Monsanto Australia Ltd v Freeman
[2013] VCC 1797
•25 November 2013
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
COMMERCIAL LIST
EXPEDITED DIVISION
Case No. CI-12-04951
| MONSANTO AUSTRALIA LTD ABN 86 006 725 560 | Plaintiff |
| v | |
| RICHARD FREEMAN | First Defendant |
| and | |
| DL FREEMAN | Second Defendant |
---
JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 November 2013 | |
DATE OF JUDGMENT: | 25 November 2013 | |
CASE MAY BE CITED AS: | Monsanto Australia Ltd v Freeman & Anor | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 1797 | |
REASONS FOR JUDGMENT
---
Subject: BREACH OF CONTRACT
Catchwords: Assessment of damages – contractual breach – liquidated damages – damages with respect to amounts in the reasonable contemplation of the parties – damages including legal costs.
Legislation Cited: County Court Civil Procedure Rules 2008.
Cases Cited:Goma Holdings (UK) Ltd v Minories Finance Ltd [1993] Ch 171; Hadley v Baxendale (1854) 9 Exch 341; Manwelland Pty Ltd v Dames & Moore Pty Ltd [2001] QCA 436; Orlit Pty Ltd v JF & P Consulting Engineering Pty Ltd, Supreme Court of Queensland, unreported, 30 July 1992; Tate & Lyle Food Distribution Ltd v Greater London Council [1981] 3 All ER 716; Whild v GE Mortgage Solutions Ltd [2012] VSC 322.
Judgment: Award of damages for the plaintiff against the defendants.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Wise | K&L Gates |
| For the Defendants | No appearance |
HIS HONOUR:
1 This trial relates to the assessment of damages following the plaintiff entering judgment in default of appearance against the defendants on 21 March 2013.
2 The plaintiff prepared affidavit material regarding proof of the assessment of damages. At the time the plaintiff prepared that affidavit material, there was no specific order permitting this to occur. However, given that this method of producing the evidence had the dual benefits of setting out precisely what the plaintiff relied upon and also enabled the defendants to see what case they had to meet regarding damages, it seemed expedient to me to make an order pursuant to Rule 40.03(1)(b) granting leave nunc pro tunc for the use of the affidavit evidence.
3 The plaintiff relied on several affidavits:
· Katherine Sarah Lang, affirmed 30 October 2013;
· Lisa Maree Egan, sworn 31 October 2013 and 17 December 2012;
· Sandra Griffiths, sworn 11 November 2013.
4 The Lang affidavit contained the substantive evidence relating to proof of the loss. The more recent Egan affidavit exhibited the invoice to the plaintiff from its solicitors for professional fees and disbursements incurred in the period between 1 August 2013 and 31 October 2013. The invoiced amount, inclusive of GST, was $19,251.90. The earlier Egan affidavit explained why Egan served copy documents on the first defendant by attaching them to an email sent to “[email protected]”. Egan said that she used this address because it was the listed contact email address for the defendants under the Technology User Agreement (“TUA”) with the plaintiff. Further, Egan was advised by one of her partners at Middletons that she had sent emails to the first defendant at that email address and had received notification that the emails had been received.
5 The Griffiths’ affidavit related to service of documents. On 7 November 2013 at approximately 9.40am, Griffiths attended a property at Glenklevin, “Ventura” at 362 Middle Gully Road, Edgeroi in New South Wales (the “farm”) She personally served the second defendant with the following documents:
(a)cover letter from K&L Gates to the second defendant dated 31 October 2013;
(b)affidavit of Katherine Sarah Lang, affirmed 30 October 2013, together with exhibits;
(c)affidavit of Lisa Maree Egan, sworn 31 October 2013, together with exhibits;
(d)sealed copy of the interlocutory judgment for damages dated 21 March 2013;
(e)notice of hearing for the assessment of damages dated 8 May 2013.
6 The Griffiths’ affidavit also showed that the plaintiff attempted to serve the first defendant on the same day but, according to his wife, the second defendant, he was working about nine kilometres away at the time. Griffiths had a telephone conversation with the first defendant in which she advised him that she had some documents to give him. The first defendant said he would not drive the nine kilometres to collect the documents at his home. Accordingly, Griffiths left copies of the documents referred to in paragraph 5 above with the second defendant to give to her husband. The second defendant said that she would do that.
Background
7 On about 24 November 2010, the plaintiff and defendants entered into TUA number 107403 which incorporated various terms and conditions. The TUA was valid for the cotton growing season which ran from approximately August 2010 until July 2011. Under the terms of the TUA, the plaintiff granted the defendants a licence to use certain cotton technologies, in particular, the Bollgard II Technology and Roundup Ready Flex Technology (collectively referred to as the “cotton technology”).
8 There were terms of the agreement between the parties that:
(a)the TUA only permitted the defendants to grow one crop using the cotton technology on the farm and only for the cotton growing season (clause 1.2);
(b)the defendants must not save any seeds containing the cotton technologies supplied to them or produced from cotton technology pursuant to the TUA (clause 3.1(f));
(c)the grower must not, without the plaintiff’s prior written consent, plant any seeds produced from cotton which contains the cotton technology (clause 3.1(g));
(d)the defendants must, prior to 15 December 2010, notify the nominated technology service provided (as defined in the TUA, namely Cotton Growers Services Pty Ltd – Narrabri) of the quality and location of any cotton technology seed purchased pursuant to the TUA and not planted (clause 3.1(h));
(e)the grower must obey and comply with all reasonable directions and instructions given by the plaintiff (clause 3.1(m));
(f)the grower must, in relation to seeds containing the Roundup Ready technology or Roundup Ready Flex technology alone, strictly comply with any resistance risk management plans (“RRMP”) issued by the plaintiff in the event that the grower is in breach of the Roundup Ready Crop Management Plan and/or the Roundup Ready Flex Crop Management Plan (as those terms are defined in the general terms and conditions) (clause 3.2.(b));
(g)subject to clause 15.3, upon the termination or expiry of the TUA, however caused, all rights and privileges of the grower under the TUA will terminate (clause 15.1);
(h)termination or expiry of the TUA will have no effect by any means whatsoever upon any rights or liabilities which have accrued to either party prior to termination or expiry, nor upon any liabilities which may arise from damages deriving from a breach of the TUA prior to termination or expiry (clause 15.2);
(i)clauses 3.1(f), (g), (m) survive termination or expiry of the TUA and will remain in full force and effect (clause 15.3).
9 The defendants did not use in the cotton growing season for 2010-11 all the seed containing the cotton technology purchased from the plaintiff. Instead, without informing the plaintiff of the seed which they had not planted and without entering into a new TUA, the defendants planted more of the plaintiff’s seed in the 2011-12 growing season without the plaintiff’s approval or knowledge. It appears the defendants undertook this unauthorised planting in about November 2011 after the expiry of the TUA.
10 On about 14 June 2012, the plaintiff conducted an audit of the defendants’ farm by, inter alia, taking samples of the cotton crop. The plaintiff tested the samples and found that the cotton tested contained parts of the cotton technology.
11 On about 17 June 2012, the plaintiff conducted a further audit of the farm and took additional samples of the cotton crop. Again, the test results demonstrated that the cotton tested contained parts of the cotton technology.
12 In a conversation between the plaintiff’s legal representative and the first defendant in June 2012, the first defendant confirmed that he was using the plaintiff’s cotton technology in the then current cotton growing season.
13 On about 12 October 2012, the plaintiff commenced this proceeding alleging various breaches of the TUA by the defendants. The breaches alleged were as follows:
(a)the defendants wrongfully used the cotton technology outside the cotton growing season;
(b)the defendants wrongfully saved seeds relating to the cotton technology supplied to them by the plaintiff;
(c)the defendants wrongfully planted seeds produced from cotton containing the cotton technology without the prior written consent of the plaintiff;
(d)the defendants wrongfully failed to notify Cotton Grower Services Pty Ltd prior to 15 December 2010 or at all of the quantity and location of any seeds containing the technology it had purchased from the plaintiff pursuant to the TUA and had not planted.
14 On 21 March 2013, the plaintiff entered judgment against the defendants for damages to be assessed.
15 By reason of the allegations in the Statement of Claim which, as a result of the defendants non-appearance, are taken to be admitted, the plaintiff now claims damages for the losses said to flow from the defendants’ breaches.
16 Although the courts are flexible in the application of general principles in order to achieve reasonable compensation for the injured party, a useful starting point remains the underlying rationale for contract damages, namely, damages for breach of contract are awarded on the principle that the injured party, so far as money can do it, is placed in the same situation as if the contract had been performed.[1] Where the court assesses damages by reference to that principle, the court aims to protect the innocent party’s expectation that the contract will be performed in accordance with its terms. Hence, contractual damages are often referred to as expectation damages.
[1]Elinghouse, paragraph 23.6
17 The plaintiff here claims amounts which it says represent the losses flowing directly from the defendants’ breach. The categories of loss for which the plaintiff claims are unpaid licence fees, audit fees, and legal costs.
Licence fees
18 Had the defendants not saved the plaintiff’s seed or, if they had excess seed, had they reported this to Monsanto, then the plaintiff would probably have allowed them to use that additional seed. Such an outcome would have been consistent with what actually happened with the defendants planting the saved seed. If the plaintiff had permitted the defendants to so act, then this would have been pursuant to a TUA for the 2011-12 cotton growing season, and the defendants would have been liable for the licence fees normally payable under such a TUA.
19 It is apparent from the material in the Lang affidavit, that in the 2011-12 growing season, the charge per green hectare of cotton batch I was $401 (exclusive of GST) and per green hectare of cotton batch II was $79 (exclusive of GST).
20 In order to establish the number of hectares planted with the saved seed, the plaintiff’s representatives undertook sampling during two audits undertaken in June 2012.
21 The first sampling exercised involved the plaintiff taking random samples of cotton from the defendants’ property. The second part of the sampling process involved the plaintiff systematically sampling the property at measured intervals.
22 In order to determine the existence of the plaintiff’s material on the defendants’ farm, the plaintiff crushed cotton seeds collected during the sampling process and carried out chemical testing to ascertain whether any of the collected seeds possessed or evidenced the plaintiff’s cotton technology.
23 As a result of the testing process, the various findings referrable to each sampling point were plotted on a map of the farm. The map showed areas marked:
· Red and yellow, representing the sampling points which tested positive for the presence of the plaintiff’s material;
· green for the sampling points which did not indicate the presence of any of the plaintiff’s material.
24 As a result of conducting this exercise, the plaintiff has calculated that as a result of the breaches of the TUA, the defendants produced approximately:
(a)55 green hectares of cotton comprising Bollgard II and Roundup Ready Flex Technology (“cotton batch I”); and
(b)25 green hectares of cotton comprising Roundup Ready Flex Technology (“cotton batch II”).
25 It follows from this that the plaintiff has suffered loss and damage by way of unpaid licence fees in the amounts of:
(a) 55 green hectares of cotton batch I x $401 = $22,055 (excluding GST);
(b) 25 green hectares of cotton batch II x $79 = $1,975 (excluding GST);
being a total sum of $24,030 (exclusive of GST) or $26,433 (inclusive of GST).
Audit fees
26 Pursuant to clause 15.5 of the TUA, upon termination or expiry of the TUA, the plaintiff had the right to conduct audits of the grower’s property to inspect and carry out testing. Also, pursuant to clause 3.1(l), the plaintiff had the right to carry out audits and surveys of a property to ensure compliance with the TUA.
27 The plaintiff contended that:
(a) it undertook the audits in the ordinary course of its business in providing technology or services to growers; or
(b) having regard to the terms of the TUA, it was contemplated by the parties that the plaintiff might undertake an audit in the event that the TUA was breached if a grower withheld seed purchased and planted it in a subsequent growing period without the knowledge or consent of the plaintiff.
28 Whether the actions of the plaintiff in conducting the audit were characterised as the exercise of the plaintiff’s right to inspect in the usual course of its business or as something that fell within the reasonable contemplation of the parties as arising naturally from the breach of the agreement (in accordance with the general rule in Hadley v Baxendale),[2] I am satisfied that the plaintiff was entitled to undertake the audit and to recover the costs associated with the audits.
[2](1854) 9 Exch 341
29 In respect of the first audit, the plaintiff claims $1,800 (exclusive of GST) comprising the cost of two Monsanto representatives attending the farm to carry out the audit and subsequent related tasks for a period of six hours each at a cost of $150 per hour.
30 In relation to the second audit, the plaintiff claims $9,000 (exclusive of GST) comprising the cost of four Monsanto representatives attending the farm and carrying out the audit and subsequent related tasks over a period of 15 hours each at a cost of $150 per hour (exclusive of GST).
31 In addition, the plaintiff claims the sum of $2,879.37 (inclusive of GST) representing the travel and accommodation costs for the four Monsanto representatives who carried out the second audit.
32 Having regard to the experience of Katherine Lang in attending and carrying out numerous audits and engaging external consultants to carry out audits as agents for the plaintiff and also having regard to the seniority and qualifications of the individuals carrying out those audits, I am satisfied that $150 per hour represents a reasonable cost.
33 In permitting the plaintiff to recover for managerial time expended upon activities associated with the defendant’s breach, I accept the applicability of authorities such as Tate & Lyle Food Distribution Ltd v Greater London Council,[3] Orlit Pty Ltd v JF & P Consulting Engineering Pty Ltd,[4] and Manwelland Pty Ltd v Dames & Moore Pty Ltd.[5]
[3][1981] 3 All ER 716
[4]Supreme Court of Queensland, unreported, 30 July 1992
[5][2001] QCA 436
Legal costs
34 The plaintiff claims the legal costs incurred in relation to the breaches by the defendants of the TUA.
35 Pursuant to clause 12.1 of the TUA, the defendants agreed to indemnify the plaintiff against “any losses, damages, costs, claims and expenses of any nature whatsoever” incurred as a result of any breach of the TUA.
36 The plaintiff contends that at the time of entering the TUA, it would have been within the contemplation of the parties that, if the defendants were to breach the TUA, the plaintiff would incur legal costs and that those costs would include solicitor and own client costs.
37 The affidavits of Lang and Egan attest to the plaintiff incurring legal costs in the sum of $64,488.38 up to 18 November 2013. This comprises legal costs and disbursements to 31 July 2013 of $29,477.38 (inclusive of GST), legal costs and disbursements from 1 August 2013 to 28 October 2013 of $19,251.90 (inclusive of GST) and estimated legal costs to 18 November 2013 of $15,759.10 (inclusive of GST).
38 In claiming costs, the plaintiff referred not only to the terms of the TUA but referred also to authority with respect to the court’s discretion as to costs in circumstances where the payment of costs is part of the agreement between the parties.
39 In Whild v GE Mortgage Solutions Ltd,[6] Croft J said at [5]:
“It is common ground that the terms of any agreement as to costs will inform the Court’s discretion as to the basis of taxation of costs and that the Court should ordinarily exercise its discretion in accordance with the agreement. It is clear on the authorities that whether the terms of any agreement as to costs entitle a party to more than party and party costs is ultimately a matter of construction. It is also clear that the terms of the agreement must provide in plain and unambiguous language that costs are to be paid on a special basis, otherwise costs should be awarded on a party and party basis only.”
[6][2012] VSC 322
40 His Honour went on to say that the English Court of Appeal decision in Goma Holdings (UK) Ltd v Minories Finance Ltd[7] made clear that the general discretion on costs will ordinarily be exercised to reflect a contractual right to costs. Croft J went on to quote at some length from the judgment of Scott LJ, who delivered the judgment of the Court of Appeal. The gist of the passages referred to was that, although the court retains an overall discretion with respect to the making of orders regarding costs, generally it would be an improper exercise of the court’s discretion to direct a taxation on a basis different from that agreed by the parties.
[7][1993] Ch 171
41 Another particular passage in Goma Holdings (UK) Ltd[8] referred to by the plaintiff was to the effect that the words “all costs” cannot mean anything other than costs assessed on an indemnity basis.
[8]Ibid
42 On the material before the court and in the absence of any material from the defendant, I am not aware of any conduct on the part of the plaintiff or any other factor which might reasonably disentitle the plaintiff to receiving its costs on the basis agreed between the parties. Having regard to the width of the terms in clause 12 of the TUA, I accept that the plaintiff is entitled to recover its costs on an indemnity basis.
Conclusion
43 Accordingly, I make the following orders:
(a) the plaintiff have leave pursuant to Order 40.03(1)(b) of the County Court Civil Procedure Rules to give evidence by affidavit in support of its claim for damages;
(b) the defendants pay the plaintiff damages assessed in the sum of $41,192.37 together with interest from 12 October 2012 until 25 November 2013 in the sum of $4,830.25;
(c) the defendants pay the plaintiff’s costs of the proceeding fixed, pursuant to Order 63A.07(2)(c) of the County Court Civil Procedure Rules, in the gross sum of $64,488.38.
0
3
0