CITATION: OneSteel Trading Pty Limited v Capital Steel & Pipe Pty Limited (Judgment 3) [2007] NSWDC 201 HEARING DATE(S): 28/5/07-31/5/07, 4/6/07, 7/6/07, 13/6/07, 9/8/07
JUDGMENT DATE:
5 October 2007JURISDICTION: Civil JUDGMENT OF: Rolfe DCJ DECISION: See paragraphs 274-277. CATCHWORDS: PART I: - CONTRACT - CONCENSUS - CONDITION PRECEDENT - TIME OF THE ESSENCE - VARIATION - BREACH - FRUSTRATION - UNCONSCIONABLE CONDUCT - DAMAGES INCLUDING ELEMENT OF SETTLEMENT OF THIRD PARTY CLAIM - PART II: - CONTRACT - TERMS - FURTHER CONTRACT - TERMS - TIME OF THE ESSENCE & RESERVATION OF RIGHTS - BREACH & TERMINATION - MITIGATION - ACCORD & SATISFACTION - FRUSTRATION - UNCONSCIONABLE CONDUCT - ASSESSMENT OF DAMAGES UNDER SALE OF GOODS ACT LEGISLATION LEGISLATION CITED: Sale of Goods Act 1923 (NSW)
Sales of Goods Act 1972 (NT)
Trade Practices Act 1974 (Cth)CASES CITED: Ormwave Pty Ltd v Smith (2007) NSWCA 210
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR [97326] at 11,117-11,178
Meares v Attorney-General (1983) NZLR 308 at 377
Vroon BV v Foster's Brewing Group (1994) 2 VR 32
Branir Pty Ltd v Owston Nominees (No. 2) Pty Ltd (2001) 117 FCR 424 at 525
Pagnan S.p.A. v Feed Products Ltd (1987) 2 Lloyds REP 601
Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251
Air Great Lakes Pty Limited v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622
Magill v National Australia Bank (2001) NSWCA 221
Concrete Constructions Group v Litevale Pty Ltd & Ors (2002) NSWSC 670
Bowes v Challenger (1923) 32 CLR 159
Trans Trust S.P.R.L. v Danubian Trading Company Limited (1952) 1 Lloyds' Rep 348
Ficom SA v Sociedad Cadex Limitada (1980) 2 Lloyd's LR 118 at 131
W J Alan & Co Ltd v El Nasr Export and Import Co (1972) 2 QB 189
Satellite Estate Pty Ltd v Jaquet (1968) 71 SR (NSW) 126 at 150
Etablissements Chainbaux SARL v Harbormaster Ltd (1955) 1 Lloyds Rep 303
Amann Aviation Pty Ltd v Commonwealth (1988) 100 ALR 267 at 309
Davis Contractors Ltd v Fareham (1956) AC 696 at 729
Fairway Trading Pty Limited v Project Blue Moon Pty Ltd & Anor (1999) ACTSC 99
Gillett v Holt (2001) Ch 210
Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298
Yimin Zhang v Shanghai Wool and Jute Textile Co Ltd (2006) VSCA 133
Dominion Motors Ltd v Grieve (1936) NZLR 766 at 771
Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516 at 523
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603
Rowe v The Australian United Steam Navigation Company Ltd (1909) 9 CLR 1 at 18 & 27
Jones v Dunkel (1959) 101 CLR 298
Nicolic & Anor v Oladenly Pty Ltd & Ors (2007) NSWCA 252 at [17]
Insurance Commissioner v Joyce (1948) 77 CLR 39 at 49
British Railways Road v Harrington (1972) AC 877
Blatch v Archer (1774) 1 Cowp. 63 at 65 (98 ER 969 at 970)
Russell v Aiello (2003) HCA 53 at [11]
Payzu Ltd v Saunders (1919) 2KB 581
Kargotich v Mustica (1973) WAR 167 at 169
Osborne v McDermott (1998) 3 VR 1 at 10-11
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 at (356 & 359)
Hollyburton UK Ltd v Irani (2006) VSC 403
Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 at 300
Wendt v Bruce (1931) 45 CLR 245 at 254
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981) 149 CLR 337
Krell v Henry (1903) 2KB 740
International Paper Co v Rockefeller 161 N.Y. App. Div 180
Howell v Coupland (1876) 1 QBD 258
Herne Bay Steam Boat Co v Hutton (1903) 2KB 683
Scanlan's New Neon Ltd v Toohey's Ltd (1943) 67 CLR 169
El Rio Oils (Canada) Ltd v Pacifica Coast Asphalt Co 213 P 2d1 (1949)
Canadian Industrial Alcohol Co Ltd v Dunbar Molasses Co 179 NE 383 (1932)
Denmark Productions Ltd v Boscobel Productions (1969) 1QB 699
ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 at [51]
ACCC v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51
Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 (at 9)
CIT Credit Pty Ltd v Blayn Norman Keable (2006) NSWCA 130
Elders Ltd v Incitec Ltd & Anor (2006) SASC 99 at [233]
Wertheim v Chicoutimi Pulp Co (1911) AC 301
Franke v CIC General Insurance Ltd ("The Coral") (1994) 33 NSWLR 373
ABD Metals v Anglo Chemical (1955) 2 Lloyd's Rep 456PARTIES: OneSteel Trading Pty Limited (Plaintiff/Cross Defendant/2nd Cross Claimant)
Capital Steel & Pipe Pty Limited (Defendant/Cross Claimant/Cross Defendant to 2nd Cross Claim)FILE NUMBER(S): 5424/04 COUNSEL: J E Sexton SC with R J Cheney (Plaintiff/Cross-Defendant/2nd Cross-Claimant)
A J McInerney with C N Bova and D Barnett (Defendant/Cross-Claimant/Cross-Defendant to 2nd Cross-Claim)
JUDGMENT (NO. 3)
1 The plaintiff, OneSteel Trading Pty Limited, sells steel and associated products.
2 The defendant, Capital Steel & Pipe Pty Limited, imports steel and associated products and supplies them in Australia to companies such as the plaintiff.
3 These proceedings concern three claims between the parties. The first claim is known as the Wharf Claim, in which the plaintiff claims damages from the defendant arising out of the defendant’s alleged breach of contract in failing to supply tubular steel piles and various associated components. The second claim, which is unconnected to the Wharf Claim, is known as the SeAH Claim. The SeAH Claim includes two interrelated claims, the defendant’s 1st Cross-Claim in which it claims a liquidated sum for the alleged failure by the plaintiff to pay for Steel Linepipe which the defendant supplied to it. Secondly, it includes the 2nd Cross-Claim in which the plaintiff claims damages from the defendant for the defendant’s alleged failure to deliver steel Linepipe and Ultrapipe.
PART 1: WHARF CLAIM
Pleadings
4 The pleadings in the Wharf Claim comprise:
(a) Further Amended Ordinary Statement of Claim filed in Court on 29 May 2007.
(c) Reply filed 8 September 2006.(b) Further Amended Defence filed in Court on 7 June 2007.
Submissions
5 The submissions comprise:
(a) Plaintiff’s written submissions dated 25 June 2007, paragraphs 1-150.
(c) Plaintiff’s outline of submissions in reply dated 8 August 2007, paragraphs 1-34.(b) Defendant’s outline of submissions “Wharf Claim” dated 20 July 2007.
Witnesses
6 No witnesses were called, so the case has to be decided on the documents put into evidence.
Bundles of Documents
7 The plaintiff’s bundle of documents relating to the Wharf Claim are contained in exhibit A. I will refer to documents in this bundle, for example, as A150 and so on.
8 The defendant’s bundle of documents relating to the Wharf Claim are contained in exhibit 1. I will refer to documents in this bundle, for example, as 1.150 and so on.
A Was there a contract.
B What were the terms of the contract.
C Was there a variation of the Contract.
D Was the contract breached.
F Was there unconscionable conduct on the part of theE Was the contract frustrated.
G Damages
9 I will deal with each of these issues in turn.
A WAS THERE A CONTRACT
10 On or about 28 February 2002 the Northern Territory government awarded to Thiess Pty Limited (“Thiess”) the contract for the construction of Stage 2A of the East Arm Wharf Development in Darwin.
11 On or about 2 May 2002 Thiess entered into a supply contract with the plaintiff, under which the plaintiff was required to supply 1,545 lineal metres of 1500 millimetre diameter X 28 millimetre wall thickness of tubular steel piles and various associated components (the “Piles”). The plaintiff was required to deliver the Piles to the Wharf with due expedition and without delay by mid July 2002. Time was of the essence in relation to the plaintiff’s contract with Thiess for the supply of the Piles.
12 The plaintiff alleges that it entered into a contract with the defendant in April 2002, under which the defendant agreed to supply, inter alia, the Piles for a price of $1,316.66 per metric tonne for tubular piles, $2,303.00 each for driving shoes and $44.50 each for backing rings.
13 The plaintiff says the contract was made either as at 12 April 2002 or, alternatively, as at 24 April 2002 and relies on the following communications between the parties up to 24 April 2002 to establish there was a contract in writing:
(a) Facsimile from plaintiff to defendant dated 7 March 2002: A141.
(b) Facsimile from plaintiff to defendant dated 14 March 2002: A213
(c) Email correspondence between Paul Boardman on behalf of plaintiff and Ed Studdy on behalf of defendant on 22 March 2002: A228 and 25 March 2002: A229.
(d) 4-page facsimile from defendant to plaintiff dated 9 April 2002: A274.(e) 3-page facsimile from plaintiff to defendant dated 9 April 2002: A283.
(f) Email from plaintiff to defendant dated 9 April 2002 4:33pm: A 288.
(g) Email correspondence between plaintiff and defendant on 12 April 2002 at 12:41pm (Northern Territory time): A 319 and 12:20pm (Sydney time): A 308.
(i) Purchase Order No. 4569/200178 dated 23 April 2002: A 378.(h) Facsimile letter from plaintiff to defendant dated 24 April 2002: A375 and
14 The plaintiff contends that the terms of the contract were:
(a) The defendant would supply the products to the plaintiff at Darwin Free Ex Hook.
(c) Time was of the essence.(b) The products would be despatched by ship from Korea by the earliest possible date in July 2002 for delivery to Darwin; and
15 The plaintiff pleads that, in breach of the contract, the defendant failed to dispatch the Piles from Korea by the earliest possible date in July 2002 or at all. By reason of that failure, the plaintiff says it terminated the Contract, procured the Piles from elsewhere, and compromised Thiess’ claims made against it for loss and damage suffered as a result of the plaintiff’s failure to have the Piles in Darwin by mid July 2002.
16 The defendant contends there was no contract at all between the plaintiff and it for the supply of the Piles for two reasons. First, the defendant says there was no consensus between it and the plaintiff of a kind that would constitute a binding contract. Secondly, the plaintiff had not supplied a letter of credit to the defendant in terms which were acceptable to it.
17 The defendant contends that even if there was a contract it was not solely for products sourced from the Dong Yang steel mill in South Korea which it claims is all that has been pleaded by the plaintiff. This is a pleading point and the Court rejects it from the outset. Paragraph 7 of the Further Amended Ordinary Statement of Claim was amended on the second day of the hearing, without opposition, and the words “inter alia” were included with the result that the plaintiff has pleaded a contract for the supply of the Piles as defined and other things, namely, the products which the defendant procured from the Dongbu mill. Clearly, the plaintiff’s case was conducted on this basis and on the basis that the defendant failed to deliver the Piles as defined in the pleading.
18 The plaintiff submits that the proper law to be applied in determining whether there was a contract is either the law of New South Wales or the Northern Territory. The defendant does not contend otherwise. This means either the Sales of Goods Act 1923 (NSW) or the Sale of Goods Act 1972(NT) applies. As it does not matter which of these Acts applies because their provisions are identical, I will refer to the legislation in this judgment as the “SOG Act”. Also, it was not suggested that there was any difference between New South Wales and the Northern Territory in terms of the general principles of contract law applying to the circumstances of this case.
19 The starting point is s 6 of the SOG Act which provides:
(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property and goods to the buyer for a money consideration called the price.”“6 Sale and Agreement to Sell
20 As the plaintiff contends, all that is necessary in order for there to be a contract for the sale of goods is for there to be an agreement to transfer property and identification of the goods themselves and the price to be paid for them. The expression “transfer the property” distinguishes a sale from a transaction such as a mortgage or pledge: see s 4 (4). Also, the price does not have to be expressly agreed: s 13 (2).
21 As the plaintiff points out, whether identification of only the goods and the price is sufficient for there to be a contract, that is, whether there is a sufficient consensus for there to be an agreement, is a different question. In that respect, s 8 is relevant. It provides:
Subject to the provisions of this Act and of any statute and that behalf, a contract of sale may be made in writing (either with or without seal), or by word or mouth, or partly in writing and partly by word of mouth, or may be implied from the conduct of the parties.”“8 Contract of Sale How Made
22 In other words, where there are dealings involving the transfer of property in goods for a price, it may be implied from the conduct of the parties that there was sufficient consensus for there to be a contract even in the absence of express oral and written communications to that effect.
23 As already noted, the plaintiff contends that there was a contract in writing by virtue of the communications set out in paragraph 13 above. It also says that the parties conducted themselves thereafter on the basis that there was a contract.
24 Although the words in s 8 “implied from the conduct of the parties” is a matter of statutory construction, in the Court’s determination of whether there was a sufficient consensus between the plaintiff and defendant, assistance can be found in those cases where it was not easy to locate an offer or an acceptance but nevertheless a contract was found to exist.
25 First of all, it is not necessary, in determining whether a contract has been formed, to identify either a precise offer or precise acceptance, nor a precise time at which an offer or acceptance could be identified: Ormwave Pty Ltd v Smith (2007) NSWCA 210.
26 In Ormwave the Court referred to Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 in which Heydon JA pointed out at 176.7 that the traditional offer and acceptance analysis does not work well in various circumstances. His Honour set out examples in the judgment and referred to Integrated Computer Services Pty Limited v Digital Equipment Corp (Aust) Pty Limited (1988) 5 BPR [97326] at 11,117 – 11,178 where McHugh JA (Hope and Mahoney JJA concurring) said:
“Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties’ subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed.”
27 Reference was also made to Meares v Attorney-General (1983) NZLR 308 at 377 where Cooke J said:
“The acid test in the case like the present is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain.”
28 As noted by Heydon JA, this passage was cited with approval by Ormiston J in Vroon BV v Foster’s Brewing Group (1994) 2 VR 32 where he went on to say at 81:
“A manifestation of mutual assent may be made even though neither offer nor acceptance could be identified and even though the moment of formation cannot be determined.”
29 In the context of these types of cases, Allsop J in Branir Pty Ltd v Owston Nominees (No. 2) Pty Limited (2001) 117 FCR 424 at 525 spoke of the failure of business people to dot the “i’s” and cross the “t’s” as follows:
“Sometimes this failure occurs because, having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation. In such circumstances, eve in the absence of clear offer and acceptance, and even without being able (as one can here) to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract.”
30 The plaintiff also relies on Pagnan S.p.A. v Feed Products Ltd (1987) 2 Lloyds REP 601, a sale of goods case in which the Court stated as follows at 611:
“The parties may by their words and conduct make it clear that they do intend to be bound, even though there are other terms yet to be agreed, even terms which may often or usually be agreed before a binding contract is made (cases cited omitted) … … When once it is shown that there is a complete contract, further negotiations between the parties cannot, without the consent of both, get rid of the contract already arrived at.”
31 The plaintiff relies on Pagnan as authority for two propositions. First, the conduct of the parties may show an intention to be bound even though not every term has been agreed and secondly, once there is such an agreement, subsequent negotiations about the additional terms cannot get rid of the contract already arrived at.
32 In reaching its determination on this issue, the Court has been guided by the authorities referred to above because, on the facts, this case does not lend itself to the traditional offer and acceptance analysis. In this respect, the cases referred to by Capital Steel in its opening at T 101, including Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251, Air Great Lakes Pty Limited v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 and Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622, do not assist because they are cases concerned with whether the parties intended to be bound before a formal contract was prepared, which is not the case here. To the contrary, the correspondence demonstrates, for example, the absence of a formal purchase order would not be an impediment to the performance of the contract. Indeed, the defendant was prepared to make a firm booking for the products with the mills in South Korea before receiving a purchaser order from the plaintiff as disclosed by the defendant in A308:
“We have booked firm with the mills the final quantities and your delay in sending us your official order sheet will not delay the bulk shipment.”
33 In a case such as this, evidence of post-contractual conduct is admissible to prove that there was a contract, but not on the question of what the contract means: see Magill v National Australia Bank (2001) NSWCA 221 and Concrete Constructions Group v Litevale Pty Ltd & Ors (2002) NSWSC 670.
34 The defendant submitted that no contract had been formed because there was a lack of consensus as to the following matters:
(a) The terms of the letter of credit
(b) Date of shipment of the Piles.
(d) The price at which the Piles were to be supplied.(c) The quantity of Piles to be supplied.
(a) The Terms of the Letter of Credit and
(b) Date of Shipment of the Piles
35 In its facsimile of 14 March 2002 (A213), the defendant submitted an offer to supply the Piles and other steel products. Payment was to be made by irrevocable letter of credit payable at sight.
36 On 9 April 2002 the defendant advised the plaintiff of the details which it required in respect of the letter of credit (A274). Those details were:
Form of documentary credit: Irrevocable and Divisible
TransferableDate and place of expiry: 15th August 2002
…Drafts: At sight
Latest shipment date: 31 July 2002Partial shipment: Not allowed
…
37 Between 11 April 2002 and 24 April 2002, the defendant reminded the plaintiff on a number of occasions that it required the letter of credit to be in the terms set out above:
(i) By facsimile dated 11 April 2002 (A302), the defendant reminded the plaintiff that it required the “Letter of Credit to be strictly in accordance with our four page fax of 9th April (refer Page 3)”
(ii) By facsimile dated 19 April 2002 (1.882), the defendant told the plaintiff:
“Letter of Credit
Please advise when we can expect to receive your Letter of Credit which we indicated was needed by or on 19 April in a format set out in our fax of 9th April to Kerri-Ann.
(iii) By e-mail dated 23 April 2002 the defendant told the plaintiff:***We need your Letter of Credit no later than Tuesday 23rd
April ”.
“Letter of Credit – we urgently require your L/C. Notwithstanding we do not have your official order sheet which you may still be a couple of days off and to which we agreed yesterday as being acceptable, we must have your L/C bef Anzac Day otherwise there could be a delay in delivery.”
38 On 24 April 2002 the plaintiff requested its banker, ANZ Bank, to open a letter of credit in terms different to those requested by the defendant, in that the latest shipping date was 2 July 2002 and the expiry date was 17 July 2002 (1.946, 1.949-951).
39 On 26 April 2002 the ANZ Bank issued a letter of credit (1.1002) on that basis.
40 There is no evidence before the Court that the ANZ letter of credit was the subject of discussion between the plaintiff and the defendant before 15 May 2002.
41 On 15 May 2002 the defendant requested that the letter of credit be amended to reflect a “Latest Shipping Date” of 10 July 2002 (in lieu of the earlier date requested of 31 July 2002) (A 489). The defendant made the same request again on 17 May 2002 (1.1152).
42 The new date requested by the defendant, 10 July 2002, meant there would only be a difference of 8 days between that date and the date in the existing letter of credit.
43 During the period 11 April 2002 - 15 May 2002 the defendant conducted itself consistently with the performance of a contract and did not do otherwise until the strike at the Dong Yang mill occurred: A 497, 498, 503 & 505. Further, the defendant’s e-mail to the plaintiff of 17 May 2002 (referring to the dates in the letter of credit) is not couched in terms that suggest the matter was critically important. Rather, it demonstrates an expectation that the issue regarding the dates in the letter of credit would be resolved, that resolution being in the context (a) that the defendant “will naturally push for the material to be ready on or by 30th June”, (b) that the Dong Yang shipment “could in fact be ready on or about 25th June” and (c) that the issue was whether the “Latest Date for Shipment” should be 2 July or 10 July.
44 On 20 June 2002, the plaintiff placed an updated order for delivery (A597) that included the statements “this order is placed in acceptance of conditions of L/C” and “Delivery is critical – we expect materials to be loaded and dispatched from Korea earliest possible date July 2002”.
45 In late May 2002 the defendant had informed the plaintiff that the Dong Yang plant was expected to go on strike. The upshot of this was that after receipt of the revised purchase order the defendant requested further amendments to the letter of credit on 4 July 2002, that is, partial shipping allowed, shipping date of 24 July 2002 and expiry date of 3 August 2002 (1.1596).
46 On 9 July 2002 the defendant requested further amendments to the letter of credit, that is, partial shipping allowed, shipping date of 29 July 2002 and expiry date of 8 August 2002 (1.1641-1642).
47 On 22 July 2002 an amended letter of credit in the amount of $3,954,207.36 was issued by the plaintiff’s banker, ANZ Bank, which allowed partial shipment of the Dongbu products with a later shipping date of 29 July 2002 and a date of expiry of 8 August 2002.
48 On 29 July 2002 the Dongbu product was loaded on board the MV “Melabar Light” and the vessel departed on the following day (1.1856).
49 On 9 August 2002 the defendant presented the necessary documentation under the letter of credit and the amount of $1,185,378.13 was paid to it for the Dongbu product (1.1914-16, 1.1990-92).
50 The defendant submits that up until 22 July 2002 (at the earliest) the plaintiff had failed to provide it with a letter of credit in the terms previously required by the defendant.
51 The plaintiff submits that even if the failure to agree on the last date for shipment in the proposed letter of credit meant that no time for the defendant to send the Piles to the plaintiff was fixed, this does not mean there was no contract. Because, on any view, the defendant was required to send the Piles to the plaintiff, the plaintiff says that s. 32 (2) of the SOG Act imposed an obligation on the defendant to send the Piles to the plaintiff within a reasonable time. S 32 (2) provides:
“Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time.”
It is then for the Court to determine, as a question of fact, what a reasonable time was within which the defendant was bound to send the Piles. S. 58 of the SOG Act, in this context, provides:
“Where by this Act any reference is made to a reasonable time, the question what is a reasonable time is a question of fact.”
52 Putting the letter of credit to one side for the moment, there can be no doubt that, in April 2002, the parties were in agreement that shipment from Korea should occur by the end of June. The defendant was aware that time of delivery was “critical”. (A 288, 229, 375 & 480). Its understanding is demonstrated by its facsimile to its Korean agent dated 10 April 2002 (A291):
“We need everything ready for shipment by end of June in Inchon.”
By reply facsimile, the agent confirmed (A321):
“CARGO READY: BY 25 JUN 2002 AT LATES. [sic]”
Later, by facsimile to his agent dated 22 April 2002 (A 371), Mr Studdy, the managing director of the defendant, reiterated the importance of the time for delivery:
“5. Delivery must be end June i.e. Shipment end June ex Korea.”
53 The communication at A 472 from the defendant’s freight forwarder POST is consistent with the common understanding thus:
“… there will be NO PROBLEM for cargo readiness of above pipes [i.e. from Dong Yang] to meet our June Loader’s schedule at Inchon …”
54 Looking at it objectively, it was not reasonably practicable or necessary to specify an exact date for shipment from Korea because that would not ensure the plaintiff could deliver the Piles to Thiess in Darwin by a particular date: the time for the sea voyage from Korea to Darwin was variable and depended on the weather and the type of vessel used; a delayed departure could be made up for in good weather.
55 Having regard to the revised purchase order sent by the plaintiff to the defendant on 20 June 2002 (A597) and the other matters I have referred to, I am satisfied that the common understanding of the parties about the date on which the Piles would be shipped had changed from “end June” to “earliest possible date in July”.
56 I accept the plaintiff’s submission that even if it be the case that a failure to agree on the exact date for shipment meant that no precise time for sending the Piles had been fixed, this does not mean there was no contract in existence. I do not regard the words “earliest possible date July 2002” as too uncertain to be enforceable: Bowes v Challenger (1923) 32 CLR 159. In any event, the Court can determine what was a reasonable time within which the defendant was to send the Piles.
57 Two issues must be considered as part of the Court’s determination. First, whether the requested date for last shipment in the letter of credit was inconsistent with other time stipulations in the correspondence. Secondly, if so, did the request by the defendant for a particular “latest shipment date” take precedence over other correspondence in terms of identifying the date for delivery. In other words, is the contractual date for delivery to be determined primarily by the letter of credit or by the other correspondence?
58 As the plaintiff points out, the question of inconsistency falls away because the competing contentions are 2 July 2002 on the one hand and 10 July 2002 on the other. In my opinion, 10 July 2002 is not materially inconsistent with “earliest possible date July” and that is why I am satisfied there was a consensus between the parties as to the date of shipment of the Piles. In that respect, I accept the plaintiff’s submissions set out in paragraphs 6-10 of its submissions in reply and I am not persuaded by the defendant that “earliest possible date July 2002” should be read as meaning “by the earliest possible date in July 2002 after the strike at the Dong Yang mill ends.”
59 As an alternative to its submission that there was a failure to agree on the date of shipment, the defendant contends that, until 22 July 2002, there was no contract because the plaintiff failed to supply it with a letter of credit in terms acceptable to it. The submissions relied on are in paragraphs 84-96 of counsel’s submissions in chief. In particular, reliance was placed on what was said by Denning L J (as he then was) in Trans Trust S.P.R.L v Danubian Trading Company Limited (1952) 1 Lloyds’ Rep 348. In dealing with a case where a buyer stipulated that the credit should be provided at a specified time well in advance of the time for delivery of the goods his Lordship stated:
“What is the legal position of such a stipulation? Sometimes it is a condition precedent to the formation of a contract, that is, it is a condition precedent to the formation of the contract, that is, it is a condition which must be fulfilled before any contract is concluded at all. In those cases the stipulation “subject to the opening of a letter of credit” is rather like a stipulation “subject to contract”. If no credit is provided, there is no contract between the parties. In other cases a contract is concluded and the stipulation for a credit is a condition which is an essential term of the contract. In those cases the provision of the credit is a condition precedent, not to the formation of the contract, but to the obligation of the seller to deliver the goods. If the buyer fails to provide the credit, the seller can treat himself as discharged from any further performance of the contract and can sue the buyer for damages for not providing the credit.”
60 As a fall back, the defendant submits that, if there was a contract, the defendant was discharged from any obligation to ship the Piles by reason of the plaintiff’s breach of a condition precedent, namely, failing to provide a letter of credit in strict compliance with the defendant’s requirements.
61 In this context, the Court should not lose sight of what was truly important to the parties and that was for them to agree on price. Agreement on price was legally necessary for there to be a contract. The Court has found in favour of the plaintiff on this issue (see below).
62 The decision in Trans Trust S.P.R.L. turned on the failure of the buyer to provide a letter of credit enabling the seller to obtain the goods from the original supplier. This Court is not dealing with such a case. Rather, the plaintiff supplied the defendant with a letter of credit on 26 April 2002. There is no complaint that this somehow or other prevented the defendant from obtaining the Piles from the Dong Yang mill. This is hardly surprising because the defendant’s own agent, Mr Yoo, of World Trading and Marketing, had told Mr Studdy of the defendant in his facsimile dated 25 April 2002 headed “L/C for Dong Yang” (A381A) that the letter of credit required, at that point, by Dong Yang, included a latest shipping date of 5 July 2002, only three days later than the date in the letter of credit provided by the plaintiff to the defendant. As already noted, although the defendant found out from its bank on 2 May 2002 the two dates did not coincide with the two dates it had requested, it was not until 15 May 2002 that the matter was taken up with the plaintiff. Even then, again as already noted, the defendant said it would accept 10 July 2002 as the latest shipping date. At the same time, both parties were conducting themselves on the basis that there was a contract for sale of identified goods, at an identified price and for delivery at an identified time.
63 In truth, the defendant’s complaint is only that the “latest shipment date” and “date of expiry” were not the exact dates the defendant said it required. In that respect, I do not see why the lack of agreement on these two items should be elevated to support either of the defendant’s submissions particularly when the parties had agreed that payment would be made by letter of credit and a letter of credit had been made available by the plaintiff to the defendant.
64 I therefore reject the defendant’s submissions on this point.
(c) Quantity of Piles
65 As to the quantity of Piles to be supplied by the defendant to the plaintiff, the history of the purchase orders is:
(i) On 23 April 2002, the plaintiff submitted Purchase Order No. 4569/200178 (A378-380).
(iii) On 20 June 2002, the plaintiff submitted varied Purchase Order No. 4569/200178 (A 596-600).(ii) On 15 May 2002, the defendant sent a facsimile to the plaintiff advising that “P.S. There are some mistakes in the prices on your Purchase Order Sheet and for good orders sake we re-fax back to you what they should read which is identical to our email to you of 8th April (Also attached).” (A498-502).
66 The defendant alleges that the varied purchase order submitted on 20 June 2002 was a change of the original order relating to associated products from Dongbu in a material respect such that there was no consensus on this issue. This is said to be because the plaintiff had initially placed an order with the defendant on 23 April 2002 for 124 x 1500mm backing rings at a price of $44.50 each (A379), but varied the order on 20 June 2002 by requesting 113 backing rings. This is a difference of only 11 backing rings worth $489.50 in the context of a $4million contract. I do not regard the variation as material and, in the absence of evidence to the contrary, the inference to be drawn is that the defendant accepted the variation.
(d) The Price of the Piles
67 The background to this issue is:
(ii) On 24 April 2002, the plaintiff issued Purchase Order No. 4569/200178 which, amongst other things, contained a price for the 1500 x 28mm pipe of A$1,316.66 per metre (1.916).(i) On 8 April 2002, the defendant provided the plaintiff with a list of final prices for various items of Dong Yang product and Dongbu product (1.690). In particular, a price of A$1,316.66 per metric tonne was listed for the 1500 x 28mm pipe;
68 The defendant claims the price identified by the plaintiff was erroneous and that on 15 May 2002, the defendant informed the plaintiff of the mistake (A498-502).
69 The defendant also points to correspondence concerning the degree of bevelling to be applied to the ends of pipes, specifications for pipe coating and driving shoes.
70 As to price, the figure quoted by the defendant to the plaintiff, $1316.66 per metric tonne, was slightly higher than the figure of $1339.04 per metre which was a calculation done by Ms Laurence, the plaintiff’s Piping Systems Sales Manager. What Ms Laurence did was to convert the dollar per metric tonne price to a dollar per metre equivalent using a factor of 1.017 rather than the 1.0169 at A80, twelfth row in the column titled “Mass kg/m”.
71 I am comfortably satisfied, when one looks at the correspondence, that it should be construed as identifying an agreed price of $1316.66 per metric tonne, which is slightly higher than the $1339.04 per metre. If I am wrong about this then, in any event, I consider $1316.66 per metric tonne to be a reasonable price and I so determine in accordance with s 13 of the SOG Act which provides:
“13 Ascertainment of Price
Where the price is not determined in accordance with the foregoing provisions, the buyer must pay a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.”The price in a contract of sale may be fixed by the contract, or may be left to be fixed in a manner thereby agreed, or may be determined by the course of dealing between the parties.
72 I have determined in favour of the plaintiff each of the issues identified by the defendant to support its submission that the parties had failed to reach a consensus. In doing so, I have taken into account the overall picture based on the approach adopted in the cases referred to earlier in the judgment. I have rejected the defendant’s attempt to segregate specific issues and approach them on a strict offer and acceptance analysis.
73 I am therefore comfortably satisfied that on or about 24 April 2002 the parties had agreed that the defendant would sell and supply to the plaintiff the Piles and associated products set out in the schedule annexed to the plaintiff’s email of 12 April 2002 (A319) for the prices set out in the defendant’s facsimile dated 9 April 2002 (A274). I am satisfied that the contract was in writing evidenced by the communications set out in paragraph 13 of this judgment.
B TERMS OF THE CONTRACT
74 It is not in dispute that the defendant would supply the Piles to the plaintiff at Darwin Free Ex Hook. I have also found that the parties agreed that the Piles would be shipped from Korea to Darwin at the earliest possible date in July 2002. In this respect, the plaintiff has pleaded that time was of the essence of the Contract.
75 The defendant contends that time was not of the essence and submitted with reference to shipment by the earliest possible date in July 2002:
“67. As a matter of construction, the term pleaded by (the plaintiff) was premised on the basis that a shipment of the Dong Yang Product may or could have occurred or happened in July 2002; that is, that it was possible for such a shipment to be made. While it remained impossible for such a shipment to occur, the term pleaded by (the plaintiff) imposed no delivery deadline on (the defendant).”
76 The parties conducted themselves on the basis that a short delay in delivery could be accommodated. In that respect, once the plaintiff was informed that the Veritas inspection would not occur until after 30 June 2002, it accepted, but with great concern, that loading would occur in Korea “earliest possible date July” (A511) rather than “by end June”. In those circumstances, I am not satisfied that time was of the essence but I am satisfied that both parties recognised that time was critically important.
77 In effect, the defendant’s contention is that the plaintiff’s letter of 20 June 2002 (A1498) should be read on the basis that it meant “by the earliest possible date in July 2002 after the strike at Dong Yang Mill ends.” (emphasis added).
78 The plaintiff’s letter of 20 June 2002 does not say that. The reference in the letter to the strike was clearly not intended to excuse performance of the contract by the defendant until the strike at Dong Yang ended.
79 In so far as the defendant contends that shipment would be made when “possible”, in the context of “dispatched from Korea by the earliest possible date July”, the word “possible” qualifies the word “date”, not the word “dispatched”, that is, it is the date for delivery and not the fact of delivery which is being addressed. The letter of 20 June 2002 merely recognised that loading and therefore sailing times were uncertain. I do not accept the defendant’s contention that the plaintiff at any time accepted or conceded that performance by the defendant could await the end of the strike at Dong Yang mill, however long that took. I should also add that such a contention is inconsistent with the course of correspondence between the parties, including the plaintiff’s letter to the defendant dated 24 July 2002 (A677) set out later in this judgment.
C VARIATION OF CONTRACT
80 The defendant seeks to rely on the Amended Letter of Credit issued on 22 July 2002 to assert that there was a variation of the contract as follows:
(a) The defendant was permitted to ship the Dongbu product separately.
(c) A shipping date for the Dong Yang product was left open pending the outcome of the strike.(b) A shipping date for the Dongbu product was set for the end of July.
81 As a matter of principle, an amendment to the terms of a letter of credit in the context of a contract for the sale of goods can constitute a variation to the contract of sale. In Ficom SA v Sociedad Cadex Limitada (1980) 2 Lloyd’s Law Reports 118 at 131, Lord Goff observed:
“It is plain on the authorities that parties to a contract of sale under which payment is to be made by means of a letter of credit, can, by subsequently agreeing to terms of the letter of credit which differ from those specified in the sale contract, thereby vary their contractual obligations under the sale contract: see W J Alan & Co Ltd v El Nasr Export and Import Co (1972) 2 QB 189.”
82 Counsel for the defendant submitted:
“102. The intention, objectively ascertained, was that (the defendant) would rely on the letter of credit as amended for the shipment of the Dongbu Product. If and when the Dong Yang Product became available in the future, (the defendant) would require either a new letter of credit or a further amendment to the existing letter of credit with appropriate expiry and shipping dates.”
83 The submission is inconsistent with the Amended Letter of Credit. As noted earlier, the amount of the credit was $3,954,207.36 of which the defendant received $1,185,378.13 for the Dongbu product. This was because, on the face of it, the amended credit allowed for partial shipment. But it also provided for shipment of all product by the end of July, i.e. “latest shipping date” was 29/07/2002. In my opinion there was a variation of contract, but those matters were the extent of it. The defendant has not discharged the onus of establishing a foundation in the evidence to support its contention that there was an additional term of the variation, namely, that the parties would “leave open the shipping date for the Dong Yang product pending resolution of the strike”. One would have expected witnesses to be called to give evidence to the effect that such a term was agreed, but that did not occur.
D BREACH OF CONTRACT
84 The plaintiff pleads in paragraph 11 of the Further Amended Ordinary Statement of Claim that, in breach of contract, the defendant did not dispatch the Piles from Korea by earliest possible date in July 2002, or at all. The plaintiff alleges in paragraph 13 that, by reason of the defendant’s failure to dispatch the Piles from Korea, the plaintiff terminated the contract and procured the Piles from elsewhere. In my opinion, the absence of the words “repudiation” (with reference to the defendant) and “acceptance” (with reference to the plaintiff) is neither here nor there because the substance of the plaintiff’s claim was clearly apparent from the way the plaintiff conducted the case. The defendant understood how the plaintiff was putting the substance of its case as is clear from counsel for the defendant’s opening at T 136.20-45.
85 On 24 July 2002 the plaintiff wrote to the defendant in the following terms, omitting formal parts (A 677):
“We refer to the above Purchase Order placed on 24 April 2002 as amended by subsequent correspondence.
As you are aware the Purchase Order was divided into delivery of product from Dongbu mill and delivery of product from Dong Yang mill both in Korea.
As you were made aware, delivery of both products to Darwin was specified to be critical.
You have informed us at various times that industrial action at Dong Yang mill has taken place from early May 2002 and is, as of this date, unresolved.
OneSteel considers the balance of the Purchase Order, being product sourced from Dongbu mill to remain valid. Further, should OneSteel suffer any damages for any late delivery or other breaches for that product, OneSteel reserves its rights to recover such damages under the contract.”With respect to the supply of product from Dong Yang, we provide formal notice that Capital Steel & Pipe Pty Limited has been unable to secure delivery in accordance with the Purchase Order. In that regard OneSteel reserves its rights to seek damages for breach of contract.
86 The defendant submitted that the plaintiff’s letter of 24 July 2002 was either a purported termination which was wrongful or, alternatively, the plaintiff elected not to terminate the contract. In my opinion, the better view is that the plaintiff did not terminate the contract but attempted to reserve its rights to claim damages for delay due to the defendant’s failure to deliver the Piles by that date. In other words, the plaintiff sought to treat the breach as one of delay rather than non-delivery in which respect it affirmed the contract. In any event, the attempt to treat the contract as having been breached was anticipatory only, and had no lawful effect because the defendant had at the very least until 29 July 2002 to deliver the Piles on the basis of the Court’s finding in paragraph 82 above that the contract had been varied. Alternatively, pursuant to s 32 (2) of the SOG Act the defendant still had a reasonable time within which to deliver the Piles.
87 Because of the Court’s finding in paragraph 86 it follows that there was no repudiation of the contract by the plaintiff since the letter of 24 July 2002 was not an unlawful termination of the contract. In any event, if that analysis is incorrect and the letter of 24 July 2002 was a repudiation, the defendant did not accept such repudiation and the contract remained on foot. At the same time, the plaintiff effectively kept its options open by affording the defendant the opportunity of performing the contract and also sourcing the Piles from other producers or suppliers. The defendant was well aware of this and so there is no substance in the defendant’s submission that, even if there was no actual termination, the plaintiff’s conduct was repududictory anyway because a reasonable person would have concluded that the plaintiff did not intend to fulfil its part of the bargain: Satellite Estate Pty Limited v Jaquet (1968) 71 SR (NSW) 126 at 150. In fact, a reasonable person would have concluded the exact opposite.
88 The position was, at the end of July 2002, that time for delivery of the Piles remained critical. Nothing which happened or was said in July, August or September 2002 changed this, as demonstrated by the defendants continued regular updates about the situation at the Dong Yang mill. For example:
(i) In his e-mail of 26 July 2002 (A680) Mr Studdy said:
“Dong Yang still on strike as of Thursday 25th July. We expect to hear further news today. Will revert”.
(ii) Later, on 26 July 2002 Mr Studdy told the plaintiff (A681):
“Whilst we are expecting a breakthrough, as at today the strike at Dong Yang continues, which has affected delivery of the total order.”
(iii) On 29 July 2002 Mr Studdy reported in his e-mail to Ms Laurence (A689):
“The strike continues but the management expect a breakthrough and if so, cargo could then be completed by or on end August.”
(iv) On or about 1 August 2002 Mr Bailey informed Mr Studdy:
“The attached is a copy of a fax sent to me from Dong Yang. They are requesting that following their notification of a return to work we make an immediate decision on continuing with the order.
I can confirm that OneSteel will comply with this request allowing of course for a reasonable period of time to communicate the advice within our business, access our position, and respond accordingly. I expect that we will receive immediate advice on Dong Yang’s decision to end the strike and that it will take them a couple of days to gear up for production.”
Dong Yang did not notify the plaintiff of their return to work.
(v) On 5 August 2002 Mr Studdy told Ms Laurence in his e-mail (A702) that (subject to certain things being resolved) “Dong Yang expect the situation to be settled by next week”.
(vi) In his fax to the defendant’s agent, Mr Yoo, of 7 August 2002 (1.1896) Mr Studdy advised:
It would be good if you could convince Dong Yang to have our cargo ready to meet this vessel to discharge in Darwin prior to Dampier and then Fremantle.”“Please note P.O.S.T. have a vessel loading in Inchon 26th-28th August, which is discharging in Dampier and then Fremantle.
This demonstrates Mr Studdy was still doing everything he could to ensure delivery of the Piles would occur
(vii) On 20 August 2002 Mr Studdy told Ms Laurence in his e-mail (A720), with reference to the strike, “ … both parties are doing best to find acceptable solution next week”.
(viii) On 20 August 2002 Mr Studdy reported in his e-mail to Ms Laurence (1.2000):
“After the President came back, Management and Labour Union are talking more positively but have not yet concluded.
So, both parties are doing best to find acceptable solution until next week.”
(ix) On 5 September 2002 Mr Studdy told Mr Bailey of the plaintiff in his e-mail (A734) that “ … regret to inform there is no substantially updated situation except they continue to talk …”.
(x) On 5 September 2002 Mr Studdy told Mr Bailey in his e-mail (1.2043):
“Advice as follows:
Quote:
‘Regret to inform that there is no substantially updated situation except they continue to talk and discuss on the requests of labour union.
The Management tried to solve the matter by end of August but failed as union still insists several unacceptable conditions.
Anyhow, they said that the solidarity inside union is getting very weak day by day and expects the strike to end by around 20 September, before the long holiday (Harvest Day).
Please be informed. Thanks.’”
(xi) By fax dated 8 October 2002 (1.2080) Mr Studdy made this request of his agent, Mr Yoo, of World Trading and Marketing:
“Notwithstanding OneSteel have purchased this material from several domestic manufacturers, can you please have Dong Yang fax to us on their letterhead a statement saying that they apologise that they were unable to fulfil the contract with Capital Steel & Pipe due to the strike and that they unfortunately are not in any position to compensate Capital Steel.
I need this letter urgently as I have a meeting with OneSteel either tomorrow or Thursday upon receipt of the Dong Yang letter as OneSteel have frozen any payments to Capital which at this point in time is more than A$1 million overdue with further substantial amounts outstanding and due end Oct/Nov/Dec.”
(xii) Mr Studdy received a reply from Dong Yang by facsimile dated 18 October 2002 (1.2127) in which they stated, inter alia:
“Our stance on the situation is as follows:
- We have informed you of the labor strike that we face at our manufacturing facility – considered to be ‘Force Majure’ in international trade-and the fact that we may not be able to supply the products until the fore mentioned problem is resolved. Furthermore, we informed you of the labor negotiation progress regularly to keep you posted.
- We are bewildered by how & why your customer is requesting compensation for the cost difference caused by their own decision, made without any consultant or consent from us. We are free from liquidate damage by the reason of ‘Force Majure’.”- Until now, we did not receive any official notice from you of the cancellation of the order. Only when we restart production and asked for your information to fulfil your order, we were notified that your customer had placed replacement order and bought the materials from the domestic manufacturer.
89 Once the above was communicated by Mr Studdy to the plaintiff, the plaintiff decided it had had enough and terminated the Contract both verbally and by its letter to the defendant dated 24 October 2002 (A798) in the following terms, omitting formal parts:
“As you are aware (the plaintiff) has verbally provided notice of termination of the portion of the Purchase Order which relates to piles from Dong Yang Mill.
(The plaintiff) reserves the right to seek damages for breach of contract due to non performance under the Purchase Order.”This letter confirms that (the plaintiff) terminated that portion of the Purchase Order which relates to Dong Yang due to non supply of piles.
90 I am comfortably satisfied, based on all of the above evidence, that the defendant was still unable to perform its part of the bargain in October 2002 and that the plaintiff was entitled to terminate the contract and it did so lawfully on or about 24 October 2002. In that respect, it was unnecessary for the plaintiff to give the defendant express notice of its intention to do so because it is obvious that the defendant would still have not been able to perform the contract: see the discussion of the principle in K E Lindgren Time in the Performance of Contracts 2nd Ed Butterworths at (424); Etablissements Chainbaux SARL v Harbormaster Ltd (1955) 1 Lloyds Rep 303 and (at first instance) Amann Aviation Pty Ltd v Commonwealth (1988) 100 ALR 267 at 309.
91 At this point, before turning to damages, it is necessary to deal with several other issues raised by the defendant.
E FRUSTRATION
92 On 14 March 2002 the defendant offered to supply Piles to the plaintiff. The defendant’s letter included the statement “Dongbu Steel Pipe, Korea, SeAH Steel Pipe, Korea and Dong Yang Steel Pipe, Korea will produce the piling pipe in accordance with ASTM A 252 Grade 3 with minimum yield of 350 MPA”.
93 In the plaintiff’s e-mail of 22 March 2002 Mr Boardman asked whether Piles could be delivered first (1.302). The defendant replied that the Piles could come first as they were produced at the Dong Yang Steel Pipe plant.
94 On 5 April 2002 Ms Laurence sent an e-mail to Mr Studdy (1.667) stating:
Could you please advise these details, for my info, at your leisure.”“I have gone through our file for this East Arm Project, and note the manufacturers are Dongbu Steel Pipe, Korea, SeAH Steel Pipe, Korea and Dong Yang Steel Pipe, Korea. In our file it is not clear which manufacturer is producing what size piles.
95 Mr Studdy’s reply (1.691) was:
“The 1500 x 28mm will come from Dong Yang and the balance will come from Dongbu.”
96 The defendant submits the above correspondence demonstrates that the parties were proceeding on the mutual understanding that the source of the Piles would be the Dong Yang mill. As well, the defendant relies on Clause 3.5 of the Thiess specification (A89) which required its approval of a foreign manufacturer. The defendant was given a copy of the specification (A141). The defendant submits that the clear inference to be drawn is that before the plaintiff and the defendant entered into their contract, Thiess approved the Dong Yang mill as the manufacturer. Specifically, the defendant submitted (para 205):
“The point is that OneSteel sought, and obtained, approval from Thiess for the Dong Yang mill (and presumably Dongbu as well), such that the use of that mill as the source of the relevant piles formed part of the common understanding between Capital Steel and OneSteel so as to enliven the principles of frustration when that source became unavailable.”
97 The principles relating to the modern law of frustration are contained in the speech of Lord Radcliffe in Davis Contractors Ltd v Fareham (1956) AC 696 at 729:
“frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract … . It was not this that I promised to do.”
98 The onus of proof is on the party asserting that the contract has been frustrated: Fairway Trading Pty Limited v Project Blue Moon Pty Limited and Anor (1999) ACTSC 99.
99 The defendant says, applying this principle, that:
“when the Dong Yang mill became unable to supply Piles due to the strike, which were circumstances that did not involve any fault by the defendant, the contract between the plaintiff and the defendant was frustrated insofar as it related to the Piles.”
100 I am not persuaded by the defendant’s submissions for the following reasons.
101 The defendant originally informed the plaintiff that 1500 x 28mm Piles would be manufactured in Japan (A13). They also approached another manufacturer, SeAH (A176). Moreover, the Thiess specifications did not specify a manufacturer. This is important because the plaintiff and the defendant entered into their contract knowing that it was for the purpose of the plaintiff performing its Contract with Thiess. Although Thiess had to approve any foreign manufacturer, such approval was not restricted to Dong Yang. The critical requirement, under Clause 3.5 of the Thiess specification when Thiess’ approval was being obtained was “to demonstrate that the steel conforms to the requirements of the specification”. Accordingly, in my opinion, the references in the communications between the parties to the Dong Yang mill manufacturing the Piles were not an essential part of the description of the subject matter of the contract. The reality was that the plaintiff could not have rejected Piles which met the specifications set out in the Thiess tender documents. In this respect, the contemporaneous documents (A13, A15K and A176) clearly demonstrate that there were other sources of supply for 1500 x 28mm Piles, including Korea, Japan and Australia. The defendant has not demonstrated why it could not obtain the product from these sources. Moreover, there is nothing in the evidence to suggest that Thiess would not have approved some other supplier and no one from Thiess was called to give evidence that such approval would have been withheld.
F UNCONSCIONABLE CONDUCT
102 In paragraph 4 of its defence, the defendant pleads that the plaintiff engaged in unconscionable conduct in trade and commerce under s 51AC of the Trade Practices Act 1974 (Cth) (“the TPA”) such to prevent it from contending there was a contract as pleaded by it or a breach of such contract by the defendant.
103 The defendant’s submissions on this issue are set out in paragraphs 207-232 of counsel’s written submissions.
104 The plaintiff submits that s 51AC of the TPA does not apply to the Wharf Claim because there was a single contract for the supply of both the Piles and the other products sourced from Dongbu for a price exceeding $3 million.
105 Subsections 51AC (9) and (10) of the TPA provide:
(10) A reference in this section to the acquisition or possible acquisition of goods or services does not include a reference to the acquisition or possible acquisition of goods or services at a price in excess of $3,000,000, or such higher amount as it prescribed.”“(9) A reference in this section to the supply or possible supply of goods or services does not include a reference to the supply or possible supply of goods or services at a price in excess of $3,000,000, or such higher amount as is prescribed.
106 No higher amount has been prescribed.
107 Subsection 51AC (11) relevantly provides:
(a) … the price for“For the purposes of subsections (9) and (10)
(ii) the acquisition or possible acquisition of goods or services by a person;
(i) the supply or possible supply of goods or services to a person; or
is taken to be the amount paid or payable by the person for the goods or services.”
108 The contract between the parties called for the supply by the defendant of precise quantities of goods, all of which were to be supplied by the same time, and it is common ground that the contract price (which was expressed in US$) was the equivalent of in excess of AUD$4 million. As counsel for the defendant put it in opening (T128.10):
“it was always intended that there would be one bulk shipment and that the price would be in the order of $4.4 million ..”
109 Accordingly, I am satisfied that s 51AC has no application in this case.
110 For the sake of completeness I should add that, leaving s 51AC to one side for the moment, I am not satisfied that the defendant has established sufficient detriment in order for it to call in aid the principles of election, waiver, acquiescence, estoppel, approbation/retrobation and unconscionability, all of which were referred to during the argument as different ways of putting the same thing. The authorities establish that the detriment required must be substantial: Gillett v Holt (2001) Ch 210; Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298.
111 Nor is the Court satisfied that the conduct of the plaintiff, after the events of July 2002, constitutes any form of unequivocal statement or representation that the defendant would be discharged from any further performance of its obligations to deliver the Piles: Yimin Zhang v Shanghai Wool and Jute Textile Co Ltd (2006) VSCA 133; Handley Estoppel by Conduct and Election 14-014. Rather, the position is the opposite, as demonstrated by Mr Bailey’s fax to Mr Studdy set out at paragraph [88 (iv)]. The plaintiff informed the defendant that if Dong Yang became able to perform, it would consider accepting performance. That communication was neither open ended nor did it carry with it any suggestion that the defendant was forgiven for the continuing failure and delay in supplying the Piles. Indeed, nothing that the plaintiff did suggested in the slightest that either the defendant or the Dong Yang mill could have whatever time it might take to supply the Piles.
G DAMAGES
112 The first limb of the plaintiff’s damages concerns s 53(3) of the SOG Act. Under s 53(3) the prima facie measure of damages is the difference between the Contract price of the Piles and the market price at the time of non-delivery. Non-delivery occurred between July and October 2002 when the Contract was terminated.
113 The evidence demonstrates that there was not a widely available market for 1500 x 28mm Piles in July 2002. Mr Bailey’s notes at 1.1654 and the position paper on the supply of Piles at 1.1664 establish, to the Court’s satisfaction, that the actual source of replacement Piles was the cheapest source available. Accordingly, the plaintiff has established what the market price of Piles was: see Sutton, Sales and Consumer Law 4th Ed., 1995 at (22.4) citing Dominion Motors Ltd v Grieve (1936) NZLR 766 at 771.
114 Even if the evidence did not establish what the available market was, the result would be the same because the measure of damages is the actual cost of obtaining alternate supply: s 53 (2) SOG Act and Sutton (op cit) at (22.5) “Where there is no market in which to purchase replacement goods and the purchaser has bought in the course of trade, the proper measure of damages is the loss of anticipated profits.”
115 The plaintiff’s anticipated profit was the difference between its Contract price with Thiess and the cost to it of delivering the Piles to Thiess. The only factor which changed was the cost of obtaining Piles and related components from other sources in Australia. Thus, the loss of anticipated profits is the difference between that cost and the Contract price.
116 The evidence of the actual expenses incurred by the plaintiff is set out in Annexure ‘A’ to plaintiff’s counsel’s written submissions dated 25 June 2007, which the Court has treated as a replacement to Schedule ‘B’ to the Further Amended Statement of Claim.
117 Under the Contract, the defendant was to supply 1545 metres of 1500 x 28mm Piles at $1316.66 per metric tonne. The weight per metre was 1016.9kg/m (A80). Therefore, the total weight of the Piles was 1545m x 1016.9kg/m = 1,571,110.5kg = 1571.11 tonnes.
118 Accordingly, the total price of the Piles to be supplied by the defendant to the plaintiff was $1316.66 x 1571.11 = $2,068,617.69 (which I have treated as the substituted figure for $2,155,707.60 in the “Price” field in the second row of Schedule A to the Further Amended Statement of Claim). The figure of $2,086,617.69 includes GST. Without GST, as demonstrated by the figures in Schedule B to counsel’s submissions, I arrive at $2,100,262.21 for the total price of the Piles (including additional components).
119 On this basis, the loss suffered by the plaintiff, taking account of the figures set out in Annexure ‘A’ to counsel’s written submissions is:
$ 396,580.29$2,496,842.50
less
$2,100,262.21
____________
120 In relation to the plaintiff’s claim in this amount, the defendant merely submitted (para 269 of counsel’s written submissions):
“ … the defendant submits that it is not clear that the entire amount claimed to be expended on alternative supplies was properly referable to any breach of contract by the defendant and not, for example, to any of the problems independently encountered by the plaintiff and referred to above (at paragraphs 258 and 259).”
121 On the balance of probabilities the Court is satisfied that the amount claimed by the plaintiff was properly expended on alternative supplies. The defendant’s submission is rejected.
122 Accordingly, the Court awards the plaintiff damages in the amount of $396,580 under the first limb of its claim against the defendant.
123 The second limb of the plaintiff’s claim for damages arises out of the compensation payment it made to Thiess in the amount of $310,000 for the delay in supplying the Piles to Thiess. The plaintiff in turn claims this amount from the defendant pursuant to s 53 (2) of the SOG Act.
124 On 1 October 2002 Thiess notified the plaintiff (A792A) that it was claiming damages for breach of contract by the plaintiff in the amount of $425,327.
125 In its letter of 15 November 2002 (A800A) Thiess claimed an additional amount of $280,388 for additional costs said to have been incurred because some Piles did not conform to the contractual specifications.
126 By the plaintiff’s letter of 13 May 2003 (A807A), countersigned by Thiess, the plaintiff and Thiess agreed to settle Thiess’ claims against the plaintiff for $310,000.
127 The plaintiff acknowledges that the two letters from Thiess cover two claims, namely, one for delayed delivery of Piles and a second for costs associated with defective Piles. Notwithstanding, the plaintiff submits that it is clear from the letter of 13 May 2003 that the $310,000 was wholly intended to cover the claim for late supply because, first, the letter states:
“I wish to confirm OneSteel’s agreement to settle your claims by paying to you $310,000 plus GST (“Settlement Amount”) … In reaching this settlement agreement Thiess has agreed that it will not make any further claims for damages or liquidated damages from OneSteel as a result of late supply of piles.”
And secondly, the letter goes on to deal separately with Thiess’ claims against OneSteel regarding defective coating to the Dongbu Piles and records the further arrangements agreed upon in that regard.
128 Alternatively, the plaintiff submits that the $310,000 should be apportioned between the two claims made by Thiess against it. Thus, the apportionment would be:
$425,317 divided by (425,327 + $280,388) x $310,000 = $186,834.
129 I reject the construction that the plaintiff seeks to put on the letter of 13 May 2003 because the claim for defective coating was not the only claim that Thiess had made against the plaintiff as is made tolerably clear by the letter of 15 November 2002. I am therefore comfortably satisfied that the amount of $310,000 was paid by the plaintiff to Thiess in respect of both its claims. Clearly, the plaintiff is therefore not entitled to recover the whole amount of $310,000 from the defendant.
130 Before dealing with the apportionment issue, it is necessary to consider the defendant’s submissions.
131 I reject the submission that the plaintiff ought to have adduced evidence of the settlement deed referred to in the letter of 13 May 2003. The inference I draw is that no such deed was executed. In any event, the Court views the letter of 13 May 2003 as a binding contract between the plaintiff and Thiess.
132 Next, the defendant submits that the evidence does not support any finding that the plaintiff’s “liability to Thiess as embodied in, and quantified by, the Thiess Settlement was caused by any breach of contract by (the defendant)” (para 250 of counsel’s written submissions). There are two bases upon which the defendant put this submission.
133 First, the defendant submits that the plaintiff was in breach of the early supply of one 1500 x 28mm Pile. It is true in this respect that part of the $425,327 claimed by Thiess from the plaintiff for additional costs incurred by reason of the plaintiff’s failure to deliver the Piles on time includes the single Pile due by mid-June 2002. On balance, I am not satisfied that the plaintiff can recover from the defendant for the costs incurred by Thiess regarding delay in delivery of the single Pile. The dimensions of the Pile were 35.55 lineal metres x 1500 x 28mm (A792A). The total quantity of Piles to be supplied by the defendant to the plaintiff and by the plaintiff to Thiess was 1545 lineal metres. So the single Pile represented less than 3% of all the Piles.
134 The defendant’s second submission is that the problems experienced by the plaintiff and Thiess on site do not primarily or solely relate to the defendant’s failure to deliver the Piles. Based on Mr Bailey’s file notes of what happened on site between 9 August 2002 – 25 September 2002 (1.1919-1939), the defendant points to the following matters which it says cannot possibly flow from its breach of contract:
(a) Thiess dropped and damaged the first Pile.
(b) Some of the sheet piling provided by the plaintiff was damaged or unusable.
(c) Some 27 of 50 plates rolled by BHP were rejected by Thiess due to edge cracking. This caused a delay of some days.
(d) Damage in transit to some of the Dongbu Coated product.
(e) Tolerance issues relating to expansion and contraction of some of the Piles.
(f) There was a problem with welding a particular clutch that Thiess had asked the welder to weld onto the Piles.(h) Thiess requested the plaintiff to remove a backing ring on some of the Piles.(g) There was some bevel damage to some of the Piles.
(i) Thiess had made no allowance for the adjusting of Piles prior to them being joined. The plaintiff had to work with Thiess to deal with this.
135 In addition, the defendant relies on Thiess’ letter to the plaintiff in which it claimed $280,388 for costs incurred by it as a result of the plaintiff supplying non-conforming Piles. As I read it, the letter did not include a claim for coating. It will be recalled that, in its letter of 1 October 2002, Thiess claimed $425,327, not including coating. The two amounts claimed by Thiess total $705,715. In this respect, there is no explanation before the Court as to how the plaintiff and Thiess arrived at a compromise amount of $310,000 in relation to settlement of the two claims made by Thiess in its letters dated 1 October 2002 and 15 November 2002 respectively. This is why the plaintiff has suggested an apportionment approach.
136 The defendant therefore submits that the Court simply cannot conclude that the amount which the plaintiff paid Thiess was attributable to its own breach of contract. The plaintiff bears and has not discharged it: Reg Glass Pty Ltd v Rivers Locking Systems Pty Limited (1968) 120 CLR 516 at 523.
137 Secondly, the defendant submits that the plaintiff has failed to establish that the settlement with Thiess was reasonable, therefore it is precluded from asserting that the amount it paid Thiess is recoverable from it: Unity Insurance Brokers Pty Limited v Rocco Pezzano Pty Limited (1998) 192 CLR 603. There is no doubt, that the effect of what the High Court said in that case, is if a settlement is found to be reasonable it is not unjust to include the amount of it in a case of this sort. The rationale is that the law encourages settlements.
138 In the instant case, Thiess’ claim for costs incurred in the plaintiff’s delay in supply the Piles was $425,327. On the evidence, the claim probably included some of the matters identified by the defendant as not being attributable to it set out in para 133 (b), (c), (e), (f), (g) & (h) above. The inference the Court draws is that these items compromised only a small portion of Thiess’ claim. As can be seen from its letter of 1 October 2002, the costs were essentially costs incurred in hiring equipment for longer periods ($133,108), labour costs incurred through incremental delay in delivering Piles ($20,844), site overhead costs ($249,600) and costs incurred by Thiess in having its representatives attend in Korea to find out what was going on. It seems to me that costs of this nature were clearly attributable to the defendant’s breach. Moreover, it should be borne in mind that the amount claimed by the plaintiff, $186,834, is the equivalent in percentage terms of 43% of Thiess’ claim set out in its letter of 1 October 2002, including the liquidated damages referred to on page 4 of the letter (A792D). In this respect, the Court can infer that the matter was quickly resolved by the plaintiff so as to put an end to the Claim. In addition, the Court is in a position, based on the contractual material between Thiess and the plaintiff, which is in evidence, to recognise that Thiess had a good cause of action against the plaintiff and the damages it could have recovered would have fallen within the categories referred to. As well, there is no reason why the Court cannot take into account all of the specific items claimed by Thiess as well as allowing for the matters not attributable to the defendant (see above) to conclude, as the Court does, that the amount of $186,834 should be awarded to the plaintiff as the second limb of its damages claim.
139 The plaintiff claims interest on its damages. The defendant did not contend that the plaintiff was not entitled to an award of interest. I will leave it to the parties to do the calculations.
PART 2: SeAH CLAIM
Pleadings
140 The pleadings in the SeAH claim comprise:
(a) Defendant’s notice of cross-claim filed on 7 March 2005.
(b) Plaintiff’s defence to cross-claim filed on 3 June 2005.
(c) Defendant’s reply to the plaintiff’s defence to the cross-claim filed on 15 May 2007.
(d) Plaintiff’s amended second cross-claim filed 8 September 2006.
(f) Plaintiff’s reply to the defendant’s amended defence to the amended second cross-claim filed in Court on 7 June 2007.(e) Defendant’s amended defence to the plaintiff’s amended second cross-claim filed on 10 May 2007.
Submissions
141 The submissions in the SeAH claim comprise:
(a) The plaintiff’s written submissions dated 25 June 2007, paragraphs 151-238.
(c) Plaintiff’s outline of submissions in reply dated 8 August 2007, paragraphs 35-119.(b) Defendant’s written outline of submissions “SeAH Claim” dated 20 July 2007.
Witnesses
142 No witnesses were called, so the case has to be decided on the documents put into evidence.
Bundles of Documents
143 The plaintiff’s bundle of documents relating to the SeAH claim are contained in exhibit B. I will refer to documents in this bundle, for example, as B 150 and so on.
144 The Defendant’s bundle of documents relating to the SeAH claim are contained in exhibit 4. I will refer to documents in this bundle, for example, as 4.150 and so on.
A What were the Terms of December 2003 Contract
B What were the Terms of April 2004 Contract
C What was the Defendant’s Benefit under the April 2004 Contract
D Was the April 2004 Agreement BreachedE Was there Accord and Satisfaction
F Was the December 2003 Contract Frustrated
H DamagesG Was there Unconscionable Conduct
A DECEMBER 2003 CONTRACT
145 On 9 December 2003 the defendant agreed to sell and deliver to the plaintiff, and the plaintiff agreed to purchase from the defendant, approximately 70,740 metres of steel Linepipe and Ultrapipe for a total price of USD$432,221.04 FOB.
146 Ultrapipe is a proprietary product of the plaintiff that could only be manufactured at the mill operated by SeAH Steel Corporation, Korea (“SeAH”). Linepipe was not a product of the plaintiff and was available from foreign and domestic suppliers.
147 The parties are in agreement that the documentation relating to the December 2003 Contract included the following:
(a) Plaintiff’s order to the defendant dated 5 December 2003, to which was attached the plaintiff’s special conditions and general conditions (A356-362).
(c) E-mail from the defendant to the plaintiff dated 9 December 2003 (A391).(b) The plaintiff’s purchase orders numbered 7500024760, 75000224767, 75000224823, 75000224764, 75000224770 and 75000224771.
148 The defendant pleaded that the Contract was also included the following documents:
(i) E-mail from defendant to plaintiff dated 28 November 2003 (A349).
(ii) E-mail from defendant to plaintiff dated 5 December 2003 (A351).
(iii) E-mail from plaintiff to defendant dated 5 December 2003 (A352).
(v) E-mail from plaintiff to defendant dated 5 December 2003 (A355).(iv) E-mail from defendant to plaintiff dated 5 December 2003 (A354).
149 There is nothing in the documents identified in (i) – (v) which has a bearing on the outcome of this case. In my opinion, they do not constitute part of the December 2003 contract. They merely amount to evidence of the pre-contractual negotiations leading up to the plaintiff placing its order on 5 December 2003 (A356 and following) which the defendant accepted by its e-mail dated 9 December 2003 (A391).
150 The individual purchase orders attached to the letter dated 5 December 2003 identified each type of pipe, the quantity, and the price per metre. Each purchase order identified the date for shipment as “3rd week March 2004”. The third week of March 2004 commenced on Monday 15 March and ended on Sunday 21 March 2004.
151 As the Contract was on FOB terms with delivery on board the vessel in Pohang, Korea, the contractual date for delivery in Korea was, at the latest, by the end of the third week in March 2004, namely, 21 March 2004. In that respect, it is not in dispute on the evidence that a cargo loaded in Korea in the third week of March would not arrive in Australia until some time in April 2004.
152 Clause 6 of the plaintiff’s general conditions (B359-360) provided:
“DELIVERY
Quantity and Timing
A supplier shall, upon receipt of a written order, supply and deliver goods in accordance with the delivery conditions specified in the contract and to the designations on the contract and the required quantities of goods within the time or times specified in the contract.”
153 From the plaintiff’s letter dated 5 December 2003 there is no doubt that the FOB Contract was to be performed by the defendant delivering the goods onto a vessel arranged by the plaintiff: see the last paragraph of B357 as follows:
“these programs are to be made available to both Chris Francis (an employee of the plaintiff) and Uti in Korea to enable booking space” and General Condition 6 “Shipment of the contract is to be arranged through OTL’s nominated agent (details attached).”
154 By at least 9 March 2004 the defendant knew that SeAH was refusing to supply products to the defendant to enable it to satisfy the December 2003 contract: B494. The notation “09320” is the defendant’s own reference to the December 2003 Contract; see B.391:
“Subject: Your O/Nos: 7500024760, 7500024767, 7500024823, 7500024764, 7500024770 & 7500024771 – Our 09320-2nd Qtr ERW: and the order numbers at B 363-368.”
155 The Court infers from the facsimile from SeAH to the defendant, dated 16 March 2004 (B495) that there were further communications between the defendant and SeAH between 9 March 2004 and 16 March 2004, but there is no evidence of any communication to the plaintiff regarding the situation until 17 March 2004 (B496), that is, during the third week of March 2004, and at best, four days before the last date for delivery in Korea of the products to be supplied by the defendant under the December Contract.
(The plaintiff) reserves all of its rights under the Contracts and generally, including its right to claim damages from (the defendant).”(The plaintiff) is also pursuing alternative supply of the goods outstanding from other sources and, under the Contract. We will keep you informed of our efforts in this regard and let you know the product and price details when products are received.
199 I am comfortably satisfied that the defendant was in breach of the April 2004 contract because time was of the essence and of the 120 metric tonnes due for delivery at the end of April 2004, the defendant had only delivered 85 metric tonnes and that amount of product was delivered in May 2004.
200 In the context of the plaintiff’s letter of 14 May 2004, the plaintiff’s counsel submitted that the statement “to date you have not been able to accept our settlement proposal set out in the letter of 21 April 2004” should be read as meaning “to date you have not been able to perform our settlement proposal set out in the letter of 21 April 2004”, in the sense that it meant the defendant had failed to comply with the terms of the April 2004 contract. I accept this submission.
201 Counsel for the plaintiff submitted that the sentence “(The plaintiff) intends to terminate the contracts from 1 July 2004” was a statement of termination effective as at 1 July 2004. Counsel for the defendant submitted that this language meant that the plaintiff intended to keep the contract on foot. I accept the plaintiff’s submission. In my opinion, the reference to the plaintiff continuing to accept outstanding orders where product was in its possession by 30 June 2004, was not a statement consistent with either the December 2003 or April 2004 contracts remaining on foot. In my opinion, the words were intended to convey the plaintiff’s intention to mitigate its loss by accepting product if it was in its possession by 30 June 2004. I do not read the statement as a waiver of an existing breach or a promise that if the plaintiff accepted further product from the defendant no loss would be claimed from the defendant because there was an unequivocal statement in the last paragraph of the letter by which the plaintiff reserved all of its rights under the contracts and generally, including its right to claim damages from the defendant. In this respect, the law recognises that, in a contract for the sale of goods, where the seller is in breach, the buyer may mitigate its loss by receiving further goods from the seller: Payzu Ltd v Saunders (1919) 2KB 581; Kargotich v Mustica (1973) WAR 167 at 169.
202 On 1 June 2004 the defendant sent the plaintiff the e-mail (B650) which contained the following statement:
“We reconfirm our today’s advice that (the defendant) is doing everything possible to perform and supply the quantities/sizes as per your original spreadsheet.
We refer to previous correspondence and reconfirm that (the defendant) is doing its utmost to supply the quantities and sizes in accordance with your spreadsheet in a global market that continues to be chaotic.”It is on this basis we refer to your letter dated 21st April and considering we are performing the re-negotiated tonnage as per the original spreadsheet to the very best of our ability and in accordance with your delivery schedule and at considerable expense to (the defendant) (i.e. inland transport from Brisbane to Perth), we request that (the plaintiff) not take action against (the defendant) as referred to in that letter.
203 On 10 June 2004 the defendant sent the plaintiff an e-mail (B659) which included the following statement:
“In view of the fact (the defendant) is proving its ability to meet the specified delivery dates as set out in your letter of the 21st April 2004, we would kindly request confirmation that (the plaintiff) will withdraw its intention to terminate the contracts and seek compensation from (the defendant) as we are demonstrating that we are in fact being able to meet your settlement proposal.”
204 I am satisfied these e-mails demonstrate that the defendant accepted that the plaintiff’s letter of 21 April 2004 contained the relevant obligations, including delivery dates and that the defendant had not complied with its obligation in respect of the April shipment, that the plaintiff was entitled to terminate and claim compensation and that the defendant was doing its utmost to ship 600 metric tonnes by the end of June 2004.
205 It is obvious that the defendant was hoping to avoid a claim for damages by the plaintiff, but at the same time, it was anxious to get the product to Australia by the end of June 2004 in order to claim USD$600 per metric tonne from the plaintiff. I accept the plaintiff’s submission that, in doing so, the defendant was not acting in any way to its detriment.
206 On 18 June 2004 the plaintiff sent the defendant an e-mail which contained the following statements:
“- Currently we have virtually no product in our possession so (the plaintiff) has no alternative at this stage but to proceed with the intent to terminate the contract as advised in our letter dated 14 May 04.
(b) The payment for the 27th May and the 11th June will not be made until (the plaintiff) have taken possession of the 330 tonne that is currently pending delivery.”(a) (The plaintiff) may however elect to continue to accept any pipe offered by (the defendant) after the termination of the contract if it is in (the plaintiff’s) best interest to do so.
207 I accept the plaintiff’s submission that in this e-mail the plaintiff was making it abundantly clear that the plaintiff was not waiving the existing breaches or electing to affirm either the December 2003 contract or the April 2004 contract, or otherwise resiling from the position that the contracts would be terminated for breach. All the plaintiff was doing was making it clear that, if the defendant chose to do so, it could reduce its exposure to the plaintiff by offering to supply pipe in the future, but it would be up to the plaintiff to decide in those circumstances whether or not to accept the pipe. By giving the defendant the choice as to whether it supplied any more pipe, the plaintiff was relieving the defendant from any further obligation to perform. But whichever choice the defendant made, the plaintiff was making it abundantly clear to the defendant that the defendant remained liable for damages for its existing breaches.
208 By the end of June 2004 only 366 metric tonnes had been shipped as the defendant’s file note (B668) and e-mail to the plaintiff of 7 July 2004 (B694) make clear.
209 At this point it is necessary to consider the defendant’s submissions on accord and satisfaction because they are relevant to the plaintiff’s claim for damages for breach of contract.
E ACCORD AND SATISFACTION
210 The defendant’s primary submission was that the compromise embodied in the April 2004 contract was one that was intended to supersede the 9 December 2003 contract and discharge the parties’ obligations under that contract. At para 131 of their submissions, counsel for the defendant stated the foundation of this submission as:
“131 … the finding that, for the reasons set out above (paragraphs 82-99 above), the April contract does not contain any term to the effect pleaded by (the plaintiff):
(b) The failure by (the defendant) to deliver the linepipe by the date specified entitled (the plaintiff) to recover against (the defendant) for breach of the 9 December contract.”(a) Time was of the essence in respect of the date specified in the April contract for the delivery of the linepipe and
211 Because of the Court’s finding concerning the terms of the April 2004 contract, it follows that the defendant has not made good its primary submission.
212 In the alternative, the defendant submitted that the April 2004 contract amounted to an accord and conditional satisfaction and the condition was fulfilled by the plaintiff accepting delivery of the linepipe.
213 The defendant relied on the following statement of principle in Osborne v McDermott (1998) 3 VR 1 at 10-11:
“Where there is accord and conditional satisfaction, the plaintiff is bound to await performance and accept it if tendered, but if there be no performance, then the plaintiff may proceed according to general principles called into play when any agreement is repudiated: the plaintiff may either treat the agreement (the accord) as at an end and proceed on his original cause of action; or he may, at his option, sue on the compromise agreement, in place of the original cause of action.”
214 The defendant submitted that the plaintiff was bound to await performance by the defendant under the April 2004 contract and accept it if tendered. Only in the event of there being no performance could the plaintiff, if it so elected, treat the April 2004 contract as being at an end and proceed on its original cause of action for breach of the December 2003 contract.
215 The defendant submitted that it performed the April 2004 contract by delivering the linepipe to the plaintiff. It submitted that once that occurred the plaintiff was bound to accept the defendant’s performance and in fact did so. Accordingly, the plaintiff was not entitled to terminate the April 2004 contract.
216 The defendant further submitted that even if it had failed to perform, before the plaintiff could sue on the original cause of action, it had to treat the accord, namely, the April 2004 contract, as being “at an end”. That is to say, the plaintiff had to terminate the April 2004 contract.
217 The defendant submitted that, irrespective of breach, because the plaintiff had accepted the defendant’s performance of the April 2004 contract it thereby lost the ability to terminate that contract and consequently could not recover any damages in respect of the breach of the 2003 contract.
218 The defendant also submitted that the acceptance of the linepipe by the plaintiff constituted an unequivocal act consistent only with the exercise of the right to affirm the contract: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 at (356) and (359). At the same time, the conditional satisfaction was thereby fulfilled by the defendant.
219 In response, the plaintiff submitted that the defendant had not performed the April 2004 contract. The plaintiff relied on what Whelan J said in Hollyburton UK Ltd v Irani (2006) VSC 403 (in which his Honour referred to the decision of Phillips JA in Osborne v McDermott) as follows:
“Here, there is an immediately binding agreement for a compromise but satisfaction and discharge of the pre-existing liabilities is deferred until performance. The original liabilities are suspended unless and until there is performance, and the plaintiff is bound to await the time for performance before seeking to enforce those original liabilities and to accept performance if it is tendered.”
220 For the defendant’s submission that it performed the April contract by delivering the linepipe to the plaintiff to be sustainable, the time for delivery under the April 2004 contract would need to have been at large so that the defendant was free to deliver the linepipe whenever it pleased. But this was not the case and the Court has found that, in breach of the April 2004 contract, the whole of the April shipment was delivered late and only two-thirds of it was delivered by May. Further, by the end of June 2004, only 366 metric tonnes had been shipped. The defendant therefore did not perform the April 2004 contract.
221 As to the defendant’s submission that the plaintiff did not terminate the contract, I have already found that the plaintiff did not resile from its position that the contracts would be terminated for breach as at 1 July 2004. In any event, it was not necessary for the plaintiff to terminate the April contract in order to sue for damages for breach of the December 2003 contract. This is because the terms of the April 2004 contract entitled the plaintiff to sue the defendant pursuant to the December 2003 contract if the defendant failed to supply the quantities specified in the April contract by the dates specified in the April contract. This is a case where termination of the April 2004 contract was not a prerequisite of recovering damages under the December 2003 contract: Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 at 300.
222 As noted earlier, the defendant submitted that the plaintiff had elected to affirm the contract. I reject the submission. This is not a case of a party trying to adopt one part of the contract and rejecting the rest: Wendt v Bruce (1931) 45 CLR 245 at 254. The material relied on by the defendant and set out in para 188 of its counsel’s submissions is entirely consistent with the plaintiff attempting to mitigate its loss occasioned by the breach of the April 2004 contract once it became apparent that the defendant could not perform that contract in accordance with its terms.
F FRUSTRATION
223 The defendant submitted that the plaintiff was not able to recover damages for any breach of the December 2003 contract because that contract was wholly discharged by frustration in March 2004 when SeAH refused to supply Ultrapipe to the defendant. The defendant relied on the statement of principle in Davis Contractors set out in paragraph 97 of this judgment. This statement of principle was adopted in Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1981) 149 CLR 337 where Mason, J said:
“The earlier cases provide many illustrations of the proposition that a contract will be frustrated when the parties enter into it on the common assumption that some particular thing or state of affairs essential to its performance will continue to exist or be available, neither party undertaking responsibility in that regard, and that common assumption proves to be mistaken.”
224 In Codelfa, the High Court found that the common assumption of the parties was that the contractors who were building the railway would work “round the clock”, including Sundays, that it had become impossible for them to do so as a result of injunctions sought by third parties and that, in the circumstances, the contract was discharged by frustration.
225 In paragraphs 207-209 of its submissions the defendant refers to cases, by way of illustration, where it was held that the failure of supply from a specified source was a frustrating event: Krell v Henry (1903) 2KB 740 and International Paper Co v Rockefeller 161 N.Y. App. Div 180.
226 Howell v Coupland (1876) 1 QBD 258 is another case the defendant relied on. In that case the defendant potato grower entered into a contract to sell potatoes to the plaintiff. When the defendant’s potatoes were attacked by disease, thereby reducing the quantity he could supply under the contract, the defendant was held not liable for the failure to deliver because the contract had been frustrated.
227 At the same time the defendant acknowledges in paragraphs 212 and 213 of its submissions that there have been numerous cases where a change in circumstances affected one party to a contract and was held not to be a frustrating event: Herne Bay Steam Boat Co v Hutton (1903) 2KB 683 and Scanlan’s New Neon Ltd v Toohey’s Limited (1943) 67 CLR 169.
228 I accept the defendant’s submission that the parties proceeded on the basis that Ultrapipe could only be provided to the defendant by SeAH. In particular, the pleadings and evidence establish:
(a) Ultrapipe was a proprietary product of (the plaintiff) in respect of which it had a registered trade mark.
(b) SeAH held an exclusive licence from (the plaintiff) for the production and manufacture of Ultrapipe.
(c) SeAH was subject to a confidentiality regime imposed by (the plaintiff) in respect of the technical specifications and manufacture process of Ultrapipe.
(e) (The Plaintiff’s) Special Conditions of Contract provided by it to (the defendant) on 5 December 2003 included the following (4.2539):(d) (The plaintiff) and (the defendant) knew, that any Ultrapipe orders placed on or after 5 December 2003 would only be manufactured by SeAH in Korea.
FOB Berth Terms Pohang in USD/M as per your final quote dated December 5 2003.“1 PRICE
…
6 SHIPPING AGENT: As you are aware, Uti Korea will handle shipment for this order. They will contact SeAH for cargo readiness.
…
Capital Steel/SeAH to provide a firm rolling programme (x line item x tonnes x metres) for our product at least 4 weeks and then 2 weeks before scheduled vessel sailing dated.”
229 In addition, the defendant relies on the following correspondence which I am satisfied demonstrates that the parties proceeded on the basis that Ultrapipe would be manufactured by SeAH at its mill in Korea and shipped to Australia ex Pohang:
(a) Email of 28 November 2003 from (the defendant) to (the plaintiff) referring to Ultrapipe and prices as “FOB USD/Metre Pohang Berth Terms” (4.2523).
(c) Email of 9 December 2003 from (the defendant) to (the plaintiff) which stated (4.2575):(b) Email of 5 December 2003 from (the defendant) to (the plaintiff) (4.2528).
“SeAH advise they will accept and apply new document Revision 5 for Ultrapipe in sizes 88.9mm, 114.3mm, 141.3mm and 168.3mm diameter dated 4th August 2003 to your new order i.e. 2nd Qtr ERNW (your O/Nos: 7500024760, 7500024767, 7500024823, 7500024764, 7500024770 & 7500024771 – Our 09320).”
(d) The manufacturing and Inspection Procedure certificates issued by SeAH and sent by facsimile from (the defendant) to (the plaintiff) on 11 December 2003 (4.2478).
230 In March 2004 the plaintiff lodged a complaint with the Australian Customs Service about the dumping of steel pipe products exported from Korea to Australia. SeAH was identified in the complaint (4.2693, 4.2701 and 4.2705).
231 On 5 March 2004 the Australian Customs Service issued a Notice of Investigation following the complaint made by the plaintiff (4.2636). The result was that SeAH decided it would not supply the defendant with Ultrapipe. This is established by the following:
(a) Email dated 9 March 2004 from Mr Yoo to Mr Study stating, in part (4.2718):
“they told me that SeAH decided not to supply to (the plaintiff) any more and cancelled. They are very much angry (sic) with the behaviour of (the plaintiff) and find no reason for them to support them.”
(b) Facsimile from SeAH to (the defendant) dated 16 March 2004 which states (4.2754):
“We’d advise that we are not in the position to supply any outstanding order from (the plaintiff) group, due to the recent instigation (sic) into alleged dumping of ERW pipe from SeAH, Korea.”
A copy of this facsimile was sent to the plaintiff (4.2768).
232 On 17 March 2004 the defendant send an e-mail to the plaintiff stating (4.2758):
“It is with regret that we advise that SeAH will not supply the material against this order due to the fact that (the plaintiff) have initiated an investigation into alleged dumping of ERW Steel Pipe against Korean manufactures.”
233 Although in its submissions in chief the plaintiff invited the Court not to find that SeAH had refused to supply Ultrapipe to the defendant because of the anti dumping complaint, the Court is satisfied that this is what occurred and that the plaintiff was aware of it: see, for example the documents in evidence at 4.2798, 4.2809 and 4.2812.
234 The defendant submits that SeAH’s refusal to supply Ultrapipe to the defendant in March 2004 was a frustrating event which discharged the whole of the December 2003 contract. This is said to be the case because there was a failure of a specified source, namely, the SeAH mill (Howell v Coupland) and the failure of a common assumption (Codelfa).
235 The Court is not persuaded that the December 2003 contract was frustrated.
236 First of all, this case does not concern the impossibility of SeAH supplying Ultrapipe to the defendant. It is about SeAH’s refusal to supply Ultrapipe. In cases of this sort, it has been held that the contract is not frustrated: El Rio Oils (Canada) Limited v Pacifica Coast Asphalt Co 213 P 2d1 (1949); Canadian Industrial Alcohol Co Limited v Dunbar Molasses Co 179 NE 383 (1932).
237 Secondly, this is not a case, for example, of governmental prohibition or destruction by fire which are external events impacting on the supplier’s source. Rather, it is what the learned authors of Carter and Harland (4th Ed) describe as “self induced frustration”. At para 2014 they state:
“Where a supplier’s source is not available to satisfy the requirements of a contract, the question of frustration depends on two matters:
(1) The reason the source is not available; and
(2) The scope of the supplier’s promise.
If a supplier’s source is not available because of external events, such as government prohibition or destruction by fire, flood and so on, the supplier may be in a position to invoke the doctrine of frustration. On the other hand, if the failure is due simply to a decision to supply another person who has offered a higher price, the doctrine will not be applicable because the frustration is ‘self-induced.”
238 In this case, the reason that the source was unavailable was twofold. On the one hand, SeAH chose not to supply the Ultrapipe and on the other, the defendant took no steps whatsoever to compel SeAH to honour its contractual obligations to the defendant. The defendant’s failure to do so is significant and it cannot hide behind that failure to assert that the December 2003 contract was frustrated: Denmark Productions Limited v Boscobel Productions (1969) 1QB 699. Moreover, the defendant adduced no evidence to satisfy the Court that it could not enforce its contract with SeAH.
G UNCONSCIONABLE CONDUCT
239 The defendant relies on s 51AC(1) of the Trade Practices Act 1974 (C’th) (the “TPA”) and asserts that the plaintiff engaged in unconscionable conduct such that it is entitled to damages under s 82 TPA or S 87 TPA.
240 Section 51AC(1) TPA relevantly provides that a “corporation must not, in trade or commerce, in connection with … the acquisition or possible acquisition of goods or services from a person (other than a listed public company) … engage in conduct that is, in all the circumstances, unconscionable”.
241 Here, the plaintiff is “the corporation” and the “acquirer” referred to in ss(4). The defendant is “the person”, referred to in ss(4) as the small business supplier.
242 In paragraphs 240-258 of its submissions the defendant sets out the general principles which guide the Court in its application of s51AC(1) regarding unconscionable conduct. The plaintiff accepts that the summary is accurate, in particular, before a contravention of s 51AC can be found it must be shown in all the circumstances that the impugned conduct was “clearly unfair or unreasonable” or “irreconcilable with what is right or reasonable”.
243 The defendant contends that when the plaintiff made its complaint to the Australian Customs Service that the plaintiff “foresaw the risk the making of the complaint would have on SeAH’s willingness to supply Ultrapipe to (the defendant) in satisfaction of orders placed for (the plaintiff)” (para 263). Specifically, the defendant contends in paragraphs 266 and 269 of its submissions that the plaintiff knew of the potential impact of its decision on the defendant and chose to make the decision in any event because it believed that it could source enough Ultrapipe elsewhere (through P T Bakrie) so as not to have to rely on the defendant. In making these submissions the defendant relies on the documents in exhibit 13 and Mr Fithall’s e-mail in response to an e-mail from Ms Lapworth.
244 Ms Lapworth was the plaintiff’s in-house counsel. In her e-mail of 7 April 2004 (4.2836A) she stated:
“the fact that seAH is the only company which is able to make Ultrapipe product does not appear to have been raised as a risk in proceeding with the anti-dumping application.”
245 Mr Fithall was a strategic marketing manager of the plaintiff. He responded in his e-mail (4.2839A) as follows:
I am concerned that we may be getting confused between developing an initial basis for claims on (the defendant) (in the hope that this will encourage them to resolve the issue and supply product) vs determining a true cost to the business for potentially reviewing our strategy on the dumping case moving forward – as I believe they are two different things …”“The risk associated with (the plaintiff’s) ongoing supply through SeAH was identified and understood by OSMM/OSPS prior to proceedings with the anti-dumping application. Mitigation of this risk was the basis for us pursuing alternative supply avenues for Ultrapipe through PT Bakrie. My understanding is that no impediments were identified to us sourcing Ultrapipe through PT Bakrie. However, since that time, global supplies of HRC have tightened and at the present point in time we are unable to source Ultrapipe from Bakrie cost effectively. OSMM is currently pursuing HRC from BlueScope to supply PT Bakrie.
246 Mr Fithall’s e-mail does not support the defendant’s submissions. Read in its context, it says nothing about SeAH breaching contracts it already had to supply Ultrapipe with third parties such as the defendant if the plaintiff lodged an anti-dumping complaint. Nor is there any evidence that, to the extent the plaintiff was “pursuing alternative supply avenues for Ultrapipe” that such alternative supplies would be used to make up shortfalls caused by SeAH refusing to supply the defendant under its existing contract. Rather, Mr Fithall was discussing the consequences of SeAH refusing to supply into the future.
247 In light of the above, I am not satisfied that the plaintiff’s conduct was any relevant “intended conduct …that might affect the interests of (the defendant)” within the meaning of s 51AC(4)(i)(i) TPA.
248 Next, the defendant submits that when the plaintiff made the complaint in March 2004 it was only a matter of weeks before the defendant was required to secure shipment of 900 tonnes of Ultrapipe under the December 2003 contract and that when SeAH refused supply and the plaintiff threatened to hold the defendant liable for breach of the December 2003 contract or cancel it, the plaintiff was engaging in “bullying conduct” which was unconscionable conduct within the meaning of s 51 ACT TPA: ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 at [51].
249 The Court rejects this contention. The case cited does not support the proposition contended for in the context of these proceedings, namely, where the plaintiff was merely trying to enforce its contractual rights under the December 2003 contract; see also ACCC v C G Berbatis Holdings Pty Limited (2003) 214 CLR 51.
250 The defendant further submits that the plaintiff required it to “comply with conditions that were not reasonably necessary for the protection of the legitimate interests of (the plaintiff)” within the meaning of s 51AC (4)(b) TPA by withholding the payment of invoices unconnected with the SeAH dispute as a means of putting additional pressure on the defendant. The evidence relied on is set out in paragraphs 280-287 of the defendant’s submissions. The evidence is unremarkable and does not support the submission. Indeed, the defendant has referred the Court to what Gleeson C J said in ACCC v C G Berbatis Holdings at 65 (16). For my part, I see no reason why the material relied on by the defendant is nothing more than “ … the stuff of ordinary commercial dealing” which the Chief Justice was addressing; in reality, the plaintiff was doing nothing more than withholding payment of invoices when the defendant was clearly in breach of contract and the plaintiff had suffered substantial damage. See also Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 (at 9), cited with approval in the context of unconscionability laid down in statutes by the legislature in CIT Credit Pty Limited v Blayn Norman Keable (2006) NSWCA 130.
251 As noted earlier in this judgment, the plaintiff commenced placing orders for linepipe with Sin Soon Huat (as well as Soon Supply International Pty Ltd) in March 2004 and April 2004. This is said to cast doubt on the plaintiff’s “good faith” in negotiating with the defendant and should be taken into account pursuant to s 51AC (4)(k).
252 The Court rejects the defendant’s submission. There was no reason to prevent the plaintiff from looking elsewhere for another supplier of linepipe to mitigate its loss. There is no reason to infer that, by entering into the Singapore contracts, the plaintiff had no intention of paying for linepipe supplied by the defendant under the April 2004 contract: Elders Ltd v Incitec Ltd & Anor (2006) SASC 99 at [233].
253 The defendant has therefore failed to make out a case under s 51AC TPA.
H DAMAGES
254 There are three components to the plaintiff’s claim for damages against the defendant.
255 The first component of the plaintiff’s claim is for loss of profits arising out of the defendant’s failure to deliver linepipe under the December 2003 contract. This claim is made under s 53(3) of the SOG Act which provides:
“Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time of times when they ought to have been delivered, or if no time was fixed, then at the time of the refusal to deliver.”
256 The plaintiff, of course, has no difficulty proving the contract price. The defendant accepts that the column “Contract Price” in revised Annexure ‘C’ to the plaintiff’s submissions in reply correctly sets out the prices which are found in evidence at B 389. The defendant, however, submits that the plaintiff has not been able to prove the current or market price of the pipe at the times when it ought to have been delivered.
257 The plaintiff’s claim of $6,422.02 is based on the contracts it had with the Singapore suppliers. Annexure C4 to the plaintiff’s submissions contains a summary of those contracts.
258 The defendant says that evidence of the Singapore contract prices does not assist the plaintiff because the plaintiff should have established what the market price for the products was in Pohang, Korea as at 21 March 2004. The Court rejects the defendant’s submission on this point because the authorities clearly establish that the market value in other places, sometimes distant, but allowing for additional cost of carriage, can be used for assessing damage: Wertheim v Chicoutimi Pulp Co (1911) AC 301; Franke v CIC General Insurance Ltd (“The Coral”) (1994) 33 NSWLR 373; and ABD Metals v Anglo Chemical (1955) 2 Lloyd’s Rep 456.
259 In this case, because Singapore is closer to Australia than Korea, it can be inferred that there was no additional cost of carriage. Secondly, the time at which the market price is to be calculated does not have to be 21 March 2004 – it can be calculated by the Court at the first practical opportunity which the plaintiff had in the market. In this case the plaintiff investigated the cheapest alternative supply (1.1664). Annexure C4 contains the summary, which the Court accepts, of the prices obtained in Singapore within 20 days of the defendant’s breach of contract.
260 Accordingly, the amount of $6,422.02 will be included in the plaintiff’s damages.
261 The next component in the plaintiff’s damages claim is a claim for loss of profits on resale of the Ultrapipe the subject of the December 2003 contract. In the absence of evidence of the available market within the meaning of s 53(3) SOG Act, the claim is based on the loss of profits on resale suffered by the plaintiff pursuant to s 53(2) SOG Act.
262 The amount claimed by the plaintiff is $494,016.96, the calculation of which is set out in Revised Annexure ‘C’ to the plaintiff’s submissions in reply. In this respect it was common ground that the SeAH mill was the only source of supply of Ultrapipe at the relevant time. Accordingly, the Court is satisfied that there was no relevant market for Ultrapipe for the purpose of s 53(3). However, during the months of April, May and June 2004, the plaintiff did have Ultrapipe available for sale. I am satisfied that Revised Annexure ‘C’ accurately records the sale price of the product.
263 I am satisfied that the plaintiff could have sold whatever Ultrapipe it could obtain at the time. In coming to this conclusion I have taken into account contemporaneous comments made by the defendant about the global market. For example,
(a) In the defendant’s e-mail dated 8 April 2004 to the plaintiff at B 549 Mr Studdy told Mr Bailey:
(The Defendant) obviously want to supply to (the plaintiff) the outstanding orders for Ultrapipe and API pipe ex SeAH but the current worldwide chaotic situation is causing major problems for all customers.”“SeAH advised me that they explained to you the situation of acute short supply of all steel products including H.R. Coil and the very steep price increases of H.R. Coil that has led SeAH to re-negotiate outstanding orders with all of their customers. I am informed this situation is not peculiar only to SeAH but applicable to most, if not all suppliers of steel and finished steel products.
(b) In the defendant’s e-mail to the plaintiff dated 20 April 2004 Mr Studdy spoke about “ … the current turmoil in the global supply of all steel products affecting pricing and delivery” as well as the fact that “ … overseas suppliers have had not only to renegotiate with their overseas customers the prices” and referred to the defendant’s attempt to supply product to the plaintiff “considering the turmoil the global steel market was currently in”.
264 In the circumstances, the Court is satisfied that the plaintiff could have sold any Ultrapipe it had for a profit and that Revised Annexure ‘C’ accurately records the profits the plaintiff lost by reason of the defendant’s breach.
265 The defendant submitted that, in its original formulation of this component of its claim in the amount of $703,930.82, the plaintiff had not taken into account the costs consequent of the December 2003 contract being an FOB contract. In its submissions in reply, the plaintiff conceded the point, but, by reference of what the costs were likely to be, recalculated its claim. The plaintiff relied on documents such as 4.3152, 3145, 3154, 3189, 3221, 3332, 3340, 3344, 3352, 3357, 3568 and 3573 to establish the costs and I am satisfied this was a permissible approach. Converting USD$600 at the rate of AUD$0.69 produces a figure of AUD$870 per metric tonne. (The figure of 0.69 is the one noted in the handwritten calculations). The plaintiff arrived at an average of $249 per metric tonne by making calculations, with reference to each invoice in Annexure C7 which allowed for this figure of AUD$870 per metric tonne. For example, the costs in addition to the FOB price for invoice 1398 (4.3152) is AUD$1112 – AUD$870 = AUD$240 per metric tonne, and so on.
266 The documents in exhibit C identify the weight in metric tonnes and the length of each item of pipe referred to in the plaintiff’s submissions in chief in its original Annexure ‘C’. The plaintiff has calculated the quantity of supply shortfall in metric tonnes as per Annexure ‘C6’ to its submissions in reply. I see no reason why the Court should not accept this calculation.
267 As a consequence, the plaintiff arrived at the figure of $494,016.96 by calculating in metric tonnes and metres the shortfall in the quantity of pipe supplied by the defendant and using the average cost of AUD$249 per metric tonne for freight etc.
268 As the defendant points out, the plaintiff’s claim of $494,016.96 includes amounts of $2,101.26 (in relation to the 101.6 x 5.7 linepipe), $17,043.86 (in relation to the 219.1 x 12.7 linepipe) and $12,157.86 (in relation to the 508.0 x 12.7 linepipe), a total of $31,302.98. Because these items are linepipe, I am not satisfied that the plaintiff has established the absence of an available market in respect of such items. Therefore the amount of $31,302.98 will be deducted from the sum of $494,016.96, which results in a net figure of $462,713.98. This will be included in the plaintiff’s damages.
269 Although the defendant submitted that there was no evidence of “holding costs such as warehousing and administrative costs”, I reject the submission. Prima facie, the Court is entitled to infer, in the absence of evidence to the contrary, that such costs were fixed from the plaintiff’s point of view and not variable.
270 The plaintiff acknowledges that the defendant is entitled to a set-off against the plaintiff’s claims referred to above for $349,024.34 being the amount owing to the defendant in respect of its outstanding invoices for the 585 metric tonnes delivered. However, the plaintiff claims the amount of $126,569.15 for the difference between the prices charged by the defendant in supplying the 585 metric tonnes and the original December 2003 contract price. The defendant conceded that this was the correct approach.
271 Accordingly, the amount of $126,569.15 will be included in the plaintiff’s damages.
272 The damages thus far awarded by the Court to the plaintiff total $589,283.13. After allowing for a set-off of $349,024.34, the net result in favour of the plaintiff is $240,258.79.
273 The plaintiff claims interest on its damages. The defendant did not contend that the plaintiff was not entitled to an award of interest. I will leave it to the parties to do the calculations.
PART 3: CONCLUSION
274 It follows that by reason of the above that:
(a) In respect of the Wharf Claim, the plaintiff is entitled to a verdict on its claim.
(c) In respect of the SeAH claim, the plaintiff is entitled to a verdict on its Second Cross-Claim.(b) In respect of the SeAH Claim, the defendant’s Cross-Claim should be dismissed.
275 My preliminary view is that costs on the ordinary basis should follow the event.
276 To enable the parties to consider these reasons, I stand the proceedings over for mention before me on Thursday 8 November 2007 at 9.30am when the plaintiff should bring in Short Minutes of Order to give effect to these reasons. If there are matters which are still outstanding, such as interest or costs, I will then fix a timetable for submissions.
277 I direct that the exhibits be returned.
- AGLC
- OneSteel Trading Pty Limited v Capital Steel & Pipe Pty Limited (Judgment 3) [2007] NSWDC 201
- Case
- [2007] NSWDC 201
- Decision Date
CaseChat Overview and Summary
The court had to determine whether there was a binding contract between the parties, whether time was of the essence, whether Capital breached the contract, and if OneSteel was entitled to damages. The court also needed to consider whether OneSteel's conduct was unconscionable, whether the contract was frustrated, and whether OneSteel mitigated its losses. Additionally, the court needed to assess damages under the Sale of Goods Act, including the settlement of a third-party claim.
The court found that a binding contract existed between the parties, and time was of the essence. Capital did breach the contract by failing to deliver the steel products within the agreed timeframe. The court rejected Capital's argument that OneSteel engaged in unconscionable conduct and that the contract was frustrated. The court held that OneSteel mitigated its losses by seeking alternative suppliers. The court assessed damages under the Sale of Goods Act and took into account the settlement of a third-party claim.
The court ordered that Capital pay OneSteel damages for breach of contract, including the settlement of the third-party claim. The court also ordered that OneSteel pay Capital for the value of goods that were accepted and retained. The court further ordered that each party bear their own costs of the proceeding.
Orders
Orders of the court
See paragraphs 274-277.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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