Jointgood P/L v Tuna Boat Owners Assoc of Aust Inc No. Scgrg-93-2360
[2000] SASC 333
•11 October 2000
JOINTGOOD PTY LTD v TUNA BOAT OWNERS ASSOC OF AUST INC
[2000] SASC 333
WILLIAMS J.
The nature of the dispute
Mr Chang King-to is an aquaculture expert. He is the principal of the plaintiff company which has sued the defendant Association alleging a breach of the contract under which Chang (via his company) was engaged as consultant to an experimental commercial tuna fish farming project at Boston Bay, Port Lincoln. The plaintiff alleges that in addition to a consultancy fee (at a fixed annual rate), it was entitled to a commission of 20 per cent of the sale price of the Southern Blue Fin (SBF) tuna which were the subject of the research project. When the immediate experiment had run its course, there remained from the trial approximately 550 live tuna (sometimes called “the remaining fish”) within the farm (214 larger fish caught in 1991 and 336 smaller fish caught in 1992); the plaintiff claims an entitlement to 20 per cent of the market value of these fish which it contends ought to have been sold as part of the winding up of the experiment on 31 May 1993 or thereabouts. A further 964 wild tuna, (sometimes called the “additional fish”), were captured and penned on about 19 May 1993 - that is to say, a few days before the conclusion of the project. The defendant contends that these additional fish were brought in for the purposes of anticipated future trials, however, the plaintiff contends that it is also entitled to commission on the market value of these fish.
The plaintiff’s consultancy contract, (which provides for the payment of commission), is silent as to detail associated with the winding up of the project at the beginning of June 1993. The plaintiff contends that a term should be implied in the agreement so as to require all fish to be disposed of commercially at the end of the project (except perhaps a limited number of tuna to be retained for experimental purposes associated with breeding). Central to the dispute is an issue as to whether such a term is to be implied, and as to the number of fish (if any) in the farm as at 31 May 1993 which are to be treated as subject to an exemption from sale for the purposes of future experiments.
The plaintiff also relied upon assurances allegedly given to him between July 1990 and June 1991 (when the consultancy agreement was being negotiated) as bearing upon the terms to be implied into the agreement and as the basis for a separate claim alleging misleading conduct under the Fair Trading Act 1987.
The defendant, as its name implies, is an Association of tuna boat owners. The Association resolved to investigate the feasibility of growing and harvesting SBF tuna for the Japanese sushemi market. The identified demand is for a high quality large whole raw fish being gutted, gilled and chilled for delivery in Japan within about two days of slaughter in Port Lincoln. The concept involved catching wild tuna offshore, and then fattening the fish in net cages supported by pontoons in Boston Bay until they reach optimum weight upon a diet of pilchers or substitute food pellets - eg grain. Instead of having a value of about $1.30 per kg upon sale to the Port Lincoln cannery, the expectation was that the prime whole fish could be sold for about $35 kg on the Japanese market (after allowing a 15 per cent weight loss during processing).
The immediate question to be determined by the tests was the feasibility, (technically and commercially), of such a project. Whether fish could be encouraged to spawn in captivity in Boston Bay, and whether the eggs could then be fertilised and developed into viable juveniles within the controlled environment of a fish tank were questions for the future.
Mr Chang in his evidence drew a distinction between “ranging” and “farming”. “Ranging” (to him) involves capturing and fattening wild fish for market. “Farming” involves a breeding programme. Chang acknowledged that at all relevant times he understood the trials to be for a fish farm although as regards the choice of location, he had his doubts concerning the prospects of success with respect to spawning in Boston Bay. It is known that in the wild, tuna reach maturity at about the age of 8 years and reproduce in the warm waters of the Java sea. The ocean currents then carry the developing juveniles into Southern waters. What part nutrition plays in the life cycle of tuna invites investigation; there is also a question as to a possible link between fish diet (nutrition) and breeding programmes.
The experiment to which Mr Chang was consultant has been most successful in terms of the capture, fattening and marketing of wild tuna. Whether spawning is achievable in Boston Bay, and whether breeding is feasible within the confines of a nearby shore based enterprise still remain open questions for further investigation.
The Tripartite Agreement and its significance
On 13 December 1990 the defendant entered into an agreement (the Tripartite agreement - Exhibit P5) with the South Australian Minister of Fisheries and The Overseas Fishery Co-operation Foundation (OFCF) of Tokyo. The latter is an agency of the Japanese Government which was interested in the possibilities of the scheme but was not itself interested in deriving profit from the venture. The Tripartite agreement was essentially for a collaborative scientific experiment in which the Japanese agreed to contribute the cost of fish feed. The project was for an experimental commercial fish farm which would prove up the feasibility of catching SBF tuna in South Australian waters and fattening the fish for the northern hemisphere premium sashemi market. The experiment proceeded upon the assumption that the highest and best use of these tuna was not in a Port Lincoln cannery but upon the table in Japan.
The Tripartite Agreement provided for a project to be undertaken in accordance with an implementation plan (agreed between OFCF and the defendant) attached to the agreement. The agreement and plan specify that the project will continue until 31 May 1993, but acknowledged that the period of the project could be extended or shortened, subject to agreement among the parties. The subject of the project is “to conduct a feasibility study of SBF tuna farming (grow out)”. The Implementation Plan provides in par 5(f):
“Reproductive Studies: An agreed number of fish will be retained for life cycle studies, breeding and other related issues.”
I am satisfied that Chang at all relevant times was aware of the thrust of the Tripartite agreement and of the plans to retain fish for studies concerning reproduction. He was present in Japan when the agreement was being negotiated. Chang was also present at a meeting of the project management committee on 26-27 January 1991 (see the minutes Exhibit P47 p 232). The minutes show that at this meeting:
“Dr Suda also emphasised that it was worthwhile keeping some big fish as an experiment. Mr Clarke supported this as a necessary way of getting growth rates for the second year, and developing broodstock.”
The project represented by the Tripartite Agreement faced and overcame many hurdles. By experiment a method was found for catching the fish at sea in nets and then towing them very slowly to harbour. A method was derived for facilitating the tow by the weighting of the forward end of the net. It was found that fish could not be introduced into freshly laid harbor pens until the nets had fouled with the effluxion of time. In this way, the fish were enabled to see the nets and avoid the stress of knocking themselves against the cage. Methods were found to round up the fish with subdivisional nets within the cage for harvesting purposes. Methods of packaging chilled fish in containers for air transport were worked out. All in all, the immediate aim of the project was satisfied, and in May 1993, the defendant was anticipating moving on to new trials but without the continuance of financial support from Japan in terms of feeding costs. The precise nature and objectives of these further trials is not in evidence, but I conclude that there was some change in direction at the end of May 1993 when OFCF ceased to be entitled to influence the policy of the farm. For the purpose of the trials, it was necessary to accommodate and build up a substantial stock of fish each year. Estimates vary as to this numerical requirement (depending upon the estimator’s definition of the objectives) but the retention of something in the vicinity of 200 fish per year was debated in evidence; Mr Chang suggested keeping 200 fish in 1992. In his evidence Mr Chang accepted that to get fertilised eggs from a spawning project an estimated 500 fish would be needed (T283-4). It is necessary to slaughter a number of fish on each occasion that a step is taken in an experiment in order to study the physical state of the fish in the particular season and under the chosen conditions.
In the overall interests of science it was therefore necessary that the search for knowledge progress from one stage to the next. It would be obvious to anyone such as Chang when entering upon the project, that the retention of a reasonable quantity of fish could be expected as part of the routine of scientific research.
In my opinion, the contract to which the plaintiff was a party was negotiated against the general background which I have outlined.
It is of course easier with the benefit of hindsight to identify the long term project and its stages. I have not overlooked the fact that I have the advantage of scientific answers obtained in the course of a successful project. However, if asked at the time when the plaintiff’s contract was made, the parties would have affirmatively answered “of course” to the crucial question as to whether fish would be retained for future study. Having regard to the scientific aims of the undertaking, a decision to dispose of all the remaining fish in June 1993 could be regarded as containing an element of irresponsibility bearing in mind the potential scientific value of the tuna, and the circumstances in which they had been nurtured at the expense of an overseas government agency for the purpose of promoting research. The tripartite agreement itself provided that at the conclusion of the project the Minister will “accept the transfer to him of all equipment and materials” associated with the project (see cl 6(3)(b) of the agreement). The plaintiff places considerable store on this clause as supporting an argument that the live fish, owned by the defendant in terms of cl 5(a) of the implementation plan would have no home if the fish cages were surrendered to the SA Government at the conclusion of the project. Against this must be brought to account the fact that the Project Management Committee constituted under cl 9 of the agreement had control of decisions as regards harvesting (cl 5(a) of implementation plan).
Mr Chang was engaged as an expert consultant to the venture. His advice was invaluable and enabled the problems to be identified and solved. He has impressive professional qualifications. However, his interest in the project was not idealistic. From Chang’s point of view, the plaintiff was contracted to the project to make money. That is not a criticism of Chang. In a sense, the aim of all commercial endeavour can be expressed in terms of financial advantage.
In my opinion, for present purposes the plaintiff’s contract should be regarded as auxiliary to the fish farm venture. The purpose of the venture was to gain scientific knowledge from the test alongside information as to the commercial feasibility of tuna fish farming in Port Lincoln for the lucrative overseas markets. The aim of the trial farming project was not to make money, although the successful exploitation of the fish commercially generated a flow of money which minimised the need for the association to find monies elsewhere - whether from its own accumulated resources (if any), government grants or calls upon the association’s members. The proving up of a new industry was the purpose of the project. It was not a partnership for which the primary aim is profit. The plaintiff was engaged as an adviser in a search for knowledge. In the course of that search it was necessary to sell fish. The farming venture stood to be assessed by reference to sales in the ordinary course and the venture in this sense resembled a commercial undertaking. I find that at the time of making the consultancy agreement, the unspoken expectation of the parties to this action was that the fish would be sold as they were brought to their prime, but subject to the operational requirements of the project.
The plaintiff’s consultancy contract
Against this background I turn to the terms of the actual arrangement between the parties. It was made in the knowledge of the arrangements contained in the Tripartite agreement. Whether Mr Chang had actually seen that document is not known. I am satisfied that the plaintiff (through Mr Chang) was aware of the climate in which its contract had been made. In particular I find that Mr Chang was aware that studies were proposed regarding breeding and life cycles of tuna.
In my opinion, the consultancy contract is contained in a letter dated 4 June 1991 (Exhibit P6) from Chang to Jeffriess upon which Jeffriess has endorsed his own signature as president of the defendant association. The body of the letter reads as follows:
“CONSULTANCY WITH ATBOA
This is to confirm that our company accepts to extend the interim consultancy with ATBOA to a long-term one as follows:
(a).... The next phase of the consultancy is from June 1, 1991 to June 1, 1993, i.e. to the “official” end of the current research project. However, we are well aware that the research project is likely to run to at least November 1993 and if so this phase of the contract will run to the end of the research project.
(b)The ATBOA, or its Member Companies, will then enter a new contract with our company. The terms of that contract will depend on the progress on the project and our own choice of options on employment.
(c)It is confirmed that the current contract from June 1991 to June 1993 is on the following terms:
Payment at the rate of $50,000 per year, paid monthly instalments depending on the extent of service carried out that month, plus
Twenty per cent (20%) commission on the gross selling price of the fish in 1991 and 1992, (and in 1993 if sold under ATBOA control) net of marketing and processing expenses. The potential income from this commission has been discussed at length with us on a no-commitments basis. We note that one conservative scenario is to assume we market 600 fish at 23 kg...at $25/kg. gross price minus $6/kg. marketing/processing costs. This would leave us with approximately $50,000 commission on full marketing of one season’s growth, and
A guaranteed annual income of $65,000.”
The guaranteed minimum income as abovementioned has been satisfied and is not an issue. The guarantee is only of importance in that it limits the speculative nature of the plaintiff’s entitlements. Arguably, the vicissitudes associated with the venture were such that the guarantee and an understanding as to good faith were the only matters which were firm. Everything else depended upon the success of an experiment and the precise form of the experiment.
The formal agreement was preceded by oral and written negotiations. By letter dated 29 August 1990 (Exhibit P2), the defendant proposed the outline for an agreement. By letter dated 28 December 1990 (Exhibit P3), Mr Chang develops the proposal. He was present in Japan when negotiations for the Tripartite agreement were conducted. Mr Chang came to Port Lincoln and started work full time in about January 1991. Until the agreement of 4 June 1991 was signed, the relationship was governed by oral discussions supported by the memoranda to which I have referred, together with a handwritten note (Exhibit P4), written on behalf of the defendant which sets out the essentials of the remuneration package which were then not fully defined. However, Mr Chang relocated his family to live in Port Lincoln based on these interim arrangements.
The plaintiff’s claim in monetary terms
21.............. The plaintiff alleges that its commission should be calculated at $35 per kilogram upon the estimated market weight of the fish in the cages in May 1993. The plaintiff seeks to treat the large fish (caught in 1991) at a nominal weight of 48 kgs each, the smaller fish (caught in 1992) at a nominal weight of 30 kgs, and the additional fish (caught in May 1993) as being 17 kgs each.
The plaintiff’s claim to 20 per cent commission is then calculated as follows:
550 “remaining fish” (caught 1991 and 1992)
214 fish x 48 kgs = 10,272 kgs
336 fish x 30 kg s = 10,080 kgs
Total 20,352 kgs
Nett proceeds: 20,352 kg x $35 per kg = $712,320
20% commission $142,464
964 “additional fish” (caught May 1993)
964 fish x 17 kgs = 16,388 kgs
Nett value @ cost: 16,388 kgs x $4.50 per kg = $ 73,746
20% commission $ 14,749
Total Commission $157,213
During the course of the trial it became common ground that upon gutting and gilling the fish would lose approximately 15 per cent weight; that has not been brought to account in the above calculation. In the case of the 550 fish, if this adjustment were made, 20352 kgs would reduce to 17299 kgs, worth $605472 upon which 20 per cent commission would return $121094.
The plaintiff abandoned at trial a claim for exemplary damages.
As well as these claims, the plaintiff expresses its case further and in the alternative, upon the footing that the defendant prematurely terminated the plaintiff’s engagement before the research project had been wound up, and without giving the plaintiff a proper opportunity to be introduced into other work. The plaintiff seeks compensation for these lost opportunities at upwards of $20000. When interest for about seven years is added the plaintiff’s claim becomes about $250,000.
An analysis of fish slaughtered and sold from the defendant’s fish farm shows the following information which is crucial to the plaintiff’s case.
| Quarter | Number | Weight | Av Weight/Fish |
| Mar-92 | 56 | 1316 | 23.50 |
| Apr-92 | 0 | 0 | |
| May-92 | 30 | 752 | 25.07 |
| 86 | 2068 | 24.05 | |
| Jun-92 | 24 | 617 | 25.71 |
| Jul-92 | 0 | 0 | |
| 24 | 617 | 25.71 | |
| Total | 110 | 2685 | 24.41 |
| Quarter | Number | Weight | Av Weight/Fish |
| Mar-93 | 76 | 1666 | 21.92 |
| Apr-93 | 25 | 720 | 28.80 |
| May-93 | 0 | 0 | |
| 101 | 2386 | 23.62 | |
| Jun-93 | 94 | 3052 | 32.47 |
| Jul-93 | 108 | 3694 | 34.20 |
| Aug-93 | 49 | 1520 | 31.02 |
| 251 | 8266 | 32.93 | |
| Total | 352 | 10652 | 30.26 |
The plaintiff contends that in anticipation of the plaintiff’s contract coming to an end on 1 June 1993 or thereabouts, the defendant held back fish from sale as the termination date approached and then resumed sales with some vigour in June 1993 and thereafter (as the abovementioned table demonstrates).
Even if the defendant were entitled to hold back a reasonable quantity of fish as the nucleus for further investigations, the plaintiff contends that the defendant has acted unconscionably in depriving the plaintiff of commission upon the sales which occurred. Even if the defendant were permitted to withhold for future trials (say) 100 fish from the 1991 catch and a further 100 fish from the 1992 catch, the plaintiff would claim that a balance should be brought to account at $35 per kg being the approximate price obtainable in June 1993.
If that claim were recognised the result would be as follows:
| Fish | Weight | Gutted | Price | $ | 20% |
| 114 | 48 | 0.85 | $35.00 | 162,792.00 | 32,558.40 |
| 236 | 30 | 0.85 | $35.00 | 210,630.00 | 42,126.00 |
| 373,422.00 | 74,684.40 |
If the retention of 200 fish per year were reasonable, then there remained 14 fish for the 1991 year (average 48 kgs) and 136 for the 1992 year (average 30 kgs).
The value of these fish and commission at certain assumed prices in April 1993 and June 1993 respectively would be as follows:
At April 1993 price: ($21.80 per kg)
1991 Fish:
14(fish) x 48 (kilos) x .85 (gill/gut) x $21.80 (April price) = $12452
1992 Fish:
136(fish) x 30 (kilos) x .85 (gill/gut) x $21.80 (April price)= $75602 $88054
Commission at 20% = $17610At June 1993 price: ($35 per kg)
1991 Fish:
14(fish) x 48 (kilos) x .85 (gill/gut) x $35 = $ 19992
1992 Fish
136(fish) x 30 (kilos) x .85 (gill/gut) x $35 = $121380
$141372
Commission at 20% = $28274.
The witnesses
Mr Chang and Mr Jeffriess (the professional secretary of the defendant) gave evidence. Mr Chang was unimpressive as a witness. I reached the conclusion that Mr Chang in evidence sometimes would say whatever he considered would advance his monetary claim. His credit was severely dented in cross-examination. Although he was clearly knowledgeable in technical matters, I would be slow to rely upon his evidence for anything which mattered in this case. The point at which the truth of his evidence blends with statements of convenience is difficult to discern. Except to the extent that his evidence is otherwise supported, I would not rely on it and I would prefer the evidence of Mr Jeffriess.
The evidence of Mr Jeffriess by contrast was most satisfactory. Although he is not a scientist, he obviously learnt a lot as executive director of the project. I accept his evidence in its entirety. He was pressed in cross-examination regarding a letter which he wrote to Mr Chang (Exhibit P17), suggesting that he withdraw his own application for a fish farm licence under the Fisheries Act 1982. He suggested to Mr Chang that he withdrew his application to avoid a “bloody confrontation” with the Tuna Boat Owners.
Mr Jeffriess accepted in his evidence that this was an overstatement. However, he was becoming exasperated that Chang would not accept some advice as given in the letter. I consider that Chang seized on that letter and the statement to which I have referred as his reasons for his actions. I have discounted Mr Chang’s explanation, except that I accept that he did withdraw his application for a fish farm licence by reason of Mr Jeffriess’ letter. Nothing turns on this fact at the end of the day.
I am satisfied that by about March 1993, Mr Chang (who is an intelligent and perceptive man) had worked out for himself that in view of the objectives of the Management Committee under the tripartite agreement, there were a considerable number of fish likely to be left in the Boston Bay fish pens in the ordinary course at the end of the contract. The Japanese were quite firm as to where the project was heading and used their influence in terms of setting operational policy. Being aware of policies which the Management Committee had formulated, Mr Chang set about trying to bring about a situation in which these fish would be sold. In my view he tried to manipulate the situation for his own advantage. There is nothing wrong with that. However his actions must be assessed in light of his appreciation of the true situation, namely that he had no entitlement to the sale of fish (earning him commission) in respect of an undisclosed number of fish. It was vital to the success of a continuing research project that there be an accumulation of fish of known age (insofar as this can be judged) and history.
I infer that Mr Chang always well knew that spawning experiments required the build up of large quantities of stock for later study. He was dismissive of those spawning experiments in Boston Bay. In my judgment his attempts to justify the killing and sale of all fish at the end of the experiment were unconvincing. He argued in the course of his evidence that a certain amount of important information could be gathered from a study of the gonads of the slaughtered fish. He argued that there was important scientific information “locked up” in the live fish which could be retrieved when the fish were killed and examined. He contended that the current experiment could not be regarded as complete until the fish were marketed - at which time commission was payable.
I should observe that although English is not the plaintiff’s first language, his command of English is excellent but his pronunciation is sometimes a little difficult to understand. I have made allowance for the fact that he might not “think” in English. Mr Jeffriess was prepared to give Mr Chang an excellent reference. Mr Chang has a strong desire to make money and his desire to better himself financially is so strong that it clouds his perception of events. Mr Jeffriess went out of his way to assist Mr Chang in his endeavours to better himself in Port Lincoln. A friendship developed between the two men. I was impressed by Mr Jeffriess’ tolerance of Chang’s attitude towards him. There was a stark difference in the attitude of each man towards the other.
During the period April 1993, the orderly sale of fish slowed to a halt until June 1993. The plaintiff suggests that this was done to deprive it of profits. I do not consider that this attack upon the bona fides of the defendant or its members or Mr Jeffriess as executive director has been supported by the evidence. I accept Mr Jeffriess’ explanation as to why harvesting of tuna ceased in May 1993 and thereabouts.
It should be a matter of record that the plaintiff made some serious allegations in its pleadings which the plaintiff did not pursue at trial; the allegations in par 38 of the statement of claim were not pursued and par 39 was modified at trial. It is sufficient to say that these allegations (which have no basis) did not enhance Mr Chang’s standing in my eyes. Nevertheless, I have made allowance for the fact that Mr Chang is a very intense person.
A set off
The defendant claimed to have available, a set off totalling $23400 as appears from the defence. The statement of claim contains a detailed statement of accounts as an allegation. It is apparent that $20000 actually received by the plaintiff has been omitted from those accounts (as the plaintiff acknowledged in the course of opening). By production of receipts the defendant was able to prove in cross-examination of Mr Chang that a further $3400 had been paid by the defendant for which credit had not been given in the statement of claim. The set off of $23400 has been proved but there is no counterclaim for repayment. In the result upon the taking of accounts, the defendant establishes a “cushion” of $23400 against any liability which may be established against it in this action.
A claim for premature termination
The agreement dated 4 June 1991 included a provision that ATBOA or its members will enter into a new contract with the plaintiff at the termination of the research project which had its “official end” on 1 June 1993. The plaintiff complains that in lieu of that agreement and verbal assurances given to Mr Chang, the defendant was liable for bringing the arrangement to an end in May 1993.
In my view, the so-called agreement in this respect was but an agreement to make an agreement and gave rise to no enforceable contract. However, it might be construed as bearing upon the reasonableness of the actions of the defendant in terminating the engagement of Mr Chang at short notice in May 1993.
In my view, the evidence is that there was a mutual parting of the ways in May 1993, although Mr Chang was not required to attend the project in its closing days. Mr Chang’s correspondence since March 1993 shows his lack of interest in remaining with the project (see for example Exhibit D 71). The inference which I draw is that Mr Chang obtained a personal reference (P 21 and D 70) in anticipation of pursuing other interests.
A meeting between representatives of OFCF and ATBOA in Port Lincoln on 4 March 1993 was attended by Mr Chang. It was clear from the minutes of that meeting (Exhibit P 23) that the project would end on 31 May 1993, and that the South Australian Government would have to agree to any further use of the pontoon equipment. The experimental nature of any continued use of the farm area was emphasised.
Jeffriess’ letter of 31 March 1993 to Chang (Exhibit P 24) included the following (P487)
“4..... ...I accept your decision that you no longer want to work for the ATBOA and that you want to be your own boss with your own thing, but it is just not that easy any more.”
As from 1 June 1993 financial responsibility of the Japanese interests for feeding the fish came to an end. The financial ability of ATBOA to continue to pay commission on sales thereafter was seriously reduced. Mr Chang was interested in the financial opportunities which might be available to him in Port Lincoln. He was interested in developing his own fish farm. The evidence suggests to me that by the time of Jeffriess’ letter of 31 March 1993 Chang was ready to move on and that Exhibit P 24 was a fair reflection of the climate. Mr Jeffriess explained the changing environment with which Mr Chang was faced (see T440-2). By allocating a pontoon area to Mr Chang out of its own reservation in Boston Bay, I consider that the defendant was generous. In light of a glowing personal reference about Chang (which genuinely reflected Mr Jeffriess’ beliefs), I consider that the defendant has discharged any residual obligation which could be said to arise under the consultancy agreement in the winding up of the arrangement.
The numbers of fish to be retained
In the early discussions to which Mr Chang was party in January 1991, he raised the topic of keeping fish for spawning experiments (T227). He acknowledged that five hundred fish might be required.
In cross-examination of Mr Chang the following exchange took place (T237):
“Q.... Why did you suggest that fish be retained.
A.That because the mention of us spawning in the first management meeting, it just be logical that they keep some fish back if they are interested in the future to go into spawning, because spawning is a very important part of any aquaculture, fishing farming activities. Without spawning some people don’t even say it’s fish farming. They just say we be ranging.”
A management plan was discussed at a meeting between the defendant and OFCF on 4 March 1993 (P23). Earlier, on 25 February 1993 (D62), Mr Jeffriess had raised questions of policy objectives with OFCF; it was clear from the letter that ATBOA had in mind the retention of some older fish for further experiments. It was after the meeting on 4 March 1993, (which Mr Chang attended) that he raised the question of future sales policy with Mr Jeffriess (P20) and promoted with others the idea that all fish should be sold before the termination of the project. These other people were the representatives of parties to the Tripartite Agreement.
On 10 March 1993 Chang wrote to SA Fisheries (Mr Lewis - Exhibit D41):
“It is to our understanding that all experimental fish be harvested and marketed before the termination of the project.”
And on 6 April 1993 (D42):
“...Why Koga thinks that he can manipulate my commission?
I have mentioned my worry to my accountant, Ron Davies, during our meeting on 3rd April. He can only offer to write an introduction letter for me to a lawyer that he has dealings with before. A copy of the letter is also enclosed.
It seems more and more to me that my only hope is that they market most fish before the termination of my contract. As I have no bargaining power with them any more, I can only hope that you could put your foot down, and at the same time convince OFCF that all or most fish should be harvested and marketed before the official termination of the project, as there are a(sic) lots of base line study data locked up in the fish.”
And on 18 April 1993 (D43):
“Yesterday I have an un-official indication from Koga that they plan to have the last harvest on 26 April, 1993 of only about 30 fish. It seems that they do not plan to harvest all or most of the experimental fish.
Do you think if it could be of any use if I appeal to the Minister of Fisheries or the Minister (the then Minister of Fisheries) ?? or the FRDC?”
On an unknown date (but probably 19 March 1993 (D44) Chang wrote to Dr Suda of OFCF:
“It is our understanding that at the termination of the project all experimental fish will be harvested and marketed.
At the same time, I hope you do agree that it is important to the project that before the termination of the Experiment Project that most of the experimental fish should be harvested and marketed that a accurate report and conclusion can be written about the Experiment. There are a lot of important base line study data locked in the un-harvested fish.
During the meeting on 4th Mar.,93, it has been established that even if ATBOA would go into future breeding program, they only need 100 fish per year class for that Project.
But they have now postponed harvesting with close to 600 fish in the farm until after the termination of the project and my contract.
I hope you and OFCF would agree that we should keep on harvesting until there are 100 fish per year class left before the termination of the project.”
I draw out of all this the conclusion that as known to Mr Chang, a policy decision to retain some 600 fish was made at the meeting of 4 March 1993. The subsequent actions of the defendant are consistent with such a decision. If that were the management committee’s decision, then ATBOA was bound by it. If that decision were made in the ordinary course, then I consider that the plaintiff’s arrangements with ATBOA must give way to the operational decisions made under the Tripartite agreement.
Mr Jeffriess’ evidence confirms the general thrust of a policy decision at the meeting on 4 March 1993 (Exhibit P23 p3) that there was interest in continuing spawning experiments involving Japan Tuna Federation (on a non-commercial basis) after 31 May 1993.
In cross-examination of Mr Jeffriess there were the following exchanges (T484):
“Q.... Do you say there was any decision about how many fish were to be kept at that time, or not.
A.There was a general direction for how many initially to keep, and it was about 600. The specific amount to be kept was to be decided later in final discussion, as it was, on 30 April and confirmed on 1 May between the two parties to the implementation agreement.”
And (T485-486):
“Q.... What I’m suggesting to you is that, as far as OFCF was concerned there was no decision as to what was going to happen on the experimental farm after 31 May.
A.No, what there wasn’t a decision of by OFCF was as to what the relative contribution between them and the Japanese federation was. What they were arguing internally about, which was none of their business, to some extent, was if there were two experts retained, as there were, Koga and Hamano, who paid for who. Now, Japan tuna refused to pay for Koga and they only wanted to pay for half of Hamano. ATBOA said that wasn’t acceptable, because they said they had contributed enough to the project already, and it was an issue between those two, an internal funding issue. OFCF background at that stage, because of the declining interest rates in Japan, their whole funding is dependent on interest income from a government grant....”
And T487-488):
“Q.... In fact, there were an extra 964 fish released into the farm in May; is that right.
A.Yes, May 23, yes.
Q...... That was part of the long-term commitment with the Japanese, wasn’t it.
A.And to SARDI and to a range of feed manufacturers, yes.
Q...... And, in fact, what you were expecting to bring in was quite a few more than that.
A.Well, we’d hoped to bring in 1400, yes.”
It is apparent from mid 1991, that ATBOA was looking at the possibility of promoting and maintaining a spawning and breeding study with the support of Commonwealth Government grants if available. Mr Jeffriess explained the extent of the commitment given to the Department of Primary Industry (Fishing Industry Research Council) when cross-examined about Exhibit P11 which discloses an objective of examining “the possibility of Breeding SBT”.
At T492 the cross-examination proceeds:
“Q.... ...This is part of the document that you sent off to the Department of Primary Industry in Canberra that we looked at earlier. Your continuing application sets out objectives, and that includes the ‘growing out of SBT in pontoons to assess growth rates, food conversion ratios, preferred feed, influence on water quality, to assess the quality and market acceptance of farmed SBT and, amongst other, to examine the possibility for breeding SBT.’ You were still telling the government, in May 1992, that there were all these possibilities, but no-one had actually decided whether that was to be a specific objective of the project or not, had they.
A.It had been part of the application to FIRDC and therefore when you put it as an objective to FIRDC, that’s a contractual commitment to proceed with that. That’s the way that system works.”
And at T494-495:
Q...... What I’m suggesting to you is that on the one hand you keep trying to tell us that you were bound by the tripartite agreement in certain things, but what you were really doing was keeping it as fluid as you could as to precisely what was going to happen at the end of the project, weren’t you.
A.No, not at all. I was in the middle of negotiating with OFCF on what type of expertise, paid by someone, whether it be them or someone else, they might be able to provide us with for breeding. As I said, all the intellectual capital of breeding tuna in the world existed, as far as I knew, in Japan, and they were doing it in Morocco and Panama. It would be unrealistic to believe that you could do it yourself without their expertise, or certainly you would be wasting a lot of time trying to do it without their expertise.”
In my opinion the evidence establishes that the retention of 550 “remaining fish” was in accordance with operational requirements to protect the future of the experimental farm, and consistent with overseas practice in experimental fish farms. The decision was a prudent one bearing in mind the uncertainties which surrounded the long term project.
Decisions made to sell fish in June 1993 were made in the course of a new project involving an investigation of feeding.
I accept the following evidence given by Mr Jeffriess in his examination (T444-445):
“Q.... How did you arrive at the figure of 550 fish as the fish to be retained.
A.Well, we had always - I’d always perceived, anyway, that 200, at least, from each year class was the appropriate amount. That was based on some Japanese advice, based on some rough rule-of-thumb calculation advice from the CSIRO. Now, the Japanese, the OFCF argument, and the argument of some of the tuna owners, was that poaching, they believed, had been reasonably significant. I wasn’t sure about that, so that didn’t play a big part in my mind. But the second part, second issue, and this was a risk management approach, a second issue was our obligations under the tripartite agreement. It wasn’t up to me to make that decision unilaterally, or the tuna boat owners, or whatever it may be, this was a joint decision to be made by the tuna boat owners and OFCF. They felt reasonably strongly at that meeting that, in fact, we hadn’t kept enough fish. There was a whole range of other factors we thrashed out before and at that meeting on 30 April, which the Japanese put to me, and I accepted as perhaps indicating that we might have kept more. For example, just the addition of issues, like the necessary harvesting of the fish to assess the gonad growth each year; remember these fish weren’t going to spawn, at best, we thought, until 1998 or 1999 even. The second thing was that we’d had significant mortalities in ’92, in the winter, that was in June, and, to a lesser extent, July. Were those going to be repeated? Those mortalities actually concentrated on the bigger fish, so that was a risk that we were taking. We were also - the experience in Morocco was that any kind of natural weather event could, you know, have a major impact on your fish, as proved in Morocco later, that all their spawning fish were wiped out in a storm. There was - I didn’t quite understand totally, but the Japanese insisted, and I understand it subsequently, that you have to have a substantial feed program to your spawning program for the two reasons that if you’re going to accelerate the maturation of the fish, then you really need to somehow transfer hormonal, or artificial hormones to them, and the only vehicle you can have to do that is a pellet. There’s no other way you can do it....”
There was some evidence that it was necessary to retain only one hundred fish each year for breeding experiments. In his letter to the defendant dated 30 March 1993, Mr Lewis, writing on behalf of SA Research and Development Institute (Exhibit P22) stated:
“I have been approached by King Chang seeking similar advice on the fate of the fish.
SARDI considers that about 100 brood stock would be adequate for breeding purposes. This would provide sufficient numbers to ensure the presence of both sexes, fish for regular sampling for gonad condition and to cope with an expected 10per cent mortality per annum.
From the above agreements SARDI would assume that all other fish are to be harvested by May 1993 with the ownership of the equipment and materials being transferred to the government.”
Despite this comment, I consider that the decisions of the Management Committee under the Tripartite Agreement, constitute the operational decisions which are now relevant. Mr Lewis and the SA Government were not party to the decisions of the Management Committee. I am satisfied that these decisions were properly reached in good faith.
Some alternative findings
To enable the parties to pursue their rights I make the following findings which would be relevant only if (contrary to my decision) the plaintiff was able to establish liability against the defendant.
I find:
(a).... that the 964 tuna brought into the farm in May 1993 were worth $1.30 per kg even although they cost $4.50 per kg to harvest. In the absence of a market to sell to some other fish farm the cannery price only of $1.30 was available. I find that there was not any other buyer available at that time of year in 1993. To keep the fish would have involved considerable expenditure.
The price of $1.30 would be payable upon the whole weight in these circumstances ie without 15 per cent reduction. The commission on these fish would be:
......... 964 fish @ 17 kg = 16388 kgs
16388 kgs @ $1.30 = 21304
......... 20 per cent commission thereon = $4260.
(b)that the 550 remaining fish, if sold on the sashemi market in the ordinary course would have brought $35 per kg nett weight (ie 85 per cent of gross) if sold in June 1993 but about $25 per kg if sold in April 1993.
......... There being no evidence to explain these figures, I would adopt $25 per kg as the market value of the fish for the purposes of the case bearing in mind that there is no evidence as to what the price may have been in May 1993, and what the effect might be if introducing a large quantity of fish onto the market.
At the price of $25 per kg (instead of $35 per kg) the plaintiff’s entitlement upon the 17299 kgs abovementioned would return a commission of 5/7 x $121094 = $86495.
The price per kilogram (in Australian dollars) obtained for the fish sold to Japan appears from exhibits P78 and P79. It is necessary to divide the “nett proceeds” by “Total weight of fish”.
On 29 April 1993 the price was down to only $21.80 (15703 ÷ 720) but had been over $30 in March 1993. In June 1993 sales were effected at $34.85, $33.94, $48.48 and $39.97. In my opinion, an assessment of $35 per kilogram is justifiable. Likewise, $25 as the price in May 1993 can be justified by interpolation.
The plaintiff submitted that I should allow interest at 7.5 per cent from the date of commencement of the action (1 December 1993) to the date of trial. The plaintiff suggests a lump sum equal to 50 per cent of the assessed damages for interest. I consider that such an amount would be reasonable.
Conclusion
In these reasons I have not sought to distinguish between the position of Mr Chang and the plaintiff. That is consistent with the way in which counsel approached the case.
In my opinion, the plaintiff was entitled to commission on fish marketed during the term of his consultancy. Upon the proper construction of the consultancy contract, the plaintiff was not entitled to be paid in respect of fish which were retained for breeding and nutritional studies. The number of fish retained as at 1 June 1993 were those appropriate to a mixture of short and long term study until about the year 2008. The numbers retained needed to take account of poaching, mortality rates and the numbers needed for each stage of each investigation.
The fish captured in May 1993 were for the purpose of a proposed new project which was to commence in June 1993. They were not part of the project in respect of which the plaintiff had been engaged to provide consultancy services.
There was nothing untoward in the defendant’s actions in building up a stock of live fish between March and June 1993. The decision in this behalf was made at the behest of OFCF who continued to exercise a strong influence until June 1993.
Knowing that fish farming (as opposed to ranging) must include breeding, the plaintiff “took its chance” as to the number of fish which would be marketed: see per Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR at 346:
“For obvious reasons the courts are slow to imply a term. In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question.
Accordingly, the courts have been at pains to emphasize that it is not enough that it is reasonable to imply a term; it must be necessary to do so to give business efficacy to the contract.”
The surrounding circumstances (including the facts known to the parties as to the operation of the Tripartite Agreement), point strongly against implying the terms pleaded by the plaintiff.
The plaintiff was not to be paid for the period when Chang was on holidays. That was consistent with the terms of the consultancy arrangement. No fees were payable whilst Mr Chang was absent from the project.
The contract was not terminated unlawfully but Mr Chang was not required to attend the farm for a short period before 1 June 1993. Mr Chang had lost interest in continuing to be associated with the project as from the end of the consultancy. There was no obligation upon the defendant to offer the plaintiff or Mr Chang anything further.
The representations alleged in the statement of claim are not established except to the extent that they are included in the written agreement. In particular the plaintiff has not established that the defendant was obliged to maximise profits for the benefit of the plaintiff (or to endeavour so to do). There was no misleading or deceptive conduct proved.
The plaintiff’s claim will be dismissed.
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