Pillirone & Sons Pty Ltd v Meadow View Stud Pty Ltd
[2000] VSCA 13
•22 February 2000
SUPREME COURT OF VICTORIA
COURT OF APPEAL Not Restricted
No. 4910 of 1998
| PILLIRONE & SONS PTY. LTD. |
| Appellant |
| v |
| MEADOW VIEW STUD PTY. LTD. |
| Respondent |
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JUDGES: | ORMISTON, CALLAWAY and BATT, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATES OF HEARING: | 11 and 12 October 1999 | |
DATE OF JUDGMENT: | 22 February 2000 | |
MEDIUM NEUTRAL CITATION: | [2000] VSCA 13 | |
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CONTRACT – Supply of manufactured milk – Whether implied term for equality of treatment of all suppliers to factory whenever price increase announced – Whether term to be implied by custom or practice in industry – Whether term to be implied from statutory provision – Dairy Industry Act 1992 s.59 – Whether increase announced to some suppliers applicable to all suppliers in financial year.
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APPEARANCES: | Counsel | Solicitors |
For the Appellant | Mr M.J. Colbran, Q.C. and | GSM Lawyers |
| For the Respondent | Mr J.P. Brett | Boothby & Boothby |
ORMISTON, J. A.:
The "law" of supply and demand, occasionally and especially where sales of primary products are concerned, has a striking tendency to set at nought the certainties of the law of contract, at least as administered by common law courts. The present appeal concerns the price, as understood by the parties, of milk supplied by the respondent dairy farmer to the appellant cheese factory, in circumstances where neither party was prepared to accept the prices put forward at the beginning of each financial year or, for that matter, at any other time in advance of the supply of the milk. The evident uncertainty of the agreed price has now, after the events, to be transformed into a price certain for what has been previously supplied. Ideally both vendor and purchaser should have known at the time of sale what the final price was, but the cows could not be held in the stalls and the gleaming milk tankers could not remain parked in the yard while the parties negotiated a new price for each day's supply of milk. For various reasons, in the present case, the listed price notified by factory to farmer was rarely the final price, for in the course of each year over the three year period they did business it was varied by a process of what were called "step ups" and "back pay", which the factory announced and gave effect to in various ways, although it cannot be said that in strictness, by reference to any known principle of contract law, it was obliged to announce that it would do so. Nevertheless, if the appellant factory had not taken the course that it did in the present case over many years, in one form or another, then one may doubt that there would have been many farmers who would have knocked on its door or rung it up asking to supply it with milk. On the other hand, short of joining a co-operative, it seems on the evidence that it would have been nigh on impossible for the dairy farmers to have found a factory to take their milk if they had insisted in advance on the prices which for the most part they ultimately received. Too much depended upon seasonal variations and the like for factories such as that of the appellant to commit themselves to the various increases in price represented by step ups and back pay. Thus it is against that background of market forces, that the Magistrates' Court, the learned judge on appeal, and ultimately this Court have had to give legal form and effect to the apparently uncertain and undoubtedly complex communications between the parties.
Added to this the courts have had to give such effect as is appropriate in these circumstances to a section in the Dairy Industry Act 1992 which is a remnant of the elaborate controls of what was once a highly regulated industry, which by that Act is now only partly so. Section 59(1) of the Act reads:
"The owner of a factory to which dairy farmers supply milk must use the same basis of payment for all milk supplied on the same day to the owner for use as manufacturing milk."
Sub-section (2) reads:
"At least one month before making a change to a basis of payment for milk the owner of a factory must give notice in writing of the proposed change to all dairy farmers who supply milk to the factory."
The issue raised by this appeal is whether one could imply a term in the agreement for the supply of "manufacturing milk", as defined by the Act, that, in substance, the appellant would pay each of its suppliers, including the respondent, at the same rate and so that, if the rate were changed retrospectively, in relation to a period when the respondent supplied milk to the appellant, the respondent, along with other suppliers, would be entitled to be paid the difference between the original rate and the altered rate. This was said to be implied from the course of dealing between the parties, the dealings between other suppliers and other factories over the relevant years (which at times, though not universally, was described as a custom or usage of the industry) and the operation of s.59 of the Act. There was some further detail as to how the implied term would be effectuated to which I shall return later. The magistrate held that there was a term to the effect I have described, although he did not use precisely the same language. There was an appeal pursuant to the Magistrates' Court Act to a judge of the Court and there has now been a further appeal to the Court of Appeal. The magistrate also held that a particular announcement to suppliers dated 8 July 1996 amounted to a relevantly applicable retrospective price increase so that the respondent was entitled to receive it, notwithstanding that at the time, that is after 30 June 1996, it had taken its business elsewhere and was supplying a different cheese factory. Its entitlement is likewise the subject of the appeal before this Court although, as to these matters, two of the questions of law stated by the learned master for the purposes of the Magistrates' Court appeal have been varied by this Court, without significant opposition, so as to pose the questions whether it was open to the magistrate to find both the implied term and the right to payment arising out of the July 1996 increase.
It seems that over the three years from 1 July 1993 to 30 June 1996 the arrangements relating to the price to be paid for manufacturing milk supplied to the appellant by the respondent and each of the other suppliers to the appellant's factory were as follows. Either shortly before or during the early days of each financial year the appellant would send to each supplier a letter in general terms ("Dear Supplier") setting out the prices for the coming season. Except in the case of the letter of 8 July 1996 after the respondent had taken its business elsewhere, these letters were, for better or worse, undated but headed with the business name of the plaintiff namely "Sudano Cheese Co." and signed by Mr Pillirone. Because of the significant variations in seasonal demand the prices were not uniform, so that, as announced, the prices for July and then the following May and June would be significantly higher than for the period from August to April but there were variations for even those months. The prices were not calculated by reference to volume of milk, although the appellant also charged each supplier 2.7 cents per litre for milk transport. Each delivery was paid for at prices per kilogram of butterfat and per kilogram of protein supplied, the latter requiring some sophisticated calculation which had to be communicated in due course to each supplier. Usually at the start of each year, as occurred for the presently relevant year 1995-1996, the appellant also notified in the same letter proposed payments, by way of addition to the price, of what were called "Autumn Winter Production Incentives". These were apparently designed to encourage production or supply during less productive months but, apart from knowing that they were also the subject from time to time of announcements relating to retrospective increase in those incentives, there is no need to examine them further for the purpose of this judgment.
The aspect of the parties' arrangements which gave rise to the present dispute concerns a practice adopted by the appellant which the respondent said amounted to a custom or usage of that trade which comprised those who supplied and processed manufacturing milk to make cheese, other than co-operatives and their members. The appellant did not deny that some such practice was not infrequently put into effect by itself and was used from time to time by other cheese manufacturers. It denied only, for various reasons including uncertainty, that the practice was such as could lead to the implication, in favour of the respondent, of a term giving the right to variations of price by way of step ups and back payments.
The practice evidenced itself in a number of ways. It was understood in the manufacturing milk trade that factories, whether run by co-operatives or private firms, could not predict demand or market price (for their products) in advance. So at the beginning of each year they proposed and were prepared to pay prices for milk set in advance for the whole of the succeeding financial year based on what they could afford to pay at that time. It was also recognised, and there seemed little dispute as to this, that market forces might permit and usually did permit those prices to be increased, probably at least once and possibly at other times during the course of the year, when the factories had a better knowledge of what they could afford to pay. As I understand it the factories in this part of the market would then ordinarily increase their prices for all their suppliers not merely prospectively, but also retrospectively in relation to deliveries already made. The choice each company made to announce price increases in this way was not brought about by any contractual obligation to increase prices but because they feared that if they did not pay increased prices their suppliers would go elsewhere, so as to supply their milk to other factories or co-operatives which were prepared to pay at a higher level. One of the principal pressures leading to this mode of dealing was the influence in the market of the co-operatives which, of course, were able to and did distribute any larger profits to their members, so providing what might be seen to be an indirect return to those dairy farmers who were members of any particular co-operative. Again it seems that neither party disputed that there was no obligation to announce price increases in this way but what the respondent asserted, and what the magistrate and the judge at first instance held, was that, if any such increase was announced, it applied equally to all dairy farmers who had supplied the appellant with milk at the relevant time so there was in this sense a payment on an equal basis to each of those suppliers, as might be seen to be required by s.59 of the Act. There was some dispute as to what the "same basis of payment" in s.59 of the Act meant, but in the end I understood the respondent not to be asserting that the term in question was to be implied by reason of s.59 itself, merely that the provisions of the section enabled one with greater confidence to reach a conclusion as to what the custom or usage of the trade was and thus the extent to which an implied term was binding on the parties.
The procedure for announcing increased prices had, as I have said, ordinarily two aspects to it. So far as increases during the course of any year were concerned the increases normally applied in relation to payments for the rest of that year, but in addition an increase in price usually would be paid retrospectively for deliveries made earlier in the year, the rate of increase being ordinarily, though not invariably, at the same rate of cents per kilogram of butterfat and protein for past months as for future months. Price increases of this kind were ordinarily called "step ups", though the magistrate misheard and was thus said to have described them as "set backs"! Although the respondent appeared to call both elements of these increases in price "step ups", as did the appellant in its submissions, there seems to have been some inconsistency of usage and in at least one letter (15 November 1995) the appellant described the retrospective payments as "back pay".
There was a further aspect to this practice relating to increases in price as were subsequently announced. At or after the end of the year announcements as to retrospective increases were made by way of circular letter to the suppliers, at least during one year when the respondent supplied the appellant and certainly on a number of other occasions not merely by the appellant but by other cheese factories receiving manufactured milk. These were certainly described as "back pay" or "back payments" and were likewise announced as an increase in cents per kilogram referable to the butterfat and protein content of the milk supplied, but payable only retrospectively and taking the form of an increase to the prices already paid month by month, or so it appeared in each of these announcements. The increase was agreed to be paid some time later in the succeeding financial year. Again as I would understand it, the factory's willingness to make those retrospective payments reflected competition, in particular from the co-operatives, who would normally be announcing a distribution of profits at the end of each financial year, whenever that was practicable. The respondent asserted that, although there was no obligation to announce such payments by way of "back pay", they were required to be paid equally to each of its suppliers, whenever a decision was made to make any such payment. The appellant characterised these payments as mere bonuses which it was neither obliged to pay at all nor obliged to pay equally to each of its suppliers. Again, both the magistrate and the learned judge held that there was an implied term that, if announced, "back pay" should be paid at the same rate to all who supplied milk in the relevant financial year. I should add, as might be thought obvious, that such payments were announced immediately after the end of a particular financial year, presumably being based on what the market could bear and the factory's apparent profits for the year immediately past.
The factual circumstances which led to the particular dispute in which the respondent sued the appellant, seemingly arose out of the same market forces as impelled factories generally to make the various agreements by way of step ups and back pay. The respondent, for various reasons, decided that as from 1 July 1996 it would take its business and thus supply milk to a different cheese factory, in part because of the departure of a manager or field officer named Pingree. The respondent and four other dairy farmers had decided to give up supplying the appellant in order to give their business to the company to which Mr Pingree had gone, seemingly upon the basis that somewhat higher prices would be paid by that company. The immediate consequence of these moves, however, was that on 8 July 1996 the appellant wrote only to its continuing suppliers, not merely announcing its prices for the new financial year, but stating that the Pillirone family wished "to announce a bonus payment to everyone who has been loyal and supportive to Sudano Cheese Co.". The bonus was stated to be payable to those who continued to supply the appellant but thereafter was baldly expressed as a payment of 14 cents for butterfat and 35 cents for protein, to be paid in instalments in September and October of 1996. There was no dispute, though it was not directly stated, that the announced payments were to be calculated by reference to the quantities of milk supplied during the financial year 1995-1996.
The respondent said that this so-called "bonus" was in truth the announcement of back pay which, pursuant to its agreement with the appellant, the respondent was obliged to pay equally to all who had supplied milk in 1995-96. Both the magistrate and the judge at first instance held that the applicant was liable in the sum of $13,441.41 for milk supplied by the respondent in that year, together with $920.24 by way of interest. Thus the present appeal, although, because appeals of this kind are confined to questions of law, the issue before the learned judge and this Court must be limited for present purposes, to the question whether it was open to the magistrate to make the findings he did in favour of the respondent.
The learned magistrate's reasons are very briefly expressed, at least in the form which they take in the papers before this Court. Again there was no transcript and the version we have is merely in indirect speech, as is the summary of evidence. It would seem that the magistrate, after a brief reference to the arrangements made within the dairy industry, expressed the opinion that "both legislatively and in practice factories have paid and must pay the same price to each supplier for milk supplied to it". It is not precisely clear what significance that finding had, for his Worship then considered the evidence in this particular case, acknowledging that only "some" private factories reflected the system of making payments at the end of the year in order to ensure supplies. The magistrate then concluded:
"I find there was a contract between the plaintiff and the defendant pursuant to which the plaintiff would supply milk to the defendant and the defendant would pay each of its suppliers at the same daily rate. If the daily rate changed, if the rate was calculated retrospectively as here, then it would be paid at the changed daily rate as a set back or back pay."
Accepting that the defendant factory was under no obligation to pay step ups or back pay, nevertheless he held that, if there were such an announcement, then all suppliers must be paid equally, thus finding in favour of the plaintiff.
Essentially the learned judge found that the magistrate was entitled on the facts to reach these conclusions and, acknowledging the restrictions imposed on his power to review a decision of this kind, he concluded that there had been no error of law. It is important, however, to notice the form of the questions of law which were stated by the master pursuant to s.109 of the Magistrates’ Court Act 1989. The first on its face appeared to relate to questions of law but the second and third each appeared originally to raise a mere question of fact so that, after some discussion between the court and counsel at the opening of this appeal, this Court ordered that questions 2 and 3 be amended so as to reflect the limitations placed on the Supreme Court hearing an appeal from the Magistrates’ Court. Thus as amended those three questions now read:
"1. Whether –
(a) section 59 Dairy Industry Act 1992; and
(b) trade practice
bound the appellant to pay each of its suppliers the same price.
2.Whether it was open to the magistrate to find that there was a term of any contract for the sale of milk by the respondent to the appellant that the appellant would pay each of its suppliers prices at the same daily rate, even if the rate was changed retrospectively.
3.Whether it was open to the magistrate to find that the 'bonus payment' announced by the appellant in July 1996 constituted a payment of the price for milk supplied." [The words underlined indicate the amendments inserted by this Court.]
The grounds of appeal to the Court of Appeal essentially reflect those three issues although expressed in somewhat more expanded form. The appellants main difficulty in this Court is that the learned judge correctly viewed most of the findings of the magistrate as findings of fact, whether as to the alleged custom or practice or whether, more importantly, as to whether a term of the kind alleged by the respondent should be inferred. Moreover there is no statement of law either by the magistrate or by the judge which can be properly characterised as an erroneous proposition, so that the appellant has been forced to assert errors implicit from other aspects of their reasoning. Consequently in seeking to set aside both judgment and order the appellant faces considerable difficulty.
Before dealing with the questions of law raised it is perhaps desirable to deal first with two aspects of the appeal otherwise raised by the appellant.
The first preliminary matter, one of characterisation, is raised by the first ground of appeal by which the appellant asserts that the payment announced on 8 July 1996 was not a payment for milk supplied but a bonus payment, so that, as the appellant contends, it was not open on the evidence to find that the payment was in consideration for the milk supplied during the preceding year by each of the relevant suppliers. In turn this raises two further questions. The first is the nature of the obligation of the appellant to make such payments and the other is as to the interpretation of the announcement made at that time, which it may be recalled, was after the time the respondent had decided to put its business elsewhere. As to the first, there seems to me to be a misconception in this aspect of the argument as the nature of the respondent's claim. At no time did the respondent assert that the appellant was obliged to make any such announcements, whether by way of step up or by way of back pay. In the unusual circumstances of the dairy industry, no supplier could fairly expect that the prices would be raised by particular amounts or that they would be raised at all. Indeed that was the very purpose of the announcements made at the beginning of each financial year whereby it was left entirely to the factory's discretion whether it was possible to make additional payments thereafter. All that the respondent claimed was that, if such announcements were made to suppliers, then the increase so announced would be applicable to every supplier who had supplied milk during the relevant period, in this case the preceding financial year, and in respect of the milk actually supplied by each supplier, as measured by its butterfat and protein content. As the respondent had supplied the milk to the appellant during the whole of that preceding year, so it claimed and was successful in claiming, then it should be paid the increased amount in respect of each relevant delivery.
This misconception also infects certain other arguments put as to the nature of the payment and the right to claim it. Thus it was said to be voluntary in nature. So the decision to make an announcement was, but nobody disputed that. The real question was, once the appellant had determined that there should be some extra payment in respect of milk supplied during the relevant period, whether each of the suppliers was entitled to it or only those whom the appellant chose to inform and to whom it decided to make payments. Here, as the evidence showed, the way in which the prices were negotiated was not individually, but by announcements made to all suppliers at the relevant time. Thus the respondent's claim is based on the making of such announcements, which had been the normal method of fixing prices during the three years that the appellant had supplied milk, and the fact that this particular payment was announced in a similar way. The answer may have been different if the appellant had negotiated written, or indeed oral, contracts on an individual basis and had fixed the prices for each of its suppliers on a similarly individual basis. But that was not the practice of the industry, or, more importantly, of the appellant in its dealings with its own suppliers. Thus there is no difficulty in saying, as both magistrate and judge held, that, if such an announcement were made, then each of the relevant suppliers was entitled to that price increase. The right might be expressed in terms based upon the existence of a condition precedent thus: the respondent was entitled to X and Y cents per kilogram of butterfat and protein content together with such additional sum per kilogram as may be announced by way of step up or back pay, if and insofar as such announcements of increases were made.
The second question of characterisation, also raised by ground 1, was whether the payment, announced on 8 July 1996 by the appellant to each of the "suppliers" to which that letter was sent, was a back payment or whether it was a mere bonus payable to those who remained suppliers to the factory from the beginning of the financial year commencing 1 July 1996. Undoubtedly Mr Pillirone in his letter used language which sought to characterise the payment as "a bonus payment to everyone who has been loyal and supportive to Sudano Cheese Co.". It is useful to set out in full the precise terms of the paragraph which followed the announcement of the so-called bonus payment:
"The bonus comprises of .14c Butterfat and .35c protein. This bonus will be paid as follows:-
(a60% will be paid with your August milk proceeds in September
(b40% will be paid with your September milk proceeds in October."
It is not difficult to see why the learned magistrate chose to characterise the payment announced by the appellant as a payment by way of back pay and not a "bonus payment" in the sense of an ex-gratia payment unrelated to the amount of milk previously supplied. In terms the letter did not even condescend to refer to the preceding year's supply or indeed to any quantity which would be the subject of the payments so announced relating to butterfat and protein. In truth it must have been more than obvious to those who received it that, as usual, it related to the quantities supplied during the year ended 30 June 1996. That needed no exposition to the hard-headed dairy farmers who received it. It could not have been anything other than an announcement of back payments which on this occasion the appellant sought only to announce to those still supplying him in the current financial year, or at least so it was clearly open to the learned magistrate to find. If it had been a bonus payment merely to recognise those who were loyal to the appellant company, then one might have expected a single out and out payment of a money sum, or at least a money sum calculated on a different basis, such as, for example, the quantities of milk being currently supplied, perhaps by reference to the preceding month's supply. There was no error of a relevant kind so far as this conclusion of both magistrate and judge.
The second preliminary matter was raised by a contention that the term was uncertain, as was reflected in ground 6 of the notice of appeal. So the appellant contended that the judge erred in failing to decide that the term should not be implied "as it would be uncertain of operation". Indeed it was argued that the term amounted to an "illusory promise", relying on principles as far back as those in Justinian's Digest, in so far as they may be imported into the modern common law of contract. Again the argument misapprehended the nature of the respondent's claim. It would indeed have been an uncertain and illusory promise if the respondent had sought to say that the appellant was obliged to make announcements or to promise to pay increased sums during or at the end of each financial year. But that is not what it argued. It said only that if an increase were announced, then that should be paid. As to the amount of each announced increase there was clearly no uncertainty, nor was there any uncertainty as to its application in respect of any of the respondent's deliveries during the previous financial year. The increase, retrospective though it was, was both simply expressed and simple in operation. Nor was there, as was suggested, any want of consideration, for the consideration was applicable to the whole of the contract for supply, including the term for payment of increases on a conditional basis. If the condition was satisfied, then, as part of that whole contract, the respondent was entitled to be so paid as part of the price for the milk, or at least so it was open to the learned magistrate to find.
Returning now to the first of the questions of law raised by the appeal, it is necessary to look first at the question which asks whether either s.59 of the Dairy Industry Act or a trade practice bound the appellant to pay each of its suppliers the same price. It should first be noted that the question whether or not a relevant custom usage or practice existed in an industry is essentially a question of fact and there seems nothing in the learned magistrate's findings, at least in the form which they have come before this Court, to show that the magistrate applied any erroneous principle or was otherwise guilty of an error of law in discussing this particular question. It is thus unnecessary to examine the statements of principle contained in such cases as Con-Stan Industries of Australia Pty. Ltd. v. Norwich Winterthur Insurance (Aust.) Ltd.[1], for there is no dispute that customs of the kind there described must be shown to be notorious, certain and reasonable. It should be repeated, as counsel for the respondent made clear, that it did not rely on a trade custom to imply a term with respect to the obligation to make payment of step ups and back pay; rather it relied on a trade custom to import a term that all suppliers would be treated equally. As to that there was more than sufficient evidence of equality of treatment in the industry. The evidence and argument tended again to concentrate on whether other factories in this part of the dairy industry made or did not make payments by way of back pay and on what terms such payments were made. There seemed little dispute that there were some factories which made no payments but the issue in this case was merely whether, if payments were announced, they would be paid on an equal basis and as to that question of fact the magistrate was entitled to reach the conclusion he did.
[1](1986) 160 C.L.R. 226.
In any event it may be doubted whether the alleged custom was relied upon in itself as constituting the relevant implied term. There seems little doubt that s.59 was not relied upon independently for this purpose either before the magistrate or on appeal. What the section and the custom were primarily called in aid to establish was that there was, in relation to this contract and those of the other suppliers to the appellant, a term of the kind previously described and requiring equality of treatment. As pleaded and as argued before this Court both the section and more particularly the custom were relied on, but in part only, to support the contention that as between these parties a term might be inferred whereby, if announcements of increases by way of step ups or back pay were made, then each supplier would be treated on an equal basis.
In the end therefore I do not understand that the appellant contended that an answer to question 1 would resolve this appeal since, whatever the magistrate said in the first passage which I have quoted above from his reasons, he did not seek to say that either s.59 or the alleged trade practice, whether in combination or separately, required the importation of the alleged term into the respondent's contract. Certainly it was not suggested that s.59 of itself provided an answer, or, to be more precise, that the magistrate had misunderstood that section in reaching his conclusion as to the term here in question. Nor was anything said by the magistrate in his reasons such as would indicate a misapprehension of principle as to the importation of a custom. It is clear that his Worship understood that the practice of paying step ups and more particular back pay was not universal for he said that only "some private factories" reflected a practice of paying increased payments. As I have previously said, it was open to the magistrate to find that there was a term to be inferred as to equality of treatment but I am of opinion that any answer to the first question could not resolve this appeal.
It is the second question which may fairly be said to be critical to this appeal. It now asks in substance whether it was open to the magistrate to find that there was a term in the relevant contract that the appellant would pay each of its suppliers prices at the same daily rate, even if that rate were changed retrospectively. Much of what I have already said will serve to answer this particular question. Again the issue is whether it was open to the magistrate to find that there was such a term, not whether as a matter of fact this Court would make any such finding. The evidence was heard by the magistrate and, having regard to the all too frequent absence of transcript, it is but imperfectly recorded in the affidavits sworn in the appeal. Unless the appellant can show that there was implicitly or explicitly an error of law on the part of the magistrate or unless it can show that there was no evidence to support the magistrate's finding, then it cannot succeed in an appeal of this kind. There was, as has been seen, a good deal of evidence showing how the trade operated in relation to the sale of manufacturing milk. It may not have been entirely consistent inasmuch as the practices of different factories varied in that some did not pay step ups or more particularly make payments by way of back pay. However, as I have already said, the issue is not as to whether this form of payment occurred across the whole of this part of the industry, but whether, when such payments were announced and paid, it was the practice that they should be paid equally to each supplier. On that more limited question the evidence was far more consistent and certainly capable of supporting the conclusion to which the magistrate came. In part it depended upon what was said to be a custom of the trade, but his conclusion was one relating to the relationships of the parties in this case and in particular the relationship between the appellant and the suppliers of manufacturing milk to its factory. In so far as there was a wider practice called in aid, the respondent was also able to point to s.59 of the Act. There may be differences as to its interpretation, but its broad thrust is that there should be equality of treatment by the owner of a factory to which dairy farmers supply manufacturing milk. There is some dispute as to whether that would cover actual payments or whether, having regard to the way in which the section is expressed, there is significance in the use of the expression "the same basis of payment", as opposed to the same rate of payment. Here that is of little consequence for the issue in the present case is whether the same basis should have been applied in relation to all the appellant's suppliers, namely that of equality of treatment in respect of announced back payments. However, as I have repeated, the question the magistrate had to determine was what the terms of the contract were in this case and on that it was clearly open to the magistrate to make the findings he did and to hold that there was a term of the kind which the respondent relied upon.
Each of grounds 2 to 6 in various ways sought to attack the conclusion which the learned magistrate and judge reached but it is unnecessary to examine them separately for I have dealt with them in one way or another already. It should be added only that in ground 4 it was asserted that the custom was inconsistent with the terms of the existing agreement. That misconceives the nature of the agreement and of the term alleged, for it was argued, correctly, that the term entitling the respondent to equality of treatment in relation to announced back payments, was part of the original agreement between the parties and in particular the agreed terms as to the price to be paid.
The answer to the second question must be in the affirmative, so that it should be concluded that it was open to the magistrate to find that there was a term in the contract of a kind which the respondent asserted and which both magistrate and judge held existed.
Finally the third question asked in substance whether it was open to the magistrate to find that the bonus payment announced on 8 July 1996 constituted a payment of the price for milk supplied. As originally posed this was a question of fact and I see no reason to differ from the conclusion which the magistrate and the learned judge both reached namely, that the so-called bonus payment was merely another name for a back payment announced in the customary and agreed way, albeit that the announcement was not sent to the appellant but was only sent to suppliers who continued to supply the appellant in the year 1996-1997. I have already dealt with this issue and, as I then said, there can be no doubt that such a finding was open on the facts. It is of course a question of characterisation, not a question of law, but I see no reason to differ from the conclusion which both magistrate and judge reached, namely, that the particular announced payment was properly characterised as a back payment to which the term of the contract as to equality of payment applied. The proved facts clearly left it open to reach such a conclusion and none of the appellant's arguments persuaded me to the contrary.
It was therefore open to the magistrate to make this finding, so that the third question should likewise be answered in the affirmative.
For these reasons the appeal should be dismissed.
CALLAWAY, J.A.:
As the learned presiding judge has recorded at [12], the Court gave leave to the appellant to amend the second and third questions settled by the Master. We ordered that those amendments have effect on 29th July 1998, being the first day of the hearing before the learned primary judge. It was conceded by counsel for the respondent that the amendments did no more than express the way in which the case was argued and decided below. It is therefore unnecessary to consider the full extent of the power to amend a question of law on which an appeal is brought, or purportedly brought, pursuant to s.109 of the Magistrates' Court Act 1989.[2]
[2]We made our order under Rule 64.22(1) of Chapter I of the Rules. See also s.10(3) of the Supreme Court Act 1986.
Mr. Pillirone agreed in cross-examination that the amount of the "bonus payment" announced by the appellant in July 1996 was calculated on the weight of butterfat and protein in the milk supplied in the previous financial year and was in effect a payment for that milk. He also agreed that it was indistinguishable from back pay except that the appellant intended that it should be paid only to farmers who continued to supply milk to the appellant in the next financial year. In those circumstances it was well open to the learned magistrate to find that the bonus payment was a further payment of the price for milk supplied. That was to be judged objectively. I do not overlook that one of the objective facts was that the letter announcing the bonus payment was not sent to all the appellant's suppliers, but that did not compel a contrary conclusion on the part of the magistrate.
Once the bonus payment is characterized in that way, it is a short step to say that the bonus payment was a "payment for ... milk supplied" within the meaning of s.59(1) of the Dairy Industry Act 1992. The respondent prayed that sub-section in aid of the contractual term which, it said, applied by custom in the industry. The difficulty of enforcing s.59(1) is enough to show that such a customary term would be reasonable, which is one of the requirements for such a term.[3] There must be many customary terms which have their origin in, or are reinforced by, legislative provisions. More often they are provisions of regulations than of a statute. The question is not whether this Court would have found that the alleged term was established but whether it was open to the magistrate to do so. In my opinion it was.
[3]Con-Stan Industries of Australia Pty. Ltd. v. Norwich Winterthur Insurance (Australia) Ltd. (1986) 160 C.L.R. 226 at 236-241.
The term was not uncertain or illusory. It was simply that a factory would treat its suppliers equally, so that, if it made a further payment for milk supplied, it would make that payment to each supplier. (Of course, the actual amount of the payments could differ so long as the basis of payment was the same.) There was an option not to make a further payment but, if the factory decided to do so, it was a result of the customary term that the payment had to be made to all its suppliers. Accordingly the passage in the Digest (45.1.108.1) to which counsel referred, although it accords with the common law, does not apply.
For these reasons I, too, would dismiss the appeal.
BATT, J. A.:
I have had the benefit of reading in draft the reasons for judgment of Ormiston, J.A. I agree that this appeal should be dismissed and, subject to one small comment, I agree with his Honour’s reasons.
The primary judge and the parties from time to time spoke of the “declaration” of back-pay or of a bonus payment as the alleged “trigger” for the appellant’s obligation to pay to the respondent the sum which it claimed. But, as is suggested by [32] in the reasons for judgment of Callaway, J.A., which I have also had the benefit of reading in draft, it may strictly be that the condition upon which the liability of the appellant to pay the respondent depended was, not the announcement or declaration of a relevant further payment, but the actual making of such a payment to another of the appellant’s suppliers. Nothing, however, turns on this difference, since the announcement or declaration was followed by payment to others of the appellant’s suppliers for the year ended 30 June 1996.
The obligation of the appellant to make payment to the respondent was conditional upon the appellant, in its discretion, determining to make, or making, a payment for milk to other suppliers. Such a contract, being one where the discretion is in the protasis or “if” clause, and not the main clause imposing the obligation, is not illusory[4].
[4]Meehan v. Jones (1982) 149 C.L.R. 571 at 581-582
It may appear ironic that the appellant has to make to the respondent a payment which it deliberately set out to ensure would not be received by the respondent and others who had, like it, ceased supplying it. But that is the consequence of the continuing operation of the term which it was open to the magistrate to find was imported into the contract of supply.
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