Moorabool Valley Eggs Pty Ltd v Seasons Ranch Organic Pty Ltd
[2021] VSC 795
•2 December 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2021 04051
BETWEEN:
| MOORABOOL VALLEY EGGS PTY LTD (ACN 621 168 769) | Plaintiff |
| - and - | |
| SEASONS RANCH ORGANIC PTY LTD (ACN 633 144 788) | Defendant |
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JUDGE: | Riordan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 November 2021 |
DATE OF JUDGMENT: | 2 December 2021 |
CASE MAY BE CITED AS: | Moorabool Valley Eggs Pty Ltd v Seasons Ranch Organic Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2021] VSC 795 |
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INJUNCTION – Application for mandatory injunction to supply organic eggs – Whether serious question to be tried about whether parties had agreed to be bound by the terms of a draft supply agreement – Whether there was an offer and acceptance – Whether a contract could be inferred – Effect of the proposed injunction on third party rights – Application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A M Donald | Bowman & Knox |
| For the Defendant | Mr P H Wallis QC with Mr B J Murphy | Petersen Westbrook Cameron Lawyers |
Contents
Background
Principles
Is there a serious question to be tried?
Submissions
Plaintiff’s submissions
Defendant’s submissions
Consideration
Was there an offer?
If there was an offer, was there acceptance?
Was there an implied agreement?
Does the balance of convenience favour granting an injunction?
Submissions
Plaintiff’s submissions
Defendant’s submissions
Are damages an adequate remedy in the event the plaintiff is successful at trial?
Submissions
Plaintiff’s submissions
Defendant’s submissions
Conclusion
Plaintiff’s claims under the Australian Consumer Law
Orders
HIS HONOUR:
By writ filed 3 November 2021 and further amended statement of claim filed 10 November 2021, the plaintiff[1] seeks, among other relief, specific performance of an alleged contract for the supply of organic eggs from the defendant to the plaintiff.
[1]On occasion, the plaintiff is referred to as ‘MVE’ in quotations.
By summons filed 3 November 2021, the plaintiff seeks an order that, until further order, the defendant supply organic eggs to the plaintiff in accordance with the terms of a supply contract, as referred to in the affidavit of Mr Todd Menegola sworn 28 October 2021.
The plaintiff is in the business of, among other things, grading, packing, selling and distributing a product known as ‘organic free-range eggs’ to persons carrying on retailing businesses in the Greater Melbourne metropolitan area, the Mornington Peninsula, the Greater Geelong metropolitan area, as well as Woolworths and Eco Farm stores in New South Wales. The plaintiff is related to Egg Marketing Australia Pty Ltd (‘EMA’), which comprises a sales and marketing team, including a fleet of egg transportation vehicles serving Melbourne and the regions.
The defendant is in the business of producing, packing and supplying organic eggs.
Background
Mr Menegola is the Chief Executive Officer of the plaintiff. In March 2019, Mr Menegola was approached by Mr Yining Steven Tao,[2] a director of the defendant, who canvassed whether the plaintiff wished to buy free-range eggs that the defendant had previously been supplying to another company.
[2]In various documents, Mr Tao’s English name was spelt ‘Stephen’. I have adopted the spelling ‘Steven’, in accordance with how Mr Tao has signed his own name in various emails in evidence before me.
By email of 15 March 2019 to Mr Menegola, Mr Tao relevantly stated:
the contract we need is good for all of us on better understanding the conditions and good for financials, otherwise the return is abit too low if everything paid off,, also if we can have a potential contract for the future buyings on the production as what you are doing with your currently contractors [sic]. we are happy to go further at this stage with more capital invest into it.
After undertaking due diligence, Mr Menegola informed the defendant that the plaintiff was not interested.
During the course of these discussions, Mr Tao raised the possibility of setting up a supply chain of organic eggs to the plaintiff.
By email of 7 May 2019 to Mr Menegola, with the subject line ‘Organic Eggs Project’, Mr Tao attached a slideshow headed ‘Seasons Ranch’ and stated:
Nice to talked [sic] to you again today. As discussed on the phone , I am sending you the presentation of the organic free range egg project, plz note the organic certification, we can grade and pack all the organic eggs under your brand in our organic certified grading floor in Kerang, we anticipate that we will come online by November this year for production and grading togetherly [sic] with first two sheds
As discussed on the phone, plz keep the confidential [sic] at this stage.
I am looking forward to a very good relationship in this regard between us
Thanks very much
On 7 June 2019, there was a meeting between Mr Menegola and Mr Michael Cowie, a consultant within in the egg industry who was described as being part of the defendant’s management structure. Mr Menegola deposes that, at the meeting, they discussed ‘various aspects of the production, accreditations, sales and distribution and importantly the key terms of the proposed organic egg supply contract, namely the purchase price per dozen, the temporal term of the supply contract and payment terms’.
By letter of intent dated 14 June 2019 to Mr Tao, Mr Menegola stated:
We are pleased to confirm that EGG MARKETING PTY LTD hereby submit a letter of intent to a contract to purchase your SEASONS RANCH PTY LTD - Organic Free-Range Eggs from your Organic Free-Range Egg Farm at 122 Lake Lookout Road, Beauchamp, VIC 3579, packed in our packaging to EGG MARKETING PTY LTD specifications.
We envisage that the principal terms of the proposed transactions would be substantially as follows:
The farm has an agreed maximum density rate of 195,000 birds, this equates to approximately 378,000 doz. eggs per month.
We, EGG MARKETING PTY LTD will start to take Organic Free-Range Eggs from 1 shed initially producing up to 30,000 dozen eggs per month and will grow with you as required. Supply volumes will be maintained through the development of additional sheds as per the Seasons Ranch farm plan.
Indicative rate of remuneration (Purchase Fee) per doz. Organic Free-Range Eggs has been set at $5.80 per doz. for 600g eggs, $6.20 per doz. for 700g eggs and $6.40 per doz. for 800g eggs. These prices for Organic Free-Range Eggs are inclusive of packaging costs and delivered FIS to our Distribution centre in Melbourne, Victoria.
Price reviews will be conducted in 6 monthly intervals for both cost increases and decreases in inputs such as;
a.Feed
b.Electricity and water
c.Bird costs
d.Packaging costs
e.Six monthly review for fluctuations in the marketplace
The contract term proposed is 5-years plus a further 5-year option. The contract to be negotiated at the time production comes online will take precedence over this Letter of Intent (LOI).
On an individual contract payment terms will be payment in full purchase fee within 21 days of receiving the Invoice from SEASONS RANCH PTY LTD - Organic Free-Range Eggs.
SEASONS RANCH PTY LTD - Organic Free-Range Eggs - Obligations:
•Produce Organic Free Range Eggs as per the industry standard
•Grade and Pack Organic Free-Range Eggs as per the industry standard to the full specifications of the product e.g. graded, certified organic eggs packed into our packaging to our specifications
•Deliver Organic Free-Range Eggs FIS to your distribution centre in Melbourne.
EGG MARKETING PTY LTD - Obligations
•Purchase the Organic Free-Range Eggs from Seasons Ranch Pty Ltd.
•Distribute eggs from your distribution centre in Melbourne.
This letter is not the official purchase agreement but is confirmation of intent to purchase the Organic Free-Range Eggs from Seasons Ranch Pty Ltd, based at 122 Lake Lookout Road, Beauchamp, VIC, 3579.
All of the terms and conditions of the proposed transaction would be stated in the Purchase Agreement, to be negotiated, agreed and executed by both parties within 90 days of executing this agreement.
By email of 9 July 2019 to Mr Menegola, Mr Cowie relevantly stated:
Just keeping you in the loop on progress for the Seasons Ranch organic egg production.
We had a meeting with management last week for discussing the estimated production dates for the organic eggs. As I mentioned during our last phone conversation we’ve had some issues with the organic pullet grow out. The problem being the sites and sheds we had identified earlier didn’t met the Organic criteria so we have had to look elsewhere. We all met at a proposed shed and site last week hoping that it might meet the criteria. It was fine for the non-use of chemicals etc but wasn’t much good as a grow out facility. Since our meeting we have instead decided to use the organic certified property that we have already in Terang and build a fit for purpose grow out facility at that site.
One of our reasons for looking to utilise existing sheds and sites was not only for the financial benefits but would of also brought us online earlier. Now with having the build time for the grow out facility to contend with the supply date for the eggs has been amended to mid-February. At a pinch we may have been able to use the last the shed but I just wasn’t prepared to risk the integrity and the sustainability of the product over a possible earlier production date.
Apologies for the extended supply date but we have to get this right the first time round. Todd I’ll continue to keep you posted on the progress and soon I have something to show you at the farm I’ll get up to Kerang for a visit. It should be quite speccy.
Thank you for your continuing support and I'll keep in touch.
Between July 2019 and February 2020, Mr Menegola deposes that he assisted Mr Cowie to address issues with compliance and processes in anticipation of the production of organic eggs.
On 16 October 2019, Mr Menegola and Mr Tao had a meeting to further discuss the pertinent terms of the proposed supply contract, including the price, volume, payment terms and duration of the supply contract. The duration of the proposed contract was recorded in Mr Menegola’s handwritten notes of the meeting as ‘5 + 5 yrs’.
By email of 25 October 2019 to Mr Menegola, Mr Tao attached the first draft of a proposed supply agreement and stated:
Plz check the agreement for my bank if all good release the fund first, then we work out the new back to back contract when you lock up with supermarkets. And resign the old one , thx.
The terms of the draft agreement included:
(a)in clause 2, that the defendant would have a maximum supply capacity of approximately 378,000 dozen eggs per month; and
(b)in clause 5, that the term of the agreement would be ‘a 5-year plus 5-year contract’.
On 15 and 27 November 2019, Mr Menegola met with Mr Tao and Mr Cowie respectively to address issues relating to organic certification and other operational matters.
By email of 2 December 2019 to Mr Tao, Mr Menegola stated:
Thanks for your time on Saturday.
I just wanted to confirm our discussion and actions.
1.Ungraded Egg Price Per Doz. delivered to Meredith or Melbourne - $4.80
2.Volume: Initial allocation to Egg Marketing Australia from 25,000 hens = circa 140,000 - 160,000 eggs per week
3. Moorabool Valley Eggs Grading certification. Action Todd
Steven I will follow up SXC re the cost and time to certify our Grading room.
By email of the same date, Mr Tao replied and stated: ‘Ok, let’s move on as we discussed’.
By email of 16 March 2020 to Mr Tao, Mr Menegola confirmed a discussion he had with Mr Tao on 13 March 2020, stating:
Confirmation of our discussion on Friday:
Volume: Week commencing 16/3
•Organic Egg weekly supply to revert to eggs from 25k birds, as per LOI.
•Weekly volume = 62.5% of total volume
•Weekly volume is estimated at 1,409 stacks (180 eggs)
•MVE weekly volume = 880 stacks = 18.3 pallets per week (48 stacks per pallet)
•Pace Farms 37.5% of total volume = 529 stacks = 11 pallets p/week (48 stacks per pallet)
Price: Week Commencing 16/3
•Price will now be $4.80 per stack (180 eggs)
•Seasons Ranch are reminded not to send excessive dirty eggs
Delivery: Week Commencing 16/3
•Tuesday
Egg Weekly Collection Schedule:
Monday Pace Farms
Tuesday Pace Farms
Wednesday Pace Farms
Thursday MVE
Friday MVE
Saturday MVE
Sunday MVENext Flock:
•Current Age 8 weeks
•POL 7th May
•Action MVE to assist wit [sic] finding a buyer & location for the 24k birds due to shed 4 production delay
•Expected cost per Pullet $9.50 plus GST
National Organic Standard: Seasons Ranch expect accreditation by 20th March
Steven I have attached your bird plan as requested. Any questions give me a call.
On 30 June 2020, Mr Tao was charged with a number of criminal offences.
On 13 July 2020, Mr Menegola convened a meeting with Jean Tao, Mr Fernando Ferreira and Mr Ivor Schutte (the defendant’s operations manager), with the following agenda items:
(a)Seasons Ranch business structure.
(b)Organic production going forward.
(c)Operations and delivery plan.
(d)Packaging.
Mr Menegola deposes that, at the meeting, Mr Ferreira was tasked with providing a letter from an authorised officer of the defendant or its legal counsel, with the following details:
(a) the new business structure;
(b) shareholder details;
(c)confirmation that capital funds provided for the farm development are not implicated in the recent charges levelled at previous management; and
(d)the defendant’s ability to continue trading as a legal entity.
By email of 24 July 2020 to Mr Menegola, Mr Ferreira stated:
Please find herewith the new structure for Seasons Ranch Organic Pty Ltd.
Please note that the shareholders are now the directors.
I will get a declaration done as to the fact that:
1.Capital funds provided for the farm development are not implicated in the recent charges levelled at previous management
2. Ability for Seasons Ranch to continue trading as a legal entity.
Also please find herewith the ASIC documentation in regards to the appointment of the current directors.
The attachment to that email was headed ‘Appointment Letter-New Directors’, was addressed to ‘Stakeholders’ and confirmed the appointment of new directors of the defendant, being Jingjing Zhang (‘Jacey’), Chenyu Sun (‘Tracey’) and Hanyin Zhang (‘Jean’). Moreover, the letter stated that the appointments were necessary as a consequence of ‘Tao’s resignation as a director, due to personal reasons. The new board of directors will no [sic] manage the business’.
On 24 August 2020, the plaintiff provided another letter of intent to the defendant, substantially in the same terms as the letter set out in paragraph 11 above. Specifically, the letter contained the same agreed maximum density rate of 195,000 birds, or 378,000 dozen eggs per month, and a contract term of ‘5-years plus a further 5-year option’.
By email of 8 September 2020 to Mr Schutte, Mr Menegola attached a proposed supply agreement that had been prepared by the plaintiff’s solicitors (‘the Draft Supply Agreement’), and stated:
Please see attached Egg Supply Agreement for your review.
•I have left out the egg price and will discuss this directly with you before populating this within the agreement.
•Term 5 years plus 5 years
There are a couple of other areas where I will need your input, such as shed m2 and please advise if there are any company or personal information errors.
Once you have had a chance to review please feel free to call to discuss any queries or if you require clarification on any points.
On the same day, Mr Schutte forwarded the email referred to in the preceding paragraph to Jacey, Tracey and Jean and asked: ‘Please go through it and let me know if any changes are required’.
On 12 November 2020, there was a meeting between Mr Menegola and Mr Schutte to discuss pricing, a proposed engagement survey and the signing of the Draft Supply Agreement.
On 30 November 2020, Mr Menegola attended a meeting of the directors of the defendant and gave a PowerPoint presentation with the following agenda:
► EMA commitment
► Market Production System Segmentation
► Market Status
► Grading
► Future
► Seasons Ranch DirectionThe presentation included the following:
(a)Under the heading ‘EMA Demonstrated Commitment’, it was noted: ‘For EMA the Seasons Ranch business partnership is at a critical point.’
(b)Under the heading ‘Future’, it was noted:
► Seasons Ranch & EMA
► Commitment to a genuine partnership
► EMA have offered a long-term contract - no response to date
(c)Under the heading ‘Next Steps’, it was noted:
Next Steps
► Commit to each other via a long-term contract
► Certainty for both businesses
► Egg Volumes
► Price management
By email of 11 December 2020 at 2:47 pm to Tracey and Jacey, following a meeting of 8 December 2020, Mr Menegola stated:
Thanks for your time Tuesday. Please see follow up items from our meeting.
1. Australian Eggs October statistic - attached
2. Organic 600’s:
a.potential to purchase: Unfortunately there is no demand for Organic 600’s. My sales team have circled the market again without any positive opportunities or potential sales, even at a discount rate.
b.Due to the market also in oversupply with Free Range 600’s I can even offer you a reasonable price for downgraded Organic 600 to Free Range 600.
3. Organic 700’s:
a.Moorabool Valley Eggs(MVE)/Egg Marketing Australia (EMA) are purchasing 13 pallets x 48 stacks per week, equivalent to 1 x shed production
b.Egg Marketing Sales are working on Organic promotional activity with Woolworths for December and January to increase sales. This will require financial (discount) support from Seasons Ranch.
4. Free Range
a.MVE can continue to purchase Ungraded free range eggs. Volume per week is 20 pallets x 48 stacks. Current price is $33 p/stack
b.MVE can assist with moving additional volume but at a discounted rate of $30 p/stack. Weekly volumes to be confirmed by Seasons Ranch & MVE.
Please call if you have any questions.
By email of 11 December 2020 at 3:10 pm to Mr Schutte, Mr Menegola compared the volumes ordered and received ‘this week’, which showed more organic eggs had been received than ordered and stated:
Normally we downgrade the additional Organic volume ton Free Range as agreed, however we have secured addition sales volume through Woolworth Sydney DC for nexty [sic] week so I can propose that we purchase the an additional 7 pallets x 48 sacks at $52 to support the Woolworths Sydney promotion.
Mr Menegola therefore offered the following purchases:
(a)$75 for 624 stacks of ‘Organic Normal’;
(b)$52 for 336 stacks of ‘Organic Additional’; and
(c)$33 for 1,008 stacks of ‘Free Range’.
By email of 11 December 2020 at 4:04 pm to Mr Schutte, Mr Menegola confirmed ‘volumes & pricing for next week deliveries’.
On 23 December 2020, Mr Menegola had a meeting with Mr Schutte to discuss shed capacities, volumes, pricing and packaging.
On 29 January 2021, there was a meeting between Mr Menegola, Jacey and Tracey with the following proposed agenda:
1 Sales/Market General Update
2 Organic:
a. Major Retail. Tony
3 Asian Grocery sales opportunities. Jacey & Tracey
a. organic
b. free rangec. cage?????
4 Egg Supply
a.Supply forecast next 24 months: Organic & Free Range. Jacey & Tracey
b. Supply Agreement. Todd
5 Grading
a.Seasons Ranch Grading floor update
Mr Menegola’s handwritten notes included, with respect to the Draft Supply Agreement, ‘unable to sign due to business structure issues’. Mr Menegola deposes that this was the explanation proffered by the defendant for their inability to execute the Draft Supply Agreement.
On 10 March 2021, there was a meeting between Mr Menegola, Jacey and Tracey. Mr Menegola deposes that he directly raised the issue of signing the Draft Supply Agreement and was told that ‘there was issues with the structure due to the criminal investigation being an impediment to signing the long-term agreement.’ Mr Menegola’s handwritten notes of the meeting included: ‘Issues with structure due criminal investigation … short term agreement, long term agreement’.
On 21 April 2021, there was another meeting between Mr Menegola, Jacey and Tracey with respect to the ongoing supply of organic eggs. Mr Menegola’s handwritten notes of the meeting stated: ‘Again Jacey/Tracey advise that due to ongoing criminal investigation they are unable to sign an agreement’.
By email of 22 April 2021 to Jacey, Mr Menegola asked: ‘Who would you like the return to reusable packaging advice emails sent to in your organising [sic]’. By email of the same date, Tracey replied and stated:
Thank you for your email.
In the meanwhile, would you pls send all seasons ranch organic related emails to me? I think that will be easier for egg marketing.
Once we have new structure in place, I will indicate who will receive the emails.Also Todd would you let me know if you wanna take more 700g organic eggs?
By email of 30 April 2021 to Mr Menegola, Mr Bird, the Certification and Audit Manager of Southern Cross Certified, stated:
Please be advised that Seasons Ranch Unit trust have been suspended today. Any eggs received today or prior may be processed as certified organic. Any eggs received after today must not be processed as certified organic. As always, happy to discuss if you have any questions.
On 2 May 2021, Mr Bird sent a follow-up email stating that the suspension had been lifted.
By email of 4 June 2021 to Jacey, Mr Menegola stated:
Confirming our conversation just now:
MVE commit to purchasing additional Free Range egg from Shed 4 under the following conditions:
•Period:
o commence supply Thursday 10/6 for 4 weeks until w/c 5/7.
o potential to extend if quality parameters are maintained
•Quality:
o providing the egg quality is maintained and the 2nd quality grading% does not increase above the current level of 8%
o grading data reviewed weekly
•Price: $33 per stack
•Volume: approximately 14-15 pallets x 48 stacks per week
Jacey if the quality of the eggs drops away quickly, as it can do with older flocks, then we agree to stop purchasing immediately or as soon as possible and Seasons Ranch will depop the shed.
Please confirm.
By email of 6 June 2021 at 9:21 am, Jacey replied and stated:
Thank you for the offer.
After confirming with Fred;
For the period, commence supply will be 14/6/2021 for 4 weeks until 12/7/2021.. as shed 4 soli is still have full and free range feed will be only delivered next Friday the earliest. Thursday delivery for shed 4 will be still organic.
Agreed that the eggs quality might drop due to old flocks or change of feed. Lets monitor the grading data, and if the quality drops quickly, we can depopulate shed 4 ASAP.
For next week Woolworths promotion, pls let us know any extra pallets on Tuesday or Wednesday, so we can prepare them for Thursday delivery.
Thank you.
By email of the same date at 12:56 pm, Mr Menegola replied and stated:
Free Range
Understand the feed issue & your need to run the organic feed out. We can move the free range start date back 1 week, but not sure if we can continue supply for additional week. We will need to monitor the market & egg quality before committing to w/c 12/7.Organic additional
I can confirm we can take an additional 3 pallets for Thursday 10/6 for the Woolworths promotion.
Price for additional pallets will be $45 per stack.
By email of the same date at 2:24 pm, Jacey replied and stated:
For Free range, understand. We can do a review on week of 5/7/2021 for further supply.
For organic extras, it will be 64 stacks/pallet. Price confirmed will be at 45/stack.
Thank you
On or about 1 or 2 July 2021, there was a meeting between Mr Menegola and Jacey regarding the operations of Shed 4 and Shed 5.
On 14 July 2021, there was a meeting between Mr Menegola and representatives of the defendant. Mr Menegola deposes, by reference to his notes, that the meeting related to a ‘long-term Supply Agreement’, including shed rotations, organic egg volumes, Woolworths promotional plans and packaging.
On 24 July 2021, there was a meeting between Mr Menegola and Jacey.
By email of 14 October 2021 to Mr Menegola, Jacey stated that the defendant did not intend to continue the supply of eggs to the plaintiff. The email stated:
Thank you for your enquiries regarding shed 4 first eggs and future supply strategies in recent weeks.
As you know the business has had a challenging start and many aspects of the operations have evolved to meet circumstances rather than the result of good planning.
Some months back we started a complete review of our business operations and farming practices to identify and pursue the best commercial outcomes for the business moving forward.
With this in mind we have decided to restructure our sales arrangements and customer base as a part of the drive to improve the performance of the business across the board.
Unfortunately, this restructure does not involve the continuation of supply to Moorabool Valley Eggs/Egg Marketing Australia.
This is a decision that has not been taken lightly.
We appreciate that this is difficult news for your organisation, and plan to work with you on the supply transition over the remaining weeks.
The changes to our customer mix are effective 1 November 2021.
Prior to that we will continue to ship eggs to you (unless you advise you no longer have any need for them) under the same conditions as previously.
In the lead up to 1 November we will discuss with you transitioning the last shipment of eggs on to cardboard trays and a reconciliation and return of all Happy Hens branded green plastic trays, dividers and pallets and receive back from you all purple and blue trays and any dividers and pallets that are the property of Seasons Ranch Pty Ltd, Seasons Ranch Organics Pty Ltd or Australian Organic Eggs Pty Ltd.
We thank you for the support of MVE/EMA over the years since commencement of the business operations. However we are sure you understand that we must consider at all times the needs of the farming business and ensure we pursue opportunities that provide the best commercial outcomes for the operation.
We appreciate your understanding in this matter and wish MVE and EMA every success in the future.
Please do not hesitate to contact us to discuss further details of this transition.
Principles
The principles for establishing an entitlement to interlocutory injunctive relief are well established.[3] In summary:
[3]See Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57, 68-7 [19] (Gleeson CJ and Crennan J), 81-2 [65] (Gummow and Hayne JJ), recently applied in Transonic v Tilakee [2021] VSC 413, [11] (Nichols J).
(a)The applicant must prove prima facie a sufficient likelihood of success to justify preservation of the status quo pending trial. This requirement is to be understood as whether there is a serious question to be tried as to the applicant’s entitlement to relief and it is not necessary to establish that it is more probable than not that the applicant will succeed at trial.[4] The requisite strength of the probability the applicant must establish depends upon the nature of the rights it asserts and the consequences likely to flow from the injunction sought.[5]
(b)The balance of convenience must favour the grant of the injunction. After considering relevant matters favouring or militating against the grant of the injunction, the Court must ‘take whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial’.[6]
(c)In determining where the balance of convenience lies, the impact of an interlocutory injunction on the rights of third parties may also be an important factor.[7] The general principle is that:
Courts of equity will not ordinarily and without special necessity interfere by injunction where the injunction will have the effect of very materially injuring the rights of third persons not before the court.[8]
(d)The Court will also consider whether or not damages would provide an adequate remedy for the injury that the applicant is likely to suffer. In Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd, Kaye J suggests that this question would be better reformulated as:
Is it just, in all of the circumstances, that a plaintiff should be confined to his remedy in damages?[9]
[4]A Saraya Nominees Pty Ltd v National Australia Bank Ltd [2014] VSC 524, [28] (Dixon J).
[5]Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618, 622 (Kitto, Taylor, Menzies and Owen JJ), quoted with approval in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57, 81-2 [65] (Gummow and Hayne JJ).
[6]Tymbook Pty Ltd v State of Victoria; Bradto Pty Ltd v State of Victoria (2006) 15 VR 65, 73 [35].
[7]Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1, 41 [65] (‘Patrick Stevedores’).
[8]Miller v Jackson [1977] QB 966, 988 (Cumming-Bruce LJ), quoted with approval in Patrick Stevedores (1998) 195 CLR 1, 42 [65].
[9][1984] VR 947, 955.
If the above elements are satisfied, there remains a residual discretion of the Court to refuse relief after consideration of issues such as delay and the like.
The above principles are not applied in isolation. In considering where the lower risk of injustice lies, all relevant factors are to be weighed in the balance. In particular, the strength of the applicant’s case may be a relevant matter in assessing the balance of convenience.[10]
[10]Transonic v Tilakee [2021] VSC 413, [13].
The injunction sought by the plaintiff in this case is an order for the defendant to supply organic eggs to the plaintiff in accordance with the terms of the Draft Supply Agreement. Such relief is in the nature of a mandatory injunction.[11]
[11]Tymbook Pty Ltd v State of Victoria; Bradto Pty Ltd v State of Victoria (2006) 15 VR 65, 70 [22].
In Tymbook Pty Ltd v State of Victoria; Bradto v State of Victoria, the Court of Appeal considered whether a different standard should be applied in applications for mandatory injunctions in contrast to applications for prohibitory injunctions. The Court, consisting of Maxwell P and Charles JA, concluded as follows:
In our view, it is desirable that a single test be applied in all cases where an interlocutory injunction is sought. There is nothing in the body of authority to which we have referred, nor any consideration of principle, which requires a special test to be applied to one subcategory of such injunction applications, namely, those where mandatory relief is sought. On the contrary, as pointed out convincingly by Hoffmann J in Films Rover, the grant of a mandatory interlocutory injunction may be justified in a particular case notwithstanding that the court does not feel the requisite ‘high degree of assurance’.
As Lord Woolf MR said in Broadmoor Special Health Authority v Robinson, adopting the words of Lord Cooke in TV3 Network Ltd v Eveready New Zealand Ltd:
[T]he remedy of injunction should be available whenever required by justice.
In our view, the flexibility and adaptability of the remedy of injunction as an instrument of justice will be best served by the adoption of the Hoffman approach. That is, whether the relief sought is prohibitory or mandatory, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting the injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial.[12]
Is there a serious question to be tried?
Submissions
[12]Ibid 73 [33]-[35] (citations omitted).
Plaintiff’s submissions
The plaintiff submitted that there was a serious question to be tried, as it has a prima facie case for equitable relief by way of specific performance, for the following reasons:
(a)The plaintiff provided the Draft Supply Agreement to the defendant in September 2020, constituting an offer.
(b)Mr Menegola’s evidence was that the defendant did not take issue with anything in the Draft Supply Agreement, and no contrary evidence was given by the defendant.
(c)From March 2020 until 1 November 2021, the defendant supplied eggs to the plaintiff substantially in accordance with the terms of, and the annexures to, the Draft Supply Agreement.
(d)That course of dealing constituted an acceptance by the defendant of the plaintiff’s offer to contract in accordance with the terms of the Draft Supply Agreement.
(e)The fact that the Draft Supply Agreement was not signed is no answer because the course of dealing between the parties is strong evidence of assent.
(f)The defendant has now secured a ‘better deal’ with one of the plaintiff’s trade rivals and is seeking to unlawfully avoid its contractual obligations.
Defendant’s submissions
The defendant submitted that there is no serious question to be tried, because the plaintiff’s claims are unorthodox and highly speculative, for the following reasons:
(a)It is common ground that the defendant did not execute the Draft Supply Agreement, and never conveyed to the plaintiff orally or in writing that it had accepted the terms.
(b)Courts will rarely infer a contract from conduct in the absence of written or oral communications evidencing the exchange of mutual promises, and it is not enough that the parties’ conduct is consistent with the alleged terms.
(c)The Draft Supply Agreement was manifestly incomplete, including as to the critical issue of price.
(d)The egg supply between the parties reflected ad hoc arrangements, rather than a formal agreement, because:
(i)the defendant had supplied eggs to the plaintiff from March 2020, before the Draft Supply Agreement was provided;
(ii)the price of eggs varied considerably between September 2020 and October 2021; and
(iii)the evidence shows that the parties did not comply with numerous terms of the Draft Supply Agreement, including the obligation for the defendant to provide a delivery docket and for the plaintiff to provide a purchase order.
(e)The plaintiff’s own conduct, including in its presentation and file notes of meetings, demonstrates that it did not believe itself that they had entered into a binding agreement.
Consideration
Was there an offer?
Principles
The critical question is whether a reasonable person in the position of the parties would have understood that the provision of the Draft Supply Agreement from the plaintiff to the defendant was, having regard to the circumstances in which it occurred,[13] the communication by the plaintiff of an offer to enter into legal relations capable of being accepted by the conduct of the defendant.[14]
[13]Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, 105-6 [25] (Gaudron, McHugh, Hayne and Callinan JJ).
[14]Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424, 457 (Dixon CJ, Williams, Webb, Fullagar and Kitto JJ); Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1, 12-13 [22]-[23] (French CJ, Kiefel and Bell JJ), 59-60 [196] (Nettle J), 76 [242] (Gordon J).
In answering this question, the Court may have regard to whether it is common practice for parties to intend to be finally bound to agreements or deeds of the type in question prior to the execution and exchange of the formal contract.[15]
Conclusion
[15]Liquorland (Australia) Pty Ltd v GYG Holdings Pty Ltd (Supreme Court of New South Wales, Powell JA, 28 October 1994) 29. See, eg, with respect to the sale of real estate, Elgas Ltd v AJ Young Industries Pty Ltd (1986) 4 BPR 9329, 9335 (McHugh JA, with whom Mahoney and Priestley JJA agreed); Seventh Shar Nominees Pty Ltd v Hortico Pty Ltd [2000] VSC 155, [29] (Mandie J).
In my opinion, an objective observer would not, in normal circumstances, consider that a party, simply by emailing a draft agreement, is making an offer capable of acceptance by the other party, without the document being executed or otherwise confirmed by the parties.
Although the parties may, by words or conduct, subsequently agree to be bound by the terms in a draft agreement, that would not, in the absence of other circumstances, be the inferred intention of the offeree at the time the agreement is sent.
In my opinion, the circumstances prevailing at the time the Draft Supply Agreement was emailed do not support an inference that the plaintiff was making an offer immediately capable of acceptance by the defendant, for the following reasons:
(a)The Draft Supply Agreement provided for signatures by both parties.
(b)The Draft Supply Agreement was not on its face complete.
(c)The email from Mr Menegola to Mr Schutte on 8 September 2020 attaching the Draft Supply Agreement referred to the fact that the egg price would need to be discussed, and also stated: ‘There are a couple of other areas where I will need your input’.
I do not consider there are any facts in this case that support a conclusion that, at the time the Draft Supply Agreement was provided to the defendant, it was intended that legal obligations would arise prior to execution by both parties.
If there was an offer, was there acceptance?
Principles
As the Court of Appeal observed in Woolcorp Pty Ltd v Rodger Constructions Pty Ltd, in the absence of an offeree’s express consent, acceptance of an offer may be inferred if an objective bystander would conclude from the offeree’s conduct, including its silence, that the offeree has accepted the offer and has signalled that acceptance to the offeror.[16] As the Court of Appeal said in Danbol Pty Ltd v Swiss Re International SE:
The conduct relied on must be objectively capable of constituting and conveying acceptance in the eyes of a reasonable person in the position of the offeror. It may be found where the offeree takes the benefit of the offer.[17]
[16][2017] VSCA 21, [9] (Santamaria, Kyrou JJA and Elliott AJA).
[17][2020] VSCA 274, [75] (McLeish, Niall and Sifris JJA) (citations omitted).
In summary, the principles to be applied in determining whether an offer has been accepted so as to form an enforceable contract are as follows:
(a)The test for finding offer and acceptance will be satisfied if there has been a ‘clear indication by one party of a willingness to be bound on certain terms, accompanied by an unqualified assent to that offer communicated by the other party’.[18]
[18]JW Carter, E Peden and GJ Tolhurst, Contract Law in Australia (LexisNexis Butterworths, 5th ed, 2007) 37 [3-02], quoted with approval in Kriketos v Livschitz (2009) 14 BPR 26,717, 26,735 [110] (McColl JA, with whom Allsop P and Macfarlan JA agreed).
(b)The test is objective and requires the Court to consider ‘the text of relevant documents, and also the surrounding circumstances known to participants, and the genesis, purpose and object of the transaction, but not the participants’ subjective beliefs’.[19] The Court may have regard to:
(i)the parties’ pre-contractual conduct on the issue of what each party, by their words and conduct, would have led a reasonable person in the position of the other party to believe;[20] and
(ii)the parties’ subsequent communications for the purpose of determining what terms were essential or important, whether there were admissions, and whether the parties intended their ‘agreement’ to be binding.[21]
(c)The absence of an essential term will render the ‘agreement’ incomplete; and, if the parties have not reached a consensus on important matters, it is less likely that they intended to be immediately bound.[22]
(d)The acceptance of an offer can be inferred if an objective bystander would conclude from the offeree’s conduct, including his or her silence, that the offeree has accepted the offer and has signalled that acceptance to the offeror.[23]
Conclusion
[19]Kriketos v Livschitz (2009) 14 BPR 26,717, 26,735 [108] (McColl JA, with whom Allsop P and Macfarlan JA agreed).
[20]Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd(as trustee for Jack Road Investments Unit Trust) [2019] VSCA 91, [46] (Kaye, McLeish and Hargrave JJA).
[21]Queensland Phosphate Pty Ltd v Korda(as joint and several liquidators of Legend International Holdings Inc (in liq)) [2017] VSCA 269, [37] (Tate, Beach JJA and Sifris AJA).
[22]Ibid.
[23]P’Auer AG v Polybuild Technologies International Pty Ltd [2015] VSCA 42, [9] (Whelan JA, with whom Ferguson and Kaye JJA agreed).
In my opinion, even if I had found that there had been a valid offer, an objective bystander would not conclude that the defendant had accepted the terms of the Draft Supply Agreement, nor that it had signalled acceptance to the plaintiff, for the following reasons:
(a)After the Draft Supply Agreement was emailed, the defendant continued to supply eggs to the plaintiff in the same manner as it had prior to the provision of the document. As counsel for the plaintiff rightly conceded, nothing changed in the supply arrangements between the plaintiff and the defendant after the document was provided.
(b)There was no evidence of any discussion, as foreshowed in the email of 8 September 2020, in which the price to be paid under the Draft Supply Agreement was agreed. In fact, on more than one occasion, the parties appeared to consider themselves at liberty to negotiate both the price and the quantity of eggs to be supplied.
(c)Communications between the plaintiff and the defendant after the provision of the Draft Supply Agreement do not demonstrate a common understanding that the eggs were being supplied pursuant to the terms of the Draft Supply Agreement. In particular:
(i)On 30 November 2020, Mr Menegola presented to a meeting of the directors of the defendant and included the following items:
(1)‘EMA have offered a long-term contract - no response to date’; and
(2)‘Commit to each other via a long-term contract’ under the heading ‘Next Steps’.
(ii)At the meeting on 29 January 2021 between Mr Menegola, Jacey and Tracey, the issue of ‘Supply Agreement’ remained an agenda item.
(iii)On 29 January, 10 March and 21 April 2021, Mr Menegola was told that, as a result of the criminal investigation, the defendant was unable to sign the long-term agreement.
In my opinion, an objective bystander would conclude that these communications were inconsistent with the parties having already accepted that they had entered into an agreement on the terms of the Draft Supply Agreement.
(d)I reject the contention of counsel for the plaintiff that the defendant’s acceptance of the terms of the Draft Supply Agreement should be inferred from the first supply of eggs after it was emailed on 8 September 2020. The continuation of existing supply arrangements could not, in normal circumstances, be interpreted by an objective bystander as unqualified assent to the terms of the Draft Supply Agreement.
Was there an implied agreement?
Principles
The circumstances in which a contract will be inferred were explained by Sundberg J in Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd:
A contract may in certain circumstances be inferred from conduct, even where no offer and acceptance can be identified. However the existence or otherwise of an enforceable agreement depends ultimately on the manifest intention of the parties, objectively ascertained. Where mutual promises are sought to be inferred, the conduct relied upon must, on an objective assessment, evince a tacit agreement with sufficiently clear terms. It is not enough that the conduct is consistent with what are alleged to be the terms of a binding agreement. The evidence must positively indicate that both parties considered themselves bound by that agreement.[24]
[24][2009] FCA 499, [39] (citations omitted), quoted with approval in P’Auer AG v Polybuild Technologies International Pty Ltd [2015] VSCA 42, [11] (Whelan JA, with whom Ferguson and Kaye JJA agreed).
As Whelan J explained in P’Auer AG v Polybuild Technologies International Pty Ltd:
It is important to emphasise that the circumstances in which a contract will be inferred, otherwise than by the traditional analysis of offer and acceptance, will be rare. …
In determining if an agreement has been made in this way regard must be had to the entirety of the relevant conduct. The precise point in time at which the agreement comes into existence may not be clear, and the relationship between the parties themselves may be dynamic in such a way that the terms of the agreement might be added to or superseded over time.[25]
Conclusion
[25][2015] VSCA 42, [11]-[12] (with whom Ferguson and Kaye JJA agreed).
For the reasons set out in paragraphs 61 and 65 above, the evidence does not positively indicate that both parties considered themselves bound by the terms of the Draft Supply Agreement. On the contrary, I consider the evidence points to the opposite conclusion.
Does the balance of convenience favour granting an injunction?
Submissions
Plaintiff’s submissions
The plaintiff submitted that the balance of convenience favours granting the injunction sought, for the following reasons:
(a)Maintaining the status quo carries a lower risk of injustice than the alternative.
(b)The plaintiff will suffer severe hardship, in that it will be forced out of the organic egg business. On the other hand, the defendant adduced no direct evidence of hardship to any trade rivals.
(c)The potential hardship to the defendant is obviously less than to the plaintiff because, if the injunction is granted, the defendant will retain the plaintiff’s custom. On the other hand, if the injunction is not granted, the plaintiff will lose all of its custom.
(d)If specific performance is granted, any court supervision of the contract would be minimal.
(e)The plaintiff is ready, willing and able to perform its obligations and is able to pay its debts.
Defendant’s submissions
The defendant submitted that the balance of convenience does not favour granting the injunction sought, for the following reasons:
(a)The Court should not imperil the legitimate interests of third parties.
(b)The defendant has entered into written supply agreements with third party distributors which means that it cannot supply the plaintiff without breaching its supply obligations to those third parties. This, in turn, would result in those third parties breaching their agreements with retailers. On the other hand, the plaintiff merely asserts an implied contract, in contrast to the formal, written agreements the defendant has with the relevant third parties.
(c)The evidence falls well short of establishing that the plaintiff will be forced out of business if the interlocutory injunction is not granted. Whilst it may be true that the plaintiff will be unable to supply organic eggs, this is a small subset of its broader egg distribution business, which it will otherwise be able to continue.
(d)There is a real risk that the parties will require the ongoing assistance of the Court to manage their contractual relationship, because issues such as volume, price and egg quality are likely to remain issues in the future.
Are damages an adequate remedy in the event the plaintiff is successful at trial?
Submissions
Plaintiff’s submissions
The plaintiff submitted that, in the event that it is successful at trial, damages would be an inadequate remedy, for the following reasons:
(a)There is no current alternative supplier of organic eggs.
(b)Not granting the injunction would have the effect of putting the plaintiff out of the wholesale organic egg business because the defendant is the sole means by which the plaintiff can keep its business going.
(c)Performance of the Draft Supply Agreement is not impossible, as evidenced by the fact that the defendant has entered into a different contract for the supply of eggs to another customer.
The plaintiff further submitted that, although specific performance is not usually awarded for specific goods, it would be appropriate in this case because:
(a)the Draft Supply Agreement is in relation to long-term supply arrangements where business often depends on guaranteed, continued supply; and
(b)the state of the market is such that it is similar to the category of ‘unique goods’ cases, because the supply of organic eggs is unique.
Defendant’s submissions
The defendant submitted that the plaintiff has not led any admissible evidence that establishes that damages will not be an adequate remedy if it succeeds at trial. In particular:
(a)To the extent that the plaintiff can demonstrate a loss of sales to Woolworths and other retailers, the value of those lost sales can easily be calculated and addressed by damages.
(b)There is no evidence of any obligations on the part of the plaintiff to supply Woolworths or any other retailer with organic eggs.
(c)There is no evidence of any reputational damage to the plaintiff, or any adverse impact on its ability to supply other varieties of eggs.
Conclusion
As I have found that the plaintiff has not demonstrated a prima facie case or a serious question to be tried, it is not strictly necessary to decide the questions of balance of convenience and damages as an adequate remedy.
However, in my opinion, had I been satisfied that there was a serious question to be tried, I would have refused the injunction for the reasons submitted by the defendant, in particular, the following:
(a)The uncontradicted evidence of the defendant demonstrates that, if it was required to supply the quantity of organic eggs as provided under the terms of the Draft Supply Agreement, it would be unable to meet its contractual obligations to third parties. I do not accept the submission of counsel for the plaintiff that the defendant would be able to increase its production of organic eggs by converting shed producing free-range eggs to organic egg production. This contention was made without notice to the defendant or evidence that it was possible or practical.
(b)There was no compelling reason put forward as to why, if a contractual breach could be established, the plaintiff would not be properly compensated by an award of damages.
Plaintiff’s claims under the Australian Consumer Law
In its further amended statement of claim filed 10 November 2021, the plaintiff also seeks relief, including an interlocutory injunction pursuant to ss 232 and 234 of the Australian Consumer Law (‘ACL’)[26] remedying alleged breaches of ss 18, 20 and 21 of the ACL.
[26]Competition and Consumer Act 2010 (Cth) sch 2.
The claims for breaches of the ACL are alleged to have arisen from the defendant representing to the plaintiff that it was willing and able to supply organic eggs for a period of five years. The representation is alleged to be partly written and partly oral, as follows:
(a)the written part is alleged to be contained in emails and documents between March 2019 and August 2020, including letters of intent and a draft agreement sent by the defendant to the plaintiff, proposing a five plus five year supply; and
(b)the oral part is alleged to have been made by Mr Tao to Mr Menegola in various meetings between them.
The representation is alleged to have been false at the time it was made because at no time did the defendant intend to supply the plaintiff with organic eggs for a period of five years.
I am not satisfied that the allegations of contraventions of the ACL give rise to a serious question to be tried, for the following reasons:
(a)Neither the further amended statement of claim, nor the plaintiff’s submissions, identify the meetings between Mr Tao and Mr Menegola, much less what was said at those meetings, that constituted the representation.
(b)There was no evidence that:
(i)the defendant was not negotiating in good faith for a supply agreement; or
(ii)prior to the criminal investigation into Mr Tao in June 2020, the defendant was not at least open to entering into such an agreement.
After that time, the defendant stated on more than one occasion that there were impediments to the signing of a long-term supply agreement with the plaintiff.
Further, the plaintiff does not allege what it would have done but for the representation. As the representation does not descend to the terms on which eggs would have been supplied, injunctive relief would require the Court to effectively draw the terms of the contract under which the defendant should be compelled to supply.
Damages are the usual remedy for such contraventions of the ACL; and there was no submission as to why it would not be an adequate and appropriate remedy if the plaintiff can make out the contraventions.
Orders
I propose to order that the plaintiff’s summons filed 3 November 2021 be dismissed with costs.
I will hear the parties on the final form of orders.
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