RW & ME Smith Pty Ltd v Boral Resources (Vic) Pty Ltd
[2022] VCC 729
•30 May 2022
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
EXPEDITED LIST
Case No. CI-20-03807
| RW & ME SMITH PTY LTD (ACN 105 445 645) | Plaintiff |
| V | |
| BORAL RESOURCES (VIC) PTY LTD (ACN 004 620 731) | Defendant |
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JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 31 May, 1-3 and 16 June 2021 | |
DATE OF JUDGMENT: | 30 May 2022 | |
CASE MAY BE CITED AS: | RW & ME Smith Pty Ltd v Boral Resources (Vic) Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 729 | |
REASONS FOR JUDGMENT
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Subject:CONTRACT
Catchwords: Whether the defendant acted unlawfully in summarily terminating the plaintiff’s services under a cartage agreement – whether the parties breached express or implied terms of the cartage agreement – whether the defendant would have terminated in any event - effect of deed of termination as a bar to recovery of damages by the plaintiff – alternatively, whether plaintiff entitled to damages for loss of goodwill
Legislation Cited: Australian Consumer Law 2010; Occupational Health and Safety Act 2004
Cases Cited:Agtan Pty Ltd v Caltex Australia Petroleum [2018] VSCA 169; Androvitsaneas v Members First Broker Network [2013] VSCA 212; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; AWB (International) Ltd v Tradesmen International (PVT) Ltd [2006] VSCA 210; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Butt v McDonald (1896) 7 QLJ 68; Byrne v Australian Airlines Ltd (1995) 185 CLR 410; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; DPN Solutions Pty Ltd v Tridant Pty Ltd [2014] VSC 511; Drinkwater v Caddyrack [1997] NSWSC 431; Elders Ltd v EJ Knight & Co Pty Ltd [2009] NSWSC 1462; Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228; Fabre v Arenales (1992) 27 NSWLR 437; Federal Commissioner of Taxation v Murry (1998) 193 CLR 605; Jams 2 Pty Ltd v Stubbings [2020] VSCA 200; Jones v Dunkel (1959) 101 CLR 298; Masters Home Improvement Australia Pty Ltd v North East Solutions Pty Ltd [2017] VSCA 88; North v Marina [2003] NSWSC 64; R v Darling Island Stevedoring & Lighterage Co Ltd (1938) 60 CLR 601; Sherman v Peabody Coal Ltd (1998) 88 IR 408; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] 219 CLR 165; Westgyp Pty Ltd v Northline Ceilings Pty Ltd (No 2) [2019] WASCA 145; Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr L E P Magowan | Aitken Partners |
| For the Defendant | Ms K Burke | Australian Business Lawyers and Advisors |
Table of Contents
Introduction and Summary
Factual Narrative
Issues in Dispute
(a) Are there implied terms of the cartage agreement as alleged, and if so, were they breached?
(b) Did the plaintiff breach express terms of the cartage agreement: clauses 1.1(d) (f) and (h)?
(c) Was the Plaintiff acting at the request, supervision and direction of Boral on 9 July 2015, and if so, did that prevent Boral from terminating the cartage agreement?
(d) Termination of cartage agreement
(e) Deed of Termination: effect and construction
(f) Entitlement to goodwill
(g) Loss and damage
Conclusion
HER HONOUR:
Introduction and Summary
1On 9 July 2015, a chain broke on the head drum in the load out area at the defendant’s (“Boral”) Swan Hill concrete plant. This occurred during batching of the first load of concrete that day. Three men (Boral’s acting site manager and two employees of the plaintiff) removed a safety guard on the drum and fitted a replacement chain. Their actions resolved the problem and the loading resumed. A photograph taken of the three men undertaking the repair work was provided to the site manager (who was on leave at the time) along with an update on the plant. When Boral’s head office received the photograph, an investigation was initiated. Boral’s concrete production manager described the events in an incident report form as “very unsafe and against all that we are trying to do about unsafe work”. The manager assessed the incident as having a risk rating of “Extreme” and categorised the incident as a “Serious Harm Event”.
2The claims in this proceeding arise from a contract termination following these events. The plaintiff, RW & ME Smith Pty Ltd, provided concrete cartage services to Boral, pursuant to a concrete cartage agreement dated 1 August 2014 (“the cartage agreement”). The plaintiff is a company owned and operated by truck driver, Mr Robert William Smith (“Mr Smith”) and his wife. Boral is a national supplier of construction materials and building products including concrete. Boral summarily terminated the cartage agreement on 21 July 2015 due to what it regarded as serious misconduct by the plaintiff arising from the incident on 9 July 2015.
3The plaintiff alleges the cartage agreement was wrongfully terminated by Boral. The plaintiff seeks damages from Boral of $990,500, being the net present value of future maintainable earnings based on lost earnings for the balance of the seven years that were left on the cartage agreement (assuming options were exercised).[1] Alternatively, the plaintiff claims damages for goodwill it has allegedly foregone following termination of the cartage agreement estimated at $424,000.[2]
[1] Amended Particulars of Loss and Damage dated 3 June 2021
[2]Amended Particulars of Loss and Damage dated 3 June 2021
4Boral denies the cartage agreement was wrongfully terminated. In the event the plaintiff succeeds in its claim for damages, Boral seeks an order by counterclaim that the plaintiff indemnify Boral pursuant to clauses 3.1 and 3.2 of a Deed of Termination entered into by the parties on 13 October 2015 against any and all liability which Boral may have to the plaintiff in this proceeding. These clauses are also relied upon in the defence as a complete bar to any claim for damages .[3]
[3]Second Further Amended Defence and Counterclaim dated 1 June 2021
5For the following reasons, I was not satisfied that the plaintiff discharged its onus of proving Boral’s summary termination of the cartage agreement was wrongful. If Boral was not entitled to terminate summarily, contrary to my finding, I accept the alternative case put by Boral that it would nevertheless have terminated the plaintiff’s contract on three months’ notice. As the plaintiff continued to provide services up until 13 October 2015, the plaintiff has sustained no compensable loss. But even assuming the plaintiff was entitled to an award of damages, such damages were precluded by the operation of clauses 3.1 and 3.2 of the Deed of Termination, whereby the plaintiff indemnified and released Boral against any liability which Boral might owe to the plaintiff arising out of the cartage agreement. I was also not persuaded that the plaintiff was entitled to any payment for goodwill, which the plaintiff claimed in the alternative.
Factual Narrative
Mr Smith’s early involvement at the Swan Hill plant
6On 4 March 1970, Mr Smith commenced working at the Swan Hill concreting plant on Cobb Court (“the Swan Hill plant”), which was then owned by Readymix (now Holcim). Mr Smith contracted to Readymix through a partnership to supply concrete to the region between 1970 and 1988.
7In 1988, Boral became the owner of the Swan Hill plant. Mr Smith continued his work at the Swan Hill plant, and by 1999 had become the exclusive contractor to deliver concrete to all of Boral’s customers within the region.
8Between 2001 and 2011, Mr Smith was subcontracted to act as the full-time plant operations manager at the Swan Hill plant.
9On 8 July 2003, the plaintiff was incorporated as RW & ME Smith Pty Ltd (“the plaintiff”). Mr Smith and Mrs Smith were appointed and remain the sole directors and shareholders of the company, working on the operations and secretarial management sides of the business respectively.
10On 21 August 2006, Mr Smith completed Boral’s Contractors Induction Program training on behalf of the plaintiff for the Swan Hill plant.
11Mr Smith worked as the site manager at the Swan Hill plant until around 2011. From 2011, he returned to working solely in cartage services for the plaintiff. Around this time, the plaintiff and Boral entered into their first written contract for cartage services.
2014 Disciplinary Incident
12In 2014, the plaintiff’s employees were subject to a disciplinary incident. Mr Smith gave evidence that around 12 June 2014, Mr Mick Kiley (the plant manager of the Swan Hill plant) had a conversation with Mr Smith about recent activities at the Swan Hill plant, during which he said to him: “Look, you’re not allowed to put water in the back of the truck and no standing on the back of the truck”. Mr Smith said Mr Kiley asked him to sign a blank incident investigation form, saying to him “[w]e had an incident the other day, just sign the bottom and I will fill it in later”. Mr Smith said he would not have signed the blank form had he known what Mr Kiley would later insert in the form, as he disputed its accuracy. Mr Smith said he was not putting water in the back of the truck but instead he was hosing off loose material from the side of the truck. He confirmed that it was his employee, Mr Pickering, who was standing on the back of the truck and not himself.
13On 13 June 2014, Mr Kiley completed an incident investigation form 052-F01 relating to the previous day’s incident. This document was signed off by Mr Smith, Mr Kiley and Mr Tate Pickering (a former employee of the plaintiff). It includes two photographs of the plaintiff’s employees, as well as the following notes from Mr Kiley:
“IMPROPER PRACTICES AT OLD SLUMP STAND MUST CEASE. SCALING THE REAR OF TRUCK TO INSPECT LOAD CONTRAVENES ALL SAFETY PRACTICES. ANY FURTHER BREACHES OF SAFETY + IMPROPER PRACTICES COULD RESULT IN DISMISSAL.
…
USING A HOSE WITHOUT A WATER GAUGE TO MONITOR THE QUALITY OF WATER ADDED TO A LOAD IS NOT PERMITTED. THE NEW SLUMP STAND MUST BE USED FOR THE ABOVE PRACTICES.”
14On 1 August 2014, the plaintiff and Boral entered into a document entitled “Concrete Cartage Agreement” (“the cartage agreement”). The plaintiff engaged two full time and two part time drivers to perform cartage works for Boral’s Swan Hill plant in order to fulfil its obligations under the cartage agreement.
Events on 9 July 2015
15On the morning of 9 July 2015, the chain drive broke on the head drum in the load-out area during batching of the first load of the day. Mr Neil Congram, who was acting as site manager while Mr Kiley was on leave, was in attendance. Mr Congram called Mr Smith about 6:30am and notified him that there was a problem at the plant. Upon arrival at the Swan Hill plant, Mr Smith observed that the elevator motor was still working, and suggested to Mr Congram that the drive chain was either off its teeth or broken. Mr Smith gave evidence that Mr Congram said that he would need to go up and have a look at the elevator. Mr Congram then isolated the plant by flicking off the fuse in the switchbox, and asked Mr Smith for the key to the hatch on the access ladder. Mr Smith gave evidence that Mr Congram asked him to go up the access ladder with him to help, and once on the ladder, they identified that the chain was off.
16Mr Congram telephoned Boral’s Production Manager, Mr Malcolm Ball and told him that the usual maintenance contractor was on leave. Ms Kirsten Gandert (Boral’s Health Safety Environment Advisor for the Western and Southern region) gave evidence that Mr Ball had told her that he tried to organise a scissor lift to enable access, but could not, and so told Mr Congram to organise one. Mr Congram did not do so.
17Mr Congram made efforts to contact two engineering firms to repair the chain, but both were unavailable. Mr Smith gave evidence that Mr Congram said that they would have to fix it themselves and asked Mr Smith to come up the ladder to help him. Mr Smith deposed that Mr Congram asked Mr Smith to help him take the safety guard off the elevator drive. Mr Ball authorised Mr Pickering to leave the Swan Hill plant to purchase a new chain from the Swan Hill Bearing Service. Upon returning with a chain, Mr Smith says that, at Mr Congram’s request, he assisted Mr Congram to fit the new chain. Mr Smith estimated that the whole process to repair the plant took approximately two hours.
18Mr Brendyn Wilson (another employee of the plaintiff) took a photograph of Mr Smith, Mr Congram and Mr Pickering during the reparation work (“the photograph”). The photograph shows Mr Smith lying across the elevated platform deck, reaching with one arm out of the metal guard, to unscrew the safety guard. Mr Congram is standing over Mr Smith and is holding Mr Smith’s hard hat. Mr Pickering is seen standing on the side of a truck, handing up a spanner to Mr Smith. The photograph was provided to Mr Kiley to show what happened while he was on leave. Mr Kiley sent the photograph to Boral’s Head Office.
Investigation and Report
19On 15 July 2015, Ms Gandert received both a phone call and an email advising her of an incident that had occurred at the Swan Hill plant. The email attached a copy of an incident report form prepared by Mr Ball, which described the incident as follows:
“WHILE WORKING ON THE CONVEYOR CHAIN A DRIVER WAS NOTED STANDING ON THE CHUTE OF AN AGITATOR. VERY UNSAFE AND AGAINST ALL THAT WE ARE TRYING TO DO ABOUT UNSAFE WORK.”
Mr Ball provided a risk rating of “Extreme” for a “Serious Harm Event”, concluding that the risk was likely to occur and could have been major.
20On 16 July 2015, Ms Gandert drove to the Swan Hill plant to speak with Mr Smith, Mr Pickering, and Mr Congram separately. Ms Gandert spoke with Mr Smith in the lunchroom at the Swan Hill plant, where she asked him to provide an account for what happened on 9 July 2015. Ms Gandert gave evidence that when she showed Mr Smith the photograph, Mr Smith said that he was disappointed that it was taken and claimed that he had not been told that what he was doing was unsafe. Mr Smith stated in his evidence that this conversation took ten minutes at most. It was agreed that Ms Gandert did not walk around the site to view the incident location, though she provided evidence that she could see the location as depicted in the photograph from the lunch room and office.
21Ms Gandert gave evidence that in her meeting with Mr Congram she asked him whether he had written out a safe work method statement, and he responded no.
22On 17 July 2015, Ms Gandert prepared an incident investigation report at Boral’s head office in Port Melbourne. In the report, Ms Gandert summarised that the “incident involved a non-routine task, with a manager who was unfamiliar with the site and … drivers assisting where they would not usually do so”, assessing the work undertaken as having been conducted in an “unsafe manner”. The report notably provided a risk rating under Boral’s rating system of the actual risk being “Major Likely” and the “Potential Risk” being “Extreme”.
Termination of the cartage agreement
23About 10.30am on 21 July 2015, Mr Smith, Mr Ball and Mr Phil McIntyre (Boral’s acting operations manager at the Swan Hill plant) met in the Swan Hill plant’s lunchroom. Mr Smith provided an account of what happened on 9 July 2015. Mr Kiley interrupted the meeting and requested Mr Smith to take a delivery to Cheetham Salt. Upon returning from the delivery about four hours later, Mr Ball and Mr McIntyre said to Mr Smith that they had conferred and decided that his position was terminated. They advised Mr Smith that the plaintiff’s trucks could be advertised through Boral’s online intranet.
24On 22 July 2015, Boral sent a letter to the plaintiff addressed to Mr Smith, terminating the cartage agreement. The letter reads in part as follows:
“We refer to the meeting held with you on 21st of July 2015 and confirm the decision relayed to you that your Concrete Cartage Agreement has been terminated by reasons of level of conduct (serious misconduct) in relation to the nature of incidents that took place on 9th of July 2015 and your failure to adhere to the standard operating procedures.
Boral has considered your conduct and your response in relation to these incidents. In our view, we are satisfied that your conduct amounts to serious misconduct in that your driver Tate Pickering and yourself:
·Engaged in wilful behaviour that is inconsistent with the terms of your contract
·Caused a serious and imminent risk to the health or safety of a person.
Further, Boral considers that your conduct is in breach of:
(a)Terms of your Concrete Cartage Agreement with Boral, and
(b)Boral’s policies and procedures relating to occupational health and safety.
In the circumstances your conduct has given us no alternative but to terminate your Concrete Cartage Agreement with Boral. …
…
A Deed termination will be required to end the Concrete Cartage Agreement between RW & ME Smith Pty Ltd and Boral Construction Materials. As agreed this termination is effective on the day of the 21st of August 2015.”
25On 22 July 2015, Mr McIntyre sent Mr Smith a second letter regarding the pending on-sale of the three trucks that the plaintiff was using to meet its obligations under the cartage agreement at the time. Boral’s fleet manager at the relevant time, Ms Catherine Coombs, stated in cross-examination that she personally wrote this letter. The letter states that:
“Boral will conduct an interview with potential contractor and issue approval based on compliance under the term of contract. Both parties will be notified via correspondence to advise expectance. Boral will then permit the sale upon return of statutory declaration stating that “No Good Will” is involved in the sale of the aforementioned vehicles.
Deed of Termination will be required to end the Concrete Cartage Agreement between RW & ME Smith Pty Ltd and Boral Construction Materials; this will be issued pending an effective start date for on sale.”
26On 22 July 2015, Mr Charlie Caruso (Boral’s Production Manager) sent a letter to Mr Congram terminating his employment with Boral for failing to ensure appropriate lock out and safe systems of work were undertaken during the repair on 9 July 2015.
Events following termination
27The plaintiff continued to provide concrete cartage services to Boral’s Swan Hill plant from 21 July to 13 October 2015, though Mr Smith and Mr Pickering did not drive the trucks. Mr Smith did not attend the Swan Hill plant unless there were documents to sign.
28The plaintiff’s trucks were advertised for sale in the Swan Hill Guardian and on the Boral website. Mr Smith said that he received telephone inquiries from 12 to 13 people who were interested in buying the plaintiff’s three trucks. Ms Coombs gave evidence that nobody inquired through Boral and only one purchaser was interviewed (Mr Anthony Foot, the director of Merran Ridge Pty Ltd). Mr Smith determined that Mr Foot would be a suitable purchaser, so Ms Coombs drove up to interview Mr Foot at the Swan Hill plant.
29On 21 August 2015, Mr Smith on behalf of the plaintiff signed a deed of termination. Mr Smith said he met Ms Coombs at the Swan Hill plant, and she said “I’ve got the documents there for you, Bob, we need a signature on it”. Ms Coombs gave evidence that they met for a coffee on the main street in Swan Hill. Ms Coombs said they spoke about the deed, and that the deed had to be executed to end the cartage agreement. Ms Coombs gave evidence that Mr Smith expressed his disappointment with the incident and it being the end of an era with Boral.
30On 10 September 2015, Ms Coombs received a “New Carter Application Pack” from Merran Ridge Pty Ltd (“Merran Ridge”, a company owned by Mr Foot), which included a statutory declaration dated 6 September 2015 stating that Mr Foot did not pay any goodwill in the purchase of the plaintiff’s vehicles.
31Before the purchase of the three trucks was completed, Mr Foot ran into complications in arranging financing. As the first deed of termination signed by Mr Smith was released to him with dates Merran Ridge consequently could not meet, Boral put together a second deed of termination for the plaintiff, to allow Merran Ridge time to secure appropriate financing for the purchase of the trucks.
32On 13 October 2015, Mr Smith on behalf of the plaintiff signed a second “Deed of Termination” (“the Deed”). The Deed relevantly includes the following:
“The parties gave [sic] mutually agreed to terminate the contract upon the terms and conditions set out in this deed.
Terms and Conditions
1. Contract Termination
1.1 To enable the Contractor to sell the vehicle within the Boral fleet.2. Final Payment
2.1 Boral will pay the Contractor the amount due to the Contractor for services provided by the Contractor to Boral for the period from the last payment date to the Termination Date (Final Payment Amount).
2.2The parties agree that payment by Boral to the Contractor of the Final Payment Amount is in full and final settlement of all payment obligations of Boral to the Contractor under the Contract to the intent and with the effect that no further claim for any payment may be made by the Contractor against Boral.
…
3. Indemnity and Release
3.1By its execution of this Deed, the Contractor agrees that, subject to payment by Boral to the contractor of the Final Payment Amount due for the period to the Termination Date, the Contractor will indemnify and release Boral from any and all liabilities, losses, claims, damages and expenses howsoever arising which may, directly or indirectly, arise from the Contract and the vehicles, equipment and drivers used and engaged in the provision by the Contractor of the transport services.
3.2The Contractor acknowledges and agrees that effective on the termination date the Contract between Boral and the Contractor is at an end and the Contractor has no further claims or entitlements against Boral either now or in the future and hereby releases and indemnifies Boral against any and all such claims.
…”
33On 14 October 2015, Merran Ridge commenced cartage services for Boral for the Swan Hill plant. On 15 October 2015, Mr and Mrs Smith executed an agreement with Merran Ridge for the sale of the plaintiff’s trucks. The trucks were paid for over a 12-month period.
Jones v Dunkel inferences
34The plaintiff submits that the Court ought to draw significant Jones v Dunkel adverse inferences from Boral’s failure to adduce relevant evidence and call relevant witnesses, including its employees Mr Congram, Mr Kiley, Mr Ball and Mr McIntyre. It is submitted that Boral failed to call relevant evidence, including:
(a) any person who was present at the plant or made management decisions in relation to the plant on 9 July 2015;
(b) any evidence of any person who made the decision to terminate (including Mr Ball and Mr McIntyre);
(c) any person with operational knowledge of the Swan Hill site; and
(d) any expert evidence, particularly relating to the assessment of loss and damage.
35The plaintiff further submits that a Jones v Dunkel inference ought to be drawn for Boral’s failure to plead or adduce evidence that Boral notified the plaintiff of any policies or had an established procedure to record any notifications.
36Boral submits that the plaintiff does not specify the precise terms of the inference to be drawn. Boral submits that it only would be required to call a witness where they are required to explain or contradict something, and that no inference can be drawn unless evidence is given in relation to facts requiring an answer. There was evidence given by Boral’s witnesses regarding their procedures relating to the communication of its safety policies, which Mr Smith accepted in cross-examination.
37Boral submits that Mr Congram was not called because he was likely to give evidence in a manner favourable to Mr Smith, as he was sacked by Boral. It suggests that the plaintiff could have called Mr Congram to give evidence. I agree with this submission and do not draw any Jones v Dunkel adverse inference from Boral’s failure to call Mr Congram. He was no longer in Boral’s camp and if anything, a witness who was more likely to have been called by the plaintiff.
38The plaintiff submits that Boral ought to have called Mr Kiley to explain or contradict Mr Smith’s evidence that from time-to-time Boral would ask its contractors to offer assistance. Further, it is submitted Mr Kiley could have given evidence about the necessity to comply with safety procedures at the Swan Hill plant.
39Boral submits that an inference ought not be drawn about calling Mr Kiley as he was not present on 9 July or 21 July 2015, therefore his evidence on the issues in dispute are irrelevant. Boral relies on the authority of Fabre v Arenales[4] to submit that a Jones v Dunkel inference does not require a party to call a witness blind.
[4](1992) 27 NSWLR 437
40Boral submits that the only matter that Mr Kiley could give evidence on was whether he asked Mr Smith to sign a blank incident report form in 2014. However, this allegation was only raised at trial. On 16 June 2021, the final day of the trial, Boral tendered as Exhibit “D3” an affidavit sworn by Mr Luis Izzo dated 3 June 2021. In that affidavit, Mr Izzo deposed to attempts made by Boral’s solicitors to contact Mr Kiley shortly after the allegation was raised, without success.
41On this basis, I consider Boral has provided reasonable grounds as to why evidence was not adduced from Mr Kiley. Reasonable efforts were made in the circumstances to contact him about the allegation raised at trial relating to the incident in 2014.
42The plaintiff claims an inference should be drawn on the basis that Boral failed to call Mr McIntyre, Mr Ball or anyone who made the decision to terminate the contract. Boral submits there was no reason to call Mr McIntyre and Mr Ball to explain the decision to terminate, as their evidence would merely be cumulative. The letter speaks for itself, and the defendant has nothing to explain or contradict.
43I do not accept that I should draw a Jones v Dunkel inference as to Boral’s failure to call Mr McIntyre or Mr Ball. The meeting with Mr Smith after the incident and the two letters sent to the plaintiff on 22 July 2015 all speak for themselves. I have not been satisfied that there are disputed facts in evidence which necessitated Mr McIntyre or Mr Ball being called to give evidence. There was little if any controversy about the events that occurred on 9 July 2015. The real issue in the case was whether those events warranted summary termination, being ultimately a question of law.
44Boral submits that there was no need to call someone with operational knowledge of the plant, because Mr Smith had superior operational knowledge of the plant, having worked there for about 40 years. As Mr Smith himself agreed to this statement when put to him, I also accept that an adverse inference cannot be drawn from Boral’s supposed failure to call a Boral employee with similar or inferior operational knowledge of the plant. Finally, it was a matter for Boral to decide whether to call any expert evidence. It was entirely within its rights not to do so and instead to challenge the methodology and findings of the plaintiff’s expert by way of cross-examination, which is what occurred.
Issues in Dispute
45The plaintiff claims that the termination by Boral was unlawful. No particulars of the allegation as to why it is said to be unlawful are pleaded other than to say that it was done in breach of terms of the cartage agreement. Further, it is alleged that if the conduct did amount to conduct which justified termination, then the conduct was done by the plaintiff at the request, supervision, and direction of Boral. In those circumstances, it would be unconscionable for Boral to rely on its own conduct for the purposes of terminating the cartage agreement, and it is, or should be, estopped from doing so. It is then pleaded that this amounts to a breach of s 21 of the Australian Consumer Law 2010 (“ACL”).
46It is also alleged by the plaintiff that Boral insisted on compliance with what is described as a “no goodwill policy”, such that the plaintiff could only sell its trucks to a third party who entered into a new contract with Boral in compliance with the policy, and the plaintiff could not sell its business with its goodwill. It is further alleged that no such policy was ever notified to the plaintiff in accordance with the terms of the agreement, such that Boral was in breach of the agreement by insisting upon a statutory declaration from a new contractor and otherwise in destroying any goodwill attached to the business of the plaintiff.
47Further, irrespective of whether the agreement had been validly terminated or not, it is alleged that if the “no goodwill” policy formed part of the agreement (which is denied), insisting on compliance with the “no goodwill” policy as a precondition to the sale of the plaintiff’s trucks, and therefore its business, Boral engaged in conduct in breach of sections 21 or 20 of the ACL.
48In summary, Boral contends that it had a legitimate basis for summarily terminating the agreement, the reason being that in undertaking the work on 9 July 2015, Mr Smith failed to follow basic safety procedures of which he was aware, and put both himself and his colleagues at risk of serious harm. Boral alleges that the plaintiff was not directed, compelled, or otherwise required to assist with the work. Any failure on the plaintiff’s part to follow or apply any of Boral’s safety practices was not in accordance with any request or direction by Boral.
49In respect of damages, Boral contends that even if it was not entitled to terminate the agreement summarily pursuant to cl 22.2, the plaintiff has suffered no compensable loss or damage. The basis for this argument is that having regard to the conduct on 9 July 2015, had Boral been informed that it was not entitled to terminate summarily, it nevertheless would, as it was entitled to do, provide three months’ notice under cl 22.4 of the agreement.[5] Although the agreement was terminated summarily on 21 July 2015, the parties later agreed that the plaintiff would continue to provide services pursuant to the cartage agreement for a further period of around three months. On that basis, Boral contends the plaintiff has suffered no loss.
[5]Compare TCN Channel Nine Pty Ltd v Hayden Enterprise Pty Ltd (1989) 16 NSWLR 130 and Commonwealth v Amann Aviation Pty Ltd 174 CLR 64
50The other basis upon which Boral contends that the plaintiff has suffered no loss is that it relies upon the Deed whereby the plaintiff released Boral from any claims arising from the termination of the cartage agreement and indemnified Boral against the loss now claimed by the plaintiff.
51The parties provided a compendious list of issues for determination in dispute, not all of which were agreed. The issues can be narrowed down to the following:
(a) Do the following implied terms form part of the cartage agreement:
(i)implied terms of good faith and cooperation as pleaded by the plaintiff; and
(ii)an implied term that the plaintiff would comply with its own and Boral’s work, health and safety obligations, as pleaded by Boral?
(iii)If so, did either party breach the implied terms?
(b) Did the plaintiff breach any express terms of the cartage agreement, including clauses 1.1(d), (f) and (h)?
(c) Was the plaintiff was acting at the request, supervision or direction of Boral on 9 July 2015, and if so, was Boral estopped or otherwise prohibited by law from terminating the cartage agreement?
(d) Did Boral wrongfully terminate the cartage agreement?
(e) In relation to the effect and construction of the Deed:
(i)Do clauses 2.2, 3.1 and 3.2 of the Deed, separately or in combination, constitute an indemnity and release in favour of Boral from the claim that is the subject of this proceeding?
(ii)If so, is Boral estopped from relying on the indemnity and release as provided under the Deed as to do so would be unconscionable?
(iii)If not, pursuant to the principle of circuity of action, should the Court decline to grant the relief sought by the plaintiff in this proceeding?
(f) Is the plaintiff entitled to an amount representing loss of goodwill, being the alternative head of damages claimed?
(g) If so, has the plaintiff suffered loss and damage as a result?
(a) Are there implied terms of the cartage agreement as alleged, and if so, were they breached?
52The plaintiff and defendant both plead implied terms that form part of the cartage agreement. I will address these in turn, before determining if either party breached any implied terms of the cartage agreement.
Implied Terms of Good Faith and Cooperation
53The plaintiff pleads that there were implied terms of the cartage agreement that each party owed each other a duty of cooperation and an obligation of good faith.
54The plaintiff submits that if the Court is satisfied that there is such an implied duty of mutual good faith and cooperation incorporated into the cartage agreement, and that the plaintiff was acting at the request, supervision and/or direction of Boral on 9 July 2015, then it must follow that the termination was wrongful because “…a contractual right to terminate for breach cannot be exercised by a terminating party who is not itself ready and willing to perform, or who has prevented or dispensed with the performance in question”.[6]
[6]N Seddon, R Bigwood, and M Ellinghaus, Cheshire & Fifoot Law of Contract 10th Edition LexisNexis Butterworths Australia 2012 at para 21.6
Implied Duty of Mutual Good Faith
55The plaintiff submits that case law provides that the Court ought only find a duty of good faith where it is owed mutually.[7] The plaintiff points to cl 1.1(g) of the cartage agreement which states that the plaintiff must perform the Cartage Works “in good faith and using best efforts to promote Boral’s business”. The plaintiff submits that, as there is no equivalent express provision cast upon Boral, a duty of good faith must also be implied as owing to the plaintiff under the cartage agreement to prevent a lack of mutuality.
[7]Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228, [2]
56The plaintiff submits that Boral’s commercial strength, its production of a standard form contract omitting an express mutual good faith obligation, and its ability to induce the plaintiff to sign the deeds of termination without objection demonstrate both the significant power imbalance between the parties, and the plaintiff’s vulnerability to this imbalance. The plaintiff relies on Warren CJ’s reasoning in Esso Australia to submit that Boral is a commercial leviathan, and the power imbalance between Boral as a commercial “behemoth” and the plaintiff as an assetless company whose sole shareholders are in receipt of pensions further necessitates the implication of a duty of mutual good faith.[8]
[8]Ibid, [4]
57Boral says it is unnecessary for the Court to determine this question of whether an implied mutual duty of good faith exists, claiming that even if the court was to find such an implied duty, Boral has not breached it. In terminating the cartage agreement, Boral acted honestly and reasonably for the purpose of protecting its legitimate interests by requiring all work done on its plant and equipment to be performed safely.
58Boral submits that an obligation of good faith is not an implied legal incident of all commercial contracts.[9] It submits that, pursuant to the principles in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (“BP Refinery”),[10] it is not necessary to find an implied term of mutual good faith, as the plaintiff has not demonstrated that it was vulnerable or that the defendant engaged in exploitative conduct.[11] It submits that the cartage agreement was not a standard form contract presented to the plaintiff on a ‘take it or leave it basis’, as the plaintiff’s interests were represented in negotiations between Boral, representatives of the Transport Workers Union and representatives of the contractors in the formulation of the cartage agreement. The inequality of financial position between the parties was also submitted not to give rise to vulnerability in the sense relevant for a duty of mutual good faith to be implied.
[9]Ibid, [25]
[10](1977) 180 CLR 266 at 264
[11]Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228, [28]
59Boral also submits that even if an obligation of good faith exists, it does not require a party to subordinate its legitimate interests to those of another party.[12] Similarly, an obligation of good faith is not an implied fetter on the exercise of express contractual rights and powers.[13] It is submitted that an implied term of mutual good faith would be inconsistent with the express terms of the cartage agreement, including clause 22.4, which entitles either party to terminate for any reason, at any time, and at their absolute discretion.
[12]Masters Home Improvement Australia Pty Ltd v North East Solutions Pty Ltd [2017] VSCA 88, [99]
[13]DPN Solutions Pty Ltd v Tridant Pty Ltd [2014] VSC 511, [108]
Implied Term of Cooperation
60In its written submissions, the plaintiff states that the duty of mutual cooperation is a universal term implied by law into every contract.[14] The plaintiff relies on the Butt formula from Griffith CJ, namely “it is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract”.[15]
[14]N Seddon, R Bigwood, and M Ellinghaus, Cheshire & Fifoot Law of Contract 10th Edition LexisNexis Butterworths Australia 2012 at para 10.41
[15]Butt v McDonald (1896) 7 QLJ 68, 70-1
61Boral submits that it is not necessary for the Court to consider the implied duty of cooperation because the plaintiff has failed to articulate either what the implied duty required the defendant to do, or how the duty was breached by the defendant in terminating the cartage agreement.
Analysis and Conclusion
62While there is an uncontentious imbalance of resources and commercial magnitude between the plaintiff and Boral, I agree with Boral that there is no necessity to imply a duty of mutual good faith into the cartage agreement. As Ms Coombs deposed, the cartage agreement is a standard form of contract between Boral and its contractors. It was made on terms negotiated between the defendant, union representatives and a contractors’ delegate in each region.
63To employ the language of Warren CJ in Esso Australia, I am of the opinion that the plaintiff did not suffer a disadvantage, nor was it vulnerable in a sense that ought to attract greater protection than that provided by the law of contract given the circumstances in which this standard form agreement was created.
64Even if I was to find that a duty of mutual good faith was an implied term of the cartage agreement, I am not persuaded that Boral has breached any duty of good faith. Boral terminated its agreement with the plaintiff because it failed to meet Boral’s safety standards for users of its concrete plants. The decision made was based on the materials available to Boral (including the photograph and interviews conducted by Ms Gandert).
65I also agree with Boral’s submissions that the plaintiff has failed to adequately articulate when, where and how an implied duty of cooperation necessitated a different course of action than that which Boral took. A duty to cooperate with the plaintiff does not amount to an absolute prohibition on Boral terminating the cartage agreement to ensure the plaintiff has the benefit of the contract. The parties must still abide by the express terms of the contract, including the duties owed under cl 1.1, and the right to termination under cl 22. I was not persuaded that Boral breached its obligations to cooperate in circumstances where it summarily terminated the cartage agreement on the grounds of serious misconduct.
Implied Terms that the plaintiff would comply with Boral’s and its own work, health, and safety obligations
66Boral pleads in its further amended defence that it was a further implied term of the cartage agreement that:
(a) the plaintiff and its agents would comply with their own statutory work, health and safety obligations; and
(b) the plaintiff and its agents would comply with all work/occupational health and safety policies and procedures of the defendant,
(collectively, “the implied terms”).
67Boral pleads that the implied terms are implied by operation of law (having regard to, inter alia, clauses 1.1(d), (f) and (h) of Part C of the cartage agreement), and to give business efficacy to the cartage agreement. Boral submits that terms may be implied in a contract by law where necessary, and the relevant necessity will arise where the rights conferred by the contract “would or could be rendered nugatory, worthless or … seriously undermined” or otherwise would be “deprived of its substance, seriously undermined, or drastically devalued”.[16]
[16]Byrne v Australian Airlines Ltd (1995) 185 CLR 410, 450, 453; see, also, Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 at [29], [36]
68The plaintiff pleads in its reply that the implied terms are vague and uncertain such that they are not enforceable at law. It relies on BP Refinery at 264:
“For a term to be implied, 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 term of the contract.”
Plaintiff’s Statutory Work, Health and Safety Obligations
69Boral pleads that the relevant statutory work, health and safety obligations were the plaintiff’s obligations under any and/or all of sections 20, 21, 23-25 and 32 of the Occupational Health and Safety Act 2004 (“OHS Act”).
70Boral submits that, if the plaintiff has contravened any of the abovementioned provisions, Boral was entitled to terminate the cartage agreement under an implied term that the plaintiff would comply with its own statutory work, health and safety obligations.
71Boral submits that the plaintiff, as an employer, was responsible for its employees’ health and safety at work. In closing submissions, Boral defined the plaintiff as the employer to both Mr Pickering (as an employee) and Mr Smith (as a self-employed person).[17]
[17]Citing OHS Act s5
72Boral submits that the question of whether the plaintiff’s conduct complied with the OHS Act is to be determined objectively, by reference to whether the contravening conduct occurred.[18] Boral submits that the plaintiff, through its actions on 9 July 2015, failed to provide and maintain a working environment for its employees that was safe and without risks to health (s21). It further submits that the plaintiff failed to meet its obligation to ensure that persons other than employees (here, Mr Smith and Mr Congram) were not exposed to risk to their health or safety arising from the conduct of the plaintiff’s undertaking (s23). In his individual self-employed capacity, Mr Smith was obliged to ensure others (here, Mr Pickering and Mr Congram) were not exposed to risks to their health and safety arising out of his conduct (s24). Finally, Boral submits that Mr Smith recklessly engaged in conduct that places or may place another person who is at the workplace in danger of serious injury (s32).
[18]Sherman v Peabody Coal Ltd (1998) 88 IR 408
73The plaintiff submits that the implied term that the plaintiff and its agents would comply with their own statutory work, health and safety obligations is meaningless, circulatory and does not satisfy the test outlined in BP Refinery.
Boral’s work/occupational health and safety policies and procedures
74Boral submits that an employee is bound at common law to obey a lawful and reasonable direction of their employer.[19] It was submitted that this principle logically extends beyond employment to contracts for service. The plaintiff was directed by Boral to comply with its work/occupational health and safety policies and procedures while performing cartage services and associated tasks, which Boral submits Mr Smith and therefore the plaintiff knew. Boral contends that the evidence reveals that Mr Smith simply did not consider it necessary to follow any formal or informal safety procedures, because he did not feel that he was at risk.
[19]Citing R v Darling Island Stevedoring & Lighterage Co Ltd (1938) 60 CLR 601, 621–2
75Boral submits that the plaintiff was aware of Boral’s safety practices and procedures which applied to work done by contractors while working for or at Boral. Boral relies on Mr Smith’s evidence that Mr Ball regularly addressed new safety procedures or policies at the Swan Hill plant and that safety material was frequently available in the lunchroom. Evidence was also adduced that Mr Smith underwent ‘refresher’ training on Boral’s safety practices in 2006, 2011 (possibly) and 2014, as well as other safety training in 2015. Mr Smith also acknowledged that he received training on the health and safety rules applicable to working at the Swan Hill plant as recently as 2014. He further acknowledged his awareness of Boral’s 2014 “Safety Absolutes” poster, which expressly listed the relevant safety procedures in place at the time. Many of the safety materials which Mr Smith acknowledges he read expressly provides that failure to follow safety procedures was serious misconduct which could result in disciplinary action, including termination.
76Boral also relies on Mr Smith’s evidence that, on or before 13 July 2014, Mr Kiley had told him and Mr Pickering not to stand on the back of trucks, which is what Mr Pickering did on 9 July 2015.
77Boral submits that, in light of the training and information discussed above, Mr Smith evidently had awareness of each of the following Boral safety practices and procedures:
(a) Safety guards should never be removed without confirming isolation is in place;
(b) Power is to be isolated by applying the lock and tag out procedure, which required all persons to apply a padlock to any power source that has been switched off;
(c) Correct fall injury prevention systems must be worn when working within 2 metres of an unprotected edge where there is a risk of falling 2 metres;
(d) A ‘Take Five’ or Safe Work Method Statement risk assessment should be undertaken for any incidents;
(e) The correct personal protective equipment should always be worn for the task; and
(f) Site users must comply with relevant laws and regulations.
78The plaintiff argues the implied term pleaded by Boral at paragraph 7(c) of its further amended defence does not satisfy the BP Refinery test.
Analysis and Conclusion
79Whilst no doubt the plaintiff as an employer would owe duties to its employees to ensure a safe system of work by complying with statutory obligations, I do not find that this suggested implied term should be implied as a term of the cartage agreement given:
(a) the suggested term is not necessary to give business efficacy to the cartage agreement; and
(b) such a term is not so obvious that it goes without saying.
80As for the second implied term pleaded by Boral, clauses 1.1(d) and (f) of the cartage agreement expressly provide that the plaintiff must act in accordance with Boral’s safety requirements, directions, policies, procedures and specifications, such that this obligation arises without the need to imply a term to that effect. Such a term is not necessary to give business efficacy to the contract or goes without saying. I am not persuaded such a term needs to be implied given the express terms contained in clauses 1.1(d), (f) and (h) of the cartage agreement, which are dealt with in the next section.
(b) Did the plaintiff breach express terms of the cartage agreement: clauses 1.1(d) (f) and (h)?
81Boral pleads that the cartage agreement was lawfully terminated, as the plaintiff breached express terms under Part C of the cartage agreement at clauses 1.1(d), (f) and (h). The relevant terms read as follows:
“1.1 The Contractor must perform the Cartage Works:
…
(d)safely, and in accordance with Boral’s safety requirements as notified by Boral from time to time;
…
(f)in accordance with any direction, policy, procedure or specification (including but not limited to Boral’s standard operating procedures) notified by Boral from time to time;
…
(h)in compliance with Applicable Laws.”
Did the events on 9 July 2015 satisfy the definition of ‘Cartage Works’?
82The plaintiff submits that these clauses of the cartage agreement do not apply to the events on 9 July 2015, because those events did not relate to the performance of “Cartage Works” within the meaning of the cartage agreement. Boral contends that the acts of Mr Smith and Mr Pickering do fall within this meaning of “Cartage Works”. Part C, clause 28 of the cartage agreement relevantly defines “Cartage Works” as “deliveries of Goods and associated tasks performed by the Contractor for Boral in accordance with this Agreement”.
83The plaintiff contends that the repairs undertaken at the Swan Hill plant were not within the scope of this definition. By extension, the plaintiff asserts that Boral was not permitted to terminate the cartage agreement over work that did not fall within the definition of “Cartage Works” but merely amounted to an ancillary task that was not governed by the agreement.
84Boral disputes the plaintiff’s definition, submitting that this construction of “Cartage Works” would impermissibly limit the scope of the cartage agreement to the strict delivery of goods only. Instead, it submits that the work undertaken by the plaintiff on 9 July 2015 was an “associated task” performed by the plaintiff for Boral within the definition of “Cartage Works”. Any task with some subject-matter, geographic, or temporal connection with the delivery of concrete will be “associated” for that purpose. As Mr Smith was at the Swan Hill plant that morning for the purpose of delivering concrete and gave evidence that he occasionally undertook repair work to effect a return to concrete delivery work, the 9 July 2015 events have a clear association with the delivery of concrete within the relevant definition.
85On balance, I am satisfied that the repair works satisfy the cl 28 definition of “Cartage Works”. The work done on 9 July 2015 by the plaintiff was, in my view, a task associated with the delivery of concrete under the cartage agreement. The truck was being loaded with concrete at the plant at the time the incident occurred. It is artificial to argue that what was being done on that day fell outside the definition of Cartage Works.
Did the plaintiff breach clause 1.1(d) and (f) on 9 July 2015?
86Clause 1.1(d) and (f) impose obligations on the plaintiff to perform Cartage Works “safely, and in accordance with Boral’s safety requirements as notified by Boral from time to time” and “in accordance with any direction, policy, procedure or specification … notified by Boral from time to time” respectively.
87The plaintiff submits that it did not breach either cl 1.1(d) or (f) on 9 July 2015. It claims, firstly, that it did not perform work in an unsafe manner, and secondly that it did not breach any specific policy governing what occurred on 9 July 2015 as notified by Boral from time to time.
88The plaintiff relies on Mr Smith’s evidence that the works performed on 9 July 2015 were safe because he had turned his mind to safety and considered his actions to be safe. The plaintiff also submits that Mr Congram did not think the actions of the plaintiff’s agents were unsafe, evinced by Mr Congram’s encouragement of the reparation works being performed by Mr Smith and Mr Pickering depicted in the photograph.
89The plaintiff submits that Boral failed to notify the plaintiff of any specific direction, policy, procedure, or specification with which it was required to comply in its performance of the Cartage Works.
90The plaintiff argues that Boral had an obligation to notify it of any updates to safety requirements pursuant to clause 1.1 of the cartage agreement. It is submitted that Boral’s policies included on the posters and induction packs were not effectively incorporated into the terms, as the plaintiff was not notified of them from time to time, such that they lacked contractual force.
91Boral contends the plaintiff’s submission in this respect misunderstands the purpose of safety policies which apply to all persons on site, irrespective of their relationship to Boral.
92Boral says that the actions of the plaintiff’s agents on 9 July 2015 were unsafe. It relies on both Mr Ball’s and Ms Gandert’s investigative findings concluding that the incident involved an extreme risk of harm. Mr Smith’s subjective opinion as to his own safety is irrelevant in assessing whether the work was done safely.
93Boral submits that the plaintiff was at all times aware of Boral’s safety procedures (as discussed in paragraphs 75 - 77 above).[20] This includes Mr Smith’s attendance at induction and refresher safety courses, Mr Smith’s evidence of Mr Ball regularly addressing employees and contractors regarding new safety procedures and policies, the plaintiff’s access to safety materials in the lunchroom at the Swan Hill plant and Ms Coombs’ evidence that carters (including Mr Smith) completed a safety pack once a month.
[20]Including Mr Ball’s attendance at the Swan Hill plant to address new safety procedures and policies, and Mr Smith’s evidence that he frequently saw safety material in the lunchroom in the plant.
94I am satisfied that the plaintiff did breach cl 1.1(d) and (f) of the cartage agreement. Despite Mr Smith’s assertions that he thought he was acting safely, it is evident that the plaintiff (through its agents Mr Smith and Mr Pickering) acted in an unsafe manner, contrary to these clauses. These actions breached numerous safety policies and procedures of which Mr Smith gave evidence he was aware. Mr Smith and Mr Pickering had received safety warnings in June 2014 about standing on the back of vehicles. Mr Smith acknowledged he had observed Boral’s “Safety Absolutes” posters around the Swan Hill plant, which state that “Breach of Safety Non-Negotiable Rules is serious misconduct and will always result in Disciplinary action up to and including termination”. On the evidence, I am satisfied that the plaintiff did breach some listed Non-Negotiable Rules, including the following:
“NEVER remove a guard without confirming isolation is in place or written authority.
…
NEVER work within 2m of an unprotected edge where there is a risk of falling 2m without wearing correct fall injury prevention systems.”
95On the evidence, it is apparent no agent of the plaintiff confirmed that the isolation was in place when the guard was removed. Similarly, the photograph clearly depicts Mr Smith reaching beyond the protected edge without wearing any safety headwear or other PPE and without fall injury prevention systems, such as a safety harness in place. He was then some 3 metres above the floor. As Mr Smith later commented to Ms Gandert after seeing the photograph, he was disappointed that it was taken and he was not told that it was unsafe what he was doing. Mr Pickering was standing on the truck which was unsafe and prohibited.
96On that basis, I am satisfied that the plaintiff failed to act safely and in accordance with Boral’s safety requirements, policies and procedures in breach of cl 1.1(d) and (f).
Did the plaintiff breach cl 1.1(h) on 9 July 2015?
97Boral further submits that the plaintiff breached cl 1.1(h), as it did not act in compliance with “Applicable Laws” as defined in the cartage agreement, which Boral pleads includes ss 20-25 and 32 of the OHS Act.
98Clause 28 of the cartage agreement provides a definition of Applicable Laws as follows:
“all applicable laws, regulations, industrial awards, and agreements including all applicable safety, health and environmental regulations”.
In light of the objects of the OHS Act (for example, securing the health, safety and welfare of employees and other persons at work),[21] and the close connection to expressed obligations to act ‘safely’, I accept that the OHS Act is an ‘Applicable Law’ per the cl 28 definition.
[21]OHS Act s2
99For the reasons given by Boral as set out paragraphs [83] to [87] of its closing submissions, I am satisfied that the plaintiff committed a breach of the Applicable Laws, contrary to clause 1.1(h).
Conclusion as to express terms
100In summary, I am satisfied that the plaintiff through its agents Mr Smith and Mr Pickering engaged in “Cartage Works” on 9 July 2015 as defined by cl 28 of the cartage agreement. Accordingly, it was obliged to meet its express obligations under cl 1.1 of the cartage agreement in the performance of those works.
101I am further satisfied that the plaintiff failed to perform the Cartage Works safely and in accordance with Boral’s safety requirements, policies and procedures as notified by Boral to the plaintiff. Accordingly, the plaintiff breached cl 1.1(d) and (f) of the cartage agreement through the actions of its agents on 9 July 2015. The plaintiff also breached clause 1.1(h), by contravening its obligations under the OHS Act.
(c) Was the Plaintiff acting at the request, supervision and direction of Boral on 9 July 2015, and if so, did that prevent Boral from terminating the cartage agreement?
102The plaintiff submits that Boral’s termination of the cartage agreement was wrongful if the plaintiff was acting at the request, supervision and direction of Boral on 9 July 2015. The plaintiff makes this claim on the basis that a terminating party cannot exercise a contractual right to terminate for breach if it was not ready and willing to perform itself, or has prevented or dispensed with the performance in question. The plaintiff points to the following evidence to show that agents of the plaintiff acted at the request, supervision and direction of Boral:
(a) Mr Smith’s viva voce and affidavit evidence;
(b) Boral’s provision of the credit card to purchase the new chain;
(c) Boral’s “Incident Investigation Form” which provided that “TP [Mr Pickering] and BS [Mr Smith] pitched in to help NC [Mr Congram] identify the problem”;
(d) Boral’s termination letter to Mr Congram, which provided that “…you oversaw and participated in the breakdown repair…”; and
(e) Boral’s response to Mr Congram’s unfair dismissal claim, which included:
“As Plant Supervisor, [Mr Congram] was responsible for the supervision of the repair work.”
and
“[Mr Congram] attempted to access the head drum from a platform and permitted the lorry owner/driver to stand on the rear of his vehicle and balance with one foot on the chute to reach the chain drive. In doing so, [Mr Congram] placed himself and the lorry owner/driver at risk of significant injury or fatality.”
103The plaintiff submits that if the plaintiff’s conduct took place at the direction, supervision and control of Boral, it follows that any breach of the plaintiff was mutual, such that Boral itself was not ready and willing to perform at the time said to give rise to the right to termination. The plaintiff submits that Boral’s contractual right to terminate for breach could not be exercised where it was not ready and willing to perform.
104Boral submits that the plaintiff and its agents were not directed, compelled or otherwise required to assist with the work on 9 July 2015. Boral relies on Ms Gandert’s incident report, which found that Mr Congram “was not familiar with the plant” and “relied on [Mr Smith] to get the plant up and running”. Mr Smith too acknowledged that, on 9 July 2015, he was the person most familiar with the Swan Hill plant on site, and that he knew the plant better than Mr Congram. In cross-examination, he conceded that he could have refused to assist with the repair work.
105Further, Boral submits that its representatives did not expressly or impliedly request or direct the plaintiff to undertake the work unsafely, in disregard of Boral’s safety procedures and the plaintiff’s statutory obligations. Boral submits that any such direction (if found) would not constitute a breach by it of the terms of the cartage agreement, and would not absolve the plaintiff of responsibility to comply with its contractual obligations. It notes that these obligations are expressly provided in cl 1.3 of the cartage agreement, which provides that “[a]ny direction made, approval granted, or discretion exercised by Boral under this Agreement … does not relieve the Contractor of any obligation or liability set out in this Agreement”.
106Despite Boral’s claims that Mr Smith took the lead with the repair works, I am satisfied on Mr Smith’s evidence that the works undertaken were at the request of Mr Congram, as representative of Boral. I accept the evidence that Mr Congram asked Mr Smith to assist him with putting the chain on. The photograph clearly depicts Mr Congram standing over Mr Smith and Mr Pickering as they engaged in the repair works, which I am satisfied were performed unsafely.
107However, I do not accept the plaintiff’s contention that any of its breaches were made in circumstances where there were mutual breaches made by Boral such that Boral was not ready, willing or able to perform its obligations under the cartage agreement. No evidence was adduced demonstrating that Mr Congram or any other agent of Boral requested the works be performed unsafely. I am satisfied that it was the decision of Mr Smith and Mr Pickering to undertake the works in the manner that they did. Further, under clause 1.3 of the cartage agreement, Mr Congram’s lack of intervention does not relieve the plaintiff of its obligations under clause 1.1 to perform Cartage Works safely. As such, Boral was not prohibited from terminating the contract because of its employee’s supervision and participation in the plaintiff’s repair work.
Did Boral unconscionably rely on its own conduct for the purposes of terminating the cartage agreement?
108The plaintiff pleads that Boral, in terminating the cartage agreement, engaged in unconscionable conduct under the ACL and/or the unwritten law. The plaintiff submits that, on Boral’s own evidence, it was Boral’s fault that its plant broke down and that it did not have a system in place to fix the problem. It is submitted that it would be unconscionable for Boral to terminate the cartage agreement after taking advantage of Mr Smith and Mr Pickering by receiving their services to repair the plant without remuneration.
109Section 21 of the ACL provides that:
“A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of goods or services to a person; or
(b) the acquisition or possible acquisition of goods or services from a person;
engage in conduct that is, in all the circumstances, unconscionable.”
110Section 20(1) provides that:
“a person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time.”
Section 20(2) relevantly provides that s20 does not apply to conduct that is prohibited by s21.
111Boral submits that the plaintiff’s claims under both s 20(1) of the ACL and the unwritten law must fail because the common law test for unconscionability has not been made out. It contends that the plaintiff has not identified a sufficient special disadvantage in its dealings with Boral or one which seriously affected the plaintiff’s ability to make a judgment as to its own best interests, of which Boral knowingly took unconscientious advantage. Neither inequality of bargaining power, nor an element of hardship or unfairness in the transaction amounts to unconscionable conduct without the presence of these additional factors.
112Boral further submits that it did not engage in unconscionable conduct under s21(1) as the plaintiff was not directed to undertake the work unsafely or in disregard of Boral’s safety procedures.
113In assessing the evidence before this Court, I am not persuaded Boral engaged in unconscionable conduct contrary to ss 20 or 21 of the ACL, nor the unwritten law. The plaintiff has failed to identify a sufficient special disadvantage in its dealings with Boral to make out such a claim. The plaintiff’s claim under ss 20(1) and 21 of the ACL and the unwritten law falls short.
114Furthermore, I do not consider Boral’s conduct, in terminating the cartage agreement with the plaintiff, to be unconscionable. It was not “offensive to a conscience informed by a sense of what is right and proper according to values which can be recognised by the court to prevail within contemporary Australian society”.[22] Boral’s decision to terminate was based on a reasonable and genuine belief that the plaintiff’s agents had engaged in unsafe practices, contrary to policies of which Mr Smith acknowledged he was aware. Boral’s decision to terminate to meet its obligations to the safety of its staff and plant users cannot be determined to be “so far outside the societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience”.[23]
[22]Jams 2 Pty Ltd v Stubbings [2020] VSCA 200, [90] (since overturned by the High Court on factual grounds)
[23]Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1, [92]
115Accordingly, I do not find that Boral unconscionably terminated the cartage agreement under the unwritten law or statute.
Was Boral estopped from terminating the cartage agreement for representing to the plaintiff that Boral did not require strict compliance with its terms?
116The plaintiff further pleads that Boral waived strict compliance with the terms of the cartage agreement, and/or represented and warranted by its conduct that it would not require strict compliance with the terms of the cartage agreement. The plaintiff claims that its agents engaged in the conduct on 9 July 2015 in reliance on the representation, and that it would be unconscionable for Boral to resile from said representations. Consequently, it suggests that Boral is estopped from terminating the cartage agreement.
117The plaintiff submits that conduct similar to that undertaken by the plaintiff on 9 July 2015 has been ongoing at Boral for a long time. It is submitted that Boral had not insisted on compliance with its policies, such as the failure to have “Take 5” cards at the Swan Hill plant.
118Boral rebuts the plaintiff’s argument that a party cannot take advantage of its own wrong. Relying on Drinkwater v Caddyrack [1997] NSWSC 431, Boral submits that the plaintiff has failed to precisely identify disentitling conduct. It is submitted that it is irrational to suggest that running out of “Take 5” cards at Swan Hill released the plaintiff from all safety obligations under the cartage agreement.
119Boral submits that there is no evidence that Mr Congram (as the only Boral employee who spoke with Mr Smith on 9 July 2015) made any representation that Boral would not require strict compliance with the terms of the cartage agreement. Boral further submits that the plaintiff has failed to lead evidence from Mr Smith that is capable of supporting a finding that he relied on any such representation in deciding to undertake the repair work unsafely, or at all, and that he would have acted differently had the representation been made.
Analysis and Conclusion
120In assessing the evidence and submissions, I consider the plaintiff has failed to adduce a sufficiently clear representation or warranty from Boral on or before 9 July 2015 capable of misleading a reasonable position in the position of the plaintiff to the belief that Boral would not terminate the contract for any unsafe practices performed on 9 July 2015. This so particularly where express policies and procedures were documented and updated around the Swan Hill plant prior to the 9 July 2015 incident, and the plaintiff had received an earlier disciplinary warning.
121Even if a representation was made, and the plaintiff was found to have reasonably relied on any representation, it would not be unconscionable for Boral to depart from any representation where the plaintiff has acted unsafely and not in accordance with Boral’s safety policies and procedures. In a workplace where safety is paramount, a reasonable person would not consider it unconscionable for Boral to terminate the plaintiff’s cartage agreement for a safety incident assessed as being likely to have a major risk and a risk rating of “extreme”.
122In conclusion, Boral was not estopped from terminating the cartage agreement, as there was no sufficiently clear representation that it would not require strict compliance with the terms of the agreement, and any departure from any representation would not be unconscionable in light of the extreme nature of the safety incident and Boral’s readily apparent prioritisation of safety at its plants.
(d) Termination of cartage agreement
Did a breach of the express terms under cl 1.1 entitle Boral to terminate the cartage agreement under cl 22.2?
123Clause 22.2 of the cartage agreement provides that:
“Boral may, by written notice to the Contractor, immediately terminate this Agreement or any Cartage Works being undertaken by the Contractor if the Contractor commits a material or wilful breach of any of the terms of this Agreement, including:
(a)refusal or failure to perform any Cartage Works;
(b)wilful or negligent destruction of or damage to Boral Equipment or the property of any customer of Boral;
(c)obstruction of Boral’s premises or the premises of any customer of Boral;
(d)misappropriation of Boral Equipment, the Goods, or the property of any customer of Boral;
(e)denigration of Boral’s name or products; and
(f)breach of any Applicable Laws, including Chain of Responsibility Laws.”
124The plaintiff submits that even if its actions breached a term under cl 1.1, cl 22.2 does not specify that a breach of clause 1.1 gives rise to an express right to summarily terminate the cartage agreement. It suggests that the specified grounds for termination listed at clause 22.2 giving rise to summary termination relate only to driving trucks and delivering concrete, and that accordingly a breach of cl 1.1 is beyond this scope and does not give rise to a right to terminate.
125The plaintiff further submits that if it is found to have breached a clause in the cartage agreement, its breach was neither material or wilful (particularly compared with the specified example grounds under cl 22.2), and that Boral was therefore not entitled to terminate the cartage agreement under cl 22.2 for a breach of clause 1.1.
126Boral contends that it was entitled to, and did validly, terminate the cartage agreement under cl 22.2. Boral submits that the word “material” in the clause means “important” and connotates “significance”.[24] It is submitted that the ‘material’ nature of any breach is to be assessed by reference to that breach, rather than to the obligation that was breached.[25] The Court should evaluate whether a particular breach has had a serious effect on the benefit which the other party was otherwise intended to enjoy by the breaching parties’ compliance with the contract.[26] The breach will be wilful where the contravening conduct is intentional.
[24]Citing Androvitsaneas v Members First Broker Network [2013] VSCA 212, [89]
[25]Androvitsaneas v Members First Broker Network [2013] VSCA 212, [90]-[92], citing Elders Ltd v EJ Knight & Co Pty Ltd [2009] NSWSC 1462 at [48]
[26]Ibid
127Boral submits that the plaintiff’s conduct on 9 July 2015 constituted a material and wilful breach, as Mr Smith deliberately failed to pay regard to his experience and training on safety matters (including Boral’s safety policies and procedures), exposing Mr Smith, Mr Pickering and Mr Congram to a risk of serious harm and potentially Boral to prosecution under the OHS Act.
128Boral contends that in these circumstances the plaintiff was evidently aware of its express obligation to act safely and in accordance with Boral’s safety procedures, and that the plaintiff breached that obligation.
129I do not accept the plaintiff’s submission that a breach of cl 1.1 was beyond the scope of Boral’s right to terminate the cartage agreement under cl 22.2. The right under cl 22.2 expressly provides scope for a “material and wilful breach of any of the terms of this agreement” (emphasis added). The list provided is self-evidently non-exhaustive.
130It is said the failure to have regard to Mr Smith’s experience and training on safety matters exposed both himself and those present to a risk of serious harm, and potentially to Boral of prosecution under the OHS Act. It is said that the evidence shows that Mr Smith failed to follow basic safety procedures and engaged in unsafe conduct with a high risk of harm. The fact that Mr Smith subjectively thought that the task was safe and without risk does not exonerate him. By acting in the unsafe manner asserted by Boral, it is said the plaintiff contravened express and implied terms of the cartage agreement to act safely, to comply with Boral’s safety requirements, and to comply with relevant provisions of the OHS Act. Boral says the breaches were material and wilful, and that in terminating the cartage agreement Boral did not, in the circumstances, breach any implied duty to the plaintiff or otherwise act wrongfully or contrary to law.
131I am satisfied that the plaintiff’s breaches of cl 1.1(d), (f) and (h) were material. The plaintiff clearly breached numerous Boral safety policies when undertaking the repair works. Both Ms Gandert and Mr Ball’s incident reports concluded that the events on 9 July 2015 were likely to lead to a major risk incident and assessed the potential risk rating as extreme. Despite no one being harmed on 9 July 2015, I am satisfied that the conduct engaged in amounted to a material breach. I also consider that the conduct was wilful as the plaintiff’s acts were intentional and done in disregard of various safety obligations known to the plaintiff and its employees.
132Accordingly, in my view, the plaintiff’s breach of clauses 1.1(d), (f) and (h) entitled Boral to summarily terminate the cartage agreement under cl 22.2.
Conclusion as to Termination
133Having accepted above that the plaintiff did breach cl 1.1(d), (f) and (h), I am satisfied that Boral was entitled to summarily terminate the cartage agreement in its letter to the plaintiff dated 22 July 2015. Boral was not estopped, nor did it act unconscionably in terminating the cartage agreement.
134I consider the events that occurred on 9 July 2015 were sufficiently serious so as to constitute serious misconduct entitling Boral to summarily terminate the cartage agreement under clause 22.2. The breaches that occurred were, in my view, material and or wilful and posed serious and real risks to the safety of the individuals concerned.
135Consequently, the plaintiff’s wrongful termination claim must fail.
(e) Deed of Termination: effect and construction
136Boral further pleads that the plaintiff agreed to indemnify Boral from any and all liabilities, losses, claims, damages and expenses arising directly or indirectly from the cartage agreement by the Deed dated 13 October 2015. Boral seeks an order by counterclaim that the plaintiff indemnify it pursuant to cl 3.1 and 3.2 of the Deed against any and all liability which it may have to the plaintiff in this proceeding.
137The plaintiff pleads at paragraph 7 of its further amended reply dated 8 June 2021 that “the Deed of Termination is not in fact a ‘Deed’ but rather a contract and is not supported by any consideration (that is, it calls for the Plaintiff to be paid what is already owed to it) such that it is not enforceable”.
138If the Deed is so held to be an enforceable agreement, the plaintiff pleads in its reply that the release and indemnity in cl 3.1 and 3.2 do not extend to the plaintiff’s claims of wrongful termination of the cartage agreement and under the ACL. It pleads that it would be unconscionable for Boral to rely upon the indemnity in the second deed of termination where the only consideration provided by Boral under that agreement was payment already due by it to the plaintiff for sale of the vehicles within Boral’s fleet.
Is the Deed of termination a deed or an unenforceable contract?
139While the plaintiff pleads at paragraph 7 of its further amended reply that the Deed was not in fact a deed, it did not make any written or oral submissions addressing this position. In closing submissions, Counsel for the plaintiff conceded that the Court ought to give effect to the Deed having regard to the circumstances of the case and established principles of construction.
140I have not been satisfied that the plaintiff has made out its claim. The Deed executed by Paul Hillyer of Boral and Mr Smith of the plaintiff on 13 October 2015 evidently meets the requirements of a deed. It is in writing, signed by both parties, and manifests an intention for both parties to be immediately bound by the terms of the agreement. Boral is therefore entitled to seek to enforce the agreement concerned.
(i) By clauses 3.1 and 3.2, did the plaintiff agree to indemnify Boral from the wrongful termination claim brought in the matter before this Court?
141Boral pleads at paragraph 7 of its counterclaim that if it unlawfully terminated the cartage agreement or contravened the ACL, the plaintiff is required to indemnify Boral against any and all liability which Boral may have to the plaintiff in this proceeding pursuant to clauses 3.1 and 3.2 of the Deed. It submits that the Court should apply the principle of circuity of action to enter judgment for the defendant.
142The plaintiff pleads in response at paragraph 8(e) of its further amended reply and defence to counterclaim that on its face, any release and/or indemnity does not extend to a release of or indemnity with respect to wrongful termination of the cartage agreement or its claims under the ACL.
143Boral submits that, applying orthodox principles of construction, the terms of cl 3.2 would cover a claim for wrongful termination. It submits there is no ambiguity as to the meaning of the words used, and that the express stipulation of the plaintiff having “no further claims or entitlements against Boral either now or in the future” (emphasis added) in the release and indemnity covers the plaintiff’s alleged wrongful termination claim, which existed at the time both deeds of termination were entered.
144Boral raises the purpose of the Deed (the conclusion of the legal relationship between the parties) to submit that it would be wholly inconsistent with the text and purpose of the deed to construe the release and indemnity as excluding any claim brought by the plaintiff in relation to the termination itself. Boral further relies on the specific release in cl 2 in respect of claims for payment of work performed under the cartage agreement as supporting its submission that cl 3.2 is a general release.
145The plaintiff contends that cl 3.1 and 3.2 relate only to any monies owed at the time the second termination agreement was signed. The plaintiff submits that at the time the Deed was executed, there had been no threat by the plaintiff to sue Boral for wrongful termination. It further submits that the indemnity is limited to “those matters concerning ‘final payment’”, and that if Boral wanted the release and indemnity to extend to wrongful termination and claims under the ACL, it should have expressly provided as such in the Deed.
146The plaintiff points to the first recital in the Background to the Deed:
“The Contractor has, as a [sic] independent contractor, provided various transport services to Boral upon certain terms and conditions accepted and performed by the parties over a period of time (Contract).”
The plaintiff submits that this section of the Background supports its contention that the deed had nothing to do with the termination of the cartage agreement and the events on 9 July 2015.
147The plaintiff pleads that the Deed, which was prepared by Boral’s solicitors as a standard form document, ought be construed contra proferentem to the extent that it is ambiguous. It submits that any doubt as to the construction of the guarantee and indemnity should be resolved in favour of the guarantor or indemnifier, and suggests that such ambiguity can arise not only from the uncertain meaning of a particular expression but from “its apparent width of possible operation”.[27] The plaintiff pleads that the Deed ought be construed strictly in favour of the indemnifier,[28] relying on passages from The Modern Contract of Guarantee to submit that the Court ought not readily infer cl 3 to be construed as extending to liabilities incurred through deliberate breaches of the contract in whose favour it was given (here being Boral).
[27]Citing Westgyp Pty Ltd v Northline Ceilings Pty Ltd (No 2) [2019] WASCA 145 at [11]
[28]Citing J Phillips and J O’Donovan, The Modern Contract of Guarantee
148Boral submits that the plaintiff has not identified any ambiguity in the terms of the Deed. Counsel for the defendant relies on the decision of North v Marina [2003] NSWSC 64 at [75] to submit that “[i]t is not a legitimate approach to construction to say that two meanings of a particular provision are open, and the meaning unfavourable to the moving party should be chosen, if one of the alternative meanings is an unlikely construction of the contract”.
149Boral also relied on Chernov JA’s judgment in AWB (International) Ltd v Tradesmen International (PVT) Ltd [2006] VSCA 210 at [24] to contend that the maxim of contra preferentem “is a rule of last resort in the sense that the words of the contract should, in the first instance, be given their ordinary meaning and the rule applied where there is, nevertheless, ambiguity.”
150Boral also submits that there is no legal principle in support of the proposition that an instrument prepared on one party’s letterhead, or in a standard form, must be construed strictly and contrary to that party’s interest.
Analysis and Conclusion
151The terms of the Deed are to be construed objectively, by reference to the text, context and purpose of the instrument.[29] For the following reasons, I do not accept the plaintiff’s construction of cl 3.1 and 3.2, as I do not find ambiguity in the relevant provisions. The maxim of contra preferentem therefore need not be applied.
[29]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] 219 CLR 165 at [40]
152Clause 3.1 provides that the plaintiff “will indemnify and release Boral from any and all liabilities, losses, claims, damages and expenses howsoever arising which may, directly or indirectly, arise from the [cartage agreement] and the vehicles, equipment and drivers used and engaged in the provision by the [plaintiff] if the transport services” (emphasis added). Clause 3.2 furthers the scope of clause 3.1, the plaintiff agreeing that it has “no further claims or entitlements against Boral either now or in the future and hereby releases and indemnifies Boral against any and all such claims”. While broad in scope, I do not accept the plaintiff’s submission that there is any ambiguity in these clauses.
153I am satisfied that the plaintiff’s wrongful termination claim does fall within the scope of cl 3.2 of the Deed. Applying Agtan Pty Ltd v Caltex Australia Petroleum [2018] VSCA 169 at [88], and considering the whole of the Deed, it is apparent that clause 2.2 creates a specific release in respect of claims for payment of work performed under the cartage agreement by the plaintiff, while clause 3.2 creates a general release and indemnity of Boral by the plaintiff. It cannot be objectively construed that the Deed only pertained to the final monies owed Boral (as submitted by the plaintiff), as to do so would render cl 3.2 unnecessary in light of cl 2.2.
154I accept Boral’s submission that the Deed’s purpose was to effect termination of the cartage agreement and conclude the legal relationship between the plaintiff and Boral. This is evidenced by the second recital, which provides that “[t]he parties gave (sic) mutually agreed to terminate the contract upon the terms and conditions set out in this deed”. I do not accept the plaintiff’s contention that the Deed’s purpose was solely to set the terms of the payment of monies owed by Boral, as to do so fails to consider the text of the deed as a whole and the context in which it arose, being Boral’s termination of the cartage agreement.
155Looking at the totality of the Deed and its purpose to conclude the legal relationship between the plaintiff and Boral, I accept that a reasonable businessperson in the position of the parties would have understood clauses 3.1 and 3.2 to cover a claim of wrongful termination by the plaintiff against Boral either at the time of execution or in the future. The terms of the Deed are unambiguous, and the “Court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust.”[30] The wrongful termination claim before this Court falls within the ambit of clauses 3.1 and 3.2, and therefore the plaintiff has by the Deed released and indemnified Boral against such a claim.
[30]Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109
(ii) Is Boral estopped from relying on the indemnity as to do so would be unconscionable?
156The plaintiff pleads in paragraph 10 of its further amended reply and defence to counterclaim:
“in circumstances in which all that was provided by the Deed of Termination was for the payment by the Defendant of monies due by it to the Plaintiff (as a condition of the Plaintiff being able to sell its vehicles within the Boral fleet such as to mitigate its loss and damage), to the extent that the Deed of Termination does in fact release the Plaintiff from these claims or contain an indemnity as alleged, it would be unconscionable for the Defendant to be able to rely upon the Deed of Indemnity for this purpose, and the Defendant is estopped from doing the same.”
157The plaintiff submits the following evidence from Ms Coombs supports its claim:
(a) the Deed is a standard form of contract drafted by solicitors;
(b) Boral had a deed of termination signed every time Boral terminated a cartage contract;
(c) every time Boral terminated a contract it had a deed signed; and
(d) Boral would do the “final balancing” for payment to contractors once a deed was signed and entered into Boral’s system.
158The plaintiff submits that it experienced a special disadvantage because as a wrongfully terminated contractor, it would not get paid monies owed to it unless Mr Smith signed the deed of termination. Counsel for the plaintiff made the following written closing submissions:
“… [Boral] is alleging … that it has a system which requires in all circumstances in which it terminates a contract that the contractor sign a deed (after termination) which releases Boral from liability (including for wrongful termination) and grants an indemnity in favour of Boral for any wrongful termination. The only consideration it offers is for payment of the monies it already owes the contractor: that is, nothing. It forces a release and indemnity down the throat of a contractor simply for the contractor to be paid what it is owed. If the contractor does not sign the deed, it does not get paid monies owed to it by Boral. There are, with respect, standover men who would blush at this. It is for this reason that the unconscionability is alleged.”
Counsel for the plaintiff repeatedly submitted that Boral’s system of requiring contractors to sign a deed of termination on the terms as before this Court was “chilling” and may encourage other large corporations to adopt Boral’s approach as a modus operandi.
159Boral submits the plaintiff has failed to demonstrate how it would be unconscionable for Boral to rely on the Deed. It submits that the plaintiff has failed to particularise or evidence how Boral allegedly insisted on the execution of the Deed as a prerequisite for payment of the monies owed, nor how any conduct by any person on behalf of Boral applied improper pressure on the plaintiff to sign the deed. Boral further submits there is no evidence before the Court that it threatened to withhold payment of monies owed to the plaintiff unless the second deed of termination was executed.
160Despite the plaintiff’s submission that Boral would not settle debts owed to the plaintiff unless the Deed was signed, I am not satisfied that the plaintiff experienced any special disadvantage impairing its ability to make a judgment in its best interests at the time that Mr Smith signed the deed on its behalf.[31] Mr Smith’s own evidence was that he did not believe he needed to sign the Deed to settle debts owed by Boral to the plaintiff, but rather to receive money from Merran Ridge for the sale of trucks. As I found above, the plaintiff has not demonstrated to the Court that it possessed a special disadvantage giving rise to a finding of unconscionable conduct either in equity or under s20 of the ACL.
[31]Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462
161The plaintiff has also failed to prove its unconscionability pleading under s21 of the ACL. I am not satisfied that it would be unconscionable for Boral to seek to rely on the indemnity under cl 3.2. The Deed’s purpose was to bring to an end the commercial relationship between the plaintiff and Boral. Clause 5 of the Deed confirmed that the plaintiff was advised by Boral to seek independent legal advice concerning the terms of the deed. I am not satisfied that the plaintiff was obliged to sign the Deed or that Boral acted in a manner which was unconscionable in circumstances governed by s 21 of the ACL.
162Mr Smith signed the Deed voluntarily and could have obtained legal advice as to any potential ramifications before doing so. The plaintiff is bound by the terms of the Deed including the release and indemnity. Boral is entitled to enforce the agreement contained in the Deed.
Conclusion as to Indemnity
163If I had found that the cartage agreement was wrongfully terminated, I would have applied the principle of circuity of action because I am satisfied that clauses 3.2 and 3.3 of the Deed indemnifies Boral for any damages the plaintiff would be entitled to claim under wrongful termination. The plaintiff has failed to prove that Boral should be estopped from exercising such an indemnity because of unconscionability.
(f) Entitlement to goodwill
164As the evidence of Ms Coombs made clear, Boral has had now for many years what is described as a no goodwill policy when dealing with its cartage contractors. This is reflected in the standard cartage agreement which prohibits assignment. Ms Coombs explained why the policy had been introduced primarily because Boral would not be able to guarantee any level of earnings to future contractors. The rationale for the policy was also confirmed by Mr Carra, Boral Fleet Manager, in his outline of evidence dated 4 June 2021 which was tendered at trial.[32] The policy was also referred to in the affidavit sworn by Nigel Ward, Boral’s solicitor, dated 4 June 2021. His affidavit was also tendered at trial.[33]
[32] Exhibit “D1”
[33] Exhibit “D2”
165The agitators on each of the plaintiff’s three trucks was owned by Boral. Had the plaintiff wished to do so it could have sold the trucks without the agitators in the open market. The three trucks were on sold to Merran Ridge for the sum of $200,000 plus GST with the agitators in place. In accordance with the longstanding no goodwill policy, Merran Ridge was required to sign a statutory declaration confirming that it had paid no goodwill.
166I am not persuaded that the plaintiff has any entitlement to goodwill in circumstances where Boral’s longstanding no-good will policy was in place and the cartage agreement contained a term precluding assignment to another contractor.
167Boral states that goodwill “is the valuable right or privilege to use ... assets of the business as a business to produce income”.[34] Mr Jensen, the expert witness for the plaintiff, agreed with this definition. It was put that there was no evidence the plaintiff’s business had any valuable capable of attracting goodwill. The claim was based on the fact that if the plaintiff had sold its business (i.e. the shares in the company or its trucks), a purchaser would also buy the plaintiff’s cartage contract with Boral. Alternatively, if the plaintiff sold its trucks to an incoming Boral contractor, it was entitled to extract a payment from the purchaser reflecting the anticipated value of the use of the trucks. It should be noted that cl 15 of the cartage agreement prohibits assignment by the contractor.
[34]Federal Commissioner of Taxation v Murry (1998) 193 CLR 605, [23]
168Ms Coombs gave evidence that the “no assignment” clause had existed in previous versions of the contract and was a clause contained in all contractor agreements across Boral. As for the second alternative, there was no evidence provided which would support the plaintiff’s claim for goodwill.
169The plaintiff had submitted in opening that but for Boral’s “no goodwill” policy, Merran Ridge, who did purchase the trucks, would have had to pay for goodwill, but no evidence from Merran Ridge was tendered, and the plaintiff did not explain or provide evidence as to how it could have compelled Merran Ridge to pay for goodwill.
170It was also said in opening that the Court would hear evidence that trucks are sold in the market with their contracts, and purchasers pay not just for the truck but for the balance of the cartage agreement, which comprises goodwill. No evidence to this effect was provided. Mr Smith gave evidence he never sold any trucks, nor had he bought an existing carting business. Mr Jensen was not able to find any instances of recently sold cartage businesses. At best, Mr Smith’s evidence was that because the purchaser of a truck with an agitator could start work “tomorrow”, Mr Smith considered “there’s got to be a value there at least of something.” As is not disputed, the plaintiff did not own the agitators, which at all times were owned by Boral. Consequently, the plaintiff could not claim any entitlement to the value of the agitators. Nor did a seller in his position transfer its business to the purchaser of the trucks. The position is that anyone wishing to be engaged as a contractor with Boral has to enter into a new contract.
171Evidence was led on behalf of Boral that while previously there had been a practice of contractors selling their vehicles in New South Wales to incoming contractors for a premium representing goodwill, this practice was subsequently eliminated. By the late 1990s, there was no general practice of that sort in Victoria. The policy had been in place when Ms Coombs began working at Boral in 2004. It was in place when the parties entered into the agreement, and continues to be in place. The rationale for the “no goodwill” policy was that Boral could not promise to deliver a financial return to the incoming carters. This is consistent with the various “no guaranteed earnings” provisions in the cartage agreement.
172The plaintiff’s case on this point is that Boral’s “no goodwill” policy unconscionably deprived the plaintiff of that goodwill. However, even if the plaintiff believed that he was entitled to a payment of goodwill upon the sale of his trucks, that state of mind was not brought about in any way by any representation by Boral, and nor did Boral unconscionably take advantage of the misapprehension by the plaintiff. Ms Coombs was in fact very surprised to hear that Mr Smith claimed not to have known of the “no goodwill” policy before July 2015.
173I am not satisfied that any claim for goodwill can be made out in the circumstances where the trucks could not be sold with the agitators, there was no ability to assign the contract, and there was in existence the longstanding “no goodwill” policy which Boral applied uniformly across the board. The fact that Mr Smith perhaps understandably is disappointed or unaware that he was not entitled to claim goodwill does not provide a basis for establishing that Boral has acted in some way unconscionably and in breach of sections 21 and 20 of the ACL. Given these matters, I am not persuaded that the plaintiff is entitled to any amount for goodwill as is claimed.
(g) Loss and damage
174As I have concluded that the plaintiff’s wrongful termination claim has not been proved, and even if it had, the plaintiff by clauses 3.1 and 3.2 of the Deed indemnified and released Boral from all claims, there is no need to assess the plaintiff’s putative loss and/ or damages claim.
175Additionally, if I am wrong and Boral was not entitled to terminate summarily, I accept Boral’s alternative submission that it would have terminated on three months’ written notice pursuant to clause 22.4 of the cartage agreement. Under that clause, either party may at its absolute discretion terminate this agreement at any time upon three months written notice to the other party. Given the plaintiff continued to provide its services under the contract until October 2015 with Boral’s consent, then the plaintiff sustained no compensable loss as the requisite period of notice was provided.
176In assessing the likelihood of termination by other means by a defendant, the Court is required “to postulate a situation in which all the facts remain as they occurred”, had the defendant considered or was advised it was not entitled to summarily terminate the contract in question.[35]
[35] See Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381, [122]
177Had Boral come to the view that it was not entitled to terminate summarily, I find an inference should be drawn in this case that Boral would have still terminated the cartage agreement by reason of the following evidence:
(a) the rating of the seriousness of the incident by Boral as “Extreme” and a “Serious Harm Event;
(b) the fact of the earlier disciplinary incident involving the plaintiff in 2014;
(c) the fact that Boral sacked its own employee Mr Congram over the incident; and
(d) Boral’s oft stated concerns and requirements about ensuring safety procedures being followed at all times, in effect a zero-tolerance policy for unsafe work practices.
Given this, then I find Boral would have still terminated the plaintiff’s services. Consequently, the requisite period of notice was served out with the result that the plaintiff has no entitlement to claim damages under the cartage agreement.
Conclusion
178I will order that the plaintiff’s claim be dismissed. There is no need to make the orders sought in Boral’s counterclaim having dismissed the plaintiff’s claim.
179Subject to hearing from the parties, the plaintiff should pay the defendant’s costs of and incidental to the proceeding, to be taxed on the standard basis in default of agreement.
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Certificate
I certify that these 51 pages are a true copy of the Reasons for Judgment of Her Honour Judge A Ryan delivered on 30 May 2022.
Dated: 30 May 2022
Associate to Her Honour Judge A Ryan
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