John Shearer Ltd & Anor v Gehl Company

[1996] HCATrans 246

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A4 of 1996

B e t w e e n -

JOHN SHEARER LTD and ARROWCREST GROUP PTY LTD

Applicants

and

GEHL COMPANY

Respondent

Application for special leave to appeal

DAWSON J
GAUDRON J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON THURSDAY, 15 AUGUST 1996, AT 10.56 AM

Copyright in the High Court of Australia

MR J.M. WILKINSON:   If your Honour pleases, I appear with MR A.L. DAL CIN for the applicant.  (instructed by Cowell Clarke)

MR P.A. McNAMARA:   May it please the Court, I appear for the respondent.  (instructed by Johnson Winter & Slattery)

DAWSON J:   Mr Wilkinson.

MR WILKINSON:   If your Honour pleases, this application relates to two points of law that we say deserve the attention of this Court.  The first is the implication of an implied term into the distribution agreement covering the situation after is expires when the distributor is left with stock on his hands unable to sell it without being able to supply spare parts for the warranty.  We say there should be implied into the distribution agreement, that, on its termination, the supplier will continue to supply spare parts for a reasonable time thereafter, to enable the distributor to sell the stock remaining on hand, and the ‑ ‑ ‑

GAUDRON J:   But even if you say that, you have got to establish breach.  There seems to be some paucity of evidence that there was any failure to supply spare parts.

MR WILKINSON:   There is no finding of facts, of course, in this matter, your Honour.  But that is the allegation that was made, that there was a failure to supply.  The letters clearly say that they were not going to supply.  There is no finding of fact on which that can be based.  The Court below clearly rejected the fact that there could be any such implied term, and we say that they were wrong in that decision.  The second point is a claim under ‑ ‑ ‑

KIRBY J:   It is asserted that you never defined, which is often the test, with precision the implied term ‑ ‑ ‑

MR WILKINSON:   And that is correct, your Honour, because ‑ ‑ ‑

KIRBY J:   ‑ ‑ ‑ and that you could not really do it because it raises questions of how long, in what circumstances, to where.  There are just so many imponderables that in a commercial dealing, if commercial people want to have such terms, they normally work them out and put them in writing.

MR WILKINSON:   If your Honour pleases, there is nothing in writing here, of course, that is why we are seeking to imply, and we have not precisely set the term out, because ‑ ‑ ‑

KIRBY J:   That is often said to be the test.  It is often only when you actually get to write out the implied term that you find how difficult it is.

MR WILKINSON:   Yes.  We have not go to pleadings or anything of that nature.  We are simply setting up an offsetting claim for the purpose of Part 5.4 of the Law.  So, it is true that we have not precisely formulated it but the concept of what it is, which is really all that is needed to be set up for the purposes of Part 5.4, at that stage, the concept is what we are putting up.  It is capable of being put into words, but it has ‑ ‑ ‑

KIRBY J:   We have to test the concept by the actuality and, even to this point you have not defined with precision the implied term.  The cases say that is often the test, when you actually sit down to write it out, and then you see the imponderables and the uncertainties and the time span and the places and all the other things that make it unlikely that that is something that you say, “Of course, has to be devised”, if you cannot devise it.

MR WILKINSON:   I accept that, your Honour, but the concept of it is clearly devisable and understandable, that the distributor is left with stock at the end of the day which he cannot sell without a supply of spare parts to honour the warranty, and there ought to be implied in it that ‑ ‑ ‑

DAWSON J:   That means you ought to have made provision for it but it does not give rise to an implied term.  With hindsight, you ought to have made provision for it, but ‑ ‑ ‑

MR WILKINSON:   The agreement is silent on it.

DAWSON J:   Yes, exactly, but it is neither a necessary nor an obvious term.

MR WILKINSON:   With respect, your Honour, we would say that it is, in these circumstances, otherwise the ‑ ‑ ‑

DAWSON J:   But, something that is desirable from one party’s point of view, is not necessary or obvious, by reason of that fact.

MR WILKINSON:   No, your Honour, but we would argue that it is obvious that if the parties had addressed their mind to it ‑ ‑ ‑

KIRBY J:   What is the general significance of this; the fact that you omitted, in your business dealings, to work out exactly what you were going to do in the long term?  Why is this a matter of general significance?  This is just another implied term case.  The principles are fairly clear; been stated by this Court in Codelfa and other cases.  What is so special about the case, on this point?

MR WILKINSON:   It is, your Honour, as your Honour puts it, another implied term case but we have been shut out of being able to put such an implied term case by the finding of the Full Court, which we say ‑ ‑ ‑

DAWSON J:   You have not been shut out for the purposes of this litigation.  You put it. 

KIRBY J:   It was rejected.

MR WILKINSON:   Yes, that is what I mean.  We are now shut out of being able to put it, and we say it was wrongly rejected at that point ‑ ‑ ‑

DAWSON J:   The court had to decide the matter and it did.

MR WILKINSON:   That is so, your Honour, and we say, wrongly, and that is why we ‑ ‑ ‑

DAWSON J:   Yes, you do.

MR WILKINSON:   ‑ ‑ ‑ come here, your Honour, to see if we can right it.  And we say that it ‑ ‑ ‑

KIRBY J:   It is just another implied term case, it looks to me, and the principles are clear and they include the test, and can you express it with clarity, precision and with sharpness that you would say, “Of course that was included”, and even to this day you have not defined it.  You just have a vague idea that justice required it and, therefore, it has to be put in.  Our laws of contract between business people are not at that level of generality.

MR WILKINSON:   Well, I cannot take that submission any further, your Honour, except to say nowhere did they consider what was necessary for an implied term.  It was just rejected out of hand on a Part 5.4 application and we say that it should not have been, and that is why we have come here to see whether this Court will intervene in the matter.

DAWSON J:   You had another point, did you, Mr Wilkinson?

MR WILKINSON:   Yes.  The second point, your Honour, is a section 52 point, where we say this distribution agreement started in about 1982 with a two‑year agreement that was rolled over every two years and we say, from the conduct of the parties, and their commitment to each other, we could reasonably have expected it to be continued to be rolled over past the time when it was determined.  We say that the conduct in determining it in those circumstances was misleading and deceptive, and the court below said that we could not sustain that because we had to prove that Gehl Company had the intent to determine it some time prior to when they gave notice in May.

GAUDRON J:   That is not exactly correct, is it?  They said it was hard to see how you could establish that claim unless you did and, again, it really was a criticism of your failure to particularise the precise nature of your claim.

MR WILKINSON:   Your Honour, this is not a normal trial situation.  This is a 5.4 where we simply have to set up an offsetting claim.  So, it does not go on the particularity that pleadings would - - -

GAUDRON J:   No, but you have to give the court something to work on and in this it was really a bare assertion of a claim and - - -

MR WILKINSON:   With respect, there was affidavit - sorry.

GAUDRON J:   - - - the court had to decide if it was a genuine claim, did it not?

MR WILKINSON:   Yes.

GAUDRON J:   And, in the absence of something more particular, it was certainly open to the court to find otherwise, was it not?

MR WILKINSON:   Your Honour, there was plenty of affidavit evidence as to this relationship that was before the court.

GAUDRON J:   Yes, but we are not concerned with the relationship.  You have to establish misleading conduct and you need a little bit to establish a genuine claim.  You need something more than a bare assertion.

MR WILKINSON:   There was plenty more than the bare assertion in the affidavit material which is how these things are fought in the early stages of ‑ ‑ ‑

DAWSON J:   All it came down to was a reliance by your clients on the fact that this situation would continue because it had continued in the past.

MR WILKINSON:   And because of the conduct of the parties.  There was substantial evidence about what they had done in relation to each other in the early part of the year.  They had indicated that this thing would be rolled over again.  But what we say is that the court went wrong in saying that we had to show that they had an intent to do this prior to the time in May when they indicated they were not going to extend.

DAWSON J:   Yes.  In other words, they could form quite quickly an intention to do something which they had not thought of before.  There was no reason why they should not.  The contract allowed them to do that.

MR WILKINSON:   Except that the expectation had been created by the ‑ ‑ ‑

DAWSON J:   No doubt there were expectations but that does not mean that there is misleading conduct.

MR WILKINSON:   At the end of the day - and, of course, that is what a court - - -

DAWSON J:   Anyway, it is an issue which, on the evidence - and you say there was plenty of evidence in the affidavits - the court came to a particular conclusion and it is not possible to say that that conclusion was a wrong conclusion.

MR WILKINSON:   With respect, your Honour, we are saying it was based on a wrong understanding of the law, that we had to prove their intent in order to succeed in our section 52 case.

KIRBY J:   The respondent conceded that you did not have to prove it as a matter of law.  The respondent concedes that you do not have to prove intent.  That is clear, I think, that is not as a matter of law a prerequisite.

MR WILKINSON:   That is what their Honours found in the Full Court, that - - -

KIRBY J:   Where is the passage you say most clearly indicates that they found it?

MR WILKINSON:   At application book, page 58, your Honours, line 25:

It is hard to see how Shearer could succeed in any claim under the Trade Practices Act reliant upon a failure by Gehl to inform Shearer, unless Shearer could prove that Gehl had, at a date earlier than May 1994, decided to terminate but had refrained from advising Shearer of this decision, leaving Shearer to continue to make orders for goods to its detriment.

KIRBY J:   I just do not read that as saying that you have to prove the intent of Gehl.  It is saying that, looking at the facts, that that is a fact that would have been critical for that determination.

DAWSON J:   It follows too because if they had no intention, in fact, up to a certain point of time intended to continue but then changed their minds, their conduct up to the point where they had changed their minds could not be misleading.

MR WILKINSON:   If they created the expectation that it would continue and then they terminate it, that could be, with respect, misleading and deceptive.

DAWSON J:   No.  They are not deceiving anyone.  Their conduct was quite in accordance with their intentions at the time.

MR WILKINSON:   But, at the time, they were creating a future expectation - - -

DAWSON J:   What you say is only because it was a situation in which they could change their minds.  Well, it was.

MR WILKINSON:   We say that given the conduct of the parties, if the matter had gone to a trial, they were not in a position, without being misleading and deceptive, to change their minds at that point in time without some - - -

DAWSON J:   You do not need a trial to determine that issue.

MR WILKINSON:   We certainly, with respect, do not have to prove - I mean, it would be impossible for us to prove their state of mind prior to May 1994 other than in exhibits from their conduct.

DAWSON J:   Maybe but what you did have to be able to prove is misleading conduct or deceptive conduct.

MR WILKINSON:   Yes, that is so, your Honour.  We say, your Honour, that that is an incorrect view of the law and it ought to be the subject of a look from this Court.  I am not going to get any better by going on; unless I can assist further, your Honour.

DAWSON J:   Thank you, Mr Wilkinson.  We need not trouble you, Mr McNamara.

There is no sufficient reason to doubt the conclusion reached by the Full Court of the Federal Court in this matter.  Special leave to appeal is accordingly refused.

MR McNAMARA:   May it please the Court, I seek an order for costs.

DAWSON J:   You cannot say anything about it, Mr Wilkinson?  With costs.

AT 11.10 THE MATTER WAS CONCLUDED