Langton v Geelong Brewing Co Pty Ltd - [2005] SASC 124

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
LANGTON & ANOR v GEELONG BREWING CO PTY LTD
Judgment of The Honourable Justice Anderson
8 April 2005
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE - REPUDIATION
Appellants were sued by the respondent in the Magistrates Court for losses arising out of a contract allowing the respondents to sell beer and other products at an event promoted by the appellants - Magistrate found that the respondent was entitled to terminate the contract for anticipatory breach on the part of the appellants - essential condition of the contract that the respondent be able to sell its products at the event - another company in fact already had the rights to sell alcohol at the venue - appellants therefore required the respondent to enter into a subcontract with this other company - Magistrate held that this requirement constituted an anticipatory breach by the appellants, and that the respondent was entitled to treat it as a repudiation of the contract and therefore terminate the contract - held: no error on part of the Magistrate demonstrated -appeal dismissed.
Kennedy v Hill (1999) 202 LSJS 43, considered.

LANGTON & ANOR v GEELONG BREWING CO PTY LTD
[2005] SASC 124
Magistrates Appeal

ANDERSON J In this matter the appellants are appealing from a decision of a Magistrate given on 16 November 2004. The appellants were sued by the respondent for losses arising out of an event promoted by the appellants at the Wayville Showgrounds between 1 and 3 November 2002.
The parties had entered into a contract which was partly oral and partly in writing, as a result of which the appellants had granted the respondent sponsorship and various rights to sell beer and other products during the three days of the event for a contract price of $12,500.
The learned Magistrate found that a contract was entered into at a meeting held on 19 September 2002, and that the terms of the contract were set out in a document, Exhibit P2, in which the appellants agreed to provide the respondent for the sum of $12,500:-
1The respondent’s logo on all TV commercials;
2The respondent’s logo on all print advertising (ie posters and t-shirts);
3The respondent’s banners placed on oval and around Pavilions (two on oval);
4Minimum of two PA announcements for Saturday night show and unlimited use of PA inside Pavilions (within reason) for all three days;
5Eight premium grandstand passes for Saturday night, twenty one-day admin passes, ten three-day passes, all weekend trade arm band passes, and car parking;
6The respondent to have the right to sell its product in and around the oval and the Pavilion;
7Twelve by twelve trade site as agreed in Jubilee Pavilion;
8The respondent to have naming rights to the Jet Car fire up;
9The respondent to have naming rights to the fastest car ever to be Dyno Tuned Commodore;
10The respondent to have naming rights to fireworks or engine start-ups;
11The respondent to have the right to place banners in the Dyno Tuned area as a support sponsor only.
On the middle of the three days, the Saturday, there was a separate event called the Zero Gravity event to be held on the main arena at the Showgrounds. That event was to be run independently of the appellants. Between the first discussion and the production of a document (Exhibit P1), and the second discussion where the Magistrate found the contract was entered into in the terms of Exhibit P2, there were significant changes to P1 which are apparent from a comparison of the documents.
In P1 the sponsorship package was offered for $6,500 plus GST. It nominated the Pavilion area only and nominated only a twelve by twelve trade site in the Jubilee Pavilion with rights to sell the product in the Pavilion and in the Food Court. It did not include the Saturday night event nor did it include any rights to sell products in and around the oval.
By the time P2 was produced, the package had changed from the Extreme Horse Power Show to the Extreme Horse Power Show and Zero Gravity. Zero Gravity was the Saturday night event. The sponsorship package was then offered for $12,500 plus GST with the various conditions as set out earlier in these reasons. It can be seen that the inclusion of clause 6, namely, the right to sell product in and around the oval and the Pavilion was substantially different from what was proposed in the first sponsorship package.
After some haggling between the parties, the sponsorship package was agreed not at $12,500 plus GST, but at $12,500 inclusive of GST.
Prior to the time of the event, the respondent paid to the appellants the sum of $8,000 by two instalments of $4,000 each. It did not pay the balance due, because by that stage disputes had arisen in relation to the terms and conditions of the contract.
Mr Brian Warming was a director of the respondent, and in accordance with the discussions which had taken place at the time of agreeing the terms of the contract, he made application on behalf of the respondent to the Liquor Licensing Commissioner for the grant of a limited licence to enable liquor to be sold by the respondent at the Showgrounds during the three days of the event. At the time of making that application, a copy of a letter from the Royal Agricultural and Horticultural Society (the owner of the Showgrounds) indicated that there was no objection to the respondent’s Liquor Licence application and that included the sale of liquor “on and around the main area”.
As time proceeded, however, it became apparent that the appellants had either not known or not understood at the time of their discussions with the respondent that another organisation, Spotless Catering, had the rights to sell liquor in the Showgrounds generally. It then became necessary for the appellant to attempt to come to some arrangement with the respondent. It was suggested that the respondent would be able to enter into a subcontracting arrangement with Spotless. A subcontract agreement was drawn up stipulating various conditions. The learned Magistrate found that the requirement for the respondent to enter into such a subcontract arrangement was a failure by the appellants to comply with the contract, and that the respondent was entitled to treat the appellant’s actions as a repudiation of the contract, thus enabling the respondent to accept the repudiation and terminate the contract.
The learned Magistrate found that it was an essential term of the contract that the respondent had the right to sell its product in and around the oval and the Pavilion. In particular, the proposed vending sites as agreed, in and around the oval, were no longer available on the Saturday night when the Zero Gravity Show was to take place. It could be expected that the Saturday night was likely to be the most profitable night from the point of view of sale of the respondent’s product, and also to give it the maximum exposure by way of promotions.
The ability of the respondent to sell its product in and around the oval, throughout the whole time of the show without any limitation was an important part of the deal, as evidenced by the witnesses who gave evidence on the topic, including Mr Warming, but also including Messrs Stark and Langton who were witnesses for the appellants.
In Kennedy v Hill (1999) 202 LSJS 43 Doyle CJ summarised the applicable law at 44 as follows:
“A party to a contract is said to repudiate the contract if the party indicates, before the time for performance arrives, that the party will not be ready and willing to perform at the appointed time. If that occurs, the other party can accept that repudiation and terminate the contract without waiting for the time for performance to arrive. Such a repudiation, occurring before the time for performance has arrived, is called an anticipatory breach of the contract.”
In my view, the learned Magistrate correctly reasoned that the conditions sought to be imposed, namely, requiring the respondent to enter into a subcontract with Spotless, was a fundamentally different situation both factually and legally from what the parties had envisaged when they bargained initially. Apart from the requirement to now enter into a subcontract, the respondent had lesser rights than what it had bargained for when the agreement was reached.
The respondent engaged solicitors in the days leading up to the event to attempt to break the impasse which existed between the parties regarding the negotiation of new terms. In the end result, no new terms were negotiated because the respondent chose to terminate the contract following what it considered was a repudiation of one of the essential terms of the contract by the appellants.
The learned Magistrate dealt with these matters at [131] and [132] of her reasons:
“I do not accept these submissions. It is clear from the terms of Exhibit P2 that the plaintiff was to have the right to sell its product ‘in and around the oval and the pavilion’ for the three days of the Event. This right was confirmed by the terms of Exhibits P7 and P10. The first occasion the plaintiff was informed of any restrictions or conditions on this right was following the receipt of Exhibit P12 from RA&HS on 18 October 2002. As I have indicated, in my view this letter demonstrates that RA&HS had overlooked the terms of the licensing arrangements between itself and SSL and had been subsequently reminded of these arrangements by SSL.
I accept the submission of counsel for the plaintiff and find that the plaintiff’s right to sell its product in conjunction with the promotion its product (sic) was an essential element of the contract and one that was integral to the sponsorship package.”
Furthermore, in her reasons the learned Magistrate said at [136]:
“I find the requirement of the plaintiff to enter into a subcontracting arrangement with SSL amounted to a failure on the part of the defendants to comply with the terms of the agreement. I find that this requirement was reasonably and properly treated by the plaintiff as a repudiation by the defendants of an integral part of the contract. It was an anticipatory breach entitling the plaintiff to terminate the contract.”
In my view, the learned Magistrate’s conclusions were quite correct. It is clear that the Zero Gravity Event was an important aspect of the negotiations. When the terms and conditions of the contract were being negotiated Spotless made it clear that, whereas they were prepared to enter into other arrangements by allowing the respondent to obtain a limited licence to sell beer, wine and spirits on all three days in the Atrium and Jubilee Pavilion, and allowing the respondent to act as a subcontractor for the Zero Gravity Event on 2 November, “the above offer is non-negotiable”. Spotless indicated that the respondent “may elect to proceed with the Atrium and Jubilee options and not the Saturday night (Zero Gravity) Event if they wish”.
Whilst Spotless was prepared to forego its rights in the Atrium, it was clearly not prepared to do so in respect of the outlets adjacent to the main arena for the Saturday night. It insisted upon a subcontract being entered into.
As can be seen, this non-negotiable offer by Spotless was not acceptable to the respondent. As I have said, it is clear from the evidence of the witnesses for the appellants that the sale of the respondent’s own product in its own right on the Saturday night was significant in the negotiations which took place.
The respondent claimed damages for the loss which it sustained as a result of pulling out of the event, and the appellants counterclaimed for the balance of the money which they claimed was due to them, namely, $4,500. There is no doubt that the respondent was required to mitigate its loss, and the question is whether it did so.
The respondent did not claim any loss of profit from the anticipated sale of its products, but it did claim a lost benefit in being unable to promote the product as it had intended. The appellants complain of the statement by the Magistrate at [144]:
“I do not consider that the plaintiff should be required to enter into a subcontracting agreement with a party who was not a party to the original agreement and, as a consequence, the plaintiff’s refusal to do so should not be regarded as a failure to mitigate on its part.”
The appellants submitted that the matters concerning the Spotless subcontract discussions were not genuine reasons which prevented the respondent from participating in the event. I do not accept this submission and agree with the comments of the learned Magistrate.
The Magistrate awarded the sum of $4,000 damages for the loss of the benefit to the respondent in the promotion of its product by effectively taking the difference between the initial contract proposal for $6,500 and the proposal as agreed for $12,500, and using the difference as some basis for determining the value of the promotion. Her Honour obviously then discounted that difference to reach the sum of $4,000. I consider this a reasonable approach to this area of damages and that it is a proper head of damage.
There is a complaint that her Honour allowed $280 in respect of expenses incurred with Regal Display contrary to the evidence. Regal Display produced labels which I understand from the evidence were related to this event and hence not reusable. There was a concession by the respondent, however, that not all of the amount claimed was part of a legitimate claim for damages because unrelated items were also part of the invoice. Her Honour dissected the invoice and finally allowed one quarter of a broad axe estimate of $825.00 plus GST. I consider this to be quite reasonable.
In relation to four items claimed as damages, namely, beer dispensing equipment, Cara Refrigeration, Sturt Street Crash Repairs, and Apollo Lighting, the Magistrate allowed amounts for expenses or repairs to enable the equipment to be in good enough condition to be used during the event. It seems that all these expenses were incurred as a result of upgrading the equipment for this event specifically, and that in the case of the beer dispensing equipment it was obsolete, and the Magistrate made a finding to that effect. The finding on this is supported by the evidence.
The next item was for Gillingham Printers in the sum of $4,843.30 for brochures produced for the event. 100,000 brochures were produced and the evidence was that the cost was not much more, namely, three or four hundred dollars, for printing 100,000 instead of 30,000. 30,000 was the anticipated crowd over three days. Some brochures were used subsequently for promotions by the respondent. Her Honour allowed fifty per cent of the invoice and I consider that to be a reasonable exercise of her broad discretion.
Finally, in relation to the respondent’s legal costs of $4,239.45, it was not suggested before me, in the event that the finding of the Magistrate as to the respondent’s right to terminate the contract was upheld, that these costs were not reasonably incurred. Therefore they should be allowed.
There was also a claim for $885.50 for promotional baseball caps. Some were sold later and an amount of $735.50 was allowed for this item. Once again, I consider the Magistrate was well within her discretion in allowing this amount on the evidence before her.
The overall complaint about damages amounts to an argument based on the premise that some residual value remains with the respondent despite the fact that it has expended the money claimed. In the end result, it seems to me that the learned Magistrate had sufficient evidence to support the findings which she made in the balancing exercise she undertook.
Accordingly I would not interfere with the assessment of damages. The appeal is dismissed.