Milne Feeds Pty Ltd v Hamersley - [2000] WADC 47

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: MILNE FEEDS PTY LTD -v- HAMERSLEY [2000] WADC 47

CORAM: COMMISSIONER CHANEY

HEARD: 17 JANUARY 2000

DELIVERED : 18 FEBRUARY 2000

FILE NO/S: CIV 214 of 1999

BETWEEN: MILNE FEEDS PTY LTD (ACN 008 919 579)
Plaintiff
AND
LENNARD COLIN HAMERSLEY and MAXINE HAMERSLEY
Defendants

Catchwords:

Contract - Sale of hay - Purchaser failing to take delivery - Contract varied - Hay onsold by vendor with consent of purchaser - No common understanding reached as to method of accounting for proceeds - Proceeds of sale constitute moneys had and received to the benefit of original purchaser - Turns on own facts

Legislation:

Nil

Result:

Judgment for Plaintiff

Representation:

Counsel:

Plaintiff: Mr S Penglis
Defendants: Mr G Guidice

Solicitors:

Plaintiff: Freehill Hollingdale & Page
Defendants: George Guidice Law Chambers

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Nil

COMMISSIONER CHANEY: This action arises from an agreement entered into between the plaintiff and the defendants on 16 September 1997 whereby the plaintiff, which is a company engaged in the business of, inter alia, marketing and trading in grain, agreed with the defendants that the latter would supply approximately 500 tonnes of export grade Pallinup oat hay to the plaintiff. The consideration payable by the plaintiff to the defendants was $92 per tonne plus $20 per tonne for raking and baling. The agreement is admitted on the pleadings, but the dispute between the parties arises from a subsequent variation to the agreement arising in circumstances which I will outline.
The agreement between the parties was in writing and provided that payment was to be made by 15 October 1997. The hay was to be loaded on trucks by the defendants, and if hay was damaged by rain during curing, then the price per tonne of the hay was reduced to $82. The contract was executed by Mr Lennard Hamersley on behalf of the defendants, and by a Mr Desmond Blechynden on behalf of the plaintiff.
Under the contract, it was the obligation of the plaintiff ("Milne Feeds") to take delivery of the hay at the defendants' farm, with the farmers obligation being to load the hay onto trucks. It was anticipated that delivery would be made in late September or early October 1997. Because the defendants farm is in Walkaway near Greenough the hay which they produced became available earlier than hay further to the south. The defendants' hay was amongst the earliest in the northern region at that time, and that was a significant factor from the point of view of the plaintiff because, according to Mr Blechynden, Milne Feeds needed "that hay to fit a window prior to hay closer to Perth becoming available." As it happened, however, a refurbishment of the plaintiff's processing plant at Spearwood was not completed by the anticipated completion date, with the result that the plaintiff did not wish to take delivery of the hay as originally contemplated under the contract. Consistent with its obligations under the contract however, the plaintiff paid the defendants $50,400 in early November 1997. That sum represented the amount payable for 450 tonnes of hay at $112 per tonne. The hay then sat in the defendants' paddocks awaiting collection by the plaintiff until around April or May 1998. By that time, the defendants, not surprisingly, were becoming anxious to have the hay, which they had sold to the plaintiff, removed from their paddocks so that they could proceed to use the paddocks for their 1998 cropping programme.
Evan Hamersley, a relative of Lennard Hamersley, who has a farming property in same region as the defendants, also had a contract for the supply of hay with Milne Feeds, and found himself in the same position as the defendants by early 1998. Evan Hamersley had a longer relationship with the plaintiff than the defendants, and had been instrumental in the introduction of the parties to each other which led to the September 1997 contract. Mr Evan Hamersley made contact with the plaintiffs representatives in April and May 1998 with a view to having the hay removed from Lennard Hamersley's property. Initially arrangements were made in April 1998 between Mr Blechynden and either Evan Hamersley or Lennard Hamersley for the hay which was on the defendants' property to be moved and stacked so that the defendants could use their property, and the plaintiff agreed to pay $3 per bale to move and stack it. That was done, although payment was not made by the plaintiff.
Up to this point, the facts are common ground. It is also common ground that the parties subsequently agreed that the defendants were authorised to sell the hay the subject of the September contract on the local market. The reason the parties agreed to that arrangement was that Mr Evan Hamersley had contacts to whom he could sell the hay, and it was of no real value to the plaintiff to ship the hay to Perth because it no longer had a need for it and because of the transport costs. It was to everybody's advantage that the hay be sold so as to remove it from the defendants' property. The issue which arises in this trial is the terms upon which the defendants were authorised to sell the hay.
Mr Blechynden gave evidence that the arrangement for the sale of the hay was made in a telephone conversation which he had with Evan Hamersley in May 1998. Mr Blechynden said that there was a call for domestic hay in the region, probably 100 kilometres away, in May. He said that Evan Hamersley was already selling his own hay into that market and had the opportunity to sell Milne Feeds' hay as well and that Evan Hamersley agreed to sell it on behalf of Milne Feeds. His evidence as to what was to happen in relation to payment was as follows:
"I asked the question, 'what about the' – you know, 'who gets paid?' His reply was, 'I've got my own hay. I've sold my own hay to these people as well. I'll keep a record of what's sold and we'll square off against next years crop.' "
In cross-examination, Mr Blechynden recounted the conversation as follows:
"Evan Hamersley said, 'I've sold this chap some of my own hay. It would be easier for me to sell your hay to him as well and we can square off with next seasons hay.' They were his words."
Mr Blechynden did not clarify with Evan Hamersley what was meant by the term "squaring off".
Not having been a party to any conversation in relation to the sale of the hay in May 1998, Lennard Hamersley could give no evidence as to the terms upon which the hay was sold on the local market.
Evan Hamersley's evidence of the agreement in relation to the sale of hay on the local market was that it occurred in mid April 1998. In examination in chief, he said:
"The hay was stacked and it was being damaged by rain. I had some reasonable hay orders from Mr Johnson and Mr Wheatley, and (indistinct) station, Mr Dempster, so I put a deal together and I contacted Mr Blechynden and I said that I was prepared to try and sell the hay on the condition that I could return the hay in the next season, the 1998 season, in September, October, and that’s all that was done."
As to the hay on the defendants' property, Evan Hamersley said that he had sold around 2,200 rolls for Milne's but still had a market, so he spoke to Lennard Hamersley who agreed to enter the same arrangement with Milne Feeds. He said he then contacted Mr Blechynden and the following conversation took place:
"I said, 'Would that cover – would Len be able to sell his hay or could I sell Len's hay on the same conditions as I've sold mine?' and he said – he agreed to it yes."
He denied that he used the words "square off" to Mr Blechynden. In cross-examination, Evan Hamersley denied that he had used the word "returned" but rather suggested that the words used were "replace the hay with the new season".
It is admitted on the pleadings that the defendants sold the hay on the domestic market for an amount of $31,072. The evidence, and in particular Exhibit 4, suggest that the amount of $31,072 was not in fact the amount received from the sale of the hay on the domestic market, but rather is a final balance which arises as being the amount which the defendants, if liable, would have to reimburse the plaintiff taking into account various adjustments for amounts due by the plaintiff to the defendant. I was advised, however, that the parties agree that the sum claimed represents the net sum payable by the defendants to the plaintiffs in the event that the defendants are liable to account to the plaintiff for the proceeds of the sale of the hay on the domestic market.
In September 1998, there was a further meeting and Mr Blechynden and both Lennard and Evan Hamersley. According to Mr Blechynden, at that meeting the parties worked out the balance due by the Hamersleys to Milne Feeds. When Mr Blechynden then indicated the price of hay for the 1998 season which would apply to hay supplied by the Hamersleys in 1998 to meet the balance of their liability to Milne Feeds, the Hamersleys objected and demanded that hay be bought from them at the 1997 prices. There is some dispute on the evidence of Lennard and Evan Hamersley as to precisely what was said at this meeting, but not a great deal turns on that meeting, and I accept that the account of the meeting given by Mr Blechynden summarises the substance of the meeting.
There was also evidence of a further meeting between Evan and Lennard Hamersley, Mr Blechynden and Mr Rory Coffey, the General Manager of Milne Feeds in the plaintiffs Welshpool offices in September 1998, after the meeting between Mr Blechynden and the Hamersleys at Evan Hamersley's home earlier that month. That meeting consisted of attempts to resolve the impasse which had occurred, but not a great deal turns on what was said at that meeting.
The critical issue in the case is the terms of the agreement which enabled the defendants to sell the hay, which clearly belonged to the plaintiff, on the domestic market. The plaintiff's case is that Evan Hamersley said that he would "square off against next years crop". Evan Hamersley's evidence is that he would "return" or "replace" the hay in the next season. Resolution of that issue by accepting either version leaves a number of questions unanswered. If the parties discussed "squaring off" then the question arises to what is meant by that expression. Mr Blechynden in cross-examination expressed the view that all farmers know what squaring off means: "That means squaring off the financial obligation." That understanding still begs the question as to whether the account is "squared off" by the supply of new hay, or simply by way of an accounting contra. The issue of what might happen if no sale of hay by the defendant to the plaintiff occurred in 1998, whether by reason of the plaintiff's choice, or the fact that their hay may not have been of the requisite quality, remains unanswered.
On the other hand, the proposition that hay would be "returned" or "replaced" takes no account of the financial adjustments which the parties obviously accepted needed to be made between them. How was a credit in relation to the $3 per bale which had been agreed for stacking the hay, but remained unpaid, to be accounted for?
In a note prepared by Mr Blechynden to his superiors at Milne Feeds on 7 October 1998 (Exhibit 3) Mr Blechynden gave the full history of the matter. His account of the critical dealings concerning the sale of the hay on the domestic market reads as follows:
"In discussion with Evan, the fact that most of the hay was being sold to his clients, and no doubt being sold in with some of his own hay, that from a monetary point, it would be easier for them to sell the hay and square off with hay this coming season.
At this point I made the mistake of not dropping everything else, to ensure that it was in writing and that all parties fully understood how we were going to square off with hay.
The fact that they had been paid twice for the hay, my understanding was the money outstanding would be cut out with hay contracted at this years prices.
Their understanding was to return or replace the quantity of hay. Which begs the question, what guarantee did they have that it would be export quality. In hindsight, I would have given a higher priority to documenting this, there is fault on both parties in this instance, as Evan has been away at times, and he was the man with what was sold and at what price."
It can be noted that in that passage, Mr Blechynden uses the expression "square off with hay" as distinct from the expression used in evidence "square off against next year's crop." Although with the passage of time it is unlikely that either of the witnesses could recall the precise words used in their conversation (which was one of several about that time), I find that it was more probable than not that the words "square off" or words to that effect, namely that the parties would adjust their account between them in the light of their dealings in respect of the 1998 crop, were used.
Although not elegantly expressed, that passage set out above from the note of 7 October 1998 encapsulates what I find to have been the position as between the parties in May 1998. There was no common understanding between the parties as to precisely how Milne Feeds would ultimately obtain the benefit of the sale of the hay. I find that the substance and effect of what the parties agreed in May 1998, was that, upon sale of the hay in the domestic market, the defendants would retain the proceeds until such time as the parties accounted as between themselves in the light of their dealings during the 1998 season. I find that the parties did not address the question between themselves, whatever their individual understanding may have been, as to precisely how that accounting would occur, and on what basis.
The breach of agreement pleaded against the defendants is that they "failed and refused to sell the plaintiff 1998 hay at 1998 prices and offset the varied amount against the same." That is said to be a breach of the term of the agreement as varied that:
"The defendants would offset the amount which they received for hay on the domestic market against the amount the plaintiff would owe the defendants for hay to be purchased by the plaintiff from defendants, defendants 1998 hay crop."
That varied agreement as pleaded goes beyond, because of its precision, what I find the parties to have broadly agreed in May 1998.
Whatever may have been the basis upon which the account between the plaintiff and the defendants was finally settled, there is no doubt that the proceeds of the sale of the hay on the domestic market were received for the ultimate benefit of the plaintiff. Not only does that conclusion flow from an analysis of the evidence of the May agreement, but it accords with logic. As of May 1998, the hay was the property of the plaintiff. The proceeds of the sale of the plaintiff's hay belonged to the plaintiff. All that was uncertain between the parties was the mechanism by which the plaintiff would ultimately be paid the proceeds of sale. The parties having failed, in September or October 1998 to reach agreement as to a method by which the plaintiff could receive its entitlements by the supply of hay, the proceeds of the sale constitute monies had and received by the defendants for the use of the plaintiff.
On that basis, as pleaded in the alternative claim in paragraphs 11 and 12 of the statement of claim, the plaintiff is entitled to recover the sum of $31,072, and there should be judgment in that sum together with interest thereon at the rate of 6 per cent per annum from 8 October 1998, pursuant to s32 of the Supreme Court Act. The date of 8 October 1998 is chosen because it was on that day, after the meetings between the parties which endeavoured to resolve the matter, the plaintiff, in effect, made demand by facsimile for payment of $31,072 (Exhibit 5).