Pryors Tours Pty Ltd v Minister for Transport
[2003] WASCA 129
•18 JUNE 2003
PRYORS TOURS PTY LTD -v- MINISTER FOR TRANSPORT [2003] WASCA 129
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASCA 129 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:107/2002 | 5 MAY 2003 | |
| Coram: | MALCOLM CJ PARKER J MCKECHNIE J | 18/06/03 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | PRYORS TOURS PTY LTD (ACN 009 336 789) MINISTER FOR TRANSPORT |
Catchwords: | Contract Implied terms Conditions Whether an implied term not to withhold consent to an assignment No new principles Turns on own facts |
Legislation: | Nil |
Case References: | BP Refinery Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 Byrne & Frew v Australian Airlines Limited (1995) 185 CLR 410 Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33 Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 New South Wales v Banabelle Electrical Pty Ltd (2002) 54 NSWLR 503 Pryors Tours Pty Ltd v Minister for Transport [2002] WADC 119 Treloar v Bigge (1874) LR 9 Exch 151 Yared v Spier (1979) 2 NSWLR 291 Devefi v Mateffy Perl Nagy Pty Ltd (1993) 113 ALR 225 Federal Commissioner of Taxation v Murray (1998) 193 CLR 605 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : PRYORS TOURS PTY LTD -v- MINISTER FOR TRANSPORT [2003] WASCA 129 CORAM : MALCOLM CJ
- PARKER J
MCKECHNIE J
- Appellant
AND
MINISTER FOR TRANSPORT
Respondent
Catchwords:
Contract - Implied terms - Conditions - Whether an implied term not to withhold consent to an assignment - No new principles - Turns on own facts
Legislation:
Nil
Result:
Appeal dismissed
(Page 2)
Category: B
Representation:
Counsel:
Appellant : Mr P G McGowan
Respondent : Mr R M Mitchell
Solicitors:
Appellant : Paiker & Overmeire
Respondent : State Crown Solicitor
Case(s) referred to in judgment(s):
BP Refinery Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Byrne & Frew v Australian Airlines Limited (1995) 185 CLR 410
Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33
Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
New South Wales v Banabelle Electrical Pty Ltd (2002) 54 NSWLR 503
Pryors Tours Pty Ltd v Minister for Transport [2002] WADC 119
Treloar v Bigge (1874) LR 9 Exch 151
Yared v Spier (1979) 2 NSWLR 291
Case(s) also cited:
Devefi v Mateffy Perl Nagy Pty Ltd (1993) 113 ALR 225
Federal Commissioner of Taxation v Murray (1998) 193 CLR 605
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
(Page 3)
1 MALCOLM CJ: In my opinion, this appeal should be dismissed for the reasons to be published by McKechnie J. There is nothing which I could usefully add.
2 PARKER J: For the reasons published by McKechnie J I agree that this appeal should be dismissed.
MCKECHNIE J:
Introduction
3 On 3 September 1996 the parties entered into a written agreement No 17958 to provide a school bus service to take students daily to the Fitzroy Crossing District High School, along a 170 km route, for the period between 1 January 1997 and 31 December 2001.
4 The operator of the bus service seeks to have terms implied into the contract. In the trial court, Williams DCJ declined to imply any condition into the contract and dismissed the operator's claim: Pryors Tours Pty Ltd v Minister for Transport [2002] WADC 119.
The contract
5 The agreement contained certain obligations to be imposed on the operator. Those relevant to this appeal are the following:
"1. The contractor hereby agrees with the Minister as follows:
…
g) To drive and manage the omnibus personally and not to delegate, permit or suffer any other person to do so without the express approval in writing of the Minister, who may in his absolute discretion refuse such approval or grant such approval upon such terms and conditions as he may think fit.
h) Not to assign or transfer any of his rights under this Agreement without the written consent of the Minister.
…
(Page 4)
- 3. a) If the Contractor desires to determine this Agreement and gives to the Minister two calendar month's previous notice in writing of such desire then immediately on the expiration of such notice this Agreement and everything herein contained shall cease and be void but without prejudice to the remedies of either party against the other in respect of any antecedent claim or breach of covenant.
b) If the Minister desires to determine this Agreement and gives to the Contractor one calendar month's previous notice in writing of such desire then immediately on the expiration of such notice this Agreement and everything herein contained shall cease and be void but without prejudice to the remedies of either party against the other in respect of any antecedent claim or breach of covenant."
6 Clause 4 of the contract provided for the Minister's obligation to pay the operator and cl 5 provided for matters which were mutually agreed.
7 One such matter is cl 5. d):
"When and as often as the Minister considers it necessary he shall be entitled to change the route or on three month's notice to require smaller or larger vehicle to be provided and on each occasion he so does a financial adjustment shall be made as set out in Clause 6."
A proposed sale is frustrated
8 In 1999 the operator entered into negotiations to sell the bus service to Mr Dunbar of the Derby Bus Service Pty Ltd for $200,000, of which $150,000 was goodwill and the balance was the purchase price of the bus. A $5,000 deposit was paid and possession was due to take place on 25 January 2000.
9 In the course of processing the application to transfer the bus service, officers of the Department of Transport discovered that they may have made an error in the calculation of the daily rate for use of an air-conditioned bus.
(Page 5)
10 Without writing to the operator, on 17 January 2000, Mr Tonkin, an officer of the Department of Transport, having the carriage of bus contracts, wrote directly to Mr Dunbar, by facsimile, pointing out that he considered the air-conditioning rate should have been 16.2 cents per kilometre, not 37.8 cents per kilometre and concluding:
"Transport will only accept the lower air conditioner rate of 16.2 cents per kilometre on transfer. I am not convinced that the service has been provided in accordance with the contract and I will follow up with Pryor's Tours Pty Ltd tomorrow."
11 As the direct result of this letter, Mr Dunbar, on 21 January 2000, wrote by facsimile, to the operator as follows:
"It is with regret that I must withdraw my offer to purchase the above service, and request refund of my $5000 deposit. Upon receiving confirmation from Transport that the daily rate will reduce by around $42 per day after transfer, it makes an uneconomic proposition which I cannot accept.
If an acceptable rate can be reached with Transport, I may be willing to renegotiate the sale. Please keep me informed."
12 In the event the operator continued the bus service under the contract until the contract ended. No reduction in rates was ever made.
13 In February 2002 a further contract was agreed between the parties for a period of one year at the existing rate.
The basis of the operator's claim
14 At the hearing of the appeal, the Court gave leave for the operator to amend the statement of claim. The essence of the claim is to be found in par 8 of the amended statement of claim as follows:
"8) By Clause 1(h) of the Contract the Contract was not to be assigned without the consent of the defendant. It was also an implied term ('the implied term') of the Agreement that the defendant would not do anything to prevent the assignment or transfer of the agreement on the same terms thereof. Alternatively it was an implied term of the Agreement that the defendant's consent to an assignment or transfer of the Agreement would not be unreasonably withheld. The implied term is to be implied
(Page 6)
- in the Agreement by implication of law and/or because it gives business efficacy to the Agreement.
- 9) By its conduct in giving the Advice to the Purchaser that the Rate was purportedly incorrectly calculated the defendant breached the implied term."
The grounds of appeal
15 The grounds of appeal deal with three issues. In summary, the first ground asserts that the trial Judge was wrong in fact in finding that the Minister had incorrectly calculated the amount of the air-conditioning component included in the daily rate under the agreement. It was conceded by counsel for the operator that this was not a fact in issue at trial. Nor was it live at trial that there should be a determination as to whether or not the rate was wrongly calculated because the contract specified a rate. Within the calculation of the rate was a figure of 37.8 cents per kilometre for air-conditioning allowance. This formed an agreed part of the contract rate. There was no scope for recalculation on the basis of error.
16 I do not understand the trial Judge to have made the finding set out in the ground of appeal. At [11] the trial Judge summarised Mr Tonkin's facsimile to Mr Dunbar where Mr Tonkin wrote: "… the rate being paid is incorrect." An issue might have arisen had Mr Tonkin attempted to interfere with the existing contract. In the event he did not and the only significance of his calculations, be they correct or not, is the effect they had on Mr Dunbar and whether the facsimile of 17 January 2000 may be categorised as a constructive refusal to assign the contract.
17 Grounds 2 to 6 raise squarely the issue of the implied term and grounds 7 and 8 deal with the damages which might flow if there was a breach of the implied term.
Should a term be implied into the contract?
18 To an extent the grounds of appeal mirror the statement of claim as to the two alternative terms which are advanced for inclusion into the contract, they being:
(a) that the Minister would not do anything to prevent the assignment or transfer of the agreement on the same terms;
(Page 7)
- (b) that the Minister's consent to an assignment or transfer of the agreement would not be unreasonably withheld.
Principles in relation to implication of terms
19 The classic statement of principle for the implication of a term to give business efficacy to a contract is in BP Refinery Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 per Lord Simon at 36:
"… In order to justify the implication of a term in a contract which the parties have not thought fit to express, the following conditions (which may overlap) must be satisfied:
1. it must be reasonable and equitable;
2. it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;
3. it must be so obvious that 'it goes without saying';
4. it must be capable of clear expression;
5. it must not contradict any express terms of the contract."
20 In Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, Mason J, with whom Stephen J agreed, said at 346:
"… with implication the term is one which it is presumed that the parties would have agreed upon had they turned their minds to it - it is not a term that they have actually agreed upon. Thus, in the case of the implied term the deficiency in the expression of the consensual agreement is caused by the failure of the parties to direct their minds to a particular eventuality and to make explicit provision for it. …
For obvious reasons the courts are slow to imply a term. In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the difficulty of
(Page 8)
- identifying with any degree of certainty the term which the parties would have settled upon had they considered the question.
Accordingly, the courts have been at pains to emphasize that it is not enough that it is reasonable to imply a term; it must be necessary to do so to give business efficacy to the contract."
21 In Byrne & Frew v Australian Airlines Limited (1995) 185 CLR 410 at 449, McHugh and Gummow JJ said:
"… terms of this kind, although treated as implied by law, may be excluded by express provision made by the parties and also as a result of inconsistency with terms of the contract. …"
22 The Court was there dealing with terms said to be implied by operation of law. The present case is somewhat different and is in reality the type of case outlined by Mason J in Codelfa.
23 The principles were re-stated by Steytler J in Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33; see also New South Wales v Banabelle Electrical Pty Ltd (2002) 54 NSWLR 503 per Einstein J at 521 - 523 [40] to [43]. With those principles in mind I turn to a consideration of the contract and to see whether either term can, or should be implied.
(a) Not do anything to prevent the assignment
24 The proposed term is inconsistent with the intention of the contract expressed in cl 3. b) giving the Minister the right to determine the contract one calendar month's previous notice in writing and cl 5. d) giving the Minister the right to change the route.
25 Clause 6 sets out a formula by which alterations and adjustments may be made. Furthermore, having regard to cl 6, it was contemplated during the course of the contract, conditions which might make the operation less financially favourable could occur.
26 It is not necessary to imply the term to give business efficacy to the contract which is efficacious without such a term.
27 Nor does it go without saying that the parties would have agreed to such a term. In one sense the actions of Mr Tonkin speak eloquently of the attitude of the Department of Transport at a point when it believed it
(Page 9)
- was being commercially disadvantaged. Furthermore, the contract appears to have been a standard form contract, whose terms were entirely set by the Department of Transport and it is reasonable to assume that it contains all the terms on which it was prepared to be bound: cf Codelfa Construction Pty Ltd per Mason J at 356.
28 I have examined the question solely on the basis of the contract and without regard to extrinsic material to determine the factual matrix of the negotiations. It is unnecessary to go further, and as the Minister would submit, have regard to extrinsic material. In my judgment, term (a) should not be implied because it does not meet any of the criteria specified in BP Refinery & Frew v Hastings Shire Council.
(b) Consent would not be unreasonably withheld
29 The express terms of the contract militate against the existence of such an implied term. I refer again to cl 3. b). It scarcely makes sense to imply a term of reasonableness as to consent to transfer when the Minister has an absolute right to determine the contract on one calendar month's previous notice.
30 There is a further answer to the operator's contentions. Under the contract, the obligation is not placed on the Minister to give consent, but is placed on the contractor not to transfer rights without written consent.
31 In Treloar v Bigge (1874) LR 9 Exch 151 there was an action for breach of a covenant and lease:
"And the said Thomas Treloar doth covenant with the said T.E. Bigge that he shall not nor will assign this present lease, or let, Sc, or otherwise part with the premises hereby demised, or any part thereof, without the consent in writing of the said T.E. Bigge, such consent not being arbitrarily withheld."
32 Kelly CB said in respect of this clause, at 154 - 155:
"… The words, taken grammatically, do not seem to me to amount to an undertaking by the lessor, but are a part of the same sentence as that containing the lessee's covenant, and qualify its generality. They prevent that covenant operating in any case of arbitrary refusal on the part of the lessor, that is, in any case where, without fair, solid and substantial cause, and without reason given, the lessor refuses his assent. …"
(Page 10)
33 Amphlett B at 156 and 157 said:
"… Now, looking at the place in which the words relied on occur, I think they ought to be construed as a qualification on the covenant of the lessee. That covenant is in derogation of his common law rights and it is more convenient and reasonable to hold that the words were introduced to limit the generality of the covenant than to hold them to impose an obligation on the lessor. The true interpretation of the words, I think, is to release the plaintiff from his covenant not to assign without the plaintiff's assent, if that assent is arbitrarily withheld. If that be so they can not be construed as creating a cross liability. They either qualify the tenant's covenant, or they create a covenant on the landlord's part. They cannot do both. …"
34 After an examination of cases following Treloar v Bigge, in Yared v Spier (1979) 2 NSWLR 291, Waddell J concluded at 297:
"It seems to me that it has been taken to be settled law for many years that, in the absence of an express covenant by a lessor not to refuse his consent, provisos of the kind under discussion have been regarded as not exposing him to any liability in damages for such a refusal. There is, I think, no justification for departing from this settled view of the law."
35 Applying this settled law to the particular circumstances, I do not construe the contract as imposing on the Minister an obligation to reasonably consent. Rather, I construe the clause as qualifying the operator's powers to transfer its rights under the contract to another person..
Conclusion
36 In my opinion, the operator has failed to establish the implication of either suggested term into the contract.
37 The issue of damages therefore does not arise. I would dismiss the appeal.
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