Par Recycling Services Pty Ltd v United Resource Management Pty Ltd

[2022] NSWSC 1269

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Par Recycling Services Pty Ltd v United Resource Management Pty Ltd [2022] NSWSC 1269

Hearing dates:

5 – 9 September 2022

Date of orders:

20 September 2022

Decision date:

20 September 2022

Jurisdiction:

Common Law

Before:

Schmidt AJ

Decision:

Orders must be made in favour of Par. The parties should confer and file proposed orders, including as to costs, within 14 days. In the event that they need to be heard they should approach and also file and serve a short outline of submissions.

Catchwords:

CONTRACTS — Termination — where termination of one contract results in termination of another — common mistake that contract remains on foot.

CONTRACTS — Implied contract — where parties to and term of resulting implied contract in issue — whether failure to make payments due under implied contract — where parties enter a further contract — parties to and terms of further contract in issue — whether failure to make payments due under further contract — whether loss or damage suffered as result of mistake — unjust enrichment.

CONSUMER LAW — Misleading or deceptive conduct — Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law, s 18 — whether misleading or deceptive conduct induced error as to continuation of terminated contract — whether parties became bound by implied agreement as the result of misleading or deceptive conduct — whether further contract entered because of misleading or deceptive conduct — silence —whether loss or damage suffered as the result of misleading or deceptive conduct.

EVIDENCE — Opinion evidence — Exceptions — Expert opinion — Evidence Act 1995 (NSW), s 79 — where witness’ necessary specialised knowledge based on experience in industry in issue — whether opinions substantially based on witness’ experience in issue — where facts and assumptions upon which opinion based are undisclosed — where reasoning process is undisclosed — evidence inadmissible as expert opinion evidence.

EVIDENCE — Credibility and reliability evidence —conflicting evidence — whether Jones v Dunkel inferences arise to be drawn from failure to call other available witnesses — failure results in drawing of Jones v Dunkel inferences.

Legislation Cited:

Competition and Consumer Act2010 (Cth), Sch 2, Australian Consumer Law, ss 18, 236

Corporations Act 2001 (Cth), s 129

Evidence Act 1995 (NSW), ss 76, 79

Material Recovery Facility Processing Refund Protocol 2017

Waste Avoidance and Resource Recovery Act2001 (NSW), ss 19, 28

Waste Avoidance and Resource Recovery (Container Deposit Scheme) Regulation 2017 (NSW), reg 18

Cases Cited:

ASIC v Rich [2005] NSWCA 152

Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60

Butt v McDonald (1896) 7 QLJ 68

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24

Crawford Fittings Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438

Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48

Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7

Francis Gregory Hannigan v Inghams Enterprises Pty Limited [2019] NSWSC 321

Fuller v Avichem Pty Ltd t/as Adkins Building & Hardware [2019] NSWCA 305

HG v The Queen (1999) 197 CLR 414; [1999] HCA 2

Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97,326

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8

Kriketos v Livschitz [2009] NSWCA 96

Kyrwood v Drinkwater [2000] NSWCA 126

Miller& Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31

Mount Bruce Mining Pty Ltd v Wright Prospecting Ltd (2015) 256 CLR 104; [2015] HCA 37

Newey v Westpac Banking Corporation [2014] NSWCA 319

RHG Mortgage Corporation Ltd v Ianni [2016] NSWCA 270

Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47

Svanosio v McNamara (1956) 96 CLR 186; [1956] HCA 55

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52

Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65

Category:

Principal judgment

Parties:

Par Recycling Services Pty Ltd (Plaintiff)
United Resource Management Pty Ltd (First Defendant)
Anthony Charles Johnston (Second Defendant)

Representation:

Counsel:
Mr J Gooley (Plaintiff)
Mr R Higgins (Plaintiff)
Mr J McLeod (First Defendant)

Solicitors:
RH Law (Plaintiff)
Harris & Harris (First and Second Defendants)

File Number(s):

2019/256104

JUDGMENT

1. Par Recycling Services Pty Ltd pursues payments it claims it is owed under agreements which it entered with United Resource Management Pty Ltd, URM, and Mr Anthony Johnston, its managing director, in respect of waste materials delivered by URM to the material recovery facilities which Par operated at Somersby, which were regulated by the Waste Avoidance and Resource Recovery Act2001 (NSW). There it sorted and recovered recyclable waste, which it then sold.

2. Par entered the first written 2011 Somersby Supply Agreement with URM and Mr Johnston in 2011. URM then operated the Kimbriki Resource Recovery Centre at Terrey Hills under an agreement it had with Kimbriki Environmental Enterprises Pty Ltd, KEE, which owned the Centre. It was known as the KES agreement. For its part Par never had any agreement with KEE.

3. The shareholders of KEE were then various local Councils, comprised in 2011 of Manly, Mosman, Pittwater and Warringah. They were known as “SHOROC”, which was not a separate legal entity. URM had separate contracts with these Councils for the collection of waste from the kerbside, which it delivered to Kimbriki. Those Councils operated residential split service collections, where households divided mixed paper and commingled containers of recyclables such as glass, plastic and aluminium into separate bins which URM then collected.

4. Such collections may be contaminated by non-recyclable rubbish placed into a kerbside recycling bin. At Kimbriki URM removed some of this non-recyclable waste, combined the balance and transported those materials by semi-trailer to Somersby. Par then had to separate the remaining waste and dispose of it in landfills, at its own cost.

5. Such waste removal increases the cost of processing and the materials which have to be disposed of in landfill also increases the cost to operators like Par. The level of acceptable contamination was thus regulated by the 2011 agreement. It also provided that it would come to an end on termination of the KES agreement.

6. In October 2014 the KES agreement was terminated and replaced by another agreement between KEE and another company in the URM Group, URM Environmental Services Pty Ltd, URME. Whether this was known to Par was in issue. But even though the term of the 2011 agreement depended on the continuation of the KES agreement, Par was never provided with a copy of that agreement, nor the one that replaced it in 2014.

7. URM and after 2014, URME, received materials at Kimbriki which had been collected from the SHOROC councils from kerbside recycling bins, as well as from others, including commercial collectors. It was all that material which was bulked up at Kimbriki and transported for processing at other material recovery facilities, including Par’s Somersby facilities.

8. It became common ground at the hearing that when the 2011 agreement terminated in 2014 on the KES agreement coming to an end, a second, implied agreement which replaced the 2011 agreement then came into existence. But its parties and terms were also in issue.

9. The third agreement, which on Par’s case it entered with URM in 2018, concerned the sharing of container deposit scheme refunds which Par later received in respect of the waste it processed at Somersby, the CDS agreement. The parties to and terms of that agreement were also disputed. That agreement was reached in the context of the regulation of the new scheme introduced under the Waste Avoidance and Resource Recovery Act and the Waste Avoidance and Resource Recovery (Container Deposit Scheme) Regulation 2017 (NSW), which came into operation in December 2017.

10. Up until 2019 Par had no contractual relationships with individual SHOROC Councils. It was in February 2019 that Par entered into a second refund sharing agreement with the Northern Beaches Council, the regulatory scheme precluding it from continuing to receive refunds after December 2018 without either entering into such an agreement, or Council taking the view that in the circumstances it was fair and reasonable that there was no such agreement in force: reg 18(2)(a)(i). In issue is whether the CDS agreement was still then on foot.

11. Disputation between the parties regarding the failure to make payments due to Par and Par’s failure to make payments that URME claimed were due to it under the CDS agreement, resulted in the parties’ dealings with each other coming to an end in June 2019 and the commencement of these proceedings in August 2019.

12. Until early 2018 Mr Waddington had been Par’s controlling mind and afterwards that became Mr Gallagher, who was the sole director and beneficial owner of Stop Waste Pty Ltd, which acquired Par in 2018. It was Mr Anthony Johnston, one of URM’s directors, who was its controlling mind. At relevant times his brother Mr David Johnston was also a director and the general manager.

13. Mr Anthony Johnston and Mr Waddington had long had a commercial relationship, albeit marked at times with disputes about adherence to their companies’ contractual obligations, which they mainly resolved. Those which involved Mr Gallagher and Mr Johnston after Mr Waddington’s departure were finally not.

The competing claims

14. URM had delivered containers of recyclable waste to Par for specified “gate fees” under the 2011 agreement. These fees were varied in accordance with the terms of the 2011 agreement or by specific agreement, even after the 2011 agreement was terminated in 2014 and the implied agreement came into existence.

15. Par originally claimed that some seven invoices for outstanding gate fees totalling $687,352.60 due under the 2011 agreement in 2018 and 2019, which Mr Johnston had guaranteed, remain unpaid. Par also claimed that it made payments totalling $503,665.80 to URM under the CDS agreement, which it was liable to refund. That was disputed.

16. The URM parties’ pleaded case included that at relevant times URM was not a party to the agreements Par relied on, the 2011 agreement having been terminated in October 2014 and the parties to the CDS agreement being Par and URME. Further, that Par was itself in breach of the CDS agreement.

17. By their cross-claim, URM and URME sought to recover from Par some $2,095,356.13 for its alleged breaches of the CDS agreement, although only $2,077,585.91 was pressed in opening written submissions. Accepting that there were sums unpaid under the implied agreement, an order in favour of URME for $1,824,431.05 plus interest was finally pressed.

18. That was also defended by Par which, by its cross-claim against URM and URME, also sought a declaration that the CDS agreement was void ab initio. It also sought to recover loss or damages of $9,859,157.17 from URM under s 236 of the Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law for misleading and deceptive conduct and in the alternative, on the basis of unjust enrichment.

19. At the hearing Par’s cross-claim was amended without objection following the late service of an affidavit sworn by Mr Johnston only in August 2022 in which he deposed that until these proceedings were brought, he had believed that the 2011 agreement had not been terminated in 2014.

20. By the amendment to its cross-claim Par also claimed that the CDS agreement should be set aside in equity, it having entered that agreement in the mistaken belief that the parties were bound by the 2011 agreement. That being fundamental to the negotiation of the CDS agreement, a mistaken belief for which Par was not at fault, but URM was responsible, the money orders it pressed would be made.

Conclusion

21. In short, for reasons which follow, I am satisfied that Par has made out its claims in respect of the unpaid invoices and what it paid under the CDS agreement, but the parties have not met the onus falling upon them to establish what was pursued by their respective cross-claims.

Facts and Issues

22. Before the hearing the parties agreed the following facts:

“1. On 19 February 2010, URM entered into a bulking up agreement of that date with Kimbriki Environmental Services Pty Ltd (KES) (the KES Agreement).

2. Sometime shortly thereafter, URM commenced providing services to KEE under the KES.

3. On 23 March 2011, URM and PAR entered into the Somersby Supply Agreement (SSA) and Anthony Johnston signed as guarantor.

4. On 13 October 2014, a Waste Processing Agreement (WPA) was entered into between an entity related to URM called URM Environmental Services Pty Ltd (URME) and KEE.

5. URME was incorporated in 1994.

6. During 2015 and 2016, PAR actively sought an increased fee under the Somersby Supply Agreement from URM.

7. On 29 April 2016, PAR issued a Default Notice to URM under the SSA asserting that the contamination level in co-mingled containers delivered to PAR at Somersby was greater than 6%.

8. On 30 June 2016, PAR issued a second default notice to URM in relation to the contamination issue, asserting a contamination level in URM deliveries to Somersby in excess of 3%.

9. In around October 2016, URM agreed to a fee increase for the gate fee for deliveries to PAR at Somersby from $33.84 per tonne to $50 per tonne.

10. In June 2017, URM (on PAR’s case) or URME (on URM’s case) agreed with PAR to an increase in the gate fee for deliveries to PAR at Somersby to $70 per tonne from $50 per tonne.

11. On 1 December 2017, the NSW Government’s Container Deposit Scheme (CDS) commenced operating.

12. In December 2017, Waddington, Gallagher, Johnston and Johnston’s brother (David Johnston) met in Chatswood.

13. On 9 January 2018, an agreement was reached between URM or URME and PAR to share CDS revenue and for an increase in the gate fee to be paid to PAR as from 1 December 2018 (the CDS agreement). There is dispute about the terms of this agreement (the nature of which dispute is reflected in the Agreed Issues as between the parties).

14. During 2018, PAR paid URM $503,665.80 relating to CDS revenue received by PAR, comprising:

a) $239,844 in relation to CDS revenue received in relation to the CDS periods December 2017 and January 2018; and

b) $263,821.80 in relation to CDS revenue received in relation to the CDS periods February and March 2018.

15. On 18 May 2018, Exchange for Change issued Recipient Created Tax Invoice no. MRF500000020 to Par indicating that $4,519,552.24 (inc GST) would be paid to PAR for all of its entitlement to CDS for the period (including in relation to material processed for other customers of Par), and that in fact occurred.

16. In July 2018, Stop Waste Pty Ltd started issuing invoices on behalf of PAR.

17. On 14 August 2018, Exchange for Change (NSW) Pty Ltd issued Receipt Created Tax Invoice no. MRF500000052 to Par indicating that $2,152,951.80 (inc GST) would be paid to Par for all of its entitlement to CDS for the period (including for other customers of Par), and that in fact occurred.

18. On 14 November 2018, Exchange for Change (NSW) Pty Ltd issued Receipt Created Tax Invoice no. MRF5000000851 to Par indicating that $1,620,171.82 (inc GST) would be paid to Par for all of its entitlement to CDS for the period (including in relation to material processed for other customers of Par), and that in fact occurred.

19. 30 November 2018 was the date by when a Material Recovery Facility (MRF) operator like PAR needed to have a Refund Sharing Agreement (RSA) in place with a relevant local council/s (in the present case relevantly the group of councils known as the Northern Beaches Council (NBC)) in order to continue, from 1 December 2018, to be entitled to receive CDS revenue.

20. 1 December 2018 (until 26 February 2019 when PAR entered into a RSA with NBC) was the date from which PAR was unable to access CDS revenue as a result of not having a RSA in place with NBC.

21. 1 December 2018 to 26 February 2019 was the period during which there was no RSA in place between PAR and NBC.

22. On 14 February 2019, Exchange for Change (NSW) Pty Ltd issued Receipt Created Tax Invoice no. MRF500000113A to Par indicating that $1,594,667.36 (inc GST) would be paid to Par for all of its entitlement to CDS for the period (including in relation to material processed for other customers of Par), and that in fact occurred.

23. 26 February 2019 was the date PAR entered into a RSA with the NBC, and therefore the date from which PAR could resume receiving CDS revenue.

24. 31 July 2018 to 30 June 2019 is the time period relating to the seven allegedly unpaid invoices in the amount of $687,352.60 (as pleaded in its Statement of Claim at paragraph 9).

25. On 15 May 2019, Exchange for Change (NSW) Pty Ltd issued Receipt Created Tax Invoice no. MRF500000145 to Par indicating that $997,338.48 (inc GST) would be paid to Par for all of its entitlement to CDS for the period (including in relation to material processed for other customers of Par), and that in fact occurred.

26. On 30 June 2019 URM or URME ceased supplying co-mingled containers to PAR.

27. On 14 August 2019, Exchange for Change (NSW) Pty Ltd issued Receipt Created Tax Invoice no. MRF500000174 to Par indicating that $1,358,078.91 (inc GST) would be paid to Par for all of its entitlement to CDS for the period (including in relation to material processed for other customers of Par), and this in fact occurred.

28. On 18 September 2019, Exchange for Change (NSW) Pty Ltd issued Receipt Created Tax Invoice no. MRF500000145A to Par indicating that $10,272.00 (inc GST) would be paid to Par for all of its entitlement to CDS for the period (including in relation to material processed for other customers of Par), and this in fact occurred.

29. The “Scheme Coordinator” for the CDS is an organisation called “Exchange for Change”, and the scheme is supervised and overseen by the NSW Environmental Protection Authority.”

The development of the issues

23. The extensive issues lying between the parties were identified pre-trial, but in written opening submissions the URM parties’ case was that the real issues could more simply be identified to be:

“10(a)   Including after allowing for any set off based on the URM/URME Cross-claim (that being the First Cross-claim), does URM or URME owe PAR any money for gate fees relating to the seven issues PAR contends (at paragraph 9 of the Statement of Claim) is owing to it in the amount of $687,352.60?

(b) Does PAR owe URM or URME any money in relation to a CDS revenue sharing agreement known as the CDS agreement: this controversy arises on URM and URME’s First Cross-claim.

(c) Did URM or URME mislead PAR in contravention of s 18 of the ACL as to whether or not a contract called the Somersby Supply Agreement between URM and PAR dated 23 March 2011 (the SSA) had come to an end? If yes, has PAR sustained any loss “because of” that conduct of URM?”

24. They, it was contended, turned on three key documents: the 2011 agreement, the KES agreement, and the written part of the CDS agreement.

25. In final submissions the issues addressed for Par included:

1. the terms of and parties to the implied 2011 agreement;

2. the three invoices issued under the implied agreement claimed by URM to have been paid by way of set off;

3. whether URM breached the implied agreement for which the damages claimed are payable;

4. the terms of and parties to the CDS agreement, including whether it required URM or URME to negotiate a refund sharing agreement with the councils;

5. whether Par breached the CDS agreement for which the claimed damages are payable; and

1. whether there was a mistake in relation to the termination of the 2011 agreement which has had the result that URM or URME was unjustly enriched as the result of its misleading and deceptive conduct, so that it should be ordered to repay what Par had paid under the CDS agreement.

26. The issues addressed for the URM parties in closing written submissions were:

1. in respect of Par’s Statement of Claim, are four or seven gate fees invoices still owing by URM or URME to Par?

2. does the CDS agreement on which URM and URME sue for contractual loss relate to the period 1 December 2017 to 30 June 2019, or 1 February 2018 to 30 November 2018?

3. how much is payable by Par to URM based on the URM/URME cross-claim alleging breach of the CDS agreement?

4. the fate of Par’s Cross-claim – it should be dismissed.

27. The damages finally sought by Par were:

1. $7,978,953.70 for the amount that Par would have been paid by URM or URME for the containers it received, were it not for the URM parties’ misleading conduct. This figure is the difference between what URM/URME paid Par under the implied agreement and Par’s commercial rates during the term of that agreement, said to be evidenced by various notices that it issued to other customers of its rates;

2. $503,665.80 paid under the CDS agreement; or

3. $689,042.20 outstanding under the implied agreement, unless it is found that URM or URME paid $185,376.40 to Par in respect of invoices 25, 61 and 113 by way of contra for what it was owed under the CDS agreement.

28. The damages pressed by the URM parties was an underpayment under the CDS agreement of $1,824,431.05.

29. Evidence was called from Mr Gallagher, Mr Waddington, Mr Knowles who is Par’s long time general manager and Mr Anthony Johnston, who were each cross-examined. The result was that there was conflict between the evidence of all of the witnesses, which has to be resolved.

30. There were also issues at the hearing about the admissibility of part of Mr Johnston’s evidence as expert evidence under s 79 of the Evidence Act 1995 (NSW), and the credibility and reliability of some of the witnesses’ evidence.

31. Mr David Johnston, who had been involved in various of the meetings and correspondence between the parties, was not called. Nor was Mr Harris, for a long time URM’s company secretary and at times its general counsel, who had drafted the 2011 agreement.

32. Also in issue was whether Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 inferences would be drawn from the URM parties’ failure to call evidence from Mr David Johnston and Mr Harris. There was no issue that they were available and the explanation given for not having called them was that their evidence was not necessary, given the evidence of Mr Johnston.

The claimed expert evidence

33. There was no issue as to the relevance of the disputed evidence. I took the view that while it was admissible as Mr Johnston’s explanation of the claims advanced against Par, it was not admissible as expert opinion evidence under s 79 of the Evidence Act. The reasons for those conclusions were as follows.

34. In his first affidavit Mr Johnston explained his undisputed experience in the waste management, resource recovery and recycling industries since about 1990 and his business dealings with Mr Waddington, Par and Mr Gallagher over time. He had taken over his father’s business and established the URM Group, which operates five processing facilities in Australia and the UK. Mr Johnston explained how the URM parties’ cross-claim had been calculated, by reference to a table exhibited to his affidavit.

35. While Mr Gallagher said he could not agree to figures in the table without an audit, there was no issue as to the tonnage delivered by container under the 2011 agreement for processing by Par, established by contemporaneous records, to which Mr Johnston had referred in his calculations.

36. Mr Johnston also explained what, in his opinion, the containers delivered to Par contained, by reference to glass, aluminium and plastic. In his affidavit he explained that:

“65. As best as it can without the underlying documents from Par and Exchange for Change, URME has calculated its entitlement to its share of the CDS revenue as follows:

(a) First, by calculating the number of tonnes that were delivered to Somersby from Kimbriki in each relevant quarter (the CDS revenue was paid quarterly, with the first quarter in 2018 including the tonnes for December 2017). This was calculated utilising Par’s invoices and weighbridge dockets for each month (which were checked against the outgoing tonnes from Kimbriki).

(b) Second, by calculating the percentage mix in respect of each container type delivered by URME to Somersby. I have estimated this percentage mix as best I can by applying my own experience as to the product mix of the Kimbriki loads and consulting with sources I have in the industry. Based on my experience, I consider these are conservative estimates. For example, it concludes that the total CDS-eligible containers comprise 82.41% of the load. This means that it estimates that 17.59% of the product delivered was either Waste or Steel (being non-eligible CDS items). There is likely to have been a much lower rate of waste and steel delivered by URME to Somersby during the period.

(c) Third, the percentage of each container type was then applied to the total tonnes delivered by URME to Par for each relevant quarter to obtain a figure for the total tonnes delivered for each container for that quarter.

(d) Finally, by applying to the tonnages for each container type the “eligible container factor”. The eligible container factor (ECF) is the number generated by Exchange for Change (on behalf of the EPA/government) which stipulates the number of containers per kilogram for each container type. A printout of the relevant eligible container factors for each relevant quarter is to be found at pages 286-289. Because the ECF gives a number per kilogram, when it comes to applying that factor to each tonne, it must be multiplied by 1000. The payment to the MRD in respect of each container is 10 cents. To obtain a dollar figure for each tonne, therefore, you multiply the eligible tonnes by the ECF by 100 (being 1000 multiplied by 0.10).

66. Utilising that method, a spreadsheet of URME’s calculations as to its share of the CDS revenue is to be found at pages 290-291.”

37. What Mr Johnston otherwise had regard to in arriving at his opinions was not disclosed. Their admission as expert opinion evidence was opposed as not satisfying the requirements of s 79 of the Evidence Act.

38. Section 76 makes evidence of an opinion not admissible to prove the existence of a fact about the existence of which the opinion was expressed. Section 79 provides an exception in the case of the opinion of a person who has specialised knowledge based on the person’s training, study or experience, in respect of evidence of an opinion of that person that is wholly or substantially based on that knowledge.

39. Whether Mr Johnston had the necessary specialised knowledge, based on his experience in the waste recycling industry was in issue, as was whether his opinions were substantially based on that experience.

40. URM’s case was that his opinions resting as they did on his undoubted long industry experience and his understanding of the URM Groups’ businesses, established that they were substantially based on his specialised knowledge and so were admissible under s 79 of the Evidence Act.

41. I was satisfied that this could not be accepted.

42. In HG v The Queen (1999) 197 CLR 414; [1999] HCA 2, the need for an expert to differentiate between assumed facts on which an opinion is based and the opinion in question, and that opinions which are based on a combination of speculation, inference, personal and second-hand views are not admissible under s 79 of the Evidence Act, was discussed at [39]-[44]. That is why the reasoning process which led the expert to the opinion expressed must also be disclosed: Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21 at [42].

43. That was of importance in this case because it was expertise in an industry claimed to have been gained by experience in operating a business, rather than expertise in a more objective field, on which the opinions expressed by Mr Johnston were based: Dasreef at [37].

44. The difficulty with the disputed evidence was that in his affidavit Mr Johnston did not disclose what his opinions were based on, other than by the above quoted paragraphs. Nor did he explain his reasoning process.

45. The evidence suggested that URM had records about the composition of containers which it sent to Somersby for processing. In evidence already were also contemporaneous documents establishing the results of audits which Par conducted of such containers. In 2016, for example, at a time when the parties were engaged in an extensive dispute over contamination, Par considering that the containers contained excessive waste, about which Mr Waddington had been cross-examined. But Mr Johnston did not reveal whether he had considered such records in arriving at his opinions or indeed, what other information he had had regard to.

46. On the evidence, “Exchange for Change” had also examined samples of the URM containers Par had processed after the statutory refund scheme in respect of which the CDS agreement was entered, came into operation. But whether Mr Johnston had had any regard to information about the results of that sampling, was also not revealed. Nor did he reveal what information which the undisclosed industry sources he had consulted had provided him, or the result of the account he had taken of that information.

47. Utilisation of information produced by such third parties does not necessarily make an expert’s opinion inadmissible. But what is considered and the use made of it by an expert in exercising his or her specialised knowledge, in order to arrive at an opinion must be disclosed so that the Court is able to determine whether or not the opinion arrived at was substantially based on the claimed specialised knowledge: Dasreef at [37]. That is, the expert must explain how the opinion reached was produced. That requires the facts underlying the opinion to be disclosed: ASIC v Rich [2005] NSWCA 152 at [92]-[107].

48. The reasoning process must also be disclosed. Otherwise, the lack of transparency of what the expert considered and how it led to the opinion may make it inadmissible, even though expert opinion evidence will not be excluded solely because the factual basis upon which the opinion is proffered is not established by other evidence: Fuller v Avichem Pty Ltd t/as Adkins Building & Hardware [2019] NSWCA 305 at [89]. In this case neither the factual bases on which Mr Johnston’s opinion was arrived at was disclosed in his affidavit, nor were any assumptions which he had made, nor his reasoning process.

49. After I announced my conclusion that while the disputed evidence was admissible to explain the claim, it was not admissible as expert opinion evidence, Mr Johnston was called. In his oral evidence in chief, he then altered the table exhibited to his affidavit, but the claim advanced against Par was not altered as a result.

50. That development confirmed the problem with the disputed evidence, which made it inadmissible as expert evidence.

51. The table in issue provided, for example in relation to what was described to be the December 2017 to March 2018 and April to June 2018 quarters:

CDS Revenue Calculations - 2018

Quarter:		Q1 – Dec 2017–Mar 2018			Q2 – Apr-Jun 2018
TONNES DELIVERED:		6125.000			3735.010
Material	% of container types (Est.)	ECF* – Approved 24 Apr 2018	Tonnes	CDS Revenue** (Tonnes x ECF x 1000 x 0.10)	ECF* – Approved 10 Aug 2018	Tonnes	CDS Revenue** (Tonnes x ECF x 1000 x 0.10)
Aluminium	1.01%	59.17	61.863	$ 366,040.41	58.11	37.724	$219,211.85
PET segregated	3.00%	18.96	183.750	$ 348,390.00	13.9	112.050	$155,749.92
HDPE segregated	2.15%	0.69	131.688	$ 9,086.44	0.64	80.303	$5,139.37
Mixed plastics segregated	0.00%	3.62	0.000	$ -	2.83	0.000	$ -
Mixed plastics combined	8.25%	8.74	505.313	$ 441,643.13	5.44	308.138	$167,627.25
Glass	68.00%	2.25	4165.000	$ 937,125.00	1.83	2539.807	$464,784.64
TOTAL	82.41%	93.43	5047.613	$2,102,284.98	82.75	3078.022	$1,012,513.03
TOTAL (incl GST)		$2,312,513.47			$1,113,764.33
URME SHARE @ 40% (incl GST)		$925,005.39			$445,505.73
less PAID (incl GST)		($503,665.80)			$ -
OUTSTANDING (incl GST) (Est)		$421,339.59			$445,505.73

* - Eligible Container Factor – number of containers per kilogram

** - Container Deposit Scheme Revenue = Eligible tonnes x Applicable ECF x 1000 (to give a figure per tonne) x 10 cents (rebate per container)

52. In his oral evidence Mr Johnston amended the first column of the table to increase the amount of glass from 68% to 75-78% and the total of the recyclable materials from 82.41 to 89.41-92.41%. That was said to have been a “clarification” of his position. It was in fact an unexplained alteration in the opinions he had earlier expressed, which had the result that the calculations made in other parts of the tables were incorrect.

53. The explanation Mr Johnston gave for these amendments was:

“Q. What, if any, effect in number terms do those changes have to what you would anticipate to be the figures in the table?

A. The effect would be that they would increase the eligible containers for the purposes of the scheme and it would increase the claim.

Q. Do you press for any increase in the claim separate to what the figures are in this table?

A. No. No, I do not.”

54. That development confirmed the failure to disclose the facts and assumptions on which Mr Johnston’s earlier and final opinions were based, as well as the reasoning process by which Mr Johnston had arrived at his original and altered opinions. His oral evidence did not rectify these problems, it compounded them. That confirmed the inadmissibility of the disputed evidence under s 79 of the Evidence Act.

55. Nevertheless, the evidence was admissible to explain the claims advanced against Par, on the basis of beliefs which Mr Johnston had about the composition of the containers in issue. There was no issue that he had those beliefs. But beliefs may or may not have a rational basis. They may have a foundation in fact, or they may be mistaken. Establishing a basis for beliefs on which a claim such as that here advanced depends requires evidence about the matters on which the beliefs are based, the onus falling on the URM parties to make out their claim on the balance of probabilities.

56. Given that Mr Johnston’s beliefs could not be admitted as expert opinions under s 79 of the Evidence Act, the result of which would have been proof of the existence of facts about which his opinions were expressed, those facts had to be otherwise established.

57. As it transpired Mr Johnston’s beliefs were finally not relied on. An amended schedule based on his altered table was later provided, but a claim based on his calculations was not pressed.

58. Instead, orders were pressed on the basis of the 2016 audit documents about which Mr Waddington had been cross-examined. That had the result that the claim pressed against Par was reduced.

Credibility

59. Mr Johnston’s evidence contradicted aspects of the evidence of Mr Gallagher, Mr Waddington and Mr Knowles, who had corroborated aspects of the evidence which the others had each given in their affidavits. But in his cross-examination Mr Waddington made concessions which supported aspects of Mr Johnston’s evidence and contradicted that given by Mr Gallagher, who remains Par’s beneficial owner and controlling mind, as well as that given by Mr Knowles, who remains its general manager.

60. Little light was shed on Mr Knowles’ evidence by his cross-examination, he not being much cross-examined, even about concessions which Mr Waddington had made.

61. Whether concessions which Mr Waddington had made should be accepted or treated as mistaken was put in issue by Par.

62. It was Par’s case that given that Mr Waddington had contradicted his affidavit evidence, which parts of his evidence were more reliable had to be determined, with there being no general requirement that his cross-examination should always be preferred. It was in the circumstances open to conclude that some of his answers were mistaken, for example as to the term of the CDS agreement. Further, the notion that his affidavit evidence was either somehow contrived or influenced by lawyers, should be rejected.

63. I am satisfied that Mr Waddington was a careful witness who adhered to the requirements of his oath, answering questions put to him without obfuscation, explaining clearly why he did not agree to the propositions with which he disagreed, but accepting some matters put to him, even when they did not advance Par’s case. I am satisfied that his concessions were honestly made. I am not able to conclude that his concessions can be dismissed as Mr Waddington having been mistaken.

64. Both Mr Gallagher and Mr Johnston approached their evidence differently to Mr Waddington, sometimes not making concessions which clearly, they ought to have. I came to have reservations about aspects of both of their evidence.

65. Mr Waddington’s evidence, I am satisfied, was both credible and reliable, agreeing as he did with propositions put to him, even when they did not advance Par’s case in respect of matters which occurred at a time when he was its controlling mind. I have also concluded that in the event of conflict between the evidence of Mr Waddington and that of other witnesses, his evidence largely has to be preferred.

66. Unlike Mr Waddington, Mr Gallagher and Mr Knowles also had an interest in the proceedings, given their respective ongoing positions, which had to be considered. Mr Johnston’s evidence had to be understood in light not only of his own interest in the proceedings, but also of the fact that although he has never practiced, he is legally qualified and on his own account, often enters into commercial agreements without obtaining legal advice, including with Par. Par also sometimes took legal advice about its dealings with URM, but not always. Still, I was not satisfied that all of his evidence had to be rejected.

67. Mr Waddington’s evidence also helped resolve conflicts in the evidence of Mr Johnston and Mr Gallagher.

Jones v Dunkel inferences

68. Contrary to the case advanced for the URM parties, I am satisfied that Mr Johnston having given evidence about matters about which Mr Harris and Mr David Johnston could also have given evidence, does not satisfy the operation of the rule in Jones v Dunkel. That rule is concerned with the calling of evidence about some matter which calls for explanation.

69. While I accept that s 129 of the Corporations Act 2011 (Cth) is not pertinent to the resolution of this issue, that Mr Harris was in a position to give evidence about the state of URM’s knowledge of its contractual relationship with Par must be accepted.

70. Mr Harris drafted the 2011 agreement, signed the KES agreement and was at relevant times URM’s company secretary and chief legal counsel. Objectively, its terms were always known to URM. Given Mr Harris’ position, his knowledge of the parties’ contractual relationships was also relevant to determining what URM’s corporate knowledge was on matters in issue, particularly in relation to the result of the termination of the KES agreement, for the 2011 agreement. That knowledge did not depend alone on Mr Johnston’s understanding at various times of contracts by which URM was bound, even though he was the controlling mind of both URM and URME.

68. It follows that there was a seriously arguable case about the state of URM’s knowledge of the contracts by which it was bound at relevant times, despite Mr Johnston’s evidence about his understanding. This was not a case where the most appropriate person to give particular evidence having been called, there was no requirement to call cumulative evidence from others.

69. Mr David Johnston was the general manager present at various meetings, the author of emails and involved in discussions on which other issues turned. He could have given evidence about some matters which Mr Anthony Johnston could not, as well as, like Mr Knowles, giving evidence corroborating or disputing aspects of the evidence given by the other witnesses who the parties called.

70. I am satisfied that the result of the failure to call both Mr Harris and Mr David Johnston is that an inference must be drawn that their evidence would not have assisted the URM parties’ case on issues about which they could have given evidence.

71. That accords with the operation of a Jones v Dunkel inference explained in RHG Mortgage Corporation Ltd v Ianni [2016] NSWCA 270 at [160] to be:

“... a Jones v Dunkel inference is open where there is an unexplained failure to call evidence as to a matter which calls for explanation from a person whom it could reasonably be expected would be called to give such evidence. The rule in such a case permits evidence in relation to that matter to be given greater weight, and an inference or inferences to be more readily drawn, when the party who might have called evidence to the contrary has chosen not to do so. In Commonwealth of Australia v McLean (Court of Appeal (NSW), 31 December 1996, unrep), Handley JA and Beazley JA, as her Honour then was, said that “[t]he rule typically applies to strengthen or weaken an inference otherwise available on the evidence for the benefit of the party not in default”.”

The implied agreement

75. The parties to the 2011 agreement were Par, URM and Mr Johnston. The evidence is that all three conducted themselves as if they were still bound by its terms, even after it came to an end in 2014. In Mr Johnston’s case, for example, by signing letters in 2016 which threatened the pursuit of orders for specific performance of the 2011 agreement, as well as damages for its breach.

76. It follows that the parties’ agreement that after the termination of the 2011 agreement and on termination of the KES agreement, albeit unbeknownst to Par, they were bound by an implied agreement must be accepted as having a good foundation. That accords with the approach to the inference of a contract from conduct discussed in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97,326 at 11,117-11,118, referred to in Francis Gregory Hannigan v Inghams Enterprises Pty Limited [2019] NSWSC 321 at [75], on which the URM parties relied and in Kriketos v Livschitz [2009] NSWCA 96 at [11]. In Integrated Computer Services it was observed:

“… a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words … The question in this class of case is whether the conduct of the parties viewed in the light of the surrounding circumstances shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract … Care must also be taken not to infer anterior promises from conduct which represents no more than an adjustment of their relationship in the light of changing circumstances … 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.”

77. The evidence well establishes that this dynamic commercial relationship remained on foot from 2011 until 2019, after the termination of the KES agreement in 2014 and the resulting termination of the 2011 agreement, which was not known to Par, under the ongoing implied agreement.

78. During that time Mr Waddington and later Mr Gallagher were involved in repeated, extensive discussions with Mr Johnston about the need to increase gate fees because of changes in the market, in a context where Mr Johnston was also pursuing discussions with KEE and the Councils about increases in gate fees which they paid. Mr Johnston did not agree with all of Mr Waddington’s views about the challenges which the changes in the market presented Par at different times, for reasons which he explained, but Mr Waddington’s representations resulted in negotiations being pursued by Mr Johnston about increased fees.

79. Mr Johnston referred at one point in his evidence to “tripartite agreements between council, KEE and URM that needed to be entered into”, but the evidence does not establish that such an agreement ever came into existence. The position was that there came a time when KEE was no longer prepared to contract with URM and so a new agreement with URME was negotiated after a corporate restructure. Mr Johnston said that restructure had resulted in URME tendering for new contracts after 2013 and existing contracts being assigned to URME, in the case of Councils, with their consent.

80. The same approach was not adopted in relation to Par.

81. The 2011 agreement provided, somewhat redundantly, for the agreement to end on the expiry date, defined to mean the date of expiry of the KES agreement, or its earlier termination in accordance with its terms, or the termination of the KES agreement: cl 2.2. Clause 2.3 dealt with extension:

“The parties agree that if the term of the KES Agreement is extended, then URM will agree to extend the Term of this Agreement to coincide with any such extension. For the avoidance of doubt the parties agree that this Agreement will automatically terminate upon the termination of the KES Agreement.”

82. Clause 9 dealt with termination in the event of insolvency or default and in the case of URM, by notice in writing if the KES agreement terminated. But it never gave Par such notice.

83. These express provisions favoured URM, given that the agreement did not require it to notify Par of the termination of the KES agreement. While Mr Johnston said that he had discussed some of the provisions of the KES agreement with Mr Waddington, including its term, he was never given a copy.

84. But still there is thus good reason for thinking that Mr Johnston should have appreciated that termination of the KES agreement, which also brought the 2011 agreement to an end, required that Par be given notice of its termination. That included his own legal training; his involvement in the negotiation of the terms of the 2011 agreement; the legal advice which URM had at relevant times; his involvement in the negotiation of the agreement which replaced the KES agreement; and his later involvement in pursuit of Par for alleged breaches of the 2011 agreement.

85. But Mr Johnston’s evidence was that despite discussions which he claimed he had in 2014 with Mr Waddington about URME, which Mr Waddington denied, he did not appreciate that the 2011 agreement had terminated until 2020, when involved in preparation of the defence of Par’s claim in these proceedings. It was not put to Mr Johnston that his evidence was false. His understanding was consistent with adoption of an approach which did not pay sufficient regard to the differences between the companies involved in the URM Group, which itself had no independent legal existence, or the position of Par. That was established by both correspondence and conduct.

86. Mr Johnston’s explanation included how he came to appreciate only after the proceedings were commenced that it had terminated in 2014, as the result of advice then received. He said in cross-examination that he considered the agreement which replaced the KES agreement merely extended it, that he had formed the view that a new corporate entity was required to enter that agreement and that “we were the same entity”. Further that:

“I felt that the, the rollover provisions within the Somersby agreement would have continued, especially in circumstances where the entity, the new entity, had been discussed between Daniel and myself, and also in terms of the fact that there was a rollover provision within that agreement to extend it. I felt that if one party had the ability to simply change a company name and then the agreement would be terminated, I found that as surprising and against the, the underlying agreement itself.”

87. This and other aspects of his evidence were difficult to credit and what Mr Johnston told Mr Waddington in 2014 when the KES agreement was terminated was also in issue. Characterising termination of the KES agreement to which URM was a party and URME then entering a new agreement on different terms, KEE no longer being prepared to contract with URM, cannot sensibly be described as a mere change in the name of the company which had contracted with Par. If that was what he told Mr Waddington he would have misled him.

88. I am satisfied that Mr Waddington’s evidence must be preferred. What he was told conveyed neither that the KES agreement had been terminated, nor that a replacement agreement had been entered by URME.

URME was not a party to the implied agreement

89. There was finally no issue that Mr Johnston was a party to the implied agreement, under which he continued to provide a guarantee. Whether it was URM or URME which was the contracting entity was in issue. I am satisfied that it was URM.

90. The documentation provided to Par lends no support to the conclusion that any contract between URME and Par ever came into existence. That required an intention to enter into a contractual relationship which never existed on Par’s part.

91. On Mr Gallagher’s evidence, he first began working with Par in 2016. As part of his due diligence, he reviewed Par’s books and records, including the 2011 agreement. But until these proceedings were brought, he had never seen the KES agreement. Nor had Mr Waddington.

92. Until then both Mr Waddington and Mr Johnston also believed the 2011 agreement had continued to operate until 2019. It was only during the course of these proceedings that the replacement for the KES agreement was disclosed.

93. Mr Waddington’s affidavit evidence was that his understanding was that the 2011 agreement was for the duration of the KES agreement; that by June 2014 he was discussing with Mr Knowles its termination, because of deteriorating market conditions, but that he did not think Par had a right to terminate. It was only in 2020 that Mr Gallagher told him that it had been pleaded in the defence that the KES agreement had been terminated in 2014. Nor had he ever been told that there was a new agreement between URME and KEE.

94. In his affidavit Mr Johnston explained the negotiations pursued from 2012 with KEE for an agreement to replace the KES agreement, which resulted in extensions of the KES agreement to December 2013, February 2014, April 2014, June 2014, August 2014 or until execution of a new agreement, and December 2014 or until execution of the new agreement. There were issues about the gate fee which KEE was prepared to pay. Mr Johnston was then concerned that KEE might try and take over control of the Kimbriki facility and put it up for a new tender. He claimed that he had discussed his concerns with Mr Waddington in February 2014, who was concerned that Par might lose the product supplied from Kimbriki.

95. In his reply affidavit Mr Waddington also disputed this. His evidence was that he was unaware at the time that URME was negotiating a new agreement, although he did know that the KES agreement had been extended and might be extended further.

96. Mr Johnston gave some further oral evidence and both Mr Johnston and Mr Waddington were cross-examined about this issue.

97. Mr Waddington insisted that Par’s contracts were with URM. He had been dealing with Mr Johnston since 2009 and had purchased the Somersby operation from him in 2011; they became acquaintances; at all times while he had a management role at Par he dealt with URM on the basis that the 2011 agreement was on foot; that this agreement “had a perpetual nature that linked it” to the KES agreement and “so as long as that arrangement existed we had an agreement that we would process the materials”; while the agreement remained in place Par had a contractual obligation to process the material URM supplied; that Mr Johnston told him in early 2014 that he was negotiating a new agreement between KEE and the URM Group; but he denied being told that in place of URM, another Group entity would become the contracting party with KEE.

98. Mr Waddington’s evidence was also that:

“…there was comment that potentially you may lose the material coming to Somersby and that URM was back in negotiations at that point in time with the counsel [sic] for an extension or renewal of their contract and that's about the lump sum of all I know about it. I don't know the ins and outs of the URM business structure and corporate - you know, how many businesses they run and, and what companies they put in a constructive deals together and if you tell me in passing, "I'm going to use this entity", what, what does that mean to me?

Q. So, you concede that he may well have told you in passing that there was going to be a new entity entering into a new deal with KEE--

A. But if you're having a - sorry. You're having an open discussion about the reconstructing. You're, you're going in to say, "We're going back into renew the contract" and if you were - and, and if - and in the event that it was significant enough that you were changing entities et cetera, you could've just drafted a new contract that we had and said, "Now the new entity that's managing this contract is this entity, Daniel, can we get together and put this to bed?" It's not that difficult.

Q. If you don’t mind attending to the previous question that I was asking or in the process of asking. Do you concede, bearing in mind that what the relevant entity was wasn't a great concern to you, that Mr Johnston could have in early 2014 told you that KEE wanted to do a new deal in relation to Kimbriki with URM with a new entity and therefore that a new entity would be dealing with PAR going forward? Do you concede that he might have told you that?

A. No. Categorically, no.

Q. He also told you that, and tell me whether you agree or disagree, in terms of the new agreement that he was negotiating with - he did tell you that he was negotiating a new agreement with KEE in relation to Kimbriki, didn't he?

A. I don't know if it's a new agreement or basically renewing the agreement that was already afoot.

Q. Do you concede that he could have expressed it as a new agreement?

A. He might have expressed that he was doing a new agreement but that's his business.

…

Q. Mr Johnston told you in around about October 2014 after an agreement had been reached, a fresh agreement had been reached between his business and KEE in relation to Kimbriki, he told you that that agreement had been put in place, didn't he?

A. He did.

Q. I suggest to you that he told you that it was an agreement with a different or a new URM entity compared to the one that you had historically dealt with. Do you agree?

A. I didn't historically deal with any, anything, anyone. I only dealt with URM.

Q. What I'm putting to you is that Mr Johnston told you in around about October 2014 that the new deal that had been done by the business of URM with KEE in relation to Kimbriki was between KEE and a URM entity which was not the URM that you had known over time. Do you agree or not?

A. No, I disagree.”

99. Mr Waddington was not re-examined.

100. Mr Johnston also said that during the ongoing negotiations he spoke to Mr Waddington about KEE’s insistence that the URM entity it contracted with change, which meant that the entity Par dealt with would also have to change. In oral evidence he said that their conversation was:

“Daniel, Aaron Hudson has, has advised that, that the unit trust of URM will not be able to be used for the purposes of a new deal with KEE and has also advised that the price charged cannot represent a significant increase in the price charged for processing of containers." Daniel said words to the effect, "What does that mean?" I said, “Well, in the case of the entity, we propose to use URM Commercial Services Pty Ltd,” which it was at the time the only other commercial entity within the group other than the unit trust and it appeared on the bottom page of our letterhead.

And Daniel advised, “That's okay, I've been invoicing URM Group so it makes no difference to me." In relation to price, I said, "We cannot move any further on price so the price would have to be the price that you have charged for processing, adjusted in accordance with the Somersby agreement, and he said, That's okay.”

101. The rates were agreed but even if this discussion occurred, which I am satisfied cannot be accepted, it did not evidence a desire nor agreement that URME would replace URM as the party Par was contracting with. The later written notification given only in September 2015, after new internal systems were put in place, advised, firstly:

“Re: Change to supply bills to URM Group

Due to the fact that a company internal restructure was incurred on 1 July 2015, all supply bills intended for the URM Group and its subsidiaries should be made out to “URM Environmental Services Pty Limited, ABN 21 066 120 090” effective immediately. I also attached a letter from URM Group General Manager David Johnston advising such changes for your kind reference.

The aforementioned direction is a direct result of an internal restructure and does not in any way change the nature of service provision.

Should you have any questions or request any further clarification, please feel free to contact me to discuss.”

102. Mr Johnston’s letter advised:

“Dear Valued URM Supplier,

Changes to Supply Bills issued to URM Group

This letter advises of an important change which affects the issue of supply bills to United Resource Management Group (‘URM Group’) for goods and services supplied to the company.

From 1 July 2015, all supply bills intended for the URM Group should be made out to URM Environmental Services Pty Ltd, ABN 21 066 120 090.

The aforementioned direction is a direct result of an internal restructure and does not in any way change the nature of service provision.

In the event that you have any queries with respect to the above please contact URM on 8424 2200 or [email protected] and we will be more than happy to assist.”

103. Mr Johnston was also cross-examined about this advice, agreeing that it was sent to notify suppliers of changes to supply bills for the Group, reflecting the conclusion of its restructure, which had gone through a number of stages since 2013. He agreed that this had tidied up billing arrangements.

104. The written advice Par so received did not reflect any prior agreement that URME had replaced URM as the contracting party. To the contrary, it was consistent with a lack of concern or interest in giving Par information which it required, in order to understand the consequences of steps taken by URM to terminate the KES agreement, which resulted in the termination of the 2011 agreement, or to negotiate an agreement to replace it.

105. Consistently with Mr Waddington’s understanding that the 2011 agreement remained on foot, later communications from Par referred to URM. They were never corrected as needing to be directed to URME. They included default notices sent under the 2011 agreement in 2016; communications about increases in gate fees which necessarily involved amendment of that agreement; and correspondence from Par’s lawyers, which also dealt with the 2011 agreement and referred to URM.

103. The use of URM Group letterhead which referred in a footer to both URM and URME in communications directed to Par, to which Mr Johnston referred in his cross-examination, also does not establish that URME ever contracted with Par.

104. In the result I am satisfied that Mr Waddington’s evidence on this issue must be preferred over that of Mr Johnston. I am satisfied not only that there was no disclosure of the termination of the KES agreement, that its replacement had been entered into with URME and that the 2011 agreement had terminated as a result, but that URME never became a party to the implied agreement.

The terms of the implied agreement

108. It was an express term of the 2011 agreement that it would terminate when the KES agreement ended. Given this, it seems improbable that Par would not have had regard to the terms of the KES agreement when it negotiated its commercial agreement with URM. On Mr Johnston’s evidence Par was never given a copy, although on notice of its existence.

109. Still the terms of the KES agreement are pertinent to determining the terms of the implied agreement, Par being unaware of either its termination or the existence of the agreement which replaced it, the new agreement between KEE and URME.

110. In issue is whether the implied agreement had a specified period and similar provisions as to termination as the 2011 agreement, albeit in the latter case by reference to the new KEE/URME agreement.

111. That was the URM parties’ case. Thus in opening written submissions it was submitted that as from around 13 October 2014 Par and URM continued to deal on the basis of an implied agreement that the parties were operating on the same terms as the 2011 agreement “as it related to the delivery of the relevant containers and payment of gate fees by URM to Par, as only varied by the three specific gate fee price increases referred to above to $50 per tonne (in October 2016), $70 per tonne (in June 2017) and $100 per tonne (in December 2018).”

112. Par’s case was that the implied agreement had no express duration and thus contained an implied term that it could be terminated by either party on the giving of reasonable notice to the other: Crawford Fittings Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438 at 443-444.

113. I am satisfied that Par’s case must be accepted.

114. The commencement date of the KES agreement was 1 January 2010 and its term was specified in cl 2.2.1 to be the “Initial Contract Term”, defined in cl 1.1.1 to mean “the period of three years commencing on 1 January 2010”.

115. Clause 5 provided for the KES agreement to be varied; cl 6.2 dealt with default; and cl 6.3 with termination in the event of default. It was extended by a number of separate agreements, until it came to an end in 2014.

116. Par did not come to know that the 2011 agreement had been terminated until 2020. Its term was specified to be until the expiry of the KES agreement, unless earlier terminated by agreement: cl 2. Par was not given notice of the termination of that agreement or that URME had entered into a replacement agreement with KEE, despite cl 9 of the 2011 agreement also providing for immediate termination on the giving in writing of notice to Par of the termination of the KES agreement. Such notice was not given.

117. In those circumstances the implied agreement cannot have had any fixed duration. Nor could it contain terms referrable to the KES agreement, which had terminated, nor that entered by URME and KEE to replace it, the existence of that agreement not having been disclosed to Par, while the implied agreement remained on foot.

118. In my view the result is that as to termination, the implied agreement contained a termination provision implied by law, by the giving of reasonable notice.

119. The implied agreement was later terminated. Mr Johnston’s evidence was that in January 2018 he instructed accounts to stop making payments to Par until there was a proper reconciliation of what was owing under the CDS agreement. After June 2019 no further waste was provided to Par to process. There is no suggestion that URME’s agreement with KEE had by that time come to an end.

120. It follows that termination of the implied agreement can have only happened as the result of steps taken by URM to bring about that result. That accords with the implied agreement containing the implied term, which permitted either party to give the other reasonable notice of its termination. Neither party contended that what URM had done had involved any breach.

121. While that is certainly not determinative, it establishes how these commercial parties dealt with each other under the implied contract, by which they accept they were bound

The outstanding invoices

122. There is no issue that the seven invoices on which Par’s case rests have not been paid. Whether three of them are subject to a binding “contra” agreement entered in the context of the CDS agreement has to be resolved.

The claimed contra agreement

123. On his evidence Mr Johnston was concerned that URME was being underpaid and so in January 2018 instructed that payments due to Par cease being made, while he pursued a reconciliation of the CDS payments. Negotiations resulted, on his evidence, in payments due to Par being offset against CDS revenue, with the balance $83,470.64 outstanding to be paid by URME.

124. There were 2018 email communications about the three invoices being set off against payments due under the CDS agreement, which was agreed. On Par’s case this was not binding and was later withdrawn by another email communication on 7 March 2019 when it was advised:

“Please note that the URM contra should not have been applied given that the URM portion of the URM/SHOROC shared required the SHOROC RSA to be concluded along with the other adjustments mentioned in my earlier email.

Regardless, invoicing since 1 Oct ’18 amounts to $505,411.06. It is not acceptable to withhold any payment for cost 30 September regardless of your position on CDS, please bring the account up to date immediately.”

125. It was clearly open to the parties to agree to payments due to each other under their two agreements to be set off against each other. Once made as it was, there being no suggestion of any lack of authority or absence of good faith, the contra agreement could not be unilaterally withdrawn, proper consideration having been given by the parties’ respective promises to each other about payments due.

126. Given the conclusions which I have reached in relation to damages which require the repayment of what URM was paid under the CDS agreement, however, it follows that there can be no set off of any amount payable under that agreement against what Par is owed under the invoices the subject of the contra agreement.

What would Par have done if put on notice of the termination of the 2011 agreement in 2014?

127. Also in issue was whether the parties would have entered a new agreement in 2014, if Par had been put on notice of the termination of the 2011 agreement and what fees would then have been agreed.

A new agreement would have been negotiated

128. Clause 5.1 of the 2011 agreement provided for fees of $30 per tonne to 28 February 2012; $31 per tonne to 28 February 2013; and $32 per tonne to October 2013, thereafter to be varied in accordance with the CPI rate. There was no other right to variation of these rates, but increases were later agreed.

129. Mr Waddington’s affidavit evidence was that after 2014 while Par was still operating under the 2011 agreement, he was looking at increasing the gate fees it provided, or terminating the agreement, because Par’s operations under the agreement were running at a loss. Mr Waddington also described falls in the market price of glass up to 2014 and what Par was doing to deal with this and other problems in the industry, about which he was cross-examined.

130. He also said that had he known the agreement had terminated, he would have stopped accepting deliveries, but he did not think Par could. He would also have cancelled the agreement, if he thought he could. While he would have considered entering a new agreement, he would then have required a starting price of at least $105 per tonne.

131. In cross-examination Mr Waddington said however, that Par was receiving a significant income stream from URM; that it wanted to continue that commercial relationship, which was why it later pursued the default process under the 2011 agreement as it finally did in 2016; and why steps to terminate the agreement were not then taken. Further that:

“Q. Just dealing with late 2014, if you had known that the Somersby supply agreement had ended, I suggest to you as at that point PAR still would have kept doing commercial dealings with URM or a URM entity in respect of the receipt of materials at Somersby, correct?

A. At that point in time, yes.

Q. Going forward, if it had that awareness that it had come to an end, the Somersby supply agreement, it still would have done a deal with URM on substantially the same terms as the supply agreement to continue to receive material at Somersby, correct?

A. More than likely.

Q. It would have been a matter of, mutually between the parties, agreeing on a form of price structure that both mutually agreed with in the context of putting in place or furthering that commercial deal going forward, correct?

A. Correct.

Q. It would have likely have been a period for a form of commercial deal going forward over a number of years, it would have had quite a lengthy term, as well as, I suggest, it would have been the most likely scenario, correct?

A. Well, it would have been on the same basis as the agreement that, that is in play. Was there

Q. When you say the same basis, what do you mean?

A. Well, we have a contract at the moment that, that you're aware of, and that just would've been stayed afoot, which it did.

Q. I just want to put to you the following propositions. Let's assume for the purposes of the following questions that you did apply yourself in good faith to securing a new commercial deal at around about October 2014 with URM or URME for the supply of material to Somersby. I want to suggest to you that it might have been a scenario where there was an agreed fixed price for gate fees per tonne for the first three ears of a deal and then CPI increases going forward. Do you agree that may well have been the case consistently with the Somersby supply agreement?

A. It would have been consistent with the Somersby supply agreement. There was no reason to change it at that particular point in time. The industry had been very stable for over ten years, commodity prices were very stable over ten years. No one had a crystal ball of what was coming. But at that particular point in time the market was stable and it was a viable business activity, and PAR was in the business of processing recyclables so were happy to engage and provide the service to URM to process their, their container stream material from Kimbriki.”

132. Mr Gallagher’s evidence shed no light on this, he not having been involved in Par in 2014, other than advancing the table by which the claim for what fees Par would have charged URM if not bound by the 2011 agreement.

133. Mr Knowles said that he had also not been involved in the negotiation of the 2011 agreement, but when it was entered the market for recyclables was stronger than in later years. By 2014 it had declined significantly and like other operators, Par was seeking to renegotiate its gate fees. His recommendation to Mr Waddington was that the gate fees had to be increased, or the 2011 agreement terminated. Further, that if he had been aware of the termination of the agreement, he would have told Mr Waddington that Par had to stop taking deliveries from URM or enter a new agreement.

134. Despite Mr Waddington’s affidavit evidence, I do not accept that he was mistaken in the concessions which he made in cross-examination. Even in 2016 when Par was pursuing URM for default when contamination levels went considerably higher than the 2011 agreement permitted, Par did not seek to terminate the 2011 agreement. This would have allowed it to negotiate higher rates, unconstrained by the 2011 agreement by which it believed it was then still bound.

135. I am thus satisfied that Mr Waddington’s concession must be accepted, he being at the relevant time Par’s controlling mind.

136. It follows that if Par had been given notice of the termination of the 2011 agreement in 2014, it would have entered into a replacement agreement with URM or URME for gate fees negotiated in the context of the replacement to the KES agreement.

137. What was not known by Par while the implied agreement was on foot was that the replacement agreement between URME and KEE was for an initial fixed term commencing on 1 September 2014 and expiring on 31 March 2017, during which the right to terminate was limited, but during the subsequent term to 30 June 2019, it could be terminated on the giving of 3 months’ notice. Had that been made known to Par, it would no doubt have affected the parties’ negotiations.

What gate fees would have applied?

138. Par’s cross-claim was advanced on the basis that if it had been put on notice in 2014 of the termination of the 2011 agreement, it would have negotiated very considerably higher fees with URM. I am satisfied that it cannot be concluded that the rates Par claimed would then have been agreed.

139. They were outlined in the table attached to Mr Gallagher’s affidavit, he being the driving force behind the litigation pursued after Mr Waddington was no longer involved in the business. The rates ranged from $82 per tonne in September 2014, at a time when Mr Gallagher was not involved in the business and when the gate fee under the 2011 agreement was only $32 per tonne, to finally $195 per tonne when the gate fee agreed in the context of the CDS agreement, was only $100 per tonne.

140. Par relied on notices it issued from time to time to its commercial customers of its increased rates to advance its case. It had also sought in the past to negotiate much higher increases with URM, but that had never resulted in URM agreeing to pay such rates. There was also little contemporaneous record that they had been paid by other of Par’s customers.

141. On Par’s case the documents establish that the gate fees URM paid in accordance with the 2011 agreement and what was negotiated were:

Date	Gate Fee (by tonne) (excl GST)
1 March 2011	$30
1 March 2012	$31
1 March 2013	$32
1 November 2015	$33.84
1 August 2016	$34.46
7 October 2016	$50
1 June 2017	$75
1 December 2018	$100

142. But Mr Waddington’s evidence was that he had accepted URM’s position that the June 2017 increase to $75 per tonne should be reduced to $70 per tonne.

143. Mr Gallagher explained in his affidavit that he was aware from Mr Waddington and his involvement with Par of its pursuit of higher gate fees in ongoing discussions with Mr Johnston, but that he only became involved in negotiations about this in the context of entry into the CDS scheme in December 2017. Had he then been aware that the 2011 agreement was no longer in force, he would not have entered the CDS agreement. It was then that the increase in the gate fee to $100 per tonne was agreed.

144. Mr Gallagher explained Par’s cross-claim to be based on rates Par charged commercial waste collectors, the “commercial commingled rate”. He said:

“PAR also accepts deliveries from commercial waste collectors and processes that material in the same way it processed material received from URM. This material is usually comingled waste, that is, it is general waste and recyclable material mixed together, collected from commercial premises. Par charges a commercial comingled rate for these deliveries which changes from time to time.”

145. Mr Gallagher agreed that fully commingled waste included not only recyclable materials of the kind which Par received from URM as the result of the kerbside split collection material it collected, such as glass, aluminium and plastic, but also paper and cardboard, sometimes collectively referred to as “fibre”. The SHOROC Councils with which URM dealt used blue bins for fibre and yellow bins for other recyclables. In the case of other Councils with which Par dealt, all recyclables were collected in one bin. That increased the difficulty and cost involved in its processing.

146. Mr Gallagher explained that the rate notices he relied on communicated gate fee price increases to commercial companies with whom Par did not have an ongoing contract for a specified period for the processing of commercial waste. Those rates were for commingled waste, including fibre and other recyclables, which such customers might provide on an ad hoc basis.

147. The lower rates Par charged URM were explained by Mr Waddington’s affidavit evidence. There he explained that residential collections tended to have lower levels of contamination than commercial collections, with the result that operators tended to charge lower gate fees for residential collections because there was expected to be a much higher percentage of saleable commodities contained in that waste. Further, that the bulk of the material received under the 2011 agreement was glass, which meant inherently lower waste levels and higher saleable commodity, so that URM could be charged lower gate fees.

148. Mr Waddington’s evidence was also that if Par had been in a position in 2014 to do so, it would have required a starting fee of $105 per tonne. There was in evidence an email sent to Mr David Johnston in December 2015 when the need for such a gate fee was discussed, at a time when the fee was said to be $34.90 per tonne. But doubt still was cast on Par’s case by other evidence, including that of Mr Waddington and Mr Knowles.

149. The fees Par claimed need also to be considered in light of discussions between Mr Waddington and Mr Johnston in 2014 about the gate fee which Par would charge for waste collected from Ku-ring-gai Council, for which a tender was being pursued by URM. The price Par then required was only $45 per tonne.

150. That was considerably less than the rates it charged for ad hoc contracts with commercial customers for comingled waste. It follows that those rates did not dictate what it would have negotiated in 2014 with URM, had it been aware of the termination of the 2011 agreement. Nor did Mr Gallagher’s evidence that at the time of the CDS agreement, Par had an agreement with another collector Remondis for $175 per tonne.

151. What was relevant was what Par charged other customers at the time the 2011 agreement came to an end, with whom it had similar contracts to that which it had with URM and what it would have then been prepared to contract with URM for, given the type of waste it provided. The former was not revealed, but on Mr Knowles’ evidence he advised in 2014 that a rate of $42 per tonne was required by Par for the URM waste. That was less than the price that Par was prepared to do the Ku-ring-gai Council work for, $45 per tonne, consistent with Mr Waddington’s view that $42 per tonne was insufficient.

152. In 2014, according to Mr Gallagher’s table, Par was charging ad hoc commercial customers $82 per tonne. That also does not support the view Mr Waddington expressed in his affidavit that in 2014 Par would have required $105 per tonne from URM, if it had known of the termination of the 2011 agreement.

153. Mr Waddington’s evidence in cross-examination was also that in 2014, if he had been aware of the termination of the 2011 agreement, an agreed fixed price for gate fees per tonne for the first three years of a deal and then CPI increases going forward would have been arrived at.

154. Mr Johnston’s evidence that URM would not have paid the claimed fees and that it would instead have contracted at lower fees with other operators which it then used, also cannot be overlooked. At that time it was paying Visy for the same product which it collected from Lane Cove and Hunters Hill and delivered to Somersby, only $37.50 per tonne. Contemporaneous documents reflected payment of such fees, which may explain why nothing came of Par’s offer to process waste from Hunters Hill Council for $45 per tonne.

239. In his affidavit Mr Johnston said the conversation with Mr Gallagher was to the following effect:

“Me: It’s okay, I spoke to Daniel and we’re all agreed.

DG: Yeah he told me.

Me: Why have you change the date to February?

DG: We need some time to catch up on cash flows.

Me: No. The revenue share has to start from December as agreed. If you need additional time to pay that is a different matter. We can work that out.

DG: Okay.”

240. Mr Gallagher disputed this both in his affidavit and in cross-examination. Mr Waddington said in his affidavit that the February 2018 commencement offered had been arrived at in discussion between he, Mr Gallagher and Mr Knowles, Mr Johnston having asked that the date be brought forward from 1 April 2018, which had earlier been considered. That was accepted because Par needed the revenue and this was a good faith compromise.

241. He also said that he would not have agreed to the changes to the agreement Mr Johnston claimed, because Par had no obligation to share the refund before December 2018 and he would not then have agreed to fix the gate fee for after that date.

242. The dispute over the term of the agreement, I am satisfied, was resolved by Mr Waddington’s cross-examination, which reflected how the parties dealt with each other, despite the variation to the term of the agreement not having been reduced to writing.

243. There is no issue that Par did pay URM from 1 December 2017, although on its case what was paid for December and January 2018 was an advance on what was payable for the period which commenced from February 2018, to which I will return.

244. Mr Waddington agreed that “the period in respect of which revenue from the CDS scheme to be shared was agreed with URM by Par as being a period from 1 December 2017 at the start of the scheme to 30 June 2019.” He was not sought to be re-examined about this.

245. In final submissions Par urged that this aspect of Mr Waddington’s evidence would not be accepted, he having been mistaken and having given this evidence without having been taken to the January 2018 letter, or the dispute about the date, or being asked the basis upon which he said that the agreement ran for this longer period. It was also relevant that he had not been a party to the discussion between Mr Gallagher and Mr Johnston on which the oral variation to the agreement depended.

246. Nevertheless I am satisfied that Mr Waddington’s evidence must be accepted. He was Par’s controlling mind at the time the January 2018 agreement was reached and I did not consider there to have been any unfairness in his cross-examination about his understanding of the terms of that agreement, through which he was taken.

247. Despite the other matters he remained adamant about, Mr Waddington’s concession about the term of the agreement was clear and accorded with the payments Par later calculated and made. Mr Gallagher explained his discussion with Mr David Johnston in May 2018, when they said words to the effect:

“Council had promised to pay a rate increase but they haven’t done it yet.

I’m in a cashflow hole, could you please help me out.”

I said words to the effect “send me an email with what you need and how we can reconcile and I’ll see what I can do.”

248. The email request was:

“Hi Danny,

As discussed we are still awaiting negotiations with Council to accept the uprate on the Northern Beaches, they have promised however not actioned.

I was seeking if possible to have Dec / Jan CDS volumes paid to URM in the same account and then deducted from the next two quarters if possible.

This will be of great assistance as we anticipated Council would have agreed by now.

Let me know what you think?

Regards,

DJ”

249. By May 2018 Par had not received refunds, even though the first quarter under the scheme ended on 31 March 2018. The second quarter had not ended, but no payments having as yet been made to Par, it had no obligation to pay any share to URM.

250. In cross-examination Mr Johnston was taken to the email which was copied to him. He explained that the position then was that no increases in gate fees had yet been agreed with the Councils, nor had payments yet been made under the CDS agreement, but a new fleet of 40 trucks had been put in operation. The result was a cashflow problem and so an advance of the payment due under the CDS agreement was sought.

251. It is apparent that at the time Par could only be making a loan when agreeing to pay URM in respect of “Dec / Jan volumes”, which were part of the first quarter under the scheme. The obligation to pay URM a 40% share was only triggered by Par receiving a refund. By May 2018 the first quarter had ended, but no refunds had been received. The loan sought was not a specified money amount, but payment in advance of the 40% share of the refunds Par was to receive for December and January. That is what the “Dec / Jan volumes” referred to.

252. That was agreed, as was the proposal that the loan advanced would be repaid by being deducted from the 40% share Par had to pay URM in respect of refunds it received for the following two quarters. It was not deducted from URM’s share of the refund for the first quarter.

253. It follows that this agreement was consistent with Mr Waddington’s concession that the CDS agreement had commenced in December 2017. That was what the payment of the advance agreed reflected.

Did the payments made under the CDS agreement satisfy Par’s contractual obligations?

254. In issue is whether URM was owed any more under the CDS agreement than it received for the periods it was paid.

255. There is no issue that Par did not have a refund sharing agreement with a Council by 30 November 2018. In accordance with reg 18, from 1 December 2018 to 26 February 2019 when it entered its agreement with Northern Beaches Council, Par thus had no right to receive any refunds under the scheme and thus no obligation to make any payments to URM under the CDS agreement. It received nothing which it was obliged to split.

256. Even though on Par’s case the agreement did not come to an end until 30 November 2018, it made no payments for the period after 30 September. The parties were then in dispute over what was owed under both their agreements.

257. But given the conclusions I have reached about the term of the CDS agreement, it follows that Par was obliged to continue to pay URM 40% share of the refunds which it received up until 30 June 2019.

The contractual terms

258. Whether the amount of the payments made satisfied Par’s contractual obligations for the periods for which they were paid also depends on the proper construction of the 9 January letter. It will be remembered that it relevantly provided:

“Par Recycling is delighted to continue working with URM as a contract manager for the SHOROC Councils and extend a share of the revenue from CDL with the basis of a 60/40 split from 1^st February 2018 till 30^th November 2018,

The estimated value to URM/SHOROC is forecasted to be between $1.5 and $2 million dollars subject to EPA audit data. **URM/SHOROC will be required to conduct audits at Kimbriki to assist in the quantification and maximise the return from the Contained Deposit Scheme (CDS).”

The calculation of the payments made

259. The records establish the total materials Par processed. From December 2017 to March 2017, for example, 22,073.75 tonnes from the following suppliers:

Suppliers	Tonnage	Percentage of total delivered to Somersby MRF
Central Coast	11,917.69	54.0%
URM	6,086.79	27.6%
Gateshead	887.33	4.0%
Shoal Haven	2,636.38	11.94%
Commercial Comingle	545.56	2.47%
Total incoming weight	22,073.75	100%

260. The total refund revenue Par received for this material was:

Commodity	Tonnage	Eligible container factor	Total received
Aluminium	153.52	59,170	$908,377.84
Glass	9,684.2	2,250	$2,178,945
Mixed plastic	1,683.77	8,740	$1,471,614.98
Steel	342.73
Total	11,864.22	$4,558,937.82

261. The $503,306.74 Par paid URM for this period was calculated as 40% of $1,258,266.84, that being 27.6% of the $4,558,973.82 refund it received from Exchange for Change for this period.

URM’s claimed calculation of the 40% share claimed

262. The claim initially pursued was that Par short paid URME by $2,077,585.91. That did not reflect 40% of the payments Par received under the scheme for the weight of the materials which URM had supplied. Rather, Mr Johnston’s calculation of what he considered it should have paid URME, given his opinions about the likely composition of the materials URME supplied for processing.

263. In his affidavit Mr Waddington explained why he disagreed with Mr Johnston, referring for example to the Northern Beaches glass collection being high in wine bottles which were not CDS eligible, with the result that his ratios were a guess. In cross-examination he accepted that the average figures arrived at as the result of the 2016 audit are likely to have reflected the recyclable materials contained in the waste URM later supplied, but Mr Gallagher did not. Mr Gallagher considered that required further load audits which had not been undertaken.

264. Mr Gallagher also did not agree that the waste received from other councils contained considerably less recyclable materials than that provided by URM. He also explained his experience of changes in the composition of materials Par processed and what was eligible for recycling, over time, having first been brought into the business in 2016 to assist with operations.

265. The claim based on Mr Johnston’s beliefs was abandoned in final submissions.

266. Then a claim for $1,824,431.05 was advanced. It was calculated by reference to the 2016 audit, the result of which was an average of the loads then examined. Mr Waddington agreed that while there were seasonal fluctuations, it was representative of what URM provided. That evidence has to be understood in the context that this audit was part of the resolution of a dispute pursued by Par over URM’s alleged breaches of the 2011 agreement in respect of unacceptable contamination levels. Later investigations found higher levels of contamination.

267. It was Mr Johnston’s opinion that the results of the 2016 audit reflected that materials URM supplied contained more recyclables and less contamination than material provided to URM by other of its customers. That was also disputed.

268. Mr Gallagher disagreed and in cross-examination denied that the 60/40 split was to be made in relation to the actual materials that were supplied by URM or URME to Par, reflecting the actual quality of those materials. He considered that URM was only entitled to share in refunds which Par received, which were calculated by the eligible container factor put together by the State. He also explained that the estimate in the 9 January letter was based on modelling undertaken at a time when all the operation of the scheme was still not known.

Why URM’s case cannot be accepted

269. URM’s case finally was that its construction of the 9 January letter accorded with the objective theory of contract by giving work to do to its purpose, which one would infer based on knowing what the parties knew at the time in relation to their deal.

270. I am satisfied that there is no evidentiary basis for this conclusion, nor do the terms of the 9 January letter permit the construction for which URM contended.

271. It must be remembered that the agreement was arrived at in circumstances where those who negotiated it all understood Par and URM were bound by the 2011 agreement. Both it and the implied agreement contained the same term as to contamination levels. The CDS agreement was arrived at in the context of an extended dispute over excess contamination levels, given the contractual limitation, over time higher than that disclosed by the 2016 audit.

272. That explains the January 2018 letter’s referral to URM auditing the containers it delivered to Par. But it did not do so. Nor did Par.

273. Still, URM contended that the orders made in its favour under the CDS agreement should be calculated by reference to the 2016 audit. That reflecting the requirement that its share of the refund be calculated by reference to the URM tonnes which it supplied, and reflective of the quality of the actual material that they contained.

274. But the letter made no reference to this, or even to the composition of the materials which URM delivered to Par for processing. All that was agreed was that Par would “extend” to URM “a share of the revenue from CDS with the basis of a 60/40 split”. The refunds which Par received in respect of materials URM and its other customers supplied were all calculated by weight, not actual composition.

275. That URM’s case that the CDS agreement must be interpreted as requiring Par to calculate its share of Par’s refund, by reference to the composition of all of the materials which it actually received from URM, simply has no foundation in the words used in the contractual letter, or how a reasonable person would have understood them.

276. I am satisfied that it is impossible to infer this requirement into the January 2018 letter, for reasons including:

1. the letter was not drafted by lawyers but two businessmen who used simple language to describe what they offered, a share of the CDS revenue Par received under the new statutory scheme, by way of a percentage split;

2. Mr Waddington agreed in cross-examination that the agreement contemplated payment for URM tonnes. But that this meant anything more than calculation of URM’s share of Par’s refunds by reference to the number of tonnes it delivered to Par, is not apparent;

3. that if it had been intended that the refunds Par was paid under the scheme would be shared by reference to the amount of the different recyclable components of the tonnes of waste URM delivered to Somersby, that could easily have been said. But it was not;

4. given that the percentage of those components, which Mr Waddington explained did not alter significantly over time, although there were seasonal differences which he explained, had been audited in 2016 during the dispute over contaminated materials, calculation of the URM share of the refund could also easily have referred to those percentages, but that was also not adopted;

5. the evidence of the discussions which resulted in the agreement does not establish that the claimed method of sharing the revenue was discussed before the final letter was sent or accepted;

6. while explanations, spreadsheets and calculations were later exchanged, URM explaining how its payments reflected that refunds it received were paid by Exchange for Change on the basis of a NSW state average which it used in the calculations by which Par’s refunds were arrived at, URM did not then claim that they should have been calculated on the basis pressed in these proceedings;

7. had the parties intended that revenue URM received would be split on such a basis, it is likely to have conducted the audits to which the January letter referred, because that would have established the payments to which it was entitled, but it never undertook any audits;

8. the agreement did not require Par to undertake such audits;

9. Par did not separately process what URM delivered, nor did the agreement require it to;

10. the audits which Exchange for Change undertook also did not involve separate sampling of the loads of waste URM delivered; and

11. Par had modified its operation to enable Exchange for Change to undertake the statutory sampling required for the refunds it received to be paid. But no separate arrangements were sought or made for the separate handling or sampling of URM’s deliveries.

277. The result was that there was no contemporaneous examination of the loads which URM delivered, which could have established a basis for the claim it advanced in these proceedings. That accords with a reasonable business person not understanding from the terms of the 9 January letter that payment by reference to the actual composition of the tonnes which URM delivered was required. That is what ultimately necessitated URM’s reliance on the 2016 audit results, which I am satisfied were irrelevant to the payments to which it was entitled under the CDS agreement.

URM’s cross-claim

278. In the result the damages sought in respect of the claimed miscalculation of the 40% share of the refunds URM received under the CDS agreement cannot be awarded.

Was there misleading or deceptive conduct?

279. It was not in issue that the orders Par sought could be made if the alleged misleading and deceptive conduct had been pursued. But that it was misleading and deceptive was in issue.

280. In Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [111] McHugh J explained that conduct is misleading or deceptive if it induces or is capable of inducing error. Also, that a corporation does not avoid liability because a person who has been the subject of its misleading or deceptive conduct could have discovered that conduct by proper inquiries. It is conduct that objectively leads one into error that is misleading.

281. Par’s case was that but for URM’s misleading and deceptive conduct, it would have acted differently and would not have entered the CDS agreement.

282. URM’s case was that there had been no misleading and deceptive conduct on its part. In final oral submissions it was contended that instead there had been “a course of mutual assent dealing that continued between the parts from around about 13 October 2014 and going onwards that is reflective of them operating consensually and commercially” That objectively the conduct in issue would not be considered to be misleading or deceptive “in the circumstances where there was no evidence that anyone knew that the 2011 agreement had come to an end in the case relevantly between the parties.” Further, that there had simply been a situation where there were two parties who continued to deal as commercial parties on the belief that a commercial contract was on foot.

283. I am satisfied that this cannot be accepted on the evidence.

284. Whether or not the conduct URM pursued was misleading and deceptive does not depend on Mr Johnston’s understanding of the effect of the termination of the KES agreement on the parties’ contractual relationship, or even on what Mr Harris knew, although it can be inferred that his evidence would not have assisted URM’s case.

285. The evidence does establish that URM’s ongoing conduct was misleading and deceptive, pursued as it was up to the termination of the parties’ relationship to URM’s advantage. I have already dealt with what Par would have done in relation to entry into an agreement to replace the 2011 agreement, had it known that it had been terminated in 2014. But it did not. Further, but for URM’s ongoing misleading and deceptive conduct, that in 2018 Par would not have entered the CDS agreement, must be accepted.

286. Had Par been made aware before that agreement was entered, that the KES agreement had terminated in 2014, with the result that the 2011 agreement had also been terminated and the implied agreement thereupon came into existence, Par would not have made the offer conveyed by the 9 January 2018 letter, ultimately to its considerable disadvantage.

The misleading and deceptive conduct

287. When the CDS agreement was negotiated and entered all involved were still acting on the mistaken belief that the 2011 agreement remained in force. What happened cannot, however, sensibly be characterised as merely reflective of a practical, pragmatic, bargaining relationship in this industry, which does not speak to misleading or deceptive conduct, as was also finally submitted for URM.

288. On Mr Waddington’s evidence it was in 2014 that the market was adversely affected, the price for green glass, for example, dropping from $82 per tonne to $10 per tonne in August. A major glass manufacturer closed two of its furnaces and Par began stockpiling glass, looking for alternative markets. While Mr Johnston did not accept all of the representations Mr Waddington made at the time or in his evidence about the state of the market, I am satisfied that it must be accepted that there were adverse consequences for Par, which led to its ongoing pursuit of higher gate fees and consideration of how the 2011 agreement could be brought to an end.

287. Eventually, Government response to the changed market conditions and their consequences led to the introduction of the statutory scheme.

288. Mr Waddington’s evidence was that by mid-2014 Par started making losses under the 2011 agreement and even under the increase to $42 per tonne Mr Knowles was proposing, it would still have made a loss. It had to investigate other solutions, such as crushing glass for road base or use by Councils as drainage mediums at landfills and washing and crushing glass to be sold as sand. But Par understood that it had no right to terminate the 2011 agreement, or to increase the gate fee, as it continued to believe to be necessary.

289. In 2015 Mr Waddington pursued price increases with Mr Johnston and his brother and introduced a CPI increase in November, which the 2011 agreement permitted. In December he sought an increase to $105 per tonne, which was not agreed. Mr Waddington believed Mr Johnston had not then pursued increased fees with Councils. It was then that he began pursuing Par’s concern with increasing contamination levels. Examination of delivered loads established levels higher than the contracted 3% levels, which increased Par’s costs of processing, reduced what it could sell and also increased the cost of sending materials to landfill.

290. Mr Waddington then decided Par had to enforce its contractual rights and considered that it might even be able to get out of the 2011 agreement as the result of URM’s breaches. A contractual breach notice was delivered to URM in April 2016. Despite discussion, the contamination problem continued and a second default notice was served in June, together with a proposed increase in gate fees to $75 per tonne.

291. The parties retained lawyers, URM threatened to pursue specific performance and damages and the audit of URM’s trucks was ultimately agreed. Eventually URM agreed, without prejudice, to remove 50 tonnes of waste from Par’s sites and to seek to renegotiate the gate fees, after consulting with the Councils.

292. An increase was agreed, but in 2017 further audits revealed contamination levels to be 7%. There were further discussions about this, a further rate increase and the incoming CDS system. The rate was increased to $75 per tonne from June 2017, but $70 per tonne was accepted by Par after further discussion.

293. On Mr Waddington’s evidence, Mr Johnston did not then want Par to negotiate directly with Councils about the incoming statutory refund scheme. That was also Mr Gallagher’s evidence, albeit denied by Mr Johnston. I am satisfied that Mr Johnston’s evidence cannot be preferred, despite the conclusions which I have reached about the terms of the 9 January letter which were finally agreed.

294. The parties were plainly aware that there needed to be an agreement put in place which satisfied the regulatory scheme by 1 December 2018, if refunds were to be obtained afterwards. Par also wanted the gate fee to increase to $100 per tonne. Both were discussed and the CDS agreement reached on 9 January 2018.

295. But Mr Johnston did not proceed on the basis that URM had an obligation to negotiate a refund agreement between the Councils and Par, as Mr Gallagher and Mr Waddington both understood. That had adverse consequences for both Par and URM, given the result of the operation of reg 18. Namely, that from 1 December 2018 to February 2019 when the agreement was entered with Northern Beaches Council, Par received no refunds and URM had no right to its 40% share under the CDS agreement.

296. Even accepting that there was a genuine disagreement over what the CDS agreement actually required, I am satisfied that Mr Waddington’s evidence, corroborated by Mr Gallagher, that had he known at the time the CDS agreement was made that Par was not bound by the 2011 agreement, Par would not have entered that agreement must be accepted. That agreement reflected commercial decisions, not requirements of the statutory scheme, made in circumstances where Par had been considerably misled by URM and Mr Johnston as to matters which necessarily affected its decision making.

297. The 2011 agreement contemplated URM giving Par written notice of the termination of the KES agreement: cl 9. Neither that nor any other notice about the resulting termination of the 2011 agreement was ever given and afterwards Mr Johnston and his companies proceeded as if the 2011 agreement remained in force.

298. Mr Johnston may not have appreciated that the 2011 agreement terminated in 2014. But even if it be accepted that this objectively reflected the state of URM’s understanding, given the terms of the 2011 agreement, the termination of the KES agreement and Mr Harris’ involvement, URM’s ongoing conduct was misleading. It had the result that the parties became bound by the implied agreement, an outcome which would not have occurred, but for the misleading conduct.

299. Intention is not a necessary element of misleading and deceptive conduct under s 18 of the Consumer Law, which provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive. Even if a corporation acts honestly and reasonably, it may engage in conduct that is misleading or deceptive or is likely to mislead or deceive: Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65 at 66. In this case, that in the circumstances URM acted reasonably, cannot be accepted.

300. Silence can also be a relevant circumstance, as may be common assumptions and reasonable expectations of disclosure: Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2020] HCA 31 at 370. There Cicero was quoted:

“Holding things back does not always amount to concealment; but it does when you want people, for your own profit, to be kept in the dark about something which you know and would be useful for them to know”.

303. While it is not necessary for commercial parties to volunteer information to other parties which is of assistance to their decision-making, non-disclosure of a fact can be misleading or deceptive even when the recipient of a true statement is misled, absent disclosure. Here, however, URM’s ongoing representations that the 2011 agreement remained in force, despite the KES agreement having been terminated, were not true and considerably misled Par.

304. On all of the evidence I have discussed, I am satisfied that even if it be accepted that URM and Mr Johnston did not intend so to mislead, in the circumstances in which they were dealing with Par, they did not act reasonably in not giving it notice of the termination of the KES agreement, or the resulting termination of the 2011 agreement. The result was that URM’s ongoing conduct until the relationship was terminated, was misleading and deceptive.

305. Termination of the KES agreement remained entirely within URM’s knowledge, unless disclosed to Par. That Par had a reasonable expectation that it would be given notice of termination of that agreement, given the terms of the 2011 agreement, must be accepted. Despite knowing that Par had never been provided with a copy of the KES agreement and the 2011 agreement expressly providing that it would come to an end, if the KES agreement was terminated, of which written notice could be given, still URM failed to inform Par of their termination.

306. The steps which were and were not taken in 2014 and subsequently, were entirely within the control of URM and Mr Johnston and pursued for their benefit. Not only when URM threatened to pursue specific performance of the 2011 agreement after Par had served default notices under that agreement in relation to excess contamination levels; but also in the context of the ongoing negotiation of increased fees, which Par continued wrongly to understand was constrained by the 2011 agreement to a right to CPI increases because the KES agreement remained on foot; and when the CDS agreement was proposed, negotiated and agreed. Throughout, URM persisted in its misleading and deceptive conduct.

307. The result of the failure to disclose the termination of the KES agreement thus led Par into error and misconception, to its ongoing detriment.

308. Termination of the 2011 agreement in 2014 entitled Par to pursue negotiations for increased gate fees at a time when the market for recyclables in Australia had suffered a downturn. That was constrained, while Par remained bound by the 2011 agreement. Unbeknownst to it while bound by the implied agreement, Par could also have taken steps to bring that agreement to an end, by giving reasonable notice of termination, which would have permitted it to pursue negotiations for higher gate fees, unconstrained by either the 2011 or implied agreements. But as the result of URM’s ongoing conduct, that was also a right of which it was unaware.

309. The ultimate result of URM’s conduct was that until the parties’ relationship came to an end in 2019, Par continued to proceed as if constrained by the 2011 agreement.

310. That Par might have been put on notice of the termination of the KES agreement beforehand, if it had made enquiries does not alter this. That does not absolve URM’s breach of s 18 of the Consumer Law: Burke v LFOT Pty Ltd (2002) 209 CLR 282: [2002] HCA 17 at [66]. In the result that Par did suffer damage as the result of the misleading conduct which has been established, also follows.

Mistake

311. The evidence also establishes that the contracting parties did act from 2014 onwards on the mistaken basis that the 2011 agreement continued in force until their relationship came to an end in 2019, although it was only Par which had the mistaken understanding that the KES agreement also remained in force. Par was not at fault for its mistaken understanding of either matter.

312. The parties’ common mistake concerned a fundamental misconception as to the state of their contractual relationship.

313. Given the nature of that mistake and the result, unbeknownst to the parties, the coming into existence of the implied contract, its terms could not be ones to which the parties could have justly been held. In the result the specific performance URM threatened to pursue after the termination of the 2011 agreement could not have been obtained, even in relation to the implied agreement: Svanosio v McNamara (1956) 96 CLR 186; [1956] HCA 55 at 195-196. Unlike that case, here there was ongoing misrepresentation that the 2011 agreement remained in force.

314. The results of the common mistake also included the parties’ continued commercial dealings with each other under the terms of the 2011 agreement and finally, their entry into the CDS agreement, which Par would not have entered, but for the common mistake.

315. Such a mistake can give rise to a prima facie obligation to make restitution of a resulting payment. This is such a case. To displace such liability the recipient has to point to circumstances which the law recognises would make an order for restitution unjust. The recipient may thus raise by way of answer any matter or circumstance which shows that his or her receipt or retention of the payment is not unjust: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48 at 379. That has not here been established.

316. In all of the circumstances which arise for consideration, I am satisfied that it cannot be concluded that URM’s retention of the payments it received under the CDS agreement is not unjust.

317. That provides another basis for the damages to which I am satisfied Par is entitled.

318. Reliance was also placed by URM on Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [32] where the equitable remedy of rectification to overcome common mistake, by making an instrument conform either to a concluded antecedent agreement or to the continuing concurrent intention of the parties to the instrument arose.

319. That is not relevant in this case, however, rectification being an equitable remedy the purpose of which is to make a written instrument "conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately”: at [103]. That is not here sought, given the results of the common mistake which arise to be dealt with.

Unjust enrichment

320. I am also satisfied that what I have explained also provides a basis for the conclusion that as the result of URM’s conduct, it has been unjustly enriched.

321. That also provides a basis for damages orders to be made in favour of Par.

Damages

322. The claimed damages Par pressed in opening written submissions were the higher gate fees Mr Gallagher calculated, as well as what was unpaid under the 2011 agreement and what it had paid under the CDS agreement.

323. I have dealt with the higher gate fees which were also pursued under the cross-claim, which I have concluded must be dismissed. I am satisfied, however, that a basis for an order in respect of the unpaid invoices and what was paid under the CDS agreement has been established.

324. Had URM not pursued its misleading and deceptive conduct as it did, Par would not have offered the terms which it did in 2018 in relation to refund sharing, which understandably Mr Johnston accepted, to the very considerable advantage of URM, at a time when there was no statutory requirement for Par to have entered into such an agreement with anyone. The commercial purpose of the agreement, so far as Par was concerned, rested on its continuing understanding that it was bound by the 2011 agreement, which constrained its ability to pursue increased gate fees otherwise.

325. But for this mistaken belief, the result of URM’s ongoing misleading and deceptive conduct, the CDS agreement would not have been offered or agreed as it was, both Mr Waddington and Mr Gallagher’s evidence about this having to be accepted.

326. In the result damages for both the unpaid invoices and for what Par paid URM under the CDS agreement must be ordered, without any set off for what was payable in respect of the outstanding invoices, by reference to what was due to URM under the CDS agreement.

Orders

327. For the reasons given orders must be made in favour of Par.

328. The parties should confer and file proposed orders, including as to costs, within 14 days. In the event that they need to be heard they should approach and also file and serve a short outline of submissions.

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Amendments

17 October 2022 - the word "for" added into paragraph 306

Decision last updated: 17 October 2022