was the sale price and that it had been paid.  This document was entered into Farmlink’s computer after receipt of TVO’s dispatch docket (which described the number of cartons and the varieties of cherries), as was the sale price which Ms Churchill described as “the expected price return” to TVO.  Such discounts as were applied were entered ordinarily prior to settlement with TVO. 

5. I would note in passing that the freight invoices, copies of the airway bill or the bills of lading and the invoices to overseas buyers were not sent by Farmlink to TVO.

6. To anticipate matters, the applicant’s contention is that the above documentation clearly indicated that each transaction involved a sale by TVO to Farmlink with a re-sale to the overseas buyer.  Farmlink, in contrast, contends that the documentation is consistent with its having acted as an agent for sale vis-à-vis TVO and as a seller vis-à-vis the overseas buyers, hence its reliance upon Romalpa at 690.

   THE 2003/2004 SEASON

   1.        General matters

   2.        Price

7. Consistent with her practice in earlier seasons, Ms Churchill arranged a pre-season planning meeting at PBVO on 30 October 2003 with growers (including Mr Hannaford) with whom she hoped to deal and who may have been interested in exporting some cherries.  Apart from having a wrap-up of the previous season, the agenda referred, amongst other matters, to crop expectations, ie volume, size, quality and timing, to export market potential and to packaging requirements.  The agenda did not refer to price – unsurprisingly in my view given that the meeting was almost two months in advance of when exporting might be expected to commence and about a month before picking.  It is Ms Churchill’s evidence that price probably was not discussed at that meeting:  “Not that early, no”.  I would note that the Cherry Export Marketing Strategy she faxed to TVO on 2 December 2003 made no mention of price and, in a fax to Freshmart of the same date suggesting an export “Program for Singapore”, she gave only indicative prices as it was “too early for the real prices”.

8. At some time, though, it is clear that the growers told Ms Churchill what prices per kilo they wanted for cherries (categorised by size), such that there was, according to Ms Churchill, an understanding between not just Farmlink and TVO, but all the growers that “this was the sort of price they would want to go out to the market to return, and that’s what they expected”.  It is equally clear that she calculated her own export strategy referred to below on the basis of those prices.  Those prices were (i) $7.00/kg for 24-26mm fruit;  (ii) $9.00/kg for 26-28mm fruit;  (iii) $11.00/kg for 28mm fruit;  and (iv) there was about a $1.00 premium on 500gm punnets.  Farmlink and TVO later agreed several changes to these prices as actual consignments were made.  It also is alleged that Farmlink made unauthorised changes on occasion, ie changes not negotiated with TVO. 

9. While Mr Hannaford could not recall when prices were discussed, he said it would have occurred at some stage:  “We had to have some basis on which to have a meaningful business relationship, not only with Farmlink but with all our buyers”.  The prices referred to above were those he had in mind at the time.

10. At some time before Farmlink actually started shipping cherries, Ms Churchill prepared for Farmlink’s own use the “Cherry Shipping Marketing Plan – 2004”.  That document set out in tabular form projected consignments by air and sea for the weeks commencing 22 December 2003 and ending 19 January 2004;  the names and volumes of cherries to be supplied by named sellers;  and the cherry prices.  These last were in the following table:

CHERRY PRICES 2004
Type/Size	Ave	Pallet	Sea
5 KG
24	$47.50	$45.00	$40.00
26	$57.50	$55.00	$50.00
28	$67.50	$65.00	$60.00
6 x 2 KG
26	$144.00	$138.00	$126.00
28	$168.00	$162.00	$150.00
500g PUNNETS	$90.00	$86.00
1 KG GIFT PACK	$150.00	$144.00

(The acronym “AVE” refers to a particular type of container for aircraft shipments.)

1. Though slow to concede in cross-examination that the strategy document projected Farmlink’s own prices it is clear, in my view, that such was their intended purpose and were devised in much the manner indicated by Ms Churchill in evidence-in-chief:

   Well, based on the price advised by growers, I calculate what my shipping costs and transport costs, and export costs might be, add in my margin, work out what sort of selling price that my buyers have to accept before I can confirm an order, then I issue that price to the market.

2. Farmlink’s sale prices to overseas buyers were set by it without reference to Mr Hannaford;  they were never revealed to him;  and Ms Churchill said she would have refused to tell him the margin Farmlink received “because it was commercially sensitive”.  I would note that this evidence is reflected in paras 5.1.5-5.1.6 of the Further Amended Defence.

3. There are three further matters concerning price to which I should refer.  The first relates to Mr Hannaford’s evidence as to his allegedly having been told by Farmlink that he could only be given an estimate of the price he would be paid for the sale of the cherries and why this was so (see FAD para 5.1.3):

   MR BROHIER:        Now, it is said by Farmlink that it was orally agreed in December 2003 between you and Ms Churchill that the prices – that Farmlink could only give an estimate as to price and prices were dependant on the prices which Farmlink could obtain for cherries in specific markets – are you with me at the moment – as affected by four matters.  Demand in the market at the time of supply.  Was that ever discussed between you and Ms Churchill?---We quite often discussed market-related issues.

   But did you discuss the issue of price being dependant on the demand of the market at the other end?---No.  No, we were selling in our own market and it was not related to specific variation in markets overseas, it was what was happening in Australia.

   So is the answer to that question - - - ?---No.

   No.  Did you discuss that the price that Farmlink would give you would be dependant on the price of other cherries of equal quality in the Hong Kong and Singapore markets at the time?---No, definitely not.

   Did you discuss that the price that they would give you would be dependant on the quality of the cherries being sold?---No.

   And that the price that they would give you would be dependant on the stability or instability of the markets?---No.

   Despite what is pleaded in FAD para 5.1.3 (which is reflected in the above questions), Ms Churchill’s evidence did not controvert Mr Hannaford’s.

4. Secondly, Mr Freeman gave evidence that his company, Jayfresh, contracted with suppliers on the basis of an agreed price, fixed after inspection of the consignment at the airport or port of dispatch.  Prior to that the parties determined an estimated or indicative price.  Earlier he gave evidence, seemingly of industry practice, that producer and exporter fix the price at which the producer is selling.  Save in one respect to which I will refer below, I should indicate I have not found Mr Freeman’s evidence of particular help.  Jayfresh’s business practices as described by Mr Freeman differ significantly from those of Farmlink and I am not satisfied that his practices have been shown satisfactorily to be the industry’s practices in South Australia.  Aspects of what he had to say about re-negotiation of agreed prices for quality and market issues are, nonetheless, noteworthy.  I refer here to evidence given in cross-examination which enlarges somewhat on his affidavit: 

   And sometimes [the agreed price] is the subject of quality discounting, isn’t it?---Quality and market discounting.  I make that point very strongly.  It is often – not sometimes – it is often subject to a buyer wishing to re-negotiate based on quality and based on market.

   Okay?---Yes.

   If they do re-negotiate, they do that with you, do they?---Yes.

   And then you go back to the buyer?  [The reference to “buyer” appears to be mistaken and that “supplier” was intended:  see Affidavit para 26.3.]---Yes.

   And work out, do you, what is going to be the final price?---It depends.  As I think I made quite clear in my affidavit, if it is of a relatively modest adjustment, or something that I feel would be acceptable to that particular producer – in the case we are talking about here, Tony Hannaford at TVO – but I deal with many producers, and you have different relationships with different producers.  If I felt comfortable that the modification was (a), deserved, and (b) consistent with my relationship with that particular producer I may well accept it straight up.  But if it is any major issue – and I would state that anything over 5 per cent is a major issue – then it requires further investigation, further discussion before any acceptance.  Can I make clear at this point the fixed prices, the fixed price at this point.  It is not arbitrary that you accept any discount.  It is not arbitrary that you accept any discount.  It is my role to ensure that any discounts, any modifications to the price are carried out correctly, fairly and in timely fashion.

   Though cross-examined at length on the difficulties in re-negotiating back-to-back contracts, his evidence remained that, subject to his relationship with a particular producer, he had to secure agreement to the variation of two contracts.  He also later indicated that where a reduction was sought for a purely market related issue, eg the market had changed:

   … then you would be putting a very strong emphasis on the responsibility of the actual importer and, notwithstanding, they may have lost severely.  They have an obligation to share in that particular loss and not pass on their loss down the chain.

   Distinctly, he indicated that he had been told by Mr Hannaford the prices he had agreed with Farmlink (they were as I noted earlier).  Mr Freeman considered that the price was higher than what he knew he could get for TVO cherries.  He could not compete with Farmlink’s prices.

5. Thirdly, it was Ms Churchill’s evidence that the prices agreed with TVO were “firm prices” as the following illustrates:

   MR BROHIER:        Now … Ms Churchill, before the adjournment you said that when you sent orders off overseas, you had confidence that the prices that were reflected in your purchase order which you had keyed in would be achieved?---Yes.

   So, so far as you were concerned, those prices were firm prices?---At that point in time, at the point of export, yes.

   And any changes to those prices had to be by negotiation?---Yes.

   And that negotiation had to include the grower?---Yes.

   And because it was by negotiation, the grower had the right to say that he wouldn’t agree to a change in price?---Yes. 

6. She went on, though, to qualify this by differentiating between “price” and “quality”. 

7. Again to anticipate my conclusion, I am satisfied that prior to the first consignment TVO and Farmlink agreed the prices at which TVO would sell its cherries.  These were firm prices which could be re-negotiated.  They were not simply indicative or “expected” prices.  I will later explain my reason for this conclusion in that it involves rejecting the contention that the prospect of purchase discounts necessarily made agreed prices “expected” ones.  I have already foreshadowed my conclusion that the TVO-Farmlink relationship in respect of the individual consignments was that of seller and purchaser.  As to Ms Churchill’s assertion that she did not have to re-negotiate discounts for quality issues, this relates to the terms of the contract.  As I will later indicate, I am not satisfied that such a term reflected the implied intention of the parties.  I should add, even if I had concluded that the parties relationship was that of principal and agent, I would similarly have concluded that the agreed price was the return Ms Churchill was authorised to obtain for TVO and that she was not authorised to bind TVO to quality discounts if TVO did not consent to them. 

   3.        Farmlink’s forms

8. In the FAD para 5.1, Farmlink pleaded that its December 2003 oral contract with TVO was on terms (inter alia) that (i) the cherries were to comply with the specifications as set out in Farmlink’s Pre-Shipment Inspection Form (as provided by it to TVO);  and (ii) Farmlink’s Cherry Packaging Requirements had to be adhered to by TVO.

9. Farmlink had produced probably in 1999 a document entitled CHERRY PACKAGING REQUIREMENTS.  It is unnecessary to reproduce it here.  It specified how differing weights were to be packaged for export whether by air or by sea, how the cartons were to be labelled and what exceptions applied when exporting to Hong Kong.  Ms Churchill’s evidence is that she distributed it to the suppliers including Mr Hannaford in and after the 1999 season and that in 1999 she had a discussion with Mr Hannaford about it.  She distinctly remembered delivering the Requirements form to him in the 2003/2004 season at his premises sometime in December “prior to the start of cherries”.  On a subsequent visit to his premises she saw the document pinned on a little notice board in his office.

10. For his part, Mr Hannaford’s evidence-in-chief was that he did not recall receiving the Requirements form and could not recall it specifically, although he accepted that a copy of it may have been pinned to his noticeboard.  He reiterated this evidence in cross-examination.

11. It is unnecessary for me to further consider the evidence concerning the document.  Though pleaded by Farmlink as supplying a term of the parties’ contract, I do not consider that it was likely to have been intended to have had contractual effect.  There is no evidence to suggest that it was provided in circumstances indicating such was the case or that, over the ensuing years, adherence to it was insisted upon and monitored.  There is equally no evidence that TVO did, or did not, pack in accordance with the Requirements form.  The form was, probably, an instructive guide to Farmlink’s suppliers.  This conclusion seems to me to be the more likely given my finding on the Pre-Shipment Inspection Form.

12. The Inspection Form was a detailed document requiring the sampling and testing of cherries to be shipped for defects and quality characteristics.  It was to be signed by a quality officer after testing at the supplier’s packing shed.

13. Ms Churchill’s evidence is that she “certainly” gave copies to Mr Hannaford in the 2003/2004 season and pointed out to him that the form differed from previous years now that there was an instrument called a penetrometer that could measure the firmness of cherries.  She said Mr Hannaford asked her if she could get him one but she was unsure whether she could get him one for use in that season.

14. For his part, Mr Hannaford agreed he was given the form at the beginning of the business relationship in 1999.  He thought he was given only one copy.  He did not recall, and thought it very unlikely, that he was later given other forms:  “we never referred to it specifically again”.  He acknowledged that when it was received, all the suppliers looked at it:

    We were all in a learning process and it is good to see what the buyers are looking at and talking about and what their buyers want.

    He had no recollection of it being suggested he should have a penetrometer.  While he thought he probably should have one, he did not know anyone “even at this point” who actually had one.

15. The critical part of Ms Churchill’s evidence which doomed any contractual defence founded on the Inspection Form arose out of questioning upon the first active order (4014), a consignment which was delivered to PBVO:

    And you didn’t ask Mr Hannaford for the pre-shipment inspection report?---No, I didn’t.

    And you shipped a total of 21 shipments in the 2003/2004 year?---Yes.

    And you never asked for a pre-shipment inspection report?---Not for each particular order, no, but when those pre-shipment inspection forms are issued, they’re issued on the basis that they are an in-house record of inspection and, if possible, I would like a faxed copy of those to Australian Farmlink for each order;  that was my wish-list.  If they were too busy or couldn’t do it or whatever I did not insist.

    And in the 2003/2004 year you never once, after the shipments started, ask for those forms?---In all the dealings I’ve had with Torrens Valley Orchards I’ve never once received any of those forms.

    And you never once asked for those forms in the 2003/2004 year?---At the start of every season I asked all the growers suppling [sic] export cherries to use these as a guideline to ensure that their cherries would meet our buyers’ specifications and it’s up to them to comply with those wishes but I don’t force them to do it.

    My question is that, from the time the shipments started on 19 December, you didn’t once ask for those forms?---I asked for those forms before the shipment starts.  I have indicated what my expectations are.

    But just listen to my question?---Yes.

    From the 19 December, when the shipment started from TVO?---Yes.

    You didn’t once ask for those forms?---I did not ask for them to be delivered to me, no.

    And it wasn’t, in your understanding, any part of the contractual requirements between yourself and TVO that those forms would be completed?---It was my expectation in their best interests for them to use those forms to please pack to Farmlink specifications.

    But if they chose not to that was none of your business?---It was for their own benefit.

    But if they chose not to, then you went along with that?---If they chose not to it would be to their own disadvantage.

    4.        The weather

1. The reports themselves are not altogether convincing documents.  They are relatively standard form in their findings and they assert conclusions about the saleability of the cherries in the Hong Kong market.  Mr Kwan’s expertise to give evidence on the cherry market was obviously open to objection – he simply relied on “commonsense”.  And if the photos “actually prove anything” (Mr Hannaford’s comment), the evidence on them, as well as my own impression of them, do not accord with the reports’ conclusions.

2. What is clear beyond question is that Mak did not supply, nor was he asked in a timely fashion to supply, adequate information on the nature, extent and circumstances of the defects and losses.  The opportunity to make informed evaluations of the cause or likely causes of the losses (I am assuming they were in fact losses) was lost.  One can understand why Dr Brown said:  “It is impossible now to actually say what happened.”  One equally can understand why it is accepted under Art 39 of the CISG that the time for notice of nonconformity for perishable goods is very short:  cf the “Flowers” case, above.

3. Such are the doubts raised about the evidence in relation to any of the orders – doubts exaggerated by Ms Churchill’s failure to pursue the alleged quality complaints diligently – that I cannot now be satisfied in relation to any of the alleged quality complaints that the cause or causes of the losses and price reductions were ones for which TVO alone was responsible.

4. In consequence Farmlink could not, by relying upon “issues of quality”, have avoided an order to pay TVO the balance of the agreed purchase price.  Nor could it have so made out a damages claim against TVO for an equivalent amount.

   CONCLUSION ON THE CONTRACT CLAIM

5. I will order that there be judgment for the applicant in the sum of $452,779.40 for unpaid purchase price, this being the higher of the two sums advanced.  The other sum is $432,473.80.  The difference between the two, as I understand it, turns on whether or not, when Mr Hannaford agreed to a $1 per kilo discount on 7 January 2004, that was only for the 11 January consignment to Hong Kong.  Ms Churchill applied it to later orders, although she agreed in evidence that, though it applied to the 9 January order, it was “to be negotiated if necessary after that”.  There is no evidence of such having occurred.  Accordingly, I have chosen the higher sum.

6. There will need to be further calculations done for the claim for the loss of use of monies.  I will give directions accordingly.

   THE TRADE PRACTICES ACT CLAIMS

7. My conclusion on the contract claim makes it strictly unnecessary to consider directly the misleading or deceptive conduct claim against Farmlink or to discuss (inevitably at some length: see Cheshire and Fifoot at [11.118]) the interaction of s 51A and s 52 of the TP Act and contractual promises: see eg Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217. It is necessary, though, to deal with the claims as they relate to each of the natural person respondents, Ms Churchill, Mr Plummer and Mr Koh. Though claims are made against all three under the TP Act (via s 75B), the Fair Trading Act 1987 (SA) s 54 and the Misrepresentation Act 1971 (SA) s 7, I will as a matter of convenience deal only with the TP Act claims given the view I take of the actual allegations made against the respondents individually. I would add that the TP Act claims against Ms Churchill provide in substance the foundation of the claims against Farmlink on whose behalf she was acting at all relevant times: see TP Act s 84(2).

8. It needs to be said at the outset that the claims, understandably, have been formulated against the contingency of fact findings quite different from those I have made.  While it is necessary for the reason I gave above briefly to consider them, I recognise that those findings have rendered these claims superfluous.

   1.        The claim against Ms Churchill

9. There are three categories of representation alleged to have been made by Ms Churchill to Mr Hannaford and on which he is said to have relied, which constituted misleading or deceptive conduct.  These were as follows:

   (i)In representing that Farmlink could sell TVO’s cherries into Hong Kong and Singapore such that TVO would receive the agreed prices, Ms Churchill impliedly represented that Farmlink had reasonable grounds to make that representation:  FASC paras 14-16, (“the negotiations representations”);

   (ii)In a sequence of telephone conversations with Mr Hannaford after cherry consignments had commenced, she misled him in the following four respects (FASC paras 13.7.3 – 13.7.6, 17 and 18):

   (a)from about 23 December 2003, Mr Hannaford and Ms Churchill had daily telephone conversations in relation to the ordering, delivery and sale of TVO’s cherries.  In those conversations Ms Churchill said words to the effect that everything was going “all right”, when she had no reasonable basis to make such a representation; 

   (b)on about 4 January 2004, Mr Hannaford, in one such telephone conversation said to Ms Churchill words to the effect that he had heard from China that he was going to lose significantly and get nothing from dealing in the Hong Kong market.  Ms Churchill said words to the effect that as far as she knew everything was all right, when she had no or no reasonable basis to make such a representation; 

   (c)on about 6 January 2004 Mr Hannaford in a telephone conversation asked Churchill words to the effect whether the Chinese market had crashed.  Churchill said words to the effect that it had not but it was “a bit weak”, with a “bit of oversupply” which should clear quickly when she had no or no reasonable basis to say the market was only “a bit weak” or only “bit over supplied” and would clear quickly but should have said that there was no or no reasonable prospect of TVO obtaining the Agreed Prices; 

   (d)after 6 January 2004, Mr Hannaford continued to have regular telephone conversations with Ms Churchill.  Ms Churchill did not advise Mr Hannaford in those conversations of any difficulties with selling TVO cherries in the Hong Kong market, save and except for saying there were allegedly problems with the quality of cherries in one shipment.

   It is alleged that in making the representations in (a) to (d) above, Ms Churchill impliedly represented that TVO would receive the agreed prices but she knew or should have known from and after 29 December 2003 that Farmlink was unable to sell TVO’s cherries into the Hong Kong market and from and after 8 January 2004 that it was unable to sell TVO’s cherries into the Singapore market at prices such that it could pay or TVO would receive the Agreed Prices and should have known at least from and after the last-mentioned dates that the market for cherries in Hong Kong and Singapore had crashed or become very poor or grim:  (“the market representations”).

   (iii)Finally, it is pleaded that (FASC para 19) Farmlink was, by Ms Churchill and its directors Mr Koh and Mr Plummer, silent as to the difficulties in fact being experienced in selling TVO’s cherries in Hong Kong and Singapore markets at prices such that it could pay to TVO the Agreed Prices or at all.  That silence, in the context of the relationship between TVO and Farmlink and the representations in (i) above made during negotiations constituted misleading and deceptive conduct or conduct which was likely to mislead or deceive”:  (“silence”). 

10. In final submissions, the TP Act claims were said to be essentially ones of non-disclosure.  As I have indicated, the claims so perceived are at odds with fact findings I have made and especially with my characterisation of the TVO-Farmlink relationship.

11. Before dealing with the three categories of contravening conduct alleged, I should make the following observations about the principles to be applied to TP Act claims such as have been made.

12. First, misleading or deceptive conduct is conduct which in the circumstance does lead, or is capable of leading, a person into error or, in non-disclosure cases, which fails to disabuse a person of his or her error:  Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 200; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198.

13. Secondly, a statement of opinion (ie of a belief or judgment) will not be misleading or deceptive or be likely to be so merely because it misinforms or is likely to do so:  Elders Trustee and Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193 at 242. It may be otherwise if the opinion was not in fact held, or had implicit in it the representation that it was reasonably based on a substratum of fact which was incorrect: RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; Cheshire and Fifoot at [11.116].

14. Thirdly, by virtue of s 51A(2) where a corporation makes a representation as to a future matter and does not have reasonable grounds for making it, the representation is taken to be misleading: CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd (2005) ATPR 40-042. The onus is on the representor to adduce evidence of reasonable grounds: Futuretronics International Pty Ltd. 

15. Fourthly, silence, ie non-disclosure of a relevant fact or matter, can constitute misleading or deceptive conduct in circumstances in which one party is reasonably entitled to expect disclosure of the existence of that fact or matter if known to the other with whom it is dealing:  see Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 at 198-201.

16. Fifthly, put shortly, s 75B of the TP Act provides that if a person is “in any way … knowingly concerned in, or party to” (inter alia) a contravention of s 52 of the Act by another, that person will be liable for that contravention under s 82 and s 87 of the Act.

    (i)        The negotiation representations

17. These can be dealt with shortly.  I have found that, prior to the making of any consignments to Hong Kong and Singapore, TVO and Farmlink entered into an agreement that the prices at which cherries were to be sold to Farmlink were fixed prices.  Implicit in that agreement was the expression of a business judgment that, as and when Farmlink placed an order for cherries for resale to Hong Kong or Singapore, it would be able to make a return for itself on cherries purchased at the agreed prices.

18. Whether Farmlink did or did not have reasonable grounds for such a judgment, whether Farmlink did or did not actually make a return on all or any of its orders, could in reality be of no operative significance to TVO (there being no suggestion that the parties were dealing with each other on the assumption that Farmlink’s capacity to pay TVO depended upon its receipts from its overseas buyers). Nor could it have led Mr Hannaford into an operative error. The price TVO was to be paid was not dependent upon Farmlink’s sale price to its buyers but upon TVO’s contract with Farmlink (whether or not renegotiated for whatever reason including quality defects for which TVO was responsible) and upon its compliance with its contractual obligations (eg s 14 of the Sale of Goods Act).

19. While I do not consider that the alleged conduct gave rise to an actionable contravention of the TP Act, I accept that a judgment such as has been pleaded was probably conveyed to Mr Hannaford before any orders were placed, but in a setting in which it was well understood that agreed prices did not trump quality issues which could reasonably be expected to arise. 

    (ii)       The market representations

20. Of the representations alleged in this category, the first – in conversations from 23 December Ms Churchill said words to the effect that everything was going “all right” to Mr Hannaford – does not warrant serious individual consideration.  The pleading is devoid of detail and of context and is quite unilluminating:  cf the observations of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319. The submissions have not ameliorated this.

21. The representations alleged to have been made in phone conversations around 4 and 6 January 2004 relating to the China market cannot stand in light of my earlier findings.  I have rejected Mr Hannaford’s evidence as to the timing of the operative conversations and I have accepted Ms Churchill’s evidence as to their substance.  They occurred on 3 and 7 January and resulted in Mr Hannaford’s agreement to two price reductions.  These conclusions necessarily must lead to my rejection of both of these allegations of misleading or deceptive conduct.  More significantly, I have found that at the relevant times Ms Churchill did make Mr Hannaford aware of the market conditions in the China market.

22. The final representation of this category was that after 6 January 2004 Ms Churchill had regular telephone conversations with Mr Hannaford but did not advise him of any difficulties with selling TVO cherries in the Hong Kong market save for saying there were allegedly problems with the quality of cherries in one shipment.  An allegation so broadly cast is not only unsatisfactory, it is contradicted by a body of evidence.  I will not reiterate that evidence here other than to note that I have found that on 7 January, Ms Churchill communicated the substance of Mak’s “serious decline” email to Mr Hannaford;  probably on 7 January he agreed to cancel a shipment;  the next morning he suggested a price reduction to which Mak agreed on 9 January;  on 9 January two separate quality complaints were made by Mak, these being the first such complaint made by Mak;  and notwithstanding the above, Mr Hannaford agreed to Farmlink’s “Mud Map” of 10 January proposing four air freight shipments to Hong Kong.  Whatever might be said from this time onwards about the adequacy or otherwise of Ms Churchill’s investigation of the quality complaints made, the burden of the complaint – that she did not advise of any difficulties with selling in the Hong Kong market – is not made out.

23. In the result, I am not satisfied that any of the pleaded contraventions of the TP Act have been made out or that Ms Churchill was knowingly concerned in, or a party to, such contraventions.

24. I would add for the sake of completeness that, as with the negotiation representations, the infringing conduct pleaded here, and the alleged vice in it, are premised upon a characterisation of the TVO-Farmlink relationship which differs in vital respects from that which I have found. 

    (iii)      The “silence” claim

25. This claim is founded on the nature of the relationship between the parties and the negotiation representations allegedly made.  As I have earlier indicated the particular non-disclosure alleged, ie of difficulties in selling at prices such that it could pay the agreed prices, could have been of no operative significance given the true character of the parties’ relationship and of their respective rights and obligations under it.

26. I will order that the TP Act claims against Ms Churchill be dismissed.  Because the claims against Farmlink are premised upon Ms Churchill’s conduct, I will dismiss the claim against it as well.

    2.        The claims against Mr Plummer and Mr Koh

27. The accessorial liability provisions of s 75B of the TP Act have been invoked against both of these respondents. While it is said that they had actual knowledge of the essential matters said to constitute the alleged contraventions of s 52 by Farmlink (via Ms Churchill), for the reasons I have already given, I am not satisfied that those contraventions have been established. Hence I will dismiss the claims against Mr Plummer and Mr Koh. I would add, though, without enlarging on it, that while the claims themselves were based on knowledge allegedly derived from the respondents’ positions in Farmlink, as supplier and buyer respectively of cherries and from alleged communications from Ms Churchill, the evidence adduced could justify no more than speculation about what each respondent knew of the actual circumstances of the TVO-Farmlink relationship and of the conduct inter se of Ms Churchill and Mr Hannaford.

    CONCLUSION ON THE TP ACT CLAIMS

28. I will order that the claims made against each of the four respondents be dismissed.

    THE APPLICANT’S AGENCY CLAIM

29. As an alternative to the sale claim, the applicant has pleaded that, if Farmlink was an agent, (i) it warranted TVO would receive the agreed prices;  (ii) it would indemnify TVO for any loss suffered by its inability to sell at prices that would enable TVO to receive the agreed prices;  and (iii) it was subject to agency duties to disclose material information and to exercise reasonable care and skill.  A claim has been made on the alleged indemnity and for breach of the agency duties.

30. Given my previous findings, it is unnecessary for me to consider this claim.

    THE CROSS-CLAIM

31. Farmlink’s cross-claim as pleaded is curious.  It is founded upon a failure by TVO to supply cherries that met the specifications in the Pre-Shipment Inspection Form with the consequence that:

    TVO was in breach of the [pleaded] Agreement and/or in breach of s 14 of the Sale of Goods Act.

    A claim for damages for these breaches is made, seemingly at least in relation to the s 14 claim, on the basis of sales to Farmlink.

32. A distinct plea is advanced for expenses incurred for export and transport costs Farmlink had to absorb.  The basis of this claim seemingly is agency.

33. The former of these pleas was not opened at the hearing.  Neither was it the subject of oral or written submissions.  And it was quite inconsistent with the case put at trial insofar as it was premised upon the TVO-Farmlink relationship being that of seller and buyer.  Even if it was not abandoned – and I consider it was – it inevitably would have failed for the reasons I gave in discussing “Issues of Quality”.

34. The plea for expenses was opened but was expanded to include a claim for Farmlink’s lost margin on sales.  Counsel conceded that there might be some difficulty with such an enlarged claim, but relied on ordinary agency principles to justify Farmlink’s costs and expenses.  Having rejected an agency characterisation of Farmlink’s position, this claim in turn must fail.

35. I will order that the cross-claim be dismissed.

    CONCLUSION AND ORDERS

36. I am conscious that my conclusions in this proceeding may cause some concerns in the conduct of the export trade in cherries.  What needs to be understood is that those conclusions were based on the evidence, such as it was, that the parties considered appropriate to put before me and on the matters that they chose to put in issue.  Significantly no reliance was placed upon practices and usages in this particular market or on the possible contextual significance of the CISG at least in relation to Singapore.  It need hardly be added that this proceeding demonstrates the obvious inappropriateness of leaving the definition of the character and incidents of a complex, ongoing business arrangement to the inevitable uncertainties of an oral agreement. 

37. I have indicated the orders that I will make.  However, there are outstanding calculations to be made relating to the claim for the loss of use of monies.

38. I will direct that the applicant file and serve on or before Friday, 21 November 2008 (a) draft minutes of order to give effect to these reasons and (b) proposed orders in relation to the claims for loss of use of monies and for interest together with expert calculations upon which the former is based.  I will adjourn the matter for the making of orders until Thursday, 18 December 2008 at 9.00 am. 

I certify that the preceding two hundred and seventy-eight (278) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.

Associate:

Dated:       24 October 2008

Counsel for the Applicant/Cross-Respondent:	Mr C Brohier
Solicitor for the Applicant/Cross-Respondent:	Kelly & Co
Counsel for the Respondents/Cross-Claimants:	Mr M Hoile
Solicitor for the Respondents/Cross-Claimants:	Cowell Clarke

Date of Hearing:	13, 14, 15, 16, 19, 20, 21, 22 and 23 March 2007, 29, 30 and 31 January 2008, 1, 4, 7, 8 and 15 February 2008 and 24 April 2008
Date of Final Submissions:	26 June 2008
Date of Judgment:	24 October 2008

Annexure A

ABBREVIATED SCHEDULE OF EXPORT PACKING ORDERS

Order No.	Date	ETD	ETA	Loading at	Destination and Payment Details
4014	19/12/03	23/12/03 2205	24/12/03 0220	Plummers	Singapore Paid in full
4015	19/12/03	24/12/03 1430	24/12/03 1855	Plummers	Singapore Paid in full
4016	19/12/03	25/12/03 1430	25/12/03 1855	Plummers	Singapore Paid in full
4018	24/12/03	27/12/03 1430	27/12/03 1855	Plummers	Singapore $18,501.50 paid $3,162.50 discount
4013	27/12/03	28/12/03 1150	28/12/03 2205	TVO	Hong Kong Paid in full
4019	27/12/03	29/12/03 1225	29/12/03 1855	Plummers	Singapore $18,870.00 paid $1,275.00 discount
4017	30/12/03	2/1/04 Sea	18/1/04	Plummers	Hong Kong Nothing paid $116,540.00 discount
4020	30/12/03	31/12/03 1430	1/1/04 1210	TVO	Hong Kong $11,903.10 paid $17,846.90 discount
4022	2/1/04	3/1/04 1430	3/1/04 1855	Plummers	Singapore Paid in full
4023	2/1/04	4/1/04 1430	5/1/04 1210	Plummers	Hong Kong Nothing paid $31,050.00 discount
4025	3/1/04	5/1/04 1225	5/1/04 1840	Plummers	Singapore Paid in full
4028	6/1/04	7/1/04 1150 Delayed in Melb.	7/1/04 2205	Plummers	Hong Kong Nothing paid $33,000.00 discount
4031	7/1/04	9/1/04 Sea	18/1/04 Arrived 19/1/04	Plummers	Singapore $30,480.00 paid $29,992.00 discount

4032	Not known	10/1/04 1430	10/1/04 1855	Not Known	Singapore $1,848.00 paid $336.00 discount
4035	9/1/04	11/1/04 1150	11/1/04 2205	TVO	Hong Kong $12,223.60 paid $17,176.40 discount
4033	10/1/04	13/1/04 2205	14/1/04 0220	Plummers	Singapore $9,780.00 paid $17,952.00 discount
4036	10/1/04	12/1/04 1655	12/1/04 2240	TVO	Hong Kong $11,023.80 paid $16,276.20 discount
4037	10/1/04	13/1/04	13/1/04 1925 Arrived 14/1/04 1900	Plummers	Hong Kong Nothing paid $27,600.00 discount
4038	10/1/04	13/1/04 2205	14/1/04 2050	Plummers	Hong Kong $10,873.80 paid $16,426.20 discount
4039	10/1/04	15/1/04 1430	16/1/04 0600	Plummers	Hong Kong $22,253.80 paid $32,978.70 discount
4041	15/1/04	17/1/04 0045	17/1/04 1155	TVO	Hong Kong Nothing paid $70,500.00 discount